Jordan Petersen – Marxism and the Pareto Principle

An interesting perspective on Marxism and why it can not work.

The essential point is that the Pareto Principle is a physical reality that applies to all manner of things, including money and economies. Marxism is ignorant of that and attributes it to a failure of Capitalism, when it isn’t. Attempts to “fix” issues with “income distribution” are akin to trying to fix gravity by passing laws.

What is the Pareto Principle? It is seen all over the place as the 80 / 20 rule. That 80% of the patents go to 20% of the inventors, or that 80% of the work is done by 20% of the people.

The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first work, Cours d’économie politique. Essentially, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.

It is an axiom of business management that “80% of sales come from 20% of clients”. Richard Koch authored the book, The 80/20 Principle, which illustrated some practical applications of the Pareto principle in business management and life.

Mathematically, the 80/20 rule is roughly followed by a power law distribution (also known as a Pareto distribution) for a particular set of parameters, and many natural phenomena have been shown empirically to exhibit such a distribution.

The Pareto principle is only tangentially related to Pareto efficiency. Pareto developed both concepts in the context of the distribution of income and wealth among the population.
In economics

The original observation was in connection with population and wealth. Pareto noticed that 80% of Italy’s land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.

A chart that gave the inequality a very visible and comprehensible form, the so-called “champagne glass” effect, was contained in the 1992 United Nations Development Program Report, which showed that distribution of global income is very uneven, with the richest 20% of the world’s population controlling 82.7% of the world’s income.
The Pareto principle also applies to taxation. In the US, the top 20% of earners have paid roughly 80% of Federal income taxes in 2000 and 2006, and again in 2018.

Attempts to “fix that” are essentially doomed to failure.

Very similar to a Parato Distribution that is a more rigorous statistical statement.

The Pareto distribution, named after the Italian civil engineer, economist, and sociologist Vilfredo Pareto, is a power-law probability distribution that is used in description of social, scientific, geophysical, actuarial, and many other types of observable phenomena. Originally applied to describing the distribution of wealth in a society, fitting the trend that a large portion of wealth is held by a small fraction of the population, the Pareto distribution has colloquially become known and referred to as the Pareto principle, or “80-20 rule”, and is sometimes called the “Matthew principle”. This rule states that, for example, 80% of the wealth of a society is held by 20% of its population. However, the Pareto distribution only produces this result for a particular power value, α (α = log4 5 ≈ 1.16). While α is variable, empirical observation has found the 80-20 distribution to fit a wide range of cases, including natural phenomena and human activities.

In effect, Marxism is un-natural and fighting with the laws of nature and human nature.

But it’s a pretty good story… “There’s always a story.” -E.M.Smith

Marxism attempts to change the value of α by an extreme amount and in a very unnatural way, so fails.

Subscribe to feed


About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in World Economics and tagged , , . Bookmark the permalink.

4 Responses to Jordan Petersen – Marxism and the Pareto Principle

  1. cdquarles says:

    Indeed. Socialism is a religion. It is a false religion, at that.

  2. Gary says:

    The Gini Coefficient, was developed by the Italian statistician Corrado Gini his 1912 paper Variability and Mutability, is a good measure of inequality.

    The Constructal Law explains how all systems as they develop complexity move toward inequality in their variables.

  3. E.M.Smith says:

    An interesting 36 minute video that does a good job of summarizing history in Europe and the Americas and showing how Cultural Marxism is trying to destroy some pretty good cultures. Has some detail in it that was new to me. Via Invidious as YouTube is not letting him monetize his videos (so money only via contributions) so I figure why let YouTube get any ad revenue? May as well block the ads.

    The LEFT’s beef with white people EXPLAINED

    views 346,457
    by: Oppressed Media

  4. Larry Ledwick says:

    Very nice video!

    Yes I always marvel at the idiocy shown by people harping about the Crusades as though they were unprovoked barbarism, when they were the perfectly reasonable response to 400 years of brutal invasion, mass slaughter and slave trade.

Comments are closed.