Game theory's master
by Robert Fulford

(The National Post, 11 March 2006)

In recent decades a few ambitious and imaginative economists have tried to break the surly bonds of statistics and produce ideas all of us can understand and maybe use. Among these noble warriors against the evils of obscurantism, Thomas C. Schelling has established himself as the champion.

Those who follow the turns of his mind weren't surprised that last fall, at the age of 84, he became one of two winners of the Nobel prize in economics. His co-laureate was Robert Aumann, an Israeli mathematician and, like Schelling, an advocate of game theory.

A former professor at Harvard, Yale, and the University of Maryland, Schelling helped design Cold War nuclear policy. Moreover, in the 1960s he also, typically, advised the late Stanley Kubrick on Dr. Strangelove, the ultimate movie satire of that same policy. Schelling's new book, Strategies of Commitment and Other Essays (Harvard University Press), takes us on a readable tour through the concerns of a major academic career.

He devotes his last essay to the most spectacular non-event of the last 60 years: No one, since Nagasaki, has exploded a nuclear bomb in anger. Schelling and game theory were among the reasons. He advocated, for instance, emphasizing retaliation rather than the hope of recovery. Bomb shelters could only convince the Soviets that the Americans imagined surviving nuclear war (and therefore might start one). In game theory you diminish the chances of a damaging conflict when your responses are absolutely predictable. So America ostentatiously buried its missiles in underground silos or mounted them on submarines. In game theory, every threat requires a demonstration of commitment.

The silos were a heavy American commitment. Another was the stationing of seven military divisions in western Europe. The much larger Red Army could have rolled over the Americans, but that wasn't the point. The Americans were consciously limiting their own options, making it impossible for them to accept a Soviet-controlled Europe. The Soviets knew that if they overran Europe they would kill many Americans, meaning the war couldn't end there.

That's what the Nobel committee meant when praising Schelling for showing "that a party can strengthen its position by overtly worsening its own options." Schelling cites 16th-century Swiss armies destroying bridges to make retreat impossible. This commitment became their strength. Enemies knew they would fight to the end because they had no alternative. That's classic game theory.

Schelling obviously believes the unexamined theory is not worth living with. His book shrewdly explains why the universal maxim, "There's no such thing as a free lunch," is nonsense. His The Strategy of Conflict (1960), the Bible for everyone studying the Cold War, was fresh in a peculiarly Schellingesque way. Alongside discussions of nuclear weapons, he mentioned Old West gun duels, ancient kings who drank out of the cups of rivals who had a reason to poison them -- and children's arguments with parents. Sometimes Schelling makes you feel you have been plunged into Today's Parent when you thought you were reading the American Economic Review.

I first had this experience in 1980 when I read an essay, The Intimate Contest for Self-Command, in The Public Interest, a policy journal. It was astonishing to find Schelling applying his theories to the problems of smoking and drinking, not to mention nail-biting and thumb-sucking. That piece, literate and compassionate, proved to be part of a larger project, studying how humans struggle against themselves. He saw people embodying two selves, a "wayward" self and a "straight" self, the latter attempting to control the former. How could the straight self, with its ambition to stop smoking (Schelling's problem at one point) or otherwise improve, control the future actions of the wayward self? Commitment turned out to be as crucial here as in global strategy.

In his career as a teacher, Schelling has been known to put his devious game-theory abilities to work, along with his knowledge of commitment. Geoffrey Colvin of Fortune magazine recently described the day when he and other Harvard undergraduates showed up for their first Schelling lecture. He started off describing how tough the class would be. Immediately, students began drifting from the room. The more Schelling talked about hard work, the more students left. At last only a few remained, all of them now terrified by the ordeal ahead. Schelling told them to relax: The tough talk was a device to reduce the class to manageable size and ensure it included only dedicated students. In fact, it was pretty tough, but the survivors decided their professor was terrific.

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