Schelling, Thomas (1921–)

Distinguished university professor and professor of economics who, using game theory, contributed to the development of such concepts as bargaining and strategic behavior applied to diplomacy of war and peace. Schelling's research interests include military strategy and arms control, conflict and bargaining theory, nuclear proliferation, energy and environmental policy, climate change, smoking behavior, international trade, and ethical issues in policy and in business.

Born in 1921, Schelling earned a degree in economics at the University of California, Berkeley in 1944, before starting his career at the U.S. Bureau of the Budget. He worked with the Marshall Plan to rebuild Europe between 1948 and 1951 and then joined the Executive Office of the President at the White House, where he served until 1953. In 1951, Schelling obtained a Ph.D. in economics at Harvard University.

In 1953, Schelling joined Yale University as professor of economics. Five years later, in 1958, he moved to Harvard, where in 1969 he became Lucius N. Littauer Professor of Political Economy at the John F. Kennedy School of Government. At Harvard, Schelling also directed the Institute for the Study of Smoking Behavior and Policy from 1984 to 1990. In 1990, he joined the Maryland School of Public Affairs at the University of Maryland.

In his 1960 work, The Strategy of Conflict, Schelling pioneered the study of bargaining and strategic behavior. The book was considered among the most influential on strategic studies since 1945. Schelling studied strategy and bargaining situations in international conflict by applying game theory. He saw bargaining as a game in which it is important to think what the opponent can do, how one can react, and how the opponent will react to one's behavior. In these situations, threats and promises may have important strategic effects.

According to Schelling, a threat is a communication of one's incentives, designed to impress on another party the automatic consequences of an action. For example, a threat of retaliation may prevent a country from starting a war, or, in an economic context, it may prevent a company from starting a competitive price war. The efficacy of a threat depends to large extent on its credibility, which is built on the incentives of the player who threatens to carry out the threat. In this context, reputation plays an important role. It tells if one should believe that a player keeps his promises. A threat without credibility has no strategic value.

Schelling further developed these concepts in Strategy and Arms Control, published in 1961. In [Page 646]1966, in his work, Arms and Influence, he applied these notions to military power and the diplomacy of war and peace. In his 1978 work, Micromotives and Macrobehavior, Schelling analyzed how minor decisions of individuals may interact in such a way that they have serious consequences at the macro level.

During his career, Schelling was elected to numerous prestigious institutions, including the National Academy of Sciences, the Institute of Medicine, the American Academy of Arts and Sciences, the American Economic Association, and the Eastern Economic Association. He also served as chairman of the advisory committee of the Institute for Social and Economic Policy in the Middle East at Harvard University and as a member of the Board of Trustees of the Albert Einstein Institution, a nonprofit organization devoted to the study of nonviolent political action.

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