When More Is Not Better

Chapter 3

Toward a Pareto Economy

The Gaussian distribution is by no means the only distribution of economic outcomes imaginable. At the turn of the twentieth century, Italian economist Vilfredo Pareto noted that, at the time, 20 percent of Italian families owned 80 percent of Italy’s land.¹ Most of the remaining 80 percent, who owned no land, farmed the land owned by their rich and often oppressive landlords. The Pareto distribution named in his honor—or Power Law distribution to most statisticians—takes the shape of the curve seen in figure 3-1.

On this curve the many poor Italians with little to no land are on the left side and the very few superrich, landowning families are in the long tapered end to the right.

Along with a very different ...