11 - Morgenstern's Catharsis

Summary

The “Introduction”

Morgenstern was energized during this time by writing the part of the Theory of Games that was to be most widely read – his accessible introduction, the “Formulation of the Economic Problem”. A manifesto for a new mathematical economics, this chapter represents the confluence of the two different intellectual traditions of the two authors, bearing traces of Austrian criticism and yet pervaded with the influence of von Neumann.

The essay defends the use of a certain kind of mathematics in economics and discusses rational behaviour, utility, and the new concepts of solution and standard of behaviour. The primitive state of economics, it is repeatedly emphasised, has been the result of an inadequate understanding of the basic categories and facts, onto which an unsophisticated and imitative mathematics has been grafted. The simple application to social interaction of the physical metaphors of rational mechanics or conservative systems is rejected.

So, too, is the idea that the natural and social worlds constitute two different domains, to be treated differently in science. This rejection of the distinction between Geisteswissenschaft and Naturwissenschaft, a rebellious stance already taken by KarlMenger in the mid-1930s, continued Morgenstern’s break with the Austrian economic tradition. Rather, following von Neumann, the empirical world, as a heterogeneous collection of phenomena, be they natural or social, is seen as a repository of potential bodies of mathematics, and the prominence of the phenomena is interpreted as a sign of their promise in this regard.