Editing Kenneth Arrow (section)

==Academic career==
From 1946 to 1949 Arrow was a graduate student at Columbia, and also worked as a research associate at the [[Cowles Commission for Research in Economics|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>{{Nobelprize}}</ref> He served in the government on the staff of the [[Council of Economic Advisers]] in the 1960s with [[Robert Solow]].<ref>{{cite news |last1=D. |first1=S. |title=The best since the 1960s? |url=https://www.economist.com/free-exchange/2010/02/25/the-best-since-the-1960s |access-date=28 March 2023 |newspaper=The Economist |date=Feb 25, 2010}}</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 [[U.S.-Italy Fulbright Commission|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>{{cite journal | doi=10.1146/annurev.ec.1.081709.100001|title=Preface|year=2009|last1=Arrow|first1=Kenneth J.|last2=Bresnahan|first2=Timothy|journal=Annual Review of Economics|volume=1|doi-access=free}}</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">{{cite journal |last1=Stefancic |first1=Mitja |title=Review of J. Maesse et al. (2022) "Power and Influence of Economists: Contributions to the Social Studies of Economics" {{!}} World Economics Association |journal=WEA Commentaries |date=July 2021 |volume=11 |issue=2 |pages=11–12 |url=https://www.worldeconomicsassociation.org/newsletterarticles/review-influence-of-economists/ |access-date=28 March 2023}}</ref>
A collection of Arrow's papers is housed at the Rubenstein Library at [[Duke University]].<ref>{{cite web |url=http://library.duke.edu/rubenstein/findingaids/arrow/ |title=Kenneth J. Arrow Papers, 1939–2009. |publisher=Rubenstein Library, Duke University}}</ref>

===Arrow's impossibility theorem===
{{Main|Arrow's impossibility theorem}}
Arrow's monograph ''[[Social Choice and Individual Values]]'' derives from his 1951 [[Doctor of Philosophy|PhD]] thesis.

{{Blockquote|If we exclude the possibility of interpersonal comparisons of utility, then the only methods of passing from individual tastes to social preferences which will be satisfactory and which will be defined for a wide range of sets of individual orderings are either imposed or dictatorial.<ref>{{cite journal |last1=Arrow |first1=Kenneth J. |title=A Difficulty in the Concept of Social Welfare |journal=Journal of Political Economy |date=1950 |volume=58 |issue=4 |pages=328–346 |doi=10.1086/256963 |jstor=1828886 |s2cid=13923619 |url=https://www.jstor.org/stable/1828886 |issn=0022-3808}}</ref>}}

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>{{cite web|last1=Morreau|first1=Michael|title=Arrow's Theorem|url=https://plato.stanford.edu/entries/arrows-theorem/|website=The Stanford Encyclopedia of Philosophy|publisher=Metaphysics Research Lab, Stanford University|access-date=25 February 2017|date=1 January 2016}}</ref>

===General equilibrium theory===
{{Main|General equilibrium theory|Arrow–Debreu model}}
Work by Arrow and [[Gérard Debreu]] and simultaneous work by [[Lionel W. McKenzie|Lionel McKenzie]] offered the first [[Arrow–Debreu model|rigorous proofs of the existence of a market clearing equilibrium]].<ref>{{cite book |first1=Andreu |last1=Mas-Colell |first2=Michael D. |last2=Whinston |first3=Jerry R. |last3=Green |title=Microeconomic Theory |location=New York |publisher=Oxford University Press |year=1995 |isbn=0-19-507340-1 |pages=691–93 |url=https://books.google.com/books?id=KGtegVXqD8wC&pg=PA691 }}</ref> For this work and his other contributions, Debreu won the 1983 Nobel Prize in Economics.<ref>{{cite news|title=Gerard Debreu – Biographical|url=https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1983/debreu-bio.html|access-date=25 February 2017|work=nobelprize.org}}</ref> Arrow went on to extend the model and its analysis to include [[uncertainty#Concepts|uncertainty]], the [[Lipschitz continuity|stability]]. His contributions to the general equilibrium theory were influenced by [[Adam Smith]]'s ''[[Wealth of Nations]]''.<ref name="Maskin">{{cite journal |last1=Maskin |first1=Eric S. |title=The Economics of Kenneth J. Arrow: A Selective Review |journal=Annual Review of Economics |date=2 August 2019 |volume=11 |issue=1 |pages=1–26 |doi=10.1146/annurev-economics-080218-030323 |s2cid=164272068 |language=en |issn=1941-1383|doi-access=free }}</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:

{{blockquote|From the time of Adam Smith's ''Wealth of Nations'' in 1776, one recurrent theme of economic analysis has been the remarkable degree of coherence among the vast numbers of individual and seemingly separate decisions about the buying and selling of commodities. In everyday, normal experience, there is something of a balance between the amounts of goods and services that some individuals want to supply and the amounts that other, different individuals want to sell. Would-be buyers ordinarily count correctly on being able to carry out their intentions, and would-be sellers do not ordinarily find themselves producing great amounts of goods that they cannot sell. This experience of balance is indeed so widespread that it raises no intellectual disquiet among laymen; they take it so much for granted that they are not disposed to understand the mechanism by which it occurs.<ref>{{cite journal |last=Arrow |first=Kenneth |title=General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice |journal=[[American Economic Review]] |volume=64 |issue=3 |year=1974 |pages=253–72 |jstor=1808881 }}</ref>}}

===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>{{cite web|title=Kenneth Arrow (1921– )|url=http://www.econlib.org/library/Enc/bios/Arrow.html|website=Concise Encyclopedia of Economics|publisher=[[Liberty Fund]]|access-date=18 June 2017|date=2008}}<!-- NOTE: This an original article, not available from other sources. --></ref>

===Endogenous-growth theory===
{{see also|AK model}}
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 [[exogenous variable|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 [[Endogeneity (econometrics)|endogenously]] to economic activities, and thus belong inside the model. Endogenous growth theory started with [[Paul Romer]]'s 1986 paper,<ref>{{cite journal |first=Paul M. |last=Romer |title=Increasing Returns and Long-Run Growth |journal=[[Journal of Political Economy]] |volume=94 |issue=5 |year=1986 |pages=1002–37 |jstor=1833190 |doi=10.1086/261420|s2cid=6818002 |url=http://www.dklevine.com/archive/refs42232.pdf }}</ref> borrowing from Arrow's 1962 "[[learning-by-doing (economics)|learning-by-doing]]" model which introduced a mechanism to eliminate [[diminishing returns]] in aggregate output.<ref name="Maskin"/><ref>{{cite journal |first=Kenneth J. |last=Arrow |title=The Economic Implications of Learning by Doing |journal=[[The Review of Economic Studies]] |volume=29 |issue=3 |year=1962 |pages=155–73 |jstor=2295952 |doi=10.2307/2295952 |s2cid=155029478 }}</ref> A literature on this theory has developed subsequently to Arrow's work.<ref>{{cite book |first1=Robert J. |last1=Barro |first2=Xavier |last2=Sala-i-Martin |title=Economic Growth |location=Cambridge |publisher=MIT Press |edition=2nd |year=2004 |isbn=0-262-02553-1 |pages=212–20 |url=https://books.google.com/books?id=jD3ASoSQJ-AC&pg=PA212 }}</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 [[warranty|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">{{cite journal |last1=Savedoff |first1=William D. |title=Kenneth Arrow and the birth of health economics |journal=Bulletin of the World Health Organization |date=February 2004 |volume=82 |issue=2 |pages=139–140 |pmid=15042237 |pmc=2585899 |hdl=10665/269064 |url=https://scielosp.org/article/bwho/2004.v82n2/139-140/ |access-date=27 March 2023 |language=en |issn=0042-9686}}</ref> later researchers investigated many other markets, particularly second-hand assets, online auctions and insurance.