An economically realistic asset exchange model

Despite their highly idealized nature, certain agent-based models of asset exchange, proposed for the most part by physicists and mathematicians, have been shown to exhibit remarkable agreement with empirical wealth distribution data. While this agre- ement is comforting, there is widespread sentiment that further progress will require a detailed under- standing of the connection between these idealized models and the more realistic microeconomic models of exchange used by economists. In this paper, we examine that connection for a three-parameter asset exchange model, the Affine Wealth Model (AWM), that has demonstrated fraction-of-a-per cent agreement with empirical wealth data. We compare certain properties of this model with those of three great milestones of twentieth century economics, namely (i) Expected Utility Theory, (ii) General Equilibrium Theory and (iii) Prospect Theory. We find that the phenomenology exhibited by the AWM is fundamentally incompatible with Expected Utility Theory and General Equilibrium Theory, but very similar to that exhibited by Prospect Theory. Based on these observations, we argue that AWM transactions are, in a particular sense, an approximation to those described by Prospect Theory, and that Prospect Theory provides the sought-for connection between econophysics and microeconomics, at least for the topic of wealth distribution. This article is part of the theme issue 'Kinetic exchange models of societies and economies'.

A poor agent and subsidy: an investigation through CCM model

In this work, the dynamics of agents below a threshold line in some modified CCM type kinetic wealth exchange models are studied. These agents are eligible for subsidy as can be seen in any real economy. An interaction is prohibited if both of the interacting agents' wealth fall below the threshold line. A walk for such agents can be conceived in the abstract gain-loss space (GLS) and is macroscopically compared to a lazy walk. The effect of giving subsidy once to such agents is checked over, giving repeated subsidy from the point of view of the walk in GLS. It is seen that the walk has more positive drift if the subsidy is given once. The correlations and other interesting quantities are studied. This article is part of the theme issue 'Kinetic exchange models of societies and economies'.

Study of taxes, regulations and inequality using machine learning algorithms

Genetic machine learning (ML) algorithms to train agents in the Yard-Sale model proved very useful for finding optimal strategies that maximize their wealth. However, the main result indicates that the more significant the fraction of rational agents, the greater the inequality at the collective level. From social and economic viewpoints, this is an undesirable result since high inequality diminishes liquidity and trade. Besides, with very few exceptions, most agents end up with zero wealth, despite the inclusion of rational behaviour. To deal with this situation, here we include a taxation-redistribution mechanism in the ML algorithm. Previous results show that simple regulations can considerably reduce inequality if agents do not change their behaviour. However, when considering rational agents, different types of redistribution favour risk-averse agents, to some extent. Even so, we find that rational agents looking for optimal wealth can always arrive to an optimal risk, compatible with a particular choice of parameters, but increasing inequality. This article is part of the theme issue 'Kinetic exchange models of societies and economies'.

Kinetic model for international trade allowing transfer of individuals

We propose a kinetic model to describe trade among different populations, living in different countries. The interaction rules are assumed depending on the trading propensity of each population and also on non-deterministic (random) effects. Moreover, the possible transfers of individuals from one country to another are also taken into account, by means of suitable Boltzmann-type operators. Consistent macroscopic equations for number density and mean wealth of each country are derived from the kinetic equations, and the effects of transfers on their equilibrium values are commented on. Finally, a suitable continuous trading limit is considered, leading to a simpler system of Fokker-Planck-type kinetic equations, with specific contributions accounting for transfers. This article is part of the theme issue 'Kinetic exchange models of societies and economies'.

Wealth Rheology

We study wealth rank correlations in a simple model of macroeconomy. To quantify rank correlations between wealth rankings at different times, we use Kendall's τ and Spearman's ρ, Goodman-Kruskal's γ, and the lists' overlap ratio. We show that the dynamics of wealth flow and the speed of reshuffling in the ranking list depend on parameters of the model controlling the wealth exchange rate and the wealth growth volatility. As an example of the rheology of wealth in real data, we analyze the lists of the richest people in Poland, Germany, the USA and the world.

Turing instability in an economic-demographic dynamical system may lead to pattern formation on a geographical scale

Spatial distribution of the human population is distinctly heterogeneous, e.g. showing significant difference in the population density between urban and rural areas. In the historical perspective, i.e. on the timescale of centuries, the emergence of densely populated areas at their present locations is widely believed to be linked to more favourable environmental and climatic conditions. In this paper, we challenge this point of view. We first identify a few areas at different parts of the world where the environmental conditions (quantified by the temperature, precipitation and elevation) show a relatively small variation in space on the scale of thousands of kilometres. We then examine the population distribution across those areas to show that, in spite of the approximate homogeneity of the environment, it exhibits a significant variation revealing a nearly periodic spatial pattern. Based on this apparent disagreement, we hypothesize that there may exist an inherent mechanism that may lead to pattern formation even in a uniform environment. We consider a mathematical model of the coupled demographic-economic dynamics and show that its spatially uniform, locally stable steady state can give rise to a periodic spatial pattern due to the Turing instability, the spatial scale of the emerging pattern being consistent with observations. Using numerical simulations, we show that, interestingly, the emergence of the Turing patterns may eventually lead to the system collapse.

Interdisciplinary education and authentic development

Whereas economists do not traditionally address social harmony, and sociologists or political scientists do not usually tackle economic development, the interaction of social harmony and economic development has recently become an object of intense concern. In their aim to foster evolved rather than uprooted cultural values, the authors of this research note suggest an educational approach to promote the concept and the implementation of what they refer to as authentic development. They propose interdisciplinary courses that include notions of history, sociology and economy. Their methodology is based on two main resources: (1) a textbook providing a broad historical survey tracing the development of 28 nations in the Americas; and (2) analytical parameters related to the extent of social interaction and income generation.  Students carry out digital and group research and elaborate the conditions that generate social harmony, economic well-being and a better balance between them. The authors have already piloted their educational approach in four secondary schools in Antigua, Guatemala with 50 students aged 17-19. Most of them are now enrolled at local universities, but the impact of this course on their performance will only emerge over time.

Household Wealth in China

With new nationwide longitudinal survey data now available from the China Family Panel Studies (CFPS), we study the level, distribution, and composition of household wealth in contemporary China. We find that the wealth Gini coefficient of China was 0.73 in 2012. The richest 1 percent owned more than one-third of the total national household wealth, while the poorest 25 percent owned less than 2 percent. Housing assets, which accounted for over 70 percent, were the largest component of household wealth. Finally, the urban-rural divide and regional disparities played important roles in household wealth distribution, and institutional factors significantly affected household wealth holdings, wealth growth rate, and wealth mobility.

Piketty in the long run

I examine the idea of 'the long run' in Piketty (2014) and related works. In contrast to simplistic interpretations of long-run models of income- and wealth-distribution Piketty (2014) draws on a rich economic analysis that models the intra- and inter-generational processes that underly the development of the wealth distribution. These processes inevitably involve both market and non-market mechanisms. To understand this approach, and to isolate the impact of different social and economic factors on inequality in the long run, we use the concept of an equilibrium distribution. However the long-run analysis of policy should not presume that there is an inherent tendency for the wealth distribution to approach equilibrium.

Wealth distribution and collective knowledge: a Boltzmann approach

We introduce and discuss a nonlinear kinetic equation of Boltzmann type that describes the influence of knowledge in the evolution of wealth in a system of agents that interact through the binary trades, an equation first introduced by Cordier et al. (2005 J. Stat. Phys. 120, 253-277 (doi:10.1007/S10955-005-5456-0)). The trades, which include both saving propensity and the risks of the market, are here modified in the risk and saving parameters, which now are assumed to depend on the personal degree of knowledge. The numerical simulations show that the presence of knowledge has the potential to produce a class of wealthy agents and to account for a larger proportion of wealth inequality.

Assessing gaps and poverty-related inequalities in the public and private sector family planning supply environment of urban Nigeria

Nigeria is the most populous country in Africa, and its population is expected to double in <25 years (Central Intelligence Agency 2012; Fotso et al. 2011). Over half of the population already lives in an urban area, and by 2050, that proportion will increase to three quarters (United Nations, Department of Economic and Social Affairs, Population Division 2012; Measurement Learning & Evaluation Project, Nigerian Urban Reproductive Health Initiative, National Population Commission 2012). Reducing unwanted and unplanned pregnancies through reliable access to high-quality modern contraceptives, especially among the urban poor, could make a major contribution to moderating population growth and improving the livelihood of urban residents. This study uses facility census data to create and assign aggregate-level family planning (FP) supply index scores to 19 local government areas (LGAs) across six selected cities of Nigeria. It then explores the relationships between public and private sector FP services and determines whether contraceptive access and availability in either sector is correlated with community-level wealth. Data show pronounced variability in contraceptive access and availability across LGAs in both sectors, with a positive correlation between public sector and private sector supply environments and only localized associations between the FP supply environments and poverty. These results will be useful for program planners and policy makers to improve equal access to contraception through the expansion or redistribution of services in focused urban areas.