Kenneth Joseph Arrow

Abstract

Nobel Prize winning economist. He was born in New York, USA, on Aug 23, 1921, and died in Palo Alto, USA, on Feb 21, 2017 aged 95 years. In any list of influential economists ranked by familiarity to the general public, Kenneth Arrow—winner of the 1972 Nobel Prize for economics—would probably not be among those making the first half dozen or maybe even the top ten. And that's odd. When asked if Arrow is indeed up there with there with greats, the Stanford University Professor of Economics Alvin Roth, himself a Nobel Laureate, answers with a corrective twist. “The greats are up there with him”, he replies. “He was arguably the most important economist of the 20th century.” Besides paving the way for economics to become a more mathematical discipline, Arrow's ideas have had a direct bearing on all manner of political and social thinking, including in the sphere of medicine and health care. Fellow professionals may know him for his fundamental theorems; specialists in tropical medicine are more likely to be impressed by his chairmanship of a US Institute of Medicine (IoM) committee that laid out a plan for dealing with the cost of new antimalarial drugs. “Arrow was unusual among the giants in that he became important by doing important economics”, says Roth. Arrow's impossibility theorem, the Arrow-Debreu model, and the Arrow-Pratt index of risk aversion have become part of the intellectual framework of the discipline. Moreover, Arrow began making an impact from the outset; it was his 1951 PhD thesis on “Social choice and individual values” that showed how social decisions differ from individual decisions, and started a whole new field of research. A decade later, he made his first and most direct impression on medicine with his paper “Uncertainty and the welfare economics of medical care”. As Roth explains, “He talked about the way that medicine is a very different kind of market to other product markets. It shaped the way that people think about the economics of medical care.” Anne Mills is Deputy Director of the London School of Hygiene & Tropical Medicine in London, UK, and Professor of Health Economics and Policy. As she comments, it is no surprise that many health economists see Arrow as the intellectual father of their subdiscipline. Mills herself was a member of the IoM committee responsible for the 2004 report Saving Lives, Buying Time: Economics of Malaria Drugs in an Age of Resistance. Chloroquine was failing, she says, and the problem was one that the market by itself could not fix. “You needed the whole world to make an economic decision for our collective benefit, but private markets aren't going to achieve that because people operate in their individual interest.” A switch from chloroquine to artemisinin in combination made good public health sense, but would be costly. “It was evident that a global mechanism would be appropriate, with a global fund to purchase on the world market and therefore drive down the cost,” Mills explains. Which is what, following Arrow's tutelage, eventually happened. Born to a father who had lost everything during the Great Depression, Arrow's original intention was to become a high school maths teacher. With a degree in the relatively unusual combination of maths and social science, he found there we no vacancies for maths teachers in his home city. Instead, he enrolled for a masters degree at Columbia University during which he did a course on mathematical economics. As he later wrote, “I realised I had found my niche”. Military service during World War 2 found him working as a statistician in the US Army Air Corp's Weather Division and charged with forecasting the number of rainy days in particular combat areas. A simple statistical test showed that his efforts were fruitless, so Arrow wrote to his general suggesting his unit be disbanded. He received a reply: “The general is well aware that your forecasts are no good. However, they are required for planning purposes.” If Arrow hadn't already grasped the way the world works, he did then. After stints at the universities of North Carolina and Chicago, and the RAND Corporation in Santa Monica, he joined Stanford University where he became Professor of Economics. He worked at Harvard University from 1969 until 1979, then rejoined Stanford, and stayed until he retired emeritus in 1991. “He was always the smartest person in the room”, says Roth, “but he wore it very lightly”. Arrow leaves a sister, Anita, and two sons, David and Andrew.