WSJ: The Great Game - Nobel Prize winner Schelling used game theory to understand human behavior

Wall Street Journal ^ | October 11, 2005 | DAVID R. HENDERSON

[OESY]

...Mr. Schelling's early work was on the most important issue of the Cold War: preventing it from becoming a Hot War. In his classic 1960 book "The Strategy of Conflict," Mr. Schelling, who had spent a year at the RAND Corporation, laid out some important applications of game theory to the issue of nuclear war. In one passage, he discussed the U.S.-Soviet conflict in terms anyone could relate to: a hypothetical duel. He wrote that "if both [duelists] were assured of living long enough to shoot back with unimpaired aim, there would be no advantage in jumping the gun and little reason to fear that the other would try it." Therefore, he wrote, "schemes to avert surprise attack have as their most immediate objective the safety of weapons rather than the safety of people." In other words, to have a credible deterrent against a Soviet first strike that would destroy many of its people, the U.S. government needed to defend its weapons.

And vice-versa: The Soviets had the same interest. I mention this because one of the most important principles in game theory -- indeed, in life -- is that to handle any interactive situation well, you must put yourself in the shoes of the person you're interacting with....

Mr. Schelling's point with these games, thought experiments and exercises is not that things ultimately fail or ultimately work. It is, rather, that one can understand the interactive behavior of groups of people and see when they are likely to work -- that is, lead to results that the group wants -- and when they are likely to fail. He points out that exchange transactions, which much of economics is about, are simply a subset of interactions that tend to work very well because participants are exchanging a particular item voluntarily....

[OESY]

Mr. Henderson is a research fellow with the Hoover Institution, an economics professor at the Naval Postgraduate School, and co-author of "Making Great Decisions in Business and Life" (Chicago Park Press, 2006).



Another Schelling analogy was his discussion of where you would meet someone if you both knew you were meeting in New York on a particular day but hadn't thought to set a time and place. This led to his concept of the "focal point." You would put yourself in the shoes of the person you were meeting and figure out a time and place that might be obvious to him and that he might think you would think of. I am told that one focal point many people came up with when playing the Schelling game is under the big clock in Grand Central Station at noon.

[Alberta's Child]

I'd do a terrible job in a "game scenario" like that. I think I'm such an iconoclast by nature that I'd select a place in New York that nobody else would think of.

I am an advertiser's worst nightmare -- an atypical consumer.

[Red Badger]

So all human behavior is in reality, just a SCHELL-Game?......

[OSHA]

Do you want to play a game?

[PzLdr]

I read a book years ago by a guy whose thesis was roughly the same, that people's games reflected their approach to war. He analyzed the Chinese Civil war in terms of GO, the Chinese version of chess. Title was "The Protracted Game". Excellent book.

[PMCarey]

I am told that one focal point many people came up with when playing the Schelling game is under the big clock in Grand Central Station at noon.

That was also written up in the book, "The Wisdom of Crowds" (an excellent book btw) and I've tried with several people now. The answer is almost always "the top of the Empire State Building at noon."

[Gondring]

The answer is almost always "the top of the Empire State Building at noon."

And I am sure the answer has varied and will vary based on pop culture, such as famous meetings in movies.

[theFIRMbss]

>The Great Game - Nobel Prize winner Schelling used game theory to understand human behavior

I guess it's as good
a metaphor for life as
most we hear these days . . .

[Señor Zorro]

GO, the Chinese version of chess.

Not to be nitpicky or anything, but GO is not the Chinese version of chess. Xiangqi is. See: http://www.chessvariants.com/xiangqi.html

[1rudeboy]

Great book.

[Redmen4ever]

The two winners of this year's prize were game theoriests, which was the hot topic in microeconomics about a generation ago.

Shelling pursued games in which participants had limited ability to communicate with each other, or to pre-commit or contract; and, in these games, participants inferred future behavior from past behavior.

His most famous contribution was the doctrine of Mutual Assured Destruction. As long as the parties involved understood that they had nothing to gain, the world would be held forever at the brink of destruction. But, what about the possibility that either party were to miscalculate?

After all, slave-owners could be shown to have a rational self-interest in the welfare of their slaves and, so, no rational slave-owner would abuse his chattals?

Same thing with hereditary monarchs. They had a rational self-interest in the welfare of their peasants and serfs. Therefore, no rational slave-owner would above his subjects?

Yet, we know that among slave-owners were cruel masters, and among the hereditary monarchs of the worlds were tyrants and warmongerers. And, so, rather than rely on the rational self-interest of slave-owners and of monarchs, we support human rights and democratic government.

Same thing with the doctrine of Mutual Assured Destruction. Ronald Reagan sought to end this doctrine through a system of positive defense combined with credible inspections. His "Zero Option" was characterized as utopian by the "realists" at the State Department and elsewhere who love to play the game of geopolitics. But we who of the conservative mindset recognize that those in government are not the masters of the universe they think they are, to be playing at such games.

[SuziQ]

Go is a Japanese game.