The archive.

When an economic model fails, has mathematics reached its limit—or has the economist posed the wrong problem? In this 1963 research memorandum, Oskar Morgenstern defends mathematical economics while challenging the substitution of formal elegance for economic understanding. Drawing on his work with von Neumann, he argues that uncertainty and strategic interaction demand more than techniques borrowed from mechanics: they may require new concepts and new mathematics. His examples make the distinction concrete. Counting equations does not prove that an equilibrium exists; treating agents as isolated maximizers can miss their dependence on one another’s choices. Readers encounter a defence of rigorous reasoning that grants no automatic prestige to symbols or axioms, and insists that historical, experimental, and statistical inquiry remain indispensable.

When economists identify cycles by picking peaks and troughs, how much information do they leave unused? In this 1964 foreword to C. W. J. Granger’s Spectral Analysis of Economic Time Series, written in association with M. Hatanaka and republished here in 2015, Oskar Morgenstern sets computational methods against familiar habits of economic interpretation. His account is also personal: he recalls plans with John von Neumann to apply Fourier analysis to economic data, frustrated by computing constraints and ultimately ended by von Neumann’s death. The distinctive interest of this brief introduction lies in Morgenstern’s view of computers not merely as calculating aids but as tools for exploration that could guide theory—and force economists to reconsider what they believed they saw in fluctuations.

What counts as a fair objection to a theory that deliberately leaves things out? In this 1964 address, Oskar Morgenstern defends game theory without claiming that it can encompass every decision or resolve the problem of war. His sharpest distinction concerns rationality: strategic analysis, he argues, does not merely assume rational conduct but seeks to define it when each actor’s prospects depend on others’ choices. He acknowledges unresolved mathematical problems while challenging critics to explain how appeals to intuition or judgment handle complexities that formal models omit. Readers can discover why multiple solutions might reflect social relations rather than theoretical failure—and why acknowledging a model’s limits need not mean abandoning its discipline.

A gift can leave everyone else’s possessions untouched yet give its recipient power over them. This possibility anchors Oskar Morgenstern’s challenge to the apparent simplicity of Pareto improvement: who can establish that nobody is worse off when additional resources change what people can do? In this 1964 research memorandum, he treats bargaining, strategic testimony, and shifts in economic power as central to welfare analysis rather than inconvenient exceptions. His examples range from money sufficient to establish a firm to adaptive computers entrusted with decisions whose consequences their designers cannot fully anticipate. The resulting critique shows how judgments about resource distributions depend on assumptions about knowledge, cooperation, and future action. Morgenstern points toward game-theoretic standards of behavior, while acknowledging that the required reconstruction remains unfinished.

How can an action be judged rational—or morally defensible—when its consequences depend on uncertain events and other people’s deliberate responses? In this 1966 paper, Oskar Morgenstern approaches that problem through economics, game theory, and a reconsideration of Jacques Rueff’s account of scientific knowledge. He distinguishes learning from physics’ standards of inquiry from borrowing its models: a strategic opponent cannot safely be treated as a passive source of statistical regularities. The ethical stakes become concrete in resource depletion, pollution, and remote warfare, where distant or dispersed harms complicate responsibility. His speculative question about nature’s possible hostility remains unresolved; it tests confidence in discovery rather than asserting a cosmology. The paper’s distinctive connection is between economic decision and moral judgment: both require reasoning about consequences that knowledge cannot fully secure.

Production technology alone does not determine how an economy holds together or how fast it can expand. In this 1966 research report, Oskar Morgenstern and Gerald L. Thompson extend von Neumann’s growth model to distinguish the effects of private and public consumption and saving. Their example of wheat, entertainment and diamonds makes a precise point: consumer demand can connect sectors that production requirements leave separate. The extension also breaks the original model’s equality between expansion and interest factors. Using matrix games and numerical examples, the authors distinguish proving that equilibrium exists from explaining which equilibrium will prevail. Readers can discover how preferences and government allocations reshape a formal growth economy—and why identical technological and preference data may still leave its outcome undetermined.

Can an economy sustain balanced growth while maintaining activities that lose money? Oskar Morgenstern and Gerald L. Thompson address this question by opening the generalized von Neumann growth model to trade at externally fixed prices. Their distinctive move is to combine those trading opportunities with domestic bounds on production, allowing profitable industries to finance loss-making services rather than excluding them from equilibrium. Under the model’s assumptions, these controls permit a continuous range of expansion rates where the closed model offered only finitely many. Linear-programming proofs and numerical examples show how trade prices and production requirements shape feasible growth—and how openness can raise it. The article also makes a useful distinction: establishing what specified controls make possible is not the same as deciding which controls an economy should choose.

Strip a share of its metaphysics and nothing intrinsic remains—only a valuation sustained transaction by transaction. From that deflationary premise Granger and Morgenstern mount an empirical assault on market folklore, insisting first that 'prediction' be defined before it is tested. Deploying spectral analysis across daily, weekly, and monthly series, they find price changes broadly following a random walk—not because the future is unknowable, but because past prices yield no usable linear forecast. The book's discipline lies in its distinctions: absolute price versus relative movement, direction versus magnitude. Volume, they show, says nothing about whether a stock will rise or fall, yet tracks the size of its swings. Optimal-allocation claims, seasonal cycles, and profitable filter rules fall in turn.

The value of a stock is only what someone else will pay for it — in cash, in another stock or whatever it may be.

When does a growth model describe a genuinely open economy, rather than a closed economy with trade variables attached? In this corrective note, Oskar Morgenstern and Gerald L. Thompson sharpen the answer by replacing import prices with export prices in a key positivity assumption. They acknowledge criticism of their earlier formulation and explain why the revised condition repairs an existence proof without changing the theorem statements. The economic distinction is concrete: trade must involve goods of positive value, not merely exchanges of free goods. Readers can follow how a small mathematical correction changes the interpretation of production constraints, while seeing the authors distinguish properties of basic solutions from conditions that would require additional assumptions.

Economic theories address people who can learn those theories and change their behavior accordingly. This feedback is central to Oskar Morgenstern’s examination of what economics can describe, predict, and prescribe. In this article, reprinted in 1976 from its 1972 publication, he brings the perspective of game theory and axiomatic utility to bear on the limits of both aggregate measurement and predictive success. Stock-market regularities that disappear when exploited and mixed strategies that remain effective when understood sharpen the question: which economic propositions survive their own application? Morgenstern’s commitment to formal rigor accompanies a concern for expectations, institutions, and historical change. Readers can discover why a successful forecast need not validate a theory—and how theory can guide action without choosing the ends that action should serve.

"Optimum" sounds like a clear concept and is nothing of the sort. Responding as a discussant to Abram Bergson and Jan Tinbergen, Morgenstern presses two objections that unsettle the confident vocabulary of welfare planning. First, productivity, so intelligible for physical output, becomes one of the weakest ideas in economics once services dominate national income, leaving comparisons across systems on shakier ground than they claim. Second, an optimum invoked rhetorically is not an optimum proven to exist, and recent theory had produced cases where none does. From there he argues that society cannot in principle be fully formalized, that imposed equality raises the unanswered question of what keeps equal incomes equal, and that identical physical circumstances can sustain rival stable orders. Choosing among them, he concludes, is an ethical and political act, not a scientific result.

There is no scientific reason why one system should be preferred over the other.

Optimization tells us how to choose when the relevant variables are under our control. What does it explain when outcomes depend on other people’s choices? This distinction drives Oskar Morgenstern’s thirteen criticisms of economic theory, first published in 1972 and reprinted here in 1976. From a game-theoretic perspective, he challenges models that remove bargaining, strategic uncertainty and political decisions from the interactions they purport to explain. His concrete objections give familiar abstractions new friction: a durable-goods purchase need not reveal a stable preference ranking, and the effects of new money depend on where it enters the economy. Readers can discover why, for Morgenstern, greater formal precision and closer empirical scrutiny belong together—and why optimizing a decision is not the same as explaining an economic relationship.