Distribution of Income (Including Minimum Wage); Comparison of Societies as Studied by a Molecular-Dynamics Algorithm and Analytical Techniques

Abstract

In this research we tried to answer the question: How to optimize the total production of economy. For finding the answer we used two postulates: First, a worker is incentivated to work if it pays off. When in the income ranking the neighbor below earns less and the one above earns more the worker will work harder and produce more. The productivity of the worker is proportional to this ’derivative’ in the income curve. (Note: a worker’s salary is not assumed necessarily proportional to his productivity). The second postulate depends on who is in control of the production process. In highly-simplified naming: In capitalism, the capital takes the decisions, in a democracy the people do, by vote. We also simulated a dictatorial system in which decisions can be imposed by a (benevolent) dictator. We used these ingredients in evolutionary computation. Starting with an arbitrary initial distribution, we make random small changes to it and if the total production increases, a decision will be made whether to implement these changes. This procedure is repeated until the distribution is stable. Remarkably, the outcomes for ’democracy’ and ’capitalism’ are similar. Capitalism and democracy go hand-in-hand together: One person getting all income, two people working, and most not working and not receiving. These results are also analytically found. In ’communism’, nobody works and everybody perishes. In a ’dictatorial’ system we can optimize production for the benefit of the people, and come to the conclusion that the introduction of minimum wages is beneficial, and these should be 50% of the average income.