Thursday, December 8, 2011

The Dark Side of Economist Oskar Morgenstern

Richard Ebeling emails a link to his review of the book, Von Neumann, Morgenstern and the Creation of Game Theory by Robert Leonard.

Oskar Morgenstern is best known as the co-developer, with mathematician John von Neumann, of game theory. Their book The Theory of Games and Economic Behavior is a classic.

But, Peter Klein notes:
Game theory can be fun and interesting. It’s central to current mainstream research in industrial organization and corporate strategy. It’s been taught to a generation of MBA students. Unfortunately, according to FastCompany, nobody in business actually uses it.
In his review, Ebeling writes:
...what is less well known is that Morgenstern was a prominent member of the Austrian School of Economics before the Second World War.

His first book was on Economic Forecasting (1928), which unfortunately has never been translated into English. He presented a biting and insightful analysis as to why quantitative models would never be able to successfully predict the economic future. His three fundamental arguments were (1) that historical events are too unique and interdependently complex to be reducible to statistical probability analysis; (2) any public forecast easily will result in people taking the forecast into consideration, and therefore acting in ways different than what the forecast presumed; and (3) how individuals act is dependent on their expectations of how they expect others to act, and understanding and interpreting people’s subjective meanings and intentions is not readily reducible to strictly quantitative categories and classifications for statistical study...

Leonard traces out the development of Morgenstern’s thinking in the 1920s and 1930a under the influence of Austrian Economists such as Ludwig von Mises and Hans Mayer, and his friendship with Karl Menger, Jr., the son of the founder of the Austrian School.

But what he also brings out is how Morgenstern increasingly turned against his “Austrian” roots...

Even worse, after 1934, with Hayek now a professor at the London School of Economics, and Mises teaching in Geneva, Switzerland, Morgenstern attempted to portray himself as the “leader” of the Austrian School in an Austria that was now a fascist-type authoritarian dictatorship. He worked as a senior advisor to the Austrian government, often offering policy advice far removed from a free market perspective...

In addition, Leonard points out that Morgenstern’s diary from this period is sprinkled with often heavily anti-Semitic sentiments, in spite of the fact that many of the members of the Austrian School at this time were Jewish (including Mises), and who had been among those encouraging and supportive of his own work and professional advancement.
As a side note, Ebeling tells us in his review that he took a course with Morgenstern and he is clearly shocked by some of the revelations about Morgenstern . See Ebeling's full review, here.


  1. That Rockefeller Foundation fellowship and appointment to Princeton University had an obvious price, eh?

  2. Bad link.

    Here's the correct link:

  3. Keynes in the introduction of the German edition of his most famous book writes how his system is particularly appropriate to totalitarian regimes. Morgenstern advises the fascist government of Austria and sprinkles his diary with anti-semitic comments. It is interesting to listen to the sound of crickets in the night on these. In comparison Milton Friedman and Hayek visit Chile under the reign of a US installed military dictatorship get advertised as proof of the 'fascist' nature of 'neo-liberalism' etc etc.

  4. ..of course, Morgenstern's partner in the development of game theory was John Von Neumann, the thinker who developed the "MAD" - mutually assured destruction - idea that ended up as the backbone of US nuclear strategy in the cold war from about the end of the Eisenhower administration through to Reagan. JVN was the model used for "Dr Strangelove" in the classic Kubrick movie. Strangelove's right arm was notoriously still loyal to Hitler.

  5. arguments are either right or wrong. and if they are right they should be accepted. and if they are wrong they should be rejected. who in particular stated the argument being considered is irrelevant. from what state of affairs the argument was born is equally irrelevant. to consider the truth value of an argument with material regard to the person stating it is necessarily fallacious.