The Pareto Threshold
Those who cannot remember the past are condemned to repeat it.
- George Santayana 1863 – 1952
Human history is a depressing cycle of repetition. Societies/economies rise; societies/economies crumble. The patterns of these cycles are virtually identical, yet living through thousands of years of this “history”, we have learned nothing.
Indeed, our understanding (and thus our “memory”) of history is worse than useless, as it is characterized by fundamental misconceptions which guarantee the repetition of this Cycle of Futility.
Ironically, just a few years before Santayana’s time, an economist (and Jack-of-all-trades) named Vilfredo Pareto was born (1848 – 1923) in Italy. Pareto himself was not a “thinker” he was an observer. What Pareto observed around him was that he quite often encountered bizarre “80/20 splits” in the allocation of a particular resource (or resources), where a 20% minority held an (inverse) 80% share – while the 80% majority held only a 20% share.
Pareto remains blameless in History. He merely reported what he observed. It was the idiot-economists who came after him who took his data and managed to pervert it into the most-preposterous conclusion which one could draw from Pareto’s observations: the “Pareto Principle”.
The economic zealots who propound this pseudo-science assert that this grossly disproportional allocation of resources is, in fact, an “equilibrium”. Thus the supporters of this Great Myth assert that such an unequal, 80/20 allocation of resources is actually (supposedly) appropriate, and thus the Pareto Principle is often expressed instead as “Pareto equilibrium.”
Within these Zealots is a cadre of extremists who take this idiocy an order of magnitude further. Not only do they presume these 80/20 splits to represent “equilibrium”, but they actually insist that such a division is optimal. Thus to the extreme Zealots, the Pareto Principle is simply the expression of “Pareto optimality”; that an unequal 80/20 division of resources is not merely appropriate – but it is an ideal to which we should aspire.
Clearly none of these economic Zealots ever heeded the warning of Santayana, and learned their history. If they had done so (with any diligence), then undoubtedly they would have come across another “principle”, nearly 2,000 years older than the observation put forth by Pareto, from a Greek philosopher named Plutarch, who was living in Rome at the time.
The Plutarch Principle was not only considered “wisdom” in its own time (and thus has survived 2,000 years), it has been confirmed again and again and again since then by our Cycle of Futility:
“An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.”
Two thousand years ago, it was old news that a grossly disproportionate allocation of wealth was not “optimal”, but rather suicidal. Two thousand years ago, it was old news that the Pareto Principle was nothing more than a recipe for disaster...
Full commentary: http://www.bullionbullscanada.…6295-the-pareto-threshold
