Lying with Statistics
Notes on Health Care

Kenneth Arrow, 1921-2017

By Jonathan B. Wight

The illustrious Kenneth Arrow passed last week. Arrow

I have a few personal thoughts.  His famous 1963 paper on health care made a huge impression on me—erudite and full of insights for how the real world works. 

His cautionary words about trying to use markets when there is widespread asymmetric information seemingly made no impression on the forces of political economy, and health insurance companies and hospitals fell over themselves to be privatized and converted into for-profits. The race for profit did not bring down cost because of misaligned incentives and other problems he identified early on.

Checking my own Ethics in Economics book, I counted 14 citations to Arrow.  In addition to his famous social choice work, I really liked these articles:

 “Uncertainty and the Welfare Economics of Medical Care,” American Economic Review 53(5)(1963): pp. 941-973.

“Gifts and Exchanges,” Philosophy & Public Affairs 1(4)(1972): pp. 343-362.

“Invaluable Goods,” Journal of Economic Literature 35 (June 1997): p. 757.

Aside from his other virtues, Arrow is remembered for having put to memory numerous quotes from The Theory of Moral Sentiments, and would trade these favorite quotes with Amartya Sen.  What a guy!



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