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Misaligned beliefs and wealth distribution: An agent-based analysis

Author

Listed:
  • Wonjae Lee

    (Institute for Welfare State Research/Yonsei University)

  • Bongkyoo Yoon

    (Korea National Defense University)

Abstract

This study explores how individual mental models and beliefs—when misaligned with the objective structure of wealth distribution—can influence macroeconomic inequality. Using an integrated framework that combines agent-based modeling (ABM) and system dynamics (SD), we investigate the effects of micro-level behavioral assumptions on wealth outcomes. Drawing inspiration from Michael Sandel's critique of meritocracy, we test whether cognitive biases, such as those grounded in prospect theory and meritocratic perceptions, can reshape wealth dynamics even in a purely stochastic economic environment. Our simulations are based on a modified version of Wilensky's Simple Economy model, termed the Flexible Simple Economy, which introduces agents with differing risk profiles based on behavioral economics. The findings reveal that mental models significantly affect the long-term distribution of wealth: prospect theory-based agents produce more egalitarian outcomes, whereas meritocratic beliefs tend to exacerbate inequality. These results suggest that policies targeting belief systems and behavioral expectations—rather than solely redistributive interventions—may be crucial for addressing economic inequality. By demonstrating a feedback loop between individual perceptions and systemic outcomes, this study highlights the central role of cognitive and psychological factors in shaping economic distributions.

Suggested Citation

  • Wonjae Lee & Bongkyoo Yoon, 2025. "Misaligned beliefs and wealth distribution: An agent-based analysis," Economics Bulletin, AccessEcon, vol. 45(2), pages 763-779.
    • Handle: RePEc:ebl:ecbull:eb-24-00258
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    References listed on IDEAS

    as
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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D3 - Microeconomics - - Distribution

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