- Person
- Kenneth Arrow
- Lived
- 1921–2017
- Field
- Economics
- From
- American
The story
Operations research applies mathematics to practical decisions: how much stock to hold, how to schedule work, how to route goods. Kenneth Arrow was drawn to it early. As an Army Air Forces weather officer in the Second World War he wrote a memorandum on using winds in flight planning that foreshadowed his later interests. After the war, while a research associate at the Cowles Commission in Chicago, he spent summers at the RAND Corporation in Santa Monica, where in 1948 he worked on sequential analysis with David Blackwell and Abraham Girshick.
The next summer, in 1949, he worked with Jacob Marschak and Ted Harris on the problem of how much inventory a business should keep. Their 1951 paper "Optimal Inventory Policy" in Econometrica became a seminal work in inventory theory. Arrow followed it with Studies in the Mathematical Theory of Inventory and Production in 1958, and the same year co-wrote Studies in Linear and Non-Linear Programming with Leonid Hurwicz and Hirofumi Uzawa.
Arrow joined Stanford in 1949 and became a professor of economics, statistics and operations research. He helped establish the university's operations research department in the early 1960s. After a period at Harvard from 1968 to 1979, he returned to Stanford as Joan Kenney Professor of Economics and Professor of Operations Research. A colleague speaking at a 2017 Stanford tribute recalled that Arrow considered his pivotal role in creating the department his most important contribution to the university.
He also served the profession, as president of the Institute of Management Sciences in 1963. Operations researchers honoured him in turn: he received the von Neumann Theory Prize in 1986, was named a Fellow of the Institute for Operations Research and the Management Sciences in 2002, and was elected to the International Federation of Operational Research Societies' Hall of Fame in 2005.
His inventory work with Marschak and Harris was an early landmark in a field that helps firms balance the cost of holding stock against the risk of running out, a problem at the heart of every modern supply chain.
Why it matters
Inventory and optimisation methods that Arrow helped develop are used by businesses and supply chains to keep goods available while cutting waste.
About Kenneth Arrow
Economist whose impossibility theorem, general-equilibrium proofs and work on risk, information and health care reshaped economics; still the youngest winner of the Nobel economics prize.
More about Kenneth Arrow
- Kenneth Arrow and Gérard Debreu proved markets can balanceIn 1954 Kenneth Arrow and Gérard Debreu published the first rigorous proof that a competitive economy can have a set of prices at which every market clears.
- Kenneth Arrow's 1963 paper launched health economicsKenneth Arrow's 1963 paper on uncertainty and medical care explained why health care markets behave differently, laying a foundation for health economics.
- Kenneth Arrow proved no voting system is perfectKenneth Arrow's 1951 book Social Choice and Individual Values introduced his impossibility theorem and founded modern social choice theory.
- Kenneth Arrow showed how learning by doing drives growthKenneth Arrow's 1962 papers on learning by doing and on markets for invention helped economists explain where innovation and growth come from.
- Kenneth Arrow used the winds to save wartime fuelAs a US Army Air Forces weather officer in the Second World War, Kenneth Arrow worked out flight paths that used prevailing winds to cut fuel use.
- Kenneth Arrow made the case for affordable malaria drugsIn 2004 Kenneth Arrow chaired an Institute of Medicine committee that called for a global subsidy so that effective malaria drugs could reach the world's poor.
Sources
- Arrow, Kenneth J. INFORMS
- Kenneth J. Arrow: Biographical NobelPrize.org
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