Kenneth Arrow Quotes

An organization is typically composed of changing individuals. Now any individual generally has access to many communication channels, of which this particular organization is only one. In particular, education is such a channel. Thus, the organization is getting the benefit of a considerable amount of information which is free to it.

To sum up, the basic values that motivated my preference for socialism over capitalism were (1) efficiency in making sure that all resources were used, (2) the avoidance of war and other political corruptions of the pursuit of profits, (3) the achievement of freedom from control by a small elite, (4) equality of income and power, and (5) encouragement of cooperative as opposed to competitive motives in the operation of society.

While economic theory in general may be defined as the theory of how an economic condition or an economic development is determined within an institutional framework, the deals with how to judge whether one condition can be said to be better in some way than another and whether it is possible, by altering the institutional framework, to achieve a better condition than the present one.

If there are at least three alternatives which the members of the society are free to order in any way, then every social welfare function satisfying Conditions 2 and 8 and yielding a social ordering satisfying Axioms I and II must be either imposed or dictatorial.

As a general rule, the greater the uncertainty, the better to avoid large and irreversible commitments, to the extent that it is possible. When the famous 1930s gangster, Dutch Schultz, was dying, his incoherent last remarks were taken down by a stenographer. One of them was. "Don't make no bull moves." His words are a lesson for the kind of future that one might choose. Maintaining flexibility or keeping ones options open, is key in these matters.

The meaning of information is precisely a reduction in uncertainty. From the viewpoint of economics or decision theory, uncertainty is relevant because it concerns the consequences of decisions. An individual making a decision may be supposed to be choosing one among a set of feasible alternatives. In general, these alternatives are themselves plans extending in time, and he will want to choose the one that yields the most satisfying consequences. These may be profits in successive periods for a business firm, or they may be other satisfactions, such as consumption, power, bequests, or interesting challenges. It can be assumed that the individual compares the entire set of consequences deriving from each alternative in his decision set with those of the others and chooses the preferred one.

For the voucher system to work, it would be necessary to have informed parents. One cannot be dogmatic without empirical evidence, but I would be surprised if the average parent has the time or patience or competence to digest the relevant information. Indeed, one wonders where the information is to come from and in what form it should exist. Do we use test scores, themselves affected by the selection processes of the students? Impressions of individual teachers or of the physical appearance of the school will tend to dominate.

Clearly, information is of the utmost importance in making economic decisions, especially when it comes to securities or other assets whose value depends on events not yet known. Now the distribution of information cannot simply be taken as given. On the contrary, information can be acquired at some cost.

Dynamic analysis may have deeper implications if we depart from the analysis of stationary states. The frim must now serve some additional roles. In the absence of futures markets, the firm must serve as a forecaster and as a bearer of uncertainty. Further, from a general equilibrium point of view, the forecasts of others become relevant to the evaluation of the firm's shares and therefore possibly of the firm's behavior.

To conclude, then, we must in a general theory take as our unit a social action, that is, an action involving a large proportion or the entire domain of society. At the most basic axiomatic level, individual actions play little role. The need for a system of public values then becomes evident; actions being collective or interpersonal in nature, so must the choice among them. A public or social value system is essentially a logical necessity.

The competitive system can be viewed as an information and decision structure. Initially, each agent in the economy has a very limited perspective. The household knows only its initial holdings of goods (including labor power) and the satisfactions it could derive from different combinations of goods acquired and consumed. The firm knows only the technological alternatives for transforming inputs into outputs. The “communication” takes the form of prices. If the correct (equilibrium) prices are announced, then the individual agents can determine their purchases and sales so as to maximize profits or satisfactions. The prices are then, according to the pure theory, the only communication that needs to be made in addition to the information held initially by the agents. This makes the market system appear to be very efficient indeed; not only does it achieve as good an allocation as an omniscient planner could, but it clearly minimizes the amount of communication needed.

From the point of view of seeking a consensus of the moral imperative of individuals, such consensus being assumed to exist, the problem of choosing an electoral or other choice mechanism, or, more broadly, of choosing a social structure, assumes an entirely different form from that discussed in the greater part of this study.

The government may be regarded as a decision-making entity. Among the decisions it makes are the formation of economic policy and the collection of economic-statistical information. In all modern nations the economic policies of the government are significant activities, if for no other reason than the high proportion of national income which passes through the Treasury; but of course in many countries much more ambitious economic planning is aimed at, though not necessarily achieved. Economic statistics, on the other hand, if one is to judge by expenditures, form only an insignificant proportion of a government's activities and are the least developed precisely in those underdeveloped countries which have the greatest felt needs for economic plans.

Learning, as studied by psychologists, closely resembles sequential analysis in some aspects. Learning experiments usually consist of a series of trials in which the subject’s choices are sometimes rewarded and sometimes not. The individual, after making many choices, eventually begins to discriminate between the proper response and the improper one. At some point, presumably, he could terminate the experiment, at least in the sense of disregarding the further observations and making the same choice each time.

If the markets for durable goods are peculiarly sensitive to price anticipations, while those for perishable goods are more sensitive to current prices, then there is a little more scope for explaining economic fluctuations.