Handbook on the History of Economic Analysis Volume III
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Handbook on the History of Economic Analysis Volume III

Developments in Major Fields of Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume III contains entries on the development of major fields in economics from the inception of systematic analysis until modern times. The reader is provided with succinct summary accounts of the main problems, the methods used to address them and the results obtained across time. The emphasis is on both the continuity and the major changes that have occurred in the economic analysis of problematic issues such as economic growth, income distribution, employment, inflation, business cycles and financial instability. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.
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Chapter 18: Game theory

Robert Leonard

Extract

In August 1941, at Princeton University, while working on the introductory chapter of what was to become the Theory of Games and Economic Behavior (von Neumann and Morgenstern 1944 [1947]), Oskar Morgenstern confided to his diary: “Johnny called me; he likes my manuscript . . . I am very happy about this. After all, it wasn’t easy for me to simplify his mathematical theory, and to represent it correctly. He is working continuously without a break; it is nearly eerie” (Morgenstern Papers, Diary, 7 August 1941, translation by author). Like other entries in his journal at the time, Morgenstern’s reflection revealed the awe inspired in him by von Neumann and the gulf that lay between the two men. The first was a Viennese economist of critical, philosophical inclination, with little or no mathematical training, while the second was a Hungarian mathematician of first rank, contemptuous of philosophy, and boundlessly confident in the application of mathematics across the scientific domain. Yet, their differences notwithstanding, the two émigrés at Princeton managed to forge a productive intellectual partnership, writing – in the middle of World War II, no less – a 500-page book on mathematical social science that would prove influential in various fields, and secure their joint renown. Beneath those arid chapters of combinatorial mathematics lies a rich scientific, social and personal history, embracing developments as diverse as the rise to cultural prominence of chess at the turn of the century; the politics of anti-Semitism in Central Europe; debates between the Formalists and Intuitionists on the foundations of mathematics; disputes over the relationship between politics and social science; and arguments over the relevance of mathematics to the pursuit of economic understanding. These developments formed the background against which von Neumann and Morgenstern were led to write their big book. In what follows, we present the history of the Theory of Games, and a brief synopsis of the book and its impact. (For a fuller account, the reader is referred to Leonard 2010, and, for related treatments, Mirowski 2002 and Giocoli 2003.)

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