Tim Harford, author of the forthcoming book Undercover Economist, wrote a glowing appreciation of Thomas Schelling today. Schelling is, of course, the 2005 Nobel laureate in Economics (shared with Robert Aumann) awarded for his work to enhance “our understanding of conflict and cooperation through game-theory analysis.” Harford writes:
No one person can claim credit, but Mr Schelling has as much claim as anyone to helping prevent Armageddon. He helped to prevent war because he understood it and explained it brilliantly to others, changing the intellectual climate, inspiring a generation of strategic thinkers and, almost incidentally, saving the young discipline of game theory from irrelevance.
(snip)
Game theory was – before Mr Schelling – the mathematical analysis of interdependent decisions: whether a union calls a strike depends on whether the union leaders think the management will respond with a better pay offer; whether I bluff at poker depends on whether I think you are likely to call the bluff. Game theory and the atomic bomb arrived at the same time with the help of the same mathematician, John von Neumann, and the early game theorists tried to use the theory to understand nuclear war. But their analysis was weak. Von Neumann told Life magazine: “If you say why not bomb them tomorrow, I say why not today?”
Mr Schelling’s 1960 book, The Strategy of Conflict, revolutionised both strategic thinking and game theory. Mr Schelling ditched the mathematics of his peers and applied the rigorous thinking of game theory to a richer world in which the superpowers tried to understand the tacit signals behind each others’ threats and promises. He showed that even the deadliest wars involved significant elements of common interest and co-operation between foes. Indeed, the striking fact that the Cold War never became a hot one is the co-operative feat of the century.
LINK to read the rest of Harford’s piece and more about Schelling’s brilliant career.