In any society, most
wealth is owned by a small population. Why is it so ?
The law of distribution of wealth is known as Pareto law.There have been
several efforts
to understand the origin of this law. It has been
argued that agents in market interact in
the same way as the gas particles interact in a box;
wealth/energy is neither created nor
destroyed during interaction/trading. It is only redistributed.
Corresponding distribution,
thus, is expected to be exponential (from equilibrium
theory). In fact, when income
distribution is caculated (in USA), 97% show
this behaviour (the red curve above,
in log scale). How ever, the rich (about 3%) follow a
power law.
Chatterjee, Chakrabarti and Manna,
introduced the concept of
savings into this ideal-gas like
models,
where agents do not trade a fraction of their wealth for
trading. This model, where
savings
propensity is random, shows (numerically) scale free
distribution of wealth.
An exact solution of this model has been obtained recently (see ref
below). Ref :
