Pareto distribution

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The Pareto distribution, named after the Italian polymath Vilfredo Pareto, is a probability distribution in the form of a power law that is used to describe social, quality control, scientific, geophysical, actuarial, and many other types of observable phenomena; the principle 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. Empirical observation has shown that the Pareto distribution fits a wide range of cases, including natural phenomena and human activities. The Pareto principle or "80:20 rule" stating that 80% of outcomes are due to 20% of causes was named in honour of Pareto. Pareto distributions with a shape value (α) of log 4 5 ≈ 1.16 exhibit the Pareto principle.

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