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Thomas Schelling and how he helped avoid a nuclear war in the Cold War – Financial Sector – Economy


Mar 4, 2023

The year 1961 was very tense for those who lived through it.

The Bulletin of the Atomic Scientists had a clock symbolic of the end of the world -because of a nuclear war- and they set it at 7 minutes to midnight.

Children in schools were told what to do in case of an atomic attack and the United States was convinced that it was losing the space race, while Russian President Nikita Khrushchev was building the Berlin Wall.

In late September 1961, Henry Kissinger, who would serve as US Secretary of State from 1973 to 1977, and a few other US strategists were meeting not far from the Pentagon, when they received a call from West Berlin.

Several Soviet tanks were on the move. A suburb of the city had been annexed, and local US forces had responded.

The stakes were high: if the Americans backed down they would be giving up control of West Berlin, if the Soviets backed down they would show that they had been intimidated and that their action had been a mistake.

And if neither party backed down…

Let’s just say that Kissinger and his colleagues didn’t last as well over the next 48 hours, as one phone call after another poured in.

But there was a ray of hope: the calls weren’t coming from West Berlin, they were coming from the next room.

It was all a war game, an exercise that had been devised by one of the foremost strategists of the 20th century, the economist Thomas Schelling.

To understand what an economist was doing organizing war games for Henry Kissinger, you have to go back to World War II.

Games theory

During that conflict, some of the leading intellectuals of the time were grappling with military problems like designing computers that broke secret codes or developing the atomic bomb.

One of the leading figures among them was a mathematician named John von Neumann, who had a side project he called «Game Theory,» about which he published a book with an economist named Oskar Morgenstern.

The premise of von Neumann’s game theory was this: think about human strategic interactions. I have interests, you have interests. What you do affects what I do. What I do affects what you do.

Von Neumann wanted to take those kinds of problems, those strategic human problems, and turn them into mathematical objects. Convert them into numbers and get an answer.

There is probably something attractive about that, at a time when both Cold War powers were developing nuclear weapons. Because you won’t continue to know how to fight nuclear war by practicing it. If you could sit in your chair, think about it very well, and solve it logically, well that is much better.

After the war, von Neumann and others like him improved at the RAND Corporation, a think tank that had been created to advise the US Armed Forces with the idea of ​​bringing together intellectuals to think about the problems of modern warfare, which of course meant Armageddon, nuclear warfare.

But it was a good place to do it, it was on the Pacific Ocean, facing the beach and people were wearing Hawaiian shirts. It was really very casual, laid back. It must have been a very fun environment to work on the strategic doctrines that were coming together in the United States at the time, surely influenced by RAND.

So, a very worrying idea was that of mutually assured destruction that was based on this: sIf the Soviets cross the line, the United States would retaliate massively with atomic weapons. Then of course the Soviets would retaliate and the world would end. And therefore, the Soviets would not cross the line.

This idea has some appeal, there is magic in it, the kind of magic that would come from a man like von Neumann, who worked almost exclusively on so-called zero-sum games. These are the ones where you lose what I win and what you win is what I lose.

Common interests and reduction of nuclear weapons

Von Neumann died in 1957, and just a few months later, Thomas Schelling came to RAND for the first time to work on research.

In a way, Schelling didn’t fit in at RAND at all. He was an East Coast scholar at a West Coast Research institution.

But in other ways, Schelling was a perfect fit. He loved game theory, he spoke the language of game theory and thought it was an incredibly powerful tool.

However, he expected that he had to use it in a completely different way. He had experience in business negotiation. He had worked on the Marshall Plan to rebuild Europe after World War II.

so when Schelling thought about game theory, he thought about games where there was always a common interest to explore, a common ground to move from. An obvious example of that is the limitation of strategic arms.

He argued that both the United States and the Soviet Union had an interest in reducing their nuclear arsenals and he was a true weapons limitation evangelist.

Schelling was also concerned with the issue of stability. So, this was based on mutual assured destruction. That was von Neumann’s balance of power, which was not a very stable balance.

Schelling wondered what would happen if something went wrong? If some psychopathic colonel set off the bomb? What resources do the great powers have to pull themselves back from the brink of Armageddon? And according to his analysis, his answer was that not much.

He dedicated himself to convincing the world that everything had to be changed. Not because he was a pacifist. He was absolutely focused on how to fight a nuclear war.but I thought they just weren’t doing it very well.

One of the obvious things missing—obvious in hindsight—was the red phone. And it is that in the late 1950s, there were no direct lines of communication between Moscow and Washington. Schelling had said that it could be a very good idea.

But it was not installed until after the Cuban Missile Crisis, when it emerged conclusively that Schelling was absolutely right and that it would have been very useful to have had one.

At that time, Schelling found himself at the height of his career, and many people came to him for advice.

In 1964, he was approached by then-U.S. Assistant Secretary of Defense John McNaughton about a specific problem he wanted Schelling to look into: The United States was dragging a war in Vietnam, and McNaughton thought that if the United States launched a short, three-week bombing campaign could persuade the North Vietnamese to stop their attacks on South Vietnam.

So Schelling asked McNaughton a simple question: Well, if you were successful in this bombing campaign, if you persuaded them to stop, how would you know? How quickly would you know?

McNaughton said it could go 10 months or more than a year without knowing, and admitted that he might never know. Schelling then told him that in that case what he wanted to achieve with the three-week bombing campaign could not be achieved.

That was the end of the conversation, John McNaughton left and six months later the US started bombing North Vietnam and Operation Rolling Thunder went on for three and a half years.

Schelling did not like military strategy very much after that and turned his attention to other problems.

Racial segregation and climate change

Schelling became interested in racial segregation. He was wondering what prompted it, and a very technical field came along that would be known today as the agent-based model, something you do with a computer, but he did it with a few coins and a chessboard.

He also developed behavioral economics before anyone else. He was embarrassed by the fact that he was addicted to cigarettes and wanted to see if he could use game theory to break that addiction.

Another topic that interested him was climate change, which he wrote about in the late 1970s.

So he said that climate change was a matter of negotiation, but the problem was that bargaining power was distributed so unequally between rich and poor countries that it was difficult to find a way to reach an agreement. That was over 30 years ago and he was correct.

An elusive Nobel

When the Nobel Prize in Economics was awarded to game theorists for the first time in 1991, Schelling was on the shortlist, but he did not win the prize.

There was a feeling that he simply had not contributed the necessary formal structures to this theory.

Oskar Morgenstern, the economist who five decades earlier had developed game theory with John von Neumann, once complained that Schelling had never proved a mathematical theorem in his life. That was true and it is a very interesting point.

There’s a dynamic in the social sciences that you can stick to formal things and you can stick to things that you can prove. But you can also try to get involved with real world problems whose difficulty is that they are very difficult to solve.

Think about the problems Shelling tackled: racial segregation, climate change, addiction. She made deep strides.

The most obvious thing about them is that you didn’t solve them and we probably won’t. But he actually solved a problem: he quit smoking and, perhaps because of this, he had a long life and lasted for more than 90 years.

But before that, in 2005, when the Nobel Memorial Prize in Economics was again awarded to game theorists, Schelling was one of the prizes.

*This text is adapted from Tim Harford’s Pop-Up Economics program for the BBC. You can listen to the original version here.

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BBC-NEWS-SRC: IMPORT DATE: 2023-03-04 12:20:06