College of Science

Physical, Biological, Mathematical and Computational Sciences

Physics and Astronomy Seminar

Statistical Mechanics of Money, Income, and Wealth

Thursday, March 20, 2008 - 11:30am
Speaker:
Victor Yakovenko, Univ of Maryland
Location:
Research Building, Room 302

Abstract

We propose an analogy between the thermal Boltzmann-Gibbs distribution
of energy in physics and the equilibrium probability distribution of
money in a closed economic system [1]. As a result of multiple money
transfers between interacting economic agents, the system develops an
exponential probability distribution of money, which corresponds to
the state of maximal entropy. By analyzing income data from the IRS t miss it.I’m also auditing yo$
and the Census Bureau, we found that income distribution in the USA one of my application process$
has a well-defined two-class structure [2]. The majority of
population (97-99%) belongs to the lower class characterized by the
exponential Boltzmann-Gibbs (“thermal”) distribution. The upper class (1-3% of population) has a Pareto power-law (“superthermal”) distribution, whose parameters change in time with the rise and fall of stock market. We propose a concept of equilibrium inequality in a society, based on the principle of maximal entropy, and quantitatively demonstrate that it applies to the majority of population. For more
references and computer animation video, see
http://www2.physics.umd.edu/~yakovenk/econophysics/ and review article [3].

References:

[1] A. A. Dragulescu and V. M. Yakovenko, “Statistical mechanics of
money”, European Physical Journal B 17, 723 (2000).

[2] A. C. Silva and V. M. Yakovenko, “Temporal evolution of the
thermal’ and `superthermal’ income classes in the USA during 1983-2001”, Europhysics Letters 69, 304 (2005).

[3] V. M. Yakovenko, “Econophysics, Statistical Mechanics Approach to”
 arXiv:0709.3662.

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