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The Principle of Social Scaling

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  • Paulo dos Santos

    () (Department of Economics, New School for Social Research)

Abstract

This paper motivates the content and analytical significance of processes of “social scaling” in competitive economic settings, postulating a general Principle that describes the regulations they impose on the functioning of certain economic systems. Economic competition often defines behavioral relationships between individual measures of certain variables and average or social measures of themselves. These relationships ensure a number of behaviorally significant economic variables are socially scaled measures. Individual values of such variables are subject to systemic interdependences, which may take the form of aggregate first-moment constraints on their distributions. The paper shows how processes of social scaling in capital and labor markets can help account for the observed frequency distributions of wage income and Tobin’s q, suggesting such processes may be a pervasive in economic systems. Finally, the paper’s discussion illustrates and motivates the distinctive usefulness of statistical-mechanical methods in Economics, both in defining new conceptualizations of the relationship between individual agencies and aggregate regulations in economic systems, and in the development of logically robust observational methods in economic analysis.

Suggested Citation

  • Paulo dos Santos, 2016. "The Principle of Social Scaling," Working Papers 1606, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1606
    as

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    File URL: http://www.economicpolicyresearch.org/econ/2016/NSSR_WP_062016.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
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    2. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
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    5. Arrow, Kenneth J, 1994. "Methodological Individualism and Social Knowledge," American Economic Review, American Economic Association, vol. 84(2), pages 1-9, May.
    6. Alfarano, Simone & Milakovic, Mishael, 2008. "Does classical competition explain the statistical features of firm growth?," Economics Letters, Elsevier, vol. 101(3), pages 272-274, December.
    7. Shaikh, Anwar & Papanikolaou, Nikolaos & Wiener, Noe, 2014. "Race, gender and the econophysics of income distribution in the USA," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 415(C), pages 54-60.
    8. Markus P. A. Schneider, 2013. "Evidence for Multiple Labor Market Segments: An Entropic Analysis of US Earned Income, 1996-2007," Journal of Income Distribution, Ad libros publications inc., vol. 22(2), pages 60-98, June.
    9. Silva, A. Christian & Prange, Richard E. & Yakovenko, Victor M., 2004. "Exponential distribution of financial returns at mesoscopic time lags: a new stylized fact," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 227-235.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Social Scaling; Economic Distribution; Statistical Mechanics; Observational Economics;

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other

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