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January 20, 20260 citationsOpen Access

The Principle of Dynamic Inequality Equilibrium: A Lorenz-Order Framework with a Stabilized Regime and a Diffusion Bridge to Criticality

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KFKevin Fathi

Key Points

  • This research aims to shift the focus from static tail shapes to dynamic inequality behaviors using the Dynamic Inequality Equilibrium framework.
  • Developed an operational stabilized-regime module for multiplicative environments.
  • Introduced a log-space diffusion model for a continuous bridge to criticality.
  • Applied geometric viability aggregation for closed-form equilibrium mapping between inequality and latent regime parameters.
  • Implemented diagnostic protocols for Lorenz dynamics, including various statistical tests and checks.
  • Demonstrated non-monotonicity of Shannon differential entropy in the Lorenz context, indicating its limitations as an equality proxy.
  • Identified large-scale behaviors indicated by exponential log-tails and power-law distributions in critical regimes.
  • Provided empirical illustrations showcasing the applicability of methods using U.S. data.

Abstract

Many mechanisms generate heavy-tailed and scale-free distributions. Static tail fitting is rarely identifying: distinct dynamics can yield similar apparent tail indices. The Dynamic Inequality Equilibrium (DIE) framework therefore shifts inference from tail shape to inequality dynamics---specifically, how distributions move under the Lorenz order (equivalently, convex order under equal-mean constraints). This paper develops (i) an operational stabilized-regime module for multiplicative environments where the bulk is often well approximated by a log-normal family, and (ii) a continuous bridge to criticality via a log-space diffusion model. In the stabilized log-normal module, Shannon differential entropy under a fixed arithmetic mean is non-monotone in the Lorenz parameter and therefore fails as a Lorenz-consistent equality proxy; we replace entropy language with Lorenz-consistent, scale-invariant proxies derived from the log-normal Gini coefficient. Conditionally, a closed-form equilibrium mapping between inequality and a latent regime parameter follows from a geometric viability aggregation. In the diffusion bridge, drift saturation in log-space yields exponential log-tails and power-law tails in levels, providing a mechanistic signature of critical regimes. We present an implementation-ready diagnostic protocol: inequality velocity and drift-area statistics for Lorenz dynamics, a falsifiable Class A null test, bulk approximation checks for stabilized log-normality, boundary-intercept tests for Type I stabilization, drift-shape tests for log-space saturation, and mobility coordinates to separate macro-stationarity from micro-mobility. Empirical illustrations using U.S. incorporated places (2000--2020) and a firm-size distribution (U.S. BDS, NAICS 61, 2010--2020) are provided, along with simulation-based validation designs.

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Cite This Study

Kevin Fathi (2025) studied this question.

synapsesocial.com/papers/696f1ac19e64f732b51ef074https://doi.org/10.5281/zenodo.18284645
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