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Abstract: Inequality is an important and seemingly inevitable aspect of the human society. Various manifestations of inequality can be derived from the concept of entropy in statistical physics. In a stylized model of monetary economy, with a constrained money supply implicitly reflecting constrained resources, the probability distribution of money among the agents converges to the exponential Boltzmann-Gibbs law due to entropy maximization. Our empirical data analysis [1] shows that income distributions in the USA, European Union, and other countries exhibit a well-defined two-class structure. The majority of the population (about 97%) belongs to the lower class characterized by the exponential ("thermal") distribution. The upper class (about 3% of the population) is characterized by the Pareto power-law ("superthermal") distribution, and its share of the total income expands and contracts dramatically during booms and busts in financial markets. Interestingly, the same equations can be also applied to heavy-ion collisions [2]. Globally, energy consumption (and CO2 emissions) per capita around the world shows decreasing inequality in the last 30 years and convergence toward the exponential probability distribution, as expected from the maximal entropy principle. In agreement with our prediction [3], a saturation of the global Gini coefficient for energy consumption at 0.5 is observed for the most recent years. All papers are available at http://physics.umd.edu/~yakovenk/econophysics/.
[1] Yong Tao et al., "Exponential structure of income inequality: evidence from 67 countries", Journal of Economic Interaction and Coordination (2017) http://doi.org/10.1007/s11403-017-0211-6 http://arxiv.org/abs/1612.01624
[2] Xuejiao Yin et al., "A new two-component model for hadron production in heavy-ion collisions", Advances in High Energy Physics (2017) 6708581, http://doi.org/10.1155/2017/6708581
[3] S. Lawrence, Q. Liu, and V. M. Yakovenko, "Global inequality in energy consumption from 1980 to 2010", Entropy 15, 5565 (2013), http://dx.doi.org/10.3390/e15125565