University of Waterloo
200 University Avenue West
Waterloo, Ontario, Canada N2L 3G1
Phone: (519) 888-4567 ext 32215
Fax: (519) 746-8115
Professor Victor Yakovenko
Department of Physics, University of Maryland, College Park, USA
By analogy with the probability distribution of energy in physics, entropy maximization results in the exponential Boltzmann-Gibbs probability distribution of money among the agents in a closed economic system. Analysis of empirical data shows that income distributions in USA, European Union, and other countries have a well-defined two-class structure. The majority of the population (about 97%) belongs to the lower class characterized by the exponential ("thermal") distribution. The upper class (about 3% of the population) is characterized by the Pareto power-law ("superthermal") distribution, and its share of the total income expands and contracts dramatically during bubbles and busts in financial markets. Globally, inequality in energy consumption per capita around the world has decreased in the last 30 years and now approaches to the exponential probability distribution, in agreement with the maximal entropy principle. All papers are available at http://physics.umd.edu/~yakovenk/econophysics/. This work is currently funded by the Institute for New Economic Thinking, https://www.ineteconomics.org/research and CIGI of Waterloo, https://www.cigionline.org/ .