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The Cities: Reactors Of Economic Transactions

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Author Info

  • Purica, Ionut

    ()
    (Institute of Economic Forecasting)

Abstract

The distribution of persons in each economy by their incomes is similar to the Maxwell-Boltzmann equilibrium distribution encountered in various physical systems. The transactions the persons are making to buy things that make them survive (in all sort of ways) are making them ‘poorer’, as they diminish the amount of money they have. The ‘work and get paid’ type of transactions are rebuilding the financial capacity of the persons. Describing this process as a diffusion equation, in a cylindrical geometry, results in a Bessel function J0(r) solution which matches the density distribution of persons in Paris (as a typical circular pattern city). The analysis of the decrease in income shows a saving/spending behavior function which saturates around 15% - 20% of the total income. This is a possible explanation of the frequent savings value of 15%-22% of GDP found in various economies. Moreover, a simple equation for the dynamic behavior of a city, on which a 365 days period is imposed, results in one week as the time after which persons have to be paid to restart transactions. The transaction cross section s is shown to have a “1/income” behavior, being a measure of the capability to make transactions, proportional to the probability of enterprises to have an income greater than a given value – this behavior has recently been shown to happen in various economies and it is known as the Zipf’s law. Using neutron physics methods in describing the economic transactions environment opens an alternative view on the forecasting models of an economic system’s behavior, and shows that the geographical dimension of a city is determined by the economic transaction behavior/environment in that city.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal of Economic Forecasting.

Volume (Year): 1 (2004)
Issue (Month): 2 (May)
Pages: 20-37

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Handle: RePEc:rjr:romjef:v:1:y:2004:i:2:p:20-37

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Related research

Keywords: economic transactions; income distribution; Maxwell-Boltzmann equilibrium distribution; urban economics;

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Cited by:
  1. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 5 Money," Working Papers tech52012, Economic Consultancy, Vocat International.
  2. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 4 Production and Entropy Processes," Working Papers tech42012, Economic Consultancy, Vocat International.
  3. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 6 Labour and Unemployment," Working Papers tech62012, Economic Consultancy, Vocat International.
  4. Chakrabarti, Anindya S. & Chakrabarti, Bikas K., 2010. "Statistical theories of income and wealth distribution," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(4), pages 1-31.
  5. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 8 Energy Resources and the Economy," Working Papers tech82012, Economic Consultancy, Vocat International.
  6. Purica, Ionut, 2012. "Control and Crisis in a City Seen as a Reactor of Economic Transactions," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 116-127, March.
  7. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 1 Introduction," Working Papers tech12012, Economic Consultancy, Vocat International.
  8. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 3 Thermodynamic Principles," Working Papers tech32012, Economic Consultancy, Vocat International.
  9. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 7 Investment and Economic Entropy," Working Papers tech72012, Economic Consultancy, Vocat International.
  10. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 9 Thermoeconomics and Sustainability," Working Papers tech92012, Economic Consultancy, Vocat International.
  11. John Bryant, 2012. "Thermoeconomics, A Thermodynamic Approach to Economics, Third Edition, Chapter 2 Stock and Flow Processes," Working Papers tech22012, Economic Consultancy, Vocat International.

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