American, Israeli Share Economics Nobel Prize

COLLEGE PARK, Md. – The way people interact and calculate the motives of others can explain the nuclear aspirations of some smaller countries, why terrorists wouldn't unleash smallpox and how people quit smoking, says Thomas Schelling (search), 2005 winner of the Nobel Prize (search) for economics.

The University of Maryland professor was cited Monday by the Swedish Royal Academy of Sciences for his work on "game theory," (search) a way of studying interactions that concludes that the behavior of an individual, group or country is dependent on the behavior of others.

Schelling's work is perhaps best known for explaining the tenuous nuclear deterrence of the Cold War. He theorized that an unspoken "taboo" existed in both the United States and Soviet Union against using nuclear weapons, with each understanding a nuclear war would lead to mutual destruction.

While the Soviet Union no longer exists, the United States still finds itself dealing with deterrence from smaller nations seeking nuclear weapons or those with small stockpiles. The United States will have to take the power of those weapons into account when negotiating with countries such as Iran and North Korea, he said.

"It will be unusual to be deterred by small countries," Schelling said Monday.

He shares the award with fellow game theorist Robert Aumann of the Hebrew University of Jerusalem. He said the two knew each other, but that they didn't collaborate on scholarly work. Schelling described himself as a "consumer of game theory" more than an author of the idea.

Schelling said he had heard rumors for several years that he would win the prize, but wasn't expecting the call from Sweden early Monday morning. In 1994, several other game theorists had won Nobel in economics, including Princeton University mathematician John F. Nash, subject of the movie "A Beautiful Mind."

Schelling appeared later in front of a crowded auditorium at the University of Maryland to several standing ovations. Appearing spry at age 84, he holds an emeritus position at the school.

Schelling first saw how nations interact during the five years he spent in Europe and the Truman White House following World War II. There he helped coordinate aid to nations as part of the Marshal Plan, the postwar reconstruction of Europe.

He went on to receive a doctorate in economics from Harvard University and taught at Harvard for 31 years. Nearing retirement, he was offered a post at the University of Maryland's school of public policy in 1990.

While his background is in economics, Schelling's interests took him far beyond his academic discipline. He applied game theory to such diverse topics as climate change, the behavior of crowds, racial segregation and organized crime.

For six years he headed Harvard's Institute for the Study of Smoking Behavior and Policy. A one-time smoker himself, Schelling tried three times before he successfully quit. He studied the motivations and techniques that people and groups used to end smoking habits.

"I observed a long time ago that the way people tried to manage or control their own behaviors are very much the way they try to manage and control someone else's behavior," he said.

A. Michael Spence, winner of the 2001 Nobel Prize in economics, said Schelling is "a very original mind" who used game theory in ways that others had not imagined. Schelling was Spence's thesis adviser at Harvard.

"He thinks about things that other people didn't know how to think about," Spence said.

That includes the threat posed by smallpox in the hands of Islamic terrorists. Schelling recently served on a National Academy of Sciences panel that studied the threat of smallpox.

He said terrorists would face the same dilemma of mutual assured destruction that was present during the Cold War. If they released smallpox in a western country, the fast-moving disease could easily spread back to the Muslim world, harming those who the terrorists are trying to impress, he said.

"Anyone who appreciates what a smallpox attack would lead to globally might be largely deterred," he said.