PS 367 Madman_Schelling - Did Thomas C Schelling Invent the...

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10-24-05 Did Thomas C. Schelling Invent the Madman Theory? By Jeffrey Kimball Mr. Kimball is a professor of history at Miami University and the author of To Reason Why, Nixon's Vietnam War, and The Vietnam War Files. On October 10, 2005, the Royal Swedish Academy of Sciences announced that it had awarded the Nobel Prize in Economic Sciences to Thomas C. Schelling and Robert J. Aumann for their separate work in having “enhanced our understanding of conflict and cooperation through game-theory analysis.” The Academy’s press release explained that Schelling’s contribution included his ideas about “uncertain retaliation”: Against the backdrop of the nuclear arms race in the late 1950s, Thomas Schelling’s book The Strategy of Conflict [1960] set forth his vision of game theory as a unifying framework for the social sciences. Schelling showed that a party can strengthen its position by overtly worsening its own options, that the capability to retaliate can be more useful than the ability to resist an attack, and that uncertain retaliation is more credible and more efficient than certain retaliation. These insights have proven to be of great relevance for conflict resolution and efforts to avoid war. . . . Notably, his analysis of strategic commitments has explained a wide range of phenomena, from the competitive strategies of firms to the delegation of political decision power. The concept of uncertain retaliation has to be placed in the context of Schelling’s critique of standard game-theory definitions of economic “rationality.” Schelling argued that in a bargaining or competitive situation one economic agent’s framework for rationality is not always necessarily another’s. If, for example, agent A does not act according to agent B’s conventional assumptions about the rules of the game, B will consider A’s behavior “irrational.” During the game, B will be uncertain about the trajectory of A’s behavior. From B’s point of view, A’s behavior is ambiguous and unpredictable. Thus, A’s irrationality might result in A winning the competition. If Agent A is not really irrational—or mad—but is using his/her unconventional behavior as part of a conscious bargaining or competitive strategy, then his/her so-called
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irrationality is effectively rational in relation to the game’s “payoffs.”1 Tyler Cowen, one of Schelling’s former students at Harvard University, explained Schelling’s irrational-behavior theory relative to nuclear deterrence this way: 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 pre-commitment [e.g., the Doomsday Machine], some element of randomness [e.g., ambiguity about one’s deterrent strategy], or a partly crazy leader [e.g., a madman such as General Ripper]. I recall Tom telling me he was briefly an advisor to Kubrick.2 Michael Kinsley, another former student, recalled a classroom lecture of
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PS 367 Madman_Schelling - Did Thomas C Schelling Invent the...

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