Oligarchy as a phase transition: the effect of wealth-attained advantage in a Fokker-Planck description of asset exchange

DOI10.1016/J.PHYSA.2017.01.071MaRDI QIDQ2145192zbMATHOpenAlexFDO

Authors Bruce M. Boghosian, Adrian Devitt-Lee, Merek Johnson, Jie Li, Jeremy A. Marcq, Hongyan Wang

Publication date 17 June 2022

Published in Physica A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1511.00770

zbMATH Keywords

Fokker-Planck equationphase transitionsasset exchange modelyard-sale modelphase coexistencewealth condensation

Mathematics Subject Classification ID

Fokker-Planck equations (35Q84) Dynamic and nonequilibrium phase transitions (general) in statistical mechanics (82C26) Stochastic methods (Fokker-Planck, Langevin, etc.) applied to problems in time-dependent statistical mechanics (82C31)

Abstract: In earlier work, we derived a nonlinear, nonlocal Fokker-Planck equation for the Yard-Sale Model of asset exchange. In the absence of redistribution, we showed that the Gini coefficient is a Lyapunov functional for this model, tending to one in the time-asymptotic limit, corresponding to maximal inequality. When a one-parameter model of redistribution is introduced, we showed that the model admits a steady state similar to Pareto's Law. In this work, we analyze the form of this distribution in greater detail, both analytically and numerically. We find that, while Pareto's Law is approximately valid for low redistribution, it gives way to something like Gibrat's Law at higher redistribution. We also prove that, while this Pareto or Gibrat behavior persists over many orders of magnitude, it ultimately gives way to gaussian decay at extremely large wealth. Following the work of Moukarzel et al., we introduce a bias in favor of the wealthier agent. We derive the corresponding modification to the Fokker-Planck equation, and we show this leads to wealth condensation when the bias exceeds a critical value. Earlier work took the bias to be a discontinuous function of the wealth differential between the two transacting agents, and reported a first-order phase transition to absolute oligarchy. By contrast, in this work we take the bias to be a continuous function of the wealth differential, and consequently we observe a second-order phase transition with a region of coexistence between the oligarch and a distribution of non-oligarchs. We additionally show that the onset of wealth condensation has a reciprocal effect on the character of the non-oligarchical part of the distribution. Specifically, we show that the above-mentioned gaussian decay at extremely large wealth is valid both above and below criticality, but degenerates to exponential decay precisely at criticality.

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Cites work

• A kinetic view of statistical physics
• An \(H\) theorem for Boltzmann's equation for the yard-sale model of asset exchange. The Gini coefficient as an \(H\) functional
• Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States
• Fokker-Planck Equation for an Inverse-Square Force

Cited in

(20)

• Bounding the approach to oligarchy in a variant of the yard-sale model
• The nonuniversality of wealth distribution tails near wealth condensation criticality
• A simple probabilistic approach of the yard-sale model
• Explicit decay rate for the Gini index in the repeated averaging model
• Investigations to the dynamics of wealth distribution in a kinetic exchange model
• Wealth redistribution with conservative exchanges
• The lattice Fokker-Planck equation for models of wealth distribution
• Stochastic Maps, Wealth Distribution in Random Asset Exchange Models and the Marginal Utility of Relative Wealth
• A kinetic description of individual wealth growth and control
• Wealth condensation and ``corruption in a toy model
• Nonlinear redistribution of wealth from a stochastic approach
• A nonstandard description of wealth concentration in large-scale economies
• The affine wealth model: an agent-based model of asset exchange that allows for negative-wealth agents and its empirical validation
• Numerical solution of the Fokker-Planck equation using physics-based mixture models
• Phase transition in the rich-get-richer mechanism due to finite-size effects
• Duality in an asset exchange model for wealth distribution
• Wealth concentration in systems with unbiased binary exchanges
• Yard-sale exchange on networks: wealth sharing and wealth appropriation
• Derivation of wealth distributions from biased exchange of money
• Condensation phenomena and Pareto distribution in disordered urn models

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