Prospects for Money Transfer Models

Abstract

Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of individual agents, a pile of money and a specific trading rule. Whatever the trading rule is, the most noteworthy fact is that money is always transferred from one agent to another in the transferring process. So we call them money transfer models. Besides explaining income and wealth distributions, money transfer models can also be applied to other disciplines. In this paper we summarize these areas as statistical distribution, economic mobility, transfer rate and money creation. First, money distribution (or income distribution) can be exhibited by recording the money stock (flow). Second, the economic mobility can be shown by tracing the change in wealth or income over time for each agent. Third, the transfer rate of money and its determinants can be analyzed by tracing the transferring process of each one unit of money. Finally, money creation process can also be investigated by permitting agents go into debts. Some future extensions to these models are anticipated to be structural improvement and generalized mathematical analysis.