Prof Kenneth Joseph Arrow, who died on 21 February at the age of 95, was a well-known economist and polymath. He was the youngest economist to win the Nobel Prize in 1972, together with John Hicks.
Arrow‘s doctoral thesis published in 1951 changed the character and outlook of economics.
His work on voting behaviour, social choice theory, information economics, risk and uncertainty greatly influenced thinking on climate change and natural capital measurement.
He laid the foundations for social choice theory, and developed the concept of asymmetric information in decision making whereby information available to different parties is not at the same level. Such thinking is relevant for the design of benefit-sharing schemes, for example where a contract needs to be drawn up between local people and the pharmaceutical industry for bioprospecting, or where international agreements are needed on policies in response to climate change.
He was vocal about the limitations of Gross Domestic Product in measuring progress and well-being. He established that to move towards the sustainability and well-being of nations, changes in per head wealth of all types are needed. He, along with Sir Partha Dasgupta and others, showed this through his work.
Arrow was the brainchild of UN Environment’s first Inclusive Wealth Report in 2012. He served on the Report’s Science Committee. He was insightful on how to link wealth measurement and conservation policies. His failing health prevented him from playing an active role in the 2014 report.
He was convinced that governance and trust must complement the market to solve the Green House Gases problem causing climate change.
Fellow economists have hailed his work:
“The most important theorist of the 20th century in economics.”- Paul Samuelson, Nobel Economist.
“Arrow formulated the basis for modern theories of financial investment and corporate finance.” - William Sharpe, Nobel Economist.
“My works on information economics continue from the foundation laid by Arrow.”- Joseph Stieglitz, Nobel Economist.
For more information, contact Pushpam Kumar, Senior Economic Adviser, UN Environment: Pushpam.Kumar[at]unep.org.