Slate carries a fascinating article by Fred Kaplan on Thomas Schelling’s role in the Cold War. I highly recommend Fred Kaplan’s book, The Wizards of Armageddon. It contains an insightful account of the central role the RAND Corporation played in the development of game theory. The RAND Corporation, formerly Air Force Project RAND (for Research and Development), was started with a huge grant from the U.S. Air Force. It was housed at facilities provided by the Douglas Aircraft Company, which had profited mightily from Air Force contracts and become one of the largest aircraft manufacturers during World War II. It was the brain child of U.S. Army Air Force General Henry “Hap” Arnold whose son had married the daughter of the Douglas Company’s owner, Don Douglas.
Douglas was eager to maintain the lucrative relationship with the Air Force going after the war. It was Arnold who wrote a memo responding to opponents of the proposed Allied fire bombing of Dresden, stating: “We must not get soft. War must be desuctive and to a certain extent inhuman and ruthless.” Arnold also wanted his wartime scientists to invent “explosives more terrible and more horrible than anyone has any idea of.” General Curtis “Bomb Them Back to the Stone Age” Lemay was appointed as the Air Force coordinator of Project RAND. The RAND Corporation later became an “independent” nonprofit institute subsisting solely on Air Force contracts.
In the 1950′s, leading economists and game theorists worked or consulted for RAND, including John von Neuman, the father of game theory, Schelling, Alan Enthoven and Charles Hitch. RAND never developed anything; it’s primary mission was nuclear “wargaming” or planning for nuclear war. During the Berlin Crisis in 1961, Schelling ran nuclear wargames over two weekends which included as “players” high officials and consultants of the Kennedy Administration, such as Henry Kissinger and McGeorge Bundy. So game theory is a “fiat” discipline created by the interventions of the U.S. Warfare State; without the enormous resources poured into the Rand Corporation by the Air Force, game theory would have been a minor and happily forgotten episode in the history of economic thought by now.
Unlike some other RAND employees and clients like Daniel Ellsberg and Robert McNamara, Schelling never apologized for or reflected on his role in planning the Vietnam War. Instead he simply moved on and applied his failed wargaming theories to other areas of human life. In 1984 he published a book of essays entitled Choice and Consequence: Perspectives of an Errant Economist. The truth would have been better served if the book bore the subtitle Perspectives of an Erring Wargamer. It seems incomprehensible that some Austrian economists would actually laud Schelling’s selection for the Nobel Prize.