logo logo

Kenneth Arrow (Kenneth Joseph Arrow )

Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51.In economics, he is considered an important figure in post-World War II neo-classical economic theory. For more than fifty years he has been one of the most influential of all practicing economists.

Background

  • Arrow is considered, along with Paul Samuelson, one of the founders of modern neo-classical economics. His most significant works are his contributions to social choice theory, notably "Arrow's impossibility theorem," and his work on general equilibrium analysis. He has also provided foundational work in many other areas of economics, including endogenous growth theory and information economics. In 1972, Kenneth Arrow received the Nobel Prize for Economics.

    Arrow's impossibility theorem was set out in his Ph.D. thesis, Social choice and individual values.

    Arrow has generalized the well-known theorem about pareto-optimality of a competitive equilibrium, and he has demonstrated that there exist general tendencies towards inoptimality in the allocation of resources between research and investments in real capital. As perhaps the most important of Arrow's many contributions to welfare theory appears his "possibility theorem", according to which it is impossible to construct a social welfare function out of individual preference functions.

    In its final form it states the following: given the conditions of Pareto Optimality (P), Unbounded social choice (S), Independence of choices (I) and non-Dictatorship (D), it is impossible to formulate a social choice function which satisfies all of them. This has tremendous implications for welfare economics and theories of justice. It was extended by Amartya Sen to the Liberal Paradox which argued that given a status of "Minimal Liberty" there was no way to obtain Pareto Optimality, nor to avoid the problem of social choice of neutral but unequal results.

    Arrow applied mathematical methods in his studies of general equilibrium systems. In a series of papers, which preferentially treated the properties of solubility and stability of such systems, he provided the basis for a radical reformulation of the traditional equilibrium theory. Through this reformulation, which was based on the mathematical theory of convex sets, the general equilibrium theory gained both in generality and in simplicity. The pioneering work, a paper from 1954, was written together with Gerhard Debreu. The model presented in this paper became the starting point for the major part of further research in this field. Among Arrow's many important contributions should also be mentioned his development of the theory of uncertainty and its incorporation within the frame of general equilibrium theory and, furthermore, his analysis of the possibilities for decentralized decisions in a society where the price system is fixed by the central authority. This analysis was made in collaboration with Leonid Hurwicz.

    Endogenous Growth theory

    Arrow was instrumental in kick-starting research into endogenous growth theory (also known as new growth theory) which sought to explain the source of technical change, which is a key driver of economic growth. Until this theory came to prominence, technical change was assumed to occur exogenously - that is, it was assumed to occur with no explanation of why it occurred. Endogenous growth theory provided standard economic reasons for why firms innovate - so innovation and technical change are determined endogenously - that is, within the model (hence the name). A vast literature on this theory has developed subsequently to Arrow's pioneering work.

    Information Economics

    Arrow was also one of the first economists to note the existence of a learning curve. His basic idea was that as producers increase output of a product, they gain experience and become more efficient. “The role of experience in increasing productivity has not gone unobserved,” he wrote, “though the relation has yet to be absorbed into the main corpus of economic theory.” More than forty years after Arrow’s article, the learning curve insight has still not been fully integrated into mainstream economic analysis.

    In yet more pioneering research, Arrow investigated the problems caused by asymmetric information in markets. In many transactions, one party (usually the seller) has more information about the product being sold than the other party. Asymmetric information creates incentives for the party with more information to cheat the party with less information; as a result, a number of market structures have developed, including warranties and third party authentication, which enable markets with asymmetric information to function. Arrow analysed this issue for medical care (a 1963 paper entitled "Uncertainty and the Welfare Economics of Medical Care," in the American Economic Review); later researchers investigated many other markets, particularly second-hand assets, online auctions and insurance.

  • Education

    • Arrow has spent most of his professional life on the economics faculties of Stanford University (1949–1968 and 1980–present) and Harvard University (1968–1979). He earned his B.A. in social science at the City College of New York and his M.A. and Ph.D. in economics from Columbia University.

    Works

    • Intergenerational Equity and the Rate of Discount in Long-Term Social Investment
    • 100 años de la American Economic Review: los 20 artículos más destacados
    • Comment on "The Historical Origins of 'Open Science'" (by Paul David)
    • Population, development, and human natures

    Politics

    Party affiliation: Socialist Party

    Religion

    Denomination: Judaism

    Membership

    • Fellow: American Association for the Advancement of Science

    • National Academy of Sciences

    • American Economic Association

    • International Society Inventory Research 1983-1990

    • Econometric Society (vice president 1955, president 1956)

    • American Statistical Association

    • Institute Operations Research and Management Sci. (president 1963, chairman council 1964, Von Neumann prize 1986, Fellows' award)
      1964

    • American Philosophical Society

    • Social Science Research fellow
      1952

    • Fellow of the Center for Advanced Study in the Behavioral Sciences
      1956 - 1957

    Personality

    Interests

    Microeconomics

    General equilibrium theory

    Social choice theory

    Connections

    • father: Harry I. Arrow
    • mother: Lillian Arrow
    • Advisor, teacher: Harold Hotelling
    Kenneth Arrow
    See on larger map
    Born August 23, 1921
    Nationality
    Ethnicity:
    • 1940
      City College of New York
    • 1940 - 1941
      Columbia University
    • 1942 - 1946
      weather officer, the United States Army Air Corps
    • 1946 - 1949
      Columbia University
    • 1946 - 1949
      University of Chicago
    • 1947 - 1949
      Research associate, Cowles Commission Research in Economics
      Chicago, Illinois, United States
    • 1949 - 1968
      Stanford University
    • 1949 - 1950
      acting assistant, professor economics and statistics Stanford University
      California, United States
    • 1953 - 1956
      Executive Head of the Department of Economics, Stanford University
    • 1962 - 1962
      Economist on the staff , United States Council of Economic Advisors,
    • 1962 - 1963
      Executive Head of the Department of Economics, Stanford University
    • June, 1964 - June, 1964
      Guest Professorin , Institute for Advanced Studies
      Vienna
    • 1968 - 1974
      professor, economics Harvard University
      Cambridge, Massachusetts, United States
    • 1971 - 1971
      Guest Professorin , Institute for Advanced Studies
      Vienna
    • 1974 - 1979
      Harvard University, James Bryant Conant University
    • 1980
      Stanford University
    • 1986 - 1986
      part-time Professor, European University Institute
    • 1995 - 1995
      Fulbright Professor at the, University of Siena
      Siena
    • 1996 - 1996
      Visiting Fellow, All Souls College, University of Oxford
    • show more ...

    Contributor  

    Nastena Lishtvan last changed 11/11/2012 view changes

    Anastasiya Shalkevich

    last changed 29/05/2017 view changes
    • Works
      • paper: A Note on Uncertainty and Discounting in Models of Economic Growth
      • paper: Conspicuous consumption, inconspicuous leisure
      • paper: The Genuine Saving Criterion and the Value of Population in an Economy with Endogenous Population Changes
      • paper: The Promise of Prediction Markets
      • paper: Limited network connections and the distribution of wages
      • paper: The Genuine Savings Criterion and the Value of Population
      • paper: Evaluating Projects and Assessing Sustainable Development in Imperfect Economies
      • paper: Benefit-Cost Analysis in Environmental, Health, and Safety Regulation: A Statement of Principles
      • paper: Is There a Role for Benefit-Cost Analysis in Environmental, Health, and Safety Regulation?
      • paper: General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice
      • article: Intergenerational Equity and the Rate of Discount in Long-Term Social Investment
      • book: Handbook of Social Choice and Welfare
      • article: 100 años de la American Economic Review: los 20 artículos más destacados
      • article: Comment on "The Historical Origins of 'Open Science'" (by Paul David)
      • article: Population, development, and human natures
    • School and college years description
    Go
    up
    Edit Profile