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Pareto law


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The law states that 80 percent of the effects are achieved by 20 percent of the causes. Historically, the law originates from the observation made by the economist Vilfredo Pareto (1848–1923) that 80 percent of the land in Italy was owned by 20 percent of the population. The Pareto law has been claimed to have widespread socio-economic applicability. The practical interpretation of the Pareto law is that beyond a certain threshold the marginal cost of improving the situation further becomes prohibitively expensive.

Subjects: Economics.


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