Being a Certified Quality Engineer (CQE) I am well-versed in the Pareto Principle – a term coined by quality guru Joseph Juran for what’s commonly known as the 80-20 rule. When I was the team leader for manufacturing improvement projects, I’d start by categorizing causes for failure and graphing them on an ordered bar chart — most to least, while keeping a running tally on the accumulation in terms of percent. (See this primer on Pareto by the American Society of Quality.) Typically the first 20 percent of causes created 80 percent of the failures – that’s where I first focused the firepower of my quality team.
Today I learned of another concept attributed to the great Italian economist*: Pareto inefficiency. The Concise Encyclopedia of Economics explains that a “Pareto-optimal allocation of resources is achieved when it is not possible to make anyone better off without making someone else worse off.” I found this detailing by The New School which is too much for me to completely digest, but my attention was caught by this heads up:
“An economy can be Pareto-optimal, yet still ‘perfectly disgusting’ by any ethical standards.”
– Harvard Economics Professor Amartya Sen (1970)
So, while I am enticed by the idea that we can make most everyone (80 percent?) better off without making the others (20 percent?) worse off, I remain skeptical. However, having seen what a focused quality improvement team can do with the aid of Pareto charts at a micro level, I remain hopeful that some big strides can be made at the macro level for health care nationwide.