Commodities - The Coming Bull Market Message Board

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Strategies & Market Trends : Commodities - The Coming Bull Market

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To: craig crawford who wrote (1091)	3/16/2002 7:12:56 AM
From: maceng2	Read Replies (1) of 1643

Protectionist tariffs...A bad idea... Pareto's theory of distribution of incomes and wealth in society follows a power law. W = 1/(W^n) Analysis of wealth distributions around the world over the centuries has found Pareto's work very accurate. Here is a link to recent work on Parteo's theory worldlink.co.uk The average wealth within the model economy turns out to follow precisely the kind of 1/(x^n) power law found by Pareto for real economies. But there’s a twist – a nugget of insight of the sort that so often emerges from even rough approximations in physics. Pareto’s data led him to suspect that the power n was always in the range of one to two and that wealth would thus typically follow 20/80-type rules. Bouchaud and Mézard’s results reveal, however, that n is not a universal constant, fixed for all economies. Instead, it turns out to be dependent on the level of trade activity among the various agents. The model shows that n grows with increasing trade activity and higher values of n lead to Pareto laws giving a more equable distribution of wealth. The point to understand here is that more trade equals a better distribution of wealth. Recent research by Aoyama and colleagues has shown that this "small world effect" means that assuming – as Bouchaud and Mézard did – that everyone is linked to everyone else isn’t hopelessly misleading after all. It also means that relatively small expansions in trading networks can bring about big reductions in wealth inequality. The lesson from this heady combination of economics and theoretical physics is clear. By stepping up levels of trade across as wide a field as possible, the inequality that disfigures the global economy can be narrowed If the USA continually resorts to the tariff weapon (such as the lumber trade with Canada) Subject 51596 You can bet your bottom dollar that other countries will resort to the same trick with trade against the USA, or conspire to use some other methods to negate it's effect on their trade. Some pareto stuff from Japan cepa.newschool.edu PARETO'S LAW FOR INCOME OFINDIVIDUALS AND DEBT OF BANKRUPT COMPANIES Abstract We analyze the distribution of income and income tax of individuals in Japan for the fiscal year1998. From the rank-size plots, we find that the accumulated probability distribution of both data obey a power law with a Pareto exponent very close to-2. We also present an analysis of the distribution of the debts owed by bankrupt companies from 1997 to March 2000, which is consistent with a power law behavior with a Pareto exponent equal to-1. This power law is the same as that of the income distribution of companies. Possible implications of these findings for model building are discussed.

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