Reproductive success and survival are influenced by wealth in human populations. Wealth is transmitted to offsprings and strategies of transmission vary over time and among populations, the main variation being how equally wealth is transmitted to children. Here we propose a model where we simulate both the dynamics of…
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48 results for “wealth equality”
Estimates returns for dollar cost averaging using geometric Brownian motion.
problem Estimating returns for dollar cost averaging investing strategy.
method Uses geometric Brownian motion and log-Normal distribution to construct a lower bound for returns. Computes parameters recursively and in closed form for dollar cost averaging. Compares to lump sum investing for matching wealth distributions.
result Probability of negative returns is less than 2.5% for 40 years of annual dollar cost averaging.
A Tale of Two (and More) Altruistsphysics.soc-ph
Model compares altruism and individualism in wealth dynamics.
problem Comparing altruism and individualism in wealth dynamics.
method Minimalist dynamical model of wealth evolution and sharing among N agents.
result Altruism leads to more global median wealth at early times but individualists accumulate most wealth in the long run.
We determine the optimal amount to invest in a Black-Scholes financial market for an individual who consumes at a rate equal to a constant proportion of her wealth and who wishes to minimize the expected time that her wealth spends in drawdown during her lifetime. Drawdown occurs when wealth is less than some fixed pro…
Model studies money exchange stability in social networks.
problem Stability and wealth equality in money exchange systems.
method Evolved Deffuant model to study money exchange.
result Asymptotic stability and wealth equality conditions identified.
Model shows significant income inequality emerges from equal opportunities in a simple economy.
problem Income inequality in a simple foraging economy.
method Minimal, endogenous model of a simple foraging economy.
result Stochastic income distributions from the model match empirical data.
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval in wealth space. To answer this question, we equate the two investment strategies and show that if the indi…
The unfair consequences of equal opportunities: comparing exchange models of wealth distributionnlin.AO
Simple agent based exchange models are a commonplace in the study of wealth distribution of artificial societies. Generally, each agent is characterized by its wealth and by a risk-aversion factor, and random exchanges between agents allow for a redistribution of the wealth. However, the detailed influence of the amoun…
This paper analyzes the equilibrium distribution of wealth in an economy where firms' productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, dynasties have linear consumption functions and government imposes taxes on capital and labour incomes and equally redistrib…
Effect of tax dynamics on linearly growing processes under stochastic resetting: a possible economic modelphysics.soc-ph
Tax dynamics affects wealth distribution in a linearly growing socio-economic model.
problem Analyzing how tax policies impact wealth distribution in a stochastic resetting system.
method Analytical and numerical study of a system of agents with linear wealth growth, stochastic resetting, and tax redistribution.
result Optimal taxation leads to economic equality, while excessive taxation results in reverse disparity.
We investigate the relation between economic growth and equality in a modified version of the agent-based asset exchange model (AEM). The modified model is a driven system that for a range of parameter space is effectively ergodic in the limit of an infinite system. We find that the belief that "a rising tide lifts all…
Flow taxes and stock taxes preserve portfolio neutrality under specific conditions.
problem Analyzing the impact of different types of taxes on portfolio choice.
method Extending the neutrality result to a full system of ownership taxes, showing how each tax modifies the drift of the wealth process.
result The combined system of taxes preserves portfolio neutrality under three conditions, and the drift-shift symmetry generalizes to a drift-shift-and-rescale symmetry.
Studies of wealth inequality often assume that an observed wealth distribution reflects a system in equilibrium. This constraint is rarely tested empirically. We introduce a simple model that allows equilibrium but does not assume it. To geometric Brownian motion (GBM) we add reallocation: all individuals contribute in…
We introduce a minimal agent-based model to qualitatively conceptualize the allocation of limited wealth among more abundant opportunities. We study the interplay of power, satisfaction and frustration in distribution, concentration, and inequality of wealth. Our framework allows us to compare subjective measures of fr…
We determine the optimal strategy for investing in a Black-Scholes market in order to maximize the probability that wealth at death meets a bequest goal , a type of goal-seeking problem, as pioneered by Dubins and Savage (1965, 1976). The individual consumes at a constant rate , so the level of wealth required fo…
The paper finds the optimal wealth growth rate in betting games.
problem Optimizing wealth growth in Kelly betting games against arbitrary hypotheses.
method Analyzes the growth rate using KL divergence and proves it equals a specific limit.
result The optimal wealth growth rate is characterized and proven to be achievable.
The paper identifies a mesoscopic market structure and uses it to improve portfolio optimization.
problem The optimal mean-variance allocation differs from the heuristic equally-weighted portfolio.
method Clustering techniques from Random Matrix Theory (RMT) to study mesoscopic market structure.
result A new wealth allocation scheme that attaches equal importance to stocks in the same community improves portfolio reliability.
Two entropy measures quantify suboptimal portfolio performance.
problem Measuring suboptimality in investment portfolios.
method Relative entropy (KL divergence) calculations.
result Suboptimal portfolios appear better than Kelly portfolios under certain measures.
For those concerned with the long-term value of their accounts, it can be a challenge to plan in the present for inflation-adjusted economic growth over coming decades. Here, I argue that there exists an economic constant that carries through time, and that this can help us to anticipate the more distant future: global…
Punctuated Equilibrium (PE) states that after long periods of evolutionary quiescence, species evolution can take place in short time intervals, where sudden differentiation makes new species emerge and some species extinct. In this paper, we introduce and study the effect of punctuated equilibrium on two different ass…
We generalize the classic Shiller cyclically adjusted price-earnings ratio (CAPE) used for prediction of future total returns of the stock market. We treat earnings growth as exogenous. The difference between log wealth and log earnings is modeled as an autoregression of order 1 with linear trend 4.6% and Gaussian inno…
New digital currency aims for equal wealth distribution.
problem Inequality in cryptocurrency wealth distribution.
method Egalitarian coin minting and joint minting across communities.
result Achieves global distributive justice in wealth distribution.
Stable cooperation emerges in fluctuating environments.
problem Evolutionary stability of cooperation in fluctuating conditions.
method Agents with fluctuating wealth share public goods, leading to cooperation.
result Agents with cooperation produce an advantage in fluctuating environments.
Wealth tax equivalent to government stake, affecting returns and portfolio choice.
problem Effect of proportional wealth tax on asset returns and portfolio choice.
method Analyzes the economic equivalence and multiplicative separability of wealth tax, deriving four main results.
result The coefficient of variation of wealth is invariant to the tax rate, and optimal portfolio weights are independent of the tax rate.
We report on results concerning a partially aggregated Stock Flow Consistent (SFC) macroeconomic model in the stationary state where the sectors of banks and firms are aggregated, the sector of households is dis-aggregated, and the probability density function (pdf) of the wealth of households is exogenous, constrained…
Investing for the Long Runq-fin.PM
This paper studies long term investing by an investor that maximizes either expected utility from terminal wealth or from consumption. We introduce the concepts of a generalized stochastic discount factor (SDF) and of the minimum price to attain target payouts. The paper finds that the dynamics of the SDF needs to be c…
The prominent inequality of wealth and income is a huge concern especially in the United States. The likelihood of diminishing poverty is one valid reason to reduce the world's surging level of economic inequality. The principle of universal moral equality ensures sustainable development and improve the economic stabil…
We model a closed economic system with interactions that generates the features of empirical wealth distribution across all wealth brackets, namely a Gibbsian trend in the lower and middle wealth range and a Pareto trend in the higher range, by simply limiting the an agents' interaction to only agents with nearly the s…
Combines absolute and relative wealth in portfolio optimization with power utility functions.
problem Optimizing portfolios with both absolute and relative wealth considerations.
method Integrates power utility functions for absolute and relative wealth, considering multiple benchmarks.
result Obtains an explicit solution for portfolio optimization combining absolute and relative wealth.
Study optimal retirement time and consumption with habitual persistence.
problem Understanding retirement consumption patterns with habitual persistence.
method Established concise habitual evolution, used martingale and duality methods.
result Optimal consumption declines sharply at retirement but excess consumption increases.
Nonequilibrium Thermodynamics of Wealth Condensationphysics.soc-ph
We analyze wealth condensation for a wide class of stochastic economy models on the basis of the economic analog of thermodynamic potentials, termed transfer potentials. The economy model is based on three common transfers modes of wealth: random transfer, profit proportional to wealth and motivation of poor agents to …
New proof shows local wealth condensation in economic models with biases.
problem Economic models with biases leading to wealth condensation.
method Elementary proof based on properties of wealth distributions.
result Local wealth condensation observed in models with wealth or poverty advantages.
Short proof shows wealth condensation in trading model.
problem Proving wealth condensation in trading model.
method Short proof extending to modified model with wealth advantage.
result Wealth condensation occurs almost surely in modified model.
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) 042…
Microeconomic Structure determines Macroeconomic Dynamics. Aoki defeats the Representative Agentq-fin.GN
Masanao Aoki developed a new methodology for a basic problem of economics: deducing rigorously the macroeconomic dynamics as emerging from the interactions of many individual agents. This includes deduction of the fractal / intermittent fluctuations of macroeconomic quantities from the granularity of the mezo-economic …
Study explores how wealth dynamics change with preferential interactions in kinetic exchange models.
problem Investigate how preferential interactions affect wealth dynamics and distributions in kinetic exchange models.
method Conducted Monte Carlo simulations to explore two types of preferential interactions: one with random selection and another with wealth difference constraint.
result Emergence of quasi-oligarchic societies and segregation into economic classes observed in preferential interactions.
Some general features of kinetic multi-agent models are reviewed, with particular attention to the relation between the agent saving propensities and the form of the equilibrium wealth distribution. The effect of a finite cutoff of the saving propensity distribution on the corresponding wealth distribution is studied. …
A wealth-process set is abstractly defined to consist of nonnegative càdlàg processes containing a strictly positive semimartingale and satisfying an intuitive re-balancing property. Under the condition of absence of arbitrage of the first kind, it is established that all wealth processes are semimartingales and that t…
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing literature on wealth distribution connects the origins of wealth inequality with a v…
Study shows bifurcation in optimal retirement planning.
problem Optimal consumption and retirement planning model.
method Cobb-Douglas utility, simple model with wealth bifurcation.
result Critical wealth level leads to a continuum of retirement trajectories.
Analyzes how economic policies affect wealth distribution in Bitcoin token economy.
problem Impact of economic policies on wealth distribution in token economies.
method Eliminated noise in wealth distribution data using macroeconomic and microeconomic time series. Causality analysis between BIPs and wealth distribution data.
result Proposed a structure for economic policy taxonomy in token economies.
Inequality persists as wealth concentrates in a few agents.
problem Widening wealth gap in society.
method Modeling wealth exchanges and proposing regulatory policies.
result Simple policies can redistribute wealth and prevent inequality.
Pareto's law: a model of human sharing and creativitycond-mat.stat-mech
A computational model for the distribution of wealth among the members of an ideal society is presented. It is determined that a realistic distribution of wealth depends upon two mechanisms: an asymmetric flux of wealth in trading transactions that advantages the poorer of the two traders and a non-stationary creation …
Wealth Distributions in Asset Exchange Modelsphysics.soc-ph
How do individuals accumulate wealth as they interact economically? We outline the consequences of a simple microscopic model in which repeated pairwise exchanges of assets between individuals build the wealth distribution of a population. This distribution is determined for generic exchange rules --- transactions that…
Study shows wealth distribution tails near criticality are not universal.
problem Understanding wealth distribution tails near criticality.
method Generalized affine wealth model with nonconstant redistribution.
result Exponential tail near criticality is not universal; depends on redistribution policy.
The higher-end tail of the wealth distribution in India is studied using recently published lists of the wealth of richest Indians between the years 2002-4. The resulting rank distribution seems to imply a power-law tail for the wealth distribution, with a Pareto exponent between 0.81 and 0.92 (depending on the year un…
Almost universally, wealth is not distributed uniformly within societies or economies. Even though wealth data have been collected in various forms for centuries, the origins for the observed wealth-disparity and social inequality are not yet fully understood. Especially the impact and connections of human behavior on …
Study extends wealth tax neutrality framework to heterogeneous investors.
problem Analyzing wealth tax neutrality in populations with varying return-generating ability.
method Extended Fokker-Planck framework to heterogeneous investors, deriving extended Fokker-Planck equation.
result Proportional wealth tax no longer neutral due to varying return-generating ability, leading to different real incidence and wealth distribution changes.