Kenneth Arrow Dies at 95
Kenneth Joseph Arrow, who was an Honorary Professor of the Higher School of Economics and a Nobel Prize-winning economist, passed away on Tuesday, February 21st. He was 95.
In 1972, Mr Arrow became the youngest recipient of the Nobel Memorial Prize in Economics, sharing it with John Hicks of the University of Oxford for their ‘pioneering contribution to general equilibrium theory and welfare theory.’ It would not be hyperbolic to say that Arrow, who began as a mathematician, was one of the founders of modern economic science.
Born in New York in 1921, he graduated college there before completing his master’s at Columbia University. It was at the university that his mentor, renowned economist Harold Hotelling, helped him decide to switch from pure mathematics to the economic applications that maths can have. This was also because Arrow had become interested in problems of social welfare and healthcare.
In his PhD dissertation, which he defended in the early 1950s, Kenneth Arrow presented what is now called the impossibility theorem, thereby laying the foundation for an separate field of economics – social choice theory. In his theorem, Arrow demonstrated how it was impossible for a society to make a rational collective decision on its priorities due to individual preferences. As for elections, this means that there is no voting system that would allow voters to make a decision that suits all of society when they are voting among several (three or more) candidates.
Arrow’s research also focused on problems with economic growth, wealth distribution, and the relationship between the market and the state. Together with Gérard Debreu, he developed a general equilibrium model called the Arrow–Debreu model. Later, in 1962, Mr Arrow introduced the idea of productive function with a constant elasticity of substitution, which established the main principles of modern economic growth theory. In 1969-1970, together with Mordecai Kurz, he completed a number of works on investments and optimal tax policy. Arrow was one of the first to research problems of information asymmetry, which market participants regularly encounter when making decisions.
Arrow’s colleagues consider him to be one of the best economists to have lived. When he received the Nobel Prize in 1972, the New York Timesnoted, ‘despite the deep abstraction of his econometric theories, friends consider Professor Arrow basically a humanist, a scholar who has always tried to apply fundamental theory to such social problems as medical care, education, race discrimination and water resources.’ Over the last several years, Mr Arrow held an actively public opinion on issues such as climate change, Obamacare, and the minimum wage.
Professor Arrow taught at Stanford University for several decades with a slight break spent at Harvard. He was close to several professors from the Higher School of Economics as well, including HSE Honorary Professor Fuad Aleskerov. In 2004, Aleskerov edited and published a translation of Arrow’s monograph Social Choice and Individual Valuesthrough the HSE Publishing House. In 2012, Professor Arrow was named an honorary professor of the Higher School of Economics, and in 2016 he became an international member of the Russian Academy of Sciences.
Fuad Aleskerov remembers Kenneth Arrow:
‘Life sometimes gives us presents, whether expected or unexpected. I cannot say that my friendship with Kenneth Arrow was entirely unexpected though – I worked hard to expand on his model in social choice theory, which is why my friendship with him was bound to occur. That was in 1985.
In 1992 and 1994, he invited me to speak at one of his well-known seminars at Stanford. Before this, I had worked on the axiomatic construction of group selection correspondences, and the work included rules that selected suboptimal elements, according to the Pareto principle. When I got this result, I concluded that I’d made a mistake and returned to the paper six months later. Everything ended up being correct.
So before Stanford, I had talked about this work at a number of top universities in the U.S. and Europe, and Ken was the only one to look at the board, understand this particularity, and ask a question. I was speechless for ten seconds, and then I said that I had never thought it possible for someone to understand this particular fact just from the board.
In 1996, he invited me to present at a seminar in Austria. There were 12 speakers and 12 reviewers, and each paper presentation lasted 45 minutes, after which the reviewer would discuss. Kenneth was the only one to listen and understand everything that the speakers and reviewers said. These papers then went into the 19th volume of the Handbook of Economics. This edition of the handbook, of which Kenneth Arrow was one of the editors, had a great impact on the development of economic research over the next quarter of a century.
And in the evenings, he would edit my text. I sat nearby, and with incredible tact he would ask if I minded if he corrected this or that sentence. He had only just arrived from the U.S., and it was clear he was tired. But each time I tried to convince him to put off my text, he said he really enjoyed editing it.
In 2004, we published a Russian version of his book Social Choice and Individual Values. I was the scientific editor of the Russian translation, and though I had read it before then, I was nonetheless amazed at how deep the ideas it contained were.
He was later a guest of the HSE April Conference in 2012 and enthusiastically talked with our students and colleagues.
I could go on about many of our meetings, each of which made an unforgettable impression on me. What I will really miss are his letters, each signed, “Yours, as ever, Ken.”’
Eric Maskin, Chairman of HSE International Advisory Committe, Nobel laureate in Economics:
'Kenneth Arrow was the most important figure in my professional life. Indeed, he was responsible for my going into economics in the first place. As an undergraduate at Harvard, I was a mathematics major, but somehow I wandered into the course of lectures that he was giving on the Economics of Information. The course was a hodgepodge of topics that were currently on the frontier of research. It persuaded me that economics is a subject that is not only socially important but extremely exciting intellectually. On the basis of Ken Arrow’s remarkable course, I changed directions, and ended up doing my PhD with him.'