Economic inequality from a statistical physics point of view
Abstract: Inequality is an important and seemingly inevitable aspect of the human society. Various manifestations of inequality can be derived from the concept of entropy in statistical physics. In a stylized model of monetary economy, with a constrained money supply implicitly reflecting constrained resources, the probability distribution of money among the agents converges to the exponential Boltzmann-Gibbs law due to entropy maximization. Our empirical data analysis shows that income distributions in the USA, European Union, and other countries exhibit a well-defined two-class structure. The majority of the population (about 97%) belongs to the lower class characterized by the exponential ("thermal") distribution, which we recently observed in the data for 67 countries around the world. In contrast, the upper class (about 3% of the population) is characterized by the Pareto power-law ("superthermal") distribution, and its share of the total income expands and contracts dramatically during booms and busts in financial markets. Globally, energy consumption (and CO2 emissions) per capita around the world shows decreasing inequality in the last 30 years and convergence toward the exponential probability distribution, as expected from the maximal entropy principle. All papers are available at http://physics.umd.edu/~yakovenk/econophysics/.
Bio: Victor Yakovenko is a Professor of Physics at the University of Maryland. He is a Fellow of the American Physical Society and was a recipient of the Sloan Research Fellowship and the Packard Fellowship in Science and Engineering. He is a theoretical physicist with more than 30 years of research in electronic properties of various materials. In addition, he joined the emergent econophysics movement in 2000 by publishing a paper "Statistical Mechanics of Money". Over the next twenty years, his ideas became increasingly popular and initiated an expanding wave of follow-up papers by many researchers around the world. The work by Yakovenko has also been covered in the media, such as Science magazine, New York Times Magazine, American Scientist, New Scientist, Science TV Channel, Australian Financial Review, and the UK Engineering and Technology Magazine. Yakovenko has given more than 100 invited talks on this subject. He was a recipient of a grant from the Institute for New Economic Thinking.
Victor Yakovenko graduated from Moscow Physical-Technical Institute with M.S. in 1984 and completed his Ph.D. at the Landau Institute for Theoretical Physics, Moscow in 1987, where he was subsequently employed as a Research Scientist. In 1991 he became a Postdoc at the Department of Physics, Rutgers University. In 1993 he joined the University of Maryland, College Park as Assistant Professor and became Associate Professor in 1999 and Full Professor in 2004.