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So, in economics, (and now expanding to other fields too, most significantly marketing tho I suppose commerce is but an extension of economical thoughts), there is a very widely held principle that 80% of the output comes from 20% of the input. As in, say in a nation's economy, 80% of its total wealth is held by only 20%, or as the person for whom it is named—Paraeto discovered, in his garden, 80% of the peas were produced by only 20% of the plants.

I was wondering is there was a mathematical description cataloguing this phenomenon, and if so, is this related to the stabilising nature of 'e', like how continuously compounding interest is not very different from a [modified] simple interest formula.

SuperSexyTrash
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  • There was a just-completed study on this rule of wealth distribution. The simulations matched what we see in the real world. Those who ended up with the lion's share of the wealth were simply the luckiest (born into wealth, companies they founded were the most popular among consumers, their investments did the best, etc.) – John Feb 02 '24 at 11:06
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    See fat tails. Pareto distribution is a prototypical example. Being exactly 80-20 is detail dependent. You might get something similar, but not with such nice round numbers. – AHusain Feb 02 '24 at 16:02
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    @John Could you please link the study? Thank you! – SuperSexyTrash Feb 03 '24 at 04:25
  • ^I don't have the actual link but here's an article about it: https://www.discovermagazine.com/mind/success-comes-down-to-skill-and-a-lot-of-luck I guess it was from a few years ago. – John Feb 04 '24 at 01:15
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    @John Thank you so much!! – SuperSexyTrash Feb 13 '24 at 06:47

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Why does the Paraeto Principle actually work?

Does it work? No, actually it does not -- it is a rule of the thumb. But those who believe it find "evidence" enough to do so.

m-stgt
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