Some of Levine's concerns:
Gaming could lend a sense that a plausible scenario is in fact probable. This could take place by virtue of the chosen, simulated scenario becoming more "real" in the minds of the participants than all of the other, unexplored possibilities. (More on cognitive biases like this one in another post soon, once I finish the paper I'm reading now)
A combination of "ersatz history" (in the form of scenarios that depart greatly from present day events) and "ersatz people" (since game players do not share the same characteristics as the individuals they are simulating) introduce biases to the gaming process that compromise its utility in generating worthwhile hypotheses.
The results of games may be used as evidence, even when they have no evidentiary value. Specifically: "If a game result appears in language which can be read as a confirmed policy conclusion, there is a substantial chance that it will be so read."
For a more recent view of some similar issues, Robert Rubel's "The Epistemology of War Gaming" (mentioned in this previous post) talks about a broader category of games, and also has steps in mind to try and address some of these methodological challenges, rather than simply advocating that gaming be abandoned as a research tool.
Rather than enumerate Schelling and Jones' replies to these and other arguments point by point, here are a few examples of their ideas (the paper is well worth reading in its entirety):
Schelling defines games as necessarily involving "at least two separate decision centers... neither of which is privy to the other's planning and arguing, neither of which has complete access to the other's intelligence or background information, neither of which has any direct way of knowing everything that the other is deciding on." This definition excludes many of the exercises we would categorize as games, and includes many that do not appear to be games at all, but this is because Schelling is focused on the strategic interaction between the two (or more) decision centers:
"What this mode of organization can do that can not otherwise be done is to generate the phenomena of understanding and misunderstanding, perception and misperception, bargaining, demonstrations, dares and challenges, accommodation, coercion and intimidation, conveyance of intent, and uncertainty about what each other has already done or decided on. There are some things that just cannot be done by a single person or by a team that works together."
"One is to judge how 'obvious' something is. An analogy is the 'hidden face' in the picture. If I draw a face with a hidden picture, there is no way for me to tell how hard it is to see the face except to show the picture to somebody. I can't not see the picture because I put it there, and the hidden face has the quality that once you've seen it it is awfully hard to recapture your innocence and not see it."
Jones responds to the charge of "ersatz history" thus (keep in mind that he was writing in 1964):
"[P]erfectly plausible, useful, and not improbable game scenarios of a situation three or four years in the future can be had by simply initiating a game using today's newspapers -- interjecting only tomorrow's equipment. Arab-Israeli controversy has existed for some time and it seems probable that it will be in existence in 1970. Turkey and Greece have not seen eye-to-eye on the Cyprus situation for a considerable period and, unfortunately, this controversy is likely to persist.... Notice here that I am not saying that games, played from scenarios which are extrapolations of today's problems, are perfect for determining tomorrow's force posture and weapons characteristics. I am saying that I can think of worse procedures (re-fighting the last war, for example) and I know of no other way in which I have even such a limited amount of confidence."
There is a good deal more in this paper than I can tackle in a blog post, but many of the ideas and concerns expressed resonate today, which is why RAND reprinted it in 1991, 27 years after it was written.