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Stanford Engineering Hero Kenneth Arrow helped pioneer operations research

Nobel Prize-winning economist launched a discipline that is now part of Management Sciences and Engineering.

Kenneth Arrow was 51 years old when he shared the 1972 Nobel Prize in Economics and became the youngest person to receive that award, a distinction he retains to this day.

Now 92, Arrow is the Joan Kenney Professor of Economics and a professor emeritus of Management Science and Engineering. In March he earned another career accolade when he was named a Stanford Engineering Hero.

Heroes are Stanford Engineering alumni or former faculty whose life work has profoundly advanced social and economic progress through the principles and practices of engineering.

Arrow is considered one of the 20th century’s most influential economists, winning the Nobel (with Sir John Hicks) for pioneering contributions to general equilibrium theory and welfare theory – theories underlying assessment of business risk, and government economic and welfare policies.

He was the first economist to apply the learning curve to understand the role of experience in increasing productivity. He has applied economic theory to wide-ranging problems such as healthcare costs, racial discrimination, malaria drugs, climate change and innovation.

Arrow was also an influential teacher who helped five of his former students go on to win their own Nobel Prizes.

What is less well known is Arrow’s role in creating the field of Operations Research and eventually helping to launch the Operations Research Department at Stanford, which has since become part of the Department of Management Science and Engineering.

Raised in New York City during the Great Depression, Arrow attended City College and graduated in 1940 with degrees in mathematics and social science. He began graduate studies in mathematics at Columbia University intending to specialize in statistics, but a course in mathematical economics – and the promise of a fellowship in economics – prompted him to switch fields.

“So I was bought,” he joked before a packed crowd who attended his induction ceremony held at the Nvidia Auditorium in the Jen-Hsun Huang Engineering Center at Stanford.

Kenneth Arrow discusses the origins of operations research 

Like many of his contemporaries, Arrow was forced to interrupt his studies by World War II, when he served as a weather officer in the Army Air Corps. It was during this period that the field of operations research was born. As Arrow explained, British leaders began asking scientists to find more efficient ways to do all sorts of things from deploying troops to evading anti-aircraft batteries.

American officials eventually created operations research teams in imitation of the British efforts. “They started approaching these as mathematical problems, what we’d call optimization problems,” Arrow said. “Trying to do the best you could under the circumstances.”

While serving as a weather officer, Arrow published his first scientific paper titled, “On the Optimal Use of Winds for Flight Planning.”

“The question was how to take advantage of the winds, which turned out to be a very interesting issue, especially when you’re dealing with a curved earth,” Arrow recalled. “I managed to solve that problem and publish it. And as far as I can make out people are still using it.”

After the war, Arrow returned to Columbia to complete his graduate studies while also working as a research associate at the Cowles Commission for Research in Economics at the University of Chicago, where he held the rank of assistant professor.

It was at Chicago that Arrow met his wife, Selma, who had connections to the RAND Corporation. This post-World War II “think tank” based in California was continuing the type of operations research that had begun during the war. Through Selma’s RAND contacts Arrow ultimately came to California, where he joined Stanford in 1949 as Acting Assistant Professor of Economics and Statistics.

“I wanted to be part of a statistics department,” he said. “I still thought of myself partly as a statistician.”

Partly through his involvement with RAND, Arrow became acquainted with researchers who were applying mathematical principles to solving real-world optimization problems. Eventually he helped create Stanford’s Operations Research Department, whose early luminaries included George Dantzig, another Engineering Hero, as well as former faculty members Arthur Veinott and Jerry Lieberman.

In addition to the Nobel Prize, Arrow has received the American Economic Association’s John Bates Clark Medal and the John von Neumann Theory Prize of the Institute for Operations Research and the Management Sciences, which is known as INFORMS. Arrow is an inaugural Fellow of INFORMS in recognition of his role as one of the intellectual leaders of this field.

Looking back on his career, Arrow said he had always taken on a wide array of challenges, which has helped to unite his interests in economics and operations research.

“Part of my life has been devoted to very general theorems, and part of it has been devoted to studying very, very specific issues,” he said.

(See three brief video clips in which Arrow discusses the origins of operations research, offers his opinion on the Affordable Care Act and advocates a carbon tax to address global warming. Or watch a 74-minute video of his induction ceremony and speech.)