×

The principle of social scaling. (English) Zbl 1380.91104

Summary: This paper identifies a general class of economic processes capable of generating the first-moment constraints implicit in the observed cross-sectional distributions of a number of economic variables: processes of social scaling. Across a variety of settings, the outcomes of economic competition reflect the normalization of individual values of certain economic quantities by average or social measures of themselves. The resulting socioreferential processes establish systematic interdependences among individual values of important economic variables, which under certain conditions take the form of emergent first-moment constraints on their distributions. The paper postulates a principle describing this systemic regulation of socially scaled variables and illustrates its empirical purchase by showing how capital- and labor-market competition can give rise to patterns of social scaling that help account for the observed distributions of Tobin’s \(q\) and wage income. The paper’s discussion embodies a distinctive approach to understanding and investigating empirically the relationship between individual agency and structural determinations in complex economic systems and motivates the development of observational foundations for aggregative, macrolevel economic analysis.

MSC:

91B64 Macroeconomic theory (monetary models, models of taxation)
93E03 Stochastic systems in control theory (general)
93B07 Observability

References:

[1] Mantegna, R.; Stanley, H., An Introduction to Econophysics: Correlations and Complexity in Finance (2000), Cambridge, UK: Cambridge University Press, Cambridge, UK · Zbl 1138.91300
[2] Lux, T., Applications of statistical physics in finance and economics (2007), Economics Working Paper, Christian-Albrechts-Universität Kiel
[3] Rosser, B., Econophysics, The New Palgrave Dictionary of Economics, 1625-1643 (2008), Palgrave MacMillan
[4] Mantegna, R., Lévy walks and enhanced diffusion in Milan stock exchange, Physica A, 179, 2, 232-242 (1991) · doi:10.1016/0378-4371(91)90061-G
[5] Mantegna, R.; Stanley, H., Scaling Behaviour in the dynamics of an economic index, Nature, 376, 6535, 46-49 (1995) · doi:10.1038/376046a0
[6] Mantegna, R.; Stanley, H., Turbulence and financial markets, Nature, 383, 6601, 587-588 (1996) · doi:10.1038/383587a0
[7] Gopikrishnan, P.; Plerou, V.; Gabaix, X.; Nunes Amaral, L. A.; Eugene Stanley, H., Price fluctuations, market activity and trading volume, Quantitative Finance, 1, 2, 262-269 (2001) · Zbl 0974.91028 · doi:10.1088/1469-7688/1/2/308
[8] McCauley, J., Dynamics of Markets: Econophysics and Finance (2004), Cambridge, UK: Cambridge University Press, Cambridge, UK · Zbl 1052.91002 · doi:10.1017/cbo9780511606588
[9] Silva, A.; Prange, R.; Yakovenko, V., Exponential distribution of financial returns at mesoscopic time lags: a new stylized fact, Physica A, 344, 1-2, 227-235 (2004) · doi:10.1016/j.physa.2004.06.122
[10] Levy, M.; Solomon, S., New evidence for the power-law distribution of wealth, Physica A: Statistical Mechanics and its Applications, 242, 1-2, 90-94 (1997) · doi:10.1016/s0378-4371(97)00217-3
[11] Dragulescu, A.; Yakovenko, V., Evidence for the exponential distribution of income in the USA, The European Physical Journal B, 20, 4, 585-589 (2001) · doi:10.1007/PL00011112
[12] Yakovenko, V.; Rosser, J. B., Colloquium: Statistical mechanics of money, wealth, and income, Reviews of Modern Physics, 81, 4, 1703-1725 (2009) · doi:10.1103/RevModPhys.81.1703
[13] Schneider, P. M., Evidence for multiple labor market segments: An entropic analysis of us earned income, Journal of Income Distribution, 22, 2 (2013)
[14] Shaikh, A.; Papanikolaou, N.; Wiener, N., Race, gender and the econophysics of income distribution in the USA, Physica A: Statistical Mechanics and its Applications, 415, 54-60 (2014) · Zbl 1402.91568 · doi:10.1016/j.physa.2014.07.043
[15] Stanley, M.; Amaral, L. A. N.; Buldyrev, S. V.; Havlin, S.; Leschhorn, H.; Maass, P.; Salinger, M. A.; Stanley, H. E., Scaling behaviour in the growth of companies, Nature, 379, 6568, 804-806 (1996) · doi:10.1038/379804a0
[16] Takayasu, H.; Okuyama, K., Country dependence on company size distributions and a numerical model based on competition and cooperation, Fractals, 6, 1, 67-79 (1998) · doi:10.1142/S0218348X98000080
[17] Bottazzi, G.; Secchi, A., Why are distributions of firm growth rates tent-shaped?, Economics Letters, 80, 3, 415-420 (2003) · Zbl 1254.91564 · doi:10.1016/S0165-1765(03)00142-3
[18] Alfarano, S.; Milaković, M., Does classical competition explain the statistical features of firm growth?, Economics Letters, 101, 3, 272-274 (2008) · doi:10.1016/j.econlet.2008.09.001
[19] Scharfenaker, E.; Semieniuk, G., A Statistical Equilibrium Approach to the Distribution of Profit Rates, Metroeconomica, 68, 3, 465-499 (2016) · Zbl 1411.62305 · doi:10.1111/meca.12134
[20] Scharfernaker, E.; dos Santos, P. L., The distribution and regulation of Tobin’s q, Economics Letters, 137, 191-194 (2015) · doi:10.1016/j.econlet.2015.11.008
[21] dos Santos, P. L.; Scharfernaker, E., Capital-market competition, informational performance, and the distribution of tobin’s q. (1607) (2016), New School for Social Research
[22] Kozubowski, T. J.; Podgórski, K., Asymmetric Laplace laws and modeling financial data, Mathematical and Computer Modelling, 34, 9-11, 1003-1021 (2001) · Zbl 1002.60012 · doi:10.1016/S0895-7177(01)00114-5
[23] Jaynes, E. T.; Rosenkrantz, R. D., Concentration of distributions at entropy maxima, E. T. Jaynes: Papers on Probability, Statistics and Statistical Physics (1979), Netherlands: D. Reidel, Dordrecht, Netherlands
[24] Jaynes, E. T., Probability Theory: The Logic of Science (2003), Cambridge University Press · Zbl 1045.62001 · doi:10.1017/CBO9780511790423
[25] Georgescu-Roegen, N., The Entropy Law and the Economic Process (1971), Harvard University Press · doi:10.4159/harvard.9780674281653
[26] Farjoun, F.; Machover, M., Laws of Chaos: A Probabilistic Approach to Political Economy (1983), Verso
[27] Foley, D. K., A statistical equilibrium theory of markets, Journal of Economic Theory, 62, 2, 321-345 (1994) · Zbl 0799.90022 · doi:10.1006/jeth.1994.1018
[28] Yakovenko, V.; Meyers, R. A., Econophysics, statistical mechanics approach to, Encyclopedia of Complexity and System Science (2007), Springer
[29] Gibrat, R., Les Inégalités Economiques (1931), Sirley · JFM 57.0635.06
[30] Ragab, A., Three Essays on the Incomes of the Vast Majority [Ph.D. thesis] (September 2013), New School for Social Research
[31] Shaikh, A., Capitalism-Competition, Conflict, Crises (2016), Oxford University Press · doi:10.1093/acprof:oso/9780199390632.001.0001
[32] Kotz, S.; Kozubowski, T.; Podgórski, K., The Laplace Distribution and Generalizations: A Revisit with New Applications to Communications, Economics, Engineering, and Finance (2001), Birkhauser Verlag GmbH · Zbl 0977.62003
[33] Soares, A. D.; Moura, J. N.; Ribeiro, M. B., Tsallis statistics in the income distribution of Brazil, Chaos, Solitons & Fractals, 88, 158-171 (2016) · doi:10.1016/j.chaos.2016.02.026
[34] Keynes, J. M., The General Theory of Employment, Interest and Money (1936), London: Macmillan, London
[35] IWPR, The gender wage gap by occupation 2016, and by race and ethnicity, https://iwpr.org/wp-content/uploads/2017/04/C456.pdf
[36] Marx, K., Capital, Volume III (1992), Penguin
[37] Watts, D., Six Degrees (2003), New York, NY, USA: W. W. Norton & Co. Inc., New York, NY, USA
[38] Hayek, F. A., The Facts of the Social Sciences, Ethics, 54, 1, 1-13 (1943) · doi:10.1086/290368
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.