Econophysical visualization of Adam Smith's invisible hand

Morrel H. Cohen, Iddo I. Eliazar

Research output: Contribution to journalArticle

16 Scopus citations

Abstract

Consider a complex system whose macrostate is statistically observable, but yet whose operating mechanism is an unknown black-box. In this paper we address the problem of inferring, from the system's macrostate statistics, the system's intrinsic force yielding the observed statistics. The inference is established via two diametrically opposite approaches which result in the very same intrinsic force: a top-down approach based on the notion of entropy, and a bottom-up approach based on the notion of Langevin dynamics. The general results established are applied to the problem of visualizing the intrinsic socioeconomic force-Adam Smith's invisible hand-shaping the distribution of wealth in human societies. Our analysis yields quantitative econophysical representations of figurative socioeconomic forces, quantitative definitions of "poor" and "rich", and a quantitative characterization of the "poor-get-poorer" and the "rich-get-richer" phenomena.

Original languageEnglish (US)
Pages (from-to)813-823
Number of pages11
JournalPhysica A: Statistical Mechanics and its Applications
Volume392
Issue number4
DOIs
StatePublished - Feb 15 2013

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Condensed Matter Physics

Keywords

  • Complex systems
  • Distribution of wealth
  • Entropy
  • Intrinsic forces
  • Langevin equation
  • Poor-get-poorer
  • Rich-get-richer

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