From: Ian Wright (ian_paul_wright@HOTMAIL.COM)
Date: Fri Jun 06 2003 - 19:24:00 EDT
Hello Rakesh, >While Kalecki establishes some interesting accounting identities and shows >that investment determines savings rather than vice versa, the analysis >leaves open too many questions. An analysis solely at the level of money quantities certainly does leave a lot out. But I wonder whether more can be deduced from "pure money" models than might first seem apparent. This was the interest behind my original question. For example, I like very much the paper "Statistical Mechanics of Money" by two physicists working in the field of econophysics: http://www2.physics.umd.edu/~yakovenk/papers/EPJB-17-723-2000.pdf Their model is extremely simple: N agents, M money, random encounters of pairs of agents who randomly transfer an amount of money between them. That's it. It turns out that the statistical equilibrium of the system generates an exponential income distribution (lots of agents with not much money, and a decreasing number of agents with a great deal). This distribution is in empirical agreement with a large section of the income distribution in the US, as measured from tax returns (the model breaks down for capitalist incomes, which are better fitted by a power law, not an exponential law, which is interesting in itself). Their model is exactly analoguous to a perfect gas, in which elastic collisions between molecules transfer energy between them. So this work is very much in the tradition of Farjoun and Machover, who also apply statistical mechanics to political economy. I wonder why the physicists' very simple model is able to capture something essential about the economy, and whether this kind of modelling approach can be extended. Maybe Kalecki's "accounting identities" are deterministic versions of the same approach of rigorously applying the principle of conservation of money. There's a lot of sense in applying this principle because it is a real behavioural invariant, unlike preferences which in aggregate are random. Only the insane destroy money. (Actually, two UK avant-garde artists once burnt a million pounds in front of the gathered press to protest the commodification of art, but these events have very low probability!) -Ian. _________________________________________________________________ MSN 8 helps eliminate e-mail viruses. Get 2 months FREE*. http://join.msn.com/?page=features/virus
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