The Surplus Theory of Social Stratification and the Size Distribution of Personal Wealth

Abstract

The Surplus Theory of Social Stratification explains inequality of wealth in terms of(1) the fugitivity of wealth not needed to sustain the production of more wealth, (2) the tendency of wealth to flow into the hands of those who are already disproportionately wealthy, and (3) the ability of workers in an industrial society to retain a greater share of the wealth they produce than workers in societies with more primitive technologies. Size distributions of wealth from societies at different levels of technology can be fitted by a family of gamma distributions, whose shape parameter is related to a society's level of technology. The Surplus Theory implies a stochastic process that generates gamma-like distributions. Analysis of this process, the Inequality Process, explains many facts about size distributions of personal wealth.

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