Does economics need a scientific revolution?

Economics does not need a scientific revolution. Economics needs accurate measurements according to high standards of natural sciences and meticulous work on revealing empirical relationships between measured variables.Comment: 6 pages, 3 figure

Evolution of the personal income distribution in the USA: High incomes

The personal income distribution (PID) above the Pareto threshold is studied and modeled. A microeconomic model is proposed to simulate the PID and its evolution below and above the Pareto income threshold. The model balances processes of income production and dissipation for any person above 15 years of age. The model accurately predicts the observed dependence of the number of people reaching the Pareto threshold on work experience and the functional dependence of the relationship on the per capita real GDP growth for the period from 1994 to 2002. Predictions of the income distribution depending on age are given for past and future. In future, relatively less rich people are observed in the younger age groups and the peak of the relative number shifts to older ages with time. The effect of the power law distribution extending itself to very high incomes is speculated to be the cause of low performance of socialist countries.personal income distribution, Pareto distribution, microeconomic modeling, USA, real GDP, macroeconomics

Modelling the average income dependence on work experience in the USA from 1967 to 2002

The average and median income dependence on work experience and time is analyzed and modelled for the USA. The original data set providing the mean and median income estimates in 10 year long intervals spans a long time period of almost 35 years – from 1967 to 2003. A microeconomic model linking personal income, population age structure and GDP per capita is used to predict the mean income values in various age groups and their relative evolution in time. Also modelled is the value of work experience where the mean income growth ends and it starts to drop exponentially with increasing age. This work experience increases through time as the square root of the per capita GDP growth. Prediction for the following 20 years is given for each age group considering potential per capita growth rate of 1.6%. The USA mean income dependence on work experience for 1987 coincides with that for 2002 in the UK – the years when per capita GDP were equal in the countries.personal income distribution, mean income, median income, microeconomic modelling, USA, real GDP, macroeconomics

Modelling the age-dependent personal income distribution in the USA

Numerical modelling of the age-dependent personal income distribution (PID) in the USA is fulfilled based on a micro- and macroeconomic model and results of the overall PID modelling. As expected from the age-dependent accuracy of the Current Population Surveys, the model has demonstrated an excellent prediction power in almost all income bins except the lowermost ones. Here we address the problem of the fine age structure of the PIDs. The age-dependent PIDs are modelled by using the same defining parameters as the overall PIDs. The predicted PIDs accurately describe the observed ones reproducing such complex features as the exponential PID decay in the youngest and oldest age groups. The evolution of the age-dependent PIDs in time is also accurately predicted. The difference in the PID levels in the youngest age group is explained by some shortcomings in the design of the enumeration procedure. Corresponding recommendations are given in order to improve the PID estimates.

PREDICTING REAL ECONOMIC GROWTH IN FRANCE, GERMANY, NEW ZEALAND, AND THE UNITED KINGDOM

The growth rate of real GDP per capita is modeled and predicted at various time horizons for France, Germany, New Zealand, and the United Kingdom. The rate of growth is represented by a sum of two components – a gradually decreasing trend and fluctuations related to the change in country-specific age population. The trend is an inverse function of real GDP per capita with constant numerator. Previously, similar models were developed and validated for the USA and Japan.real GDP per capita, modeling, prediction, population