“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

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Kenneth Arrow 37

American economist 1921–2017

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“[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 (1921–2017) American economist

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

“… a rather different class of applications of the idea of best allocation of scarce resources… usually referred to as the theory of optimal economic growth. In most studies of this kind made in the countries with market economies there is not an identifiable client to whom the findings are submitted as policy recommendations. Nor is there an obvious choice of objective function, such as cost minimization or profit maximization in the studies addressed to individual enterprises. The field has more of a speculative character. The models studied usually contain only a few highly aggregated variables. One considers alternative objective functions that incorporate or emphasize various strands of ethical, political, or social thought. These objectives are then tried out to see what future paths of the economy they imply under equally simplified assumptions of technology or resource availability.”

Tjalling Koopmans (1910–1985) Dutch American economist

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“Construction methods are… variable for each specific material.”

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“If the system exhibits a structure which can be represented by a mathematical equivalent, called a mathematical model, and if the objective can be also so quantified, then some computational method may be evolved for choosing the best schedule of actions among alternatives. Such use of mathematical models is termed mathematical programming.”

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“The measure of information to be developed here will also be related to freedom of choice; that is, it will be a function of the probabilities of choice associated with the alternative courses of action… The measure developed here is a function of m, the number of alternative potential courses of action.”

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“Organizations are (1) social entities that (2) are goal-directed, (3) are designed as deliberately structured and coordinated activity systems, and (4) are linked to the external environment.”

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“A function of a variable quantity is an analytic expression composed in any way whatsoever of the variable quantity and numbers or constant quantities.”

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§4
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