{"title":"Fokker-Planck Description of Wealth Dynamics and the Origin of Pareto's Law","authors":"B. Boghosian","doi":"10.1142/S0129183114410083","DOIUrl":null,"url":null,"abstract":"The so-called \"Yard-Sale Model\" of wealth distribution posits that wealth is transferred between economic agents as a result of transactions whose size is proportional to the wealth of the less wealthy agent. In recent work [B.M. Boghosian, \"Kinetics of Wealth and the Pareto Law,\" {\\it Phys. Rev. E} {\\bf 89} (2014) 042804], it was shown that this results in a Fokker-Planck equation governing the distribution of wealth. With the addition of a mechanism for wealth redistribution, it was further shown that this model results in stationary wealth distributions that are very similar in form to Pareto's well known law. In this paper, a much simpler derivation of that Fokker-Planck equation is presented.","PeriodicalId":250928,"journal":{"name":"arXiv: General Finance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2014-07-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"18","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"arXiv: General Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1142/S0129183114410083","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 18
Abstract
The so-called "Yard-Sale Model" of wealth distribution posits that wealth is transferred between economic agents as a result of transactions whose size is proportional to the wealth of the less wealthy agent. In recent work [B.M. Boghosian, "Kinetics of Wealth and the Pareto Law," {\it Phys. Rev. E} {\bf 89} (2014) 042804], it was shown that this results in a Fokker-Planck equation governing the distribution of wealth. With the addition of a mechanism for wealth redistribution, it was further shown that this model results in stationary wealth distributions that are very similar in form to Pareto's well known law. In this paper, a much simpler derivation of that Fokker-Planck equation is presented.
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