Income Distribution Dynamics of Economic Systems

Abstract

What is econophysics? If it is just the use of physical methods to investigate economic problems, In what way is econophysics different, if at all, from orthodox mainstream economics? If it is really different from mainstream neoclassical economic thought, Is econophysics just another nonmainstream, or heterodox, approach to economic problems? Can econophysics contribute to the understanding of economic phenomena in a different way than economics itself, no matter if this understanding comes from the orthodox or heterodox traditions? Answering these questions form the subject of the present chapter. The next sections will present a discussion on the similarities and differences between economics and econophysics from the methodological and practical viewpoints. For the benefit of readers not entirely familiar with physical terminology, there will be first a very short summary about the origins of modern physics followed by a similarly short overview on the history of economic thought.

The effects of taxes on wealth inequality in Artificial Chemistry models of economic activity

“…Other models considering wealth taxes have been discussed in the literature, e.g. [ 41 , 42 ], see also the discussion in [ 22 , p.177].…”

“…Thus it is generally akin to a flow, or change of state of an entity, and carries the unit of currency/time. In the economic literature, this is sometimes mixed, which results in some confusion as critically remarked by [ 22 ]. While we have to keep wealth W ( t ) and income I ( t ) strictly separate, on account of their dimensional difference, there nevertheless is a relationship between the two quantities: where I ( t ) is the instantaneous income at time t and W ( t ) is the accumulated wealth at time t , accumulated from a start time t 0 when W ( t 0 ) = 0.…”

Development of Econophysics: A Biased Account and Perspective from Kolkata

“…The steady state distribution becomes initially Gamma-like but crossing over to Pareto-like power-law decay when traders have non-uniform saving propensities [ 10 ]. The saving propensity magnitudes determine the most-probable income (wealth) and the income (wealth) crossover point for Pareto tail of the distribution (see References [ 63 , 66 , 67 ] for details).…”

“…Neither are there designated institutions on these interdisciplinary fields, nor separate departments or centers of studies for instance. Of course, there have been several positive and inspiring attempts and approaches from both economics and finance side (see, e.g., References [ 96 , 97 ], along with a number of those [ 66 , 67 , 98 , 99 , 100 ] from physics, which have already been appreciated in the literature). Indeed, the thesis [ 101 ] in August 2018, Department of History and Philosophy of Science, University of Cambridge, by financial economist Christophe Schinckus (one of the co-editors of this special issue), says that “In order to reconstruct the subfield of econophysics, I started with the group of the most influential authors in econophysics and tracked their papers in the literature using the Web of Science database of Thomson-Reuters (The sample is composed of: Eugene Stanley, Rosario Mantegna, Joseph McCauley, Jean-Pierre Bouchaud, Mauro Gallegati, Benoît Mandelbrot, Didier Sornette, Thomas Lux, Bikas Chakrabarti and Doyne Farmer).…”

Variation of Gini and Kolkata Indices with Saving Propensity in the Kinetic Exchange Model of Wealth Distribution: An Analytical Study

“…Patriarca, Chakraborti, and Kaski [9] assumed that the steady-state wealth distribution in the CC model could be represented well by a Gamma function P n (x) and compared that with the Monte Carlo (MC) results for P (x). There have been extensive studies and also applications of this Gamma form for the income or wealth distribu-tion P (x) in the KE models of markets (see for example [10,11] for important recent applications and discussion on the approximation). Noting that for λ − → 1 both the KE distribution P (x) and its Gamma approximation P n (x) (with n − → ∞) becomes Dirac δ(x − x 0 ) function with x 0 = 1.…”