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Nonequilibrium thermodynamics of wealth condensation

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  • Braun, Dieter

Abstract

We analyze wealth condensation for a wide class of stochastic economy models on the basis of the economic analog of thermodynamic potentials, termed transfer potentials. The economy model is based on three common transfers modes of wealth: random transfer, profit proportional to wealth and motivation of poor agents to work harder. The economies never reach steady state. Wealth condensation is the result of stochastic tunneling through a metastable transfer potential. In accordance with reality, both wealth and income distribution transiently show Pareto tails for high-income subjects. For metastable transfer potentials, exponential wealth condensation is a robust feature. For example with 10% annual profit 1% of the population owns 50% of the wealth after 50 years. The time to reach such a strong wealth condensation is a hyperbolic function of the annual profit rate.

Suggested Citation

  • Braun, Dieter, 2006. "Nonequilibrium thermodynamics of wealth condensation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 714-722.
  • Handle: RePEc:eee:phsmap:v:369:y:2006:i:2:p:714-722
    DOI: 10.1016/j.physa.2006.01.085
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    References listed on IDEAS

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    1. Drăgulescu, Adrian & Yakovenko, Victor M., 2001. "Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 213-221.
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    6. Nicola Scafetta & Sergio Picozzi & Bruce West, 2004. "An out-of-equilibrium model of the distributions of wealth," Quantitative Finance, Taylor & Francis Journals, vol. 4(3), pages 353-364.
    7. Adrian Dragulescu & Victor M. Yakovenko, 2000. "Statistical mechanics of money," Papers cond-mat/0001432, arXiv.org, revised Aug 2000.
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    Cited by:

    1. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
    2. Cristian Valeriu STANCIU & Cristi SPULBAR & Sabin RIZESCU, 2012. "Econophysics - related Remarks in Considering the Necessity of a Distribution Adjustment in the Eurozone Real Economy and Re-modeling its Financial System and Markets. Thermodynamics and Statistical P," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 2(1), pages 1-9, February.

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