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The Pareto principle, applied to wealth for example, says that around 20% of the population holds 80% of the wealth. Accordingly, it is said that a person's wealth follows a Pareto distribution.

I'm confused about two things:

  1. The Pareto distribution has infinite support. What is 80% of infinity? Do we consider a finite support?
  2. Doesn't the exponential distribution lead to an even more strict distribution of wealth since the exponential function decays faster than a power law?
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    $\begingroup$ It might help to think of the Pareto principle as a discretization of the Pareto distribution. $\endgroup$ – Mike Hunter Apr 18 '18 at 0:53
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    $\begingroup$ On the topic of wealth concentration question stats.stackexchange.com/q/79784/10479 can be useful. $\endgroup$ – Yves Apr 18 '18 at 9:56
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    $\begingroup$ It's 80% of the total of the outcome, not 80% of the support or range possible in principle. $\endgroup$ – Nick Cox Apr 18 '18 at 13:15
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    $\begingroup$ Total outcome could mean total income (word play here is accidental). It could mean total wealth, total pollution, total production, whatever. The principle can't apply unless it makes sense to talk about totals. $\endgroup$ – Nick Cox Apr 18 '18 at 17:26
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    $\begingroup$ @Yves That link was very helpful. I was only thinking of the Pareto distribution with shape = 1, thus infinite means. $\endgroup$ – ToniAz Apr 18 '18 at 17:36

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