
The Economics of Kenneth Arrow - everbody
https://www.annualreviews.org/doi/full/10.1146/annurev-economics-080218-030323
======
Apfel
It's a testament to the sheer breadth of Arrow's work that he essentially
created the field of health economics and it's only given a cursory mention in
the intro.

The below (not excessively mathematical) paper was light years ahead of its
time, and is well worth a read even now.

[https://web.stanford.edu/~jay/health_class/Readings/Lecture0...](https://web.stanford.edu/~jay/health_class/Readings/Lecture01/arrow.pdf)

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sun_n_surf
Of all the things that I thought I would never see on HN. However, this is a
technical review, and needs an advanced formal economics education to
appreciate.

~~~
cies
You (or anyone else) aware of an intro to his work for mere mortals?

~~~
arethuza
Arrow's work is covered (at a high level) in "Licence to be Bad, How Economics
Corrupted Us" by Jonathan Aldred:

[https://www.penguin.co.uk/books/306/306792/licence-to-be-
bad...](https://www.penguin.co.uk/books/306/306792/licence-to-be-
bad/9780241325438.html)

Edit: A _really_ good book - once I finished listening to the audiobook
version I went right back to the start and listened to it again and I'm going
to order a paper version.

~~~
QuesnayJr
Economics is an imperfect field, but a major source of criticism of it is that
many people fundamentally object to the idea that you can ask "is" questions
about the economy. The only proper questions are "ought" questions, and since
economics is mostly about "is" questions, it's automatically suspect.

There really were a group of economists that fit the "license to be bad"
stereotype, such as Milton Friedman. But Arrow was not one of them.

~~~
claudiawerner
One of the main criticisms of classical political economy (including
Quesnay...) and indeed of modern neoclassical economics is that they pretend
not to have any normative content despite, for instance in the case of modern
economists, a theory of value whose historical evolution was a direct response
to the normative power of labour theories. It is a specific set of ideas in
response to a social formation, and it's one reason so many economists are
allergic to talking about medieval or ancient economies.

~~~
QuesnayJr
Modern economics doesn't really have a theory of value, which is a 19th
century concern. (Arguably, Quesnay was the first person to have a theory of
value.) Or, if you prefer, economics have a subjective theory of value. This
has some normative content -- if you think the purpose of human existence is
the greater glory of God you will find economics pretty disappointing -- but
economists no longer try to explain what things are "really" worth.

Your argument is an example of what I mean, though. The labor theory of value
lost out on "is" grounds -- there are too many things it can't explain. Now
some of the people who made this argument were right-wingers, so if you think
that only "ought" questions matter, the fact that people with the wrong notion
of "ought" made a contribution proves that the whole thing is morally
bankrupt.

There are economic historians, but economists don't talk about medieval or
ancient economies just because they don't have much to say. Historians are
better equipped to understand them. Though a recent paper applied a trade
model (the gravity equation) to predict the locations of Assyrian ruins, so
maybe there's more to be done.

~~~
mpax
The fact that expected utility theory isn't nearly as scrutinized as the labor
theory of value, whilst being at least as flawed, tells you something about
the "value free" nature of modern econ.

~~~
Matticus_Rex
It... is? The difference is that the labor theory has been thrown out as
unsalvageable, whereas expected utility theory is useful enough in some
theoretical applications to stick around.

~~~
claudiawerner
The question is whether the grounds upon which it was thrown out (which relate
to specific problems) are therefore sufficient for it to be "unsalvageable".
Nonetheless, as I already mentioned, the pretension that economics lacks
normative content gives the false impression that ideas _must_ be discarded
because they are not scientifically valid rather than for ideological reasons.

~~~
Matticus_Rex
That's the thing, though -- the labor theory isn't just "not scientifically
valid." It clearly doesn't describe what _is_ \-- it's not how people value
things, and it doesn't make sense as a description of what ought to be.

~~~
claudiawerner
The LTV was never intended as a description of what "ought to be" (in fact,
Marx cautions against such use), and it was intended to describe how things
are. The idea is that people _do_ value things according to their socially
necessary labour content, and that this mechanism works "behind the backs" of
all members of society. I'm curious in what way it isn't scientifically valid.

The LTV wasn't thrown out because it fails to describe how things are, because
soon enough marginalists realize that the same criticisms actually apply to
their own theory. It was thrown out (mostly by Samuelson and his pals) of
specific issues: the transformation problem, the generalized commodity
exploitation theorem, and by extension the Okishio theorem, all of which have
been addressed in the Marxian economic literature.

~~~
QuesnayJr
LTV is clearly normative, and it's why people still try to revive it. The idea
that factory owners are exploiting their workers has a certain intuitive
appeal as a moral proposition.

The LTV wasn't exactly thrown out -- there are situations where marginalism
and the LTV exactly coincide -- but it was superseded because outside a narrow
sphere it becomes incoherent. The classic example is technological
substitution -- if you have two ways of making something, one that is capital-
intensive and one that is labor-intensive, then you will probably pick the one
that's cheaper. So you can't calculate the labor content of a good
independently of prices.

The specific issues you enumerate are issues within Marxist economics in
general. The LTV was superseded well before Samuelson's paper on the
transformation problem.

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vannevar
When reading the section on social preference I couldn't help but think of
Saaty's Analytic Hierarchy Process and its pairwise comparisons. Would that
not satisfy Arrow's three requirements? It satisfies the first, since it
functions regardless of the preferences themselves (though the consistency
matrix may suffer); it satisfies the second on its face, since if everyone
prefers A over B, then A will be ranked higher under AHP; and it satisfies the
third, since _only_ pairwise comparisons serve as inputs to the algorithm.

