Monday, April 09, 2007

Wealth inequality normal

Via Advanced nanotechnology, a report in Physorg that states:

Economists who yearn for the redistribution of wealth in an ideal society are up against history. According to a recent study, the uneven distribution of wealth in a society appears to be a universal law that holds true for economies in many different societies, from ancient Egypt to modern Japan and the U.S. This distribution may reflect a simple natural law analogous to a 100-year-old theory describing the distribution of energy in a gas.

Scientists Arnab Chatterjee and Bikas Chakrabarti from the Saha Institute of Nuclear Physics, along with Sitabhra Sinha of the Institute of Mathematical Sciences, both in India, have analyzed a variety models explaining different sets of data, and found striking similarities. The results show that the poorer majority of the population follows one distribution, while a small proportion of the wealthiest people veers off in a tail following a power-law distribution, in essence reflecting how “the rich get richer.”

The studies included large sets of data from sources such as income tax returns and net values of assets in societies including Japan, the U.S., the UK, India, and nineteenth century Europe. The data, taken from a large number of recent publications by several groups, represented a variety of different economies and stages of development. Generally, the lower 90% of the population (in terms of income) followed a log-normal distribution, characterized by an initial rapid rise in population followed by a rapid fall as income increased.

"The graph [above] shows how 90% of a population follows a log-normal wealth distribution, while the richest 10% veers off in a tail following a Pareto power law distribution. Examples of this model with data from different countries are shown at right. Credit: Chatterjee, et al."

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