WWCF: War of the Future

Which will come first?

Intentional detonation of a nuclear weapon as an act of war

or

A battle with robots fighting robots as the dominant form of combat

Terms:

The basic terms are fairly straightforward in the first case--a nuke blows up on purpose designed to hurt targeted victims. But I guess there could be some ambiguity like if a bomb detonation is attempted but somehow fails or is thwarted or if it melts down rather than properly explodes. In the interest of specificity I will stipulate that the device must be truly an intentional nuclear explosion. 

In the second case there would seem to be a lot of room for interpretation. Let us stipulate that it would need to be a significant engagement with at least a potentially meaningful affect on a larger conflict if not be the entire war by itself. This must be a major conflict in terms of world events. It must involve at least one nation state with the opponent being at least a major aggressor (significant terrorist group, etc. if not a state-level actor itself). To be robot-on-robot it must mean that humans cannot be directly targeted in the robot versus robot fighting--collateral damage notwithstanding as well as other human involvement/risk as a secondary part of the combat. I will allow that the devices doing the fighting can be "dumb" devices like drones fully controlled by humans remotely, but extra credit to the degree these are autonomous entities.

Discussion:

Tyler Cowen has been thinking a lot about nuclear war and nuclear device detonation recently including before the Russian invasion of Ukraine. His latest Bloomberg piece discusses just how thinkable the "unthinkable" has become. This is a bigger part of a much needed rethinking of MAD. 

Tyler's partner at Marginal Revolution, Alex Tabarrok, is in the game contributing this overview of the related probabilities. 

Thankfully, Max Roser has done the math for us. Relatedly, he argues that "reducing the risk of nuclear war should be a key concern of our generation". Before we get too excited about a white-flash end to civilization, consider as gentle pushback this piece arguing that nuclear weapons are likely not as destructive as we commonly believe--make no mistake, they are still really bad.*

If Roser is roughly correct, then within a decade we are at a 10% chance of nuclear war. I am not sure if his "nuclear war" would be a equal to or a different level of what would qualify in this WWCF. Suppose it is a higher threshold. Let's make the probability of nuclear weapon use as defined here slightly higher each year such that there is a 20% chance within 10 years (basically equal to his 2% annual risk curve). This gives us a baseline for comparison.

Turning to Rock 'Em Sock 'Em Robots it is not as farfetched as I think most people believe. In fact we may be quite close to it as defensive weapons like Israel's Iron Dome prepare to confront adversaries like drones and Saudi Arabia battles against drone counter attacks from Yemen. As Noah Smith writes, "the future of war is bizarre and terrifying".

It does sound terrifying in one reading, but in another there is a glimmer of hope. A proxy war using robots to settle disputes could be vastly better than any conflict humanity as known before. Imagine a world where the idea that a human would be actually physically harmed from combat was unthinkable. This is not too many steps away from professional armies, rules of engagement, and norms, laws, and treaties against harming civilians, et al.**

Back to the issue at hand, once we consider that dumb, remotely driven/released weapons might soon be battling smart, sophisticated devices with either of these being on defense from the other, we quickly relax how hard it is to foresee it all happening. The hardest hurdle might only be if the conflict big enough to qualify.

My Prediction:

I think nuclear risk is a lumpy, non-normal risk that follows a random walk (i.e., it can all of a sudden get a lot more likely but that likelihood can get absorbed away if conditions improve). It is not as linear and cumulative as Roser suggests. At the same time play the game long enough and anything will happen.

Robot battles seem more like a cumulative progression, an inevitability. We almost cannot escape it eventually happening and probably soon. So, this comes down to how likely a nuclear pop is in the very near term as it tries to out race the tortoise of robot warfare. Just like in the fable, the turtle is going to win.***

I'll put it at 75% confidence that we see this one resolved robot fights robot.

*Of course other future potential weapons that are not nuclear can be extremely scary too--"Rods from God" doesn't just sound very ominous; it truly is. 

**Then again, maybe not:

As a result, conflicts involving AI complements are likely to unfold very differently than visions of AI substitution would suggest. Rather than rapid robotic wars and decisive shifts in military power, AI-enabled conflict will likely involve significant uncertainty, organizational friction, and chronic controversy. Greater military reliance on AI will therefore make the human element in war even more important, not less.

***I know they aren't the same thing! 

P.S. When I first conceived of this WWCF, I thought I'd be comparing robot wars to lasers as prolific, dominant weapons. I changed it as laser weaponry seemed to be consistently failing to launch. However, great strides have been made recently in this realm. Perhaps I was too hasty. However, thinking about it more I would guess that robot war will go hand in hand with laser weaponry. The development of one spurs the development of the other such that there isn't much room for a WWCF.

P.P.S. The ultimate tie would be an AI launches a preemptive nuclear strike on a rival nation's AI or other robot weaponry. Let's hope if they do this the battle is on Mars.

Choose: Stocks and Bonds or Bitcoin and Cash

Over lunch this past week an interesting hypothetical was posed. Suppose you were offered one of the following, which would you choose: 

• One million dollars in some initial combination of your choosing between stocks and bonds (fully-indexed, total market coverage), or
• One million dollars in some initial combination of your choosing between Bitcoin and cash (U.S. dollars).

You will be forced to lock it in for 10 years with no changes to it or any ability to borrow against it. After the 10-year period is up, it is yours free and clear (no taxes either at that point).

Without too much thinking or much hesitation, I chose Bitcoin and cash in a 50/50 combination. My wiser colleagues said with as much or more conviction stocks and bonds--I don't recall their combinations if they stated them. Since I am the investment guy, this raised eyebrows. Maybe I'm just also the gambler. To be sure I caveated my decision with the disclaimer that I might change my mind (my guess was low conviction). To be fair the others did similarly but with perhaps a bit less hesitation (somewhat higher conviction).

In general I would assume that all four of us in this conversation are of very similar financial standing adjusted for our ages (there is about a 30-year spread from youngest to oldest). There is not a right or wrong answer on this question--at least not without a lot more information about each chooser including several underlying assumptions (risk tolerance, liquidity needs, expectations about each person's future goals and paths of life, etc.). I don't wish to get into speculation about that here nor try to evaluate the soundness of any starting position. 

What I am interested in is exploring further how we might frame such a tradeoff. One additional outcome from this exercise is thinking about what assumptions one would make about critical variables and the implications of those assumptions. 

Some people would very appropriately, for themselves, choose an allocation of 100% cash. We could argue about that, but again only by digging deeper into their goals and risk tolerance among other things. "Hey, I'll take free money and I want to know it will be basically there for me at the end of the rainbow (inflation be dammed!)." That is potentially a sensible position, but we could write a book (many books have been written) about what extreme conditions must be in place for that to be rational. Geez, I better stop now or that will be this post . . .

So let's just assume we are debating only the question of which outcome has the best highest expected value after 10 years. I strike "best" because that implies more than just the math problem I want to explore.

We need just a few inputs: 

• expected returns of stocks, bonds, Bitcoin, and cash (I am assuming we can get some yield on cash rather than thinking of it as money under the mattress.)
• expected inflation (We are going to look at values in real terms so we don't let the cash option appear better than it actually is--a likely net loser to inflation.)
• probability of various outcomes (Using a range of expected returns we need to know how likely we think those are. The range is really only important for Bitcoin given its unknown future.)

I am going to use Vanguard's capital market assumptions (CMA) for expected returns of stocks, bonds, and cash as well as inflation. To make these always updating predictions evergreen in this post and because these are publicly available information as linked above, I will also post a picture of these below. Please do see Vanguard's website for more information including appropriate disclaimers. 

I am going to totally make up the expected returns for Bitcoin because 1) my guess is as good as yours and 2) the devil is in the probability and the relative outcome versus the others--my accuracy is nearly immaterial if I am in the ballpark. 

Before you dismiss any of this upon glancing at the inflation prediction (range 1.6% - 2.6%), understand that these are 10-year predictions. I hope they are right given what this implies going forward given currently very high inflation rates, but it can easily be the case even with some persistence of current inflation (8% for a year (not that bad yet) plus 5% for a year plus 8 years at 1.6% would land us at the high range).

Note that I am looking at true total market coverage in stocks (U.S. and all international), thus I will combine the growth rates below in the proportion 55/45 U.S./Int'l. Note also that I am only using U.S. bonds in the model. I generally like some international bonds, but I will make this limiting assumption. Regardless, U.S. versus Int'l bond returns are pretty close as you can see in the details below and at the link.

Enough of that already, let's model this thing.

Here is version 1:

I am putting my thumb on the scale to be optimistic about traditional asset returns (stocks and bonds)  making the low case 25% likely and the high case 75% likely, which serves to put my initial Bitcoin/cash choice at a disadvantage. For Bitcoin I am assuming total collapse in the low-end prediction versus only 25% annual growth in the high-end version. I say only as this isn't "to the moon" although it is very strong growth indeed. Keep in mind that Bitcoin has averaged about 94% annual growth over the past 5 years through to today's price of about $38,300. While being conservative? on the high-end growth rate, perhaps I am not appropriately discounting the likelihood of the high side putting it at a 20% chance. I will change that assumption in the next model. 

But just before that, let me explain why I don't think we need to worry about the mixing and matching between individual high and low estimates (e.g., stocks grow at 6.1% while bonds only grow at 1.9% or stocks and bonds are high but Bitcoin and cash are low, etc.). Assets tend to be positively correlated over longer and longer timeframes. Even though stocks and bonds enjoy some degree of poor correlation, these fade away over time as what is good for stocks (a productive, growing economy) is also good for bonds. Likewise, a world that has Bitcoin doing well probably has stocks doing well, and a world where inflation is low, stock and bond returns are also probably low. Regardless, the heart of the debate isn't going to be impacted by these details. 

Here is version 2:

Ouch! Even though I made the low-high range for stocks and bonds 50/50, the move to make low to high outcomes 95/5 for Bitcoin destroys that option. But if that is really more like the future likelihood of the outcome range for Bitcoin, perhaps stronger return possibilities on the high end are as well. So . . .

Here is version 3: 

I greatly increased the growth rate for Bitcoin using 38.6% annual growth. This isn't a randomly chosen number. This would correspond to a Bitcoin price of approximately $1,000,000, which some roughly project as a possible destination (who knows?). Regardless, stocks and bonds still look better. So let's do just two more for the sake of good order . . .

Here is version 4:

The only change here is to make the Bitcoin high possibility a little more likely moving it from 5% to 10%. And wow! Look how sensitive the difference result is to this change. Obviously this should come as no surprise as this whole thing is about Bitcoin's high end. I guess we could run just one more taking a look at a more moderate Bitcoin but also a less than total bust low-end for it.

Finally, here is version 5:

So, allowing for a Bitcoin future in any future (low end is 10% annual decline in value) gives us a fairly strong case for my gamble on some combination of Bitcoin and cash. 

Having gone through this process would I now change my mind? I will stick with 50/50 Bitcoin and cash. But that strongly suggests a question: how can I justify that choice given that I don't have an existing portfolio that looks anything like that. I am personally overwhelmingly "boring" with an almost all-stock portfolio with just a bit of crypto sprinkled in. 

At the risk of a slight digression into the post I keep promising this will not be, allow me to defend my rationality. This hypothetical is a forced gamble. My retirement investments are different in that regard. Those I can and do change periodically including both allocation as well as contribution. I get to guide those and adjust them. The hypothetical gift invested is a Ron Popeil "set it and forget it". Part of why I cannot invest more in Bitcoin (aside from it wisely not being a 401(k) option (looking right at you, Fidelity)) is that I likely cannot tolerate the variance. If I can get in and get out of it, I am as more likely to make the wrong in/out moves as the right ones. And that is before the tax-drag effect. 

Besides that, my investment reality is the retirement assets I actually do have. This hypothetical is a lottery ticket idea. If I win the lottery, my reality materially would change. I could afford more and different risk. In this sense and surprisingly, if the hypothetical was $10,000 in stocks and bonds versus Bitcoin and cash, the rational decision for me might have been stocks and bonds! Whereas the typical person would say, "that is too little to worry about the risk, let it ride!", I would counter, "I can't afford to take the the riskiness of Bitcoin at that magnitude ($10,000)." Along this one dimension, I would be right. 

I want exposure to big upsides. Unfortunately, these are difficult to find and doubly difficult to stick with. In a sense this thought experiment has revealed some of my own limitations on putting my money where my mind and heart and mouth are. 

-----

Only Tax Unprofitable Businesses

It is income tax time again. Instead of the usual rant, I have a creative alternative for you to ponder: Only taxing unprofitable businesses. That is if we are stuck on the illogical notion of taxing income per se at all. 

Loyal readers know that we shouldn't tax corporations' profits and that we should not tax incomes in general. Corporations are just fictional middlemen between owners/workers and customers. Taxing their profits or income is just an indirect (inefficient) way to tax those owners, workers, and customers without properly changing their behavior. It would be much, much better to tax businesses as they add value to the production of final goods and services through the use of capital and labor. All of this as being part of a larger scheme to tax resource use rather than resource creation. But I digress.

Let's assume we are going to tax businesses' incomes. How should we do this? 

I propose we reverse the concept and instead of taxing a share of the revenues minus expenses (when R > E) we tax a share of the expenses minus the revenues (when E > R). In other words we only tax unprofitable businesses. 

Here is the reason for the proposal. Revenues are a measure of the benefits that a business has provided. It is an estimate of what value they have brought to the world. Expenses are a measure of the costs they have taken. It is an estimate of what value they have destroyed in an attempt to add value through their business activity. If their expenses exceed their revenues in a given year, for that year at least they have detracted from society by virtue of their activity. 

Perhaps we would need a 3-year average profitability test or carryover provision of 50% of profits from year 1 to year 2 and 25% of profits from year 1 to year 3. I'm open to ideas here. That way we smooth out business cycle and idiosyncratic effects that might otherwise undesirably punish a business in a given year for circumstances beyond its control or for investments made that have long-run payoffs. But let's not lose sight of the goal: taxing firms that cannot turn a profit (i.e., don't add value to the world).

An instant objection is that this would make a startup business unduly expensive potentially stifling economic growth. Just a little understanding of how markets work invalidates this worry. Under this arrangement a tax on an annual net loss simply adds to the cost of capital. If the expected payback is sufficient, the investment will be made. Look at it this way: Is it better that resources are used with tax encouragement (deductibility) on the prospect of future economic value creation (future profitability that would then be taxed) or that resources are used while being taxed (a discouragement to frivolous investment)? The expected return is likely the same in either case*--it is just a matter of when taxes are collected and on whom the burden falls (taxing failure or taxing success). Given that taxes discourage that which is taxed, I know in principle which one I want bearing the burden.

Thus, this method has two key attributes to admire:

1. It punishes bad investments by taxing failure.
2. It creates an economic environment that increases the returns to good investments by not taxing success.

A side benefit is that it potentially cleans up accounting--a lot. A great deal of effort (resources) is put into doctoring the books so that a firm looks less profitable than they actually are. This leads to an additional benefit of disincentivizing expenditure that is not actually net profitable. Executive perks, luxury offices, unnecessary equipment, etc. now all carry a burden where once they earned a subsidy. 

Does this have a chance in the hell that is our tax code of coming to fruition? Of course not. And if it did, the later temptation to reverse course would be too great to assume future profits would be tax free. But it is a fun thought experiment that yields a new way to see the economic error in our current taxing ways.

*This is kind of a reverse Ricardian Equivalence whereby known taxes on losses have to be justified by expected profits in the future. As long as the tax rate on losses is not devastatingly high, in which case it would prevent any method of transferring future expected profits to the current day to finance a current tax burden, the tax that would be applied to future profits is instead realized before those profits are themselves realized. This assumption is no different than assuming current tax rates on profits are not so high as to devastate the ability for businesses to earn a profit in our current system. 

Sports Handicapping - The Next Iteration

For over 100 years we have created divisions and categories for athletic competition. The original segregation for purposes of ability matching was by sex. Obviously there were other ones based on prejudices like racial divisions and socioeconomic status. While there were likely strong confounders like desire to keep out of competition from superior athletes who happened to be of a different race, etc., this was not a purely ability-based separation. 

Beyond sex-based categories, there have been many more separations to better group like-to-like competitors. For example, there are designations with the most distinct being professional versus amateur. High schools and colleges normally compete in certain divisions. Within sports there are weight classes (boxing, wrestling, etc.) and tours and qualifiers (golf, tennis, etc.).

It seems to me the next step in this process is to fully segregate sports by proven and expected talent regardless of sex. 

The recent case of swimmer Lia Thomas brings this to the forefront, but it is something that has been around for a long time. It would come as no surprise that many historic female athletes we know of were somewhere on a spectrum of male-female that did not cut neatly between the traditional sex categories. It would further come as no surprise that there are a much larger number we never were given a chance to know of because they were not allowed/encouraged to compete. 

Two recent pieces on the topic of Lia Thomas are instructive: The first by Megan McArdle asks the question whether women’s sports should exist at all. The second by Suzy Weiss prods the awkward juxtaposition that this situation has created whereby those who would/"should" be expected to support a trans athlete are now those arguably harmed by it.

These are undoubtedly rare cases, but we cannot dismiss them unless we are willing to blatantly exclude a meaningful group of potential competitors from participation for sake of forcing clear, hard lines where shades of grey actually prevail. Keep in mind that these edge cases are critical because those in question are generally vying for first place in the female category. If we want a world where we have two definitions of greatness, the actual fastest, strongest, best (almost always males) and the next group excluding the first, then we need to figure out where and how to draw that line between the two. 

Trying to draw the line on the basis of a single metric like testosterone won't get us there as this is multi-causal--there is no more a single athlete gene as there is an intelligence gene. Hence, sex phenotype works almost always until it doesn't either because of genetic edge cases or the more controversial transition cases. The latter is the news of the day and the very interesting dilemma we now face where reconciling two forms of inclusionary fairness have come into conflict. The former is how we know this isn't so easy as to say you can be a member of the club if you have always been a member of the club.

So I propose the thought experiment of self determination (set and test and rethink rules and norms at the most local level practicable) and separation by capability regardless of sex/gender (consider eligibility based purely on ability in the specific sport or event). 

Obviously this is change, which to sports fans specifically like humans in general is bad, very, very bad. But before you reject the proposal out of hand consider two points: For one, are we sure we want to have female-only competitions? Keep in mind this excludes a lot of males from enjoying a competitive forum with status. For another, are we sure males will want to compete with females? The stronger you think the answer to the first question is or should be "yes", the weaker is the concern implied by the second.  

Would there be complications as well as manipulations including out-right fraud? In sports?!? Of course there will be. This is nothing new. But while it creates an opportunity for scheming, it forces a harder look at the processes we use to sort and match competitions. This should result in better outcomes in the long term. Letting a hundred flowers bloom via open-minded exploration is the key to figuring out a new, stable equilibrium. If you doubt we can be open-minded about this exploration, you are totally ignoring why this is now an issue in the first place.

Beyond the risk of bad actors poisoning the pool of competition, the much bigger potential downside is that the disruptions will end women’s sports and perhaps even some men's divisions as we know them. This could be an outcome that means many kids and even adults don’t have a forum in which to play the sport they love and otherwise excel at even as it grants new opportunities to others in those forums (a point raised above). 

Yet again we are faced with the tough reality of tradeoffs. 

By Noske, J.D. / Anefo

Economic Sanctions - Failure in Theory and Practice

Imagine you are trying to change someone's mind. How would you go about it? What techniques would be effective? 

Imagine now you are trying to change a group of people's minds. The difficulty multiplies. 

Now imagine you are trying to get a group of people to change their behavior or worse yet to get them to make active changes in their own status quo implementing changes that put them at high risk or involve great hardship. 

For instance, suppose you are strongly opposed to abortion. You believe it is morally wrong--it is the taking of a human life. Suppose you took political power and while you could not yet overturn the legalization of abortion, you could impose sanctions on those who engage or enable it. To bring about change you would like to cut off access to credit for those who have been a customer of or worked for an abortion clinic. This can't be done, though, because you cannot identify those individuals nor can you legally target them. But you do find a technicality in the law allowing you to target an area that has an abortion clinic. All those who live and work in that area suddenly cannot access credit or the banking system. This is crippling.* 

Do you think this would be constructive to your ultimate cause? Think of those marginal or median voters. While they don't have a strongly-held position on abortion, they are not just caught in this crossfire--they are the target. You are aiming to harm them so as to bring about change. At the very least you are willingly harming them because the shotgun approach you are limited to forces the collateral damage.

If that is too politically charged for you, consider this. You are the mayor of Shelbyville. One of the things that really irks you is how many of your citizens root for the nearby town of Springfield's baseball team, the Isotopes. This isn't just a minor annoyance. Your administration is trying to support the local team and economy by building a huge new stadium complex for the home team. The lack of hometown support, though, is making this quite difficult. So what to do? You institute a blackout zone through an indirect tax. All broadcasters are subject to the onerous tax, $10,000/minute of broadcasting, for any broadcast of a sporting event of a team located more than 20 miles from the Shelbyville town center. Viola, problem solved, right? 

The desire to have people change what sports team they root for is not going to be solved by force. Many people who never watched a single game before are likely to take up the cause against you. 

Want to increase vaccine acceptance and injection rates? Well, you could . . . oh, we've been doing that experiment. I don't think it moved many needles [pun intended].

We can extend this hypothetical to all kinds of causes: disuse of fossil fuels, antipornography, zipper merging, etc.

The result is consistently and predictably emboldened and extended resistance. It is not human nature to succumb to external pressure. Any parent knows reverse psychology and distraction are the keys to getting a young child to change course. Tell them they can't, and the deviant battle begins. 

This thought experiment alludes to why economic sanctions applied by governments so often fail to achieve their desired ends. 

Setting aside all of the very important concerns about moral authority and moral culpability given who is actually harmed by sanctions, consider just if they should work to begin with. Stated differently, why do they so often completely fail? The do so because that's not how people change or how they are made to change.

So why do we do it? Partially it is action bias, the fallacy of . . . something must be done . . . this is something . . . therefore, do it!

Perhaps more importantly it relies on social desirability bias. It seems like a strategy that is more humane than active warfare. However, it is arguably much less noble and less morally defensible as it targets noncombatants attempting to turn them into double agents. In an age of high-precision bombs, economic sanctions are carpet bombing combined with landmines. 

*Arguably the linked (trucker convoy and Canada's emergency response to it) is an example of sanctions that worked! But only in the narrow sense of getting the result of disbanding the convoy. I am not sure it won any hearts and minds on net. Rather I think it turned a lot of people against the government of Canada. It also was an arguably more harmful action than simple police action would have been. The greater harm is in the threat and concern of it being used going forward as a regular tool. In this way the actions of the Canadian government are not analogous to economic sanctions but rather analogous to escalating hot-war conflict.

Resistance to Coercion versus Fighting for Freedom - Dimension Analysis

What do you do when confronted with someone wanting to have you do something you don't want to do? In fewer words, how do you respond to oppositional, hostile force? 

Of course, the force in question is probably a key to your response. Is someone trying to manipulate you into taking an unfair deal, or is someone trying to steal your car, or is someone threatening your life or way of life? Importantly your alternatives matter greatly as well. Can you delay, demur, deflect? Can you exit the situation with grace or perhaps with just some slight shame? Must you submit or resist perhaps with violence?

Let's focus on serious conflict where the stakes are relatively high if not exceptionally high. And in doing so we will think about situations from the standpoint of the victim or person under threat/attack. Therefore, this will be about degrees of losing where the best case outcome is the status quo.

I see the options being somewhere between resistance to coercion and fighting for freedom. In a sense this is passive versus active or reactive versus proactive. Take the recent actions in Ukraine with Russia threatening and then attacking. As I write on February 26, 2022, Russia has invaded and is actively attacking various areas within Ukraine including the capital city Kyiv. It is very ugly, as war always is, and the initial news is likely sketchy and subject to revision. 

That said, we can assume some basic facts to explore the implications. The Ukrainian government has not been friendly to Russia. This is a government the U.S. helped install and support going back to Obama administration. Long before that under the Clinton administration and then continuing into G.W. Bush's administration were numerous political moves and positioning to expand NATO including potentially adding Ukraine at some future date. Regardless of the likelihood of that officially happening, the support for Ukraine from NATO and its member countries as well as the outright enlargement of NATO to include former eastern-block nations in 1999, 2004, 2009, 2017, and 2020 have presented an expanding defensive/threatening position vis-a-via Russia. 

This is not an apology piece for Russia or especially Putin. It does potentially give us some understanding for what Putin is doing and how he at least tries to defend it. The Russian government is a threat to its neighbors and NATO interests. But from the standpoint of Russia, the same can be said of NATO and actions the U.S. in particular has pursued. What is interesting to me is how the perspective of both sides can be used in this dimension analysis.

As Russia engages in violent acts harming and killing people, one could label it as "fighting for freedom"--just not in the noble sense we typically use that phraseology. They have turned from resistance to coercion as an option to actively striking out (I very deliberately don't say "striking back" since Russia has not been attacked). 

Similarly the Ukrainian position has been resistance to coercion and especially the threat of future coercion by building an alliance with the West. Was this the only or best way to resist coercion? I would say probably not. Rather building ties economically and politically with Russia might have been a better strategy. In this I envision taking on an active Swiss-like neutrality while developing economic co-dependence through trade. NATO and the U.S. itself might have been much wiser to not expand NATO nor threaten to do so. Perhaps NATO should have deescalated following the fall of the Soviet Union in stages negotiating further and further withdrawal and peace leading potentially to eventually dissolving NATO altogether. This is my view, but this is not aimed at being an advocacy post nor a criticism. Rather I want to suggest that in light of these alternatives the geopolitical moves in Ukraine were in actuality fighting for freedom disguised as resistance.

Consider an analogy: A man and his family live and work in a dangerous community subject to high violent crime rates. While moving would be a great solution in theory, exit is not practicable for them. Whether they are correct or not, they feel trapped. Recently they have noticed that there are increasing incidences of violence in places they must frequent like the local grocery store and their workplace. So the man decides to start carrying a gun. Because he lives in a state that allows open carry, he can make visible his choice. [NB: This is not a post about the 2nd amendment, etc.] 

Carrying a gun in this case could be thought of as resistance to coercion, but it also can be escalatory. The thugs in the neighborhood also feel trapped--they can't take their violent ways to another place. This is where they "work". So the thugs now consider their options. They could increase their own muscle/firepower. They could target others who look less capable of defending themselves. They might even consider tactics that amount to negotiating territory and room to operate like co-opting the shopkeeper or threatening more while accepting less. 

But carrying a gun could also be fighting for freedom. The man is taking a stand and putting himself in harms way to the degree this act is escalatory or empowers him to take more risk. As an alternative or complement, he could advocate for more policing or security guards. If he didn't have an open-carry option, this advocacy might actually be more difficult if it puts him at greater risk when he carries a gun. Even if he can carry a concealed gun legally, the advocacy still pushes back on his own fighting for freedom option forcing him to be much more passive.

Sturdy doors with good locks, bars on windows, and burglar alarms are tools of coercion resistance for this family. But so too are guns, knives, big dogs, and baseball bats. The latter can easily become the tools of freedom fighting or outright aggression. The former might not have direct offensive capabilities, but they do invite suspicion as well as stronger opposition when opposition does come knocking. You're probably better off bringing no gun to a gun fight than bringing an unloaded gun and no ammo. 

The point I'd like to make with the analogy is that it is hard to see where the lines are between what is resistance and what is fighting. Active resistance (e.g., carrying a gun) can be a threat, and that can be good, justifiable, and peacekeeping. It can also enable a fight where flight would otherwise be the better course of valor.

While it might be socially desirable to align with fighting for freedom, this positioning is antagonistic with unintended consequences. While it might feel noble to claim the mantle of resistance to coercion, this can be a provocative self-deception. Think how many so-called freedom fighters were either defending a brutal regime or whose actions lead to tyranny. Consider how often a resistance movement became offensive destruction. Once put into motion, forces opposing change or pursing change can be very hard to control.

George Washington fought for freedom, but so supposedly did Che Guevara. Washington's legacy was not a fight for complete freedom (see slavery), but I think his value alignment was much, much closer to virtuous than was Che's. It is hard to know where freedom fighters might lead us.

There is no left or right monopoly with either resistance or fighting. Easily I can think of resistance to coercion as being a conservative position as when something is threatening the status quo or tradition. I can also see how people could decide to resist being victimized by traditional norms--for example, racism, homophobia, etc. Fighting for freedom is on the other side of the axis where "Hell no! We won't go!" becomes "Come and take it." with no natural political connotations.

Neither motives nor outcomes can be determined based on which of these strategies is employed. Both methods can have a claim on the moral high ground as well as disastrous pitfalls if not evil ulterior motives. The non-aggression principle (NAP), a founding concept of libertarianism and classical liberal philosophy, implies strong constraints on both ends of this spectrum lest we become that which we seek to avoid. 

Should Tipping Be My Only Charity?

I'm considering going a year where my only form of charity will be excess tipping--an amount well over and above what I would otherwise give. Before you dismiss this out of hand, consider the problem of charity  My ability to connect with truly effective altruism is very limited even if I religiously adhere to the formal EA movement or even if I completely reject the EA network. What I can do is reward good work and people working in general through gratuity. 

In truth I really probably can't make it my only form of charity from a practical standpoint. There are just too many obligations I have to traditional charity (e.g., my church donations, the United Way contributions I make through work, et al.). One could certainly argue the merits of these including how much is charity on my part versus quid pro quo where the quo is social desirability bias, virtue signaling, tax benefits (really just a subsidy for giving), and non-pecuniary benefits (e.g., two days of extra vacation for a continued minimum United Way donation). Nevertheless, I could substantially reduce all traditional and otherwise forms of charitable giving including donations of my time with excess tipping as the substitute. 

Let's consider some rough math on what this might mean. Hypothetically assume my desired annual charitable giving through this experiment to be $10,000. A point of consideration would be if the tipping would be limited to very traditional tipping situations, namely dining, valet, room service, doorman, etc., or if I would extend this to areas like occasional household services, namely plumbers, electricians, furniture movers, etc. One might argue that everyone should be tipped. However, to keep the math easy, I'll limit it to waitstaff in dining. 

Let's further suppose I dine out an average of 7 times a week at a moderate expense, 2 times a week at high expense, and 1 time per four weeks at a very high expense. The kids are with me for the moderate and high expense meals while it is just the wife and I for the very high expense meal, which are the following on average (with just the standard tip of 15%): $50, $100, $300. Per week that becomes $250 ($50x5) + $100 ($100x1) + $75 ($300x1/4) = $425/week or $22,100/year. Of this about $2,883 would be standard 15% tipping ($22,100 - $22,100/1.15)). To "donate" an extra $10,000 through excess tipping through the year, I would be making an implied 52% excess tip ($10,000/$19,217 [the amount spent before standard tip]). Stated another way, the increase is about 45% above the old levels ($10,000/22,100-1).*

Breaking this down by meal type we have a $50 meal becoming about $73, a $100 becoming about $145, and a $300 becoming about $436. Weekly expenses here have gone up $192 ($425 becoming $617). And the annual checks out where $22,100 is now $32,100. 

These would just be averages. I would hold out the ability to vary the amount to zero excess tip to a lot more excess tip based on maybe quality of service or perceived need. Also, I would do this for at least all traditional for-tip service providers. The fact that this would demand a continually updated Excel spreadsheet lending itself to trend and projection analysis along with graphs is indeed a very nice quid pro quo for me.

Some of the pros to this approach are:

1. I have a lot of relevant information close at hand since I witnessed directly the service provided.
2. I know pretty well exactly who it is going to even if there is tip sharing.
3. Related to the two points above, I can weight the charitable gift commensurate with the perceived level of deservedness provided I measure that directly proportional to the service performed. If I want to base it on need, this becomes a con (see below).
4. I am rewarding those who are doing something to improve their own situation as well as my life and others.

The cons are:

1. I am not able to see much into the level of need so as to increase my giving as a result.
2. Related to the first con, I would not be benefiting those who cannot work--very likely a group in much more acute need. However, this is a con of almost all charity as figuring this out is very difficult. My method here at least minimizes the problem of enablement--whereby charitable giving subsidizes and insulates people from the cost of bad decisions and rewards poor work ethic. Moreover, it is actually likely many of the people I would be excess tipping would be closer to people in need so as to aid them. No guarantee they will, but there is no guarantee some other method would be much better.
3. I would most likely be subject to bias in my excess tipping whether it be a subconscious prejudice (e.g., tipping attractive waitstaff or those who somehow connect to me in a way that is probably frivolous like having an interesting accent) or outright mistaken heuristics (e.g., thinking that someone working at an expensive restaurant is less deserving that someone working at a cheap diner).
4. If I am not meticulous about tracking the excess tip, I easily could fall so far behind so as to not meet the donation goal--I would be hesitant to tip someone $2,000 at an end-of-year meal. 
5. I might reduce my exposure to tipping even if inadvertently as the pain of seeing the substantially increased cost could weigh on my decision making. 
6. It might greatly disrupt my social group or the dynamic between me and the places I frequent. This is a big break with norms subject to misunderstanding and bad/unintended signaling. 
7. I may be underappreciating how it will affect me given that this attempt at more direct action on my part will not likely have noticeable results. I might become jaded for bad reasons.
8. I could have a net negative effect on the recipients subsidizing less optimal outcomes for them or hampering their natural progression to bigger and better things. The out of work actor working as a waiter might be cliché, but there is something to it. What if I unintentionally convince a young person to turn down an internship for mistaken hope that there are enough tippers like me out there making waiting tables their highest and best outcome? Did I say enough about how charity is hard?

Countering this longer list of cons, there are added benefits potentially. One is that this might become habit forming long term--when I return to charitable giving, I might continue excess tipping to some degree. Another is that it could be contagious as it would be as public as any giving I typically would engage in. One virtue of it is that it is a more generous act all things equal since I would not be getting a tax benefit. So rather than having other taxpayers subsidize my charitable choices, I would fully internalize them by going it alone.

If I end up doing this, I'll report back on how it worked in the wild.

*Notice I am ignoring the fact that this tipping is calculated on top of the sales tax--I gave up the ghost on that argument long ago for practicality sake. I don't like it, but the norm seems to be and the easier calculation certainly is to tip on the total after tax.

Losers Don't Pay Taxes

This is just a rambling thought experiment. Feel free to ignore as it probably has vast shortcomings I have not considered in the admittedly short amount of time I have spent on it.

What if we instituted a rule via Constitutional amendment that the voters for a losing Presidential candidate in the general election do not have to pay federal income taxes for the term of office for which their loser was running? Suppose further that this amendment was so firmly established that there would be no question of it being followed (unlike so much of the Constitution) and no question of it being permanent for the foreseeable future.

I can think of lots and lots of problems with this as I'm sure you can too. A chief one is that Congress and not the executive branch determines taxes. Not to sideline those, but let's jump straight into some game theory.

What might some implications be?

• Any rational potential voter would probably chose to vote given the prospect of tax avoidance.
• Those votes would likely gravitate at first to candidates who looked very unlikely to win.
• This seems to help third parties get on to ballots and garner significant vote share.
• Knowing that everyone else is pursuing this strategy, voters likely would be reluctant to throw their vote for scary candidates. Even if they realize their vote will not affect the outcome of the election (spoiler alert: your vote doesn't matter mathematically), if presented with two similar candidates where one was slightly less objectionable than the other but both rather unlikely to win, the better of the two would tend to get the vote.
• Candidates would know all this as well. That should push them to be slightly more objectionable at the margin. However, power still matters and is desired. So they would also have an incentive to try to win if they thought they could win. Now what would make them very desirable to getting votes so as to win? hmmm? Promises for very low taxes of course.
• Could they or would they promise no taxes? I think this is unlikely as everyone knows that there have to be some taxes if there is to be some government spending. What about funding spending exclusively through debt, which is promises of either future taxes or future inflation? While this could be a workaround, it would have problems. The threat of inflation harms current voters as once inflation is suspected and to the degree it is suspected, it arrives immediately, or at least eventually. Future taxes might come soon enough to affect current voters and will likely affect their offspring, a group for which voters care.
• This is starting to sound like a powerful tool to restrain government. Candidates are encouraged to campaign on small government so as to allow for low taxes. Voters are encouraged to support candidates who pursue small government. It also seems to promote experimentation as candidates are encouraged to be a bit wacky but not too wacky for fear (by voters) that they would actually get elected, and voters are incentivized to vote for marginally more wacky candidates (more than current but less than the wackiest). Here wacky means stuff like: drug legalization, troop withdrawal/de-escalation, privatization, deregulation, etc. Consider me wacky, btw.
• I would fear it would degenerate into some suboptimal game, though, like where we all pretend to pursue small government and then don't actually do it leading to a need for higher future taxes. This would create a ratchet effect making the next election a competition between greater liars offering lesser improvements. Another BIG problem relates to the issue raised and promptly ignored at the top: Congress. Would Congress be emboldened to spend more? An opposing-party Congress as compared to the President seems likely to. This could not be fixed by changing the amendment to instead be a voter for a losing party in the next Congress since we don't vote for one Congressional position. Would the rule need to be it applies only to straight-party voters? If we went down that road, perhaps we would need another amendment limiting all elections to just two parties--the default situation we have now anyway. Lock in the Democrats and Republicans granting them the oligopoly of two. This might work making them compete along the tax dimension axis almost exclusively with all other policy subservient to it. Now we might be back to strong incentives for small government. Yet another suboptimal result might be one party in each election is always aiming to be the losing party and the other party tacitly agrees to be the winning party. Would this still give a small-government outcome? Maybe. Voters can switch who they vote for, but if there is strong lock-in on policy, they may not be so quick to change their votes. Where does social desirability bias and virtue signaling come it?
• Who knows? I do like the integrity of only the voters who supported people in power have to pay for the actions of those people. 

Introducing Dimension Analysis

Something I've been thinking about for a long while with every intention of exploring in blog format is what I term Dimension Analysis - an exploration into various concepts that can be placed upon a continuum or axis. 

It is somewhat simply a thought exercise limited to the topic or concept under consideration. But it can also be a more in-depth way of seeing things in a new light including combining distinct ideas and concepts.

I have a lot of things I would like to compare in this manner and have done a bit of this previously. Some ideas I expect to be covering would be:

Motives: Status versus Profit - What does one seek more of? When is one more dominant or influential than the other? Where are the tradeoffs?

Archivists versus Free Spirits - Sometimes we seek to record our lives into personal (if not public ledgers) while other times we are minimalistic nomads. To label people hoarders would be uncharitable and not the essence of what I'm driving at. Librarian isn't exactly correct either. On the other side think more live-for-today, focus on what is important rather than careless and thoughtless.

Editors versus Curators - One has the disposition of fixing through correction while the other seeks improvement by selection and promotion.

Puzzles versus Mysteries - The solvable realm compared to the unknowns and unknowables.

Engineers versus Epistemologists - Action upon theory versus theory for theory's sake. 

Philosophers versus Mechanics - Related to the prior, this was my first example I stumbled upon for this whole dimensions analysis thing. Shades of grey versus black and white. Two very different approaches or even definitions of problem solving.

Leaders: Managers versus Visionaries - Some are (or seek to be or need to be) great tacticians while some are (same caveat) great strategists. Plan execution versus plan design.

Sculptors versus Appraisers - Stolen from Caplan's The Case Against Education, both of these have the opportunity to raise or at least transform the value of a piece of stone. But they come at it from very different angles.

Honesty versus Pleasantry - Are you telling me what I need to hear or what I want to hear? Do I want to hear what I need to hear, or do I wish to hear what I'd like to hear? Best practices versus social desirability bias.

These are but a smidgeon of comparisons I would like to explore. My ambition has exceeded my ability to get to this topic so far. Perhaps getting it posted will spur me along. That inspires another dimension: Goals versus Desires. In all cases I hope to not draw upon distinctions without differences, but I'm sure there will be a degree of that error made.

I've Got Bad News For You

Your house is going to catch fire and burn down completely in about 10 years from today give or take a month. The good news is that no one will be injured in this accident and nothing substantially bad will happen to your house between now and then. No fire, no flood, no tornado, no termites. 

The further bad news is that you are now positively uninsurable. The further good news is you no longer need insurance. Insurance is about transferring risk; not transferring expense. What you now need is a redirection of resources to prudently prepare for the coming loss. 

Similarly, worries about a collapse in health insurance markets because of genetic information breakthroughs are firstly fairly unrealistic in their assumption of complete elimination of uncertainty and secondly seriously misguided because of our misguided understanding of the purpose of insurance. 

We are confusing the mechanical result of insurance being used (compensation goes to harmed parties from unharmed parties via an insurer middleman) and the conceptual purpose for insurance existence (the transfer of a risk from those sensitive to it those better equipped to handle it including across time). 

Suppose we were in a world where health risks were as predictable as fire "risk" was in the analogy. Would this mean those with pre-existing conditions would be left to suffer? Of course not. As John Cochrane has been saying for a long time, this problem is solved by health-status insurance. 

Basically, give those with known high risks money equal to the expected value (cost) of future expenses. If the future costs are a sum certain, then there is no role for insurance (a known liability implies buying a bond). A strict parallel between the house fire and pre-existing conditions would mean no doubt about the cost ("...nothing substantially bad will happen to your house between now and then."). That is not realistic even if we have near perfect information about what pre-existing conditions foretold. 

The world we will live in even if we get really, really good at matching pre-existing conditions to future health problems will be one with some variance and uncertainty. There will still be a risk of accidental death before the predicted health problems develop along with hopefully great medical and economic advances that make treatments better and less expensive.

If we feel we should help the future victim of house fire (pre-existing conditions), we through government and private charity can give them funds to compensate for the loss. We cannot give them insurance unless and only to the degree there is uncertainty.

P.S. Perhaps doctors and patients should just secede from the broken insurance market? Count me in.

P.P.S. If you want to test your understanding, think about how a typical pregnancy is not a good candidate for insurance while a rattlesnake bite is.

P.P.P.S. I just renewed my personal homeowners policies on Casa Shazam, which gave me reason to post this thought experiment.