Statistical mechanics approach to the probability distribution of money

Details Statistical mechanics approach to the probability distribution of money Statistical mechanics approach to the probability distribution of money

2010-07-28

arxiv.org/abs/1007.5074v1

"New Approaches to Monetary Theory: Interdisciplinary Perspectives", ed. by Heiner Ganssmann, ISBN 978-0-415-59525-4, Routledg

Economy

Quantitative Finance

Statistical Finance

11 pages, 4 figures. This is an invited chapter to the book "New approaches to monetary theory: Interdisciplinary perspectives

Scientific paper

This Chapter reviews statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents in payment for goods and services. Starting from the initially equal distribution of money, the system spontaneously develops a highly unequal distribution of money analogous to the Boltzmann-Gibbs distribution of energy in physics. Boundary conditions are crucial for achieving a stationary distribution. When debt is permitted, it destabilizes the system, unless some sort of limit is imposed on maximal debt.

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