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Wealth distribution and social mobility in a simple economic model

Posted 9 months ago
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See original notebook for this post at Notebook Archive.

Much has been written lately regarding the gap between the rich and the poor. This notebook essay help explore the emergence of a wealth gap following a Pareto distribution in a very simple economic model. Although the distribution stabilizes in shape, social mobility between classes can be observed across the epochs.

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Hi Diego Thanks very much for your interesting model. I notice that in your transactCompiled function that you Unitize the individualWealth which leads to wealth always being positive. What about when people go into debt and their net wealth is negative? Would you use Sign instead of Unitize in that case?

Regards Michael

Posted 7 months ago

Hi Michael,

Yes the model was kept to be as simple as possible to observe what properties emerge. In this model the people that go broke, will not transfer funds (or buy services) but can receive assistance (provide services).

Also the total wealth is fixed in the model.

It will be for future explorations to analyze the effect of credit, wealth generation, etc. With the addition of new rules between agents and the environment.

Diego

You may find this affine wealth model that was outlined recently in Scientific American by Boghosian et al very interesting: https://www.scientificamerican.com/article/is-inequality-inevitable/. The original published article is also available at https://arxiv.org/pdf/1604.02370.pdf. Essentially they set up a simple trading model and show that after a finite number of transitions it always converges to an oligarchic state with all the wealth owned by one person. By introducing additional variables to account for debt, standardization of wealth differences and redistribution by taxation, they were able to describe accurately the Gini curves of any country. This should be equally amenable to a Mathematica representation. The takeaway is that normal capitalist systems if not regulated are inherently self-destructive. There is also a reference to another paper by Stiglitz whose work on the asymmetry of markets presaged similar results.

Regards Michael

Posted 7 months ago

I'll check it out Mike. Thanks so much for sharing.

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