Another topical colloquium here at the Kavli Institute for Theoretical Physics…

“Money, It’s a Gas”

New Developments in Statistical Mechanics of Money, Income, and Wealth (podcast, video, slides)

by Victor Yakovenko, University of Maryland.

Paper in Rev. Mod. Phys. (arXiv:0905.1518)

Money, of course, is not conserved.

It can be created, with some work,

and, famously, it can be destroyed.

Makes for interesting statistical mechanics, eh?

It turns out that putting a lower bound on net money per person was unphysical…

there is some interesting literature out there on the instability of systems with unbounded lowest state.

Hm. Actual data – in 1997 the income distribution in the US was a two piece fit, a Boltzman distribution for < $120k p.a. and Pareto (power-law [sic]) for the 3% with annual income above $120k. No evidence for a distinct middle class - in income - might be in asets. Boundary of course moves - but the low end is stable when rescaled. Power-law segment is not stable - it changes secularly. So, low end income is a diffusive process, Swedish data shows the power-law tail is capital unearned income; interstingly social transfer looks almost like a Fermi distribution, very sharp cutoff. I suspect this data comes with a narrow definition of "social transfer" - kinda pre-AIG definition. Heh. Physicists rediscover Marx. I think I need to read "Classical Econophysics", sounds amusing. Fokker-Planck eqn for diffusive income kinetics. Look for stationary solution. ` essential difference is that for small Δ$ the $Delta; is independent of $ and for high income, it is not - clearly an approximation. In F-P terms, the high end of the income distribution is non-local, changes in income are not perturbative, they scale with existing income, per unit time. I wonder what happens when the proportionality parameter goes negative - be fun to model... I have a very handy dandy Fokker-Planck code with a non-local non-perturbative term added. *“The next great depression will be from 2008 to 2023″*

p. 16 in “The Great Boom Ahead” by H.S Dent (1993)

based on demographic data.