Going West

    Before there was Walter O’Malley, there was Kenneth Arrow

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PALO ALTO – When several hundred people gather here tomorrow for an academic tribute to Kenneth Arrow, they’ll understand implicitly that one of his many fundamental contribution to economics appears nowhere on the program.  Sessions are scheduled on social choice, general equilibrium, health economics, finance, and social science research generally.  None is devoted to geography. Where economics is concerned, Arrow put Stanford University on the map.

Walter O’Malley moved the Brooklyn Dodgers to Los Angeles in 1958, even though they were the second-most valuable franchise in baseball. Arrow moved price theory to San Francisco Bay.

Born in 1921 in New York City, Arrow attended the public-examination Townsend Harris High School in Manhattan, as his father had. After his father lost his banking job at the outset of the Great Depression, Arrow spent three years at the free City College of New York, graduating in 1940, and two more as a graduate student in mathematical statistics at Columbia University under Harold Hotelling, an early pioneer of the fledgling science. There Arrow learned neoclassical economics  mainly on the sly, thanks to its wholesale omission from a curriculum designed by Wesley Clair Mitchell and John R. Commons.

After three years in the Army Air Force Weather Office, Arrow resumed work on his dissertation at Columbia, then spent two eventful year with the Cowles Commission, at the University of Chicago, 1947-49, the second of them as an assistant professor.   He married Selma Schweitzer, a graduate student and commission fellow; they spent the summer of 1948 at the newly established RAND Corp. facility in Santa Monica, a freewheeling incubator of new thinking born of the challenges of World War II. In essence, Arrow never left.

In 1949, he took a job at the non-prestigious economics department at Stanford – departments of both the Berkeley and Los Angeles branches of the University of California outranked it. Among Stanford economists, the previously best-known was Thorsten Veblen, whose pervasive skepticism of mainstream dogma had inspired the Columbia tradition.

Arrow was recognized in 1957 with the John Bates Clark Medal Clark, awarded every two years (in those days) to the economist under forty deemed most influential in the profession.  By the early Sixties, it was becoming clear that Arrow possessed an intellect as powerful as that of Paul Samuelson, of the Massachusetts Institute of Technology, if rather different in its applications. As he reached forty, Arrow was well aware of his own powers; he could go where he pleased.

He spent several months as a senior staff economists on the Council of Economic Advisers during the Kennedy administration; a year as a fellow of Churchill College, Cambridge University, 1963-64; a semester visiting MIT. In 1968, he preferred a competing offer from Harvard University.

Arrow’s father had died in 1954, but his mother lived until 1972, long enough to see him awarded the Nobel Prize.  One of his two sisters, Anita Arrow, had married Robert Summers, one of Paul Samuelson’s brothers. Both had become economists themselves and were teaching at the University of Pennsylvania; Lawrence Summers was among their children.  There were more than enough reasons to experiment with moving back East.

For the next ten years, in cahoots with like-minded junior faculty, including Jerry Green, Richard Zeckhauser, Michael Rothschild, Samuel Bowles, Truman Bewley, Steven Shavell, and Elon Kohlberg. Arrow presided over a remarkable efflorescence of Harvard economics. Allan Gibbard, Michael Spence, Elhanan Helpman, Eric Maskin, Roger Myerson, Jean-Jacques Laffont, Nancy Stokey, John  Geanakoplos, James Poterba, and Robert Gibbons (the latter two as undergraduates) studied with him.  Every summer Arrow returned to his home in Stanford, to preside, with Frank Hahn, over the economic seminars of the Institute for Mathematical Study of the Social Sciences, organized by Stanford professor Mordecai Kurz, which were transforming high-end economics. He organized and taught an annual summer school at Hebrew University in Jerusalem as well.

In 1979, Arrow returned to Stanford. Harvard hired Andrew Mas Colell, from Berkeley, in his stead. Neither Arrow nor his wife had enjoyed university life in Cambridge, compared to the informal social solidarity and easy bicycling of Palo Alto.  He published six volumes of collected papers, and began to lay down the base for at least a half-dozen more or so, zeroing in on ethical concerns and the economics of climate change, in particular. Selma Schweitzer Arrow died in 2015.

Meanwhile, the semiconductor industry, having moved west from Massachusetts and New Jersey about the same time as the Dodgers, began to put down deep roots in the fruit orchards down the peninsula from Stanford.  Berkeley engineers did the rest.  By the early 1980s, Silicon Valley was fueling the explosive growth of the nearby university that was itself located on a gigantic farm.

Today, the Stanford department and its allied Graduate School of Business are riding a wave of prosperity and success unrivaled anywhere in the world of economics.  In the last few years it has hired away from Harvard alone no fewer than five top stars: Caroline Hoxby, Susan Athey, Guido Imbens, Alvin Roth, and Raj Chetty.  Clark medal winners abound:  Dave Donaldson, Yuily Sannikov, Matthew Gentzkow, Chetty, Jonathan Levin, Athey, David Kreps, Spence.  If there is a discernible Stanford enthusiasm that unites the talent, it has to do with the “methods revolution” enabled by those evermore-powerful computer chips.  Arrow and Stanford professor Timothy Bresnahan edited the first seven volumes of the Annual Review of Economics, which has surveyed developments since 2009. Traditional centers of leadership – MIT, Harvard, and the University of Chicago – are sagging.  At the moment, only Princeton seems equally well-found as Stanford.

It is an accident of history that Arrow is much less well known than the other great formulator of modern economics during the twentieth century’s second half, Samuelson – and not just because of the difference in the years of their birth (Samuelson was born in 1915).  Eager to confirm the authority of their newest Nobel Prize – technically the Swedish Central Bank Prize in Memory of Alfred Nobel – the Royal Swedish Academy of Sciences first chose two European econometric pioneers of the 1930s, Ragnar Frisch and Jan Tinbergen.  Next they honored Samuelson by himself, and then Simon Kuznets, for the development of national income  accounting, also by himself.

In 1972, the fourth year of the prize, they divided the award between John Hicks and Arrow, citing both for their contributions to studies of general economic equilibrium.  Hicks’s contributions, though undoubted, were long past, and somewhat tainted by his failure to acknowledge work that had gone before.  The breadth and depth of Arrow’s contributions were just beginning to be recognized.

Columbia University plans a celebration.  Maskin, of Harvard, is writing up Arrow’s scientific achievements for the Annual Review of Economics,  much as Avinash Dixit earlier described those of Samuelson. Only a full biography will do Arrow justice. That will take a great many years (see, for example, the excellent start Roger Backhouse has made on relating the career of Samuelson, which nevertheless remains only a first cut). A penetrating portrait of  a key episode in Arrow’s scientific life is found in Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit, by E. Roy  Weintraub and Till Duppe (2014). For an evocation of the eventual possibilities in interpreting such magnificent lives, see Michael St. John Packe, The Life of John Stuart Mill.