Chance favors wealth concentration

U.S. researchers say chance contributes to wealth becoming concentrated in the hands of a few.First author Joseph Fargione, an adjunct professor of ecology, evolution and behavior in the University of Minnesota's College of Biological Sciences, and colleagues, built a simplified model that isolates the effects of chance and found that it consistently pushes wealth into the hands of a few, ever-richer people.The researchers simulated the performance of a large number of investors who started out with equal amounts of capital and who realized returns annually over a number of years.The study, published in the journal PLsS One, found wealth did not remain equal, because each year an entrepreneur's return was a random draw taken from a pool of possible return rates. In other words each person's rate of return differed.Therefore, a high return did not guarantee continuing high returns, nor did early low returns mean continuing bad luck, the study says.Even though all investors had an equal chance of success, the simulations consistently resulted in dramatic concentration of wealth over time.The researchers say the result is evident because when compounding capital returns, some individuals will have a string of high returns and, given enough time, will accumulate an overwhelming share of the wealth.