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Vilfredo Pareto: Italian Economist
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The Italian economist Vilfredo Pareto was one of the leaders of the Lausanne School and an illustrious member of the "second generation" of the Neoclassical revolution. Although only mildly influential during his lifetime, his "tastes-and-obstacles" approach to general equilibrium theory were resurrected during the great "Paretian Revival" of the 1930s and have guided much of economics since.
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Vilfredo Pareto (1848-1923) was an Italian economist who discovered the 80/20 rule. Born in Paris to Italian exiles, he graduated from the Polytechnic Institute of Turin in 1869. In 1893 he became chair of economics at the University of Lausanne. In 1906 Pareto published Manual of Political Economy in which he observed that twenty percent of the Italian people owned eighty percent of their country's accumulated wealth. After studying such distributions in many other places, Pareto came to believe that this 80/20 proportion was nearly universal.
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In 1906, Italian economist Vilfredo Pareto developed a mathematical formula to explain his country’s uneven distribution of wealth – now commonly referred to as the 80-20 rule. So what does this economic phenomenon have to do with managing your Web customers and your online business community? Well, it turns out… quite a bit.
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Vilfredo Pareto, a turn-of-the-century Italian economist, studied the distributions of wealth in different countries, concluding that a fairly consistent minority – about 20% – of people controlled the large majority – about 80% – of a society's wealth. This same distribution has been observed in other areas and has been termed the Pareto effect.
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The theory behind the Pareto Chart originated in 1897 when an Italian economist named Vilfredo Pareto created a formula representing the uneven distribution of wealth - what later came to be known as the 80-20 rule. You have probably heard a version of it like: "20% of the people cause 80% of the problems", or a derivative. Dr. J. M. Juran started applying this principal to defect analysis - separating the "vital few" from the "trivial many", and called it the "Pareto Chart". In fact, many (most) defect distributions follow a similar pattern, with a relatively small number of issues accounting for an overwhelming share of the defects. The Pareto Chart shows the relative frequency of defects in rank-order, and ... provides a prioritization tool so that process improvement activities can be organized to "get the most bang for the buck", or "pick the low-hanging fruit". Following is an example of paint defects from an automotive assembly plant:
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Pareto Chart shows the distribution of items and arranges them from the most frequent to the least frequent with the final bar being misc. The tool is named after Wilfredo Pareto, the Italian economist who determined that wealth is not evenly distributed. Some of the people have most of the money. This tool is a graphical picture of the most frequent causes of a particular problem. It shows where to put your initial effort to get the most gain.
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Italian Economist