A retired University of Maryland professor shared the Nobel Prize in economics yesterday for his work developing game theory and spreading its use as a tool for preventing conflict and encouraging cooperation among people.
Thomas C. Schelling, 84, who retired from the university in 2003, won the award with mathematician Robert J. Aumann, 75, who retired in 2001 from Hebrew University of Jerusalem, Israel, for their analyses of how individuals, countries and businesses make decisions while anticipating the likely response by others.
Game theory has been well studied for decades in Washington as a tool for developing military strategies, such as how to deter or respond to another country's acquisition or use of nuclear weapons. It is also used to explain political campaign tactics, price wars, trade negotiations and the challenges of reaching international environmental agreements.
Schelling's work "had a profound impact on military theorists and practitioners in the Cold War era, played a major role in establishing 'strategic studies' as an academic field of study and may well have contributed significantly to deterrence and disarmament among the superpowers," said the Royal Swedish Academy of Sciences, in an article explaining its selection of the prize winners.
One key principle in Schelling and Aumann's work was the ability of two parties to avoid war through credible threats and counter-threats. During the Cold War, for example, the United States and the Soviet Union were able to deter each other from launching a nuclear attack by indicating that they had the ability and willingness to launch a counterattack.
Game theory lends itself to games such as bridge, or even a driver's strategy in a traffic jam, in which "the important play depends on what one anticipates the partner or adversary would do," Schelling said during a news conference at the University of Maryland's College Park campus. "Game theory can be used if you try to discipline a child or deal with employees, or employers or neighbors."
One current example, he said, is the possibility of using game theory to figure out how to create an international agreement to reduce the greenhouse gases many scientists think contribute to global warming. The U.S. government is unlikely to join any treaty that involves sanctions or penalties, he said. But the NATO alliance is an encouraging example of how countries can be induced to make long-term commitments in their self-interest and largely live up to them without punitive measures, he said.
Game theory, however, is less useful in analyzing how to deter terrorists from using nuclear weapons, he said, because "it is difficult to figure out what their objectives are."
Schelling also is well known for a 1971 article analyzing how racially mixed communities can suddenly become segregated as the proportion of residents of one race gradually slides below a certain critical level, or "tipping" point, the Swedish academy noted. This provided "a convincing account of an important social policy problem . . . an early analysis of 'tipping.' "
University of Maryland officials "could not be more thrilled," Provost William W. Destler told reporters. Schelling came to the university in 1990 after 32 years at Harvard University, where he conducted his most influential work. He retired from the University of Maryland in 2003 after teaching in the economics department and school of public policy.
"For us, it was never a question of whether Tom would win the Nobel Prize, it was just a matter of when," Destler said at the news conference attended by Schelling's wife, Alice, university officials and former colleagues.
Schelling said he and Aumann have never worked together but are good friends.
Aumann "is a real game theorist," Schelling said, describing himself as a social scientist who uses game theory as a tool. "It is an honor to be associated with him."
Aumann, who retired in 2001, was born in Germany but holds dual U.S. and Israeli citizenship. He is best known for his analysis of repeated games, in which the willingness of the participants to cooperate is influenced by their expectation that they will be partners or rivals for a long time. This work was useful in understanding how unions and international trade agreements work, the academy said.
"Among Aumann's many contributions, the study of long-term cooperation has arguably had the most profound impact on the social sciences," the academy said. His work yielded "a much deeper understanding of the conditions for cooperation in ongoing relationships" as well as explanations for price wars, trade wars and other economic and social conflict.
Between 1965 and 1968, he collaborated with others in applying game theory to the dynamics of arms control negotiations.
Schelling's seminal book, "The Strategy of Conflict," published in 1960 against the backdrop of the arms race of the 1950s, "had a lasting influence on the economics profession as well as on other social sciences," the academy said.
Schelling said his game theory work grew out of his early experience working for the U.S. government in Europe and at the White House after World War II, when the implementation of the Marshall Plan for rebuilding the devastated continent involved countless negotiations.
The 1994 Nobel Prize in economics went to three early pioneers of game theory, including Princeton University professor John F. Nash Jr., whose personal story was depicted in the Oscar-winning film "A Beautiful Mind" starring Russell Crowe.
The Nobel Prize "validates game theory as a field within economics," said John S. Morgan, a professor of economics and at the business school of the University of California at Berkeley. It is a relatively new field that started after World War II, he said.
Moreover, the award offers recognition that many social achievements "owed a great debt to game theory," said Morgan, who teaches the subject. "Not just achievements that resonate within the academic community, but which resonate in the broader community."
The Nobel winners will split the $1.3 million prize.