10/10/2005 6:33:04 pm
Geneva, Germany and Game Theory. Modern technology allows you to sit in a conference room at the top of a skyscraper in a sunny Geneva, with a view of Mont Blanc, listen to a speaker and read news in your Palm Pilot - all at once. For a few moments, my attention was drawn from free economy, global health and pharmaceuticals of the future to the Nobel Prize in Economics and the new German government.

The Nobel laureates this year were not in the speculations that preceeded the choice, like William Baumol who would have been one very good winner. Instead, Robert Aumann and Thomas Schelling got the Prize for their work on game theory. It is an interesting choice and their speciality not so particular for economics. Rather, game theory is used in many disciplines, also mathematics. I have studied it mostly in political science. Of course game theory has taught us much about conflicts and their possible solutions. Thomas Schelling has also pointed out, by the way, that markets are a very efficient mechanism for solving conflicts.

And Angela Merkel becomes the first female German Chancellor and the first Chancellor who was born in the DDR. And Schroder leaves - yes! But this all comes at a high price, since the SPD seems to get most of the important ministries, such as foreign, finance, justice and labour market. Still, many negotiations remain before the government can be presented and it has a program. Despite what many commentators say, opinion polls have shown that Germans want economic reform. So the government should have a mandate to pursue a policy of change. But it will be difficult to agree for the SPD and CDU, and leading this grand coalition will be a challenge for Merkel that cannot be underestimated.