Fokker-Planck Description of Wealth Dynamics and the Origin of Pareto's Law

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.

arXiv comment6 pages

References in corpus (1)

• The Kinetics of Wealth and the Origin of the Pareto Law

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• Extended Yard Sale model of wealth distribution on Erdős-Rényi random networks