WITHIN half an hour of waking up on October 10th 2005, Thomas Schelling received four phone calls. The first was from the secretary of the Nobel Committee, with news that he and Robert Aumann had jointly won that year’s prize for economics. During the fourth call, when asked how winning felt, he answered: “Well, it feels busy.” He was nothing if not truthful. He also confessed to feeling confused about which bit of his work had won the prize.

It might have been his work on addiction—flicked off like ash from his own struggles with smoking. Economists must understand, he wrote, the man who swears “never again to risk orphaning his children with lung cancer”, yet is scouring the streets three hours later for an open shop selling cigarettes. Mr Schelling’s work laid (largely unacknowledged) foundations for future behavioural economists. In his thinking, addicts have two selves, one keen for healthy lungs and another craving a smoke. Self-control strategies involve drawing battle lines between them.

The prize could also have been for his work on segregation, showing how mild individual preferences could lead to extreme group…Continue reading