Mr. Schelling’s Nobel Prize

After spending nearly five decades as one of the world's foremost contributors to the intellectual and practical development of an increasingly influential, ever-more-wide-ranging body of thought known as game theory, retired University of Maryland professor Thomas Schelling deservedly won the Nobel Memorial Prize in Economic Sciences this week.

It is nearly impossible to overstate the impact of Mr. Schelling's work over the years. His seminal 1960 book "The Strategy of Conflict" has influenced strategic nuclear deterrence ever since. In another important work, "Micromotives and Macrobehavior," he effectively demonstrated the "tipping-point" concept by showing how an integrated neighborhood could evolve into a highly segregated community in the absence of any racist or malevolent attitudes.

Game theory can be extraordinarily obtuse and complex, particularly in its mathematical formulations, for which economist Robert J. Aumann, a retired professor at Hebrew University in Israel, shared this year's Nobel Prize in economics with Mr. Schelling. Before the evolution of game theory, the study of economic behavior had long been dominated by the theory of perfect competition, which assumes that there are so many participants that no single buyer or seller needs to be concerned about the actions of any other participant. In their 1944 path-breaking book, "The Theory of Games and Economic Behavior," Princeton economists John von Neumann and Oskar Morgenstern showed how consequences could change if participants anticipated the likely reaction of others and acted accordingly.

In "The Strategy of Conflict," Mr. Schelling used game theory to explain how the Cold War could be prevented from turning into a hot war waged at the nuclear level. Distinguishing between stable and unstable nuclear deterrence, Mr. Schelling used the example of a hair-trigger duel in the Wild West. "If both were assured of living long enough to shoot back with unimpaired aim," he explained, "there would be no advantage in jumping the gun and little reason to fear that the other would try it." Thus, interactive game theory led both sides to develop survivable second-strike weapons, thereby negating the advantage of a surprise first-attack.

Despite all the contributions from game theory, Mr. Schelling acknowledged at his University of Maryland news conference that the discipline would be less useful in prescribing policies to deter terrorists from using nuclear weapons because "it is difficult to figure out what their objectives are." On an equally pessimistic note, at his press conference in Israel, Mr. Aumann, whose "repeated games" specialty studied adversaries who repeatedly interact over the long term, predicted that the long-running Israeli-Palestinian confrontation "is going to go on for at least another 80 years."