Data Science day 24 : Price Law Vs. Pareto Principle
Almost everyone knows about the Pareto Principle (20/80 Rule), but few people know about Price Law. From Dr.Ford’s Class last week, we learned the Price Law and I am fascinated about it.
Today we will go over the basic principle’s of these two laws and use a small python program to compare the results. Then we can choose for ourselves which rule makes more sense.
The square root of the number of people in a domain do 50% of the work.
-Derek John de Solla Price
Price’s Law specifically applies to creative work. Meaning the creation of something “new” like new products, ideas, software, music compositions, basketball shots made, artwork, etc.
if a company has 10 people then roughly 3 people do 50% of the work.
if we scale the company up to 100 people then 10 people do 50% of the work.
The Pareto principle (also known as the 80/20 rule):
for many events, roughly 80% of the effects come from 20% of the causes.
Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.
It is an axiom of business management that “80% of sales come from 20% of clients”
In athletic training, where roughly 20% of the exercises and habits have 80% of the impact.
Python code for Price Law & Pareto Law
def pareto_price(n): a=n*0.2 b=n**(0.5) print ( "Pareto Principle:", a , "% of people in company A do 80 % of the work " ) print ( "Price Law:", b , "% of people in company A do 50 % of the work " ) * company A with 100 employees; pareto_price(100)
Pareto Principle: 20.0 % of people in company A do 80 % of the work
Price Law: 10.0 % of people in company A do 50 % of the work
Personally, I think Price Law might be more accurate for some specific areas, Pareto Principle is a more general approach.
But What is the common punchline of Price Law and Pareto rule?
Be great at what we do ! At least try very hard to get into that Square Root Group!
Post class scene:
Dr.Ford: Price Law is not famous because almost people freak out when they see the square root
Philip: Does it mean of square root amount of students do 50% of the class work?
Happy Studying! 😃