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A Trade-Investment Model for Distribution of Wealth

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  • Nicola Scafetta
  • Bruce J. West
  • Sergio Picozzi

Abstract

Econophysics provides a strategy for understanding the potential mechanisms underlying the anomalous distribution of wealth found in real societies. We present a computational nonlinear stochastic model for the distribution of wealth that depends upon three parameters and two mechanisms: trade and investment. To avoid economic paradoxes, the trade mechanism is assumed to be related to the poorer trader's wealth and to statistically advantage the poorer of the two traders. The two mechanisms together are shown to generate a distribution that reproduces the full range of the empirical wealth distribution, and not only the inverse power-law tail that Pareto found in western societies at the end of the 19th century.

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  • Nicola Scafetta & Bruce J. West & Sergio Picozzi, 2003. "A Trade-Investment Model for Distribution of Wealth," Papers cond-mat/0306579, arXiv.org, revised Sep 2003.
    • Handle: RePEc:arx:papers:cond-mat/0306579
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    1. Ofer Malcai & Ofer Biham & Peter Richmond & Sorin Solomon, 2002. "Theoretical Analysis and Simulations of the Generalized Lotka-Volterra Model," Papers cond-mat/0208514, arXiv.org.
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    Cited by:

    1. Josip Stepanic & Hrvoje Stefancic & Vinko Zlatic, 2006. "Social Free Energy of a Pareto-Like Resource Distribution," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 4(2), pages 136-143.

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