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Quote by Kenneth Arrow

“It seems to me that at least as far as the financial markets are concerned, there is increasing evidence against rational expectations, even at the macro level.”

Quote by Kenneth Arrow

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Kenneth Arrow
Kenneth Arrow

Kenneth Arrow, born on August 23, 1921 in New York, USA, was a distinguished economist. He made significant contributions to the field of economics, particularly in general equilibrium theory and welfare economics. Arrow was awarded the Nobel Prize in Economic Sciences in 1972 for his pioneering contributions to the economic sciences. more

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“When you look at any experimental work not directly related to economics, but trying to test rational behavior in other ways, experiments have conspicuously failed to show rational behavior. Macro evidence certainly suggests deviations from rationality, but I don't want to say the rationality hypothesis is completely wrong. If you have any introspective idea or experimental idea about people's behavior, it seems to be incompatible with the really full scale rational expectations.”

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Author:Kenneth Arrow
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“I think one of the things we learned from the physicists and also the theoretical biologists is the idea that when you're dealing with very complex systems you're going to get a large variety of behavior which can be interpreted as hill climbing, but hill climbing with a lot of modifications, hill climbing with big jumps occasionally.”

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“Evolutionary theory tends to explain quite well in retrospect how various species emerged. It's not very good on prediction. Nevertheless, one cannot say that there isn't a lot of knowledge that's been obtained in this field. In the same way, with these complex physical phenomena between solid state physics, you can say a lot of things without necessarily knowing the next step.”

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“There are all sorts of institutions in the economic world which depart from the simple price/market model which I worked on in an earlier incarnation and which has been sort of the mainstream of economic theories since Adam Smith and David Ricardo. There are all sorts of contractual relations between firms and individuals which do not conform to the simple price theory - profit-sharing schemes and so forth - and the explanation for these suddenly became clear. We now understand why these emerged and that they are based on differences in information in the economy.”

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Author:Kenneth Arrow
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