Kenneth Arrow quotes

Kenneth Arrow was an American economist and mathematician, widely recognized for his fundamental contributions to welfare economics and social choice theory. His work, including Arrow's Impossibility Theorem, has had a profound impact on modern economic thought. He was awarded the Nobel Memorial Prize in Economic Sciences for his pioneering achievements. Here are 55 of his quotes:

Uncertainty means that we do not have a complete description of the world which we fully believe to be true. (Kenneth Arrow)
Collective action is a means of power, a means by which individuals can more fully realize their individual values. View quote
Kenneth Arrow
As is by now well known, attempts to form social judgments by aggregating individual expressed preferences always lead to the possibility of paradox. View quote
Kenneth Arrow
The purpose of organizations is to exploit the fact that many (virtually all) decisions require the participation of many individuals for their effectiveness. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
Perhaps as important is the relation between the existence of solutions to a competitive equilibrium and the problems of normative or welfare economics. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
My graduate study was interrupted, like that of many others, by World War II. View quote
Kenneth Arrow
My undergraduate education, at the City College in New York, was made possible only by the existence of that excellent free institution and the financial sacrifices of my parents. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
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)
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. View quote
Kenneth Arrow
I think the idea that a society has to be responsible for all of its citizens, those who do well and those who do not, is really a precondition of a good society. View quote
Kenneth Arrow
We have to be more modest in what we claim. View quote
Kenneth Arrow
It seems to me that at least as far as the financial markets are concerned, there is increasing evidence against rational expectations, even at the macro level. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
The Austrian a priori dogmatism (von Mises, especially; Hayek, to a lesser degree). View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
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)
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. View quote
Kenneth Arrow
[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. View quote
Kenneth Arrow
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. View quote
Kenneth Arrow
Even Ricardo's most famous accomplishment, the law of comparative advantage in foreign trade, is incomplete, though not wrong. View quote
Kenneth Arrow