Kenneth J. Arrow, who died in California on 21
st Feb 2017, at the age of 95, was an intellectual giant whose contributions to economics have underpinned and transformed much of the discipline.
Professor Arrow was associated with several universities and institutions but mostly with Stanford University, where he was an emeritus professor at the time of his death.
At the age of 51, he was the youngest person to win the Nobel Prize in economics. He won it jointly with John Hicks.
In 1951, while still a student at Columbia University, Professor Arrow wrote Social Choice and Individual Values, which contained what is known as Arrow’s Impossibility Theorem (ironically called the General Possibility Theorem by Arrow himself).
His contribution is considered the foundation of modern social choice theory, for which he is best known.
Arrow left his mark across much of economics, both in terms of his theoretical contributions and through his intellectual impact on others (five of his students won Nobel Prizes).
His contributions include a general equilibrium theory proof, which showed that a set of prices exists at which all markets are in simultaneous equilibrium.
He received a Nobel Prize for his work in this area.
Arrow also made profound contributions to information economics, finance and endogenous growth theory which models the level of technology as being affected by factors within an economy rather than being externally determined.
Arrow’s treatment of topics was highly mathematical yet had huge implications for the important questions of his time, including social welfare, insurance, finance, equality and health.
His interests extended beyond economics to include statistics, philosophy, the arts and wildlife.
What is Arrow’s Impossibility Theorem?- When voters rank three or more choices, there is no way to aggregate their choices for a society as a whole, in a logically consistent manner.
- This theory holds that if done so, it cannot be attained without violating some basic principles, one of which is not having one person’s preferences overrule the others’.
- This has often been interpreted as voting systems based on ranking one outcome against another as being logically flawed.
- This is unless one individual has dictator-type rights in choosing societal preferences.
