Editing Pareto principle (section)

== Applications ==

=== Economics ===
Pareto's observation was in connection with [[Concentration of land ownership|population and wealth]]. Pareto noticed that approximately 80% of Italy's land was owned by 20% of the population.<ref name="auto"/> He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.{{citation needed|date=August 2022}}

A chart that demonstrated the effect appeared in the 1992 [[United Nations Development Programme|United Nations Development Program]] Report, which showed that the richest 20% of the world's population receives 82.7% of the world's income.<ref>{{citation|author=United Nations Development Program|title=1992 Human Development Report|year=1992|location=New York|publisher=Oxford University Press}}</ref> However, among nations, the [[Gini index]] shows that wealth distributions vary substantially around this norm.<ref>{{cite web|title=Poverty, Growth, and Inequality over the Next 50 Years|first=Evan|last=Hillebrand|publisher=FAO, United Nations – Economic and Social Development Department|date=June 2009|archive-url=https://web.archive.org/web/20171020065423/ftp://ftp.fao.org/docrep/fao/012/ak968e/ak968e00.pdf|archive-date=2017-10-20|url-status=dead|url=ftp://ftp.fao.org/docrep/fao/012/ak968e/ak968e00.pdf}}</ref>

{| class="wikitable"
|+ Distribution of world GDP, 1989<ref name="1992 Human Development Report, Chapter 3">{{citation|url=http://hdr.undp.org/en/reports/global/hdr1992/chapters/|title=Human Development Report 1992, Chapter 3|access-date=2007-07-08}}</ref>
|-
! scope="col" | Quintile of population
! scope="col" | Income
|-
| Richest 20%
| 82.70%
|-
| Second 20%
| 11.75%
|-
| Third 20%
| 2.30%
|-
| Fourth 20%
| 1.85%
|-
| Poorest 20%
| 1.40%
|}

The principle also holds within the tails of the distribution. The physicist Victor Yakovenko of the [[University of Maryland, College Park]] and AC Silva analyzed income data from the US Internal Revenue Service from 1983 to 2001 and found that the [[income distribution]] of the richest 1–3% of the population also follows Pareto's principle.<ref>{{Citation|last1=Yakovenko|first1=Victor M.|title=Two-class Structure of Income Distribution in the USA: Exponential Bulk and Power-law Tail|date=2005|work=Econophysics of Wealth Distributions: Econophys-Kolkata I|pages=15–23|editor-last=Chatterjee|editor-first=Arnab|series=New Economic Windows|publisher=Springer Milan|language=en|doi=10.1007/88-470-0389-x_2|isbn=978-88-470-0389-7|last2=Silva|first2=A. Christian|editor2-last=Yarlagadda|editor2-first=Sudhakar|editor3-last=Chakrabarti|editor3-first=Bikas K.}}</ref>

In ''Talent: How to Identify Entrepreneurs'', economist [[Tyler Cowen]] and entrepreneur [[Daniel Gross (entrepreneur)|Daniel Gross]] suggest that the Pareto Principle can be applied to the role of the 20% most talented individuals in generating the majority of [[economic growth]].<ref>[[Paris Aéroport]], ''Paris Vous Aime Magazine'', No 13, avril-may-juin 2023, p. 71</ref> According to the ''New York Times'' in 1988, many [[video rental shop]]s reported that 80% of revenue came from 20% of videotapes (although rarely rented classics such as ''[[Gone with the Wind (film)|Gone with the Wind]]'' must be stocked to appear to have a good selection).<ref name="kleinfield19880501">{{Cite news |url=https://www.nytimes.com/1988/05/01/business/a-tight-squeeze-at-video-stores.html?pagewanted=2|url-status=live|title=A Tight Squeeze at Video Stores |last=Kleinfield |first=N. R. |date=1988-05-01 |work=The New York Times |archive-url=http://web.archive.org/web/20150525080808/http://www.nytimes.com/1988/05/01/business/a-tight-squeeze-at-video-stores.html?pagewanted=2|archive-date=2015-05-25|url-access=subscription|issn=0362-4331}}</ref>

=== Computing ===
In [[computer science]] the Pareto principle can be applied to [[optimization (computer science)|optimization]] efforts.<ref name=optimization>{{citation|first1=M.|last1=Gen|first2=R.|last2=Cheng|title=Genetic Algorithms and Engineering Optimization|location=New York|publisher=Wiley|year=2002}}</ref> For example, [[Microsoft]] noted that by fixing the top 20% of the most-reported bugs, 80% of the related errors and crashes in a given system would be eliminated.<ref>{{citation|url=http://www.crn.com/news/security/18821726/microsofts-ceo-80-20-rule-applies-to-bugs-not-just-features.htm|title=Microsoft's CEO: 80–20 Rule Applies To Bugs, Not Just Features|first=Paula|last=Rooney|date=October 3, 2002|publisher=ChannelWeb}}</ref> Lowell Arthur expressed that "20% of the code has 80% of the errors. Find them, fix them!"<ref>Pressman, Roger S. (2010). Software Engineering: A Practitioner's Approach (7th ed.). Boston, Mass: McGraw-Hill, 2010. {{ISBN|978-0-07-337597-7}}.</ref>

=== Occupational health and safety ===
[[Occupational health and safety]] professionals use the Pareto principle to underline the importance of hazard prioritization. Assuming 20% of the hazards account for 80% of the injuries, and by categorizing hazards, safety professionals can target those 20% of the hazards that cause 80% of the injuries or accidents. Alternatively, if hazards are addressed in random order, a safety professional is more likely to fix one of the 80% of hazards that account only for some fraction of the remaining 20% of injuries.<ref>{{cite book |last=Woodcock |first=Kathryn |title=Safety Evaluation Techniques |year=2010 |publisher= Ryerson University |location= Toronto, ON |pages=86 |url= http://www.ryerson.ca/woodcock/}}</ref>

Aside from ensuring efficient accident prevention practices, the Pareto principle also ensures hazards are addressed in an economical order, because the technique ensures the utilized resources are best used to prevent the most accidents.<ref name=USCG001>{{cite web|title=Introduction to Risk-based Decision-Making |url= http://www.uscg.mil/hq/cg5/cg5211/docs/RBDM_Files/PDF/RBDM_Guidelines/Volume%202/Volume%202-Chapter%206.pdf |work=USCG Safety Program |publisher= United States Coast Guard |access-date= 14 January 2012}}</ref>

=== Engineering and quality control ===
The Pareto principle is the basis for the [[Pareto chart]], one of the key tools used in [[total quality management|total quality control]] and [[Six Sigma]] techniques. The Pareto principle serves as a baseline for [[time management#CITEREFLakein1973|ABC-analysis]] and XYZ-analysis, widely used in [[logistics]] and procurement for the purpose of optimizing stock of goods, as well as costs of keeping and replenishing that stock.<ref>{{harvtxt|Rushton|Oxley|Croucher|2000}}, pp. 107–108.</ref> In engineering control theory, such as for electromechanical energy converters, the 80/20 principle applies to optimization efforts.<ref name="optimization" />

The remarkable success of statistically based searches for root causes is based upon a combination of an empirical principle and mathematical logic. The empirical principle is usually known as the Pareto principle.<ref name=" Juran "> Juran, Joseph M., Frank M. Gryna, and Richard S. Bingham. Quality control handbook. Vol. 3. New York: McGraw-Hill, 1974.</ref> With regard to variation causality, this principle states that there is a non-random distribution of the slopes of the numerous (theoretically infinite) terms in the general equation.

All of the terms are independent of each other by definition. Interdependent factors appear as multiplication terms. The Pareto principle states that the effect of the dominant term is very much greater than the second-largest effect term, which in turn is very much greater than the third, and so on.<ref name=" Shainin "> Shainin, Richard D. “Strategies for Technical Problem Solving.” 1992, Quality Engineering, 5:3, 433-448</ref> There is no explanation for this phenomenon; that is why we refer to it as an empirical principle.

The mathematical logic is known as the square-root-of-the-sum-of-the-squares axiom. This states that the variation caused by the steepest slope must be squared, and then the result added to the square of the variation caused by the second-steepest slope, and so on. The total observed variation is then the square root of the total sum of the variation caused by individual slopes squared. This derives from the probability density function for multiple variables or the multivariate distribution (we are treating each term as an independent variable).

The combination of the Pareto principle and the square-root-of-the-sum-of-the-squares axiom means that the strongest term in the general equation totally dominates the observed variation of effect. Thus, the strongest term will dominate the data collected for hypothesis testing.

In the systems science discipline, [[Joshua M. Epstein]] and [[Robert Axtell]] created an [[Agent-based social simulation|agent-based simulation]] model called [[Sugarscape]], from a [[Decentralised system|decentralized modeling]] approach, based on individual behavior rules defined for each agent in the economy. Wealth distribution and Pareto's 80/20 principle emerged in their results, which suggests the principle is a collective consequence of these individual rules.<ref>{{Citation|last1=Epstein|first1=Joshua|title=Growing Artificial Societies: Social Science from the Bottom-Up|url=https://books.google.com/books?id=xXvelSs2caQC|page=208|year=1996|publisher=[[MIT Press]]|isbn=0-262-55025-3|last2=Axtell|first2=Robert}}
</ref>

=== Health and social outcomes ===
In 2009, the [[Agency for Healthcare Research and Quality]] said 20% of patients incurred 80% of healthcare expenses due to chronic conditions.<ref>{{cite web|url=http://www.projo.com/opinion/contributors/content/CT_weinberg27_07-27-09_HQF0P1E_v15.3f89889.html|title=Myrl Weinberg: In health-care reform, the 20-80 solution|last1=Weinberg|first1=Myrl| website=The Providence Journal|date=July 27, 2009|archive-url=https://web.archive.org/web/20090802002952/http://www.projo.com/opinion/contributors/content/CT_weinberg27_07-27-09_HQF0P1E_v15.3f89889.html|archive-date=2009-08-02}}</ref> A 2021 analysis showed unequal distribution of healthcare costs, with older patients and those with poorer health incurring more costs.<ref>{{cite web |last1=Sawyer |last2=Claxton |first1=Bradley |first2=Gary |title=How do health expenditures vary across the population? |url=https://www.healthsystemtracker.org/chart-collection/health-expenditures-vary-across-population/#item-discussion-of-health-spending-often-focus-on-averages-but-a-small-share-of-the-population-incurs-most-of-the-cost_2016 |website=Peterson-Kaiser Health System Tracker |publisher=Peterson Center on Healthcare and the Kaiser Family Foundation |access-date=13 March 2019}}</ref>
The 80/20 rule has been proposed as a rule of thumb for the infection distribution in [[superspreading event]]s.<ref>{{cite journal|last1=Galvani|first1=Alison P.|last2=May|first2=Robert M.|year=2005|title=Epidemiology: Dimensions of superspreading|journal=Nature|volume=438|issue=7066|pages=293–295|doi=10.1038/438293a|pmid=16292292|bibcode=2005Natur.438..293G|pmc=7095140}}</ref><ref name="Lloyd-Smith JO 2005" /> However, the degree of infectiousness has been found to be distributed continuously in the population.<ref name="Lloyd-Smith JO 2005">{{cite journal|last1=Lloyd-Smith|first1=JO|last2=Schreiber|first2=SJ|last3=Kopp|first3=PE|last4=Getz|first4=WM|year=2005|title=Superspreading and the effect of individual variation on disease emergence|journal=Nature|volume=438|issue=7066|pages=355–359|doi=10.1038/nature04153|pmid=16292310|bibcode=2005Natur.438..355L|pmc=7094981}}</ref> In [[epidemic]]s with super-spreading, the majority of individuals infect relatively few [[contact tracing|secondary contacts]].