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An out-of-equilibrium model of the distributions of wealth

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  • Nicola Scafetta
  • Sergio Picozzi
  • Bruce J. West
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    Abstract

    The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may be fitted by a non-monotonic function with an exponential-like tail such as a Gamma distribution, and the high wealth range, that is well fitted by a Pareto or inverse power-law function. We demonstrate that an appropriate trade-investment model, depending on three adjustable parameters associated with the total wealth of a society, a social differentiation among agents, and economic volatility referred to as investment can successfully reproduce the distribution of empirical wealth data in the low, medium and high ranges. Finally, we provide an economic interpretation of the mechanisms in the model and, in particular, we discuss the difference between Classical and Neoclassical theories regarding the concepts of {\it value} and {\it price}. We consider the importance that out-of-equilibrium trade transactions, where the prices differ from values, have in real economic societies.

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    File URL: http://arxiv.org/pdf/cond-mat/0403045
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number cond-mat/0403045.

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    Date of creation: Mar 2004
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    Handle: RePEc:arx:papers:cond-mat/0403045

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    Web page: http://arxiv.org/

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    Cited by:
    1. Yougui Wang & Ning Ding, 2005. "Dynamic Process of Money Transfer Models," Papers physics/0507162, arXiv.org.
    2. F. Chami Figueira & N. J. Moura Jr & Marcelo B. Ribeiro, 2010. "The Gompertz-Pareto Income Distribution," Papers 1010.1994, arXiv.org.
    3. Braun, Dieter, 2006. "Nonequilibrium thermodynamics of wealth condensation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 714-722.
    4. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frédéric Abergel, 2011. "Econophysics: agent-based models," Post-Print hal-00621059, HAL.

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