Essays, Posts & Presentations

Wealth distribution and social mobility in a simple economic model

Diego Zviovich

Author

Diego Zviovich

Title

Wealth distribution and social mobility in a simple economic model

Description

Wealth inequality and social mobility are two emerging properties in this simple economic model.

Wealth distribution and social mobility in a simple economic model

Wealth inequality and social mobility are two emerging properties in this simple economic model.

Diego Zviovich, Oct. 23, 2018

Much has been written lately regarding the gap between the rich and the poor. This notebook essay help explore the emergence of a wealth gap following a pareto distribution in a very simple economic model. Although the distribution stabilizes in shape, social mobility between classes can be observed across the epochs.

The economic model

The economic model that we’ll simulate is very simple: each agent, as long as they have resources available, we’ll proceed to give one unit of wealth to another agent at random. way to start into your exposition is to explain how the basic idea works. If it is a formula, provide the math. If it is an algorithm, describe the steps. If it is an experiment, set up assumptions and provide definitions.

Our model will include 400 individuals (agents), starting with 50 units of wealth each. We’ll track each agents wealth across 10^4 units of time (ticks). Let’s create the simulated economy:

In[]:=

individualWealth=NestList[transactCompiled,individualWealth,ticks];

Wealth Distribution

We can explore how the wealth distribution evolves over time. We can observe that the model starts with a uniform distribution, morphs to a student distribution and that finally settles to a pareto type.

The following code allows to explore how the wealth is distributed among the individuals :

In[]:=

ManipulateShowHistogramindividualWealth[[n]],

6 items

,

ListPlot

,{n,1,ticks,10}

Out[]=

ShowHistogram[individualWealth〚2801〛,{0,500,10},Probability,ImageSizeLarge,PlotTheme

Detailed,FrameLabel{Wealth,Proportion of Population},PlotLabelWealth Distribution],



Cumulative Wealth Distribution

Another interesting aspect of the simulation is to analyze the cumulative distribution of wealth. Let’s explore the last snapshot of the simulation.

We’ll sort the agents by their wealth and observe % of the population that own 80% of the wealth in this simple economic model.

In[]:=

ListPlotTranspose[{N[100Range@nbrOfIndividuals/nbrOfIndividuals],Last@individualWealth/(nbrOfIndividuals*startingWealth)//Sort//Reverse//Accumulate}],

6 items



Out[]=

Social Mobility

Although the wealth gap remains fairly stable across the simulation run, wealth changes hands across the simulation. The rich of today can become the paupers of tomorrow.

We’ll use the Manipulate function to keep tabs of the economic status of one of the individuals across the simulation epochs.

In[]:=

Manipulate

ListPlot

,{frame,1,Length@individualWealth,1}

Out[]=

frame

Author contact information

Diego Zviovich

notebook.archive@zviovich.net

Initialization Cells

In[]:=

nbrOfIndividuals=400;startingWealth=50;individualWealth=ConstantArray[startingWealth,nbrOfIndividuals];ticks=10^4;

In[]:=

transactCompiled=Compile[{{individualWealth,_Real,1}},Module[{unitize=Unitize[individualWealth],newWealth,randomPartners,i=1},newWealth=individualWealth-unitize;randomPartners=RandomInteger[{1,nbrOfIndividuals},nbrOfIndividuals];Do[newWealth[[n]]=newWealth[[n]]+unitize[[i]];i++;,{n,randomPartners}];newWealth]]

Out[]=

CompiledFunction

Argument count: 1

Argument types:



Cite this as: Diego Zviovich, "Wealth distribution and social mobility in a simple economic model" from the Notebook Archive (2018), https://notebookarchive.org/2018-10-anl8ex7