Full text: Konvolut Wealth and Income Distribution 2

- 20 
An Attempted Generalisation 
In dealing with income of property owners we have chosen as a 
state variable wealth which evolves slowly in a stochastic process? 
unearned income can be derived from it by means of another random 
variable/ the rate of return. Can we generalise this two-step expla 
nation to include also earned income? 
In a somewhat formal way we could speak of the rank which an 
individual occupies in one or several hierarchies. Examples 
of such hierarchies are wealth/ education/ status, grade (level) 
of an official or manager, rank of officers, ability, degree of 
specialisation, grading by popularity of stars etc. Each of these 
would represent a dimension in what might be called hierarchical 
space. An individual would occupy a certain point in that space, 
corresponding to its rank in the various hierarchies, and it 
would have certain probabilities of transition within a certain 
time to another point in that space. In other words, an indi 
viduals* hierarchical position in society (a vector) would be the 
state variable of a stochastic process. 
To each point in the hierarchical space corresponds a certain probabil 
lity distribution of income? the basic rule is that the higher 
rank means expectation of a higher Income.

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