John C. Harsanyi’s speech at the Nobel Banquet, December 10, 1994

Your Majesties, Your Highnesses, Ladies and Gentlemen,

I would like to say a few words on behalf of John Nash, Reinhard Selten and myself. Of course, we all feel greatly honored by the decision of the Royal Swedish Academy of Sciences to award the Nobel memorial Prize to us. But from a more general point of view, we also feel great satisfaction by the fact that, by this award, game theory has now received international recognition as an important branch of economic analysis.

This year game theory is exactly 50 years old because it was von Neumann and Morgenstern’s book published in 1944 that started it as a separate discipline. After its publication, virtually all economic journals and many important daily newspapers published book reviews of this book, most of them extremely positive about this new discipline of game theory. Many of them predicted that the advent of game theory would give rise almost immediately to truly revolutionary changes in economic theory, and would also have far-reaching implications for economic policy in many fields.

Yet, in actual fact, in its first 30 years of existence, up to the mid 1970s, the practical applications of game theory were very limited, probably as a result of excessive preoccupation by game theorists with cooperative solution concepts.

Indeed, game theory was so little known by the educated public that one of the very distinguished university libraries actually classified von Neumann and Morgenstern’s book under the surprising heading of “Games and Physical Exercises”.

Yet, in the last twenty years, starting with about 1975, game theory has become an important part of mathematical economics so that a high proportion of Ph.D. dissertations and of journal articles now make extensive use of game-theoretic methods. Likewise, government agencies and business firms now make considerable use of game theory in their analysis of auctions, collective bargaining, and international-trade policy. Thus, the optimistic predictions of the book reviews of von Neumann and Morgenstern’s book in 1944 are coming to be gradually confirmed by the facts.