Kenneth Arrow

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Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with John Hicks.<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

In economics, Arrow was a major figure in postwar neoclassical economic theory. Four of his students (Roger Myerson, Eric Maskin, John Harsanyi, and Michael Spence) went on to become Nobel laureates themselves. His contributions to social choice theory, notably his "impossibility theorem", and his work on general equilibrium analysis are significant. His work in many other areas of economics, including endogenous growth theory and the economics of information, was also foundational.

Education and early career

Arrow was born on August 23, 1921, in New York City.<ref name="Maskin"/> Arrow's mother, Lilian (Greenberg), was from Iași, Romania, and his father, Harry Arrow, was from nearby Podu Iloaiei.<ref name="Velupillai">Template:Cite journal</ref><ref>Template:Cite book</ref> The family was of Romanian-Jewish descent, and very supportive of Kenneth's education.<ref name="Maskin"/><ref name="bookref1">Template:Cite book</ref><ref name="bookref2">Template:Cite book</ref> Growing up during the Great Depression, he embraced socialism in his youth. He would later move away from socialism, but his views retained a left-leaning philosophy.<ref name="Econjwatch.org">Template:Cite journal</ref>

He graduated from Townsend Harris High School and then earned a bachelor's degree in mathematics from the City College of New York in 1940, where he was a member of Sigma Phi Epsilon. He then attended Columbia University for graduate studies, obtaining a master's degree in mathematics in June 1941.<ref name=nobel/> At Columbia, Arrow studied under Harold Hotelling, who influenced him to switch fields to economics.<ref name="Econjwatch.org"/> He served as a weather officer in the United States Army Air Forces from 1942 to 1946.<ref>Template:Cite web</ref><ref name="Maskin" />

Academic career

From 1946 to 1949 Arrow was a graduate student at Columbia, and also worked as a research associate at the Cowles Commission. During that time he also was an assistant professor of economics at the University of Chicago and worked at the RAND Corporation in California. He left Chicago to become an acting assistant professor of economics and statistics at Stanford University. In 1951, he earned his PhD from Columbia.<ref name=nobel>Template:Nobelprize</ref> He served in the government on the staff of the Council of Economic Advisers in the 1960s with Robert Solow.<ref>Template:Cite news</ref> In 1968, he left Stanford for Harvard University, where he was appointed Professor of Economics; it was during his tenure there that he received the Nobel Prize in Economics.<ref name=nobel/>

Arrow returned to Stanford in 1979 and became the Joan Kenney Professor of Economics and Professor of Operations Research. He retired in 1991. As a Fulbright Distinguished Chair, in 1995 he taught economics at the University of Siena. He was also a founding member of the Pontifical Academy of Social Sciences and a member of the board at the Santa Fe Institute. At various stages in his career he was a Fellow of Churchill College, Cambridge.<ref name=nobel/> He was one of the founding editors of the Annual Review of Economics, which was first published in 2009.<ref>Template:Cite journal</ref>

Four of his former students have gone on to become Nobel Prize winners, namely John Harsanyi, Eric Maskin, Roger Myerson, and Michael Spence.<ref name="Stefancic">Template:Cite journal</ref> A collection of Arrow's papers is housed at the Rubenstein Library at Duke University.<ref>Template:Cite web</ref>

Arrow's impossibility theorem

Template:Main Arrow's monograph Social Choice and Individual Values derives from his 1951 PhD thesis.

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In what he named the General Impossibility Theorem, he theorized that, unless we accept to compare the levels of utility reached by different individuals, it is impossible to formulate a social preference ordering that satisfies all of the following conditions:<ref name=theo/>

Nondictatorship: The preferences of an individual should not become the group ranking without considering the preferences of others.
Individual Sovereignty: each individual should be able to order the choices in any way and indicate ties
Unanimity: If every individual prefers one choice to another, then the group ranking should do the same
Freedom From Irrelevant Alternatives: If a choice is removed, then the others' order should not change
Uniqueness of Group Rank: The method should yield the same result whenever applied to a set of preferences. The group ranking should be transitive.

The theorem has implications for welfare economics and theories of justice, and for voting theory (it extends the Condorcet paradox). Following Arrow's logical framework, Amartya Sen formulated 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.<ref name=theo>Template:Cite web</ref>

General equilibrium theory

Template:Main Work by Arrow and Gérard Debreu and simultaneous work by Lionel McKenzie offered the first rigorous proofs of the existence of a market clearing equilibrium.<ref>Template:Cite book</ref> For this work and his other contributions, Debreu won the 1983 Nobel Prize in Economics.<ref>Template:Cite news</ref> Arrow went on to extend the model and its analysis to include uncertainty, the stability. His contributions to the general equilibrium theory were influenced by Adam Smith's Wealth of Nations.<ref name="Maskin">Template:Cite journal</ref> Written in 1776, The Wealth of Nations is an examination of economic growth brought forward by the division of labor, by ensuring interdependence of individuals within society.<ref>Smith, Adam, and Andrew S. Skinner. The wealth of nations. London: Penguin Books, 1999. Print.</ref>

In 1974, The American Economic Association published the paper written by Kenneth Arrow, General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice, where he states:

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Fundamental theorems of welfare economics

In 1951, Arrow presented the first and second fundamental theorems of welfare economics and their proofs without requiring differentiability of utility, consumption, or technology, and including corner solutions.<ref>Template:Cite web</ref>

Endogenous-growth theory

Template:See also Arrow was one of the precursors of endogenous growth theory, which seeks 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 outside economic activities, and was outside (exogenous) to common economic models. At the same time there was no economic explanation for why it occurred. Endogenous-growth theory provided standard economic reasons for why firms innovate, leading economists to think of innovation and technical change as determined by economic actors, that is endogenously to economic activities, and thus belong inside the model. Endogenous growth theory started with Paul Romer's 1986 paper,<ref>Template:Cite journal</ref> borrowing from Arrow's 1962 "learning-by-doing" model which introduced a mechanism to eliminate diminishing returns in aggregate output.<ref name="Maskin"/><ref>Template:Cite journal</ref> A literature on this theory has developed subsequently to Arrow's work.<ref>Template:Cite book</ref>

Information economics

In other 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);<ref name="Savedoff">Template:Cite journal</ref> later researchers investigated many other markets, particularly second-hand assets, online auctions and insurance.

Awards and honors

Arrow was awarded the John Bates Clark Medal in 1957<ref>Template:Cite web</ref> and was elected a Fellow of the American Academy of Arts and Sciences in 1959.<ref name=AAAS>Template:Cite web</ref> In 1968, he was elected to both the United States National Academy of Sciences<ref>Template:Cite web</ref> and the American Philosophical Society.<ref>Template:Cite web</ref> He was the joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972 and the 1986 recipient of the von Neumann Theory Prize.<ref name=nobel/> He was one of the recipients of the 2004 National Medal of Science, the nation's highest scientific honor, presented by President George W. Bush for his contributions to research on the problem of making decisions using imperfect information and his research on bearing risk.<ref name="Velupillai"/><ref name="Bush">Template:Cite web</ref>

He has received honorary doctorates from the University of Chicago (1967), the University of Vienna (1971) the City University of New York (1972).<ref name=nobel/> On 2 June 1995 he received an honorary doctorate from the Faculty of Social Sciences at Uppsala University, Sweden.<ref>Template:Cite web</ref> He was elected a Foreign Member of the Royal Society (ForMemRS) in 2006.<ref name="frs">Template:Cite web</ref> He was elected to the 2002 class of Fellows of the Institute for Operations Research and the Management Sciences.<ref>Template:Cite web</ref> In 2007 he was the first Witten Lecturer at the Witten/Herdecke University as the awardee of the Witten Lectures in Economics and Philosophy.<ref>Template:Cite web</ref>

Personal life and death

Arrow was a brother to the economist Anita Summers, uncle to economist and former Treasury Secretary and Harvard President Larry Summers, and brother-in-law of the late economists Robert Summers and Paul Samuelson.<ref name=nyt/> In 1947, he married Selma Schweitzer, graduate in economics at the University of Chicago<ref>Template:Cite book</ref> and psychotherapist, who died in 2015; they had two children, David Michael (b. 1962), an actor,<ref>Template:IMDb name</ref> and Andrew Seth (b. 1965), an actor/singer.<ref name=nobel/>

Arrow died in his Palo Alto, California, home on February 21, 2017, at the age of 95.<ref name=nyt>Template:Cite news</ref>

Publications

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Including: Arrow, Kenneth J. Price-quantity adjustments in multiple markets with rising demands, pp. 3–15.

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Arrow also published an article, along with Hollis B. Chenery, Bagicha S. Minhas, and Robert M. Solow, pseudonymously under the name Archen Minsol, who it was claimed was at the (fictional) University of Lower Slobbovia. The publication produced was: Template:Cite journal.<ref>See page 236 in Düppe, T., & Weintraub, E. R. (2014). Finding equilibrium: Arrow, Debreu, McKenzie and the problem of scientific credit. Princeton University Press.</ref>
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References

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External links

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Kenneth J. Arrow papers, 1921-2017, Duke University
Biography of Kenneth J. Arrow from the Institute for Operations Research and the Management Sciences
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Kenneth Arrow: An Oral History, Stanford Historical Society Oral History Program, 2011
Kenneth J. Arrow: An Oral History, Stanford Historical Society Oral History Program, 2016

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