Wealth disparities and economic flow: Assessment using an asset exchange model with the surplus stock of the wealthy

TL;DR

This paper introduces an asset exchange model incorporating the surplus wealth of the wealthy to analyze the balance between wealth disparities and economic flow, revealing a trade-off and potential policy implications.

Contribution

It proposes a novel econophysics model that integrates surplus wealth, new evaluation indexes, and explicit relationships to assess disparities and economic flow.

Findings

Wealth distribution follows a gamma-like pattern.

Limiting disparities enhances economic flow and metabolism.

Restraint on savings and surplus use is necessary for balance.

Abstract

How can we limit wealth disparities while stimulating economic flows in sustainable societies? To examine the link between these concepts, we propose an econophysics asset exchange model with the surplus stock of the wealthy. The wealthy are one of the two exchange agents and have more assets than the poor. Our simulation model converts the surplus contribution rate of the wealthy to a new variable parameter alongside the saving rate and introduces the total exchange (flow) and rank correlation coefficient (metabolism) as new evaluation indexes, adding to the Gini index (disparities), thereby assessing both wealth distribution and the relationships among the disparities, flow, and metabolism. We show that these result in a gamma-like wealth distribution, and our model reveals a trade-off between limiting disparities and vitalizing the market. To limit disparities and increase flow and metabolism, we also find the need to restrain savings and use the wealthy surplus stock. This relationship is explicitly expressed in the new equation introduced herein. The insights gained by uncovering the root of disparities may present a persuasive case for investments in social security measures or social businesses involving stock redistribution or sharing.