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FFS the bank makes a profit in every example provided. I don't want to say that you obviously didn't read the post, but I honestly can't see any way you would come to post this comment otherwise.

Loans are a service. Loans with gentle defaults are a more desirable service. Those seeking loans would often purchase such services preferentially and at a profitable premium to the bank, if they were available or if asking for them were socially acceptable. Laws should be passed to encourage banks make such offers.

An example might be an auto loan with a clause that allows a debtor who is rendered unable to pay through no fault of their own (as judged by a court or other agreed upon mediator, for example) does not lose their car (the collateral) despite not being able to pay. And to compensate the bank for this low probability but high impact loss, they pay slightly higher interest rates.

It's not about possible vs impossible. Its about industrial and social standards.

If a private individual goes to a bank and asks to take out a loan, and then starts asking about the possibility of more forgiving terms in the case of a default, the bank suddenly becomes incredibly suspicious. Planning for unexpected emergencies is seen as admitting that you intend to default. As a result, banks largely don't let people negotiate for generous debtor protection clauses, or, when they do, they only agree after incredibly punitive interest rates are agreed to. As a result, private individuals by and large just don't ask for that sort of thing. It's Not Done.

What I feel would be better is if creditors had a culture of less suspicion here. Debtor forgiveness clauses should be the default that a debtor opts out of with a bespoke loan exchange for a lowered interest rate rather than something they have to opt into if they're allowed the option at all. A debtor arranging their affairs such that a sudden injury does not financially cripple them should become the new norm, not an example of unusual prudence. Likewise, a debtor asking to take on that risk in exchange for a lower rate should be by seen creditors as dangerously recklessness rather than as confident and therefore trustworthy.

It would? I don't quite follow the question. Yes, the second type of loan would invariably have a higher interest rate. Let's say there's two loans for 10000$ and that, regardless of the loan type there is a 0.1% chance that a debtor will have an accident. If the debtor is poor, they will be forced to choose between not making loan payments and (for example) losing a leg to gangrene. If the debtor is rich, they will can pay both their loan payments and medical bills at the same time.

Loan A asks for 1000$ in total interest and has enforced payment which will prevent a poor debtor from paying their medical bills. Regardless, the creditor has priority in payment and receives their interest either way. Expected value to the bank: 1000$.

Loan B asks for 1010$ in total interest, but has a hardship forgiveness clause. There is a 0.1% chance that the creditor will lose 10000$, but no chance of the debtor losing a leg. Expected value to the bank: 1000$.

The bank is indifferent between the two loans, as both have the same expected return (lets ignore variance for now on the bank's part; we can assume they deal in a large enough volume of loans or charge slightly more interest to compensate). The poor debtor prefers Loan B, as 10$ is a small price to pay for protection against crippling disability. The rich debtor prefers Loan A, as they do not want to pay 10$ to avoid a negative result which they are already protected against.

I don't see any particular social problems arising from this situation. Do you?

I do not think it would actually be the same in practice, due to coordination problems.

To make an analogy, consider unions: In theory, unions are unnecessary because the collective bargaining unions exist of facilitate can be undertaken without a formal structure. In practice, people will simply refuse to strike unless they have a strong, formal assurance that their fellow workers will follow through with their part of the strike. The same sort of situation exists for a hypothetical hardship forgiveness clause in a loan - creditors have every incentive to use their disproportionate negotiation position to deny all such clauses and debtors are in no position to boycott the creditors in response giving a lack of credibly coordinated collective action.

By making hardship forgiveness a standardized aspect of some classes of loans, you establish a Schelling point in loan negotiations - "I will not agree to any loan without the standard protections against unexpected hardships financially ruining me" - and frame the issue in the minds of consumers such that they are explicitly thinking of a generous default clause as a protection to them (which it is) and a lack of such a clause as a salient risk to their future finances (which it is).

tl;dr: It is currently possible to demand generous debt forgiveness clauses when asking for a loan, but creditors will not concede your demands if you do. Giving such clauses social and legal sanction and framing loans without such clauses as being very risky would encourage customers to negotiate collectively for such clauses where they would otherwise not do so.

I think there may be something to consider in the idea of having

"Loans where society has promised to go to great lengths to enforce the will of the creditor, even if the debtor's reasons for nonpayment are convincingly sympathetic."


"Loans where society may forgive the debt, if the debtor offers a good reason to do so, even if the creditor disagrees with society's judgement on this issue."

be legally distinct types of lending, such that the creditor and the debtor can negotiate on which type it will be without society retroactively altering the agreement. Creditors will of course prefer the first class of loan, but society as a whole would have a preference that many loans of the second type be available for personal emergencies.

No, I would not care to demonstrate. A proof that a solution exists is not the same thing as a procedure for obtaining a solution. And this isn't even a formal proof: it's a rough sketch of how you'd go about constructing one, informally posted in a blog's comment section as part of a pointless and unpleasant discussion of religion.

If you can't follow how "It is possible-in-principle to calculate a Solomonoff prior for this hypothesis" relates to "We are dismissive of this hypothesis because it has high complexity and little evidence supporting it." I honestly can't help. This is all very technical and I don't know what you already know, so I have no idea what explanation would be helpful to close that inferential distance. And the comments section of a blog really isn't the best format. And I'm certainly not the best person to teach about this topic.

Exactly so.

The only reason I'm using the free will terminology at all here is because the hypothesis under consideration (an entity with free will which resembles the Abrahamic God is responsible for the creation of our universe) was phrased in those terms. In order to evaluate the plausibility of that claim, we need a working definition of free will which is amiable to being a property of an algorithm rather than only applying to agents-in-abstract. I see no conflict between the basic notion of a divinely created universe and the framework for free will provided in the article hairyfigment links. One can easily imagine God deciding to make a universe, contemplating possible universes which They could create, using Their Godly foresight to determine what would happen in each universe and then ultimately deciding that the one we're in is the universe They would most prefer to create. There's many steps there, and many possible points of failure, but it is a hypothesis which you could, in principle, assign an objective Solomonoff prior to.

(Note: This post should not be taken as saying that the theistic hypothesis is true. Only that its likelihood can successfully be evaluated. I know it is tempting to take arguments of the form "God is a hypothesis which can be considered" to mean "God should be considered" or even "God is real" due to arguments being foot soldiers and it being really tempting to decry religion as not even coherent enough to parse successfully.)

The length (in bits for a program in a universal Turing machine) of the smallest algorithm which will output the same outputs as the agent if the agent were given the same inputs as the algorithm.

Do note that I said "insofar as free will is a meaningful term when discussing a deterministic universe". Many definitions of free will are defined around being non-deterministic, or non-computable. Obviously you couldn't write a deterministic computer program which has those properties. But there are reasons presented on this site to think that once you pare down the definition to the basic essentials of what is really meant and stop being confused by the language used to traditionally describe free will, that you should in principle be able to have a deterministic agent who does, in fact, have free will for all meaningful purposes.

The number of bits required to specify an agent with free will (insofar as free will is a meaningful term when discussing a deterministic universe) is definitely finite. Very large, but finite. Which is a good thing, since Kolmogorov priors specify a prior of 0 for a hypothesis with infinite complexity and assigning a prior of 0 to a hypothesis is a Bad Thing for a variety of reasons.

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