Pareto Principle: An Argument Against Socialism by James Perotti

Most people understand the downfalls of the state controlling the means of production and wealth distribution in a society.  Every economic, social, and ethical argument against socialism has already been made, and while many of these arguments are both sound and true, the comprehensive theory against socialism is rarely discussed.  Chances are, you probably haven’t heard about this theory: The Pareto Principle.

Before delving into the nitty gritty of how the Pareto Principle is an argument for capitalism, we must first understand how important this principle is, and how it represents reality.  The Pareto Principle is a simple mathematical concept, in which roughly 80% of effects come from 20% of the causes. Unsurprisingly, the principle is also referred to as the 80/20 rule. For example, in both the world economy and the US economy, the top 20% control roughly 80% of the wealth; Microsoft discovered that fixing the top 20% of the most reported software bugs eliminated 80% of all the errors and crashes; in the MLB, a statistic called WAR (wins above replacement) calculated that 20% of the players won 80% of the games; 20% of criminals commit 80% of the crimes; 20% of any company’s products account for 80% of their sales; 20% of all power factories produce 80% of the pollution; 20% of pea pods produce 80% of all peas; 80% of complaints come from 20% of the customers.  Evidently, the Pareto Principle shows up everywhere and obviously represents a fundamental reality in the world. Without this principle, chaos and instability become present. When it comes to economics and a fair society, this theory is no different. With postmodernism gaining traction, people are forgetting that there is no such thing as equality, and no one is created equal. Some people have more grit than others, some are smarter than others, some are more attractive than others, some give more effort than others. Treating people as equals economically just does not represent reality. It wouldn’t be fair if Red Sox all star J.D. Martinez had to distribute his 43 home runs evenly throughout the MLB. The players who ride the bench for the Cincinnati Reds certainly didn’t hit those home runs for him or with him.  Similarly, taxing the hell out of the wealthiest class to distribute wealth back to the bottom is simply unfair and foolish. The cream of the crop always rises to the top in free markets. We would be paralyzing society’s best individuals if we fought vehemently for economic equality. Without intervention, the 80/20 rule creates natural order in all multifaceted systems, and manifests into Adam Smith’s invisible hand when referring to capitalism.

In summation, setting up society and understanding fundamental reality is so complex, but with the Pareto Principle, we understand how order is created out of something purely chaotic like a macroeconomic free market.  Anyone who ignores this reality when setting up society will find no end to his troubles, and will ultimately fail, which is why socialism is never sustainable. It is an ignorant idea and incomplete theory.

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