Von Neumann, Morgenstern, and the Creation of Game Theory: From Chess to Social Science, 1900–1960 (Historical Perspectives on Modern Economics)

Drawing on a wealth of new archival material, including personal correspondence and diaries, Robert Leonard tells the fascinating story of the creation of game theory by Hungarian Jewish mathematician John von Neumann and Austrian economist Oskar Morgenstern. Game theory first emerged amid discussions of the psychology and mathematics of chess in Germany and fin-de-siècle Austro-Hungary. In the 1930s, on the cusp of anti-Semitism and political upheaval, it was developed by von Neumann into an ambitious theory of social organization. It was shaped still further by its use in combat analysis in World War II and during the Cold War. Interweaving accounts of the period’s economics, science, and mathematics, and drawing sensitively on the private lives of von Neumann and Morgenstern, Robert Leonard provides a detailed reconstruction of a complex historical drama. ""Robert Leonard toiled for more than a decade on his manuscript on the creators and creation of game theory. I can attest to the reader that the end result was well worth the wait. Leonard's nuanced account is ̀thick history' at its best; he captures the protagonists and their milieu with precision and flair. It is a signal achievement."--Bruce Caldwell, Duke University" ""The publication of The Theory of Games and Economic Behavior by John von Neumann and Oskar Morgenstern in 1944 was hailed by one reviewer as 'one of the major scientific achievements of the first half of the twentieth century.' Another reviewer signaled that 'the techniques applied by the authors in tackling economic problems are of sufficient generality to be valid in political science, sociology, or even military strategy.' In this exemplary study in the history of economics, Robert Leonard has given us a masterful account of the gestation of this work, starting with the importance of chess in European intellectual life at the beginning of the twentieth century and ending with the military applications of game theory at the RAND Corporation during the middle of the century." ""In a superb example of scholarly detective work, Leonard has given us absorbing parallel biographies of von Neumann and Morgenstern, while painting a fascinating background of the Hungarian mathematical scene and the Viennese economic world, It is a drama with dozens of characters, each of whom influenced the final history. Every practitioner of game theory and every student of twentieth-century intellectual history should read this book."--Harold W. Kuhn, Princeton University" ""Robert Leonard excavates a multifarious genealogy for John von Neumann and Oskar Morgenstern's pioneering Theory of Games and Economic Behavior by following the trajectories of its two authors across a landscape that features some of the early twentieth century's key sites of mathematical aspiration, economic disputation, and political and personal tragedy."--Ted Porter, University of California, Los Angeles" ""Leonard unpacks the contributions of developments in psychology, philosophy, mathematics, economics, and politics during the first half of the twentieth century to the origins of game theory. He shows how external events--the rise of Nazism, World War II, and the beginning of the Cold War--interacted with the personalities of von Neumann and Morgenstern and their successors to shape the development of the theory itself and the unanticipated uses to which it has been put. The result is a book that combines the rigor of a textbook with the excitement of a historical novel."--Marina von Neumann Whitman, University of Michigan" "Drawing on a wealth of new archival material, including personal correspondence and diaries, Robert Leonard tells the fascinating story of the creation of game theory by Hungarian Jewish mathematician John von Neumann and Austrian economist Oskar Morgenstern. Game theory first emerged amidst discussions of the psychology and mathematics of chess in Germany and fin-de-siecle Austro-Hungary. In the 1930s, on the cusp of anti-semitism and political upheaval, it was developed by von Neumann into an ambitious theory of social organization. It was shaped still further by its use in combat analysis in World War II and during the Cold War. Interweaving accounts of the period's economics, science, and mathematics, and drawing on the private lives of von Neumann and Morgenstern, Robert Leonard provides a detailed reconstruction of a complex historical drama."-- Jaquette ""Robert Leonard toiled for more than a decade on his manuscript on the creators and creation of game theory. I can attest to the reader that the end result was well worth the wait. Leonard's nuanced account is ̀thick history' at its best; he captures the protagonists and their milieu with precision and flair. It is a signal achievement."--Bruce Caldwell, Duke University" ""The publication of The Theory of Games and Economic Behavior by John von Neumann and Oskar Morgenstern in 1944 was hailed by one reviewer as 'one of the major scientific achievements of the first half of the twentieth century.' Another reviewer signaled that 'the techniques applied by the authors in tackling economic problems are of sufficient generality to be valid in political science, sociology, or even military strategy.' In this exemplary study in the history of economics, Robert Leonard has given us a masterful account of the gestation of this work, starting with the importance of chess in European intellectual life at the beginning of the twentieth century and ending with the military applications of game theory at the RAND Corporation during the middle of the century." ""In a superb example of scholarly detective work, Leonard has given us absorbing parallel biographies of von Neumann and Morgenstern, while painting a fascinating background of the Hungarian mathematical scene and the Viennese economic world, It is a drama with dozens of characters, each of whom influenced the final history. Every practitioner of game theory and every student of twentieth-century intellectual history should read this book."--Harold W. Kuhn, Princeton University" ""Robert Leonard excavates a multifarious genealogy for John von Neumann and Oskar Morgenstern's pioneering Theory of Games and Economic Behavior by following the trajectories of its two authors across a landscape that features some of the early twentieth century's key sites of mathematical aspiration, economic disputation, and political and personal tragedy."--Ted Porter, University of California, Los Angeles" ""Leonard unpacks the contributions of developments in psychology, philosophy, mathematics, economics, and politics during the first half of the twentieth century to the origins of game theory. He shows how external events--the rise of Nazism, World War II, and the beginning of the Cold War--interacted with the personalities of von Neumann and Morgenstern and their successors to shape the development of the theory itself and the unanticipated uses to which it has been put. The result is a book that combines the rigor of a textbook with the excitement of a historical novel."--Marina von Neumann Whitman, University of Michigan" "Drawing on a wealth of new archival material, including personal correspondence and diaries, Robert Leonard tells the fascinating story of the creation of game theory by Hungarian Jewish mathematician John von Neumann and Austrian economist Oskar Morgenstern. Game theory first emerged amidst discussions of the psychology and mathematics of chess in Germany and fin-de-siecle Austro-Hungary. In the 1930s, on the cusp of anti-semitism and political upheaval, it was developed by von Neumann into an ambitious theory of social organization. It was shaped still further by its use in combat analysis in World War II and during the Cold War. Interweaving accounts of the period's economics, science, and mathematics, and drawing on the private lives of von Neumann and Morgenstern, Robert Leonard provides a detailed reconstruction of a complex historical drama."--Jacket Cover 1 VON NEUMANN, MORGENSTERN, AND THE CREATION OF GAME THEORY 3 Series Page 5 Title 7 Copyright 8 Contents 9 Acknowledgments 11 Half Title 13 Introduction 15 PART ONE: STRUGGLE AND EQUILIBRIUM: FROM LASKER TO VON NEUMANN 21 ONE “The Strangest States of Mind”: Chess, Psychology, and Emanuel Lasker’s Kampf 23 Introduction 23 The Perfect Strategist 24 Mathematics and the Endgame 30 The “Strangest States of Mind” 32 Conclusion 43 TWO “Deeply Rooted, Yet Alien”: Hungarian Jews and Mathematicians 44 Hungarian Jewry 44 The Mathematicians 48 Conclusion 54 THREE From Budapest to Göttingen: An Apprenticeship in Modern Mathematics 56 Introduction 56 David Hilbert 58 Mathematics in Doubt 59 Discontinuity in Physics 66 Conclusion 69 FOUR “The Futile Search for the Perfect Formula”: Von Neumann’s Minimax Theorem 70 The Infinite Chessboard 70 In Praise of Gambling 71 From Struggle to Equilibrium 76 The “Futile Search for a Perfect Formula” 85 Conclusion 86 PART TWO: OSKAR MORGENSTERN AND INTERWAR VIENNA 93 FIVE Equilibrium on Trial: The Austrian Interwar Critics 95 Introduction 95 Morgenstern: The Beginnings 96 The Preacher 97 The Critic 101 The Ideologue 105 Conclusion 110 SIX Wrestling with Complexity: Wirtschaftsprognose and Beyond 111 Rockefeller Years 111 Prediction 113 Wirtschaftsprognose 118 Reading 122 Conclusion 126 SEVEN Ethics and the Excluded Middle: Karl Menger and Social Science in Interwar Vienna 128 Introduction 128 Breaking with Brouwer 129 Red Vienna: Politics and Philosophy 133 Otto Neurath 137 Hans Hahn 139 From Mathematical to Social Order 141 Against Intuitionism 141 The Politics of the Excluded Middle 145 Ethics and the Social Order 149 Conclusion 155 EIGHT From Austroliberalism to Anschluss: Morgenstern and the Viennese Economists in the 1930s 158 Introduction 158 The Limits of Mathematical Representation 159 Social Planning and Contemporary Civilization 164 “Betweenness” in a Cultural Space: The Case of Abraham Wald 168 In Menger's Orbit 173 The Limits of Liberalism 179 Flight 187 Conclusion 198 PART THREE: FROM WAR TO COLD WAR 209 NINE Mathematics and the Social Order: Von Neumann’s Return to Game Theory 211 From Berlin to Princeton 211 A Time of Instability 213 Crisis 221 Rationality and Pathology 229 The Trip Out West 239 A Mathematics of Social Stability 242 Conclusion 248 TEN Ars Combinatoria: Creating the Theory of Games 250 Introduction 250 The Collaboration 251 Between Empirics and Aesthetics: The Psychology of Mathematical Creativity 259 Truth and the Ficitious Player 266 Conclusion 268 Coda 272 ELEVEN Morgenstern’s Catharsis 275 The “Introduction” 275 Catharsis 281 Reception 286 Conclusion 290 TWELVE Von Neumann’s War 298 Science and War 298 ASWORG 302 The Applied Mathematics Panel 307 Los Alamos 318 Conclusion 324 THIRTEEN Social Science and the “Present Danger”: Game Theory and Psychology at the RAND Corporation, 1946–1960 325 Introduction 325 Project RAND 331 The Rational Life 334 Letting Go 337 Silent Duels and Hidden Targets 340 Psychology at RAND: Individual Discipline 348 Merrill Flood: From Individual to Group Learning 351 Von Neumann and Nash at Princeton 356 Nash's Game Experiments at RAND 359 Social Discipline: The Systems Research Laboratory 360 Epistemology's New Terrain 366 Conclusion 374 Conclusion 376 Bibliography 379 Index 413 "The strangest states of mind" : chess, psychology and Emanuel Lasker's Kampf "Deeply rooted yet alien" : Hungarian Jews and mathematicians From Budapest to Göttingen : an apprenticeship in modern mathematics "The futile search for the perfect formula" : von neumann's minimax theorem Equilibrium on trial : the young Morgenstern and the Austrian school Wrestling with complexity : Wirtschaftsprognose and beyond Ethics and the excluded middle : Karl Menger and social science From austroliberalism to Anschluss : the Viennese economists in the 1930's Mathematics and the social order : von Neumann's return to game theory Ars combinatoria : writing the theory of games Morgenstern's catharsis Von Neumann's war Social science and the "present danger" : game theory and psychology at the RAND Corporation, 1946 1960. This work explores the creation of game theory by John von Neumann and Oskar Morgenstern. A dramatic reconstruction shows how game theory was related to debates in economics and mathematics, the social and political upheaval of the period, and the dramatic personal histories of its two architects