Kenneth Arrow

Kenneth Joseph Arrow (New York, August 23, 1921-Palo Alto, California, February 21, 2017) was an American economist of Jewish origin.

He was laureate of the Bank of Sweden Prize in Alfred Nobel Memorial Economic Sciences in 1972 together with John Hicks. He is considered one of the foremost economists in neoclassical economic theory in the post-World War II period.

Biography

He was born in New York on August 23, 1921, into a Romanian-Jewish family that immigrated to the United States. He studied secondary education at Townsend Harris High School and later graduated in 1940, at City College (City University of New York), in Social Sciences, which he combined with studies of mathematics, later he completed his master's degree in mathematics, at Columbia University, although under the influence of the economist Harold Hotelling, he transferred to the Economics department for his graduation paper.

From 1942 to 1946 he served in the US Army. He earned his Ph.D. from Columbia University in 1951.

Between 1949 and 1968 he worked at Stanford University, first as an assistant professor and later as head of the Department of Economics and Statistics; he was also a member of the research team in the social sciences (1952) and the Institute for Advanced Study in the Behavioral Sciences (1956-1957). In 1962 he sat on the government's Economic Council and a year later he was made a Fellow of Churchill College, Cambridge. Between 1968 and 1979 he worked at Harvard University (where he introduced his new methods for developing economic theory) and in 1979 he returned to Stanford. He was laureate of the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel (Prize Nobel Prize in Economics) in 1972 together with the British Sir John Richard Hicks, for their theories on general economic equilibrium and welfare. In 1951 he published his most important work, Social Choice and Individual Values, in which he exposed his "impossibility theorem", according to which it is unfeasible to develop a social welfare function at starting from individual welfare functions without violating certain minimum conditions of rationality and equity; for this work Kenneth Arrow is recognized as the founder of modern economic theory of social choice.

He was a member of the Pontifical Academy of Social Sciences.

Contributions

His main contributions were in the field of decision theory, especially his Arrow impossibility theorem and general equilibrium analysis in microeconomics.

Other contributions are: the CES (constant elasticity of substitution) production function, the introduction of the concepts of moral hazard and adverse selection, establishing the foundations for information theory in economics and the measure of risk aversion of Arrow-Pratt.

The Impossibility Theorem

His impossibility theorem, also known as Arrow's paradox, shows that it is not possible to design rules for making social or political decisions that strictly obey the criterion of rationality. It is part of his doctoral thesis Social choice and individual values.

General Equilibrium Theory

Together with Gerard Debreu (who received the Alfred Nobel Memorial Prize from the Bank of Sweden in Economic Sciences for this work in 1983), Arrow formally demonstrated for the first time the existence of a hollowing-out equilibrium. of the market" if certain restrictive assumptions are met. This work was the first formal proof of the first and second welfare theorems in general equilibrium theory.

Works

• Arrow, Kenneth Joseph (1974). Social choice and individual values. Ministry of Economy and Finance. ISBN 978-84-7196-111-2.
• Arrow, Kenneth Joseph; Hahn, F. H. (1977). General competitive analysis. Fund for Economic Culture of Spain. ISBN 978-84-375-0119-2.
• Arrow, Kenneth Joseph; Raynaud, Hervé (1989). Social options and decision-making through multiple criteria. Editorial Alliance. ISBN 978-84-206-6702-7.