# Reason behind Pareto principle

Is Mathew effect or Pareto Principle are the laws of nature like Newton law of gravitation. What are the reason behind Pareto principle?

• Can you please write these out as you understand them, to enable an exact answer? Aug 8, 2022 at 15:11
• Pareto principle in which concrete application? For every application there can be different reason, questions on stack exchange can’t be too broad. Consider picking some concrete application you are interested in
– 1muflon1
Aug 8, 2022 at 15:46

A starting point to understand physics is that is science built on experiments and models. Newton drops an apple and watches it fall. From this he created a model -- the so called Newton laws are models. The models make predictions of what would happen if, say as example, you drop an apple. The real test of a model is to make new experiments and see if the real world and the predictions correspond. We know now that the model does not work for very small things or for speeds approaching the speed of light. We have newer models, especially general relativity, which gives better predictions for some of these cases.

The very important thing to remember is that the real world does whatever it wants, it does not follow any models. All models has underlying assumptions, if you go outside them the model will not work. Again the example of things moving close to the speed of light that breaks down the Newton model.

Now, economics tries to (at least used to try to) mimic natural sciences in observing the world and from that create models. Some of these where at the time called laws, mimicing Newton. These models should then make predictions that could be tested by experiments.

So basically, to get back to Matthews or Pareto, they both build on observations. From these observations they created models. And these models make predictions. We use the models to make predictions for other cases. But the "real" world does whatever it wants and is not bound by the models. This should be described as the "limits" of the model -- when can you expect the model to give close enough predictions. Sadly, often we forget to present the limits together with the model.

Real world experience has shown that all economic models have limitations and when the situation is outside the limitations the models simply make very bad predictions.

So to really answer your question: No! Nothing in economics is laws that the world has to follow. They are simply observations made into models which sometimes gives good predictions.

--- Added after first post --- There is one important difference to be noted between physics and economics which does impact the validity of the models. In physics we assume that the objects we observe are inate objects, with no conscious minds. But in economics the objects are persons or groups of them. If the persons understand they are part of an experiment, or really for any other reason, the may change their behaviour. So in a specific context, where a certain model used to work, the model could suddenly stop to work.