Arrow was born on August 23, 1921, in New York City.[5] Arrow's mother, Lilian (Greenberg), was fromIași, Romania, and his father, Harry Arrow, was from nearbyPodu Iloaiei.[6][7] The family was ofRomanian-Jewish descent, and very supportive of Kenneth's education.[5][8][9] Growing up during theGreat Depression, he embraced socialism in his youth. He would later move away from socialism, but his views retained a left-leaning philosophy.[10]
From 1946 to 1949 Arrow was a graduate student at Columbia, and also worked as a research associate at theCowles Commission. During that time he also was anassistant professor of economics at theUniversity of Chicago and worked at theRAND Corporation in California. He left Chicago to become an acting assistant professor of economics and statistics atStanford University. In 1951, he earned his PhD from Columbia.[11] He served in the government on the staff of theCouncil of Economic Advisers in the 1960s withRobert Solow.[13] In 1968, he left Stanford forHarvard University, where he was appointed Professor of Economics; it was during his tenure there that he received the Nobel Prize in Economics.[11]
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.[17]
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:[18]
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 forwelfare economics and theories ofjustice, and for voting theory (it extends theCondorcet paradox). Following Arrow's logical framework,Amartya Sen formulated theliberal paradox which argued that given a status of "Minimal Liberty" there was no way to obtainPareto optimality, nor to avoid the problem of social choice of neutral but unequal results.[18]
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'sWealth 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.[22]
In 1951, Arrow presented the first and secondfundamental theorems of welfare economics and their proofs without requiring differentiability of utility, consumption, or technology, and including corner solutions.[23]
Arrow was one of the precursors ofendogenous 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 occurexogenously—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 forwhy 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 isendogenously to economic activities, and thus belong inside the model. Endogenous growth theory started withPaul Romer's 1986 paper,[24] borrowing from Arrow's 1962 "learning-by-doing" model which introduced a mechanism to eliminatediminishing returns in aggregate output.[5][25] A literature on this theory has developed subsequently to Arrow's work.[26]
In other pioneering research, Arrow investigated the problems caused byasymmetric 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, includingwarranties and third partyauthentication, 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);[27] later researchers investigated many other markets, particularly second-hand assets, online auctions and insurance.
Arrow was a brother to the economistAnita Summers, uncle to economist and former Treasury Secretary and Harvard PresidentLarry Summers, and brother-in-law of the late economistsRobert Summers andPaul Samuelson.[37] In 1947, he married Selma Schweitzer, graduate in economics at theUniversity of Chicago[38] and psychotherapist, who died in 2015; they had two children, David Michael (b. 1962), an actor,[39] and Andrew Seth (b. 1965), an actor/singer.[11]
Arrow, Kenneth J. (1951a). "Alternative approaches to the theory of choice in risk-taking situations".Econometrica.19 (4). The Econometric Society:404–37.doi:10.2307/1907465.JSTOR1907465.
and as:Arrow, Kenneth J.;Hurwicz, Leonid (1977), "Appendix: An optimality criterion for decision-making under ignorance", in Arrow, Kenneth J.;Hurwicz, Leonid (eds.),Studies in resource allocation processes, Cambridge New York: Cambridge University Press, pp. 461–72,ISBN978-0521215220.
Arrow, Kenneth J. (February 1959a). "Functions of a theory of behaviour under uncertainty".Metroeconomica.11 (1–2). Wiley:12–20.doi:10.1111/j.1467-999X.1959.tb00258.x.
Arrow, Kenneth J. (1959b), "Toward a theory of price adjustment", inAbramovitz, Moses; et al. (eds.),The allocation of economic resources: essays in honor of Bernard Francis Haley, Stanford, California:Stanford University Press,OCLC490147128.
Arrow, Kenneth J. (1960), "Price-quantity adjustments in multiple markets with rising demands", inArrow, Kenneth J.;Karlin, Samuel;Suppes, Patrick (eds.),Mathematical models in the social sciences, 1959: Proceedings of the first Stanford symposium, Stanford mathematical studies in the social sciences, IV, Stanford, California: Stanford University Press, pp. 3–15,ISBN978-0804700214.{{citation}}:ISBN / Date incompatibility (help)
Arrow, Kenneth J.;Suppes, Patrick;Karlin, Samuel (1960).Mathematical models in the social sciences, 1959: Proceedings of the first Stanford symposium. Stanford, California: Stanford University Press.ISBN978-0804700214.{{cite book}}:ISBN / Date incompatibility (help)
Including: Arrow, Kenneth J.Price-quantity adjustments in multiple markets with rising demands, pp. 3–15.
Arrow also published an article, along withHollis B. Chenery,Bagicha S. Minhas, andRobert M. Solow, pseudonymously under the nameArchen Minsol, who it was claimed was at the (fictional) University ofLower Slobbovia. The publication produced was:Minsol, A (1968). "Some Tests of the International Comparisons of Factor Efficiency with the CES Production Function: A Reply".The Review of Economic Studies', 477–479.s.50 (4 (Nov.)):477–79..[40]
Reprinted as:Arrow, Kenneth J. (1983b), "The organization of economic activity: issues pertinent to the choice of market versus non-market allocations", in Arrow, Kenneth J. (ed.),Collected Papers of Kenneth J. Arrow, vol. 2: general equilibrium, Cambridge, Massachusetts: Belknap Press, pp. 133–55,ISBN978-0674137615.
Arrow, Kenneth J. (February 1977). "Extended sympathy and the possibility of social choice".American Economic Review.67 (1). American Economic Association:219–25.JSTOR1815907.
Reprinted as:Arrow, Kenneth J. (1983a), "Extended sympathy and the possibility of social choice", in Arrow, Kenneth J. (ed.),Collected Papers of Kenneth J. Arrow, vol. 1: Social Choice and Justice, Cambridge, Massachusetts: Belknap Press,ISBN978-0674137608.
Arrow, Kenneth J.Collected papers of Kenneth J. Arrow. Cambridge, Massachusetts:Harvard University Press.
Arrow, Kenneth J. (1983a).Collected Papers of Kenneth J. Arrow. Vol. 1: Social Choice and Justice. Cambridge, Massachusetts: Belknap Press.ISBN978-0674137608.
Arrow, Kenneth J. (1983b).Collected Papers of Kenneth J. Arrow. Vol. 2: General Equilibrium. Cambridge, Massachusetts: Belknap Press.ISBN978-0674137615.
Arrow, Kenneth J. (1984b).Collected Papers of Kenneth J. Arrow. Vol. 4: the Economics of Information. Cambridge, Massachusetts: Belknap Press.ISBN978-0674137639.
Arrow, Kenneth J. (1985a).Collected Papers of Kenneth J. Arrow. Vol. 5: production and capital. Cambridge, Massachusetts: Belknap Press.ISBN978-0674137776.
Arrow, Kenneth J. (1987), "Rationality of self and others in an economic system", in Hogarth, Robin M.; Reder, Melvin W. (eds.),Rational choice: the contrast between economics and psychology, Chicago:University of Chicago Press, pp. 201–16,ISBN978-0226348575.
Arrow, Kenneth J.;Anderson, Philip W.;Pines, David, eds. (1988).The economy as an evolving complex system: the proceedings of the Evolutionary Paths of the Global Economy Workshop, held September, 1987 in Santa Fe, New Mexico. Redwood City, California: Addison-Wesley Pub. Co.ISBN978-0201156850.Book details.
Arrow, Kenneth J. (June 2009). "Some developments in economic theory since 1940: an eyewitness account".Annual Review of Economics.1. Wiley:1–16.doi:10.1146/annurev.economics.050708.143405.
Arrow, Kenneth J.;Anderson, Philip W.;Pines, David (1988).The economy as an evolving complex system: the proceedings of the evolutionary paths of the global economy workshop, held September, 1987 in Santa Fe, New Mexico. Redwood City, California: Addison-Wesley Pub. Co.ISBN978-0201156850.
^Heller, Walter P.; Starr, Ross M.; Starrett, David A., eds. (1986)."Kenneth J. Arrow".Social Choice and Public Decision Making: Essays in Honor of Kenneth J. Arrow, Volume I. Cambridge University Press. p. xiv.ISBN0521304547.
^See page 236 in Düppe, T., & Weintraub, E.R. (2014).Finding equilibrium: Arrow, Debreu, McKenzie and the problem of scientific credit. Princeton University Press.
