The social architecture of capitalism
AbstractA dynamic model of the social relations between workers and capitalists is introduced. The model self-organises into a dynamic equilibrium with statistical properties that are in close qualitative and in many cases quantitative agreement with a broad range of known empirical distributions of developed capitalism, including the power-law firm size distribution, the Laplace firm and GDP growth distribution, the lognormal firm demises distribution, the exponential recession duration distribution, the lognormal–Pareto income distribution, and the gamma-like firm rate-of-profit distribution. Normally these distributions are studied in isolation, but this model unifies and connects them within a single causal framework. The model also generates business cycle phenomena, including fluctuating wage and profit shares in national income about values consistent with empirical studies. The generation of an approximately lognormal–Pareto income distribution and an exponential–Pareto wealth distribution demonstrates that the power-law regime of the income distribution can be explained by an additive process on a power-law network that models the social relation between employers and employees organised in firms, rather than a multiplicative process that models returns to investment in financial markets. A testable consequence of the model is the conjecture that the rate-of-profit distribution is consistent with a parameter-mix of a ratio of normal variates with means and variances that depend on a firm size parameter that is distributed according to a power-law.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 346 (2005)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Econophysics; Macroeconomics; Economic distributions;
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
- Robert Axtell, 1999. "The Emergence of Firms in a Population of Agents," Working Papers 99-03-019, Santa Fe Institute.
- Ian Wright, 2003.
"The duration of recessions follows an exponential not a power law,"
cond-mat/0311585, arXiv.org, revised Mar 2011.
- Wright, Ian, 2005. "The duration of recessions follows an exponential not a power law," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 345(3), pages 608-610.
- Gaffeo, Edoardo & Gallegati, Mauro & Palestrini, Antonio, 2003. "On the size distribution of firms: additional evidence from the G7 countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 117-123.
- L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
- Giulio Bottazzi & Angelo Secchi, 2006.
"Explaining the distribution of firm growth rates,"
RAND Journal of Economics,
RAND Corporation, vol. 37(2), pages 235-256, 06.
- Fujiwara, Yoshi & Di Guilmi, Corrado & Aoyama, Hideaki & Gallegati, Mauro & Souma, Wataru, 2004.
"Do Pareto–Zipf and Gibrat laws hold true? An analysis with European firms,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 335(1), pages 197-216.
- Yoshi Fujiwara & Corrado Di Guilmi & Hideaki Aoyama & Mauro Gallegati & Wataru Souma, 2003. "Do Pareto-Zipf and Gibrat laws hold true? An analysis with European Firms," Papers cond-mat/0310061, arXiv.org, revised Nov 2003.
- William Cook & Paul Ormerod, 2002. "Power Law Distribution of the Frequency of Demises of U.S Firms," Papers cond-mat/0212186, arXiv.org.
- Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
- Canning, D. & Amaral, L. A. N. & Lee, Y. & Meyer, M. & Stanley, H. E., 1998. "Scaling the volatility of GDP growth rates," Economics Letters, Elsevier, vol. 60(3), pages 335-341, September.
- Cockshott, Paul & Zachariah, David, 2013.
"Conservation laws, financial entropy and the eurozone crisis,"
Economics Discussion Papers
2013-36, Kiel Institute for the World Economy.
- Cockshott, Paul & Zachariah, David, 2014. "Conservation laws, financial entropy and the Eurozone crisis," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 8(5), pages 1-55.
- Paul Cockshott & David Zachariah, 2013. "Conservation laws, financial entropy and the Eurozone crisis," Papers 1301.5974, arXiv.org.
- Lengnick, Matthias & Krug, Sebastian & Wohltmann, Hans-Werner, 2013.
"Money creation and financial instability: An agent-based credit network approach,"
Economics - The Open-Access, Open-Assessment E-Journal,
Kiel Institute for the World Economy, vol. 7(32), pages 1-44.
- Lengnick, Matthias & Krug, Sebastian & Wohltmann, Hans-Werner, 2012. "Money creation and financial instability: An agent-based credit network approach," Economics Working Papers 2012-15, Christian-Albrechts-University of Kiel, Department of Economics.
- Lengnick, Matthias & Krug, Sebastian & Wohltmann, Hans-Werner, 2012. "Money creation and financial instability: An agent-based credit network approach," Economics Discussion Papers 2012-61, Kiel Institute for the World Economy.
- Cottrell, Allin & Cockshott, W. Paul, 2007. "Against Hayek," MPRA Paper 6062, University Library of Munich, Germany.
- Lengnick, Matthias, 2013.
"Agent-based macroeconomics: A baseline model,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 86(C), pages 102-120.
- Wright, Ian, 2008.
"Implicit Microfoundations for Macroeconomics,"
Economics Discussion Papers
2008-41, Kiel Institute for the World Economy.
- Wright, Ian, 2009. "Implicit Microfoundations for Macroeconomics," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(19), pages 1-27.
- Thomas Lux, 2006. "Applications of Statistical Physics in Finance and Economics," Working Papers wpn06-07, Warwick Business School, Finance Group.
- Willis, Geoff, 2011.
"Why money trickles up – wealth & income distributions,"
30851, University Library of Munich, Germany.
- Geoff Willis, 2011. "Why Money Trickles Up - Wealth & Income Distributions," Papers 1105.2122, arXiv.org, revised May 2011.
- Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
- Lavička, H. & Lin, L. & Novotný, J., 2010. "Employment, Production and Consumption model: Patterns of phase transitions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(8), pages 1708-1720.
- Victor M. Yakovenko, 2012. "Applications of statistical mechanics to economics: Entropic origin of the probability distributions of money, income, and energy consumption," Papers 1204.6483, arXiv.org.
- Ian Wright, 2004. "A conjecture on the distribution of firm profit," Papers cond-mat/0407687, arXiv.org, revised Mar 2011.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.