In a closed economic system, money is conserved. Thus, by analogy with energy, the equilibrium probability distribution of money must follow the exponential Boltzmann-Gibbs law characterized by an effective temperature equal to the average amount of money per economic agent. We demonstrate how the Boltzmann-Gibbs distribution emerges in computer simulations… (More)
We present the data on wealth and income distributions in the United Kingdom, as well as on the income distributions for the individual states of the USA. In all of these data, we find that the great majority of population is described by an exponential distribution, whereas the high-end tail follows a power law.
Outline • Formulation of the problem • Description of the model: multiplicative Brown-ian motion with stochastic volatility • Exact solution of the model • Analytical analysis in several asymptotic limits
This Colloquium reviews statistical models for money, wealth, and income distributions developed in the econophysics literature since the late 1990s. By analogy with the Boltzmann-Gibbs distribution of energy in physics, it is shown that the probability distribution of money is exponential for certain classes of models with interacting economic agents.… (More)
We study the probability distribution of stock returns at mesoscopic time lags (return horizons) ranging from about an hour to about a month. While at shorter microscopic time lags the distribution has power-law tails, for mesoscopic times the bulk of the distribution (more than 99% of the probability) follows an exponential law. The slope of the… (More)
This dissertation reports work where physics methods are applied to financial and economical problems. Some material in this thesis is based on 3 published papers [1, 2, 3] which divide this study into two parts. The first part studies stock market data (chapter 1 to 5). The second part is devoted to personal income in the USA (chapter 6). We first study… (More)
The terms highlighted in bold in Sec. I refer to other articles in this Encyclopedia. This paper reviews statistical models for money, wealth, and income distributions developed in the econophysics literature since late 1990s.
– Personal income distribution in the USA has a well-defined two-class structure. The majority of population (97–99%) belongs to the lower class characterized by the exponential Boltzmann-Gibbs (" thermal ") distribution, whereas the upper class (1–3% of population) has a Pareto power-law (" superthermal ") distribution. By analyzing income data for… (More)
In this short paper, we overview and extend the results of our papers [1, 2, 3], where we use an analogy with statistical physics to describe probability distributions of money, income, and wealth in society. By making a detailed quantitative comparison with the available statistical data, we show that these distributions are described by simple exponential… (More)
Probability distributions of money, income, and energy consumption per capita are studied for ensembles of economic agents. The principle of entropy maximization for partitioning of a limited resource gives exponential distributions for the investigated variables. A non-equilibrium difference of money temperatures between different systems generates net… (More)