Vilfredo Pareto
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  • 1. Vilfredo Pareto (July 15, 1848 - August 19, 1923) Anais G. Duplan
  • 2. Economic Theories  Pareto’s Principle (The 80-20 Rule)  Pareto Efficiency  Ophelmity (As opposed to utility) www.resourcesystemsconsulting.com/.../ Pareto.jpg
  • 3. Pareto’s Principle “where a large number of factors or agents contribute to a result, the majority (about 80 percent) of the result is due to the contributions of a minority (about 20 percent) of factors or agents” “Pareto Principle.” Business Dictionary. Web. 27 Sept. 2009. <http://www.businessdictionary.com>
  • 4. Pareto’s Principle There are numerous applications:  ~20% of the population owns ~80% of the nation’s wealth  ~20% of patrons account for ~80% of sales  ~20% of supplies provide for 80% of a company’s supplies Etc.
  • 5. Pareto Efficiency A situation is Pareto efficient when “no one can be made better off without making someone else worse off.” Fonseca, Gonzalo L. “Vilfredo Pareto.” New School of Economics. Web. 27 Sept. 2009. <http://homepage.newschool.edu>
  • 6. Pareto Efficiency Pareto Efficiency can be graphically represented by a production possibilities frontier: Points A, B and C are Pareto-efficient options. Point X is inefficient and point Y is impossible given current resources. wahyu.com/wp-content/ uploads/2009/01/ppf.gif
  • 7. Ophelmity It is widely held amongst economists that consumers will act in a way that increases their utility. Pareto, suggests, however, that people act based on sentiment and not at all logically.
  • 8. Ophelmity Pareto identified seven classes of sentiment that motivate people’s actions. 1. “Instinct for combinations” 2. “Preservation of aggregates” 3. “the need for expressing sentiments through external action” 4. Maintenance of societal and communal structure 5. Societies that stress individual integrity 6. “The tendency to see social events in sexual terms”
  • 9. “Instinct for combinations” This sentiment often characterizes people that are ‘progressive’ and promote social reform and most importantly, change.
  • 10. “Preservation of aggregates” This sentiment often characterizes people who promote the preservation of the status quo.
  • 11. “the need for expressing sentiments through external action” Examples of external action are religious ceremonies and displays of patriotism.
  • 12. Maintenance of societal and communal structure An example of this is self-sacrifice for the sake of family and community.
  • 13. Societies that stress individual integrity These societies are characterized by criminal justice and civil law systems.
  • 14. “The tendency to see social events in sexual terms” This is self-explanatory.