Another idea that may be used to improve kinetic exchange models is the introduction of many-particle interactions. In the ideal gasses, these interactions do not occur, but in the social systems, they might have interesting consequences.

Originally I have written this article back in the end of 2013 and submitted it to a pop-science article contest organized by three locally well-known pop-science blogs "Mokslo sriuba" (en. Science soup; online pop-science web-show), technologijos.lt (edit: currently defunct general science news portal) and konstanta.lt (en. constant; very popular blog dedicated to astronomy and astrophysics). The article was rather successful and won the scientific jury prize in the contest!

Now, after the contest has ended, I can publish this article (and its English translation) on "Physics of Risk". So I invite you to read on!

Previously we wrote about the confrontation between the socialistic and capitalistic economic thought. We have looked into it from a point of view of elementary kinetic exchange models. While in our world, in the international context, we frequently hear about it via media, which tends to use it to explain the disagreements between China and USA or Russia and USA. Clearly those countries have different economical and political models, but are they the same as media tends to present them? We invite you to listen to two talks given by scientists (posted on ted.com) - one talk is about China's economical model, while the other is about China's political model.

The idea of this contribution has come after the publication in The Economist The Big Mac index. Such index was introduce to explain the concept of real currency exchange rate needed to deal with the problem of varying price levels in different countries. The different price levels cause the different purchasing powers of the same currency around the world. For example, the network of fast food restaurants around the world McDonald’s serves everywhere the same products, consider one of them - Big Mac. Having in mind the same quality of the product we do observe different prices of Big Mac around the world and so have to accept the varying prices or purchasing powers of the same currency, say USD. It was thought from the beginning that such effect must be temporal and exchange rates have to converge towards equilibrium where Big Mac prices equalize. Unfortunately, this do not happen, the different price levels around the world is very stable phenomena and statistically prices are higher in countries with higher incomes. This statistical phenomenon was called Penn effect and economists Balassa and Samuelson in 1964 independently explained it as a result of different productivities in tradable and not tradable sectors of the economy. The research in contemporary international macroeconomics forces us to acknowledge that this phenomenon is much more general and Balassa Samuelson effect is only one of all possible explanations.

"Money, get away. / Get a good job with good pay and you're okay. / Money, it's a gas." (Pink Floyd)

We have considered kinetic models in our few most recent texts, And we still have couple of thoughts on this topic remaining. But this time we invite you to listen to Victor Yakovenko, one of the most prominent econophysicists working on this topic. His works have attracted attention from Institute for New Economic Thinking (INET). In this video he is interviewed by Perry Mehrling of INET...