LYCOS RETRIEVER 
Vilfredo Pareto: Problems
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Pareto diagrams are named after Vilfredo Pareto, an Italian sociologist and economist, who invented this method of information presentation toward the end of the 19th century. The chart is similar to the histogram or bar chart, except that the bars are arranged in decreasing order from left to right along the abscissa. The fundamental idea behind the use of Pareto diagrams for quality improvement is that the first few (as presented on the diagram) contributing causes to a problem usually account for the majority of the result. Thus, targeting these "major causes" for elimination results in the most cost-effective improvement scheme.
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Pareto used his time at Céligny to write his Trattato di sociologia generale, which was finally published, after wartime delays, in 1916. This was his great sociological masterpiece. He explains how human action can be neatly reduced to residue and derivation. People act on the basis of non-logical sentiments (residues) and invent justifications for them afterwards (derivations). The derivation is ... just the content and form of the ideology itself. But the residues are the real underlying problem, the particular cause of the squabbles that leads to the "circulation of élites". The underlying residue, he thought, was the only proper object of sociological enquiry.
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From the chart above, you can now create a Pareto chart in which you can graphically display the quality problems. The left vertical axis (border) shows the number of defects for each defective category, and the right vertical axis shows the percentage of each defect of the total defects. The horizontal axis (bottom) lists the defective items starting with the most frequent one on the left (Caulking), progressing over to the least frequent occurrence on the right side (Torque). The vertical bars represent the Number of Defectives for each category, utilizing the vertical scale on the left side. The dots with the connecting line represent the Cululative Distribution, utilizing the vertical scale on the right side.
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Apply Pareto's rule, and complete a Pareto chart, whenever a choice has to be made between a number of alternative directions for action. This may be after an analytical exercise has been completed to uncover the possible sources of a particular problem, or after a brainstorming session to generate creative ideas to address an issue.
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If there were a unique Pareto optimal outcome for a cooperative game, that would seem to be a good solution concept. The problem is that there isn't -- in general, there are infinitely many Pareto Optima for any fairly complicated economic "game." In the bike-selling example, every cell in the table except the lower right is Pareto-optimal, and in fact any price between $80 and $100 would give yet another of the (infinitely many) Pareto-Optimal outcomes to this game. All the same, this was the solution criterion that von Neumann and Morgenstern used, and the set of all Pareto-Optimal outcomes is called the "solution set."
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This is a simple example of a Pareto diagram using sample data showing the relative frequency of causes for errors on websites. It enables you to see what 20% of cases are causing 80% of the problems and where efforts should be focussed to achieve the greatest improvement.
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