The Pareto Distribution

A natural law governing domains of creative human production.

Nicholas Porter

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Background

I recently stumbled upon a lecture given by psychology professor at the University of Toronto, where he details socio-political developments of the Soviet Union after the first World War. He begins by explaining how the“peasant class” in the Soviet Union had become tremendously successful in agricultural production, ultimately supplying a large proportion of food for Russia and Ukraine. But eventually what happened was Vladimir Lenin, in his capricious leadership of the Soviet Revolution in the late 1910’s, pushed to collectivize the farms, which targeted a small number of highly successful peasant farmers, who were labelled as the Kulaks. This collectivization and disenfranchising of a just a few farms led to the eventual demise of the nation’s economy.

Why is that relevant?

The reason the lecture is prefaced with a seemingly seemingly off-topic historical qualm, is due to its association with a mathematical phenomenon known as the Pareto Distribution; a natural law that governs patterns in domains of creative human production, such as farming. Vilfredo Pareto, a famous Italian engineer, observed this very occurrence in the distribution of wealth in Italy 1898 (hence the name Pareto Distribution), where a small minority of people controlled more than half the wealth.

In essence the law states that any system where creative human production is the form of measurement, look at the number of people who are producing in that given domain, and you’ll find that the square root of the people produce half the product.

Mathematically his observation is a square root law, a sort of natural law.

Below I quote the lecture because he explains the distribution in a relatively simplistic manner.

If you look at creative production in any domain, it doesn’t matter artistic domain, food production, novels written, novels sold, number of companies generated, number of goals scored in Hockey, or number of compositions written; anything like that where the fundamental underlying measure is human productivity, what you find is that a very tiny percentage of people produce almost all the output.

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