theory of games & economic behavior
John von Neumann, brilliant scientist, outstanding modeler and Manhattan Project pioneer, launched what later became known as 'game theory' in the late 1920s claiming, somewhat over-ambitiously, that his work (which culminated in the 1944 publication of Theory of Games and Economic Behavior, co-authored with Oskar Morgenstern) would do for economics what calculus had done for physics.
He had begun with two-player zero-sum games (where there is a winner and a loser), moving on to non-zero-sum games (cooperative situations in which players form coalitions) which, he quickly realised, generated horrendously complex, intractable mathematics.
"Picture a large enclosed building, say an auditorium or
basketball court, entirely dark. A rope is stretched across the open
space, about 4 feet off the floor and attached firmly at either end to
the walls. Standing at each end of the rope is a man facing the middle
of the arena. In one hand he holds a pistol with one bullet in it.
His other hand is handcuffed to the rope. Each man's objective is to
kill or incapacitate his opponent. Each man has a coach alongside to
give him advice. Imagine that you are one of those coaches. What
advice do you give to your man? The book is an attempt to answer that
question."
When John von Neumann, along with his collaborator Morgenthau, published The Theory of Games long considered a seminal work and studied by military strategists all over the world ever
since, he was
interviewed by a journalist. The journalist asked "What is the book about?" The
first paragraph is a quotation of von Neumann's reply.
Von Neumann's work was later taken up by John Nash, who was awarded the Nobel Prize in Economic Sciences in 1994.
Von Neumann's work was later taken up by John Nash, who was awarded the Nobel Prize in Economic Sciences in 1994.