Editing Pareto principle (section)

=== 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}}
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