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Economic Science: From the Ideal Gas Law Economy to Piketty and Beyond

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  • Song, Edward

Abstract

I start with income and wealth inequality data from the Congressional Budget Office (CBO) and Thomas Piketty, and propose approaches taken from science (for example, behavioral evolution theory,) that might be useful in explaining the data and forecasting future economic events. Using a modified production function developed by Robert Solow, I also explore redistributive effects of income when biological restrictions lead to minimum expenditure requirements and satiation conditions. I conclude that redistributing income from the wealthy to the poor can have counter-cyclical effects in recessions. Moreover, redistribution in the form of human capital can have particularly large positive economic growth effects. Finally, I explain how financial crisis may lead to large economic downturns by proposing a model where productive capital formation is dependent on debt financing.

Suggested Citation

  • Song, Edward, 2014. "Economic Science: From the Ideal Gas Law Economy to Piketty and Beyond," MPRA Paper 57391, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57391
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    References listed on IDEAS

    as
    1. Congressional Budget Office, 2011. "Trends in the Distribution of Household Income Between 1979 and 2007," Reports 42729, Congressional Budget Office.
    2. Kausik Gangopadhyay, 2013. "Interview with Eugene H. Stanley," IIM Kozhikode Society & Management Review, , vol. 2(2), pages 73-78, July.
    3. Masanao Aoki & Hiroshi Yoshikawa, 2012. "Non-self-averaging in macroeconomic models: a criticism of modern micro-founded macroeconomics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 7(1), pages 1-22, May.
    4. Masanao Aoki & Hiroshi Yoshikawa, 2007. "Non-Self-Averaging in Macroeconomic Models: A Criticism of Modern Micro-founded Macroeconomics," CIRJE F-Series CIRJE-F-493, CIRJE, Faculty of Economics, University of Tokyo.
    5. Chatterjee, Satyajit & Ravikumar, B., 1999. "Minimum Consumption Requirements: Theoretical And Quantitative Implications For Growth And Distribution," Macroeconomic Dynamics, Cambridge University Press, vol. 3(4), pages 482-505, December.
    6. Congressional Budget Office, 2011. "Trends in the Distribution of Household Income Between 1979 and 2007," Reports 42729, Congressional Budget Office.
    7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    8. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Macroeconomics; Behavioral Macroeconomics; Econophysics.;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Y90 - Miscellaneous Categories - - Other - - - Other

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