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Fokker–Planck description of wealth dynamics and the origin of Pareto's law

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  • Bruce Boghosian

    (Department of Mathematics, Bromfield-Pearson Hall, Tufts University, Medford, Massachusetts 02155, USA)

Abstract

The so-called "Yard-Sale Model" of wealth distribution posits that wealth is transferred between economic agents as a result of transactions whose size is proportional to the wealth of the less wealthy agent. In recent work [B. M. Boghosian,Phys. Rev. E89, 042804 (2014)], it was shown that this results in a Fokker–Planck equation governing the distribution of wealth. With the addition of a mechanism for wealth redistribution, it was further shown that this model results in stationary wealth distributions that are very similar in form to Pareto's well-known law. In this paper, a much simpler derivation of that Fokker–Planck equation is presented.

Suggested Citation

  • Bruce Boghosian, 2014. "Fokker–Planck description of wealth dynamics and the origin of Pareto's law," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 25(12), pages 1-8.
    • Handle: RePEc:wsi:ijmpcx:v:25:y:2014:i:12:n:s0129183114410083
    DOI: 10.1142/S0129183114410083
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    Citations

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    Cited by:

    1. Lima, Hugo & Vieira, Allan R. & Anteneodo, Celia, 2022. "Nonlinear redistribution of wealth from a stochastic approach," Chaos, Solitons & Fractals, Elsevier, vol. 163(C).
    2. Aktaev, Nurken E. & Bannova, K.A., 2022. "Mathematical modeling of probability distribution of money by means of potential formation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 595(C).
    3. David W. Cohen & Bruce M. Boghosian, 2023. "Bounding the approach to oligarchy in a variant of the yard-sale model," Papers 2310.16098, arXiv.org, revised Apr 2024.
    4. Christoph Borgers & Claude Greengard, 2023. "A new probabilistic analysis of the yard-sale model," Papers 2308.01485, arXiv.org.
    5. Sam L. Polk & Bruce M. Boghosian, 2020. "The Nonuniversality of Wealth Distribution Tails Near Wealth Condensation Criticality," Papers 2006.15008, arXiv.org, revised Oct 2021.
    6. Li, Jie & Boghosian, Bruce M. & Li, Chengli, 2019. "The Affine Wealth Model: An agent-based model of asset exchange that allows for negative-wealth agents and its empirical validation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 516(C), pages 423-442.

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