The Creed of Go

Some never travel 
staying close to where they start.
Others move along
yet they too never depart.

Journey without uncertainty
is a voyage forgone.
To go but not be ever lost
leaves the traveler yon.

The true explorer a nomad,
he lets wandering make wonder.
Letting go all the familiar,
sights he seeks, limits asunder.

Destinations are unknown until
retrospective insight.
Setting forth despite trepidation 
into a foreign night.

There are also some good ones. The second group fails not on pure fallacy. Rather, these work on their face at least, and in some cases they rise to a level deserving strong response.

One response in either case is that an argument might be assuming too much. That is the case for capital-C “Culture” as a catchall explanation for differences and as a premise fundamental to the argument being made.

Alex Nowrasteh makes the case that culture is a crutch. His subtitle says it all, “How lazy social scientists and commentators use the c-word to avoid doing their jobs.”

Culture is human behavior that is socially learned and transmitted rather than genetically inherited or individually discovered. In Substack and online debates, culture means whatever the person invoking it needs it to mean. Values. Beliefs. Norms. Attitudes. Customs. Work ethic. Family structure. Trust. Time preference. Cuisine. Music. When someone says “culture explains X,” they’re gesturing at a black box the size of human civilization and calling the gesture a theory.

Keep that definition of culture in mind as I explain how unsatisfying using the word “culture” is as an explanation. You notice a spike in unemployment. Curious what could be causing it, you ask your economist friend why unemployment is rising. He says it’s because of “the economy” and then sits back as if he’s explained something when he has done nothing of the sort. That’s how everybody sounds to me when they say that culture explains a behavior or outcome.

. . .

If you’re going to claim that culture has an effect, you should be able to do four things. First, pinpoint exactly what cultural characteristic you mean. Don’t be vague, be specific by describing the type of behavior. Second, prove that cultural behavior actually exists as a measurable trait. Don’t rely on stereotypes, do the hard work. Third, demonstrate that the cultural behavior differs meaningfully across the groups being compared. Wow, that culture likes food a lot. Which culture doesn’t? Fourth, rule out that the real cultural trait isn’t caused by an exogenous economic force like high real estate prices, rising wages, or different institutions that incentivize behavior. Almost nobody who invokes culture does any of these four things. Culture is endogenous to everything. That’s why you have to do the work to isolate it. That’s also why almost nobody bothers.

Here is the heart of the problem:

Culture is endogenous to everything. Claiming culture causes an outcome without first ruling out that the outcome’s causes also produced the culture is circular reasoning. Every cultural explanation must first survive a price, incentive, and institutional audit. Few of them do, but those that do are extraordinary findings, which is perhaps another explanation why so many claim it. Nobody would let economists get away with explaining a recession of high unemployment with the explanation, “It’s the economy.” We shouldn’t let others get away with the equally lazy non-explanation of “it’s the culture.”

As he says in his conclusion:

The culture-as-explanation discourse is largely anti-intellectual. These are faux explanations for social behavior and outcomes that have real explanations. Think harder. Read the literature on a topic yourself or ask AI to search for you. Other researchers have probably already written about the issue you claim is just caused by culture. Before you write the word “culture” in a causal sentence, search for the price. Search for the institution. Investigate the incentives. Search for the constraints. If you exhaust those and culture is still standing, then maybe you’ve found something. But you probably just didn’t look hard enough.

Throwing up your hands claiming “it’s cultural differences” is another way of saying “I don’t know!” Watch out for this dodge and beware falling for its slight of hand.

Next, Bryan Caplan offers two other responses to weak and strong arguments. Both come in the form of live debates.

The first is from the SoHo Forum where Caplan debated Simon Hankinson on the resolution: “Immigration and Customs Enforcement (ICE) should complete its mandate to deport all illegal aliens currently residing in the United States.”

From his opening statement:

While I’ve done many debates on immigration, this is the first time that you can figure out the correct side without knowing anything about immigration. The resolution states: “Immigration and Customs Enforcement (ICE) should complete its mandate to deport all illegal aliens currently residing in the United States” — and all means all. Which is a crazy view about the enforcement of even the best law imaginable. If we were debating “The NYPD should complete its mandate to imprison all murderers currently residing in New York City,” every person here should still vote nay.

How can I say such a thing? This is the basic economics of crime. Solving and prosecuting all murders would be astronomically expensive. Some murders virtually solve themselves, others require the proverbial 48 hours, others require years of police work, and others might remain unsolved even if the entire NYPD indefinitely focused 100% of its attention on the crime. About 70% of murders committed in NYC currently end in a conviction, but the NYPD couldn’t get to 100% even if they had 100% of the city’s GDP to deploy.

Astronomical expense aside, however, stricter enforcement means more false positives. The easiest way to punish every murderer is to lower the burden of proof. But the lower the burden, the more innocent people you end up punishing.

. . .

Deporting all illegal aliens currently residing in the United States has exactly the same insuperable problems. The cost would be astronomically high, probably exceeding total GDP because the goal is impossible to achieve. And even if it could be achieved, there would be massive collateral damage along the way. You can also think about it like this: To deport every illegal alien, you would have to deport everyone with a 50%, a 10%, or even a 1% chance of being an illegal alien. Otherwise, you will miss some.

Once you accept these two obvious-once-you-think-about-them facts, you really are obliged to vote nay. You’re obliged to vote for me even if you think that an illegal immigrant is as bad as a murderer! But since I have ten minutes left, I’m going to add a bunch of extra arguments to reinforce the conclusion. And along the way, I’m going to tell you exactly what I really think.

. . .

[A] law that forbids a person from living in the United States and having a job is, at minimum, mildly stupid. Why should anyone on Earth need permission from the U.S. government to wash dishes, clean toilets, or take care of kids? Work is good. Production is good. No one should need the permission of any government to work, to produce. If you think it’s OK to break a law against driving 56 mph in the desert, you should think that it’s OK to break a law against mowing grass for money.

On further reflection, though, laws against foreigners living and working here without government permission are worse than mildly stupid. Even unreasonably strict speed limits are only a minor inconvenience. Immigration laws, in contrast, are a terrible burden on everyone without the good fortune to be born a citizen of the First World. Standard estimates say that moving from the Third World to the First World multiplies migrants’ incomes by a factor of 5x, 10x, or 15x. The flip side is that successfully enforcing immigration laws divides migrants’ incomes by a factor of 5x, 10x, or 15x. That is a terrible thing to do to another human being just for doing a normal job without proper paperwork. Imagine if the U.S. government passed a law that divided your income by a factor of 10. It would be a massive harm, and almost everyone — not just libertarians — would demonize not people who broke this law, but those who enforced it.

. . .

What should be done about illegal immigration? Simple: We should make it legal. A massive apology would also be nice, but I don’t ask for miracles. What about all of the problems caused by mass immigration? They’re minor compared to the massive gains of moving hundreds of millions of workers from countries where their productivity is low to countries where it is high. If you’re still worried, then adopt the massively successful immigration policies of countries like the United Arab Emirates, almost 90% foreign-born, which welcomes immigrants of all skill levels to live and work, but not to receive government benefits or participate in politics.

Caplan was brilliant in this debate despite “losing” (I’m certain the audience was stacked). The fallacy-filled arguments by the opponent demonstrated that the anti-immigration side is filled with emotion and devoid of reason or morality.

I do think the opponent, Hankinson, is a reasonable person who could be constructive in a less-absolutist position that he otherwise agreed to take. To wit: During the debate they agreed they could come up with a sensible compromise policy if selected as co-dictators tasked with solving the problem. Unfortunately, as I’m sure Caplan would agree, this is because any compromise would be preferable to the situation we have now.

Still, the crux of the case against immigration relies on emotion-filled hypotheticals that are highly implausible. The task is mighty as I’ve pointed out before.

The second is from his UATX debate with Garett Jones, a truly strong opponent with strong arguments.

From Caplan’s opening statement in that debate:

Estimated magnitude: If everyone on Earth moves to the United States, average IQ falls from 98 to 87, reducing U.S. GDP per-capita by 49%. But on closer examination, this does not show that the immigration is a net negative! On these assumptions, total Gross World Product still rises by 81%, roughly the same as the Clemens calculation that open borders would double the production of humanity.

What would this mean in practice? Specialization and trade between higher- and lower-IQ people. Higher-IQ people — disproportionately current citizens of the First World — would specialize in high-skilled work, especially management and entrepreneurship. Lower-IQ people — disproportionately current citizens of the Third World — would specialize in low-skilled work, especially basic services. This is the same logic as any well-run business: Google doesn’t hire college grads as janitors — but it has plenty of janitors.

. . .

There’s no time to respond to the countless other complaints about immigration, but here’s my general approach. I dismiss all vivid anecdotes as demagogic distractions. If you hear a story so juicy you’re dying to repeat it to “prove your point,” don’t. In contrast, if you’ve got ugly numbers, I’m happy to hear them. But before we act on these numbers, we should always remember the truly massive economic gains of immigration. Immigrant crime, welfare dependence, and so on are sometimes notable problems, but they’re rounding errors compared to the gains. There’s more to life than GDP? Sure, but GDP and almost everything else good go hand in hand.

Both debates are highly recommended. They offer the best in response to the worst and best arguments made by immigration opponents.

Substacks mentioned:

Laissez-Faire, Laissez-Passer w/ Alex Nowrasteh & David Bier

The Culture Crutch

I bumped into a conservative acquaintance in the green room at Fox News several years ago. He was obsessed with falling fertility. Knowing that I worked on immigration policy, he said that immigrants assimilate too rapidly to America’s “low-fertility culture” and we have to find a way to slow assimilation to boost the birthrate. I disagreed. “They’re no…

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3 months ago · 122 likes · 25 comments · Alex Nowrasteh

Bet On It

Immigration Laws Are Made to Be Broken

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23 days ago · 56 likes · 36 comments · Bryan Caplan

Let’s start down this path with a video.

In this interview by John Stossel, Don Boudreaux succinctly explains the case for economic freedom. It is a very accessible explainer inviting those interested to learn even more from Boudreaux's recent book with Phil Gramm, The Triumph of Economic Freedom. Send this video to those in your life confused by the current economic-political landscape.

Now let’s go a little deeper touching on something that shallow critics of economics love to latch on to—the idea that economics rests on a bad assumption of a rational actor.

Josh Hendrickson demonstrates in his post “Panhandlers and Price Theory” that this is a mistaken accusation. Using panhandling and dovetailing off of his other recent posts on drug use he provides a great example of why price theory does not rely on the critic’s strawman version of rational actor. Rationality emerges from even “irrational” people. Chicago market economics for the win!

I also like examining topics like this precisely because they highlight what price theory is and is not. Price theory is a framework for understanding, explaining, and predicting human behavior. Price theory is not a theory of mind.

. . .

Suppose that you wanted to test this idea that, all else equal, competition tends to equalize rates of return on particular types of investments or activities. How could you do it?

. . .

For example, think of a situation in which there is (a) free entry, but (b) some reason to believe that the competitive model might not apply. If one finds evidence in favor of the competitive model under those conditions, then that is pretty strong evidence in support of the model.

One such example is that of panhandlers. It seems pretty clear that there are places in which panhandling is perfectly legal and there is no restriction on panhandling. The absence of those restrictions suggests that anyone can show up and panhandle. As a result, if panhandling turns out to be quite lucrative, we would expect to see people switch to panhandling from some alternative use of their time. In fact, competition in panhandling should drive down the rate of return on panhandling until it reaches the opportunity cost of the marginal panhandler.

. . .

Setting aside whether competition equalizes rates of return across different stations, one simple test would be to see if panhandlers follow basic economics incentives. For example, one would expect that there would be more panhandlers at the busier stations and the friendlier stations. One would also expect that there would be more panhandlers where the barriers to entry are low, such as at stations where there is a shuttle stop for the homeless nearby.

This is precisely what [researchers Peter Leeson, August Hardy, and Paola Suarez in their recent paper] find for the full sample.

He concludes:

Critics of economics generally, and price theory in particular, tend to argue that we assume that everyone is a hyper-maximizer, only concerned with self-interest and that the world is more complicated than that. People aren’t walking around all day solving utility- and profit-maximizing problems in their head. Not everyone is a rational calculator.

I think that we can reject these criticisms. I am not saying that we should reject them on the grounds that they are false characterizations of the real world, but rather that they are a false characterization of price theory. As I wrote in my previous posts, price theory is about providing rational frameworks to understand, explain, and predict human behavior. It is about rational frameworks, not rational people.

Going deeper still I share two from Scott Sumner. In the first post he explores the usefulness of tautologies examining six.

I don’t know how many times I’ve heard the news media attribute a sharply decline in stock market indices to a “selling wave” hitting Wall Street: The Dow fell 800 points as investors sold 15.4 billion shares of stock. Yes, but investors also purchased 15.4 billion shares of stock.

At one time, the stock market was closed at night and yet market indices often changed dramatically, even without a single share being traded. A hundred years ago, the Dow might close one day at 243 and open the following morning at 227, reflecting bearish overnight news. In that case, it is fairly obvious that the market moves on new information, not trading activity. To the extent that trading activity has any impact on prices, it is due to what the trading reveals about information held by various participants in the market.

In these examinations of tautologies he highlights wisdom that can be obtained from understanding them including organizing our thinking to see causal connections. This includes rejecting bad reasoning such as reasoning from a price change.

I’ll give two slices. The first is using the tautology that savings = investment:

Unfortunately, many people misinterpreted Keynes’s “paradox of thrift” as a claim that more saving is bad for the economy. That’s not what Keynes said! Keynes argued that a decline in aggregate demand (basically nominal spending or NGDP) is bad for the economy, and that this sort of decline might be caused by an increase in the public’s desire to save. But Keynes never said that more saving is itself a bad thing, as he understood that in equilibrium there is an equality between saving and investment. And since Keynes was very much pro-investment, that means he was also very much pro-saving.

The second is using the tautology that aggregate supply = aggregate demand coupled with Say’s Law:

Here’s AI Overview:

Say’s Law, often summarized as “supply creates its own demand,” posits that the production of goods generates the necessary income (wages, rent, profit) to purchase that total output. It implies that general overproduction or widespread “gluts” are impossible in a market economy, as total demand always equals total supply.

When defined this way, Say’s Law is true. The Great Depression was not caused by overproduction (as Franklin Roosevelt believed), rather it was a case of too little production. On the other hand, Say’s Law does not mean that we need not fear a situation where nominal spending is falling. Even if aggregate supply equals aggregate demand in a Depression, the equilibrium may occur at a undesirably low level of output and employment:

[Graph courtesy of ChatGPT]

Much of the confusion is due to the use of the term “aggregate demand”. I wish the model were called the nominal spending/real output model, not the AS/AD model. It has nothing to do with “demand” in the ordinary sense of the term as used in microeconomics.

The second post from Sumner is his take on the Committee for a Responsible Federal Budget’s (CRFB) plan to save Social Security, which he both praises and laments as politically implausible.

In praising and explaining the implications of the CRFB's proposal, Sumner effectively works the body on two separate fronts. He makes the case that the reform is essentially a progressive consumption tax with the economic and fairness benefits that policy change would imply while also demonstrating wealth and charity aren't well understood by the common man.

Starting with the tax part:

The CRFB’s proposal is essentially a progressive consumption tax, although it won’t look like that to the average person. I cannot teach an entire course in public finance theory in a blog post, but the essence of a consumption tax is as follows:

Imagine a world where people can either spend $6000/month on consumption today, or $12,000/month on consumption in 20 years, by saving their incomes. Now assume you impose a 33.3% tax in that world, which takes away a third of the public’s resources for consumption. With a pure consumption tax, your choice is now $4000/consumption today or $8000 consumption in 20 years.

Notice that the “terms of trade” have not changed, in both cases, the opportunity cost of a dollar spent on consumption today is foregoing two dollar’s consumption in 20 years. A consumption tax is a tax that does not change the relative price of current and future consumption. In a sense, all taxes are consumption taxes, as the burden of any tax is its impact on a person’s lifetime consumption. However, economists use the term “consumption tax” to refer specifically to taxes that treat current and future consumption equally. An income tax punishes savers and hence is not a consumption tax.

I’m pretty sure that most people don’t understand this concept, as I often see commenters say things like “we should tax consumption, not labor.” Actually, a labor tax is a consumption tax. Indeed, these three taxes are all equivalent consumption taxes, in the long run:

1. A 20% VAT

2. A 20% payroll tax on wages

3. A 20% income tax with unlimited ability to put savings into a 401k plan, and no mandatory date of withdrawal from the 401k. (Funds borrowed for consumption are also taxed.)

Note: Although I think I usually say something like “we would tax consumption rather than capital,” I’m sure I’ve made the sloppy mistake he points out of saying “we should tax consumption rather than labor.”

After fully describing how the CRFB’s plan is desirable, he turns to the implausibility basing his case on how people misunderstand wealth and charity.

Unfortunately, the CRFB plan seems too good to be true, and I expect Congress to implement something far worse. In order to understand why, consider two neighbors that both spent their careers in upper-middle class jobs making close to the Social Security taxable maximum (currently $184,500). Both retire as single people entitled to roughly $50,000/year in benefits. Both would see their benefits capped in nominal terms, which means their real benefit levels would decline over time.

But these two neighbors differ in one very important way. Smith was a high spender who would buy the latest BMW, while Jones was a high saver who always bought used cars. Smith saved very little while Jones maxed out his 401k plan.

Now Smith starts whining to his congressman that the proposed cap is unfair. It should only apply to “the wealthy”. His neighbor Jones is now pulling $100,000/year out of his 401k and doesn’t “need” his Social Security benefit to rise with inflation. “Please make the cuts depend on income levels, not benefit levels.” Because America has far more grasshoppers than ants, Congress listens to the whiners and applies benefit cuts only to those with high current incomes, not those with high lifetime wage incomes. They punish savers and reward spendthrifts.

. . .

People focus on the fact that those who are currently wealthy have more resources than the less wealthy, even when the gap is 100% due to the less thrifty person choosing to spend at an earlier stage of their lives. In my thought experiment, the two neighbors were equally wealthy in the only way that matters—they had equal lifetime resources to allocate to consumption and simply choose to do so at different points in time. Smith consumed when he was young enough to enjoy it, and Jones foolishly waited until he was old, wrongly imagining that he could still get a thrill out of life at age 70.

. . .

There’s an ongoing debate over how much money billionaires ought to donate to charity. Unfortunately, most people miss the point. The issue isn’t charity vs. investment; it is consumption vs. non-consumption. A charitable person is an individual that doesn’t consume much relative to his or her wealth. If you wish to consider heirs, you might say a charitable person is someone who ensures that he or she and all their future heirs consume only a modest portion of their current wealth.

But you can also argue that a charitable person is someone that maximizes their wealth, given the share of that wealth that they intend to use for consumption (both they and their heirs.) A wealthy person can become more charitable by reducing long run family consumption of wealth from 40% to 30%, but also by increasing their total stock of wealth and keeping the consumption share at 40%.

. . .

As Matt Yglesias recently pointed out, those billionaires that consume a large share of their wealth are the actual problem.

. . .

To be altruistic is to forego consumption for you and your heirs. That’s it.

[emphasis in the original in all cases above]

He ends with two great quotes. One is favorite of mine from Steven Landsburg that I have referenced before about misers being the ultimate philanthropists. The other is Bastiat's greatest insight, “That which is seen, and that which is not seen.” Another from Bastiat came to my mind while reading the post: “The State is the great fiction by which everyone seeks to live at the expense of everyone else.”

P.S. As if right on cue, Landsburg brings in another with this post making the same essential point about people confusing money transfers with wealth transfer:

I doubt very much that Mr. Musk plans to spend a trillion dollars before he dies. Suppose instead that he plans to spend, say, a hundred million. Now suppose he gives away all his money (or we confiscate it) and he reduces his lifetime consumption to zero. That leaves an extra hundred million dollars worth of food, clothing and fuel for the rest of us. Divide a hundred million dollars among three hundred and fifty million Americans and you get not $2800 per person, but 28 cents. That’s how much extra stuff the average American can now buy.

Whatever Elon gives to John, Paul and George must ultimately come from Elon. What’s available to others is capped by what he sacrifices.
In fact if you confiscated, say, half of Elon’s wealth and he chose to go right on consuming at the same rate, then the total value of what you could redistribute would be exactly zero.

What if you ignore all that, take Mr. Musk’s trillion dollars and redistribute it anyway? Or what if Elon himself ignores all that and decides to give a bunch of money away? The answer, in either case:: We all get $2800 checks, we all feel richer, we collectively try to buy an extra trillion dollars’ worth of stuff, there’s only an extra hundred million dollars’ worth available, so prices and/or interest rates adjust to the point where your $2800 check can purchase only about 28 cents worth of goodies.

Substacks referenced:

Economic Forces

Panhandlers and Price Theory

In my previous two posts (here and here), I focused on the role of price theory in explaining drug use. One reason that I wrote those posts is that I wanted to illustrate that price theory has explanatory power beyond the standard examples. I’m a firm believer that price theory is useful for understanding any decision that involves costs (which is essen…

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2 months ago · 42 likes · 4 comments · Josh Hendrickson

The Pursuit of Happiness

The beauty of tautologies

Tautologies have a bad reputation. They are often dismissed as mere definitions. People get scolded for trying to draw causal implications from tautologies. They are viewed as being simplistic…

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2 months ago · 48 likes · 42 comments · Scott Sumner

The Pursuit of Happiness

Too good to be true

The Committee for a Responsible Federal Budget (CRFB) has put forth an excellent plan to save Social Security, featuring a $100,000 benefit cap. The plan is so good that I see almost no prospect for it ever being enacted by our Congress, an institution that has fallen to a sadly dysfunctional state. In this post, I’ll discuss why I like the plan and t…

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3 months ago · 53 likes · 52 comments · Scott Sumner

Remember also, again importantly, that in some cases CCW leads to truth and solutions.

Along those lines, here are two posts to ponder. Each will challenge certain constituencies: one more left centered and the other more right centered. Yet in both cases these are positions that come from a high-safety value set. Like any bias, prioritizing safety comes with downsides . . . no solutions, only tradeoffs.

In the first case is Judge Glock writing a Works in Progress. The title of the post says it all: “American water is too clean.”

I imagine your first reaction is dismissal followed by consideration only allowing this in a technical sense.

Today, the average urban household in America pays about $1,300 a year for water and sewers, close to the $1,600 they spend on electricity. In San Francisco, even before the new sewer mandates went into effect, water rates were about $3,600 a year. Local governments spend more on building and maintaining their water and sewer systems than they do on policing.

The main reason for high water charges is federal mandates. The US, largely through federal mandates and subsidies, has spent about $5 trillion, in contemporary dollars, to fight water pollution since 1970, about 0.8 percent of the annual GDP in that period. This effort makes clean water ‘arguably the most expensive environmental investment in US history’, according to one study, far more than air pollution regulations.

Yet the EPA finds that the one category of environmental regulation where estimated costs exceed benefits is surface water regulations. The EPA does say that most of its drinking water mandates have benefits that exceed the costs, but, as one study showed, ‘these determinations were unsupported by the Agency’s own regulatory impact analyses’. The EPA analyses found that for many of the regulated dangers ‘the risks may be as low as zero’, but argued that potential risks should be treated as probable ones.

Technology and local governments have worked wonders over the decades to make drinking water and water systems incredibly clean. But that desire for progress has now become excessive. Mandates from the EPA are demanding water become too clean. It is important to remember that the optimal level of pollution is never zero and there are always important trade-offs to consider. The ironic knock-on effect is that these mandates have actually become environmentally negative on top of being economically destructive.1

He ends the article with suggestions about balancing the costs and benefits including this:

There is an old joke about a boy who said that he knew how to spell the word ‘banana’ but that he didn’t know when to stop. Officials in control of water today know how to get cleaner water but don’t know when to stop. Local voters already face the problems of balancing costs and benefits and the more distant the regulators, the less likely they are to get the balance right themselves.

Now turning to the second case we have Benjamin Nadelstein suggesting a way to abolish prisons.

Prisons can be viewed as an overall bad deal for society. They are expensive, inefficient, and often counterproductive. Prisoners live in dehumanizing conditions, the legal system groans under inefficiency, and taxpayers have to pay an average of $30,000 per year for every inmate.

The total price tag for U.S. prisons exceeds $80 billion annually, while the economic cost to incarcerated individuals in lost earnings exceeds $500,000 per person over a lifetime.

Prisons generally fail any purported goals of rehabilitation, failing to provide adequate educational opportunities or career programming. Prisons also tend to create overcrowded spaces with heightened violence, that often makes people more criminal, not less, by surrounding them with antisocial values and criminal networks.

That introduction lays out the scope of the problem. Here is his CCW proposal:

Instead of sitting in a prison cell at taxpayer expense, governments could auction off their prisoners’ future tax payments to private investors in exchange for more flexible confinement and rehabilitation arrangements.

These investors—let’s call them “prison career agents”—would assume full responsibility for their prisoner’s security and reintegration into society.

Crucially, these career agents could also be on the hook for their prisoners’ negative tax receipts. That means if a prisoner fails to earn income or returns to crime and is imprisoned, the career agent eats the associated costs and not the taxpayer.

After listing what he believes would be the win-wins, he anticipates pushback ending the post with a hypothetical Q&A. The quote he references from Bob Murphy probably hints at how opponents to this idea might retreat from a “it won’t work!” reaction to one of “but that’s not what I want.”

Economist Bob Murphy has pointed out that market forces would naturally regulate the private provision of prisoner security:

“No insurance company would vouch for a serial killer unless he agreed to live in a secure facility. These facilities, akin to hotels, would compete for prisoners by offering better conditions, as inspectors ensure safety. Undue cruelty would disappear because prisoners could switch providers, just as travelers switch hotels.”

PTAs would introduce competition into incarceration for prisoners, just as Airbnbs compete with hotels for travelers, Uber competes with taxis compete for riders, and UPS competes with the Post Office.

It is hard for people to get past the idea of prison as pain where any alleviation of pain is repugnant. For them there is a ratchet effect. They might not think they want it worse for prisoners at each step in it getting worse, but they refuse to think about it moving backwards from where it happens to be even though previously (before it got worse) they weren’t prepared to advocate for it being worse.

I’m not ready to endorse this as THE solution (aptly, Robin Hanson comments). But I am ready, stand always ready, to think outside the box. This idea has merit in direction and spirit if not exact specification.

Substacks mentioned:

The Works in Progress Newsletter

American water is too clean

The European Union spends more on science each year than America’s National Science Foundation, but European scientific output trails the US. What can it do to fix this? To answer this question, Works in Progress is hosting an event in Brussels on 2nd March. Sign up…

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5 months ago · 98 likes · 38 comments · Works in Progress and Judge Glock

The Invisible Foot

How to Abolish Prisons by Using Career Agents

Prisons can be viewed as an overall bad deal for society. They are expensive, inefficient, and often counterproductive. Prisoners live in dehumanizing conditions, the legal system groans under inefficiency, and taxpayers have to pay an average of $30,000 per year…

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5 months ago · 5 likes · 6 comments · Benjamin Nadelstein

I want to be truthful and clear. The only deception I potentially commit is simply ignoring arguments for my position that the intended audience would recoil from.

Economist Alvin Roth, whose latest book is Moral Economics, has spent his career in the trenches of the issues for which I think targeted persuasion is keenly needed. His recent interview with Nick Gillespie (video here) is an insightful look at his thoughts on solving fraught issues—not necessarily winning by changing minds but rather solving the underlying problems given hardheaded repugnance preventing mind change.

Roth’s area is just the extreme of the much larger realm of good economics being disconnected from acceptance. This is a big problem needing solution(s). And opinions vary on how to get there.

I don’t fully disagree but nor can I fully endorse what Benjamin Nadelstein is laying out here. Some of it is too clever by half.

People who want free market reforms have a branding problem.

On paper, many market reforms are clean and elegant. They increase coordination, reduce deadweight loss, expand the feasible set of positive-sum trades, and generate more surplus with fewer distortions. (Are your eyes glazing over yet?)

And yet the public reaction is usually the same:

Absolutely not! No! Never!

The issue is rarely that the economics fails to pencil out. It’s that the language around the proposals fails to persuade.

. . .

Successful marketers like Rory Sutherland and Frank Luntz understand that perception is a crucial part of the product.

Sometimes it is the product.

If broader adoption of market-friendly reforms is the goal, optimizing mechanism design isn’t enough.

It’s time to invest just as much effort — if not more — in optimizing the framing.

If economists spent even a fraction of the time they devote to modeling Pareto improvements thinking up better names for their policies, they might achieve most of the adoption gains with a fraction of the effort.

People need to be met where they are, and, sadly, many have a low ceiling on what they can handle intellectually (how’s that for off-putting marketing?). Yet that hot take is true, which is an unsaid point in Nadelstein’s post.

It is also true that people can exceed expectations. More importantly they should always be treated with respect. Condescension is both undignified on the part of the presenter and unappealing from the perspective of the audience.

I have a guiding principle that we should treat adults like adults (TALA). This is both in what is legally allowed and tolerated as well as in communication between adults (and I would argue children too) when the topic is difficult or positions opposing.

There is some tension between TALA and targeted persuasion. If the targeting is too selective or too salesy, it violates TALA. Strict adherence to TALA can completely neuter persuasion.

The solution is the messy truth of sometimes this and sometimes that in varying degrees. I tend to agree that the slogan should be helpful—this is sales 101. At the same time we have to be willing to make the hard arguments, which requires facing ugly truths.

My recent post on the minimum wage is a case in point. I didn’t pull punches erring on the side of assuming my position on the topic of minimum wages since the purpose of the post was to understand why these (assumed) bad laws maintain high levels of support. Had my purpose been to persuade, I would have taken a different tack.

At the same time, I did intend an element of persuasion that I think has a role in the bigger scheme of things. That is to inspire second thoughts among opponents by direct challenge—even if I use a bit of insult to do it.

This is where I am being faithful to my TALA principle. The strategy in this case goes as follows:

1. I think you’re wrong with strong confidence.

2. I have expertise in this area.

3. I assume you grant that I have some expertise.

4. I proceed to make a strong statement that at least indirectly calls you out.

5. Therefore, my bluntness may lead you to at least consider second guessing your position.

In order for it to work, item 3 is perhaps a crucial component. Notice that with the hoped-for conclusion (5) I am only striving for some opponents to consider opening their minds.

In the general case this strategy would indeed fail, but almost all persuasion attempts fail when it comes to positions like this. And I think this strategy risks little in the way of pushing opponents further away. Low risk - low expected return.

Back to Roth, his calm demeanor coupled with a brilliant mind gives him a targeted persuasion superpower. Not all possess this, obviously. I wish I did. And even he suffers from a small audience. He has been out in the field doing the work solving around where minds cannot be persuaded. Because of this, he speaks from strong credibility when he points out the failures of policy that defies economic truth and the ethics of liberty.

All of this comes full circle with one of my favorite Steven Landsburg quotes:

So Alvin Roth wins the Nobel Prize for, among other things, figuring out the best way to allocate kidneys subject to the constraint that you’re too damned dumb to use the price system.

This is very congruent with my minimum wage post but more so. When Steven Landsburg says you’re “too damned dumb”, it should make you stand up and listen. He checks hard every item in the 1-5 strategy above.

Persuasion contains multitudes. At times we should take the time to persuade with patience and generosity. At other times we don’t have time for that, and the most ignorant positions don’t always deserve it.

A Hero's Journey
[for Father's Day]

The role of hero is heavy. 
Much easier to have than to be.
He seems always at the ready
While you struggle feeling lost at sea. 

He gives comfort, a sure guide;
His wisdom always there sought out.
Yours fights an internal tide,
The constant haunt of inner doubt.

His humor is captivating
Bringing joy and deep laughter.
What source this assured creating
That endures ever after?

For you he is strong.
Giving love always gratis.
He can do no wrong.
You seek for such high status.

Your journey emulation,
Realized task lies beyond reach.
Pray with true adulation.
Earn the real gift he does teach.

In the prior post I said,

Still, I do believe and I think many agree that the average CAPE that prevailed before what I might call the modern era of equity investing is somewhat inappropriately low for what has prevailed and should be considered appropriate in this modern era. In other words, a good estimate of an appropriate CAPE is higher today than it was in the early part of the 20th century. When that transition should be placed is probably a fool’s errand as is getting too precise about how much it has increased.

Here I’d like to attempt some reasoning as to why the CAPE level that has prevailed recently might be higher than the historic level.

Backing up briefly, remember that the CAPE is a measure of how much we are paying as investors for the earnings that companies are generating. The fact that we would assume some growth in earnings in the future explains why we would pay more than simply a sum of current earnings projected into the future discounted for the time value of money.

If a company has been earning $1 per share per year, we don’t just add up the discounted value of $1 per year every year into the future (i.e., at a 5% discount rate summing $.952, .907, .864, .823, …). That would add up to a value of the stock being $20 (1/.05) if we assumed that $1 would continue forever.

Instead we would assume those earnings would grow at some rate. Usually one would assume a recent, reasonable growth rate for the near future and then some lower terminal growth rate. Therefore, the present value of the stream of cash flows would be greater than the $20 in our example. Perhaps it would be ~$67 because we assume earnings are going to grow at 10% per year for the next decade and then 2% thereafter (trust me on the math).

In these examples we would say the “multiple” we are paying (multiple of current earnings) is 20x or 67x, respectively.

The multiple on the CAPE historically was about 14.6 until 1987 (a date chosen not at random as this is about when it appears something changed structurally in the data). After 1985 the CAPE has been about 26.4. Like I said in the prior post, you can choose other start/stop dates, but the difference is basically the same.

Zooming in on what I’ll call the modern era for the CAPE (since about 1987), we can isolate two other distinct periods. From 1987-2016 the CAPE averaged 24.4. Since 2017 it has averaged 32.6. It is currently (June 2026) about 41.

Here is where my thought experiment begins. The 2017-June 2026 period is a ramping up to where we sit today. We went from a CAPE of 24.4 to 41, a roughly 68% increase (precision here is misleading—think of the changes in more rounded terms).

My question/hypothesis is that recent accelerations in earnings growth might account for this increase. I’m not claiming it is fully reasonable; rather, I am just saying that might be why the multiple has expanded as it has. Keep in mind, I think the current CAPE is too damn high (i.e., the S&P 500 is too expensive).

Back to the hypothesis, what if we forecasted a sustained bump in future earnings growth and compared the implied multiples?

As a simplified example of this, consider a simple bond analysis. If interest rates in the market are 5%, a 40-year bond with a maturity value of $100 that paid a coupon of $5 per year (based on the bond’s stated interest rate of 5%) would be valued at $100. In comparison a 40-year bond paying a $9 coupon annually would be valued at $168.64—the extra $4 per year means it is worth a lot (68%) more.1

Analogously (here is the hypothesis), let’s look at the change in the growth rate of real earnings for the S&P 500 between 1987-2016 and 2016-today. In the first period the growth was 5.59%, which is pretty close to the long-run average looking back much further in time. In the recent period from 2016 it has been 11.12%—about a 67% increase in the growth rate. Keep in mind these are real earnings so inflation is already adjusted out.

So the expansion in multiple over the past ten years (about 68%) happens to? roughly match the 10-year difference in real earnings growth rates. Why would ten years be important? Maybe it isn’t. But the formula for CAPE is a 10-year lookback at earnings. Perhaps a better analysis would add some complexity for changes in expected future growth rates allowing a smaller increase in the next decade and then a lower than recent but higher than historical terminal growth rate. We could certainly play with the numbers to get it to work out, but that wouldn’t prove much other than our ability to solve for our assumed conclusion—circular reasoning for sure.

My thought is that investors may have near-term hindsight bias. They see the bump up in real earnings growth and project it forward. If so, is that sustainable? I would argue strongly that it is not. It is beyond the scope of this post, but suffice it to say trees don’t grow to the sky. Stein’s Law has to kick in somewhere.

The CAPE is too damn high!

I freely confess: Very few of my personal friends are low-skilled workers. I’m a professor and a nerd, with decidedly high-brow tastes. If I tried sharing my feelings with any particular low-skilled worker, my outreach would no doubt come off as awkward and condescending. But I still declare before the whole world that I am deeply, sincerely grateful for low-skilled workers’ ubiquitous life-sustaining and life-affirming contributions. Contrary to popular insinuations, you are not charity cases. You keep us alive. You put roofs over our heads. You care for our children and our elders. You pick up the slack of life, taking care of the troubles others are too frazzled to handle. You deserve respect and appreciation, not casual disdain. Elites who talk as if you’re a massive burden aren’t merely rude. They are massively, blatantly, grotesquely wrong.

And ChatGPT writes in the second:

The nobility of low-skilled work is not that it is romantic. Much of it is tiring, repetitive, boring, and unpleasant. The nobility is that people do it anyway because other human beings value the result. That is enough. More than enough.

The economic case is overwhelming. Low-skilled workers expand output. They lower prices. They let higher-skilled workers specialize. A surgeon with a clean operating room, an economist with childcare, a CEO with a functioning supply chain, a parent with takeout dinner, and a tourist with a made bed are all more productive because someone else handled tasks that needed handling.

This is the division of labor. It is not glamorous. It is glorious.

And here is the ode:

To the janitor who makes the office usable before the office workers arrive.

To the dishwasher who saves the evening after the diners depart.

To the roofer under the August sun.

To the cashier who absorbs a hundred tiny indignities and still says, “Have a nice day.”

To the hotel maid who restores order after strangers leave chaos.

To the delivery driver who turns my laziness into dinner.

To the immigrant with poor English, little money, and a heroic willingness to start at the bottom.

Thank you. You are not a problem to be solved. You are fellow builders of civilization.

The least we can do is stop getting in your way.

Truly beautiful, as is the work he praises—directly and through AI prompting.

Neil Hacker explains how ASML makes the essential chips that run our world:

The most advanced version of this technology, extreme ultraviolet lithography, is used to make the very smallest chips. The smallest in 2025 were marketed as three nanometers, roughly 25,000 times thinner than a human hair.

To make them, a droplet of liquid tin is released into a chamber and hit with a single pulse of light, which melts and flattens it. As the droplet continues to fall, a second, more powerful pulse vaporizes the tin, creating an extremely hot plasma that emits light at the narrow wavelengths needed for extreme ultraviolet lithography. The light beam is then concentrated by reflecting it across a series of slightly concave mirrors so flawless that, if scaled to the size of Germany, their imperfections would be measured in millimeters. [emphasis added]

Dan Williams argues that the idea of speaking truth to power is misguided:

A simple heuristic that power and truth systematically collide doesn’t get you anywhere. Powerful people often speak the truth; the powerless often speak nonsense; and very often nobody—neither the powerful nor the powerless—has a clue what is going on, which is why we need rigorous, trustworthy, truth-seeking epistemic institutions in the first place.

Substacks referenced:

Roughly 55% of voters said no to the proposal to raise the minimum wage from $7.25 currently to ultimately $15 in 2029 with two annual increases in between.

Of course, there are two problems in that result. One, it was only 55% opposing leaving 45% (>281,000 voters) siding in support. Two, undoubtedly many of the voters in the majority were not actually doing so out of economic wisdom as I’ll explain below.

Many of my neighbors had signs in their yards promoting the increase. I refrained from making my own that would have read “Don’t make employing low-productivity workers illegal. Vote NO! on SQ 832”. It would have only been a signal to them that my intentions didn’t match their own. The fact that I understand basic economics would have been lost on them.

This got me thinking about who does and doesn’t support such efforts.

Minimum wages are about as useful at helping raise wages for the target group as is rent control at delivering affordable housing to needy people. It doesn’t work in theory, and in practice it is a disaster.

That is the correct economics, but, as we know, the zeitgeist doesn’t care about being logically correct as much as it is driven by social-desirability bias seeking what feels good over what is good.

I would like to suggest the following 2x2 framework of intentions versus economic understanding.

My explanation of the grid is the following:

• Good | Strong = Opponents of minimum wage laws—those who are at least courageous enough to vote for something unpopular (sounds bad but is good).

• Good | Weak = Supporters of minimum wage laws—those who mean well but are misguided (classic social-desirability bias to the point of promoting that which sounds good but is bad).

• Bad | Strong = A combination of supporters—those who seek to manipulate the situation realizing that higher minimum wages will make less productive people less available to compete with more productive people along with some true ugly bad actors who simply wish harm on the less fortunate. I would estimate that the former group greatly outnumbers the latter, but all are supporters.

• Bad | Weak = A mixed bag of supporters and opponents—those who seek gain at the expense of others (employers and consumers and other workers) being the supporters and those who happen to be right for the wrong reasons being the opponents. I would estimate the supporters greatly outnumber the opponents here.

Sometimes opposition to minimum wage laws comes from a place of bad intentions—the people who happen to be right for the wrong reasons. Sometimes support for minimum wage laws comes from a place of bad intentions—the people who want to stick it to the man (socialists of all parties). These are very small groups, however, greatly dwarfed by the supporters who tend to be well-meaning but are acting foolish in a destructive way.

Obviously these are not absolutely determinative positions. There are indeed people with a strong understanding of economics who nevertheless support minimum wage laws in good faith. Yet these are few and far between, and I would argue it is a hole in their understanding more than congruent with it. Spare me some elaborate theory of monopsony in a hypothetical company-town world that exists in the real world for about as long as does antimatter in a particle accelerator. This is an attempt to use a solution in search of a true problem.

It does matter that minimum wages only affect about 2% of the population. That demonstrates that while at the same time this in an esoteric issue, it is one that comes at little cost to the advocates but great dismay to the actual participants at the margin. It is a reverse of the classic case public-choice problem whereby with minimum wages we have mostly concentrated costs with mostly diffuse benefits. The costs are borne by those priced out of the market by minimum wages along with the rest of us deprived of their labor. The benefits accrue to three groups: the few that do enjoy higher wages (yet they likely suffer bearing a worse non-pecuniary work environment), the market manipulators mentioned in bad|strong like union employees, and the sea of voters that get a small psychic benefit from thinking they are doing the right thing.

The upshot is that minimum wage support gets traction because of the economic ignorance that prevails combined with the cheap benefit of virtue signaling (even if much of that signaling is internal—it makes you feel good) along with a boost from the bad actors who benefit from the policy.

I.

Here’s a proposed list of the top 100 technological innovations in products, systems, and technologies over the past 250 years. (I confess that I am a total sucker for mulling though lists like this.) The entries highlighted in dark blue were US-led; the entries in light blue were US-involved. In a broad sense, consider the dominance of US technological leadership since around 1900.

That is from Timothy Taylor referencing a McKinsey report on America’s competitive edge.

II.

Another recent analysis published in The Economist finds that global inequality in consumption spending is falling. In 2000, the richest 10% of humanity spent 40 times more than the poorest 50%. In 2025, they spent around 18 times more. Using data from World Data Lab, they find that the poorest 50% now out-consume the richest 1%, breaking from past trends.

That one is from Chelsea Follett writing “A Reality Check on the Inequality Panic”. It is a short summary of how much better the world has gotten for the poorest relatively when compared to the wealthiest. By extension, the poorest enjoy a much better world today in absolute terms, which is what really matters.

III.

And now for the uglier news . . .

The economic costs of this complexity are enormous. For starters, there’s simply the time and money we have to spend complying with an ever-growing and always-changing tax system. According to the Tax Foundation, compliance with the federal tax code cost Americans roughly $536 billion in 2024–2025—or nearly 1.7 percent of 2025 gross domestic product. They conservatively derive this number from two sources: First, there’s $148 billion in out-of-pocket costs for software, tax preparers, and accountants. Second, there’s time: Using a reasonable hourly wage, the 7.1 billion hours Americans spent complying with the tax code translates to roughly $388 billion in lost productivity.

To put these figures in context, $536 billion is more than the corporate income tax will generate this year, around twice as much as Trump’s tariffs will raise, and more than 43 times the IRS budget. The 7.1 billion hours spent complying, meanwhile, is the equivalent to 3.4 million full-time American workers—almost the population of Los Angeles—doing nothing but tax paperwork for a full year. The National Taxpayers Union puts the total compliance burden at $464 billion for 2024, with the average filer spending 13 hours and $290 just to pay his taxes. For many Americans (including me—sigh), tax filing demands multiple spring weekends doing unpaid labor just so we can cut the government another check. (Yes, I am bitter.)

That is from Scott Lincicome reporting on how much Tax Day cost Americans besides what they paid in taxes. Sadly unsurprising to me, and yet we don’t have the political will to change it. I’m bitter too, Scott.

For the purposes of this post, the market to which I am referring is the S&P 500 Index of the U.S. stock market, which is what the Shiller CAPE was constructed for.

PE ratios have obvious shortcomings. Those based on 12-month forward earnings are subject to the wishful guesswork of analysts who are notoriously wrong. Those based on 12-month prior earnings are subject to the known volatility of earnings over such short periods.

Shiller’s CAPE was designed to mitigate these problems by getting a longer-run lookback at earnings (prior ten years) smoothed out for inflation (real earnings).

What it tells us and how it has changed.

The CAPE has proven to be a much better predictor of long-run future returns while still being a very bad method of investment timing. To wit: It tells us a lot about the future while telling us little about how we’ll get there.

For those who don’t know, owning a stock means owning (part of) a company. Owning a company means being entitled to the profits of that company. The value of that ownership is (in the long run) simply the value of that stream of future profits. Since we don’t know the future, we then have to settle for the expected value of those profits (aka, earnings).

Prior earnings provide insight into future earnings. When coupled with good assumptions about the possible future (ranges of outcomes with various probabilities), we can make reasonable predictions about future earnings.

The CAPE gives us a decent tool to use simplifying this type of analysis. When the CAPE is relatively high, it implies future returns are relatively low—a high CAPE means high valuation, which means higher expectations about the future. If the future is more like the past than those expectations are implying, then those elevated expectations must be somewhat incorrect. If the future is different than the past such that the future is better, then those elevated expectations might be more appropriate than a naive reading of the CAPE would imply. In other words, the world can (and does) change.

There are several big ways the world likely has changed over the past 150 years (Shiller’s CAPE has been calculated back to 1871!). The first is that our appetite for risk has changed beyond drifting up and down from time to time. The second is that risk in the world itself has changed (again, beyond times being riskier/less risky during different eras). Add to that the growth in scope and scale of capital markets as well as a host of other structural changes. Be careful when considering these changes, though. The world is a lot more like it always was than it is different. There is a very big graveyard full of portfolios that inappropriately relied on the assumption this time is different.

Still, I do believe and I think many agree that the average CAPE that prevailed before what I might call the modern era of equity investing is somewhat inappropriately low for what has prevailed and should be considered appropriate in this modern era. In other words, a good estimate of an appropriate CAPE is higher today than it was in the early part of the 20th century. When that transition should be placed is probably a fool’s errand as is getting too precise about how much it has increased.1

Was the CAPE too high ten years ago?

As I said above, the CAPE provides insight into future returns with fairly good reliability and virtually no specific predictability. Since 1985, the relationship between the level of the CAPE and the next ten years’ total return of the S&P 500 has been pretty tight with an r-squared of .77, which means 77% of the variance in returns is accounted for by the variance in the CAPE. The relationship has been negative, of course, with a high CAPE associated with lower returns and a low CAPE associated with higher returns.

The specific regression results I derived using monthly data in keeping with Shiller’s work and relying on the website Multpl yields the equation:

So a CAPE of 10 would imply a future expected return of about 15.6% per year. A CAPE of 20 would imply a future expected return of about 9.8% per year.

Of course, basically it doesn’t ever match the regression’s expectation. In January 1985 the CAPE was 10 but the actual return over the next ten years was only 10.16% per year. In January 1993 the CAPE was 20.32 while the following decade’s return was 6.89% per year. A year and a half later in July 1994 the CAPE was 20.07 and the next decade’s return per year was 8.57%—much closer to the estimate we have today for such a CAPE reading keeping in mind that model above covers the period 1985 through June 2026. Even with these deviations (perhaps more difference than the model’s predictions than would a naive onlooker expect), the fit is tight.

In June 2016 (ten years ago) the CAPE stood at 25.84. The future return would have been predicted using my dataset that includes the ten years following June 2016 to be 6.44%. What was it actually? Drumroll . . . 11.92%!

This comparison hints at the larger point of this post. IF we knew the future, would the CAPE become more reasonable as a predictor of future returns? Or restated: Is the market efficient enough that we should expect it knows something the simple CAPE metric and it’s historical implications don’t know?

Robert Shiller won the Noble Prize in economics in 2013 in large part for his creation of CAPE and much of his body of work has been pushing back against the concept of efficient markets. So this exploration comes with a good deal of irony.

A reading of the CAPE in 2016 said to expect below-average returns or require above-average earnings. Well, we actually got above average earnings, as I’ll show below, making the CAPE fairly reasonable in 2016. I’ll define fairly reasonable as well.

What should the CAPE be?

One of the big mistakes made by investment professionals when using the CAPE is to assume what it should be and then make sweeping predictions about what’s to come. At times this includes me.

The CAPE is a metric. When that metric is interpreted and employed, it becomes a model embedded assumptions. One assumption is that the future will be like the past. As we’ve covered above, there is reason to suspect it will be and reasons to expect it will not. Remember “All models are wrong, but some are useful.”2

If forced to make a prediction about the S&P 500’s next ten-years’ return back 2016, I would have pointed to the CAPE and guessed “about 6% per year on average”. That would have been fair but incomplete. What should have been added in this (not quite) hypothetical is “either that or earnings will have to increase a lot to make this CAPE reasonable”.

Real (inflation-adjusted) earnings grew at an average annual rate of 5.35% over the past 40 years. For the period 1987 to June 2016, they did slightly better growing at an average rate of 5.59% per year. Growing at that rate for the next ten years would not have been enough to change the CAPE from its backward-looking position (price in June 2016 divided by average real earnings over the prior ten years) of 25.84 to something . . . reasonable. There’s that word again, I better define it.

The CAPE over its entire history (1871 through 2026) has averaged about 16. Remember from above that I think it should be higher in this “modern era” than it was before. Maybe it should be 20 (“20 is the new CAPE 16”). Who knows? We’ll come back to that in a bit, but let’s just assume a reasonable CAPE is still (or was in 2016) 16. Buckle up . . .

Efficient Market Hypothesis for the win!

If we knew the real earnings over the next ten years, we would know in 2016 (ten years ago) what the CAPE actually was (price in 2016 divided by future real earnings over the next ten years). Guess what? The CAPE using actual ten-year-forward real earnings was 15.4!!! Quite reasonable by anyone’s standard. The market is Mr. Zero; don’t [mess with] Mr. Zero. Turns out Mr. Zero knew.

Rather than growing at the prior average of 5% and change, real earnings grew over the ten-year period June 2016 through May 2026 at an average annual rate of 11.2% (188.8% in total).

No, I am not going to claim this level of market efficiency, which would be beyond what is meant by the EMH extending to something absurd. Yet it does indicate that the market was telling us something by pricing a CAPE at 25.84—something our model that uses CAPE wasn’t appreciating.

And if the modern era normal/appropriate CAPE is more like 20, then the market was underpricing the value of the S&P 500 in June 2016 at a CAPE of 25.84.

Another way of looking at it is through expected versus realized total return. As we saw above, CAPE of 25.84 implies a future annualized return of about 6.4% using the regression history. A CAPE of 16 implies a future annualized return of about 12%. The actual return from June 2016 through the other day (June 9, 2026) was a whopping 15.4% per year. Part of this difference is the actual, above-normal growth in real earnings we experienced in that ten-year period. Part of it was a continued source of future optimism in the growth of earnings. Which brings us forward in time a little . . .

EMH should have taken the W, and walked away.

As you may know (or suspect), the CAPE didn’t allow earnings growth to let it trend back down to something “reasonable”. It kept marching upward. Today it stands a little above 41. Back in June 2021 (five years ago and five years into the period we’ve been examining) it stood at 36.7.

I’ll do the math. That is an implied return of 0.14% per year over the next ten years (five of which we’ve already seen). The actual return over the last five years has been . . . wait for it . . . over 13% per year. So back to making predictions based on the CAPE model, that means either returns will be very low (negative) over the next five years (to get us to a reasonable forward-real-earnings CAPE) or earnings will need to grow a lot more. How much is a lot?

Real earnings grew 79% from June 2021 to May 2026 (the first five years). To have the CAPE become an implied 20.31 as of June 2021, real earnings will have to grow in total 30% over the next five years (5.35% per year) with no change in price. Real earnings have grown on average 5.35% per year over the past 40 years. Keep in mind this is just to make the CAPE in June 2021 be a reasonable figure assuming one knew the future of real earnings growth.

It is getting harder and harder to sustain the CAPE at such levels simply because it implies real earnings growth continuing at a pace that challenges (to say the least) what is theoretically possible.

Today the CAPE is about 41. This table shows the future growth in real earnings that bring that down to various levels. Keep in mind this means no change in price—a 0% nominal return (negative real return).

These all seem like “reasonable” growth rates for real earnings, but they imply very unacceptable returns—unreasonable from the standpoint of what investors expect/require.

To get the CAPE down to 20 (much less 16), investors will need to have real earnings exceed long-run historical growth and sit patiently while the price of their investment goes nowhere. Or maybe future earnings (the next ten years) will keep pace with the recent period and future-future earnings (the period beyond that) will carry a similarly optimistic outlook. We’ll see . . . .

Tattoos and Scars

Traveling through life, 
we collect the wounds.
These shape us, change us. 
These color our sight.

Make us who we are 
Define who we've been.
As the barnacles build, 
we choose their effect. 

At times a hindrance,
their drag causing grief,
but too an armor 
giving us a shield. 

For those who dare look, 
wisdom on offer.

We soon realize 
despite the burden
they stand to protect.

Hide not the marking.
Bear it all with pride.
Respect the offer.
Make peace embracing. 

Early in my career I worked on compensation analysis including direct performance pay. While I cannot claim expertise, I can claim experience.

This is a known tricky issue not just in sports but all compensation realms. The key is to get the incentives properly aligned, and it is never a solved problem. As soon as you design a system, the participants will work to break it. Sometimes this is intentional especially in poorly designed schemes. But it happens inadvertently too—just another application of Goodhart’s Law.

So think of this as a work in process where this is a good first step. Included in this are the underlying incentive conflicts as well as guiding principles to help resolve them.

First, the incentive objectives:

• Optimize for the Desired Outcome - This will be from the perspective of the labor demander, the hiring organization (the university in the case of college football). The organization determines the pay package offer, and it is the entity for which the labor cost is a means of achieving its ends. Therefore, it is the one for which we determine incentive alignment.

• Determine the Desired Outcome - Notice that I used the phrase “desired outcome” and not “profit”. Profit maximization is the ultimate goal of any organization with profit widely defined. This is true even for nonprofits. All firms and organizations should seek to maximize profits (for their own sake and society’s). If they don’t, they will not continue in existence for long and from society’s perspective will not being using resources wisely. The widely-defined-profit framing above is doing a lot of work here, though. “Profit” for a for-profit business is straightforward. Profit for a non-profit entity is not. In the case of a university it could mean things like on net fostering a better environment for students, faculty, alumni, and society in general. This is where it gets fuzzy for nonprofits as they have to properly define and measure intangibles that a business doesn’t (or at least shouldn’t) be concerned with. Preach all you want about a corporation being a “good corporate citizen” blah, blah, blah. . . That is economically and socially meaningless at best and stupid at worse. A for-profit firm that loses money because of its charitable pursuits is bad for society FULL STOP. This is not necessarily true with nonprofits.

• The Desired Outcome is . . . hard to say - Many would think I should have skipped the first two points jumping to this one and saying “win football games” as the desired outcome. Not so fast, my friends. That is assuming too much. Playing championship-level football might be more accurate for some while a goal of simply having a more competitive football program that is enjoyed by the university’s constituents even though it might be middling at best is more appropriate for others. The devil is in the details here, and one size does not fit all. That said . . .

• Improve the Team’s Winning Chances - This is a fairly good generalization of what the desired outcome likely should be. The only pushback would be not everyone (maybe no one) should desire a win-at-all-cost approach. See the recent Texas Tech situation. Long-term reputation matters for a university in ways that might even sacrifice football winning percentage.

• Align Individual Player and Team Incentives with the Desired Outcome - Here is the heart of what we want. We don’t want a player to choose personal gain over team success. We also don’t want to attempt tying a detailed, player-level or team-level pay plan to grandiose objectives like the ultimate desired outcome. So in a sense there are two major levels to this. First is align the team’s performance game-by-game and season-by-season with the desired outcome. We will assume this comes by saying team winning success including looking good doing it (not being a win-at-all-cost program) is aligned with the desired outcome. Second is align team winning success with individual player success—the purpose of this post. Again, many would think I should have started with this because it is obvious, and it basically is. BUT all of the above actually does have to be considered because excluding it is an oversimplification that risks a phantom menace being an inherently undermining problem.

• Therefore, Align Individual Player and Team Incentives with Team Success - Now comes the hard part . . .

Second, the design (four components):

Component 1 - Direct

• Individual players should NOT be compensated for positive outcomes that are directly recorded into the box score. This includes payment for points directly scored (e.g., catching a pass for a touchdown, kicking a field goal, etc.) as well as meaningful plays (e.g., making a sack, creating or recovering a turnover, etc.). At first glance this seems like ways one would want to compensate players. However, there are too many pitfalls. Namely,

  • It would make individual decisions made in the moment more complicated like considering if one should try to take a last-minute interception down the field for a touchdown rather than taking a knee. Trying to get more yards and perhaps a touchdown following an interception usually is the right call for the team and the player. However, in certain situations like at the end of a game the team wants you to go down and all but lock in victory where the player might want the glory of the touchdown as well as the additional pay. One could solve a lot of this by only paying for good plays in the first three quarters, but that’s a weird partial solution that unnecessarily complicates it and still has bad incentive consequences at the end of the third quarter like where a player might try something unduly risky knowing it is his last chance at the additional pay. In another example a running back might try to bounce outside on third and one from the opponent’s ten yard line hoping to spring it into the endzone rather than make the dive for the first down. Asking them to solve for this type of dilemma in the moment is asking for trouble. Players need as little exceptions to general rules of what to do in a given situation as possible. Coaches would surely agree.

  • It would build resentment play-by-play and within position groups. A player whose touchdown gets called back for a holding call on a lineman already has reason to be upset with the touchdown-thwarting penalty. There is no need to add to the frustration. And one wants players coming out of games when they are tired rather than, say, a running back not leaving the field knowing his replacement is likely to get a touchdown from first-and-goal at the one yard line after the player’s big run to set up the situation. Also, you don’t want a running back on that goal-line play angry that the quarterback chose to keep the ball rather than hand it off. Yes, all of these things are already at play, but let’s not compound the problem.

  • Overall, it encourages players to think too much for themselves rather than the team.

• Individual players SHOULD BE compensated for positive outcomes that are meaningful to team success at the coach’s discretion AFTER the game has ended. This is equivalent to the awarding of team balls for outstanding individual plays or overall effort. The amount should be meaningful but not so much that it is excessive. What is excessive? If the amount approaches much less dwarfs general compensation on a per game basis, it is too much. In keeping with the caveats in the point above, the coach should be very careful not to basically award pay for individual plays in a way that does informally what is thoughtfully avoided formally.

Component 2 - Indirect

• Players should be compensated for the team’s success. “Isn’t winning enough?” I hear you ask. No, as the following should demonstrate.

  • Player effort often falls before the team’s full objectives are reached. The team might want a player to help make a losing effort not look so bad (e.g., play hard to keep the loss respectable). The team might want a good showing in a late-season or bowl game that is worth very little to the players themselves. This might indeed have a direct component to it such that some players would have a bigger incentive package to play in games than others. Still, it would be important that all players are rewarded for efforts toward this team goal.

  • Players should feel that their contributions from practice on Monday to finishing the game on Saturday are being recognized.

  • The star players are already being compensated well. But winning comes from great contributions from the third-string lineman as well as the star quarterback. Spreading out compensation for a team’s win helps to reinforce that it was in fact a team win. By extension, the team’s overall goals such as earning a spot in the conference championship, winning that championship, making a bowl game, winning a bowl game, etc. are progressive in nature.

  • Again, the amount should be meaningful but not so much that it is excessive. Notice that coaches have incentives in their own packages much like these designs. A coach generally will get a bump for being conference champion, making a bowl game, making the playoffs, winning the national championship, and sometimes for just beating a rival. These amounts usually are not life changing in comparison to the coach’s already very large compensation. However, they are meaningful and send the right message.

Component 3 - General Contract

• This is the amount per player that a player has negotiated. It encompasses the salary from the school as well as any NIL arrangement the school is helping to orchestrate.

• The point of it being a contract is key. That allows both the school and the player to understand the terms of agreement getting them out of the way once practice and play begins. It also should have clawback provisions and buyout clauses and step-up conditions to allow the university as well as the player to have options and insurance against interfering circumstances. A player who is having a break-out year shouldn’t have holdout as their only option. Knowing that, at the very least, certain things will be sufficient cause to renegotiate and, even better, that certain achievements will trigger a better paying status will help players be confident that playing better means actual reward. Likewise, it will grant universities some recompense if a player fails to perform or worse is attempting to sandbag awaiting a better future elsewhere.

Component 4 - Outside Arrangements

• This would encompass the rest of the NIL world, that which is not directly controlled by the athletic department of the university for which the player plays. Understand that I mean this as an exhaustive category filling any gaps left of how college football players would be paid. These payments are up to the player and the payer. If you are the payer, I would encourage you to look for guidance from the university as to the structure of the deal as well as the size, but do not give them veto authority on your end (see the next point). You would want to make sure this trade is mutually beneficial to you including protection against failure to perform (athletically or otherwise like in the case, say, they do not appear in your car commercial as expected). You also would want to make sure you are not thwarting the bigger picture congruent with the outline above. However, you might be wiling and able to do something the university is not. That said, . . .

• The university should be able to stipulate in its contractual arrangements with players that the terms of outside deals they strike abide by certain guidelines uniformly applicable to all contracts that they the university enters with players. This could include precluding things like direct pay for scoring touchdowns, etc. It is up to players to make sure these restrictions are not overly onerous. If it surprises you that this leads me, of all people, to suggest a players union is likely needed here, consider yourself warned. While I am almost always negative on unions, state-granted/enforced monopoly (monopsony technically) is an area I find exception.

Conclusion

As in any compensation scheme, getting the structure right is essential and ongoing to best align incentives. I believe this approach I’ve outlined is a very good start to how a pay for performance arrangement with college football players would best benefit them and the university for which they are selling their services.

Two notes on that. First, you should not recoil at the phrase “pay for performance”. That is what EVERYONE WHO WORKS DOES. That includes work that is compensated with money wages as well an non-pecuniary benefits. It is funny how when pressed those who claim some strange moral high ground with statements like, “Amateur players should _____,” with the blank filled by some weak attempt apologizing away not paying athletes that only Cartman could understand will pivot to, “Acktually, they are paid with scholarships and room and board.” So, we are just haggling over price after all.

Second, a better approach to payment should result in better results given that better means improved alignment of incentives. This will be hard but not impossible to demonstrate. I look forward to sports economist research on this in the future. For now expect that you might be able to perceive more competitive balance at least among teams within certain tiers (e.g., better top-fifteen matchups as well as better games between middle-of-the-pack teams), a somewhat more professional look and feel as well as behavior both on and off the field, and more participation in games that have slipped like lesser bowls. Importantly for most who clutch their pearls with this topic, it should restore much needed and sought stability in these turbulent college football times.

Moving . . . On

In life we travel, amble just along
singing out of key a common and familiar song.
Together we trek 'til one of us falls, moves on,
then empty pockets and all collections gone.

Where once walked a reality now just a cloud.
The image fading as it's now enshroud.
Hints and memories softly come in and out.
The pain that's left lingers long though love is about.

Facing forward first reluctance then defiance.
We find some grace upon which to build reliance.
Once again with each other traveling along.
Picking up to carry on with the hopeful song.

I'd like to explore how everything is basically arbitrary aside from math, scientific laws, and core morality. This is not a dystopian take. It is about what can be known versus what must be held as belief—fact versus faith.

That is not a dichotomy between the right and the wrong, the true and the false. It is a dichotomy between what we cannot deny and what we can only accept by trust. Trying to put one into the basket of the other is folly for it can never fit. And it risks self defeat both as an argument to win over the minds of others as well as a foundation for one's own faith.

Consider the analogy of listening to diehard fans of some sport that you know little about and care even less. They can explain to you the ends and outs of how it is played, what’s going on in it currently, and their thoughts/desires for what is to come. Interest much less fandom can only reach those willing to seek it out and responsive to its specific rewards. Otherwise it will pass through them like neutrinos.

Where I am heading isn’t a nihilistic approach by any means. Say what you will about this post; at least it’s an ethos.

Consider how “Yeah, but why?” is ultimately an unanswerable question.

Questioner: Why do you do [a thing that is done]?

You: Because [states a rather factual basis for the thing being done].

Questioner: Yeah, but why?

You: Because [gives support based on history or a logical progression from some establishing basis, etc.].

Questioner: Yeah, but why?

You: Because [backs up a level repeating in the same manner].

Questioner: Yeah, but why?

. . . This continues endlessly or until you ultimately reach some first-principles position that is simply a foundational assumption or truth. There is many a slip between the cup and the lip, though, when thinking we’ve backed up enough to a truth when in fact we’ve only arrived at an originating assumption. Math works back to truth (see the Peano Axioms, et al.). What football team to root for does not.

Religion

To paraphrase René Girard: “If you don’t have a real religion, you’ll end up with a more dreadful one.” Add to this David Foster Wallace: “...in the day-to-day trenches of adult life, there is actually no such thing as atheism. There is no such thing as not worshipping. Everybody worships. The only choice we get is what to worship.”

Read more

We are never in “normal” times where normal means no worry about the future and the path we are on. But from time to time it is worse (heightened).

Here are two items that I read recently that offered some hope amongst the fear.

I.

Derek Thompson continues in a recent post:

The results were remarkable: On an independent test set of 493 scans, REDMOD detected the invisible signature of future pancreatic cancer with significant accuracy at a median lead time of 475 days before diagnosis. In other words, this AI program could detect cancer 40 months before the best doctors. Most importantly, REDMOD didn’t cheat. The team prevented the AI from cheating in several ways by making it impossible for the AI to use electronic records to identify scans where a mass was determined to be “present but overlooked.”

Before AI kills us all, it appears that it will give us meaningfully reduced mortality.

II.

Yes, China builds. Some of that building is impressive. Some of it is surveillance infrastructure and junky apartments sitting on top of a brittle political model with an aging, shrinking population. This is not a superior civilization. It is a ruthless machine that can be highly efficient at specific things while being deeply warped at its core.

Meanwhile, what does America still have?

The lead in AI.

The world’s best universities.

The deepest capital markets.

The most creative entrepreneurial culture.

The most important alliance network.

The reserve currency.

The most capable military.

The greatest ability to absorb talent from everywhere.

The broadest ecosystem for turning ideas into dominant global companies.

This is what the America declinists never understand. America’s strength has never come from looking neat on a high-speed rail brochure. It comes from combining freedom, talent, capital, scale, ambition, and military reach in a way no other country has matched. China can manufacture very effectively. America still invents the future.

That is from Lee Bressler. I love the last line of that quote from his post, “America still invents the future.”

While we need to work to make that continue to be true, it is worth pondering how enduring that truth is despite the headwinds—some of our own making.

Substacks referenced above:

Disturbing 

He smelled of a greasy lunch.
Three o'clock that afternoon
          sweat hovered in the stale air. 
Traffic squeaked and sputtered 
          nearby under rough tension. 
Close eyes only dared brief glances
          averting stare as much from 
          repulsion as courtesy.
Aid was not offered; no help
          because no one thought to help.
Desirables sought exit 
          equally hoping that this
          might soon exit their pure minds.
Yet it lingered there; image
          burned into their memories.
Chasing it out thus required
          action; earlier shirked.
Guilt propagated as judgement.
Revulsion overwhelmed 
          their compassionate mercy.

I can win the War on Drugs™.

We are losing the decades-long domestic Vietnam for the same reason hawks then and after said we lost in Southeast Asia—we simply haven’t tried to win.

To win, we need to finally get serious about it.

Here’s what it’s gonna take — A true no-tolerance policy.

• You’re caught with an illegal narcotic, you go to jail with certainty and for a long time.

• If you have prescription pills in your possession you must have a current valid prescription. And it must be in your possession with the pills at all times. If not, you go to jail.

• If you have additional pills at home, you need to purchase a government-authorized safe for storage of them, register this safe with the federal, state, and local authorities, and keep valid, current prescription documents with them as well. Failure is at least steep fine for first offenders; jail time for others.

• We need drone surveillance empowered with AI technology to watch, scan, sniff, and otherwise detect illegal narcotics or behavior that appears to be related to the trade, possession, or use of illegal narcotics.

• We need to relax the burden of reasonable suspicion such that obtaining a search warrant is quite easy.

• Increase dramatically the federal budget for enforcement of the drug laws. Target specifically any state that is seen to be lax on drug enforcement especially in the case of those that have legalized marijuana. Imagine the recent ICE interventions only permanent and for drugs.

• Dealing drugs as defined by illegal possession above a (low) threshold or being caught in a drug transaction as the seller is a capital offense. The punishment has a mandatory minimum of 20 years in prison, and the death penalty is available in jurisdictions that allow it otherwise.

• Using (under the influence or in the act of taking) illicit drugs in the presence of minors, in public view, or in a manner that could put others at risk (widely defined) is a serious offense that carries penalties both civil and criminal.

• Mandatory drug testing must be implemented at checkpoints to include: any doctor visit especially in the emergency room, periodic random checks of anyone receiving government benefits (SNAP, TANF, Social Security, Medicare, etc.), workplace testing both at the hiring point and every couple of years when at the same employer, whenever one is under investigation including a minor traffic stop, and any time an officer of the law otherwise believes it is warranted (remember the loosening of reasonable suspicion above). This is just a partial list.

• Rewards for tips that lead to a prosecution of anyone for illegal drug use will be large and proportionate to the resulting sentencing.

• Etc. etc.

No, I do not think even this would win the war on drugs. And I don’t know what winning could possibly mean even if this did obtain the paper objective of stopping drug use.

Notice these drastic penalties above target the end market and particularly consumers. That is because you have to target demand to have any chance of this nonsense actually working. Hitting supply especially at the raw production side (e.g., bombing coca fields in South America, raiding cartels in Mexico, etc.) is a fool’s errand. By analogy: You cannot drive up the cost of fine-art paintings by making paint more expensive. It is a minor input cost. Theoretically you could increase the military size and activity enough to meaningfully limit supply, but that would require forever wars everywhere on Earth.

If you’re not willing to go to these extremes because you understand the sacrifices aren’t worth it, you’re on the road to understanding why the War on Drugs™ is a miserable failure in every dimension by its very design. It is an immoral concept, immorally executed no matter the extremity to which it is taken.

It fails in principle and it fails in practicality.

Prohibition doesn’t work. And even when it seemingly does, considering the spill-over costs, it is itself a large failure.

As you may suspect from my prior writings and recordings, I don’t think football is very broken at all. In fact I think things are in many ways better today than in the past. I also feel we are on an albeit bumpy, rough road to stable improvement. Think of this post as a short cut to the ultimate destination.

The recently proposed legislation from Sens. Ted Cruz (R-Texas) and Maria Cantwell (D-Wash.) attempts much the same as what I’m aiming for below. The difference is this is my hobby. I’m not sure what business they have getting involved. It seems like Congress would have better things to do with its time . . .

Sadly, we live in a world where the political gain from such endeavors plus the regulatory corner we’ve put ourselves in means there is incentive and to a degree need for action from them.

Regardless, they among others seem to be getting a bunch of it wrong from my perspective. And they don’t cover all the ground. This is still a partial list, but it is much closer to comprehensive than you’ll find elsewhere.

• League structure:

  • Hard five-year eligibility rule from first participation in any sport at the collegiate level including practice. No exceptions in any circumstances unless declared for all participants in the sport (e.g., Covid) by the NCAA. Also, no eligibility for any player who has earned money in the sport of football with the exception of specific prize money for non-contract players1 (thus defining having played professionally).

  • Coaches cannot voluntarily leave their team for another coaching job or be discharged without cause within season (August - January).

  • Transfer rules (portal): a transfer is allowed once per academic year (July 1 through June 30 the following year) per player and only during the transfer period (i.e., portal window). For members of a football team, the transfer period is the month of February. High school signees cannot participate in a transfer portal until having been with a team in season. The transfer period for players not yet declared as playing football (member of a football team) is outside of the season for which the player would play at the new school (i.e., a non-football player cannot transfer as a baseball player in August to play football in the season that begins that August—he would have to sit out a season to the next academic year.) An emergency waiver can be granted to a player if their head coach leaves or is dismissed by that team within the months March through June whereby that player can transfer to any team except a team for which the prior head coach is now an employee. The player would be free to follow the coach but sit out a year at that new school or transfer for immediate eligibility any following year. This creates an emergency window of 30 days from the coach’s official departure. During that time transfers out and in to another program must be completed. Concurrent with that would be an emergency window of 30 days allowing any player on any other team who has not transferred within that academic year to transfer to the school from which the head coach departed.

  • Allow and standardize contracts between teams and players including clawback provisions and allow pay for performance. Liberalization and experimentation here is critical especially initially to help find the proper equilibria.

  • Conferences should be allowed to pool their broadcast rights.

  • Spending cap - There are two problems with a spending cap beyond the concern that it is yet another example of how sports in America (unlike Europe and elsewhere) are modeled on socialistic values that propagate as cronyism. Both of the problems I’m concerned with is getting the level and terms right. First, if you set it too low, this actually helps the larger, more powerful teams, the established incumbents. Why this is goes back to my paper and the general history of firms wanting and inviting regulation from government. They want to limit competitive threats so they want to limit spending by up and comers. Texas Tech is a modern example that a spending cap would work to thwart. The University of Texas wants a spending cap. Texas Tech does not (or should not). Second, if you set it too high or tightly defined, you thwart evolution in the league like the super league point made below. Yes, these two concerns are in a bit of tension. But that just illustrates how delicate the balancing act is. Spending caps are about preserving the league as it is not allowing it to develop into what it could be. I vote for no spending cap until a lot more of the current evolution is settled out.

  • Whether through the NCAA or independently among themselves, the conferences should enter into contracts between themselves establishing the above limitations and structure.

  • Season and post season:

    • Move the Army-Navy game to week 0 as the only game that week.

    • 12-game regular season (conferences individually determine in and out-of-conference composition)

    • Conference championships allowed at conferences’ discretion

    • 12-team playoff seeded by AP poll ranking—no guaranteed spots for teams (e.g., Notre Dame) or conferences (e.g., Group of 5); therefore, no committee

    • Playoff first round has a bye-week for top four and home field for next four (just like currently). Second round is home field of top four teams.2 Third and fourth rounds are rotating traditional bowl venues as done currently.

    • Playoff begins the Friday & Saturday two weeks after the conference championship weekend. Second round is the Friday & Saturday two weeks following. Third round is the Saturday one week following. Fourth round (championship game) is the second Monday following.

  • Increase officials pay and hold them to higher standards. They should be as dedicated as they are in the NFL with college football officiating as their sole occupation in season.

  • Super league (long term) - Allow for the evolution of the teams within the top division (i.e., FBS) knowing that a super league is the likely eventual outcome. Embrace the idea of relegation/promotion whereby eligibility in the super league is determined by the 64 teams with the highest average winning percentage over the past 5 years. Ties are broken first by 5-year winning percentage against teams ranking above the tied group and second by head-to-head record among those still tied. If ties remain, 5-year winning percentage against common foes (common in the same year) is used. Teams may elect to sell their position by season in the super league to the highest bidding team outside of the super league. However, once a team exits the super league in this manner, they must earn their way back into it as would any other team (e.g., via 5-year trailing winning percentage ranking). This would add some ability for a team to propel up the ladder by selling their marginal spot, winning in the lower league while banking the earnings from the spot sold, and then be in a better position upon re-entering the super league.

• In-game rule changes:

  • Down by contact - Same as NFL

  • Defensive pass interference is a spot foul - Same as NFL

  • If a player forces a stoppage of play, they must sit the remainder of that series or the team must take a time out - Much fewer fake injuries to create a time out.

  • All or almost all calls are challengeable - My only limit would be you cannot challenge a penalty that was not called.

  • Overtime - Same as first possession currently and repeated into additional periods if necessary but teams cannot ever kick a PAT or FG to tie a game.

  • Onside kick - Choice of attempt or take possession 4th-15 from your own 10.

  • Losing possession out of bounds through your own end zone is not loss of possession—keep the ball at the point where control was lost. Why should a fumble at the 1-yardline where the ball goes out of bounds there be so drastically different (worse) when instead the ball bounces forward and then out of bounds through the endzone?

  • Use sensors to determine critical calls (e.g., touchdown, field goals, line to gain made (i.e., first downs), player down before fumble, ball hitting the ground before catch/interception, etc.). Sure, make these are challengeable or have booth officials at the ready to intervene like how review works today. Officials on the field can elect to use the sensor results at their discretion. Just allow this technology upgrade to augment human officiating not replace human officiating.

• Strategy (things I think teams should do in order to win more):

  • ALWAYS onside kick - Click the link for more on this strategy. This is irrespective of the proposed rule change above.

  • Go for it on fourth down A LOT more - This is well established in modern analytics yet not well embraced in practice. Get over your biases and don’t let risk-averse coaches (and fans) undermine the better strategy!

  • Have a running back or speedster receiver be the punter - an alternative or variant of the prior idea, this allows teams to keep a defense honest while opening up fake-punt options. With a little practice, these athletic players can deliver as much punting as the average punter yields—especially true if the receiving team cannot fully prepare for a return due to the risk of a fake.

  • Downs first through third - Knowing that fourth down has more opportunity for continuing the drive due to the above two items, play calls on the first three downs should be adjusted accordingly. For some offenses/situations this would mean more conservative calls have higher expected values. In other cases more risk can be run.

  • Pooch kicking - this play is ugly but somewhat under utilized.

  • Hook and ladder - this play is beautiful and way under utilized.

First, Ross Douthat interviewed Christian Brose on his podcast Interesting Times. Brose is the president and chief strategy officer of Anduril, a defense company building autonomous weapons for the U.S. military.

It was fittingly a very interesting interview. Brose lays out the case for how the U.S. military is ill suited for the current and future landscape of warfare. The discussion of autonomous drones and other technologies including where tactics and strategy might be headed reminded me of my prior prediction regarding future war.

Specifically, it was this WWCF post from May 2022 on intentional detonation of a nuclear weapon as an act of war versus a battle of robots against robots as the dominant form of combat.

In that piece I predicted with 75% confidence that robot vs. robot would come first. While I cannot declare any resolution on this yet, it seems clear that technology continues to progress along this path fairly rapidly. The interview with Brose reinforced my thoughts for sure.

While the risk of nuclear detonation is still likely in the same stochastic realm as I described in the post, if anything the mean risk is probably slightly lower today than it was in 2022.

Searching for that post led me to another WWCF that is getting close to being resolved. That was this one from May 2021 on whether the NFL would start using sensors in footballs, which already are in the balls it turns out, to actually determine calls on the field or if the MLB would employ an autonomous system to determine calls on the field thinking but not limiting this to calling balls and strikes.

While the new Automated Ball-Strike (ABS) Challenge System is in use by the MLB (a big improvement to the game in my opinion), it is not yet making the initial call. It is only used to resolve a challenge to a human ump’s call.

Without assigning any confidence to it, I predicted the MLB side of this one will win out. I’ll now put that at 90% confidence.

P.S. Getting back to making WWCF posts is on my goal list.