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Kenneth J. Arrow

Bio: Kenneth J. Arrow is an academic researcher from Stanford University. The author has contributed to research in topics: Social choice theory & General equilibrium theory. The author has an hindex of 113, co-authored 411 publications receiving 111221 citations. Previous affiliations of Kenneth J. Arrow include University of California & Princeton University.


Papers
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Book
01 Jan 1984
TL;DR: A difficulty in the concept of social welfare is discussed in this article, where Tullock and an Existence Theorem are used to define the principle of rationality in collective decision-making.
Abstract: 1 A Difficulty in the Concept of Social Welfare 2 Little's Critique of Welfare Economics 3 The Principle of Rationality in Collective Decisions 4 Values and Collective Decision Making 5 The Place of Moral Obligation in Preference Systems 6 Tullock and an Existence Theorem 7 A Utilitarian Approach to the Concept of Equality in Public Expenditures 8 Some Ordinalist-Utilitarian Notes on Rawis's Theory of Justice 9 Formal Theories of Social Welfare 10 Rawls's Principle of Just Saving 11 Extended Sympathy and the Possibility of Social Choice 12 Current Developments in the Theory of Social Choice 13 Nozick's Entitlement Theory of Justice 14 The Trade-off between Growth and Equity 15 Optimal and Voluntary Income Distribution Index

76 citations

Journal ArticleDOI
TL;DR: The FRESH-Thinking project convenes a multidisciplinary group of scholars who collaborate to comprehensively study the specific, detailed challenges to health care reform, finding common ground on 8 fundamental policy recommendations to achieve needed fundamental reforms.
Abstract: The coverage, cost, and quality problems of the U.S. health care system are evident. Sustainable health care reform must go beyond financing expanded access to care to substantially changing the organization and delivery of care. The FRESH-Thinking Project (www.fresh-thinking.org) held a series of workshops during which physicians, health policy experts, health insurance executives, business leaders, hospital administrators, economists, and others who represent diverse perspectives came together. This group agreed that the following 8 recommendations are fundamental to successful reform: 1. Replace the current fee-for-service payment system with a payment system that encourages and rewards innovation in the efficient delivery of quality care. The new payment system should invest in the development of outcome measures to guide payment. 2. Establish a securely funded, independent agency to sponsor and evaluate research on the comparative effectiveness of drugs, devices, and other medical interventions. 3. Simplify and rationalize federal and state laws and regulations to facilitate organizational innovation, support care coordination, and streamline financial and administrative functions. 4. Develop a health information technology infrastructure with national standards of interoperability to promote data exchange. 5. Create a national health database with the participation of all payers, delivery systems, and others who own health care data. Agree on methods to make de-identified information from this database on clinical interventions, patient outcomes, and costs available to researchers. 6. Identify revenue sources, including a cap on the tax exclusion of employer-based health insurance, to subsidize health care coverage with the goal of insuring all Americans. 7. Create state or regional insurance exchanges to pool risk, so that Americans without access to employer-based or other group insurance could obtain a standard benefits package through these exchanges. Employers should also be allowed to participate in these exchanges for their employees' coverage. 8. Create a health coverage board with broad stakeholder representation to determine and periodically update the affordable standard benefit package available through state or regional insurance exchanges.

76 citations

Journal ArticleDOI
TL;DR: This book examines the problems involved in allocating resources in an economic system where decision-making is decentralized into the hands of individuals and individual enterprises.
Abstract: One of the central questions of economics relates to the coordination of individual units within a large organization to achieve the central objectives of that organization. This book examines the problems involved in allocating resources in an economic system where decision-making is decentralized into the hands of individuals and individual enterprises. The decisions made by these economic agents must be coordinated because the input decisions of some must eventually equal the output decisions of others. Coordination arises naturally out of the mathematical theory of optimization but there is still the question of how it can be achieved in practice with dispersed knowledge. The essays here explore the many facets of this problem. Nine papers are grouped under the title 'Economies with a single maximand'. They include papers on static and dynamic optimization, decentralization within firms, and nonconvexities in optimizing problems. Fourteen papers are concerned with 'Economies with multiple objectives'. Among the topics covered here are stability of competitive equilibrium, stability in oligopology, and dynamic shortages. The final part of the book includes three papers on informational efficiency and informationally decentralized systems. Leonid Hurwitcz is the Nobel Prize Winner 2007 for The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, along with colleagues Eric Maskin and Roger Myerson, for his work on the effectiveness of markets.

75 citations

Journal ArticleDOI
TL;DR: Although the reductions in energy consumption accomplished by initiatives and strategies fall far short of what is required to address impending global climate change, it is believed that the principles underlying these initiatives suggest ways to achieve more substantial reductions.
Abstract: Despite solid evidence from the scientific community about climate disruption, much of the US public remains unconvinced about the reality of anthropogenic change, and national governments have been slow to undertake major steps to deal with the climate crisis. In order to understand this lack of foresight intelligence regarding climate disruption, we identify some features of climate disruption and human psychology that combine to create barriers to effective action. We also review encouraging, albeit modest, successes in persuading Americans to conserve energy through “psych-wise” initiatives. Although the reductions in energy consumption accomplished by these initiatives and strategies fall far short of what is required to address impending global climate change, we believe that the principles underlying these initiatives suggest ways to achieve more substantial reductions. We conclude by offering some specific steps that could be taken to achieve such reductions and more generally meet the building global challenge.

75 citations

Book ChapterDOI
TL;DR: The implications of uncertainty for public investment decisions remain controversial as mentioned in this paper, and it is widely accepted that individuals are not indifferent to uncertainty and will not, in general, value assets with uncertain returns at their expected values.
Abstract: The implications of uncertainty for public investment decisions remain controversial. The essence of the controversy is as follows. It is widely accepted that individuals are not indifferent to uncertainty and will not, in general, value assets with uncertain returns at their expected values. Depending upon an individual’s initial asset holdings and utility function, he will value an asset at more or less than its expected value. Therefore, in private capital markets, investors do not choose investments to maximize the present value of expected returns, but to maximize the present value of returns properly adjusted for risk. The issue is whether it is appropriate to discount public investments in the same way as private investments.

74 citations


Cited by
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Journal ArticleDOI
TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.

49,666 citations

Book ChapterDOI
TL;DR: In this paper, the authors present a critique of expected utility theory as a descriptive model of decision making under risk, and develop an alternative model, called prospect theory, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights.
Abstract: This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses. In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. Decision weights are generally lower than the corresponding probabilities, except in the range of low prob- abilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling. EXPECTED UTILITY THEORY has dominated the analysis of decision making under risk. It has been generally accepted as a normative model of rational choice (24), and widely applied as a descriptive model of economic behavior, e.g. (15, 4). Thus, it is assumed that all reasonable people would wish to obey the axioms of the theory (47, 36), and that most people actually do, most of the time. The present paper describes several classes of choice problems in which preferences systematically violate the axioms of expected utility theory. In the light of these observations we argue that utility theory, as it is commonly interpreted and applied, is not an adequate descriptive model and we propose an alternative account of choice under risk. 2. CRITIQUE

35,067 citations

Journal ArticleDOI
TL;DR: In this paper, the authors argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities.
Abstract: In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (R&D), in which R&D contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in R&D to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative R&D ventures. **

31,623 citations

Journal ArticleDOI
TL;DR: The dynamic capabilities framework as mentioned in this paper analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change, and suggests that private wealth creation in regimes of rapid technology change depends in large measure on honing intemal technological, organizational, and managerial processes inside the firm.
Abstract: The dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. The competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining), shaped by the firm's (specific) asset positions (such as the firm's portfolio of difftcult-to- trade knowledge assets and complementary assets), and the evolution path(s) it has aflopted or inherited. The importance of path dependencies is amplified where conditions of increasing retums exist. Whether and how a firm's competitive advantage is eroded depends on the stability of market demand, and the ease of replicability (expanding intemally) and imitatability (replication by competitors). If correct, the framework suggests that private wealth creation in regimes of rapid technological change depends in large measure on honing intemal technological, organizational, and managerial processes inside the firm. In short, identifying new opportunities and organizing effectively and efficiently to embrace them are generally more fundamental to private wealth creation than is strategizing, if by strategizing one means engaging in business conduct that keeps competitors off balance, raises rival's costs, and excludes new entrants. © 1997 by John Wiley & Sons, Ltd.

27,902 citations

Journal ArticleDOI
TL;DR: A nonlinear (nonconvex) programming model provides a new definition of efficiency for use in evaluating activities of not-for-profit entities participating in public programs and methods for objectively determining weights by reference to the observational data for the multiple outputs and multiple inputs that characterize such programs.

25,433 citations