Differences between Pareto Principle and Pareto Optimization problem?
In: 3
The Pareto Principle isn’t a hard rule, it’s more of an observation of trends in life. It originated from an Italian economist in the early 1900’s who observed that vast majority of wealth in Italy was controlled by 20% of the people.
It could be simplified by saying the majority of things that happen are as a result of a few small few inputs.
20% of movies are responsible for the majority of ticket sales.
20% of drivers are responsible for the majority of car accidents.
Again, this isn’t like some physical property of the universe, it’s just a casual observation in how things work in real life.
Pareto Optimization is the idea of, if want to drive a change in a system as simply as possible, how do I target the most important, smallest group of inputs?
Think of it like a very practical form of making a policy.
If I want to save the most lives from car accidents, I can either enact some sweeping plan that effects *everyone* (but that is probably really expensive and likely impossible) or I can specifically target those 20% of drivers who cause the most accidents which is much more practical.
If I’m trying to increase sales of my product X, instead of offering some nationwide campaign, I can selectively target a discount or advertising campaign at the 20% of people who buy the most of my product, more easier and more practical.
Latest Answers