Nobel Laureate Kenneth J. Arrow, a RAND Consultant Since 1948, Dies at 95

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Wednesday
February 22, 2017

Kenneth J. Arrow

Kenneth J. Arrow

Kenneth J. Arrow, a Nobel laureate in economics and a RAND Corporation consultant since 1948 whose groundbreaking work shaped scholarly thinking about such critical issues as the fairness of democratic elections, climate change and the cost of health care, has died. He was 95.

Arrow died Tuesday at his home in Palo Alto, California, the New York Times reported.

At age 51, he became the youngest person to be awarded the Nobel Prize, in 1972. Arrow, who shared the prize with British economist Sir John R. Hicks, was recognized for pioneering contributions to general economic equilibrium theory, which seeks to explain how prices are set across an economy, and welfare theory, which examines how goods and services are allocated.

During an academic career that stretched from the University of Chicago to Harvard and Stanford universities, Arrow taught several students who went on to win their own Nobel prizes in economics.

“RAND takes great pride in the achievements of Kenneth Arrow, whose path-breaking contributions to 20th century economics took shape here more than six decades ago,” said Michael D. Rich, president and CEO of RAND, based in Santa Monica, California. “His insights over a long and distinguished career—especially his startling ideas about social choice—led to inspired work by scholars in successive generations and in many fields.”

Arrow was most famous for his “impossibility theorem,” also known as Arrow's theorem, which addressed the complexities of group decision-making and the improbable choices that often result. His work in that area, which began at RAND in the late 1940s, formed the basis of his provocative 1951 doctoral dissertation “Social Choice and Individual Values.”

In that paper, originally issued as a RAND report, Arrow offered mathematical proof that when there are numerous options and a diversity of opinions no voting system can be completely fair. His work laid the foundation for the modern study of social choice theory and has influenced scholars not only in economics but also political science, philosophy, computer science and biology.

Among those who benefited from Arrow's pioneering work was Indian economist and philosopher Amartya K. Sen, who cited the “breathtaking elegance and power” of Arrow's ideas when he was awarded the Nobel Prize in economics in 1998.

Arrow also was the author of a widely cited 1963 paper that explained the challenges inherent in the health care market, examining such factors as the gap in medical knowledge between doctors and patients and the role of insurance in shaping demand for medical care. Nearly a half-century later it remained one of the “most influential economic papers of the postwar era,” Paul Krugman, another Nobel Prize-winning economist, wrote in 2009 in the New York Times.

Arrow also was known for his analyses of information as a variable in productivity and the economics of racial discrimination, anti-malarial treatments and carbon emissions.

Kenneth Joseph Arrow was born in New York City on Aug. 23, 1921. His father was a banker whose livelihood was destroyed in the economic collapse of 1929. An exceptional student, Kenneth entered the City College of New York at age 15 and graduated in 1940 with a bachelor's degree in social science and mathematics.

After abandoning plans to teach high school math, he entered graduate school at Columbia to study statistics, earning a master's in mathematics in 1941. He switched to economics when he was offered a fellowship. “So I was bought,” he joked in a talk he gave at Stanford in 2014. “Economics really predicts quite well, or at least in that one case it did.”

He entered the Army Air Forces in 1942 and served as a weather officer during World War II. After completing his service in 1946, he resumed his studies, earning a doctorate in economics from Columbia and becoming a research associate for the Cowles Commission for Research in Economics at the University of Chicago.

In 1947 he met and married University of Chicago graduate student Selma Schweitzer. Her contacts helped Arrow secure a research position in the summer of 1948 at RAND. Conversations he had at RAND inspired him to write his dissertation on social choice theory. When he won the Nobel, he cited the book that grew out of his work at RAND as a major aspect of his accomplishment and a turning point in the development of modern economics.

In 1949 he joined Stanford's faculty, teaching economics, statistics and later operations research. Over the next decade, his career took off. In addition to his noted paper on social choice theory, he published several other major papers, including a 1954 article co-authored by French economist Gerard Debreu, with whom he developed the Arrow-Debreu model of general equilibrium.

Arrow taught at Harvard from 1968 to 1979, when he returned to Stanford. He retired in 1991.

For many years, Arrow had served on the Academic Advisory Board of the Pardee RAND Graduate School.

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