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Abstract:
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The Inequality Process (IP) is a particle system that models the dynamics of personal income and wealth at the micro (individual person) and macro (distribution) levels. Randomly paired particles compete for each other's wealth with an equal chance to win. The loser gives up a fraction of its wealth to the winner. That fraction is its parameter. By hypothesis and empirical analogue, that fraction scales inversely with the particle's productivity of wealth. Long term, wealth flows to particles that lose less when they lose, robust losers, nourishing their further production of wealth. Given a survival function that is an increasing function of wealth, the more robust loser is more losses away from death (Gambler's Ruin) at any given amount of wealth than others. The IP operates without central direction and only requires information on current and past particle wealth. The IP adapts fluidly to higher productivity, change in constraints on wealth production and over time variation in global mean wealth. The IP is a dynamic attractor for a population, maximizing wealth production, minimizing extinction risk.
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