Arrow, Kenneth J.

Kenneth J. Arrow was one of the most prominent economic theorists of the 20th century. Arrow's classic 1963 article “Uncertainty and the Welfare Economics of Medical Care” launched the field of health economics. His landmark article addressed the role of market competition in delivering healthcare services, the implications of moral hazard (the notion that health insurance increases demand for healthcare services), the uncertainty inherent in healthcare, the role of nonmarket social institutions, the existence of extreme information asymmetry (the inequalities of information between insurer, physician, and patient), and the importance of trust in the physician–patient relationship, given the existence of information asymmetry.

Arrow is currently the Joan Kenney Professor of Economics and Professor of Operations Research, Emeritus, at Stanford University, and senior fellow at the Center for Health Policy at the Freeman Spogli Institute for International Studies, the Center for Outcomes Research, and the Institute for Economic Policy Research, all at Stanford. In 1972, Arrow won the Nobel Prize in Economics for his work on general equilibrium theory and welfare theory. In 2004, he also was awarded the National Medal of Science, the nation's highest scientific honor, for his contributions to understanding decision making under imperfect information and bearing risk.

Arrow was born in 1921 in New York City. He earned a bachelor's degree in social science from the City College of New York (1940) and a master's degree in mathematics (1941) and a doctorate degree in economics (1951) from Columbia University. During World War II, he served as a weather officer in the U.S. Army Air Corps, rising to the rank of captain. From 1946 through 1949, he was a graduate student at Columbia University and a research associate at the Cowles Commission for Research in Economics at the University of Chicago. In 1949, he began teaching economics and statistics at Stanford University, where he eventually achieved the rank of professor. In 1968, Arrow left Stanford to become a professor of economics at Harvard University. He remained at Harvard until 1979. That year, he returned to Stanford University and remained there until 1991, when he retired and became professor emeritus.

Arrow is the recipient of numerous awards and honors. He received the John Bates Clark Medal of the American Economic Association. He is an elected member of the National Academy of Sciences and the American Philosophical Society. Arrow was also a fellow of the American Academy of Arts and Sciences, the Economic Society, the Institute of Mathematical Statistics, and the American Statistical Association. He was the president of the Econometric Society, the Institute of Management Sciences, and the American Economic Association. He holds honorary degrees from the University of Chicago, the City University of New York, and the University of Vienna.

Arrow's broad research interests include the economics of information and organization, collective decision making, general equilibrium theory, and environment and growth. His major contribution in the field of economics was his work in social choice theory, particularly his impossibility theorem. Arrow also pioneered research in endogenous growth and information economics, which explained the source of technical change and why firms innovate. And his research on information economics investigated the problems caused by asymmetric information in various markets.

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