The Pareto Principle: Its Use and Abuse

THE PARETO PRINCIPLE: ITS USE AND ABUSE

Robert Sanders

Vilfredo Pareto was a late nineteenth-century economist/sociologist who first noted and re- ported his observation that about 80 percent of wealth was concentrated in about 20 percent of a population. This is the basis for what we now call the Pareto Principle.

J. M. Juran, one of the foremost practitioners of statistical quality control, claims credit for giving the Pareto principle its name. Juran's Pareto Principle is sometimes known as the Rule of 80/20.

Robert E. Sanders has been Marketing Communications Manager for Rogers Corporation for the last 15 years. He spent the previous 10 years with Rogers in sales and product management.

Rogers Corporation is a diversified manufacturing company marketing a variety of materials and components to electronic OEM's and to other selected industrial markets.

Mr. Sanders graduated from Swarthmore College with a BA in Economics, magna cum laude and Phi Beta Kappa. He also has a MA degree in Economics from the University of Virginia.

He served as an adjunct faculty person at the Quinebaug Valley Community College (CT) for several years in the business department, and also served on the Steering Committe of the Connecticut Economic Development Corporation. Mr. Sanders currently is treasurer and member of the board of the Connecticut University Technical Industrial Park.

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COMMENTARY

Since that first reported observation by Pareto, many other sociological, economic, political, and natural phenomena have been observed empiri- cally to follow a similar pattern. Examples come to mind readily. For example, 80 percent of auto accidents are caused by 20 percent of drivers. Eighty percent of off-spec materials are accounted for by 20 percent of the manufacturing