Oskar Morgenstern · 1950
Morgenstern’s essay is a programmatic introduction to the theory of games as a new foundation for parts of economics that ordinary marginal analysis cannot adequately describe. It is not merely a technical report on a mathematical innovation; it is a critique of the assumption that economic conduct can generally be treated as isolated maximization under fixed constraints.
Die folgenden Ausführungen stellen den Versuch dar, einen Einblick in eine Theorie zu geben, die beabsichtigt, eine neue Grundlegung für einige zentrale Fragen der ökonomischen Theorie zu errichten.
English translation: The following remarks constitute an attempt to provide an insight into a theory intended to lay a new foundation for certain central questions of economic theory.
The central target is the older habit of treating economic variables as if they were passive data, comparable to physical magnitudes. Morgenstern grants that such simplification may work in limiting cases, such as monopoly or perfect competition, where the opponent’s will is suppressed or averaged away. But in oligopoly, bargaining, cartels, coalitions, and market rivalry, the decisive fact is that each agent’s best action depends on what other agents expect, conceal, threaten, or choose.
Jeder einzelne strebt nach seinem maximalen Vorteil, und die Interessen aller oder der meisten stehen miteinander in Widerspruch.
English translation: Each individual strives for his maximum advantage, and the interests of all, or of most, stand in conflict with one another.
This is why “rationality” cannot be defined before the strategic situation has been analyzed. A Crusoe economy may permit direct optimization; an economy of several purposive agents does not. The actor’s problem is not simply to maximize a known function but to choose under reciprocal dependence. Game theory is therefore presented as a theory of rational conduct in situations where plans confront plans.
Der Spieler muß sich „rational“ verhalten, wenn er gewinnen will, und die Theorie muß in der Lage sein zu sagen, was dies heißen soll.
English translation: The player must act »rationally« if he wishes to win, and the theory must be able to say what this is supposed to mean.
Morgenstern then explains why games are not frivolous analogies but exact models of conflict, uncertainty, secrecy, and payoff. Two-person zero-sum games introduce saddlepoints and mixed strategies: when a determinate pure strategy is unavailable, randomization can be rational because it prevents the opponent from exploiting predictable conduct. Bluffing and concealment thus become formal elements of rational action rather than psychological residues.
The richer economic significance appears in the move to games with more than two players. Here coalitions, compensations, exclusions, and distributions become unavoidable. The theory speaks directly to cartels, trusts, unions, bilateral monopoly, and cooperative production, because economic value is often created and divided by groups whose members could also defect into other groups. A “solution” is consequently not always a single equilibrium price or allocation, but a structured set of possible imputations constrained by domination and stability.
Morgenstern also links the theory to utility measurement. The essay treats expected utility not as a return to naïve psychology but as an axiomatic device required for comparing risky alternatives and payoffs. This permits strategic situations to be handled quantitatively while avoiding the older assumption that all economic values are directly observable magnitudes.
Die Axiome, die hier nicht weiter beschrieben werden sollen, beruhen auf der Tatsache, (1) daß ein Individuum eine vollständige Ordnung seiner Bedürfnisse hat und (2) daß es imstande ist, eine Kombination von mindestens zwei Bedürfnissen sich vorzustellen.
English translation: The axioms, which shall not be described further here, rest on the fact (1) that an individual has a complete ordering of his wants and (2) that he is capable of imagining a combination of at least two wants.
The conclusion is deliberately disruptive. Morgenstern does not claim that game theory has already solved all of economics, especially the full generality of many-person games. He argues instead that it has changed the problem: price formation, distribution, bargaining, and welfare cannot be grounded in simple deterministic equilibrium whenever agents strategically react to one another. The essay’s lasting importance lies in this shift from marginal adjustment to interdependent choice as the basic form of economic behavior.
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