We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Much as we might wish that most things fit Gaussian "normal" distributions because it's easy to visualize, they do not. Some college-level math underpins the Pareto distribution, but more interesting than the income and wealth distributions it describes are all of the other psychological (including intelligence), geological, and other natural effects which it predicts.
I tend to keep my spare change as it become too heavy to carry on your person. Unfortunately I have had to "hide" that collection as my spouse tends to claim my spare change collection and use it all up before I can cash it in.
Related: Price's Law
There are different iterations of this principle:
50% of the work is done by the square root of the total number of people who participate in the work.
Half of the literature on a subject will be contributed by the square root of the total number of authors publishing in that area.
For example: a company has 100 employees. Price's Law states that 50% of productivity results from the efforts of just 10 of the employees.
That's how i heard it anyway. I don't know if this is empirical or not.
It is slightly different than Pareto, but along the same lines.
No expert, but Pareto is essential in understanding or learning Economics.
Pareto Optimality points out that perfection isn't really the goal, but a 'near' perfection is possible. The cost of reaching perfection is more than the benefits it provides. Another way of describing this is Pareto Efficiency - there is no change in distribution which can take place that makes someone better off without making someone worse off.
Got into a tiff recently with the wife discussing this concept. She called it the "80-20 Rule" to which I replied "Pareto Efficiency". Her response was the name didn't matter, I explained that, in a way it did. There's more to Pareto than just the 80-20 Rule. It's a rough guide, often incorrect, but directionally correct. Having a better understanding of Pareto is useful so you don't fall into a trap of believing the rule of thumb.
Pareto Efficiency isn't one thing. It's a frontier. There are many potential outcomes - but theoretically, each one is the 'same' in terms of efficiency. It assumes perfect information, and no externalities.
Accounting for lack of perfect information and external influences (which are, of course, realities) means the frontier is rarely a straight line or curve as it is often depicted. This leaves the door open for policy-makers to step in and claim policy can 'improve' outcomes. In reality, policies can't improve incomes. They can FEEL improved and people may believe they are, but a Pareto Optimality is what most would call "equilibrium".
Since equilibrium is not one thing which never changes, there's often a series of discussions which take place around the concept. So emotions run high, and policy makers rely on this fact to continually play their role.
It's a moving target, basically, which is often achieved, but never recognized of having been achieved as people tend to believe they can "always do better".
People talk about the Pareto effect as if it meant that 80% of human beings are irrelevant. The fact is, for any particular group and any particular function you're interested in, 20% of the group may turn out to be the ones that matter. But there are other groups and other functions. Maybe a small fraction does the important R&D work, but someone else has to answer the phones, construct the office building, and so on. We can give respect where respect is due to each task without pretending that everyone is equally good at every task, or that every task is exactly an important as every other task in every context.
Bulldog: This leaves the door open for policy-makers to step in and claim policy can 'improve' outcomes. In reality, policies can't improve incomes.
That conflates policy with allocation. The former may certainly improve overall efficiency.
If there is one pie divided among three people, and two of them each have half the pie, while the third has none, that is Pareto Efficient. (Redistributing the pie would require taking from the haves and giving to the have-not.) However, if the have-not is the pie-maker, it would be bad policy to let her starve. A fairer distribution would mean more pie for everyone over the long run.
Along the same lines, with the same pie and same three people, if each person had a quarter pie, and a quarter pie was wasted, it is not Pareto efficient; but it would be better policy, as the pie-maker would not starve and could then make more pies.