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Wealth Distribution

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From Galileo to Modern Economics

Abstract

This chapter begins with Michal Kalecki’s witty epigram, quoted by Josef Steindl (Random Process and the Growth of Firms. A study of the Pareto Law. Vienna: Griffin & Co., 1965, p. 18): “Economics consists of theoretical laws which nobody has verified and empirical laws which nobody can explain.” Never more than in the case of the empirical Pareto law has Kalecki’s witticism seemed so appropriate. Whether Pareto’s law is understandable or not, econophysicists consider the Pareto curve one of the forerunners of econophysics. The invariant distribution of income over time and space was clearly an economic phenomenon that economists were unable to account for or predict. Physicists were able to offer a different interpretation of the Pareto curve, based on appropriate methods and approaches, that contained it within the broader analysis of complex systems (see Richmond et al. Econophysics & Physical Economics. Oxford: Oxford University Press, 2013, p. 16 ff.). Pareto law is introduced here as a stage in the journey toward econophysics. Its empirical features generated different interpretations, and now that it is largely a matter for the econophysicists many issues remain concerning its stability and universality, the mobility among different classes of income, and so on.

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Notes

  1. 1.

    For example, Gibrat (1931), in criticizing Pareto, said that a firm’s growth rate and size are independent of each other, that is, that small firms grow at the same rate as large firms. The Gibrat process is inconsistent with the Pareto size distribution.

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  1. University of Padova, Padova, Italy

    Gianfranco Tusset

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  1. Gianfranco Tusset
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Tusset, G. (2018). Wealth Distribution. In: From Galileo to Modern Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-95612-1_4

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  • DOI: https://doi.org/10.1007/978-3-319-95612-1_4

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