[OPE-L] conference on income distributions

From: Ian Wright (iwright@GMAIL.COM)
Date: Wed Feb 09 2005 - 13:00:20 EST


Hi all,

A conference on explaining the two-class income distribution of
capitalist economies, scheduled for March:

http://www-cmp.saha.ernet.in/~econophys/conf/index.html

Some of the abstracts make for interesting reading (see link on LHS).

High-level points:
1. There are now a number of quite similar models for the complete
income distribution. They all share the approach of modelling income
distribution in terms of statistical mechanics, and view the economy
in a state of stochastic, not deterministic, equilibrium. This is
quite different from traditional economic modelling approaches, and in
my opinion underscores the importance of the pioneering work of
Farjoun and Machover.
2. The empirical evidence of a two-class income structure is very
strong, the lower regime (wage income) characterised by an exponential
distribution, the upper-regime characterised by a Pareto distribution
(property income).
3. The explanation for the two regimes is handled in a superficial way
by some of the researchers. For example, some of the theories proposed
explain the Pareto regime arising from multiplicative returns to
investments (e.g., a growing portfolio whose growth is proportional to
its size). Let's call this the investment explanation. Obviously this
occurs, but in my opinion it remains at the surface. A deeper
explanation is that the Pareto regime can form absent stock markets
due to the undemocratic distribution of firm revenues within
capitalist firms, i.e. exploitation. Let's call this the exploitation
explanation. The Pareto (power-law) regime then forms due to
capitalist owners exploiting workers in firms whose sizes follow a
power-law. For example, Jurgen Mimkes abstract leans towards an
exploitation explanation, whereas Souma & Nirei's leans towards an
investment explanation. The usual kinds of arguments over income
distribution reappear in econophysics, but in different forms.
4. I think this kind of work demonstrates the importance of taking a
statistical equilibrium approach to economics.

Best wishes to all!

-Ian.


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