Kenneth Arrow Quotes (37 quotes) | Quotes of famous people

Kenneth Arrow: 37 quotes1 like

Famous Kenneth Arrow Quotes

“Studying oneself is not the most comfortable of enterprises. One is caught between the desire to show oneself in the best possible light and the fear of claiming more than one’s due.”

Kenneth Arrow

in Lives of the Literature, edited by William Breit and ‎Barry T. Hirsch
1970s-1980s

“The formal structure of a decision problem in any area can be put into four parts: ( 1 ) the choice of an objective function denning the relative desirability of different outcomes; (2) specification of the policy alternatives which are available to the agent, or decisionmaker, (3) specification of the model, that is, empirical relations that link the objective function, or the variables that enter into it, with the policy alternatives and possibly other variables; and (4) computational methods for choosing among the policy alternatives that one which performs best as measured by the objective function.”

Kenneth Arrow

Source: 1970s-1980s, The Economics of Information (1984), p. 55

“I want, however, to conclude by calling attention to a less visible form of social action: norms of social behavior, including ethical and moral codes. I suggest as one possible interpretation that they are reactions of society to compensate for market failures. It is useful for individuals to have some trust in each other's word. In the absence of trust it would become very costly to arrange for alternative sanctions and guarantees, and many opportunities for mutually beneficial cooperation would have to be, foregone.”

Kenneth Arrow

Kenneth Arrow, “The Organization of Economic Activity: Issues Pertinent to the Choice of Market versus Non-market Allocation” (1969)
1950s-1960s

“Decision theory, as it has grown up in recent years, is a formalization of the problems involved in making optimal choices. In a certain sense — a very abstract sense, to be sure — it incorporates among others operations research, theoretical economics, and wide areas of statistics, among others.”

Kenneth Arrow

Source: 1970s-1980s, The Economics of Information (1984), p. 55

“As is by now well known, attempts to form social judgments by aggregating individual expressed preferences always lead to the possibility of paradox.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 1, Rationality: Individual And Social, p. 25

“The choice among these alternatives in any given case depends on the degree of difficulty consumers have in making the choice unaided, and on the consequences of errors of judgment. It its the general social consensus, clearly, that the laissez-faire solution for medicine is intolerable. The certification proposal never seems to have been discussed seriously.”

Kenneth Arrow

Kenneth Arrow, "Uncertainty and The Welfare Economics of Medical Care", The American Economic Review(1953)
1950s-1960s

Kenneth Arrow Quotes about problems

“Perhaps as important is the relation between the existence of solutions to a competitive equilibrium and the problems of normative or welfare economics.”

Kenneth Arrow

Source: 1950s-1960s, "Existence of an equilibrium for a competitive economy." 1954, p. 265

“From the point of view of seeking a consensus of the moral imperative of individuals, such consensus being assumed to exist, the problem of choosing an electoral or other choice mechanism, or, more broadly, of choosing a social structure, assumes an entirely different form from that discussed in the greater part of this study.”

Kenneth Arrow

Source: 1950s-1960s, Social Choice and Individual Values (1951), p. 85

“Multiple discoveries are in fact very common in science and for much the same reason. Developments in related fields with different motivation help one to understand a difficult problem better. Since these developments are public knowledge, many scholars can take advantage of them. It is pleasant to the ego to be first or among the first with a new discovery. However, in this case at least, the evidence is clear that the development of general equilibrium theory would have gone on quite as it did without me.”

Kenneth Arrow

Arrow (1984) "November 1984 lecture at Trinity University". Lecture presented November 5, 1984.
1970s-1980s

“We don't have much time left. We are moving towards temperature increases of around two degrees Celsius, which is going to have consequences in the tropics, and we will loose things like glaciers. That's not a theory; it's happening right now. It's not a prediction; it's happening right now. But you just sightsee near those glaciers. But the glaciers are a big source of water. And on the questions of water, in California we store our water in a snowpack. When that's gone, the rain will be the same but it won't accumulate. With warming temperatures the snowpack will now work. It might be possible to substitute with dams, but that's complicated. This is conjoined with a big energy problem and I think that we really have to encourage development in this area. Just waiting for technological improvement won't work. We need to encourage it.”

Kenneth Arrow

quoted in Conor Clarke, An Interview with Kenneth Arrow, Part Three https://www.theatlantic.com/politics/archive/2009/07/an-interview-with-kenneth-arrow-part-three/22330/ (2009) New millennium

“There are information asymmetries in this story. Health insurance is limping along. It's limited in scope, and then you other consequences. Insurance companies have high premiums to protect themselves. The ones who come to the insurance company are sicker and the people have to pay more. You have adverse selection. You have moral hazard. And the doctor does what's on the safe side -- defensive medicine -- without regard to cost. These are fundamental conditions that make health insurance difficult. You have some things that help. Some doctors understand that they shouldn't abuse the system. But you still see problems in the way doctors behave towards patients. They goof off. Sometimes it's too much work. Some things are difficult and risky to diagnose.”

Kenneth Arrow

quoted in Conor Clarke, An Interview with Kenneth Arrow, Part Two https://www.theatlantic.com/politics/archive/2009/07/an-interview-with-kenneth-arrow-part-two/22279/ (2009) New millennium

“I don't know which way human psychology will go wrong. We have a world in which there is uncertainty. There are new technologies. And one of the problems is that we do things today with a thought to the future. Any purchase is one for the future. If you buy a refrigerator you are making a commitment to the future, so that you have food to eat for the next ten years. That's a simple theory, one of many simple theories -- theories that people agree on and that don't, in a fundamental way, change. But every once in a while there is unemployment, and wages will drop, and there will be several different interpretations.”

Kenneth Arrow

quoted in Conor Clarke, An Interview with Kenneth Arrow, Part One https://www.theatlantic.com/politics/archive/2009/07/an-interview-with-kenneth-arrow-part-one/22213/ (2009) New millennium

Kenneth Arrow Quotes

“Krugman's whole attack is directed at a statement made neither by Arthur nor by Cassidy. Krugman has not read Cassidy's piece with any care nor has he bothered to review what Arthur has in fact said.”

Kenneth Arrow

from Kenneth J. Arrow" http://www.pkarchive.org/cranks/Brian.html"Letter (1998) 1970s-1980s

“The purpose of organizations is to exploit the fact that many (virtually all) decisions require the participation of many individuals for their effectiveness.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 2, Organization And Information, p. 33

“Trust is an important lubricant of a social system. It is extremely efficient; it saves a lot of trouble to have a fair degree of reliance on other people's word. Unfortunately this is not a commodity which can be bought very easily. If you have to buy it, you already have some doubts about what you have bought.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 1, Rationality: Individual And Social, p. 23

“We will also assume in the present study that individual values are taken as data and are not capable of being altered by the nature of the decision process itself”

Kenneth Arrow

Source: 1950s-1960s, Social Choice and Individual Values (1951), p. 7

“Certainly, there is no general principle that prevents the creation of an economic theory based on other hypotheses than that of rationality.”

Kenneth Arrow

1970s-1980s, "Rationality of Self and Others in an Economic System", 1986

“The idealist doctrine then may be summed up by saying that each individual has two orderings, one which governs him in his everyday actions, and one which would be relevant under some ideal conditions and which is in some sense truer than the first ordering. It is the latter which is considered relevant to social choice, and it is assumed that there is complete unanimity with regard to the truer individual ordering.”

Kenneth Arrow

Source: 1950s-1960s, Social Choice and Individual Values (1951), p. 83

“It is this thinking which I think gives rise to the greatest tragedies of history, this sense of commitment to a past purpose which reinforces the original agreement precisely at a time when experience has shown that it must be reversed.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 1, Rationality: Individual And Social, p. 29

“I am old-fashioned enough to retain David Hume’s view that one can never derive “ought” propositions from “is” propositions. The two issues, method and value, are distinct.”

Kenneth Arrow

Kenneth Arrow, "Methodological Individualism and Social Knowledge", American Economic Review (1994)
1970s-1980s

“In eras when authority or at least specific authorities have been questioned, there is more tendency to examine the roots of and the need for authority. The owl of Minerva flies not in the dusk but in the storm.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 4, Authority And Responsibility, p. 65

“I want to stress that rationality is not a property of the individual alone, although it is usually presented that way. Rather, it gathers not only its force but also its very meaning from the social context in which it is embedded.”

Kenneth Arrow

1970s-1980s, "Rationality of Self and Others in an Economic System", 1986

“In this aspect, the case for democracy rests on the argument that free discussion and expression of opinion are the most suitable techniques of arriving at the moral imperative implicitly common to all. Voting, from this point of view, is not a device whereby each individual expresses his personal interests, but rather where each individual gives his opinion of the general will.”

Kenneth Arrow

Source: 1950s-1960s, Social Choice and Individual Values (1951), p. 85 as cited in: Gerry Mackie (2006) "The Reception of Social Choice Theory By Democratic Theory".

“L. Walras first formulated the state of the economic system at any point of time as the solution of a system of simultaneous equations representing the demand for goods by consumers, the supply of goods by producers and the equilibrium condition that supply equal demand on every market.”

Kenneth Arrow

Source: 1950s-1960s, "Existence of an equilibrium for a competitive economy." 1954, p. 265

“There are many other organizations beside the government and the firm. But all of them, whether political party or revolutionary movement, university or church, share the common characteristics of the need for collective action and the allocation of resources through nonmarket methods.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 1, Rationality: Individual And Social, p. 26

“Collective action is a means of power, a means by which individuals can more fully realize their individual values.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 1, Rationality: Individual And Social, p. 16

“I was early regarded as having unusual intellectual capacity. I was an omnivorous reader, and I added to that a desire to systematize my understanding. As a result, history, for example, was not merely a set of dates and colorful stories; I could understand it as a sequence in which one event flowed out of another. This sense of order crystallized during my high-school and college years into a predominant interest in mathematics and mathematical logic.”

Kenneth Arrow

Arrow (1984) "November 1984 lecture at Trinity University". Lecture presented November 5, 1984.
1970s-1980s

“The Austrian a priori dogmatism (von Mises, especially; Hayek, to a lesser degree).”

Kenneth Arrow

on question "In your mind, what has been the most misleading theoretical approach in economics?", in Karen Ilse Horn (ed.) Roads to Wisdom, Conversations With Ten Nobel Laureates in Economics (2009)
New millennium

“In an ideal socialist economy, the reward for invention would be completely separated from any charge to the users of information. In a free enterprise economy, inventive activity is supported by using the invention to create property rights; precisely to the extent that it is successful, there is an underutilization of the information.”

Kenneth Arrow

Kenneth J. Arrow (1962). "Economic Welfare and the Allocation of Resources for Invention." In: The Rate and Direction of Inventive Activity. Princeton University Press.; cited in: Thrainn Eggertsson, Economic behavior and institutions. 1990. p. 22
1950s-1960s

“Uncertainty means that we do not have a complete description of the world which we fully believe to be true.”

Kenneth Arrow

Source: 1970s-1980s, The Limits Of Organization (1974), Chapter 2, Organization And Information, p. 34

“I was a very polite person, though. Paul Samuelson tells these stories how he used to correct his professors. I assume that’s true. But I wasn’t that type.”

Kenneth Arrow

in Karen Ilse Horn (ed.) Roads to Wisdom, Conversations With Ten Nobel Laureates in Economics (2009)
New millennium

“Not only is it possible to devise complete models of the economy on hypotheses other than rationality, but in fact virtually every practical theory of macroeconomics is partly so based. The price- and wage- rigidity elements of Keynesian theory are hard to fit into a rational framework, though some valiant efforts have been made. … But if the Keynesian model is a natural target of criticism by the upholders of universal rationality, it must be added that monetarism is no better. I know of no serious derivation of the demand for money from a rational optimization. … The use of rationality in these arguments is ritualistic, not essential.”

Kenneth Arrow

1970s-1980s, "Rationality of Self and Others in an Economic System", 1986

“While economic theory in general may be defined as the theory of how an economic condition or an economic development is determined within an institutional framework, the welfare theory deals with how to judge whether one condition can be said to be better in some way than another and whether it is possible, by altering the institutional framework, to achieve a better condition than the present one.”

Kenneth Arrow

Arrow and Hicks (1972) From Nobel Lectures, Economics 1969-1980, Editor Assar Lindbeck, World Scientific Publishing Co., Singapore, 1992 ( online http://www.nobelprize.org/nobel_prizes/economics/laureates/1972/presentation-speech.html) 1970s-1980s

“[The decisionmaking role of the firm has progressed from the neoclassical standpoint of profit maximization to sales maximization, utility maximization, and satisficing. From the Operation Research point of view] …the ideal picture is that someone, presumable the firm that hires the operations researcher, hands him, on a silver platter, an objective function. By talking to the engineers, or by looking into a few scientific laws, he determines the policy alternatives available and also the model”

Kenneth Arrow

Source: 1970s-1980s, The Economics of Information (1984), p. 55 as cited in: Demetri Kantarelis (2008) " Book Review: Title: Theories Of The Firm 2nd Edition http://www.inderscience.com/books/TOF_american_econ_review.pdf". In: The American economist. Vol 52, Nr 1. p. 117

“I then follow up with four major aspects of economic research in the last 60 years, the period of my scholarly activity. One, econometric methodology and practice, is of such fundamental importance that it cannotgo unnoticed, although I played no role in it. With the other three, general equilibrium, dynamic processes, and uncertainty and information, I was more intimately involved.”

Kenneth Arrow

Kenneth Arrow, "Some Developments in Economic Theory Since 1940: An Eyewitness Account" Annu. Rev. Econ. 2009
New millennium

“Even Ricardo's most famous accomplishment, the law of comparative advantage in foreign trade, is incomplete, though not wrong.”

Kenneth Arrow

Kenneth Arrow, "Ricardo's Work as Viewed by Later Economists" (1988)
1970s-1980s

“In a capitalist democracy there are essentially two methods by which social choices can be made: voting, typically used to make ‘political’ decisions, and the market mechanism, typically used to make ‘economic’ decisions. In the emerging democracies with mixed economic systems Great Britain, France, and Scandinavia, the same two modes of making social choices prevail, though more scope is given to the method of voting and to decisions based directly or indirectly on it and less to the rule of the price mechanism. Elsewhere in the world, and even in smaller social units within the democracies, the social decisions are sometimes made by single individuals or small groups and sometimes (more and more rarely in this modern world) by a widely encompassing set of traditional rules for making the social choice in any given situation, for example, a religious code.”

Kenneth Arrow

Source: 1950s-1960s, Social Choice and Individual Values (1951), p. 1: Opening pharagraph