Bulletin of the American Physical Society
2006 APS March Meeting
Monday–Friday, March 13–17, 2006; Baltimore, MD
Session A33: Focus Session: Econophysics |
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Sponsoring Units: GSNP Chair: Mark Newman, University of Michigan Room: Baltimore Convention Center 336 |
Monday, March 13, 2006 8:00AM - 8:36AM |
A33.00001: Statistical Mechanics of Money, Income, and Wealth Invited Speaker: In Ref.\ [1], we proposed an analogy between the exponential Boltzmann-Gibbs distribution of energy in physics and the equilibrium probability distribution of money in a closed economic system. Analogously to energy, money is locally conserved in interactions between economic agents, so the thermal Boltzmann-Gibbs distribution function is expected for money. Since then, many researchers followed and expanded this idea [2]. Much work was done on the analysis of empirical data, mostly on income, for which a lot of tax and census data is available. We demonstrated [3] that 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. 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 proposed a concept of equilibrium inequality in a society, based on the principle of maximal entropy, and quantitatively demonstrated that it applies to the majority of population. Income distribution in other countries shows similar patterns. For more references, see http://www2.physics.umd.edu/$\sim$yakovenk/econophysics.html. \\ References: \\ {} [1] A.~A.~Dragulescu and V.~M.~Yakovenko, ``Statistical mechanics of money'', Eur.~Phys.~J.~B \textbf{17}, 723 (2000). \\ {} [2] ``Econophysics of Wealth Distributions'', edited by A.~Chatterjee, S.~Yarlagadda, and B.~K.~Chakrabarti, Springer, 2005. \\ {} [3] A.~C.~Silva and V.~M.~Yakovenko, ``Temporal evolution of the `thermal' and `superthermal' income classes in the USA during 1983-2001'', Europhys.~Lett.\ \textbf{69}, 304 (2005). [Preview Abstract] |
Monday, March 13, 2006 8:36AM - 8:48AM |
A33.00002: A study of personal income distributions in Australia and Italy Anand Banerjee, Victor Yakovenko The study of income distribution has a long history. A century ago, the Italian physicist and economist Pareto proposed that income distribution obeys a universal power law, valid for all time and countries. Subsequent studies proved that only the top 1-3\% of the population follow a power law. For USA, the rest 97-99\% of the population follow the exponential distribution [1]. We present the results of a similar study for Australia and Italy. \\ {} [1] A.~C.~Silva and V.~M.~Yakovenko, Europhys.~Lett.\textbf{69}, 304 (2005). [Preview Abstract] |
Monday, March 13, 2006 8:48AM - 9:00AM |
A33.00003: An out-of-equilibrium price model for Gamma-Pareto distributions of wealth and income Nicola Scafetta, Sergio Picozzi, Bruce J. West The distribution of wealth/income among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth/income shows an abrupt change between the low-medium range, that may be fitted by a non-monotonic function with an exponential-like tail such as a Gamma distribution, and the high wealth range, that is well fitted by a Pareto or inverse power-law function. We demonstrate that an appropriate trade-investment model, depending on three adjustable parameters associated with the total wealth of a society, a social differentiation among agents, which causes the prices to be out-of-equilibrium, and economic volatility referred to as investment can successfully reproduce the distribution of empirical wealth/income data in the low, medium and high ranges. [Preview Abstract] |
Monday, March 13, 2006 9:00AM - 9:12AM |
A33.00004: Boltzmann--Gibbs distribution of fortune and broken time reversible symmetry in econodynamics Ping Ao Within the framework of stochastic differential equations it is demonstrated that the existence of Boltzmann--Gibbs type distribution in economy is independent of the time reversal symmetry in econodynamics. Both power law and exponential distributions can be accommodated naturally. The demonstration is based on a mathematical structure discovered during a study in gene regulatory network dynamics. Further possible analogy between equilibrium economy and thermodynamics is explored, suggesting that statistical physics methods can indeed play an important role in the study of complex systems. \newline \newline Ref: \newline 1. P. Ao, \textbf{Commun. Nonlinear Sci. Num. Sim. (online September 8, 2005)} Arxiv: physics/0506103 [Preview Abstract] |
Monday, March 13, 2006 9:12AM - 9:24AM |
A33.00005: The Inequality Process as a Wealth Maximizing Process John Angle The Inequality Process (IP) is a particle system scattering a positive quantity, wealth. The IP is abstracted from social theory which sets tests for it. It is a jump process in which wealth exchange is driven by a discrete 0,1 uniform random variable. The losing particle, $i$, gives up a fixed proportion of its wealth, $\omega_i$. IP win/loss asymmetry is clearer than in more recent generalizations of the ideal gas model, some isomorphic to the IP up to its stochastic driver. The IP's asymmetry acts like Maxwell's Demon transferring wealth from particles with larger $\omega_i$ to smaller $\omega_i$, those more productive of wealth. While the stationary distribution of the IP is not a gamma pdf, a gamma pdf approximation to it is found from the IP's solution. This gamma pdf model is tightly constrained, expressed in terms of IP parameters, and fits both the IP's stationary distribution and empirical distributions. Annualizing the IP's wealth allows it to model the distribution of wage income conditioned on education in the U.S. 1961-2001. Smaller $\omega_i$ fit the distribution of the more educated, as hypothesized. The IP is also confirmed by the dynamics of individual wage incomes and wealth distributions over techno-cultural evolution. The smaller the harmonic mean of the $\omega_i$'s, the more active the IP's Demon, the less noise and the more $\omega_i$ signal there is in wealth, the ``cooler'' the process. The process models the emergence of skill as a society's primary form of wealth and the reduction in competition that accompanies it. To appear in Physica A. [Preview Abstract] |
Monday, March 13, 2006 9:24AM - 9:36AM |
A33.00006: Econo-Thermodynamics: The Nature of Economic Interactions Juergen Mimkes Physicists often model economic interactions like collisions of atoms in gases: by interaction one agent gains, the other loses. This leads to a Boltzmann distribution of capital, which has been observed in wealth distributions of different countries. However, economists object: no economic agent will attend a market in which he gets robbed! This conflict may be resolved by writing basic laws of economics into terms of calculus. In these terms the daily struggle for survival of all economic systems turns out to be a Carnot cycle that is driven by energy: heat pumps and economic production depend on oil, GNP and oil consumption run parallel for all countries. Motors and markets are based on the same laws of calculus (macro-economics) and statistics (micro-economics). Economic interactions mean exploiting a third party (nature) and are indeed close to robbing! A baker sells bread to his customers, but the flour comes from nature. Banks sells loans to investors, but the money comes from savers. Econo-thermodynamics is a thrilling new interdisciplinary field. [Preview Abstract] |
Monday, March 13, 2006 9:36AM - 9:48AM |
A33.00007: Correlation between the Gini index and the observed prosperity Igor Mazin It has been well established by computer simulations that a free, unregulated market economy (in the simplest model of a yard sale economy) is unstable and collapses to a singular wealth distribution. It is now a common procedure in computer simulations to stabilize a model by favoring the poorer partner in each transaction, or by redistributing the wealth in the society in favor of the poorer part of the population. Such measures stabilize the economy and create a stationary state with a Gini index $G<1$. This suggests that there is some optimal range of the Gini index which is indicative of a healthy and dynamic economy. To verify this assumption, I plotted the PPP (parity purchasing power) for all countries in the world against their Gini indices, and found that they all (with only 2 outliers) fall into one of two groups: ``wealthy'' countries with PPP$>$\$10,000/year, and the rest. The former are characterized by $G=0.29\pm 0.07$, and the latter by a uniform distribution of all possible $G$s. This means that an enforced wealth redistribution is not a moral act of social consciousness, but a necessary precondition for a sustainable economy. The existence of an optimal $G$ is illustrated through a simple model of a yard sale economy with taxation. [Preview Abstract] |
Monday, March 13, 2006 9:48AM - 10:00AM |
A33.00008: Reflection on econophysics by a statistician Samuel Kotz Some comments on econophysics from a statistician steeped in income distributions and power law. The pioneering work T. Lux and J. Angle will be discussed, and its connection with the classical approach to income distributions and inequalities will be analized. Special attention will be devoted to tracing the changes in the income inequalities in Russian Federation during the transiton period 1992--2004. [Preview Abstract] |
Monday, March 13, 2006 10:00AM - 10:12AM |
A33.00009: Proposal of a New SI Base Unit for Value. An Hedonic Estimation of the Physical Purchasing Power (PhPP) of Money. Steivan Defilla Hitherto, the purchasing power of money, i.e. its transaction value, has been measured in terms of inflation index numbers and consumer baskets. Consumer baskets are variable phenomena and their use as measurement units for value confuses the measuring with the measurand. We propose an invariant numeraire, or value unit, based on the market value of a Planck energy (1956 MJ). Planck units form a natural system of units independent of any civilization. The hedonic estimation of the PhPP of a currency differentiates energy by product as well as by thermodynamic quality (exergy). Following SI rules, we propose to name the value unit walras (Wal) in honour of the economist Leon Walras (1834 - 1910). One Wal can also be interpreted as the minimum cost of physiological life of a reference person during one year. The study uses official disaggregated Swiss Producer and Consumer Price Index data and estimates the PhPP of the Swiss franc in 2003. [Preview Abstract] |
Monday, March 13, 2006 10:12AM - 10:24AM |
A33.00010: Wealth per capita in inhomogeneous wealth distributions model of self-organized hierarchies Marcelo Castillo-Mussot, Gerardo Naumis, Luis Perez, Gerardo Vazquez-Fonseca A simple model explained the emergence of social hierarchies through fighting and randomness, and a phase transition between an egalitarian and an hierarchical society was found when the past fights are not forgotten fast enough [1]. Here we include in the model inhomogeneous wealth (water, food, oil, etc.) in the 2D lattice. Agents move randomly except when a preferred rich rich site is nearby. A strong dependence of the global inequality on the distribution of wealth is found, specially in the case when the density of the agents is small. Therefore, the overall phase diagram for the first-order transition between egalitarian and hierarchical societies does change much by inclusion of preferred sites. For low densities of agents with a poor distribution of wealth, it is found that the wealth per capita does not reach its maximum value due to lack of global information of the agents. \\ {} [1] A. O. Sousa and D. Stauffer, Int. J. Mod. Phys. C, \textbf{11}, 1063 (2000). [Preview Abstract] |
Monday, March 13, 2006 10:24AM - 10:36AM |
A33.00011: A Statistical Approach to Project Cost Estimation: Modeling the Stochastic Component of the Projected Cost Doru Velea, Anatoley Zheleznyak Based on the assumption that there is always a stochastic component in project cost data, we developed a statistical methodology for the analysis of the project cost fluctuations. We considered as examples two different AF projects: a relatively short term project in the framework of the Earned Value Model, and a long-term project in the framework of the traditional accounting. For both data sets we extracted the stochastic component of the project cost fluctuations and found the appropriate statistical description. We calculated the variance on different time scales and established the presence of two statistical regimes: uncorrelated with linear time dependence of variance, and correlated where variance saturates as a function of time. We applied the Ornstein-Uhlenbeck stochastic model and calculated the time scaled parameter of the so-called return force, which characterizes the time period it typically takes for the project cost to return to the estimated value. We predicted the project cost for the near term future and defined the respective cost margins. We formulated criteria for the identification of the potential cost overruns. [Preview Abstract] |
Monday, March 13, 2006 10:36AM - 10:48AM |
A33.00012: Statistical Anomalies of the Project Cost and Stock Market Fluctuations Anatoley Zheleznyak, Doru Velea Based on the analysis of fluctuations of both project cost and stock market data, we identified some conditions when the statistics significantly depart from conventional distributions such as Heston and Ornstein-Uhlenbeck. Considering the Probability Distribution Functions (PDF) for subsets of fluctuations with the initial conditions corresponding to the extreme fluctuations, we found that the bell-shaped PDFs are gradually distorted and approach the form that is better approximated by the uniform distribution, once the magnitude of initial fluctuations is increased. Similar statistical anomalies were found from analysis of the stock market time series intra-day data. Considering the PDFs for different volumes, we found the similar distortion of the statistical regimes when the large volume transactions occur on the short time intervals, which potentially could be used as a viable tool for identifications of the extreme fluctuations. We believe that the fluctuations could be divided into two classes: the first class covering the majority of fluctuations that obeys the conventional statistical models, and the second class of the fluctuations having the entirely different statistical behavior and possibly belonging to non-Markov processes. [Preview Abstract] |
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