Piketty's second fundamental law of capitalism as an emergent property in a kinetic wealth-exchange model of economic growth

TL;DR

This paper introduces a kinetic wealth-exchange model incorporating saving and labor income, demonstrating how Piketty's second fundamental law of capitalism emerges as an emergent property, bridging microeconomic interactions and macroeconomic growth.

Contribution

It presents a novel kinetic model that reproduces Piketty's law as an emergent macroeconomic property from microeconomic wealth exchanges.

Findings

Total wealth can grow over time in the model.

Piketty's second law emerges naturally in the model.

Model aligns with neoclassical growth scenarios.

Abstract

We propose in this work a kinetic wealth-exchange model of economic growth by introducing saving as a non consumed fraction of production. In this new model, which starts also from microeconomic arguments, it is found that economic transactions between pairs of agents leads the system to a macroscopic behavior where total wealth is not conserved and it is possible to have an economic growth which is assumed as the increasing of total production in time. This last macroeconomic result, that we find both numerically through a Monte Carlo based simulation method and analytically in the framework of a mean field approximation, corresponds to the economic growth scenario described by the well known Solow model developed in the economic neoclassical theory. If additionally to the income related with production due to return on individual capital, it is also included the individual labor income in the model, then the Thomas Piketty's second fundamental law of capitalism is found as a emergent property of the system. We consider that the results obtained in this paper shows how Econophysics can help to understand the connection between macroeconomics and microeconomics.