National Medal of Science award ceremony, 2004
Kenneth Joseph Arrow
23 August 1921
New York City, New York, U.S.
|Died||21 February 2017 95) (aged|
Palo Alto, California, U.S.
|Field|| Microeconomics |
General equilibrium theory
Social choice theory
|Alma mater|| City College of New York |
|Contributions|| General equilibrium theory |
Fundamental theorems of welfare economics
Arrow's impossibility theorem
Endogenous growth theory
|Information at IDEAS / RePEc|
Kenneth Joseph Arrow (23 August 1921 – 21 February 2017) was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972.
An economist is a practitioner in the social science discipline of economics.
A mathematician is someone who uses an extensive knowledge of mathematics in his or her work, typically to solve mathematical problems.
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, is an award for outstanding contributions to the field of economics, and generally regarded as the most prestigious award for that field. The award's official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
In economics, he was a major figure in post-World War II neo-classical economic theory. Many of his former graduate students have gone on to win the Nobel Memorial Prize themselves. 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 the economics of information.
Social choice theory or social choice is a theoretical framework for analysis of combining individual opinions, preferences, interests, or welfares to reach a collective decision or social welfare in some sense. A non-theoretical example of a collective decision is enacting a law or set of laws under a constitution. Social choice theory dates from Condorcet's formulation of the voting paradox. Kenneth Arrow's Social Choice and Individual Values (1951) and Arrow's impossibility theorem in it are generally acknowledged as the basis of the modern social choice theory. In addition to Arrow's theorem and the voting paradox, the Gibbard–Satterthwaite theorem, the Condorcet jury theorem, the median voter theorem, and May's theorem are among the more well known results from social choice theory.
In social choice theory, Arrow's impossibility theorem, the general possibility theorem or Arrow's paradox is an impossibility theorem stating that when voters have three or more distinct alternatives (options), no ranked voting electoral system can convert the ranked preferences of individuals into a community-wide ranking while also meeting a specified set of criteria: unrestricted domain, non-dictatorship, Pareto efficiency, and independence of irrelevant alternatives. The theorem is often cited in discussions of voting theory as it is further interpreted by the Gibbard–Satterthwaite theorem. The theorem is named after economist and Nobel laureate Kenneth Arrow, who demonstrated the theorem in his doctoral thesis and popularized it in his 1951 book Social Choice and Individual Values. The original paper was titled "A Difficulty in the Concept of Social Welfare".
Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external forces. Endogenous growth theory holds that investment in human capital, innovation, and knowledge are significant contributors to economic growth. The theory also focuses on positive externalities and spillover effects of a knowledge-based economy which will lead to economic development. The endogenous growth theory primarily holds that the long run growth rate of an economy depends on policy measures. For example, subsidies for research and development or education increase the growth rate in some endogenous growth models by increasing the incentive for innovation.
Arrow was born on 23 August 1921, in New York City. Arrow's mother, Lilian (Greenberg), was from Iași, Romania, and his father, Harry Arrow, was from nearby Podu Iloaiei.The Arrow family were Romanian Jews. His family was very supportive of his education. 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.
The City of New York, usually called either New York City (NYC) or simply New York (NY), is the most populous city in the United States. With an estimated 2018 population of 8,398,748 distributed over a land area of about 302.6 square miles (784 km2), New York is also the most densely populated major city in the United States. Located at the southern tip of the state of New York, the city is the center of the New York metropolitan area, the largest metropolitan area in the world by urban landmass and one of the world's most populous megacities, with an estimated 19,979,477 people in its 2018 Metropolitan Statistical Area and 22,679,948 residents in its Combined Statistical Area. A global power city, New York City has been described as the cultural, financial, and media capital of the world, and exerts a significant impact upon commerce, entertainment, research, technology, education, politics, tourism, art, fashion, and sports. The city's fast pace has inspired the term New York minute. Home to the headquarters of the United Nations, New York is an important center for international diplomacy.
Iași, also referred to as Jassy or Iassy, is the second largest city in Romania, and the seat of Iași County. Located in the historical region of Moldavia, Iași has traditionally been one of the leading centres of Romanian social, cultural, academic and artistic life. The city was the capital of the Principality of Moldavia from 1564 to 1859, then of the United Principalities from 1859 to 1862, and the capital of Romania from 1916 to 1918.
Podu Iloaiei is a town in Iași County, Romania. It has 9,573 inhabitants as of 2011, and was declared a town in 2005. Four villages are administered by the town: Budăi, Cosițeni, Holm and Scobâlțeni.
He graduated from Townsend Harris High School and then earned a Bachelor's degree from the City College of New York in 1940 in mathematics, where he was a member of Sigma Phi Epsilon. He attended Columbia University, for his graduate studies. While there, he studied under Harold Hotelling, and was greatly influenced by him.He received a Master's degree in 1941. He served as a weather officer in the United States Army Air Forces from 1942 to 1946.
Townsend Harris High School (THHS) is a public magnet high school for the humanities in the borough of Queens in New York City. Students and alumni often refer to themselves as "Harrisites." Townsend Harris consistently ranks as among the top 100 High Schools in the United States. Its most recent U.S. News and World Report ranking in 2019 puts THHS at #1 in New York City, #1 in New York State and #11 in the nation.
A bachelor's degree or baccalaureate is an undergraduate academic degree awarded by colleges and universities upon completion of a course of study lasting three to seven years. In some institutions and educational systems, some bachelor's degrees can only be taken as graduate or postgraduate degrees after a first degree has been completed. In countries with qualifications frameworks, bachelor's degrees are normally one of the major levels in the framework, although some qualifications titled bachelor's degrees may be at other levels and some qualifications with non-bachelor's titles may be classified as bachelor's degrees.
The City College of the City University of New York is a public senior college of the City University of New York (CUNY) in New York City. Founded in 1847, City College was the first free public institution of higher education in the United States. It is the oldest of CUNY's 24 institutions of higher learning, and is considered its flagship college.
From 1946 to 1949 Arrow spent his time partly as a graduate student at Columbia and partly as a research associate at the Cowles Commission for Research in Economics at the University of Chicago. During that time he also held the rank of Assistant Professor in Economics at the University of Chicago and worked at the RAND Corporation in California. He left Chicago to take up the post of Acting Assistant Professor of Economics and Statistics at Stanford University. In 1951, he earned his Ph.D. from Columbia.He served in the government on the staff of the Council of Economic Advisers in the 1960s with Robert Solow. In 1968, he left Stanford for the position of Professor of Economics at Harvard University. It was during his tenure there that he received the Nobel Prize in Economics.
The University of Chicago is a private research university in Chicago, Illinois. Founded in 1890, the school is located on a 217-acre campus in Chicago's Hyde Park neighborhood, near Lake Michigan. The University of Chicago holds top-ten positions in various national and international rankings.
RAND Corporation is an American nonprofit global policy think tank created in 1948 by Douglas Aircraft Company to offer research and analysis to the United States Armed Forces. It is financed by the U.S. government and private endowment, corporations, universities and private individuals. The company has grown to assist other governments, international organizations, private companies and foundations, with a host of defense and non-defense issues, including healthcare. RAND aims for interdisciplinary and quantitative problem solving by translating theoretical concepts from formal economics and the physical sciences into novel applications in other areas, using applied science and operations research.
Leland Stanford Junior University is a private research university in Stanford, California. Stanford is known for its academic strength, wealth, selectivity, proximity to Silicon Valley, and ranking as one of the world's top universities.
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 Science Board of Santa Fe Institute. At various stages in his career he was a Fellow of Churchill College, Cambridge.
The U.S.- Italy Fulbright Commission is a bi-national, non-profit organization promoting the opportunities for study, research, and teaching in Italy and the United States. The commission acts as executor of the Fulbright Program to and from Italy. Since 1948, the commission has fostered mutual cultural understanding through educational exchange of persons, knowledge, and skills. The commission offers competitive, merit-based grants for students, scholars, teachers, professionals, scientists and artists.
The University of Siena in Siena, Tuscany is one of the oldest and first publicly funded universities in Italy. Originally called Studium Senese, the institution was founded in 1240. It had around 20,000 students in 2006, nearly half of Siena's total population of around 54,000. Today, the University of Siena is best known for its Schools of Law, Medicine, and Economics and Management.
The Pontifical Academy of Social Sciences was established on 1 January 1994 by Pope John Paul II and is headquartered in the Casina Pio IV in Vatican City. It operates much like other learned societies worldwide, but has the special task of entering into dialogue with the Church. Its scientific activities are organised and focused to promote this dialogue.
Five of his former students have gone on to become Nobel Prize winners. These include Eric Maskin, John Harsanyi, Michael Spence and Roger Myerson.A collection of Arrow's papers is housed at the Rubenstein Library at Duke University.
Arrow's monograph Social Choice and Individual Values derives from his 1951 Ph.D. thesis.
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.
In what he named the General Impossibility Theorem, he theorized that it was impossible to formulate a social preference ordering that satisfies all of the following conditions:
The theorem has 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.
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. [ citation needed ] 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.For this work and his other contributions, Debreu won the 1983 Nobel Prize in Economics. Arrow went on to extend the model and its analysis to include uncertainty, the stability. His contributions to the general equilibrium theory were strongly influenced by Adam Smith's Wealth of Nations .
In 1974, The American Economic Association published the paper written by Kenneth Arrow, General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice, where he states:
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 indeed so widespread that it raises no intellectual disquiet among laymen; they take it so much for granted that they are not supposed to understand the mechanism by which it occurs.
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.
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,borrowing from Arrow's 1962 "learning-by-doing" model which introduced a mechanism to eliminate diminishing returns in aggregate output. A literature on this theory has developed subsequently to Arrow's work.
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);later researchers investigated many other markets, particularly second-hand assets, online auctions and insurance.
Arrow was awarded the John Bates Clark Medal in 1957and was elected a Fellow of the American Academy of Arts and Sciences in 1959. 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. 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.
He has received honorary doctorates from the University of Chicago (1967), the University of Vienna (1971) the City University of New York (1972).On 2 June 1995 he received an honorary doctorate from the Faculty of Social Sciences at Uppsala University, Sweden. He was elected a Foreign Member of the Royal Society (ForMemRS) in 2006.
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.In 1947, he married Selma Schweitzer, graduate in economics at the University of Chicago and psychotherapist, who died in 2015; they had two children: David Michael (b. 1962), an actor, and Andrew Seth (b. 1964).
Arrow was well known for being a polymath, possessing prodigious knowledge of subjects far removed from economics. On one occasion (recounted by Eric Maskin), in an attempt to artificially best Arrow's knowledge, the junior faculty agreed to closely study the breeding habits of gray whales – a suitably obscure topic – and discuss it in his presence. To their surprise, Arrow actually joined into the conversation.
Arrow died in his Palo Alto, California home on 21 February 2017 at the age of 95.
In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium. General equilibrium theory contrasts to the theory of partial equilibrium, which only analyzes single markets.
Sir John Richard Hicks was a British economist. He was considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model (1937), which summarised a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him.
John Charles Harsanyi was a Hungarian-American economist.
Gérard Debreu was a French-born economist and mathematician. Best known as a professor of economics at the University of California, Berkeley, where he began work in 1962, he won the 1983 Nobel Memorial Prize in Economic Sciences.
In mathematical economics, the Arrow–Debreu model suggests that under certain economic assumptions there must be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy.
Information economics or the economics of information is a branch of microeconomic theory that studies how information and information systems affect an economy and economic decisions. Information has special characteristics: It is easy to create but hard to trust. It is easy to spread but hard to control. It influences many decisions. These special characteristics complicate many standard economic theories.
Karl Shell is an American theoretical economist, specializing in macroeconomics and monetary economics.
Hirofumi Uzawa was a Japanese economist.
Jacob Marschak was an American economist, known as "the Father of Econometrics".
Economic methodology is the study of methods, especially the scientific method, in relation to economics, including principles underlying economic reasoning. In contemporary English, 'methodology' may reference theoretical or systematic aspects of a method. Philosophy and economics also takes up methodology at the intersection of the two subjects.
Lionel Wilfred McKenzie was an American economist. He was the Wilson Professor Emeritus of Economics at the University of Rochester. He was born in Montezuma, Georgia. He completed undergraduate studies at Duke University in 1939 and subsequently moved to Oxford that year as a Rhodes Scholar. McKenzie worked with the Cowles Commission while it was in Chicago and served as an assistant professor at Duke from 1948–1957. Having received his Ph.D at Princeton University in 1956, McKenzie moved to Rochester where he was responsible for the establishment of the graduate program in economics.
Justice in economics is a subcategory of welfare economics with models frequently representing the ethical-social requirements of a given theory, whether "in the large", as of a just social order, or "in the small", as in the equity of "how institutions distribute specific benefits and burdens". That theory may or may not elicit acceptance. In the Journal of Economic Literature classification codes 'justice' is scrolled to at JEL: D63, wedged on the same line between 'Equity' and 'Inequality' along with 'Other Normative Criteria and Measurement'. Categories above and below the line are Externalities and Altruism.
Leonid "Leo" Hurwicz was a Polish-American economist and mathematician, known for his work in game theory and mechanism design. He originated the concept of incentive compatibility, and showed how desired outcomes can be achieved by using incentive compatible mechanism design. Hurwicz shared the 2007 Nobel Memorial Prize in Economic Sciences for his seminal work on mechanism design. Hurwicz was one of the oldest Nobel Laureate, having received the prize at the age of 90.
Roger Bruce Myerson is an American economist and professor at the University of Chicago. He holds the title of The Glen A. Lloyd Distinguished Service Professor in Economics and the College and Harris Graduate School of Public Policy Studies. In 2007, he was the winner of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with Leonid Hurwicz and Eric Maskin for "having laid the foundations of mechanism design theory." He was elected a Member of the American Philosophical Society in 2019.
Yew-Kwang Ng is a professor of economics at Nanyang Technological University. He has published in a variety of academic disciplines, and is best known for his work in welfare economics.
Mathematical economics is the application of mathematical methods to represent theories and analyze problems in economics. By convention, these applied methods are beyond simple geometry, such as differential and integral calculus, difference and differential equations, matrix algebra, mathematical programming, and other computational methods. Proponents of this approach claim that it allows the formulation of theoretical relationships with rigor, generality, and simplicity.
The Shapley–Folkman lemma is a result in convex geometry with applications in mathematical economics that describes the Minkowski addition of sets in a vector space. Minkowski addition is defined as the addition of the sets' members: for example, adding the set consisting of the integers zero and one to itself yields the set consisting of zero, one, and two:
Ross Marc Starr is an American economist who specializes in microeconomic theory, monetary economics and mathematical economics. He is a Professor at the University of California, San Diego.
Convexity is an important topic in economics. In the Arrow–Debreu model of general economic equilibrium, agents have convex budget sets and convex preferences: At equilibrium prices, the budget hyperplane supports the best attainable indifference curve. The profit function is the convex conjugate of the cost function. Convex analysis is the standard tool for analyzing textbook economics. Non‑convex phenomena in economics have been studied with nonsmooth analysis, which generalizes convex analysis.
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| Laureate of the Nobel Memorial Prize in Economics |
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