- The Washington Times - Tuesday, October 11, 2005

University of Maryland economist Thomas C. Schelling yesterday won the 2005 Nobel Memorial Prize in Economic Sciences for demonstrating how game theory applies to the interactions of people and nations.

He shared the award with mathematician Robert J. Aumann of Hebrew University of Jerusalem. The two worked separately on game theory but knew each other.

“I’ve been doing this for over 50 years, and it’s hard to find a shorthand way to describe my interests,” Mr Schelling said yesterday. “But in my mind, it all comes together, and what links this work is my fascination with how people react to and influence others, as individuals and as nations.”

Game theory combines mathematics and social science to explain how actions and decisions interact in the choices people make. One principle of the theory is that nations can achieve long-term success through cooperation instead of confrontation, even if they must make sacrifices.

Mr. Schelling’s theories helped to shape Cold War policy, particularly the concept of “mutually assured destruction” in an exchange of nuclear weapons.

“My main source of optimism is that the Soviet Union faced some of its gravest challenges without ever resorting to nuclear weapons,” Mr. Schelling said. “It was not a foregone conclusion they would honor this nuclear taboo with their backs to the wall.”

Mr. Schelling, 84, retired last year but retains the title of professor emeritus at the University of Maryland and at Harvard University.

He earned degrees in economics from the University of California at Berkeley in 1944 and Harvard in 1951.

During his career, he served as an adviser to the Truman administration and gained membership in the National Academy of Sciences. He authored eight books, including “The Strategy of Conflict” in 1960, describing how making concessions in international disputes could build trust that benefits both sides.

He taught at Harvard and Yale before joining the University of Maryland’s Department of Economics and the School of Public Policy in 1990.

In announcing the Nobel Prize, the Royal Swedish Academy of Sciences cited Mr. Schelling and Mr. Aumann “for having enhanced our understanding of conflict and cooperation through game-theory analysis.”

“Why do some groups of individuals, organizations and countries succeed in promoting cooperation while others suffer from conflict? The work of Robert Aumann and Thomas Schelling has established game theory, or interactive decision theory, as the dominant approach to this age-old question,” the academy said in its prize announcement.

Their work has been applied to problems on both a global and human scale, including trade negotiations, price competition and fair-housing disputes.

Mr. Aumann’s theories have been used for numerical analysis of social phenomena. He demonstrated that peaceful cooperation requires a balance of interests in repeated games, or contests, between people.

“Insights into these issues help explain economic conflicts such as price wars and trade wars, as well as why some communities are more successful than others in managing common-pool resources,” the Royal Swedish Academy of Sciences said.

Mr. Aumann was born in 1930 in Frankfurt, Germany. He holds Israeli and U.S. citizenship. He earned a Ph.D. in mathematics in 1955 from the Massachusetts Institute of Technology and is a professor at the Center for the Study of Rationality at Hebrew University of Jerusalem.

Mr. Schelling was born in 1921 in Oakland, Calif. He lives with his wife, Alice, in Bethesda, where he is working on his ninth book.

“A person like him doesn’t retire in any fundamental sense,” said Peter Murrell, chairman of the University of Maryland’s Department of Economics. “He’s still active in intellectual pursuits.”

Mr. Schelling said he plans to lecture, write and visit his six children and nine grandchildren.

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