Level 2 Intelligent characters may sometimes be depicted as doing things that are innovative or that take other characters by surprise, and these innovations should almost always be Fair Play Insights. Then why is the enemy surprised - why didn’t they solve the Fair Play Insight themselves? Perhaps the enemy is not as smart as the protagonist. Perhaps the character has a secret weapon, an unshared resource they are not known to have (e.g. the True Cloak of Invisibility). But if your character is doing something that a whole civilization didn’t think of, we have to ask why that whole civilization didn’t think of it.

There is an old joke about the economist who sees a $20 bill on the sidewalk and decides that it can’t be real since, if it were, someone else would have already picked it up.

In point of fact, if you are on a deserted sidewalk it is perfectly plausible that you are the first person to see the $20 bill. When I asked 20 people if this had ever happened to them, 4 said yes. But you’ll note that the other 16 said no. And if you see what looks like a $100 bill stay on the floor of Grand Central Station for an hour, it’s a pretty good bet that it’s glued down or maybe painted on.

Since I haven’t yet seen an official term for this generalization of the idea of ‘efficient markets’, I have decided to use the term inexploitability.

If a lot of other people want something in limited supply, it’s surprising if there’s an easy way to get it that anyone can use. Lots of people want money, so it should be surprising if there are $20 bills lying around. It does happen, rarely, especially if the street is relatively deserted—-our society does not so thoroughly scan all the streets that all the $20 bills are plucked up instantly; it is inadequate to the task of making sure that no $20 bill is ever found. But a $20 doesn’t stay put for hours on the floor of Grand Central Station. The collective passers-by are adequate to the task of picking it up. Trying to find $20 bills lying on the floor of Grand Central Station is naive; there are no low-hanging fruit there, they have already been plucked, we expect the problem to be inexploitable.

This concept has its abuses. Short-term equity markets are inexploitable, but this reflects a lot of very smart people being paid huge bonuses if they can predict and correct a single flaw, on a timescale where they get lots of feedback on whether their ideas work or not (I specified short-term equity markets), using an aggregation mechanism (market pricing) that works excellently in practice to summarize everyone’s contributions. These are conditions under which standard theory strongly predicts inexploitability. You should not show your character doubling their money in a month by trading stocks unless they are the world’s most advanced AI or they have globally unique precognition or time travel; literally nobody is that smart.

On the other hand, right now (2014) the European Central Bank is making textbook economics errors causing trillions of euros of pointless damage to the European area. Some of my friends seem to think that some generalization of ‘efficient markets’ implies they should give me dubious looks when I suggest this is true and I know it to be true, because how could I be confident that I’ve grasped better monetary policy than the professional economists who work at the ECB? Isn’t that the same kind of overconfidence as thinking I can come up with a trading strategy that beats the market?

Not at all, actually. So far as I know, there’s literally nobody at the European Central Bank’s decision-making committee who gets paid more depending on how well Europe does. The committee-members’ jobs depend on the impression they make on politicians who are not economists. It is not possible for anyone else to step in and make a billion euros by doing it better. Under these conditions, standard economic theory does not strongly predict efficiency.

Analogously, it’s perfectly reasonable for your character to espouse better policies than their central government. It’s perfectly reasonable for the king’s armies to ignore the dragon that’s ravaging the countryside, leaving the matter in the protagonist’s hands, because the bureaucrat in charge of dragon-fighting doesn’t get paid any more if the dragon gets killed, and nobody except that bureaucrat has decision-making power. That happens all the time in real life.

But if you show the character in your world making tons of money just by combining two simple spells that everyone else knows, we really do have to ask whether maybe someone else would think of that too.

Naruto is worse at this balancing act than any other single-author continuity I can think of offhand. I’m not just talking about all these techniques that are supposedly teachable but that only one character at a time ever uses. There’s no way that ordinary armies or mercenaries would still exist when (a) there are enough chakra-users that ninja missions are affordable to farmers and not every genin is super-rich, and (b) a ninja child can beat grown, hulking mercenaries without much effort. Chakra-conductive metal is very rare and that’s why not everyone has chakra weapons? That’s fine if you keep to that rule consistently, but the Land of Snow has so much chakra-conductive metal that they can use it for full armored suits! As much as there are simple-seeming insights that nobody in our world invented for millennia, “Take something that is cheap at point A and transport it to point B where it is expensive” is not one of those surprisingly hard insights. It predates the invention of money by tens of thousands of years. We can trace flint handaxes that were traded across continents.

The ancient Greeks didn’t conceptualize natural selection despite having all required information; and in many dark corners of the world, like America, the idea is still not fully accepted. Sometimes things are surprisingly not obvious and surprisingly slow to catch on. But “take thing that is cheap at point A and move it to point B where it is in great demand” is not one of those non-obvious things. You can visualize how it works in your head, you can do it, it pays off, other people imitate that fellow who just got rich, and so the idiom goes way way back in human history.

If you decide that the Land of Snow has enough chakra-conductive metal to use it for large construction projects, you can’t have chakra metal be extremely rare and expensive in Fire Country just one month’s travel away. Your world doesn’t have to be as inexploitable as short-term equity markets, not even close, but it can’t be that exploitable without a reason.

The plot of HPMOR involves Harry sometimes seeing insights that other wizards don’t, and doing it on a timescale of months rather than decades.

There are two major background assumptions that try to make this more realistic.

(1) It is established very early in HPMOR (Ch. 5) that only a handful of Muggleborns attend Hogwarts each year, and all of those left Muggle society too young for science education. Cultural interaction with Muggle Britain, to say nothing of actual trade, is implicitly shown to be very limited (as it is in canon). This premise also allows Harry to come up with innovations that are Fair Play relative to the reader, because the reader also knows Muggle things that wizards don’t.

Although HPMOR doesn’t go into this in much depth, the lack of trade between magical Britain and Muggle Britain implies some further background reason why the Weasleys can’t just go off and make millions of pounds selling simple healing Charms to rich Muggles. Presumably people like Lucius Malfoy have arranged for trade with Muggles to be heavily regulated - for the protection of the poor innocent Muggles, perhaps - so that only people like Lucius Malfoy are allowed to make their family fortunes at it, and nobody else is allowed to try. (This is also a likely place where Harry’s idea about trading Galleons and Sickles for Muggle gold and silver would run into a barrier - there are a lot of dogs not barking, a lot of Ricardian comparative advantage trades that aren’t happening, not only that one.)

(2) Rowling is on record as saying that total attendance at Hogwarts is around a thousand students (implying there are students in Harry’s year who aren’t mentioned in the canon books). This in turn implies perhaps 10,000-20,000 people in magical Britain - that is, their ‘country’ is actually more of a small town. And J. K. Rowling consistently wrote Lucius Malfoy as being the rich evil guy of a small town, and Cornelius Fudge as the stupid mayor of a small town.

In real life, magical Britain’s tiny size might not reduce the rate of progress as much as we would naively expect. For reasons I am not clear on, the number of geniuses and the speed of progress in a civilization does not seem to scale anything like the total population size - maybe for the same reason that small startups can be as creative on average as entire large companies (whatever that reason is). Nonetheless, if magical Britain is among the most educated and organized of magical nations, and there’s only 20,000 people in it, then it’s quite reasonable for progress across the magical world to be slow.

Given these two premises, a couple of dozen tenured mystics at the Department of Mysteries can easily fail to see the possibilities inherent in a Time-Turner, and end up using Time Turners just to make Hogwarts schedules more manageable. H. G. Wells’s first stories about time travel were about visiting the strange and distant land of the future, not about solving NP-hard problems. It took several generations of our large world’s SF authors iterating on each other’s stories, for science-fictional time travel to be associated with all the possibilities that I can think of in 2014. Magical Britain doesn’t have a long tradition of science fiction, written by the best authors from our much larger world, to suggest those possibilities for time travel. And so Harry, who has read SF books, is allowed to see those possibilities even as I suppose that other wizards don’t. Only Hermione made any attempt to exploit Time Turners in canon, and she’s Muggleborn.

This is civilizational inadequacy, the flip side of inexploitability. If your character is outrunning a civilization, there ought to be reasons for it. Not necessarily good justifications, but realistic cynical-economist causes: coordination failures, principal-agent problems, people chasing status, committees where nobody gets paid any more if the project succeeds. Or even more mundanely: nobody else has the magical resource, very few people have heard of the magical secret, your protagonist is from another world and is exploiting methods of thinking that were not invented for many millennia on our own Earth, etcetera.

You don’t have to go overboard on reasons for civilizational inadequacy. In real life a civilization does much worse than you would naively guess based on the number of people and how much they appear to care. Even the countries we read about in history books, for all their flaws, are the countries that functioned well enough to make it onto the stage of world history at all. World War II Britain was an unusually competent country; WW2-era France simply collapsed as the enemy tanks rolled in. In that light, Cornelius Fudge isn’t unrealistic even as the leader of a large country.

But if you are an author of fiction advertised as intelligent, you may have to deal with the reader’s naive expectations. They may ask “Why is the King needlessly provoking the Fell Empire?” even though history books abound with stupidities of much greater depth. They may ask “Why doesn’t anyone else use this resurrection spell?” when the fictional resurrection spell is expensive or arduous, and in real life almost nobody is signed up for cryonics which costs me $125/year membership plus $180/year life insurance.

This is a primary reason for rationalist fanfiction.

Azkaban, as Rowling depicted it in the wizard world, is entirely realistic. If there are no Dementors in American prisons, it’s because American politicians have no Dementors to use, not because they’re better people than the Wizengamot. Sexual assault is routine in American prisons and that could easily be prevented with video cameras. American prisons are worse than Azkaban in ways that Rowling couldn’t easily have imitated without breaking her readers’ suspension of disbelief. At least the wizarding world isn’t imprisoning marijuana users that we ever saw.

Even so, if Azkaban were in a world of my own invention, someone might question the realism of Harry’s reaction to Azkaban, versus other people in magical Britain seeming not to notice Azkaban as a moral horror. (Just like Americans don’t notice the moral horror! Rowling was not being unrealistic!) How is it that Harry sees all these utilons that can be picked up by ending Azkaban, that nobody else has seen? (Answer: it is not possible for any arbitrary economic actor to make a hundred thousand Galleons of profit if they have the insight that Azkaban is needlessly cruel, so standard economics does not predict moral efficiency the way it predicts efficient stock markets.) Perhaps Eliezer Yudkowsky only invented Azkaban to be triumphed over by his allegedly superior hero, and put it into his world as a straw inefficiency, a weakman…

But I didn’t invent Azkaban, it’s right there in canon, and millions of readers read J. K. Rowling’s stories and (correctly) accepted this as a routine background premise rather than claiming (incorrectly) that no (flawed) democracy (the size of a small town) would ever do such a thing and that she was just putting Azkaban there to show off her hero’s moral superiority.

In fanfiction you can write stories set in someone else’s universe that you didn’t invent to be exploitable, a universe which readers nonetheless aren’t pre-blinded to the way they’re blinded to the opportunities and horrors of real life. Furthermore, your readers will know that many readers of canon accepted the background inadequacy as something that wasn’t out of character for human beings and their civilizations. “Unrealistic, you say? Did you leap out of your chair and yell ‘Nobody in real life would do that!’ while you were reading canon? You did? Well, literally millions of other readers didn’t.”

In HPMOR, I can point to Azkaban and say “Because it is there.” Just like how, in our own universe, it is not my personal outlook on life to believe that governments would sell and advertise lottery tickets, even after the introduction of lotteries had been shown to cause an average 3% reduction in spending on food by low-income families. That is not me making a great display of how cynical I am about politicians; it is a fact that I could toss into an Earthfic as a background truth without needing to justify it. In HPMOR I get to say the same thing about Cornelius Fudge, albeit the source is Rowling and not reality. The important thing is that the civilizational inadequacy is given to me, and not depicted by me as my own statement.

Some people have accused me of making HPMOR more exploitable than canon because, e.g., Rowling said out-of-story that Dementors were inspired by depression and I made them be Death. It’s true that in such cases I cannot directly plead “because it is there”… but come on, Dementors are flying corpses that nothing can kill or destroy and that can only be fended off by happy thoughts in the form of animals. Stating out-of-story that they were inspired by depression serves as a powerful statement about how horrible depression is, but that would be overthinking the riddle if you actually found yourself inside that magical universe. Like, if you wander into a magical universe, and you spot some unkillable corpses that can only be fended off by happy thoughts shaped like animals, and you’re like, “Hm… what do these represent… Mortality? Nah, I’ll go with Depression,” you are trying too hard to give counterintuitive answers. From my perspective, Dementors-are-Death was just a Fair Play Insight on the observations that the canon universe gives us.

But then we have to continue the logic: this Fair Play Insight has no barrier to keep out the likes of Godric Gryffindor and Rowena Ravenclaw. You don’t need Muggle science to solve this riddle. So now we have to ask: why is Harry the first to think of this? Wouldn’t someone else think of it too, if the riddle is really so obvious? Thus no sooner does Harry figure out that Dementors are Death, than the story explains why anyone who realizes this keeps it secret, and Harry realizes that Godric Gryffindor did figure it out, along with who knows how many others.

And then the True Patronus is based on a rare state of mind that to my knowledge was first written about by Francis Bacon in The New Atlantis in the seventeenth century: the notion that death itself can be eradicated from the universe, by your (and your civilization’s) own efforts and not by imploring a pre-existing deity to do it for you. This is a tradition that only Harry has inherited; and it is plausible enough that Godric and Rowena, who weren’t raised on the same science-fiction books, never attained the same state of mind.

All of this has to be considered in the background, if not explicitly in the story, every time some insight or invention is said to be novel relative to the surrounding civilization.

I did get a fair amount of backlash about making Dementors be instantiations of Death. And I was indeed accused of making them be that way only so that Harry could show off. Which shows what happens without the rejoinder of “Because it was in canon!”, when the author starts putting in what somebody thinks is mere author-decided exploitability.

And so there are stories you can tell in fanfiction that you can’t easily tell in any other mode of literature, because in fanfiction the reader knows that you didn’t create the problems the hero faces.

(Discussion.)