Lunch with the FT: The game of life

At first it looked as if I would never get to have lunch with Thomas Schelling, this year’s winner of the Nobel prize for economics. When I first tried to see him, he told me to wait a week or two, so he could “get over the celebrity activity” surrounding the prize. We picked another date but then he had to cancel: “I have to be at the Swedish Embassy and the White House,” he e-mailed. “I knew I should have asked my wife... sorry to confuse you with my confusion.”

Eventually he invites me to eat at his home in the pleasant Washington DC suburb of Bethesda: “It would be nicer than a restaurant,” he promises.

When I get to the house, his wife, Alice, welcomes me at the door. Schelling stands behind her with a slightly impish grin. “Remind me which newspaper you’re from again,” he says. He isn’t joking. I’m the second interviewer to visit that day, even though it’s more than a month since he got the call from Sweden that he had won the prize. Schelling was surprised - he’d given up on the award some time ago. At 84, he is the oldest man to ever win a Nobel for economics.

He sits me down in his living room and tells me that unlike other Nobel laureates, he wasn’t woken at an ungodly hour but at 7am, just seconds before journalists started phoning him. “Somebody said I was supposed to get the call by five in the morning but they didn’t have my phone number. Which leads me to believe that Swedish intelligence isn’t very good - I’m in the telephone book.”

Schelling only retired two years ago from the University of Maryland, where he was professor of economics and public policy. He had been planning to use his retirement to learn how to programme a computer so he could finish some research on racial segregation that he started decades ago.

But the prize changed his plans: “Now that I’ve got this damned Nobel award, the university has un-retired me.” He has been dutifully helping to raise funds: “The university was good to me.”

Schelling won the Nobel for his contributions to game theory (he shared it with the mathematician Robert Aumann, with whom he has never worked). When he came to the field it was dominated by mathematicians and elegant theories that bore little relation to the pressing real-world problems of the time, such as how to avoid nuclear war. Schelling was more interested in real problems: the causes of racial segregation, for example, and how people can control their addictions.

After a few minutes Alice appears and invites us to a lunch of bread and cheese with a rich pate and Greek salad. Schelling opens the bottle of red I’ve brought. “He can come again,” he says. Alice hints that I should let Schelling sit at the head of the table, then retires to use the computer.

Schelling’s father and elder brother were naval officers and with his crew-cut and cartoonishly square jaw it is not hard to picture Schelling in uniform. Though he spent most of his life teaching economics at Harvard, he also lectured young officers on military strategy at the United States War College. The Kennedy administration was packed with intellectuals fresh from Schelling’s seminars, including McGeorge Bundy, national security adviser to Kennedy and Lyndon Johnson; Walt Rostow, Bundy’s deputy, and John McNaughton, who became a close adviser to defense secretary Robert McNamara.

Through these men, Schelling helped to create a taboo against the use of nuclear weapons. Eisenhower’s administration had argued that such weapons were no different to any others, but Schelling thought otherwise, and the Kennedy administration agreed.

Schelling stopped advising the government when the US invaded Cambodia in 1970. He led a team of a dozen colleagues to see Henry Kissinger, Nixon’s national security adviser, to resign en masse from their informal advisory positions. “We thought about it the way a lot of people think about Iraq now,” he says, “that there was subterfuge, there was misuse or manipulation of intelligence information.”

Schelling continued to write about nuclear weapons but then began to branch out into issues such as euthanasia and organised crime. In 1971, he published a groundbreaking paper that showed how easily severe racial segregation could arise from the accumulated decisions of individuals, even though each person was genuinely happy to live in an integrated neighbourhood.

I’ve always wondered how he came up with that idea. It turns out he started doodling on a long flight, haphazardly drawing pluses and zeros on a piece of paper to try to figure out what happened when one person moved to avoid being racially isolated. “It was hard to do with pencil and paper... you had to do a lot of erasing.”

When he got home he sat down with his 12-year-old son, a chequerboard and the boy’s coin collection, and played around with some simple rules about what the pennies “preferred”. Zinc pennies that found themselves completely surrounded by copper pennies, for example, would move to a blank square with some zinc neighbours. Each move sparked other moves, until the board was divided starkly into two homogenous halves. Schelling had discovered something important: “A very small preference not to have too many people unlike you in the neighbourhood, or even merely a preference for some people like you in the neighbourhood... could lead to such very drastic equilibrium results that looked very much like extreme separation.”

Schelling explains all this between occasional mouthfuls of bread and pate. He does not address his personal feelings about racial prejudice: he seems free of it himself, but his work treats human frailties as something to be analysed and worked with, rather than denounced or denied. Even his own personal failings, such as his addiction to smoking, have been fodder for his research.

In 1988 two economists, Kevin Murphy and the Nobel laureate Gary Becker, published what became a significant theory of smoking in which they described a “rational consumer” of addictive products who knowingly hooks himself on cigarettes or heroin because he calculates the pleasure will outweigh the pain.

Schelling’s view of the addict was different. In his 1980 essay, “The Intimate Contest for Self Command”, he tried to understand the smoker “who in self-disgust grinds his cigarettes down the disposal swearing that this time he means never again to risk orphaning his children with lung cancer and is on the street three hours later looking for a store that’s still open to buy cigarettes”. For Schelling, the addict was neither perfectly rational nor irrational and helpless - he was a rational being at war with himself, who could deploy strategies to help him win that war.

Schelling thinks he had what Becker and Murphy lacked: personal experience. He quit smoking in 1955, but started up again in 1958 when he bought a cigar in a London restaurant (”thinking I was immune”) and spent the next 15 years trying to quit. It was many decades before Becker and Murphy formulated their hypothesis but Schelling says “I learned then that they don’t know what they’re talking about.”

Later I ask about climate change, which he first studied when chairing a commission for President Carter. “In another five or 10 years, it will become almost unmistakably clear that human-induced climate change is happening,” he says.

But Schelling says the Kyoto protocol on climate change, which commits countries that ratify it to reducing their emissions of greenhouse gases, is unworkable because no country will be willing to punish those who fail to cut such emissions. Look at the European Union, he says. It couldn’t even agree to punish France and Germany for violating the terms of the union’s economic stability and growth pact. “If the EU isn’t a tight enough community to impose sanctions on violators of the rules, I can’t imagine a greenhouse regime that will impose sanctions on the United States or on Mexico or on anybody.”

The fact that developed countries, unlike poorer ones, will bear little of the costs of climate change means that it will be even harder to get them to agree to cut greenhouse gases, he says. (Developing countries that are dependent on agriculture and struggle to cope with disease will pay a much higher price for global warming.)

Schelling’s vision of how to combat climate change owes more to Nato than Kyoto. He thinks that instead of countries committing themselves to specific targets, such as cutting greenhouse gases by a certain amount and time, they should promise to carry out specific actions, such as spending a certain sum figuring out how to contain carbon emissions from power plants, or legislating for fuel efficiency. “And leave the poor developing countries alone until the rich countries have proved that they really mean to take it seriously.”

I point out that this is radically different from the economic orthodoxy, which argues for a system of taxes or pollution permits, setting the target and letting the market work out how to meet it. His response is simple. “Yeah, that’s no good.”

Alice appears and affectionately chides Schelling for forgetting to serve coffee. More confusion? A piece of strategy seems the more likely explanation: “You probably want to go,” says Schelling. “I’ve been talking your ear off for a long time.”

The Schelling residence, Bethesda, Washington DC

1 x bottle Taltarni Three Monks Cabernet Merlot 2001

Fabrique Delices Goose Mousse Supreme

Saint Aubray brie

Greek salad

ciabatta

2 x coffee

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