The Strategy of Conflict
Thomas C Schelling
There is a HUGE mistake that many of the people who pride themselves on being the most realistic and sophisticated in the world often make. It is exemplified by the first speaker in this quote
“Because there really are only two choices. We win and they lose – or else, they win and we lose.”
“There’s a third possibility.”
“What?” he demanded aggressively.
“We all lose.”
-- Patriots, David Frum
It is also possible for everyone to win! It may be true, as they say in The Moon Is a Harsh Mistress, that "There ain't no such thing as a free lunch.", but all of economics is built on the principle that there are cheap lunches all around -- lunches whose cost is less than their value.
I have lost count of the number of people, both impecunious students and millionaires, who looked on me condescendingly when I suggested that there might be deals that would benefit both students and millionaires. "So naive!" But it is not naive. What is naive is to believe that every dollar taken from one person benefits another, or that each dollar given to one person must be taken from some other person. Lose-lose and win-win are not new ideas. They are fundamental both to Adam Smith's Wealth of Nations and David Ricardo's concept of Comparative Advantage.
The mathematical field of Game Theory was invented by John von Neumann, reportedly inspired by the poker games he played at Los Alamos during the development of the atomic bomb. It is what Thomas C. Schelling means by his title The Strategy of Conflict. After developing game theory, von Neumann showed that zero-sum games, i.e. games in which every gain of one player is balanced by a loss from another, are mathematically uninteresting. It was left to later researchers, for instance John Nash (he of the biography and movie A Beautiful Mind) to show that nonzero sum games -- games in which everyone can win or everyone can lose -- are mathematically more interesting.
Schelling was a pioneer in applying these ideas to real-world situations, economics, nuclear deterrence, and convincing ones children to behave. He was particularly concerned with conflicts whose participants have incomplete information, for instance because of a real asymmetry (as for instance between parents and children) or because of communication difficulties, such as lack of trust between the USA and USSR during the cold war.
The Strategy of Conflict is a collection of his classic papers on the subject. There is very little math, and what there is is simple. I found it readable and interesting, and still relevant, even 60 years after its publication.
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