Global Wealth Redistribution and the Pareto Principle

[FairAndUnbiased]

money is not conserved...

In the short term, it can be approximated as such if the rate of money injection is not too large.

It is a useful starting point to build more complex models where money is not conserved.

 

[William Hung]

I think @FairAndUnbiased is onto something. I've just found out that there is a research field called Econophysics lol:

Econophysics - Wikipedia, the free encyclopedia

There are indeed research papers on statistical thermodynamics of economic systems:

Statistical thermodynamics of economic systems | Econophysics Forum

The 80-20 rule was a very old observation. I don't know of any recent confirmation of this principle. So you should not read too much into the rule today. It only helps to get an idea of economic inequality.

Inaccurate. 80-20 was noticed some centuries ago and it was just carried on as an interesting ideatic line.

@Faiez, @rubyjackass, I think the Pareto principle/80-20 law is real bro. I've just skimmed through this academic paper and the author seems to take it seriously:

[cond-mat/0412004] Power laws, Pareto distributions and Zipf's law

Abstract from the article:

When the probability of measuring a particular value of some quantity varies inversely as a power of that value, the quantity is said to follow a power law, also known variously as Zipf's law or the Pareto distribution. Power laws appear widely in physics, biology, earth and planetary sciences, economics and finance, computer science, demography and the social sciences. For instance, the distributions of the sizes of cities, earthquakes, solar flares, moon craters, wars and people's personal fortunes all appear to follow power laws. The origin of power-law behaviour has been a topic of debate in the scientific community for more than a century. Here we review some of the empirical evidence for the existence of power-law forms and the theories proposed to explain them.

P. S. The US wealth distribution does reflect the Pareto principle (currently it's 90/20 but you can select a slightly different 20% to get 80/20). The current global wealth distribution is also 85/20 (close enough).

At least with regards to human traits, I have this to say. Human traits are actually a result of natural selection. In the sense that all humans with traits that caused inefficiencies got wiped out.

Yea I like evolutionary biology and I think this field is quite good in explaining a lot of things. However, I don't think evolutionary biology can explain the 80-20 distributions observed in physics, earth science and computer science. So I think there's a more fundamental mechanism behind natural selection.

But I don't really know though, these are not my field. The important thing for me is that I now have an answer for every time my parent ask why I'm so poor compared to my peers. The answer is: statistical thermodynamics.

money is not conserved...

Dollar bills are supposedly nothing more than IOU notes from the Federal Reserve. Can reserve = conserved?

 

[Faiez]

I think @FairAndUnbiased is onto something. I've just found out that there is a research field called Econophysics lol:

Econophysics - Wikipedia, the free encyclopedia

There are indeed research papers on statistical thermodynamics of economic systems:

Statistical thermodynamics of economic systems | Econophysics Forum




@Faiez, @rubyjackass, I think the Pareto principle/80-20 law is real bro. I've just skimmed through this academic paper and the author seems to take it seriously:

[cond-mat/0412004] Power laws, Pareto distributions and Zipf's law

Abstract from the article:

P. S. The US wealth distribution does reflect the Pareto principle (currently it's 90/20 but you can select a slightly different 20% to get 80/20). The current global wealth distribution is also 85/20 (close enough).


Yea I like evolutionary biology and I think this field is quite good in explaining a lot of things. However, I don't think evolutionary biology can explain the 80-20 distributions observed in physics, earth science and computer science. So I think there's a more fundamental mechanism behind natural selection.

But I don't really know though, these are not my field. The important thing for me is that I now have an answer for every time my parent ask why I'm so poor compared to my peers. The answer is: statistical thermodynamics.


Dollar bills are supposedly nothing more than IOU notes from the Federal Reserve. Can reserve = conserved?

I googled a little bit...The pareto principle is something a management guy came up with and named after a famous scientist by the name of Pareto....The Pareto distribution is something Mr. Pareto himself came up with...The article talks of pareto distribution, not pareto principle.

So the pareto principle is still not really a thing.....It's management mumbo jumbo..

That's not the reason....The reason is instead of working to get richer, you look for reasons why you can't get rich and why you're poor. It's just a mindset that you have...There's no reason why you shouldn't be in that 20% or 1% or even 0.001% of the wealthiest. Remember where there's a will there's a way. You are not willing to go far enough to get rich, that's the problem.

The 20 and 80 percent people are not static...People from the 99% jump to the 1% area and sometimes 1% people who are not clever/smart with their money fall down to the 99% bracket...This happens all the time.

 

[+4vsgorillas-Apebane]

This general principle applies not only to wealth distribution.

Take the work place for example. 20 percent of the crew do 80% percent of the work and the remaining do just enough to hold onto their jobs or to try to appear to be hard at work.

Study time at university. Fook around 80% of the time and get hardly anything done and study like crazy 20% of the time to complete all assignments and pass finals.

 

[FairAndUnbiased]

I think @FairAndUnbiased is onto something. I've just found out that there is a research field called Econophysics lol:

Econophysics - Wikipedia, the free encyclopedia

There are indeed research papers on statistical thermodynamics of economic systems:

Statistical thermodynamics of economic systems | Econophysics Forum




@Faiez, @rubyjackass, I think the Pareto principle/80-20 law is real bro. I've just skimmed through this academic paper and the author seems to take it seriously:

[cond-mat/0412004] Power laws, Pareto distributions and Zipf's law

Abstract from the article:



P. S. The US wealth distribution does reflect the Pareto principle (currently it's 90/20 but you can select a slightly different 20% to get 80/20). The current global wealth distribution is also 85/20 (close enough).




Yea I like evolutionary biology and I think this field is quite good in explaining a lot of things. However, I don't think evolutionary biology can explain the 80-20 distributions observed in physics, earth science and computer science. So I think there's a more fundamental mechanism behind natural selection.

But I don't really know though, these are not my field. The important thing for me is that I now have an answer for every time my parent ask why I'm so poor compared to my peers. The answer is: statistical thermodynamics.



Dollar bills are supposedly nothing more than IOU notes from the Federal Reserve. Can reserve = conserved?

Basically everything that happens in statistical thermodynamics (phase transitions, Boltzmann distributions, etc) happens in finance because whenever you have huge amounts of identical particles interacting (which is basically what people in classical economics are - identical rational agents) the laws of statistical physics are followed.

The most interesting questions - what is the financial equivalent of entropy? What is the thermodynamic equivalent of debt or interest?

Check this guy out: he's worked on *nothing* but finance and statistical physics.

Victor Yakovenko: Home Page

 

[William Hung]

I googled a little bit...The pareto principle is something a management guy came up with and named after a famous scientist by the name of Pareto....The Pareto distribution is something Mr. Pareto himself came up with...The article talks of pareto distribution, not pareto principle.

So the pareto principle is still not really a thing.....It's management mumbo jumbo..

OK maybe I shouldn't have used the terms Pareto principle and Pareto distribution so interchangebly since they are different. You can ignore the Pareto principle if you want, but you can't deny that the Pareto distribution/Power law has been widely observed/verified across many fields.

Like I've mentioned, the current US wealth distribution, the current global wealth distribution, and those wealth distributions observed by Pareto hundreds of years ago all roughly follows the Pareto distribution aka Power law. It is hard to believe that these distributions are all just a big coincident and has nothing to do with any common causal mechanism (e.g. the laws of statistical physics).

That's not the reason....The reason is instead of working to get richer, you look for reasons why you can't get rich and why you're poor. It's just a mindset that you have...There's no reason why you shouldn't be in that 20% or 1% or even 0.001% of the wealthiest. Remember where there's a will there's a way. You are not willing to go far enough to get rich, that's the problem.

The 20 and 80 percent people are not static...People from the 99% jump to the 1% area and sometimes 1% people who are not clever/smart with their money fall down to the 99% bracket...This happens all the time.

Bro I will be doomed to a life of poverty. There is no doubt about that. It is my fate.

Yea the individuals themselves are not necessarily static, they can move up or down the ranks. But the main point is that the distribution itself (80-20) will always stay roughly the same. There are lots of interesting implications if think about it.
I'm even thinking about some theories from a religious point of view.

 

[Faiez]

OK maybe I shouldn't have used the terms Pareto principle and Pareto distribution so interchangebly since they are different. You can ignore the Pareto principle if you want, but you can't deny that the Pareto distribution/Power law has been widely observed/verified across many fields.

Like I've mentioned, the current US wealth distribution, the current global wealth distribution, and those wealth distributions observed by Pareto hundreds of years ago all roughly follows the Pareto distribution aka Power law. It is hard to believe that these distributions are all just a big coincident and has nothing to do with any common causal mechanism (e.g. the laws of statistical physics).

Bro I will be doomed to a life of poverty. There is no doubt about that. It is my fate.

Yea the individuals themselves are not necessarily static, they can move up or down the ranks. But the main point is that the distribution itself (80-20) will always stay roughly the same. There are lots of interesting implications if think about it.
I'm even thinking about some theories from a religious point of view.

What is your point ?

The 80/20 rule is nonsense. Wealth has always been distributed unequally...That's the entire point of our survival. The one who is more successful at doing/creating things acquires more wealth (that is the definition of wealth) and that's how man evolves by competing with each other. And when there's competition, there's going to be winners and "losers".

What this proves is that no matter how hard you try you can never sustain communism (or perfectly equal wealth distribution).

With this attitude, it's unlikely you will achieve anything unless you change it.