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Economía Social de Mercado en América Latina: la responsabilidad social de la economía

ÍNDICE DE LIBERTAD ECONÓMICA 2000 –

2. Los desafíos

Power-law relationships can be used to describe two kinds of distributions of values: continuous and discrete distributions. A continuous power-law distribution describes continuous real values, while a discrete power-law distribution is for discrete values, ordinarily positive integers.

Let X be an independent variable and a function p(x) be a corresponding func- tion that measures the quantity of the observed value xof X. A continuous power- law distribution uses p(x) to indicate the sum of the corresponding values of p(x) when x is within a particular interval (a, b]. When a continuous power-law distri- bution is used to describe a probability distribution, p(x) is the probability density function (pdf) of the probability distribution, which can be expressed as:

P r(a < X b) = b a p (x)dx= b a Cx −αdx , (3.2) where

x is the observed value ofX;

C is the normalizing constant;

α is the exponent, or scaling, or scaling exponent parameter.

For example, the Pareto distribution is a Power-law continuous probability distri- bution whose probability density function is

p(x) = αx α m

x(α+1) , (3.3)

where xm is the minimum possible positive real value of X and α is a positive real value.

Supposing that α >0, α = 1 andxmin is the lower bound where the power-law

distribution holds, the normalizing constant can be easily computed:

C = +1 xminx−αdx

= α−1

xmin(1−α).

(3.4)

Thus, the continuous power-law distribution becomes:

p(x) = α−1 xmin x xmin −α . (3.5)

A discrete power-law distribution indicates the corresponding value ofp(x) when

x represents the value of a discrete random variable. When a discrete power-law distribution is used to represent a probability distribution, p(x) is the probability mass function (pmf) of the probability distribution, which has the form:

p(x) = P r(X=x) = Cx−α. (3.6) For instance, the Zipf distribution is one of the family of discrete power-law proba- bility distributions. The probability mass function of the Zipf distribution is

p(x) = x −s

HN,s ,

(3.7) where N is a natural number, s is a real value and HN,s is the Nth generalized harmonic number (i.e., Nn=1n−s). The Zipf distribution may be considered as a discrete counterpart of the Pareto distribution.

Given a lower boundxmin on the discrete power-law distribution, after computing

the normalizing constant

C = +1 i=xmin(i−α)

= 1

ζ(α, xmin) ,

(3.8)

with α >1 and xmin>0, the discrete integer power-law distribution becomes:

p(x) = x −α

ζ(α, xmin), (3.9)

where ζ(α, xmin) is a Hurwitz zeta function [55] or generalized Riemann zeta func-

tion [101], i.e., ζ(α, xmin) = + i=0 (i+xmin)−α. (3.10) In many cases, it is worth studying the complementary distributions of power- law distributions, which indicate the sum of the corresponding values of p(x) when

x is above a particular value. In probability theory and statistics, the cumulative distribution function (cdf) P(x) is used to describe the kind of distribution and can be written as:

P(x) =P r(X x). (3.11) For the continuous random variable, a cumulative distribution function is

P(x) =P r(X x) = C + x p (t)dt = α−1 xmin−α+1 + x t −αdt = x xmin (−α+1) . (3.12)

Note that Equation 3.12 indicates that the cumulative distribution of a continu- ous power-law distribution is also a power-law distribution with a smaller scaling exponent value (α1).

For discrete random variables, the cumulative distribution function is:

P(x) = P r(X x) = + i=x p(i) = + i=x i−α ζ(α, xmin)

= ζ(α, x)

ζ(α, xmin).

(3.13) The form of Equation 3.13 is too complicated to directly show that the cumulative distribution of a discrete power-law distribution roughly displays a power-law re- lationship. However, since a discrete power-law distribution can be approximately computed by a continuous power-law distribution, the cumulative distribution of the discrete power-law distribution can be approximately computed by the cumu- lative distribution of the continuous power-law distribution as well. That indicates that the cumulative distribution of a discrete power-law distribution with a scaling exponent value α approximately follows a power-law distribution with the scaling exponent value (α1). This inference can also be revealed by using the qualitative appraisal based on visualizations without loss of generality.

For instance, let α = 2.5. Figure 3.1(a) shows pairs (x, ζ(2.5, x)) in the natural log-log plot, where 25,000 x250,000. Those pairs (x, ζ(2.5, x)) in Figure 3.1(a) follow a straight line. Also, compare ζ(2.5, x) with the power-law distribution x1.5 in Figure 3.1(b) where 25,000x250,000. Note that lim x→+ ζ(2.5, x)x1.5 = lim x→+ + n=0 (x+n)2.5x1.5 = lim x→+ −x−1.5+x2.5 + (x+ 1)2.5+ (x+ 2)2.5 +· · · = 0 (3.14) and lim x→1 ζ(2.5, x)x1.5=ζ(2.5,1)1 =ζ(2.5)1 = 0.3415. (3.15) Since 0 and 0.3415 are very small values, ζ(2.5, x) is very close to the power-law distribution x1.5, when x [1,+). Moreover, ζ(2.5, xmin) is a constant with a

certain value xmin. Thus, P(x) = ζ(2ζ(2.5.,x5,xmin)), which is the cumulative distribution

of the discrete integer power-law distribution p(x) = ζ(2x.5,x2.5

min), is very close to the power-law distribution ζ(2x.5,x1.5

min). This example demonstrates that the cumulative distribution of a discrete power-law distribution roughly follows a power-law dis- tribution with a smaller scaling exponent value, which is approximately equal to

(a) Pairs (x, ζ(2.5, x)) in the natural log-log plot

(b) Functionζ(2.5, x)−x−1.5 where 25,000x250,000

Figure 3.1: The behaviour of Hurwitz zeta function ζ(α, x), where α = 2.5 and 25,000 x250,000

(α1). That is consistent with the inference based on that a discrete power-law distribution can be approximately computed by a continuous power-law distribution. In practice, a discrete power-law distribution is often approximately computed by a corresponding continuous power-law distribution. From the formulas above, it is clear that the computation of the continuous power-law distribution is much easier than that of the discrete power-law distribution, since the computation of the discrete power-law distribution involves the calculation of a Hurwitz zeta function. In general, calculating the value of a Hurwitz zeta function requires complicated calculation. Consequently, for the sake of computational simplicity, in many ap- plications, a discrete power-law distribution is approximated by a corresponding continuous power-law distribution [30].

There are many approximation methods and not all of them can generate ac- curate results in this case. For example, the approximations using rounding up or down normally generate poor results. A better approximation is to round the real values ofx of a corresponding continuous power-law distribution to the nearest integer [30].