Re: zero average profit

From: Ian Wright (ian_paul_wright@HOTMAIL.COM)
Date: Thu Jun 12 2003 - 16:27:14 EDT

Hello Philip,

Thanks for your reply.

I thought you were arguing against the possibility of
applying statistical mechanics to understanding certain
stationary distributions, such as income distributions.
But on a closer reading I see you were questioning
the relevance of deterministic theories. My point was only
that these distributions can be regarded as stationary for
our purposes, because empirically they seem to be constant
for long periods of time. In this case the distributions
can be understood as maximum entropy distributions,
i.e. the system has reached the most probable dynamic state
given the constraints on the system, such as fixed money,
fixed population and local money conservation.

In the case of income distribution an individual has
a finite lifespan and so I agree it is clear that their
income will not time-average to the distribution mean.
But I would like a satisfactory explanation of why the
approach adopted in "statistical mechanics of money"
generates a distribution in close agreement with reality
(ignoring, for the moment, the lower and upper tails).
I would need to look into it, but I would guess their
model is ergodic. The answer may lie in a more flexible
interpretation of the model. The particles in the model
can be interpreted as referring to roles, rather than
distinct individuals. Distinct individuals enter and
leave the system by assuming a role in the economy. The
roles do not change, and are "infinitely" lived, compared
to the individuals that assume those roles. The income
of any particular role will time-average to the
distribution mean, even if in the interpretation an
individual's income cannot. Does this make sense to you?
It seems to me that the same argument can be applied to
firms, capital etc.


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