Thomas Schelling, new Nobel Laureate

Note my biases, Schelling was my mentor at Harvard.

Tom is an unassuming guy, who looks as if he sells Hush Puppies at the local mall.  But he is one of the sharpest people you will meet.  He delivers the killer point, argument, or anecdote with striking regularity.  Even in his eighties he is sharp as a tack.  He has a deeply philosophical and humanistic approach to economics.  What are his contributions?

1. The idea of precommitment.  You can be better off, either individually, or institutionally, if your choices are limited in advance.  This is a key idea in monetary policy (many governments seek to tie the hands of their central banks), the theory of bargaining (try buying a used car, and see if the salesman doesn’t talk about "the boss upstairs"), and industrial organization (firms may invest in capacity to precommit a market position and deter rivals).  You find the precommitment frequently in movies as well, especially where kidnapping is involved; what is that Mel Gibson flick again?  Here is an excellent Jon Elster piece on the ambiguities of precommitment.  Here is my piece on similar themes.

2. The paradox of nuclear deterrence.  Ever see Dr. Strangelove?  Tom developed the idea that deterrence is never fully credible (why retaliate once you are wiped out?).  The best deterrent might involve precommitment, some element of randomness, or a partly crazy leader.  I recall Tom telling me he was briefly an advisor to Kubrick.  Here is someone else’s essay on the paradox of deterrence.

3. Focal points.  People coordinate by directing their attention to commonly recognized points of importance.  If a meeting time for lunch is not specified, you might assume 12 noon.  If someone mentions "economics blog," of course comes to mind.  And so on.  Much social coordination occurs in this manner.  I once asked me class: "If you had to hide a one hundred dollar bill in a book, so that your friend would find it, but you could not announce the book, which volume should you choose?"  Many said The Bible but of course the game theorist picks Schelling’s The Strategy of Conflict.

4. Behavioral economics and the theory of self-constraint.  One of Tom’s best pieces is "The Mind as a Consuming Organ," American Economics Review, 1984. Here is a lecture of his on self control.  Will Wilkinson cites a bit of that essay.  Tom made it respectable for economists to talk once again about happiness.

Tom has been an underrecognized father of behavioral economics.  His work on addiction, memory, and personal control was pathbreaking and came nearly twenty years before the "behavioral revolution" in economics.  He analyses the tricks people use to control their wills.  For Tom, self-control is often a more important determinant of happiness than is wealth.  Tom once told me his work sprung from his own attempts to quit smoking, which he did finally manage.  Several times.

5. The economics of segregation. Tom showed how communities can end up segregated even when no single individual cares to live in a segregated neighborhood.  Under the right conditions, it only need be the case that the person does not want to live as a minority in the neighborhood, and will move to a neighborhood where the family can be in the majority.  Try playing this game with white and black chess pieces, I bet you will get to segregation pretty quickly.  Here is a demo model for playing the game.

6. Later in his life Tom turned his attention to issues of global warming.  He has been skeptical of the idea that global warming involves insuperably high economic costs.  Here is a short essay by Tom on the topic.  Here is his excellent AER piece on the same topic.

Tom is not well-represented on the web, here is one photo, but the associated links are mostly broken.  Here is Tom’s piece on Hiroshima.  Here is the Wikipedia bio, note Wikipedia already reports he won the prize.  Here is a great interview with Tom.  Here is Tom’s work on the Copenhagen Consensus.

A few bio facts: Like so many other prestigious American economists, Tom worked for the Marshall Plan in its early stages.  He spent most of his career at Harvard, first in the economics department, later in the Kennedy School.  He had close ties with the Rand Corporation.  He was an advisor to Kissinger during the Vietnam War but quit in disgust.  He is now emeritus at University of Maryland.  I have always interpreted Tom’s political views as those of a conservative Democrat.

Here is a piece I wrote with Dan Klein and Timur Kuran, Salute to Schelling: Keeping it Human.  In this piece, recently published, we asked the Committee to give the Prize to Tom.  Here are Tom’s books, they are all worth reading.

Comments are open, you can add more; Tom could have won more than one Nobel Prize for all his contributions.


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