Wealth Inequality is a Sign the Economy is Doing Really, Really Well

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“Inequality” is the oldest and most divisive observation about us, as members of society. There is no topic more burning than this today, and this is why the theoretical step advanced in this paper is timely. This paper uses physics to predict the natural occurrence of hierarchical movement and wealth on earth.

The hierarchical distribution of wealth on the earth happens naturally.  Hierarchy is unavoidable, with staying power, and difficult to efface…The physical flow architecture that emerges is hierarchical on the surface of the earth and in everything that flows inside the live human bodies, the movement of humans and their belongings, and the engines that drive the movement.

The nonuniform distribution of wealth becomes more accentuated as the economy becomes more developed, i.e., as its flow architecture becomes more complex for the purpose of covering smaller and smaller interstices of the overall (fixed) territory. It takes a relatively modest complexity for the nonuniformity in the distribution of wealth to be evident. This theory also predicts the Lorenz-type distribution of income inequality, which was adopted empirically for a century.

Physics impresses all of us with its laws, which are few, precise, and universally applicable. Can biology and economics be a more precise and predictive science, like physics?…economic activity is closely correlated with the movement of all the streams of society.

The annual domestic economic activity of a country (the Gross Domestic Product, or GDP) is proportional to the physical movement measured as the amount of fuel consumed annually with purpose in that country. Why, because fuel generates power, power drives the movement, and movement dissipates the power.

How do we know cause from effect in movement?

More economic activity means more fuel consumption, not less…Improvements in efficiency lead to more fuel consumption, not to less fuel consumption. The improvements are akin to the removal of obstacles in the flow design, and once removed the obstacles are forgotten. The new design without obstacles “flows better,” and it persists in time. It is adopted by everyone…The puzzle was that the more efficient use of coal in the industrialized world in the 1800’s actually increased the consumption of coal and other resources, instead of “saving” them…world energy consumption and the world energy use per capita continue to increase even though the population weighted energy use per GDP has decreased since 1990 as the world technology for power becomes more efficient.

Because of the unification of physics and economics advanced in this article, it is necessary to begin with a set of unambiguous definitions of the terms used:
– Movement is the change in the location of the material from one spot to another on the earth’s surface.
– Movement is mostly in the horizontal direction.
– The movement is greater when the mass moved (M) and the distance traveled (L) are greater. The physical measure of movement is the product ML.
– Movement is present at all discernible scales, from water in the smallest rivulets to water in the biggest rivers and the trucks on the longest and widest highways.

An alternative physical measure of the movement ML is the work spent to cause the movement…the work spent is the product FL, where F is the horizontal force overcome by the mover. In all media (land, sea, and air), the force scales as the weight of the mass M; therefore, F ∼ Mg. The work spent has the scale MgL.

A third physical measure of movement is the amount of “fuel” (fossil, renewable, and food) used for generating the work spent in order to create the movement. This third measure is proportional to the first two. The amount of fuel used is proportional to the amount of useful energy (exergy) contained in the amount of fuel.

The spent exergy is proportional to the work produced and consumed during the movement. In the limit where the energy conversion machine that produces work from fuel operates reversibly, the exergy spent is equal to the work produced and spent during movement. In an actual machine, the generated work is a significant fraction of the fuel exergy content. Important is that according to the method of scale analysis,23 the work and the fuel exergy have the same scale.

In sum, more movement represents more work that is spent, and more work spent represents more fuel that is consumed. Movement is defined as displacement against forces that resist the displacement. Nothing moves unless it is pushed or pulled.

Wealth is a common term that represents the availability of valuable (purposeful) material resources. It is a measure of the assets of value owned by an economic entity. Key is the word “valuable,” and in this article we rely on the physical meaning and measure of wealth. In the doctrine of economics, wealth is described in dollar terms, as on the ordinate.

…the annual wealth of a population or territory is essentially proportional to the useful energy (or work and movement) generated annually by that group or on that territory…This finding is pivotal for the physics discipline because it shows that the economics concept of wealth has a physics basis, which is measurable as work, fuel consumed, or movement effected by fuel, food, and work.

This is the unification—the connection—of economics and physics. The equivalence between wealth and movement is correct in the broadest sense: outliers exist, and undoubtedly the equivalence is evolutionary because wealth and fuel use are increasing over time.

Nonuniform distribution is used here descriptively, to account for the physical (natural) occurrence of movement (or fuel use, work, and wealth) that is not allocated equally over a population or a territory. This aspect of nature is widely recognized as hierarchy: few large and many small move, flow, and “live” together. We see this in the flowing and morphing architectures of river basins, animal populations (the food chain), social organization, streets in the city, highways, and the global air traffic and commerce.
Inequality. The nonuniform hierarchical distribution of movement on the earth is commonly described as unequal distribution or inequality. This alternative description is particularly common when it comes to the physical equivalents of movement discussed above, namely, fuel use and wealth.

Constructal law is a 20-year old contribution to thermodynamics, in which the occurrence and evolution of flow configuration is recognized as a universal phenomenon in nature (bio and nonbio), which is summarized as a law of physics. The constructal law states that “For a finite-size flow system to persist in time (to live) it must evolve freely in such a way that it provides easier access to the imposed (global) currents that flow through it.”…flow systems that spread over (or collect from) an area or volume evolve toward architectures that provide greater access and exhibit hierarchy.

The physics literature shows that the constructal law is a law of physics because it accounts with one statement for the numerous (and contradictory) ad-hoc principles of optimality and self-organization, such as minimum entropy production, maximum entropy production, minimum flow resistance, maximum flow resistance, minimum travel time, minimum effort, uniform distribution of stresses, maximum growth rate of flow disturbances (i.e., turbulence), maximum power, etc.

The constructal-law literature also shows how flow architectures evolve to “liberate” their flows, to flow better, longer, and farther. In the human sphere, the evolution of technology has the effect of liberating the movement of people and their belongings. The urge of every moving thing is to have more access to movement into and over its available space.

For modern humans, this is made possible through technologies that evolve, for example, the technology of power generation. Improvements in power-plant efficiency lead to greater movement and fuel use, not less.

Finiteness is an intrinsic feature of the evolutionary design phenomenon captured by the constructal law (note the presence of “finite size” in the constructal law statement, which rules out the infinitesimal and the infinite).

CONCLUSIONS

The chief conclusion derived from physics, is that inequality is nonuniform as a manifestation of the universal natural phenomenon of evolution. This phenomenon belongs in physics. Movement is a natural evolutionary design phenomenon that changes toward flow architectures that provide progressively greater access over the territory that generates the power that drives the movement. This evolutionary design happens naturally across the board, from the river basins of the water circuit driven by the sun, to all human life driven by power from fuels, the sun, and food.

…the tendency toward greater movement goes hand in hand with the tendency toward more efficient technologies that enable the movement, and vice versa…more advanced countries have relatively straighter convex curves, i.e., their income is distributed more equally. This new aspect is an invitation to expanding the present “economics as physics” theory into the domain of government. All distributions are happening naturally, yet their degree of “inequality” can be controlled by the rule of law, which is a package of evolutionary design features that so far are not present in the theory advanced in this article.

At bottom, evolution (change in flow architecture) is favored on the same physics basis in economics, geophysics, animate, and inanimate systems. The design change that facilitates global flow is adopted and persists. It “survives.” This evolution is evident in economics. The invention of money was a dramatic change for facilitating the flow of traded goods, a huge change relative to trading in nature. The adoption of a single currency in the USA, and more recently in the Euro zone, is a more recent example. Regional free trade agreements between countries and the spreading of English, Latin script, and the Internet lead to increased movement.

Evolution unites physics with economics and extends the reach of the physics law of evolution over the phenomena of social organization, economies of scale, and movement on the globe.”

Source: http://aip.scitation.org/doi/10.1063/1.4977962

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