Kinetic Exchange Models in Economics and Sociology

TL;DR

This paper reviews kinetic exchange models used in economics and sociology, highlighting their origins from gas kinetic theory and their applications in wealth distribution, firm dynamics, and opinion formation.

Contribution

It provides a broad overview of kinetic exchange models, emphasizing their interdisciplinary applications and historical development without delving into complex mathematical details.

Findings

Kinetic exchange models effectively describe wealth distributions.

Models have been adapted for firm dynamics and opinion formation.

The framework bridges physics and social sciences.

Abstract

In this article, we briefly review the different aspects and applications of kinetic exchange models in economics and sociology. Our main aim is to show in what manner the kinetic exchange models for closed economic systems were inspired by the kinetic theory of gas molecules. The simple yet powerful framework of kinetic theory, first proposed in 1738, led to the successful development of statistical physics of gases towards the end of the 19th century. This framework was successfully adapted to modeling of wealth distributions in the early 2000's. In later times, it was applied to other areas like firm dynamics and opinion formation in the society, as well. We have tried to present the flavour of the several models proposed and their applications, intentionally leaving out the intricate mathematical and technical details.