Theory of Games and Economic Behavior

"The first one I chose was the Theory of Games and Economic Behavior , by John von Neumann and Oskar Morgenstern. There was game theory before von Neumann-Morgenstern, and, as with any field, people are now saying “in 1921 so and so did so and so”. I’m sure at the end of the day, someone will find something relevant also in the Talmud or Greek writings . But von Neumann-Morgenstern was the first comprehensive, systematic attempt to put many game theoretical ideas together. They set up the style, the concepts, some of the basic solution concepts and the level of abstraction. Von Neumann was a brilliant mathematician and Morgenstern was an economist. I imagine if someone else had written the first book – for example a philosopher – game theory could have gone down a completely different path. It’s beautiful to see, the implicit or explicit decisions about the terms and the language. These decisions determined the content and the borders of the field. It’s very difficult to break those borders later. The book does have pretensions. I read from page one: “The purpose of this book is to present a discussion of some fundamental questions of economic theory which require a treatment different from that which they have found thus far in the literature.” It’s an interesting sentence – what does it make us feel? First of all that it’s different, a different set of models than the previous economic models, and that it’s about fundamental questions of economic theory. It was different, we agree on that. It took another 30 years or so for it to be absorbed into the main body of economic theory. So I think this book is definitely on this list of five, because it set the tone and because of its brilliant ideas. These days I use it less and less. After JSTOR it became very easy to search in papers and journal articles but books are hard to search. This is changing now. More and more books are available on the web. The more they are searchable, the more we’ll use them again. It’s a book that has been referenced a lot, though I’m sure most of the references are from people who did not open it. I cannot say I use it daily, and if a student comes and tells me, “I want to learn game theory,” it will not be the first book I’d recommend. That would be a more standard book, that teaches the concepts in a didactic way, summarising what was happening over the past almost 70 years. But in the second wave, I would advise him to read the book, especially if he really wants to get into the theory. People sometimes say, “Book X is the bible of a field.” This is not. I don’t actually know any bible of game theory, and probably it’s good that there isn’t one. Because once there’s a bible in the field, it’s very difficult to make a change. A “bible” might be the beginning and the end of a field."