Wealth Condensation in Pareto Macro-Economies

TL;DR

This paper analyzes wealth condensation phenomena in different Pareto macro-economies, revealing how wealth concentrates in various phases depending on system openness and distribution tails.

Contribution

It compares wealth condensation mechanisms across closed, open, and super-open Pareto economies, highlighting new insights into phase-dependent wealth distribution behaviors.

Findings

Wealth condensation occurs in social phase for closed and open economies.

In super-open economies, condensation occurs in the liberal phase.

A 'corruption' phenomenon emerges in closed economies, with wealth amassed by a single individual.

Abstract

We discuss a Pareto macro-economy (a) in a closed system with fixed total wealth and (b) in an open system with average mean wealth and compare our results to a similar analysis in a super-open system (c) with unbounded wealth. Wealth condensation takes place in the social phase for closed and open economies, while it occurs in the liberal phase for super-open economies. In the first two cases, the condensation is related to a mechanism known from the balls-in-boxes model, while in the last case to the non-integrable tails of the Pareto distribution. For a closed macro-economy in the social phase, we point to the emergence of a ``corruption'' phenomenon: a sizeable fraction of the total wealth is always amassed by a single individual.