American University of Armenia
Just as a dilute gas consists of discrete molecules undergoing binary collisions and exchanging energy and momentum, a simple model of the economy consists of economic agents undergoing binary transactions and exchanging wealth. This talk will explain how ideas from kinetic theory can be transplanted to economics to explain the origin of empirically observed wealth distributions. These ideas are pursued to derive a simple integrodifferential equation for the time evolution of the wealth distribution. Both analytical and numerical results are presented, and the relevance of this to economics is discussed.