Loopholes!

How to outsmart the IRS, your parents, God, and the Devil

I attended a fascinating workshop a few months ago (thank you, Tomer Ullman and Elena Glassman, for setting it up and inviting me) on the topic of loopholes—in child development, religion, the law, and artificial intelligence.

In this post, I want to explore some puzzles involving loopholes that were sparked by discussions and presentations at the workshop. I hope people find them as interesting as I do.

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To set things up, Tomer began the workshop by telling us the story of the Devil and the three sons (I’m repeating it here from memory; you can find a slightly different version here.)

A younger widower was the father of three sons, and he wanted them to have a good life, but did not have the money to pay for their education. So he sold his soul to the Devil in exchange for a sack of gold. One of his boys became a woodcutter, another became a stonemason, and the third became a lawyer.

As the man grew old and frail, he brought together his sons—all happy and successful—and tearfully told them about the deal that he made. Right then, the Devil appeared, and said he was there to take the man’s soul.

The woodcutter spoke. He told the Devil that if his father could get an extra year of life, he would spend the year creating a coffin for his father with beautiful carvings of the Devil and his demons. The Devil is easy to flatter, and he agreed.

The Devil returned to man’s house a year later, admired the finished coffin, and then said he was there for the soul. But then the stonemason told the Devil that if he could just give his father just one additional month, he would make a tombstone for his father which depicted in graphic detail the glories of hell. The Devil hesitated—he really wanted that soul—but begrudgingly agreed.

A month later, The Devil returned. He admired the headstone, and then turned to the old man. But before he could do anything, the lawyer spoke:

“You have spared my father two times already, and I do not expect you to do it again. But will you let him live until that candle has burnt down?”

He pointed to the candle that was burning on the table.

The Devil sighed and said he would; it was only a butt of a candle and would not last very long.

The lawyer picked up the candle and blew it out.

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Here is a definition of what it is to exploit a loophole.

Intentionally violating the spirit of the law while following the letter of the law.

Some examples:

• Financial: The Roth IRA was created to help the middle class save for retirement. You can normally put up to $6,000 annually in it, shielding this income from taxes. Using a loophole I don’t understand, Peter Thiel managed to put five billion dollars in a Roth IRA.

• Children: In a paper by Tomer and his colleagues, they tell this story: “A father tells his daughter, ‘It’s time to put the tablet down.’ Not wanting to stop using the tablet … the child finds herself in a dilemma. With a stroke of insight, she puts the tablet down on the table in front of her, and keeps playing with it.”

• Theological: Jews are forbidden to do certain activities on the Sabbath, so the Orthodox will sometimes ask a non-Jew (a “Shabbos Goy”) to do it for them. According to the Wikipedia entry, notable Shabbos Goys have included Martin Scorsese, Elvis Presley, and Barack Obama. Here is a charming short movie on the theme—the plot: “An Orthodox Jew tries to find someone to turn off an adult toy gone rogue.”—where the Shabbos Goy is described as a “human loophole”:

• Artificial Intelligence?: There was much discussion at the workshop of how AI might follow the letter of the law and violate the spirit, perhaps to the detriment of the people who programmed it. A real example is that of an AI programmed to play Tetris and told to do its best to maximize the game time—it chanced on the idea of simply pausing the game, satisfying the instructions (keeping the game in play as long as possible) but violating the spirit (playing good Tetris).

  A more sinister case— though one that later turned out to be made up—is this:

Such AI misunderstandings might have significant consequences. (A common doomer scenario is that a powerful AI is given some trivial task, and then it kills all humans so nobody can get in the way of carrying out its mission.) But AIs are not exploiting loopholes in the sense that I’m interested in here. Loopholes require a certain sort of intention, and the AIs we currently have don’t have it—they have no purposeful goal of evading the spirit of the law while following the letter. They just obey instructions, and it sometimes turns out they do so in ways people don’t anticipate. At best, these are “unknowing loopholes”—they count only in the weak sense that if a human were to do them, they’d count as loopholes.

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Puzzle 1: What is the relationship between loopholes and indirect speech?

Indirect speech occurs when there is a direct way of saying something, but speakers allude to it instead. Here are some examples from a paper by Steven Pinker and his colleagues.

• Would you like to come up and see my etchings? [a sexual come-on]

• Nice store you got there. Would be a real shame if something happened to it. [a threat]

• We're counting on you to show leadership in our Campaign for the Future. [a solicitation for a donation]

• Gee, officer, is there some way we could take care of the ticket here? [a bribe]

Why do we say things like this? Why not just be direct?

• Would you like to come up and have sex with me?

• Give me money, or will I damage your store

• Please donate to our Campaign for the Future

• Here is a bribe

What’s wrong with these simpler versions?

Probably, the best theory involves plausible deniability. The speaker wants to make an offer or convey information while being in a position where, if things go poorly, they can later deny doing this (because it’s awkward, embarrassing, or illegal.) If someone is offended by the sexual come-on, the proposer can always indignantly respond, “But I just wanted to show you my etchings!”; when the store owner says he’ll call the police, the mobster can say: “I was just expressing concern!”

It’s a bit more subtle than this, though. Sometimes, the deniability is not for the person you’re talking to, but for third parties. Here’s an example from Wolf of Wall Street, where Jordan Belfort tries to bribe a Federal agent in a way that allows him to deny later that this is what he was up to.

The agent—and we, watching this—are perfectly aware that Belfort is offering a bribe, and we are unconvinced when he later denies it. But Belfort frames the offer so that he has plausible deniability for certain third parties, those with the power to press charges.

Or consider this classic scene from Seinfeld. Earlier, George’s date invited him to her apartment “for coffee.” He declines—”I can’t drink coffee late at night. It keeps me up.”—and only later, when driving home, he realizes that it was a sexual overture. Furious at himself, he later tells his friends: “Coffee’s not coffee. Coffee is sex.”

The interesting thing, though, is that while it’s obvious to George that he’s right (and obvious to us because we saw what happened), it’s less obvious to his friends. (“Maybe coffee was coffee,” says Elaine.) When a sentence is taken out of context, people tend to default to its literal meaning and an utterance like “Do you want to come upstairs and have some coffee?” really does sound like an invitation for coffee. And, so, even if speakers can’t preserve deniability from the people they’re talking to, they can successfully hide their intentions from others.

You can see how this connects to loopholes. Again, one definition of exploring a loophole is:

Intentionally violating the spirit of the law while following the letter of the law.

Sticking with the bribery case (where “the law” literally means the law), Belfort is violating the spirit of the law (he’s trying to bribe the officer; anti-bribery laws are intended to block exactly this sort of thing), while technically following the letter of the law (he’s not, according to the strict legal definition, bribing the officer.) It’s a loophole.

Puzzle 2: Why do some loopholes work at all?

Most loopholes can’t be explained in terms of plausible deniability. When Peter Thiel did his Roth IRA thing, he wasn’t thinking of plausible deniability; he was just trying to make money by taking advantage of a flaw in how the tax code was worded. My sense—lawyers, correct me if I’m wrong—is that people who exploit tax loopholes don’t have to be coy about it; they could write the IRS a letter saying, “I’ve noticed a loophole in the tax code and have chosen to exploit it,” and that’s fine. The success of these loopholes is not because people like Thiel succeed in persuading the government that they are making an innocent mistake; it’s because the government is constrained to follow the letter of the law.

The success of other loopholes is more mysterious, though. Consider again the case of the loophole-ing child:

“A father tells his daughter, ‘It’s time to put the tablet down.’ Not wanting to stop using the tablet … the child finds herself in a dilemma. With a stroke of insight, she puts the tablet down on the table in front of her, and keeps playing with it.”

What’s the point of this? There is no plausible deniability—it’s clear the child knows she’s ducking the parent’s command. There are no third parties that the child can appeal to. And there is no legalistic principle where children only have to follow the literal meaning of what the parents say. But it works! Experimental research finds that parents respond better to when children use loopholes than when they just refuse to follow instructions. They are less upset and say the children will be in less trouble.

I think at least two things are going on here. One is that a clever loophole might amuse the parents (when asked, parents say they find such loopholes funny), and this might take the sting out of the non-compliance.¹ Another factor is that the use of a loophole expresses partial compliance. The daughter respects her father enough to follow his orders, albeit in a tricky and rebellious way, which is seen as better than ignoring him entirely.

Puzzle 3: Why do people exploit religious loopholes?

Parents might find their children’s loophole behavior to be clever and charming. But what does God think when his followers do it?

I heard about the Shabbos Goy loophole as a child and thought it was ridulous.² It seemed to be a form of trickery. As such, it showed disrespect towards whoever was in charge of making and enforcing the rules. If someone believes that God didn’t want them to flip switches on the Sabbath, who do they think they’re fooling by gently prodding some non-Jew to do it for them? Why would someone who supposedly worshipped God try to pull this crap? It must mean that they don’t really believe in God, or they believe that God created the world and is now absent and uncaring.

This isn’t entirely a naive response.³ Here’s a version of my concern from the preface of a recent book on religious loopholes called Circumventing the Law: Rabbinic Perspectives on Loopholes and Legal Integrity, by Elana Stein Hain:

… Just because the law contains the tools for its own undoing does not mean that loopholes make sense as a strategy for those who respect law. After all, if a legal system is authoritative, why cheapen it through circumvention? Even the word "loophole" is understood as derisive: loopholing mocks the very law whose letter it claims to uphold. …

When it comes to religious law, these questions take on the added urgency of religious integrity. For the more conservative, loopholes are an affront because they attempt to fool an omniscient God and to undermine the ultimate Commander. If God knows about the ruse, why perform it? And furthermore, how can one dare circumvent God's law?

Still, while some Orthodox eschew religious loopholes, many do use them. One defense of this practice is that God’s will is inscrutable. It’s acceptable, then, to focus on the letter and not the spirit because we cannot know what the spirit is, and it’s presumptuous to guess. These issues get subtle, and Haim’s book discusses some subtle distinctions between those loopholes that are broadly seen as acceptable and those that are not. It’s a topic I hope to learn more about.

Puzzle 4: Why does the Devil let us exploit loopholes?

The sort of tricking-the-Devil-with-a-loophole story that Tomer led the workshop with is common, showing up across many cultures. It’s fun when people outsmart the Devil! But, as a law professor in the workshop pointed out, it raises a mystery: Why does the Devil respect the letter of the law? Why doesn’t he just laugh and take the old man’s soul anyway?

One can see why normal people have to follow the exact wording of a contract—if they don’t, the law will step in. But you can’t call the cops on the Devil or take him to civil court. One can also see why God keeps his word. Honoring a contract is a good thing to do, and God is good. But the whole thing about the Devil is that he’s not good at all.

Now the question “Why does the Devil keep his word?” might seem confused. The Devil does not exist! These are just stories. But, still, we can frame the question in another way: Why do these stories make sense to us? Why do we accept that the Devil will allow his plans to be foiled by a clever lawyer’s trick? When we think about actual evil people in the world, like Charles Manson or Ted Bundy, we don’t usually assume that they will keep their word, so why do we naturally assume that the Devil will do so.

Perhaps we think of evil people as falling into different categories. There’s a meme going around that has a 3 x 3 grid: On one side, there is lawful vs. neutral vs. chaotic, and on the other, good vs. neutral vs. evil. Here is an example of this meme about the different ways to seal a load of bread. (I like it so much that I made it into a little metal square that I keep in the kitchen.)

We might think of people as falling into these categories. There are lawful good people, neutral good people, and so on. When it comes to evil people, Charles Manson (real) and The Joker (fictional) fit the category of “chaotic evil.” Their evil is random and perverse, and they could never be trusted. You couldn’t tell a believable story of someone who outsmarted such an individual by exploiting a loophole in an agreement.

There is also a category for “lawful evil”, and this is where the Devil sits. He has evil goals but is rational, consistent, and even honorable in carrying them out.

Also in this category is Anton Chigurth, the antagonist in No Country For Old Men, written by Cormac McCarthy and adapted into a movie by the Coen Brothers. Played by Javier Bardem, Chigurth is a psychopathic killer—but one with rules. He flips coins for people’s lives, as in this chilling scene:

If they win the coin toss, he accepts it and lets them go.

If it’s true that we have a “lawful evil” category, though, it would just push the question back. The world contains plenty of violent people with low impulse control, but I don’t think we experience many Anton Chigurths in our everyday lives. So why do we expect some fictional characters to be lawfully evil? I don’t know.

1. Some loopholes involve wordplay. Once, when my sister and I were both young, she was doing something bad, and our father said, “Elisa, can you please behave?” Without stopping what she was doing, she looked up and said, “Okay. I’m have.” I don’t remember how our Dad reacted, but I laughed.

2. It’s not just the Jews. Muslims have “halal mortgages", for instance, and some Mormons engage in the practice of “soaking”. (I could write a whole post just on sexual loopholes).

3. I am grateful to Sydney Levine for discussing these issue with me.