nemo
/
hn-classics
1
0
Fork 0
Code Issues Pull Requests Releases Wiki Activity
hn-classics/_stories/2005/13182668.md

38 KiB
Raw Blame History

Source

Thomas Schelling, new Nobel Laureate - Marginal REVOLUTION

Marginal REVOLUTION

Thomas Schelling, new Nobel Laureate

by Tyler Cowen on October 10, 2005 at 8:16 am in Economics | Permalink

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.

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.

17 comments

1 Erik October 10, 2005 at 8:56 am

Strategy of Conflict is one of the most important books ever written in international security. Schelling’s ideas about pre-commitment and focal points are pervasive across the social sciences. This is an excellent choice and long overdue.

2 Kent Guida October 10, 2005 at 10:21 am

Where do you hide the C-note?
“Capital,” of course. Or perhaps “The Economic Point of View.”

3 Tom Slee October 10, 2005 at 10:52 am

For a long time I was hugely underwhelmed by the idea of the focal point. But one of the best pieces on it that I have read changed my mind. It is an essay by Roger Myerson at http://home.uchicago.edu/~rmyerson/research/justice.pdf

4 Radford Neal October 10, 2005 at 1:08 pm

Schelling seems to have done lots of interesting stuff, and is no doubt deserving of the prize, but the essay on global warming contains a stunningly stupid statement:

—-

In the developed world hardly any component of the national income is affected by climate. Agriculture is practically the only sector of the economy affected by climate, and it contributes only a small percentage — three percent in the United States — of national income. If agricultural productivity were drastically reduced by climate change, the cost of living would rise by one or two percent, and at a time when per capita income will likely have doubled.

—-

Of course, if agricultural productivity were drastically reduced by climate change, most of us would die of starvation!

5 Steven Vickers October 10, 2005 at 2:19 pm

“Of course, if agricultural productivity were drastically reduced by climate change, most of us would die of starvation!”

Not really. Productivity is a measure of output per unit of input. For example, labor productivity measures production per unit of labor (sometimes per worker, sometimes per hour worked). It’s entirely possible for productivity to decline and still get the same output, in this case food, it simply means that you have to devote more resources to that sector. As I understand it, Schelling is arguing that we will in fact have so many more resources that this increase will seem small small.

6 Radford Neal October 10, 2005 at 5:25 pm

“Of course, if agricultural productivity were drastically reduced by climate change, most of us would die of starvation!”

Steve Vickers responded:

“Not really. Productivity is a measure of output per unit of input. For example, labor productivity measures production per unit of labor (sometimes per worker, sometimes per hour worked). It’s entirely possible for productivity to decline and still get the same output, in this case food, it simply means that you have to devote more resources to that sector. As I understand it, Schelling is arguing that we will in fact have so many more resources that this increase will seem small small.”

It occurred to me that Schelling might have meant “productivity” in this sense, but if so, how did he conclude that “the cost of living would rise by one or two percent”? Any such calculation would require a detailed analysis of agricultural production, to see how many other resources would need to be deployed to compensate for poorer climate. Since agriculture is probably mostly limited by the amount of arable land, which is not expandable (on the assumption, of course, that climate change turns out to be bad, not good), it’s hard to see how such an analysis, if done, would lead to such an optimistic outcome.

Difficult as it may be to believe, it seems that Schelling simply thought that eliminating food production would reduce economic activity by only a few percent of GDP, and so is no big deal. It’s stunningly stupid. But it seems it’s possible if your economic thinking becomes sufficiently detached from reality.

7 Lowell R. October 10, 2005 at 7:02 pm

How exactly did Buchanan’s and Smith’s Nobels trivialize the prize? Public choice and experimental econ are very important, even if the popularity of the former is decreasing.

8 paul October 11, 2005 at 12:01 pm

Even in the early 90s, the assumption that climate change would affect only that proportion of developed-country economic activity that explicitly took place outdoors was a pretty-well-debunked crock. It doesn’t speak well for Schelling — or the economics profession — that he should have adopted it. He’s obviously quite a smart guy, but (in part as a result of that intelligence coupled with superficially good writing skills) not one I’d trust anywhere near an actual policy decision.

Which is of course true of almost all of the best economists and their can-openers.

(By the early 1990s, in addition to the severe-weather predictions, climatologists had already produced detailed maps of coastline changes for various coastal centers, estimates of increases in required local generating capacity for HVAC, and so forth. Of course, for someone who had lived through a worldwide depression and a world war, any dislocations smaller than a complete fall of civilization might have seemed minor…)

9 Radford Neal October 11, 2005 at 5:25 pm

Barkley Rosser writes:

“Well, actually Schelling is pretty much right about all this… There was a big debate between Nordhaus and Mendelsohn over ten years ago about the impact on US agriculture. Nordhaus got a several percent loss from warming by assuming that farmers kept on planting the same crops. Mendelsohn found very little loss because farmers would change their crops to adjust…”

This isn’t the issue. Fears of global warming may be exaggerated, and if it does occur, it might well turn out to actually be beneficial to agriculture, or at least not very harmful. However, Schelling’s statement ASSUMES that global warming occurs, and that it IS very harmful to agriculture. He then goes on to say that that wouldn’t matter much, since agriculture accounts for only three percent of the economy.

The most sense I can make of his statement is that he’s thinking that production with the current level of labour and other inputs might decline by, say, a factor of two, so all you need is to increase labour and other inputs by a factor of two to get back to the old level of production. This is naive in the extreme. Even less sensibly, perhaps he just hasn’t remembered that unlike DVDs, toilet paper, and flashlights, food is actually essential to life.

Now, one could actually argue that North America could cope with a factor of two reduction in food production, by reducing meat consumption, which is a very inefficient way of feeding humans. That makes strong assumptions about North America managing to isolate itself from the rest of the world, however. In any case, it’s not an argument that Schelling makes.

10 John Lilly October 11, 2005 at 10:06 pm

As a non-economist, I have little to add to certain discussions above. What I can say is that as a Harvard undergraduate I had Schelling as a professor for what I had (typically, pathetically) enrolled myself in as a gut course: his introduction to game theory.

It turned out to be the most mind-blowing course I took there…and it was a gut! The stuff wasn’t hard to understand, but it completely changed my view of the world.

This is simply great news to me. Thos. Schelling was a great teacher and an obviously good man, and the scope of his imagination and the rigor with which he applied it were and continue to be an inspiration to me.

11 Radford Neal October 12, 2005 at 1:14 pm

Barkley Rosser writes:

“Rather than making baseless statements about what Schelling might have said or might think I suggest you go read his address to the American Economic Association in the American Economic Review on the matter. It is publicly available. Naivete, sloppy statments, and inaccurate calculations are the last things in the world one will find associated with Thomas Schelling.”

The article you mention does not contain any further technical arguments. In it, Schelling says:

“… even if agricultural productivity [in developed nations] declined by a third over the next half century, the per capita GNP we might have achieved by 2050 we would achive only in 2051.”

He goes on to say that productivity might instead continue to increase, climate change might turn out to be beneficial, etc. But that’s a different argument. The statement above differs from the one in the essay linked above only in that “drastically reduced” is specified to be by one third, and the time scale is made clear.

It’s still a stupid statement. There is no reason to think that the effects of climate change, if they are indeed so bad, are going to be fixable by a proportionate increase in labour or capital inputs, since the constraint may well be the amount of arable land, which you can’t just decide to increase. His argument comes down to “agriculture is a trivial part of current GNP, therefore the effect of climate change on agriculture can’t be very important”. The flaw in this argument should be obvious, but apparently it isn’t obvious to everyone.

12 Tom Grey October 13, 2005 at 9:44 am

On “focal points”, I thought unemployment, inflation, GDP, GDP/capita, and GDP growth were the main focal points on which to judge economic performance. Though interest rates and private home ownership rates seem pretty important, too.

I note this because, under Bush, such rates for the USA seem pretty good — but the Leftist press seems want to change the points (goalposts), so as to make Bush look bad.

If coordination is going to be effective, there needs to be agreement on how to measure results. I also like the precommitment ideas; I’m wondering if there isn’t more to Becker’s marriage contract with additional precommitment and postcommitment advantages.

13 Hernan Garrido-Lecca October 18, 2005 at 9:46 pm

I had the privilege of taking a course and then have and independent resarch project with Thomas Schelling. Since I went to the first of his classes I knew he was going to get the Nobel prize sooner or later (and as I told everybody I met at Harvard and MIT, I have now dozens of witnesses). It took 23 years to fulfill my prophecy and this is just one of the best news I haver ever gotten. I admire Tom SDchelling and I can only say that this partly compensates for the frustration I have because Joan Robinson never got it.
Hernan Garrido-Lecca, Peru (Harvard MPA 84 and MIT SM 90).

14 DVD February 20, 2008 at 7:15 am

DVD

15 競馬予想データバンク August 7, 2008 at 4:28 am

競馬無料予想が大集合。競馬予想データバンク

16 kooo August 10, 2008 at 9:39 pm

ネット お小遣い
ネット 内職
骨盤 ダイエット
骨盤 ダイエット

17 kira January 19, 2009 at 6:35 pm

リストラ
転職
不況
アフィリエイト

Comments on this entry are closed.

Previous post: Schelling and Aumann!

Next post: Robert Aumann, one of two new Nobel Laureates

  • Our Books


Buy at B&N;: The Complacent Class: The Self-Defeating Quest for the American Dream

Buy at Amazon: The Complacent Class: The Self-Defeating Quest for the American Dream


Average Is Over: Powering America Beyond the Age of the Great Stagnation


Modern Principles of Economics


Launching The Innovation Renaissance


The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will(Eventually) Feel Better


Create Your Own Economy: The Path to Prosperity in a Disordered World


Discover Your Inner Economist


Good and Plenty: The Creative Successes of American Arts Funding


Judge and Jury: American Tort Law on Trial


Markets and Cultural Voices: Liberty vs. Power in the Lives of Mexican Amate Painters (Economics, Cognition, and Society)


The Voluntary City: Choice, Community, and Civil Society (Economics, Cognition, and Society)


Creative Destruction: How Globalization Is Changing the World's Cultures


Changing the Guard: Private Prisons and the Control of Crime


What Price Fame?


In Praise of Commercial Culture


Entrepreneurial Economics: Bright Ideas from the Dismal Science

Email Tyler Cowen

]108[Follow Tyler on Twitter

][108]Email Alex Tabarrok

][110]Follow Alex on Twitter

 Follow Us on Twitter

Marginal Revolution on Twitter Counter.com

Categories Select Category Books  (2,759) Current Affairs  (3,903) Data Source  (1,848) Economics  (10,254) Education  (2,281) Film  (538) Food and Drink  (1,029) Games  (262) History  (2,246) Law  (2,483) Medicine  (1,285) Music  (499) Philosophy  (985) Political Science  (2,480) Religion  (506) Science  (1,740) Sports  (443) Television  (267) The Arts  (586) Travel  (434) Travels  (260) Uncategorized  (5,029) Web/Tech  (2,122) Weblogs  (123)

  • Archives

Archives Select Month February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013 June 2013 May 2013 April 2013 March 2013 February 2013 January 2013 December 2012 November 2012 October 2012 September 2012 August 2012 July 2012 June 2012 May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004 March 2004 February 2004 January 2004 December 2003 November 2003 October 2003 September 2003 August 2003 0

Get smart with the Thesis WordPress Theme from DIYthemes.

WordPress Admin