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Econophysical visualization of Adam Smith’s invisible hand

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  • Cohen, Morrel H.
  • Eliazar, Iddo I.
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    Abstract

    Consider a complex system whose macrostate is statistically observable, but yet whose operating mechanism is an unknown black-box. In this paper we address the problem of inferring, from the system’s macrostate statistics, the system’s intrinsic force yielding the observed statistics. The inference is established via two diametrically opposite approaches which result in the very same intrinsic force: a top-down approach based on the notion of entropy, and a bottom-up approach based on the notion of Langevin dynamics. The general results established are applied to the problem of visualizing the intrinsic socioeconomic force–Adam Smith’s invisible hand–shaping the distribution of wealth in human societies. Our analysis yields quantitative econophysical representations of figurative socioeconomic forces, quantitative definitions of “poor” and “rich”, and a quantitative characterization of the “poor-get-poorer” and the “rich-get-richer” phenomena.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 392 (2013)
    Issue (Month): 4 ()
    Pages: 813-823

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    Handle: RePEc:eee:phsmap:v:392:y:2013:i:4:p:813-823

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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    Keywords: Complex systems; Intrinsic forces; Entropy; Langevin equation; Distribution of wealth; Poor-get-poorer; Rich-get-richer;

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    1. Irle, Albrecht & Milaković, Mishael & Alfarano, Simone & Kauschke, Jonas, 2008. "A Statistical Equilibrium Model of Competitive Firms," Economics Working Papers 2008,10, Christian-Albrechts-University of Kiel, Department of Economics.
    2. Alfarano, Simone & Milaković, Mishael, 2008. "Does Classical Competition Explain the Statistical Features of Firm Growth?," Economics Working Papers 2008,03, Christian-Albrechts-University of Kiel, Department of Economics.
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