Temporal evolution of the “thermal” and “superthermal” income classes in the USA during 1983–2001

Silva, A. Christian; Yakovenko, Victor M.

doi:10.1209/epl/i2004-10330-3

Cited by 170 publications

(204 citation statements)

References 26 publications

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“…Usually the income distributions are taken as inequality indicators [94] whereas here insight to the evolving distribution of wealth is drawn from the law of energy dispersal. Earlier these skewed distributions and their cumulative curves viewed as power-laws have been obtained using statistical physics concepts [95], in particular self-similarity in scaling [28], or using Tsallis' entropy [96], but not explicitly from the 2 nd law, although maximum principles have been understood as being in control [87]. When an economy is growing, the distribution shifts higher in energy because during development new more productive mechanisms are adopted and infrastructure is built, while less productive processes and outdated traditions are abandoned (Figure 2).…”

Section: Economic Stability Fluctuations and Oscillationsmentioning

confidence: 99%

Economies Evolve by Energy Dispersal

Annila

Salthe

2009

Entropy

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Economic activity can be regarded as an evolutionary process governed by the 2 nd law of thermodynamics. The universal law, when formulated locally as an equation of motion, reveals that a growing economy develops functional machinery and organizes hierarchically in such a way as to tend to equalize energy density differences within the economy and in respect to the surroundings it is open to. Diverse economic activities result in flows of energy that will preferentially channel along the most steeply descending paths, leveling a non-Euclidean free energy landscape. This principle of ‗maximal energy dispersal', equivalent to the maximal rate of entropy production, gives rise to economic laws and regularities. The law of diminishing returns follows from the diminishing free energy while the relation between supply and demand displays a quest for a balance among interdependent energy densities. Economic evolution is dissipative motion where the driving forces and energy flows are inseparable from each other. When there are multiple degrees of freedom, economic growth and decline are inherently impossible to forecast in detail. Namely, trajectories of an evolving economy are non-integrable, i.e. unpredictable in detail because a decision by a player will affect also future decisions of other players. We propose that decision making is ultimately about choosing from various actions those that would reduce most effectively subjectively perceived energy gradients.

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Section: Economic Stability Fluctuations and Oscillationsmentioning

confidence: 99%

Economies Evolve by Energy Dispersal

Annila

Salthe

2009

Entropy

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“…Similarly to the case of firms, most models of the power law distribution for personal income and wealth are based on random growth processes [99][100][101]. However, a role for someway predefined economic roles, especially within firms, is likely.…”

Section: Random Growthmentioning

confidence: 99%

Ecological Econophysics for Degrowth

Pueyo

2014

Sustainability

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This paper outlines a synthesis of ecological economics with econophysics and other complexity approaches to economics. Arguably, the resulting "ecological econophysics" will be scientifically sounder than mainstream economics and much better suited to addressing a major challenge of our times: the development of democratically-based policies to reduce economic throughput to an environmentally sustainable level without triggering economic crises and without excluding part of the world's population, i.e., to implement degrowth. Degrowth will need major structural changes, which leads us to question whether there are limits to the malleability of the economic system's architecture. A fundamental limit will be encountered if, as suggested by the physics of complexity, long-lasting complex systems always occur midway between an ordered and a disordered state. There is much evidence that this hypothesis holds and that the current economic system satisfies this condition. However, this does not mean that the problems posed by this system should be unavoidable. Ecological econophysics gives clues to identifying alternative economic systems that would also function between order and chaos, but which would have radically different implications for environmental sustainability and social justice.

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“…The demand side is characterized in this model by an ensemble of agents who are interested in purchasing the consumer durable, while the total number of agents is denoted as the market potential M. The personal income distribution can be divided into a lower class contribution (lognormal/exponential distribution) and an upper class (Pareto distribution) [8][9][10]. We assume that, in difference to luxurious goods, the upper class can always afford the good, indicated by the contribution M U .…”

Section: The Modelmentioning

confidence: 99%

The Experience Curve and the Market Size of Competitive Consumer Durable Markets

Kaldasch

2012

SSRN Journal

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An evolutionary model of the product life cycle is applied to derive the experience curve and the market size of (expensive) durable goods. The experience (learning) curve suggests that the real costs per unit decrease with an increasing cumulative output (Henderson's law). Based on the idea that in a competitive market firms are forced to pass cost advantages on to the price, the evolutionary model suggests that the mean price and also the mean costs are governed by an exponential decline with time. Simultaneously the mean price evolution satisfies Henderson's law. The market size is defined here by the number of active firms. The market size is shown to follow the total market revenue if the latter exhibits fast variations, else the size is nearly constant. A comparison with an empirical investigation confirms the model predictions.

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Temporal evolution of the “thermal” and “superthermal” income classes in the USA during 1983–2001

Cited by 170 publications

References 26 publications

Economies Evolve by Energy Dispersal

Economies Evolve by Energy Dispersal

Ecological Econophysics for Degrowth

The Experience Curve and the Market Size of Competitive Consumer Durable Markets

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