Statistical mechanics of money

By A. Drăgulescu, Victor M. Yakovenko. 2000

727 citations recorded by the source corpus.

Abstract: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 of economic models. Then we consider a thermal machine, in which the difference of temperatures allows one to extract a monetary profit. We also discuss the role of debt, and models with broken time-reversal symmetry for which the Boltzmann-Gibbs law does not hold. The instantaneous distribution of money among the agents of a system should not be confused with the distribution of wealth. The latter also includes material wealth, which is not conserved, and thus may have a different (e.g. power-law) distribution.

Subfields: Condensed Matter Physics, Economics and Econometrics, Statistical and Nonlinear Physics

View Paper: https://www.semanticscholar.org/paper/a4d1b6156ee678e89ed61bf3a6a6715d3d8c449a

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In Condensed Matter Physics

In Economics and Econometrics

In Statistical and Nonlinear Physics

Citations in the corpus

Econophysics: Empirical facts and agent-based models (2009, unknown): “For the limiting value of αm in the utility function (i.e. αm → 0 which implies λ → 0), the money transfer equation describing the random sharing of money without saving is obtained, which was studied by Dragulescu and Yakovenko (2000) mentioned earlier.”
On a Kinetic Model for a Simple Market Economy (2004, methodology): “Income data from developed countries show Pareto-like behaviors with order 1 exponents for large values of incomes (USA ∼ 1.6, Japan ∼ 1.8 − 2.2 [ 11 ]).”
Asymptotic Flocking Dynamics for the Kinetic Cucker-Smale Model (2010, background): “Emergent economic behaviors, such as distribution of wealth in a modern society [12, 20], or the formation of choices and opinions [21, 32], are also challenging problems studied in recent years in which emergence of universal equilibria is shown.”
Kinetic models of conservative economies with wealth redistribution (2009, methodology): “A second more popular approach relies on methods borrowed from statistical mechanics for particle systems [18, 12, 6, 5, 17, 25, 9, 11].”
Fokker–Planck equations in the modeling of socio-economic phenomena (2017, background): “Economics is, by far, one of the human behaviors to which methods borrowed from statistical mechanics for particle systems have been systematically applied[16, 29, 30, 31, 32, 36, 42, 63, 67, 90] (cf.”
On Steady Distributions of Kinetic Models of Conservative Economies (2008, methodology): “Econophysics, Boltzmann equation, wealth and income distributions, Pareto distribution.”
Heterophilious Dynamics Enhances Consensus (2013, background): “Self-organized dynamics is found in many other areas, from pedestrian and traffic dynamics [64, 92], social networks and economics [48, 66, 69, 77, 83], complex networks [5, 44, 91], and opinion dynamics [7, 23, 42, 49, 50, 63, 75, 105, 110, 109], all the way to applications in marketing [2, 3], pro”
Universal patterns of inequality (2009, methodology): “The exponential distribution of money (6) was proposed in [3], albeit without explicit discussion of the chemical potential, as well as in [4].”
Econophysics review: II. Agent-based models (2011, unknown): “Other models describing wealth exchange have been formulated using matrix theory (Gupta 2006), the master equation (Bouchaud and Mezard 2000, Dragulescu and Yakovenko 2000, Ferrero 2004), the Boltzmann equation approach (Dragulescu and Yakovenko 2000, Slanina 2004, Cordier et al. 2005, Repetowicz…”