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Power law (Pareto distribution), not lognormal.

But you're partly right. Simulate random exchanges at random prices and the wealth distribution will come out Pareto.

However, we cannot conclude that because [a] random exchanges lead to a power-law dist and [b] we observe a power-law in reality, that [c] the real wealth distribution is tantamount to random.



As far as I'm aware the debate of lognormal vs power law distribution on wealth is unsettled.

EDIT: google search suggests power law tail - log normal bulk.


You are maybe thinking that it is difficult to identify powerlaws? (EDIT: s/identify/statistically verify/; s/powerlaws/TRUE powerlaws/)

But look: http://globalrichlist.com/how.html The bulk is indeed powerlaw.

Maybe you are thinking that a sufficiently winsorised US income distribution is lognormal.


To the contrary I think people are too eager to find scale free and power law phenomena.

There are several papers discussing log-normal bulk and then power law tail.

http://physicsworld.com/cws/article/news/2002/feb/26/the-phy...

http://fmwww.bc.edu/ec-p/wp671.pdf and more

For what it's worth my initial statement was meant to hold beyond income and wealth and generalize to say achievement and productivity and so a lognormal assumption was fitting as the distribution to pick. It also chimed well with grandalf's statement on how advantages multiply.




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