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The incompleteness of property rights in general creates well-known problems in welfare economics, being in fact the basic component of externalities… - Kenneth Arrow
" "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.
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About Kenneth Arrow
Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, who was Professor Emeritus of Economics in Stanford, and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972.
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Kenneth Joseph Arrow
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Kenneth J. Arrow
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Ken Arrow
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Additional quotes by Kenneth Arrow
There is also one particularly needed elaboration of the model (which is not to say that it doesn't cry out for elaboration in many other directions). This is the relation between college filtering and on-the-job filtering. Once an employee has been hired, the employer can gradually draw on more directly obtained information to determine his productivity. However, this filtering may be costly. To the extent that the employer does filter and does so accurately, the Value of the college filter is reduced. The employer pays the average product of a group with given educational achievement only during the period before his own filter has become effective. Conversely, however, an increase in the college population will mean (and has meant) a depreciation in the quality of non-college students (this is not necessarily the same as a decrease in the quality of college students).
Multiple discoveries are in fact very common in science and for much the same reason. Developments in related fields with different motivation help one to understand a difficult problem better. Since these developments are public knowledge, many scholars can take advantage of them. It is pleasant to the ego to be first or among the first with a new discovery. However, in this case at least, the evidence is clear that the development of general equilibrium theory would have gone on quite as it did without me.
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I don't know which way human psychology will go wrong. We have a world in which there is uncertainty. There are new technologies. And one of the problems is that we do things today with a thought to the future. Any purchase is one for the future. If you buy a refrigerator you are making a commitment to the future, so that you have food to eat for the next ten years. That's a simple theory, one of many simple theories -- theories that people agree on and that don't, in a fundamental way, change. But every once in a while there is unemployment, and wages will drop, and there will be several different interpretations.
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