For those unfamiliar with the word Pareto, it is the last name of an Italian Statistician/ Economist who in the thirties noticed that a great many natural phenomenon followed what came to be called the 80/20 Rule - namely that very often if one was trying to identify which of several items was causing the most improvement in a given operation they should first order the potential causes in descending order of their magnitude.
When this was done what Pareto noted was that very often only 20% of the items accounted for 80% of the desireable effects.
If this principle were followed today for the disribution of wealth in the US economy one would therefore expect to find that 80% of the wealth was concentrated in the hands of 20% of its citizens.
But what do we find instead?
We find that as of 2007, the last year for which we have reliable data, 93% of the wealth is concentrated in the hands of just 1% of the people.
Pareto must be spinning in his grave don't you think?
What on earth could turn this once highly reliable tool so badly on its head?
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