Emergent Inequalities in a Primitive Agent-Based Good-Exchange Model

TL;DR

This paper presents an agent-based model demonstrating how slow adaptation and excess production capacity can lead to market failures and wealth inequalities, offering insights into the emergence of economic disparities.

Contribution

It introduces a simple agent-based model showing how inequalities and market failures can spontaneously arise from basic production and consumption dynamics.

Findings

Existence of a phase transition affecting market equilibrium

Slow adaptation and high production capacity cause wealth disparities

Market failure leads to wealth polarization and deflation

Abstract

Rising inequalities around the globe bring into question our economic systems and the origin of such inequalities. Here we propose a toy agent-based model where each entity is simultaneously producing and consuming indivisible goods. We find that the system exhibits a non-trivial phase transition beyond which a market clearing equilibrium exists but becomes dynamically unreachable. When production capacity exceeds a threshold and adapts too slowly, some agents cannot sell all their goods. This leads to global price deflation and induces strong wealth inequalities, with the spontaneous separation of the population into a rich class and a poor class. We explore ways to alleviate poverty in this model and whether they have real life significance.