Kenneth Arrow Quotes

What can be concluded? We cannot be sure that the principles of democracy and socialism are compatible until we can observe a viable society following both principles. But there is no convincing evidence or reasoning which would argue that a democratic-socialist movement is inherently self-contradictory. Nor need we fear that gradual moves in the direction of increasing government intervention will lead to an irreversible move to “serfdom.”

Democracy is a form of government in which political decisions are ultimately governed by the bulk of the adult population, though, of course, usually indirectly through election of representatives. It is fair to say that political liberties, freedom of speech and of the press, are so closely inherent in meaningful democracy as to constitute part of the definition. But one can perfectly well imagine democracy without freedom of religion or in a society where every move is reported and internal passports are needed. Whether or not these restrictions are incompatible with the persistence of democracy is a contingent question, not a tautologous consequence of a definition.

If markets were sufficiently complete, with all futures periods and all uncertain contingencies already provided for in the contracts, the concept of property would cease to be problematic. All decisions would have been made in advance, and there would be no further questions of transfers to treat as just or unjust. Because in fact many of these markets do not exist, there are direct non-market relations which affect individuals' levels of satisfaction. Voluntary transfers become possible, but not all conceivable transfers can be made. Hence, voluntary transfers become biassed in direction, and the possible injustice of the whole system of transfers must be recognized.

The incompleteness of property rights in general creates well-known problems in welfare economics, being in fact the basic component of externalities. In particular, markets for future commitments are relatively under-developed compared with those for the present or immediate future. Individuals have to supply for themselves expectations as to future developments in order to make decisions with consequences extending into the future, e.g., investments. These expectations, for example of prices or of supply availabilities, are not "property," but they influence the use of property and are taken into account in the present legal system. For example, an obligation to sell a product for the next few years at a given price is understood in the law to hold only if conditions do not change in a strongly unexpected way; this understanding does not require explicit statement.

This is by no means a "formal" matter. Clearly, the intuition behind the continuity requirement is a small step in the direction of utilitarian ethics; even the worst-off member of the society might be made to suffer if there is enough benefit to others. The assumption of diminishing marginal utility implies with regard to usual policy alternatives that there are better ways of improving the lot of better-off members than by hurting the worst-off.
But there is one striking case, of great practical importance, where our intuition is in favor of utilitarianism is some form as against any minimax rule. I refer to allocation over time. Typically, we expect future generations to be better off than we are. Should we save for them either directly or in the form of public investments? A maximin rule would surely say no. But if investment is productive, so that, in terms of goods, the next generation gains more than we lose, we usually feel that some investment is worthwhile even though the recipients will be better off than we are.

As indicated, I retain the view that the outcome should be an ordering. Presumably, the weakest possible outcome of a constitution would be a choice function, a mapping of each feasible set of alternatives into a chosen subset. Again, one cannot avoid some consistency relations among the choices from different feasible sets. Various conditions weaker than a full ordering have been proposed, but, in my judgement, they do not lead to interesting conclusions. Unless they are implausibly weak, these conditions do not lead to noticeably greater freedom in the selection of social choice procedures.

The domain of the theory of social choice is not in principle the same as that of a theory of justice. In some directions, it is clearly wider, since it is supposed to cover all decision that must be made collectively. On the other hand, it is possible to hold that propositions about distributive justice are not necessarily propositions about collective decisions.

The aim of achieving an equal distribution of political power requires a restriction on the inequalities of wealth and income.

Let us start with elementals. Income and property are certainly the instruments of an individual’s freedom. Clearly the domain of choice is enhanced by increases in those dimensions. It is true not merely in the sense of expanded consumer choice but also in broader contexts of career and opportunity to pursue one’s own aims and to develop one’s own potential. Unequal distribution of property and of income is inherently an unequal distribution of freedom. Thus a redistribution of income, to the extent that it reduces the freedom of the rich, equally increases that of the poor. Their control of their lives is increased.

I think we may safely agree that the notion of democracy has two components, both indispensable: 1) the securing of the freedom of the individual so that he may develop his individual potential; 2) a symmetric mutual respect of the individuals in the society for each other. These aims are, as has been frequently remarked, partly competitive; but, it must also be stressed, they are to a very considerable extent complementary. A hierarchical society marked by great inequalities in power and esteem will surely not tolerate the liberties of those most disadvantaged. Conversely a world in which individuals have their liberties tightly confined must be one in which there are large inequalities of power.

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.

The terms of trade with the outside world should not be regarded as freely given to the firm. In a world with a large number of commodities, even knowing the prices of relevant commodities involves the costly acquisition of certain kinds of information.

From a theoretical viewpoint, one might say that the market is in a strange sort of equilibrium; there is some shadowy sort of price at which supply and demand are equated at zero. But this price is not performing much of a signaling function.

We find that capitalism, like any very complex system, contains within itself contradictory tendencies, but there is no reason to suppose they are fatal, at least in the foreseeable future. We do find implied in these contradictions some social tasks: the completion of the tasks involved in the achievement of macroeconomic stability, the redistribution of income and power to improve the sense of justice in the arrangements of society, by which I mean the inseparable elements of the liberty and equality of individuals, and, perhaps hardest, the increase in the sense of individual and local control over one's destiny in the workplace and the small society. These aims are mutually reinforcing, not competitive.

There is little warrant for the belief that we know the laws of history well enough to make projections of any great reliability. Most of the turning points of history, great and small, were surprises to both their participants and the analysts of the day, whatever their doctrine.