lawyer

In the late 1800s, Vilfredo Pareto, an economist, established that 80% of the land in Italy was owned by 20% of the population. This was the first instantiation of a socio-economic law that soon appeared to have universal scope.

The Pareto law, in its generalized form, states that 80 % of the objectives - or more generally the effects - are achieved with 20 % of the means - or more generally the causes or the agents. Subsequently, it takes 80 % of the means to achieve the remaining 20 % of the objectives. In other words, the cost required to move from 80 % to 100 % of the objective is four times bigger than the one required to move from 0 % to 80 %.

Practically, this entails that, beyond a certain threshold, the marginal cost of improving a situation further (e.g. to increase one's market share in a given market segment) becomes prohibitively high.

Hereafter are a few examples where the Pareto law typically applies:

80 % of a stock is filled with 20 % of the products