POWER LAWS ARE DISGUISED BOLTZMANN LAWS

Using a previously introduced model on generalized Lotka–Volterra dynamics together with some recent results for the solution of generalized Langevin equations, we derive analytically the equilibrium mean field solution for the probability distribution of wealth and show that it has two characteristic regimes. For large values of wealth, it takes the form of a Pareto style power law. For small values of wealth, w ≤ wm, the distribution function tends sharply to zero. The origin of this law lies in the random multiplicative process built into the model. Whilst such results have been known since the time of Gibrat, the present framework allows for a stable power law in an arbitrary and irregular global dynamics, so long as the market is "fair", i.e., there is no net advantage to any particular group or individual.We further show that the dynamics of relative wealth is independent of the specific nature of the agent interactions and exhibits a universal character even though the total wealth may follow an arbitrary and complicated dynamics.In developing the theory, we draw parallels with conventional thermodynamics and derive for the system some new relations for the "thermodynamics" associated with the Generalized Lotka–Volterra type of stochastic dynamics. The power law that arises in the distribution function is identified with new additional logarithmic terms in the familiar Boltzmann distribution function for the system. These are a direct consequence of the multiplicative stochastic dynamics and are absent for the usual additive stochastic processes.