Wealth condensation in pareto macroeconomies

2001/01/05 by Z. Burda, D.A. Johnston, D. Johnston +9 · 7 citations
Economics, Econometrics and Finance · Physics and Astronomy · #Complex Systems and Time Series Analysis #Economic Theory and Institutions #Economic theories and models #cond-mat.stat-mech #q-fin.GN

paper · pdf · doi:10.1103/physreve.65.026102

published as Phys.Rev.E65.026102,2002 · 4 pages, 1 figure

arxiv created 2001/01/05 · openalex publication_date 2002/01/09 · arxiv updated 2009/11/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We discuss a Pareto macroeconomy (a) in a closed system with fixed total wealth and (b) in an open system with average mean wealth, and compare our results to a similar analysis in a super-open system (c) with unbounded wealth [J.-P. Bouchaud and M. Mézard, Physica A 282, 536 (2000)]. Wealth condensation takes place in the social phase for closed and open economies, while it occurs in the liberal phase for super-open economies. In the first two cases, the condensation is related to a mechanism known from the balls-in-boxes model, while in the last case, to the nonintegrable tails of the Pareto distribution. For a closed macroeconomy in the social phase, we point to the emergence of a "corruption" phenomenon: a sizeable fraction of the total wealth is always amassed by a single individual.

Citations

• The Variation of Certain Speculative Prices

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