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Article: Management accounting--decision management: Grahame Steven explains how the identification of Vilfredo Pareto's "predictable imbalance" can help a business to improve its performance.(study notes)
- Article from:
- Financial Management (UK)
- Article date:
- March 1, 2009
- Author:
CopyrightCOPYRIGHT 2009 Chartered Institute of Management Accountants (CIMA). This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The Italian economist Vilfredo Pareto derived what has become known as Pareto's law from his studies of income distribution in a number of countries at the turn of the 20th century. He found that roughly 80 per cent of the wealth was held by 20 per cent of the people and that the number of people holding a particular level of wealth fell by a constant factor each time that level was doubled. While his findings were taken as proof by some people of the inequities of capitalism, Pareto predicted that his law of "predictable imbalance" would also apply to communist societies. Studies conducted in the Soviet Union during the Seventies confirmed the accuracy of his forecast.
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