Reply #17: info and link....a very smart man [View All]

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 MarginalRevolution.com 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.

>>>>snip and link http://www.marginalrevolution.com/marginalrevolution/2005/10/schelling_and_a_1.html