The archive.

Hidden inside general-equilibrium theory sits a premise its authors rarely state: that agents foresee the future without error. Morgenstern treats this 'vollkommene Voraussicht' not as a harmless simplification but as a logical fault line running through theories of risk, profit, money, and the business cycle. Pressed for its meaning — whose foresight, of which events, over what horizon — the assumption collapses. In a world of interdependent agents each forecast must include others' forecasts of oneself, and the Holmes–Moriarty regress of anticipated reactions and counter-reactions has no natural stopping point. Unlimited foresight, he shows, is simply incompatible with equilibrium, while total ignorance is impossible too. What remains is a research program: expectations as heterogeneous, fallible, socially distributed variables — an early step toward the strategic reasoning of game theory.

Unbeschränkte Voraussicht und wirtschaftliches Gleichgewicht sind also miteinander unverträglich.

English translation: “Unlimited foresight and economic equilibrium are therefore incompatible with each other.”

A demand curve, in ordinary teaching, is a path along which buyers slide as prices change. That picture is the error Morgenstern sets out to dismantle. The curve, he argues, is first a schedule of mutually exclusive intentions at a single moment — alternative maximum bids, not a record of successive purchases. Once a buyer actually transacts, expenditure and possession change, and the remaining points no longer mean what they did; a one-variable curve is valid for exactly one transaction unless it is reconstructed through a fresh reaction function. Elasticity, price discrimination, monopolistic competition, and the cobweb theorem all inherit the flaw. What begins as immanent critique of Marshall and Schultz becomes a bridge toward a game-theoretic view of markets as strategic situations that shift with every trade.

Eine individuelle Nachfragekurve einer Variablen ist dann, ganz gleich, welches ihre Form ist, gültig nur für eine einzige Verwendung, d. h. für eine Transaktion.

English translation: “An individual demand curve of a single variable is then, whatever its shape, valid only for one single use, that is, for one transaction.”

Economics had long borrowed its self-image from mechanics, treating prices and quantities as passive magnitudes tending toward equilibrium. Against that inheritance, this programmatic essay introduces the theory of games that Morgenstern developed with John von Neumann, insisting the mathematics is essential rather than decorative. Isolated maximization may suffice for a Robinson Crusoe, or for the limiting cases of monopoly and pure competition; it fails wherever each agent's best move depends on what rivals conceal, threaten, or choose. Two-person zero-sum games yield saddle points and mixed strategies, making bluff and secrecy formal elements of rational conduct; games of three or more introduce coalitions, compensations, and solution sets rather than single equilibria — the natural language of cartels, unions, and bilateral monopoly. Rationality itself, he argues, cannot be defined before the strategic situation has been analyzed.

Jeder einzelne strebt nach seinem maximalen Vorteil, und die Interessen aller oder der meisten stehen miteinander in Widerspruch.

English translation: “Each individual strives for his maximum advantage, and the interests of all, or of most, stand in conflict with one another.”

Even a fully developed economic theory, Morgenstern contends, would leave many policy problems unsolvable — because policy adds demands theory never faces: aims stated quantitatively, timing, tolerated side-effects, feasible computation, and, decisively, a list of admissible means. A problem impossible under one set of permitted operations may become trivial under another, as squaring the circle, Columbus's egg, and the Gordian knot each illustrate. Unemployment could be 'solved' by conscription, work camps, or forced relocation; ruling those out changes the problem itself. Invoking Gödel as a reminder that decidability runs deep, he separates the theoretical solution from the policy solution and warns that civilization, by narrowing the morally acceptable instruments of action, tends to make its economic problems harder even as economic knowledge advances.

The statement that a problem has no solution for a given set of means is exactly equivalent to stating that a contradiction prevails.

Gold seemed the one balance-of-payments figure a statistician could trust: physically definite, internationally traded, central to gold-standard theory. Applying a single reciprocal test — country A's reported gold exports to B should match B's reported imports from A — Morgenstern finds the trust misplaced. For the United Kingdom, United States, Germany, France, and Canada in 1900, 1907, 1928, and 1935, the paired ratios refuse to cluster near unity and sometimes turn absurd, worst of all in the classical gold-standard years. Earmarking, transit trade, misclassification of gold and silver, and traveler-carried coin all corrupt the record, and no scientific ground exists for preferring one nation's figures over another's. If the best-looking data are this poor, he warns, a sound theory cannot rest on them — and trade statistics are likely worse still.

There is no reason why, say, an American economist or a man from Mars should prefer one set of these statistics over the others.

Science cannot supply political ends — but it can discipline the pursuit of them. That Weberian conviction anchors Morgenstern's 1956 lecture to the Nordrhein-Westfalen research society, which argues that no policy problem is even defined until one names the permitted means: unemployment looks wholly different if wage cuts, public works, or inflation are allowed. He welcomes mathematics, statistics, and electronic computation — linear programming, input-output analysis, a manganese-supply example — as ways to force objectives, quantities, and timing into the open. Yet formalization is not wisdom. Where the state truly commands its variables, quantitative methods improve decisions; where unions, cartels, and rival states react strategically, there is no single optimum, only game-theoretic solution sets and imputations. Calculation can rank feasible actions, he insists, but it cannot choose values or dissolve political conflict.

Die Theorie zeigt, daß es in diesen Fällen kein „Optimum“ gibt, keine „beste“ Lösung, sondern es gibt unendlich viele Verteilungsschemata oder „Zurechnungen“ für das Ergebnis, von denen jedoch nur einige zusammen als „Lösung“ angesehen werden können.

English translation: “The theory shows that in these cases there is no 'optimum,' no 'best' solution, but rather there are infinitely many distribution schemes or 'imputations' for the outcome, of which, however, only some together can be regarded as a 'solution.'”

Nuclear weapons, delivery systems, and the sheer speed of technological change have made national defense a strategic problem that inherited military categories can no longer grasp. Treating the arms race as a grim equilibrium, Morgenstern argues that neither side can safely reduce effort unless reductions are mutual, credible, and enforceable, so survival becomes a constraint prior to any budget. Defense is never a matter of the single best weapon but of strategies tested against an adapting opponent: interception screens answer yesterday's threat while the next generation is designed to evade them, and stopgaps such as keeping bombers permanently airborne founder on fuel and logistics. Cities, valuable and hard to protect, pose the severest problem. Rejecting both panic and wishful thinking, he makes the case that creative technical thinking, not standardized production, will decide survival.

Unilateral action to reduce the arms race is impossible and not compatible with the desire for national survival.

The classical gold standard is often imagined as a self-regulating machine; this dense National Bureau study replaces that image with a practical arrangement of tolerable deviations and institutional adaptation. Comparing monthly interest rates, exchange rates, gold points, arbitrage, and central-bank discount policy across the United States, Britain, France, and Germany for roughly 1870–1914 and 1925–1938, Morgenstern shows that mint par was rarely touched, that gold points depended on shipping costs and market practice, and that money markets displayed a bounded 'solidarity' rather than exact convergence. A new quantitative measure of inter-market 'effort' or stress runs through the analysis. World War I emerges as the great structural break, shattering a prewar coherence the interwar gold-exchange standard never restored — and throughout, he insists that fragile statistics cannot bear more theory than their quality allows.

Economic statistics are—in the overwhelming majority of cases—not scientific observations.

Economics cannot become exact merely by borrowing the vocabulary of mathematics; it must first clarify what utility, strategy, coalition and stability mean. From that conviction von Neumann and Morgenstern rebuild economic behavior as interdependent choice, where each participant maximizes an outcome he does not control—so games, not single-agent calculation, become the governing model. Read here in the German translation of the 1944 Theory of Games and Economic Behavior, the argument runs from an axiomatic numerical utility through the minimax theorem for two-person zero-sum games, where rational play may demand mixed strategies and probability becomes part of optimal design rather than uncertainty. Extending to n-person games, they replace the single optimal outcome with stable sets of imputations—standards of behavior that resist internal domination—and turn coalitions, bargaining and market organization into formal objects against the Lausanne equilibrium tradition.

Man kann nicht exakte Methoden verwenden, solange keine Klarheit in den Begriffen und Fragen besteht, auf die sie angewendet werden sollen.

English translation: “One cannot employ exact methods so long as there is no clarity concerning the concepts and questions to which they are to be applied.”

Railroad share battles, the advertising war between Lestoil and Procter & Gamble, Coca-Cola against Pepsi, European cartel threats and compensations — business life, this essay argues, is a tissue of strategic situations that ordinary maximization cannot describe. Conceding that game theory stands as an autonomous branch of mathematics, Morgenstern presses the harder claim that economic reality is itself frequently a game: the moment a rival controls a decisive variable and reacts, the normal maximum assumptions fail. Walrasian equilibrium and the crossing of demand and supply curves become special constructions that hide number, timing, and coalition. His strongest preference is for cooperative n-person theory, which can model mergers, wage bargains, proxy fights, and above all 'Macht' — power that marginal-productivity theory has no place for. Where power exists, he concludes, the prevailing theory must give way.

Es gibt kein Geschäft ohne Geschäftsgeheimnis.

English translation: “There is no business without a business secret.”

Are there limits to the use of mathematics in economics? The question, this essay answers, is wrongly posed: the obstacle lies not in the subject but in whether economists understand what mathematics is and formulate their problems well. Morgenstern dismisses the usual objections — psychology, non-quantitative data, expectations, unmeasurable utility — by noting that mathematics is not merely quantitative, that no deep gulf separates a simple addition from an integration. Economics erred not by too much formalism but by shallow model-building, borrowing equilibrium from mechanics and casting agents as solitary maximizers under fixed conditions. Game theory marks the conceptual break, supplying a mathematics fitted to strategic interdependence; expected utility, axiomatized, replaces cumbersome indifference curves. Since natural science once remade mathematics, he expects social science to do the same, leaving no fixed boundary that can honestly be drawn.

Nichts ist leichter, als die eigene Beschränktheit für die der Methode oder des untersuchten Gegenstandes zu halten.

English translation: “Nothing is easier than to mistake one's own limitations for those of the method or of the subject under investigation.”

Economic figures acquire authority because they look precise, and that appearance, Morgenstern argues, is often typographical rather than epistemic. His revised methodological study insists economics learn what the natural sciences long ago accepted: every observation carries an error, and no serious use of data can ignore its size. Ranging across foreign trade and gold-movement statistics, business accounting, national income, and growth-rate computation, he shows how paired export and import reports fail to match, how revisions never settle, and how deliberate concealment distinguishes economic data from a nature that does not lie. The demand is not for less quantification but for more honesty about it: reliability estimates, stated error ranges, and a refusal to let refined econometric operations amplify the illusion of knowledge. Data, on his account, become scientific information only when integrated with theory.

We must carefully distinguish between what we think we know and what we really do and can know.