Stability of Pareto-Zipf Law in Non-Stationary Economies

Details Stability of Pareto-Zipf Law in Non-Stationary Economies Stability of Pareto-Zipf Law in Non-Stationary Economies

2000-12-27

arxiv.org/abs/cond-mat/0012479v2

Physics

Condensed Matter

Statistical Mechanics

HTML, 5th Workshop on Economics and Heterogeneous Interacting Agents, Marseille June 15-17th; (Springer-Verlag 2001)

Scientific paper

Generalized Lotka-Volterra (GLV) models extending the (70 year old) logistic equation to stochastic systems consisting of a multitude of competing auto-catalytic components lead to power distribution laws of the (100 year old) Pareto-Zipf type. In particular, when applied to economic systems, GLV leads to power laws in the relative individual wealth distribution and in the market returns. These power laws and their exponent alpha are invariant to arbitrary variations in the total wealth of the system and to other endogenous and exogenous factors. The measured value of the exponent alpha = 1.4 is related to built-in human social and biological constraints.

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