"According to this point of view, knowledge is, so to speak, a by-product of production or of investment. In research, on the contrary, it can be said that knowledge is the primary product. The distinction between products and by-products is not important for ordinary goods, because in a competitive regime the marginal costs of the two must be equal. But since knowledge does not have the normal properties of an economic good, it is necessary to study each mode of its production."
Kenneth Joseph Arrow was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with John Hicks.
"The creation of knowledge that constitutes an innovation is in turn dependent on the acquisition and application of existing knowledge; information is an input into the production of information. This background knowledge and the ability to use it are the most important elements of the social context of individually motivated innovation."
Kenneth Arrow"The Austrian a priori dogmatism (von Mises, especially; Hayek, to a lesser degree)."
Kenneth Arrow"There are information asymmetries in this story. Health insurance is limping along. Its limited in scope, and then you other consequences. Insurance companies have high premiums to protect themselves. The ones who come to the insurance company are sicker and the people have to pay more. You have adverse selection. You have moral hazard. And the doctor does whats on the safe side -- defensive medicine -- without regard to cost. These are fundamental conditions that make health insurance difficult. You have some things that help. Some doctors understand that they shouldnt abuse the system. But you still see problems in the way doctors behave towards patients. They goof off. Sometimes its too much work. Some things are difficult and risky to diagnose."
Kenneth Arrow"I dont know which way human psychology will go wrong. We have a world in which there is uncertainty. There are new technologies. And one of the problems is that we do things today with a thought to the future. Any purchase is one for the future. If you buy a refrigerator you are making a commitment to the future, so that you have food to eat for the next ten years. Thats a simple theory, one of many simple theories -- theories that people agree on and that dont, in a fundamental way, change. But every once in a while there is unemployment, and wages will drop, and there will be several different interpretations."
Kenneth Arrow"Child care has grown up under different circumstances than education and probably for a mixture of reasons, good and bad. There are many systems of child care, some private, some public. As compared with primary and secondary education, there is clearly less need for coordination. The sequencing of classes is much less important. It would appear that the ability of parents to monitor the conduct of the child care activity is much greater because the activity is much closer to everyday experience and knowledge. Most of the informational and structural arguments for the public supply of education are absent in the case of child care. Reputation and experience may suffice for adequate monitoring."
Kenneth Arrow"For the voucher system to work, it would be necessary to have informed parents. One cannot be dogmatic without empirical evidence, but I would be surprised if the average parent has the time or patience or competence to digest the relevant information. Indeed, one wonders where the information is to come from and in what form it should exist. Do we use test scores, themselves affected by the selection processes of the students? Impressions of individual teachers or of the physical appearance of the school will tend to dominate."
Kenneth Arrow