Oskar Morgenstern: Review of Heinrich von Stackelberg’s Grundlagen der theoretischen Volkswirtschaftslehre (1950)

Oskar Morgenstern’s journal book review combines a favorable assessment of Stackelberg’s textbook with a sharp criticism of the theoretical confidence it exemplifies. Its movement is from publication history and pedagogical appraisal to specific conceptual objections, then to a broader challenge concerning economics teaching and a final reflection on theoretical competence and political ideology. The central distinction is between mastery of established economic theory and recognition of that theory’s unresolved problems: Stackelberg possesses the former, but his exposition insufficiently acknowledges the latter.

Morgenstern places the reviewed 1948 German edition in a sequence beginning with the book’s original publication in Germany in 1943. After breaking with his Nazi past and moving to Madrid in 1944, Stackelberg prepared a revised Spanish edition, published in 1946 shortly before his death. The reviewed volume contains the German version on which that Spanish edition was based. Morgenstern accepts the significance attributed to it by the prefatory writer, V. F. Wagner: a comprehensive presentation of modern theory in German could substantially influence economic instruction in that language.

The initial pedagogical judgment is generous. Conventional in arrangement and coverage, the textbook suits intermediate or advanced undergraduate teaching and invites comparison with Boulding and Stigler. Graphs largely replace mathematics, although Stackelberg had used calculus extensively elsewhere; references allow readers to pursue material beyond the exposition. Morgenstern considers an English translation potentially welcome. His strongest substantive praise identifies the area in which Stackelberg’s original research most directly informs the textbook:

The best part is that on market organization, where the author follows his own earlier book and writes with particular competence and with a full knowledge of the other main contributions.

Yet this strength also opens the review’s central criticism. Stackelberg is unusually troubled by the absence of equilibrium in markets situated between free competition and monopoly, but cannot specify adequately what equilibrium should mean there. For Morgenstern, assuming that these markets must admit the simple equilibrium familiar from current economics is itself questionable. The difficulty concerns the adequacy of the concept, not merely the completeness of its application.

A related objection concerns the treatment of time and expectations. Morgenstern acknowledges the clarity of Stackelberg’s exposition of indifference curves but argues that its serious limitations remain unrecognized. Stackelberg’s interest in expectations does not lead him to see that indifference curves cannot adequately accommodate them. His conventional account of time preference also conflicts, in Morgenstern’s judgment, with other statements about the simultaneous expectation of future wants and incomes. The review identifies these tensions without developing a replacement theory.

These objections culminate in a diagnosis extending beyond this particular textbook. Morgenstern sees recent theoretical writing as evidence that an epoch has ended and a new approach is needed. Its “baroque” character suggests an impasse, while polished exposition creates a misleading appearance of completion:

This work, too, is written as if there were no unsolved problems in economics and as if what is presented were the final answer.

The consequence is pedagogical as well as intellectual. Alert students may turn away from economics when received theory disappoints them. Morgenstern proposes presenting unresolved problems in their severity and grounding them in thorough empirical studies: visible difficulties could attract the strongest students instead of discouraging them. His standard for a good textbook therefore exceeds clarity and coverage; it includes candidly identifying where knowledge fails.

The final paragraph returns to Stackelberg’s biography. Morgenstern affirms his complete command of modern theoretical techniques, including mathematics, while recalling his long commitment to Nazism. The concluding sentence makes the distinction explicit:

This is an interesting illustration for the absence of correlation between theoretical insights and ideological interpretation of the world.

The review thus separates technical accomplishment from both critical openness and political judgment. Its lasting concern is how economics transmits established knowledge without disguising its incompleteness or confusing analytical sophistication with broader intellectual soundness.