Random Consolidations and Fragmentations Cycles Lead to Benford' Law

TL;DR

This paper demonstrates that a process of alternating random consolidations and fragmentations of quantities converges to Benford's Law, driven by the dominance of multiplicative effects over additive ones.

Contribution

It introduces a novel stochastic process model showing how cycles of consolidation and fragmentation lead to Benford's Law, highlighting the role of multiplicative dominance.

Findings

Process converges to Benford's Law after many cycles

Multiplicative effects dominate additive effects in the process

Randomness in fragmentation and consolidation is essential for convergence

Abstract

Benford's Law predicts that the first significant digit on the leftmost side of numbers in real-life data is proportioned between all possible 1 to 9 digits approximately as in LOG(1 + 1/digit), so that low digits occur much more frequently than high digits in the first place. For example, digit 1 occurs approximately 30.1% in the first place in random numbers, while digit 9 occurs only approximately 4.6%. In this article it is shown that a process where a large enough set of identical quantities constantly alternates between minuscule random consolidations (summing two randomly chosen values into a singular value) and tiny random fragmentations (division of one randomly chosen value into two new values) converges digit-wise to the Benford proportions after sufficiently many such cycles. The statistical tendency of the system after numerous cycles is to have approximately 2/3 multiplicative expressions which are conducive to Benford behavior as they tend to the Lognormal Distribution, and 1/3 additive expressions which are detrimental to Benford behavior as they tend to the Normal Distribution, hence the process represents in essence a tug of war between addition and multiplication. Since the process encounters the so-called Achilles' heel of the Central Limit Theorem, namely additions of skewed distributions with high order of magnitude, additions are not very effective, and the war is decisively won by multiplication, leading to Benford behavior. Randomness in selecting the particular quantity to be fragmented, as well as randomness in selecting the two particular quantities to be consolidated, is essential for convergence. Not surprisingly then, fragmentation itself could be performed either randomly say via a realization from the continuous Uniform on (0, 1), or deterministically via any fixed split ratio such as say 25% - 75%, and Benford's Law emerges in either case.