Common Origin of Power-law Tails in Income Distributions and Relativistic Gases

TL;DR

This paper explores the common origin of power-law tails in income and energy distributions, linking economic saving behaviors with relativistic collision kinematics, revealing similar macroscopic patterns from different microscopic interactions.

Contribution

It demonstrates a conceptual connection between income and energy distributions, showing how microscopic interaction features lead to power-law tails in both systems.

Findings

Power-law tails arise from limited exchange in interactions.

Relativistic kinematics causes small energy exchanges in high-energy collisions.

Similar distribution patterns emerge in socio-economic and physical systems.

Abstract

Power-law tails are ubiquitous in income distributions and in the energy distributions of diluted relativistic gases. We analyze the conceptual link between these two cases. In economic interactions fat tails arise because the richest individuals enact some protection mechanisms ("saving propensity") which allow them to put at stake, in their interactions, only a small part of their wealth. In high-energy particle collisions something similar happens, in the sense that when particles with very large energy collide with slow particles, then as a sole consequence of relativistic kinematics (mass dilation), they tend to exchange only a small part of their energy; processes like the frontal collision of two identical particles, where the exchanged energy is 100%, are very improbable, at least in a diluted gas. We thus show how in two completely different systems, one of socio-economic nature and one of physical nature, a certain feature of the binary microscopic interactions leads to the same consequence in the macroscopic distribution for the income or respectively for the energy.