One cornerstone of measuring income inequality is Gini index, in which the income distribution of a sample is computed and tabulated, resulting a coefficient between 0 and 1.
Method: Let f be a non-decreasing income distribution function, and obtain F(x), the cumulative distribution function (using f as probability distribution function). Now draw a straight line between the origin and (max(x), max(F(x)). The ratio of the upper curve to that of the triangle is the resulting Gini index.
Back to the 20/80 thingy. Nowadays, this 20/80 rule is really pertinent in business sectors–80% of company revenues come from 20% of clients (and 20% of salespersons), 80% of income goes to 20% of employees, and, worse still, 20% of clients make 80% of complaints.
This is true for income inequalities too. Those days, we say, 80% of national income goes to 20% of people. Today, according to an article from Time magazine, it’s projected that 50% of money will be owned by 1% of the richest people by some time in the future! As it turned out…we will be expecting a terrible Gini index then–20/80 maxim guarantees a Gini coefficient of 0.6.
This totally vouches the “incantation” by the lecturer during our Economics lectures: “rich people are getting richer, while poor people are getting poorer”. Investment and speculation, through which people use money in their hands to reap even MORE money, is a lucrative game exclusively for the rich (assuming successful attempts). How about those of middle income? Struggling hard for loans and living costs, which rise precipitously nowadays. A specter for fresh grads, indeed.
No condemnation, and not blaming anyone. But the taxation loophole is also rampant in this world (which calls US government to propose tax reform). Another article (from Economics Today), which start with the catchphrase “I’m not accusing you for being illegal, but for being immoral” deals with tax avoidance, through which companies drain profit to outlets in countries with lower corporate tax as to stave off heavy taxation. Taxation, with good intention to bridge this inequality, unwittingly turns out as a blunder.
Meanwhile, while this is hardly true for score distribution in exam (since there’s an upper bound for scores), but for those with low median scores, similar maxim (with less inequality) may apply. E.g. , 33/67 for APMO 2014 (for country scores).
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Now something less didactic:
http://www.entrepreneurs-journey.com/397/80-20-rule-pareto-principle/
Looks simple, but actually profound. Dealing with optimization of the 80/20 (or 20/80, whatever) rule in our life, it covers a range of daily life topics from phone calls and time management, to contributing to the society based on your passion (input vs output). 80% of outcome, be it financial or knowledge gain, is a maxim of life for all of us. It’s inaccurate, though, to say that 80% of our life significance comes from those outputs, for inputs are equally important for us per se–how can we upgrade our outputs (quantitatively an qualitatively) without quality input for ourselves?
Yaro Stark (the author of the post) is probably a prolific writer that can write marvelous posts everyday, but I’m not. We students still need experience to reach this yardstick, and this experience must play hand-in-hand with imbibing input–reading. Summing these up, all these will mean more than 80% for you yourself. But what’s more important like the post says, follow your passion.
Finally, note that this is the first time I dabble economics in my post (like what dilettante usually does). There is, however, a special reason why I write this…(if you think that it’s because “Two Zero Eight Zero” rhymes well, or because it connotes for prosperity in Cantonese language, you’re wrong).
anzoteh96 