Universal Laws of Human Society's Income Distribution

TL;DR

This paper explores the analogy between economic equilibrium and physical many-body systems, proposing that income distribution in just economies follows maximum entropy principles, while non-equilibrium systems may be inherently unfair.

Contribution

It introduces a novel analogy between economic equilibrium and physics, applying maximum entropy principles to explain income distribution in just societies.

Findings

Income distribution in fair economies aligns with maximum entropy.

Equilibrium solutions correspond to microstates with maximum probability.

Non-equilibrium systems may exhibit unfair income distributions.

Abstract

General equilibrium equations in economics play the same role with many-body Newtonian equations in physics. Accordingly, each solution of the general equilibrium equations can be regarded as a possible microstate of the economic system. Since Arrow's Impossibility Theorem and Rawls' principle of social fairness will provide a powerful support for the hypothesis of equal probability, then the principle of maximum entropy is available in a just and equilibrium economy so that an income distribution will occur spontaneously (with the largest probability). Remarkably, some scholars have observed such an income distribution in some democratic countries, e.g. USA. This result implies that the hypothesis of equal probability may be only suitable for some "fair" systems (economic or physical systems). From this meaning, the non-equilibrium systems may be "unfair" so that the hypothesis of equal probability is unavailable.