Ergodicity Economics

Reproduction of a an experiment by Ole Peters on wealth distribution and accumulation; case against GDP.

go get github.com/JohnCoene/go-ergo

Based on an experiment in Ergodicity Economics by Ole Peters which goes as follow. Get players to all bet $100 dollars and repeatedly flip a coin:

1. Heads their wealth increases by 50%
2. Tails their wealth decreases by 40%

A great bet on the surface.

Here's a 100 dollars, flip that coin as fast as you can; I'm off to Barbados with the winnings.

-- Rory Sutherland

While collective wealth increases by 5% (compounds) at every coin flip, the vast majority of players end up skint with only few big winners; wealth aggregation (though ultimately it's a zero sum gain). It's by no means a representation of a the real world, but Ole Peters uses it to demonstrate the difference between ensemble average and time average (and how economics does not understand that).

package main

import "github.com/JohnCoene/go-ergo/ergo"

func main(){
  // 50 players, 100 coin tosses, each starting with $1,000
  g := ergo.Play(50, 100, 1000)

  // compute ensemble average
  g.EnsembleAvg()
}