The most recent Nobel Prize winner, Tom Schelling, and his wife Alice, are dear friends. He is among four Nobel Laureates who have lectured in my Montana programs. While Tom is among the world’s smartest (and nicest) individuals, modesty occasionally trumps his predictive prowess.

Last month, Tom and Alice were at the Elkhorn Ranch for their 10th FREE/Montana State University federal judges’ seminar. I asked about the Nobel, an honor he so clearly deserved. Tom has been FREE’s summer scholar in residence, and Ramona and I have been their guests, so this was not an awkward question. Tom assured me he was not a contender, for he’s modest indeed. I demurred, and fortunately, the Nobel Committee shared my judgment.

We are all elated even though his award reduces the odds of his returning. Why? His opportunities to travel elsewhere dramatically increase by winning the Nobel. Simple economics applied to life. And that’s what he does so well, apply economic reasoning to life’s activities.

Tom is best known for his 1960 Harvard University Press book, The Strategy of Conflict. This classic influenced generations of strategic thinkers. “These insights have proven to be of great relevance for conflict resolution and efforts to avoid war,” explained the Nobel jury.

Tom’s work demonstrates that the economics discipline is not about money, business, statistics, or recreational mathematics. Rather, at root economics explains the logic of social coordination and the organization of human relations. Here’s my favorite example, one I used in classes for over twenty years, the “Schelling Point.”

Join me in a mental experiment. Assume you tell a group of out-of-state friends they are to meet in Yellowstone Park some time in the summer of ’06. Those who are together at the same time will win a prize they value. Where and when do they meet? No more information is available and they cannot communicate with one another. What happens?

Whether my group is undergrads, grad students, or federal judges, three-quarters-plus consistently answer the following: We’ll meet at Old Faithful, at noon, on the Fourth of July. Even those who have never been to Yellowstone are highly likely to give this answer. Why? It’s a place where folks naturally converge, a Schelling Point; they find a natural focal point and coordinate without communicating.

A 2002 Atlantic Monthly article described how racial segregation, a situation Tom deplores, may be a Schelling Point. In the late ’60s Tom conducted a simple experiment with X’s and O’s. It turned out that if individuals want just half their neighbors to be of the same kind, their individual decisions eventually produce near-complete segregation. Even when individuals are content with a quarter of like neighbors, distinctly segregated clusters appear. Even simple social groups produce outcomes orderly although unintended. The results were not accidental, but certainly not deliberate.

Schelling has worked on some of the world’s most important problems. Here are a few highlights. First, as an economist with the Marshall Plan, he helped rebuild post-WWII Europe. Then, during the Cold War, he advised American leaders on strategies to prevent nuclear war. Since 1978, he has worked with the National Academy of Sciences on problems of climate change. Tom is one of the few Nobel winners who could legitimately claim to have helped save humanity from tragedies.

One recurrent theme in Tom’s work is the logic underlying individuals strategically constraining their own options. His examples include an army demonstrating its commitment and determination by placing itself in a position from which it cannot retreat. If one burns his bridges behind him, the enemy knows he’s deadly serious, not bluffing.

Here’s a question Tom might find interesting. Under what circumstances might people burn bridges in front of them? I have a few ideas I’ll save for later.

Tom is one of the last humanist economists in a world of recreational mathematicians. In fact, his Nobel co-winner is a mathematician who works game theory. Tom uses jargon-free, everyday, real-world examples to convey important ideas about how societies function and how to ameliorate problems.

Tom, you’ve long deserved it. We’re honored you and Alice have spent so much time with us in Montana. We celebrate your honor and look forward to seeing you again!