Yesterday, Nobel Prize winning economist Kenneth Arrow died. Many first-rate appreciations of him have been published and I won't try to duplicate what they have said.
Rather, I'll give my own recollections of Arrow.
And I'll lead with one joke told by someone on Facebook. I won't quote him by name because I don't have permission. To get the joke, you need to read the first paragraph of my bio of Arrow in The Concise Encyclopedia of Economics and know that Duncan Black covered some of the same ground Arrow did.
Arrow is better than Black. Black is better than Condorcet. Condorcet is better than Arrow.
Unearthing an Old Arrow Memo from the 1960s
Here's a story I tell briefly here:
I learned something from this research, and it's a lesson I also learned much earlier in my life but seem to have to relearn. Actually, two lessons. The first, which I first learned from reading Pride and Prejudice three times in high school, was not to assume but to pay attention and weigh evidence. The second, which I learned when I was a summer intern at the Council of Economic Advisers under Herb Stein in the Nixon White House, was how much agreement there is among economists about not restricting competition, not regulating prices, etc. One afternoon that summer of '73, when I was caught up on all my projects, I found some old files from the mid-1960s when Kenneth Arrow was a senior economist at the Council. In one of his memos, he made the case for deregulating natural gas prices."
My first time around Arrow
In December 1973, I had just ended the fall quarter of my second year in the Ph.D. program at UCLA and flew to Boston to visit my friend Larry Siskind, who was a senior at Harvard. I hung out for a big part of the week and decided to sit in on Arrow's class. The weather was cold out and he came in just before class time and hung his coat on a hanger at the back of the room. This stood out in my memory because it made me realize that after only 15 months in southern California, after my having left Canada, the world of cold weather, coats, and hangers seemed foreign.
But my important memory is about content. Arrow was explaining a pretty basic point to this graduate econ class. He was saying that one reason many economists had concluded that average cost curves slope up past some point, even though there may still be unexploited economies of scale in production, is that the managerial function is stretched. One of the students raised his hand and Arrow called on him. "So you're saying," said the student, "that this militates against economies of scale." What an awkward way of saying that for an economics Ph.D. student, I thought to myself. Armen Alchian, who had taught me price theory the year before, would never let that pass. Arrow wrinkled his nose and said, impatiently, "It raises cost." Armen would have smiled.
November 5, 1980
On November 4, 1980, Ronald Reagan had crushed Jimmy Carter in the presidential election, carrying 44 states and beating Carter by almost 10 percentage points in the popular vote. The Republicans also, for the first time since the early 1950s, carried the U.S. Senate. I was teaching at Santa Clara University and living in San Francisco, where almost everyone around me was in shock.
It just so happened that on my schedule for Wednesday after the election was to drive down to Hoover and have lunch with Marty Anderson. It's kind of amazing to me now that that was possible given Marty's prominent role in Reagan's campaign. I'm pretty sure Marty must have been with him in L.A. the evening before. Maybe he'd flown home that evening or the next morning.
In any case, we had lunch at the Stanford Faculty Club. From where we sat, I looked over about 30 feet and saw Ken Arrow at lunch with some colleagues. I'll never forget the stunned look on his face. It was priceless.
"Uncertainty and the Welfare Economics of Medical Care"
Here's my short appreciation of that justly famous article.
Kenneth Arrow had a good run.
Reprinted from the Library of Economics and Liberty.