OpportunityFLOPs

Working Paper No. 01

The AI capability trade-off model

After Katherine’s reduced-form modelDraft of 31 July 2026Priors unvalidated

Abstract

A policy reallocates a share x of frontier AI R&D compute from capability research to alignment. This paper specifies the reduced-form model that carries that reallocation through to two observable quantities, and records exactly how much of the specification the shipped calculator evaluates.

The reallocation enters an ideas-production function for software progress, propagates into a Cobb–Douglas capability index that holds training compute equal across arms, and drives an exponential reduction channel for AI risk. A capability cost and a safety benefit follow.1 Every quantity the calculator plots is a comparison between a baseline arm and a policy arm of the same normalized run: a statement about divergence, never a dated forecast of absolute capability.

The parameter bundles are sensitivity cases drawn from assumed priors. They are not empirical estimates, they are not joint outcome percentiles, and they are not a forecast. § 9 says so at length, because for this audience an honest account of what the model cannot support is the only thing that makes the rest of it usable.

Keywords compute governance · alignment investment · reduced-form modelling · sensitivity analysis

Channel Mechanism Primary output
Capability R&D compute to software progress to frontier capability Capability cost
Safety Alignment compute to lower AI risk Safety benefit
Table 1Model summary, reproduced from the specification. The model consists of two parallel channels driven by the same policy variable.
Symbol Role in the model Value in this build Status
A Research productivity in the ideas-production function Absorbed by the baseline normalization Never evaluated numerically
β Elasticity of software progress to capability R&D compute Triangular(0.15, 0.30, 0.50) Working prior, from the specification
γ Software feedback — knowledge and AI-assisted R&D Triangular(0.20, 0.40, 0.60) Working prior, from the specification
α Training-compute elasticity in the capability index Cancels from every relative output Never evaluated numerically
δ Software-to-capability elasticity Triangular(0.50, 0.70, 0.90) Working prior, from the specification
λ Alignment effectiveness in the risk channel Triangular(0.20, 0.40, 0.60) Working prior chosen here; the source supplies none
Table 2Notation. The six structural parameters, the role each one plays, and where its value comes from. Two of the six are never evaluated; the remaining four are drawn, not measured.
§ 1

Compute reallocation

Let CR(t) be total frontier AI R&D compute and x the share of it reallocated to alignment, with 0 ≤ x ≤ 0.5 over the range the calculator exposes. Total R&D compute is exogenous and is held at its initial level across the modelled horizon.

CR(t) = CR,0(1.1)

Under the baseline nothing is reallocated, so the whole budget stays with capability work.

CBR(t) = CR(t)(1.2)

Under the policy the capability-directed budget falls by exactly the reallocated fraction.

CPR(t; x) = (1 − x)CR(t)(1.3)

The calculator implements all three. The policy enters every equation below through (1.3) alone: reallocation changes the compute available to capability research, and nothing else.2

§ 2

Software progress

Let S(t) denote the software — that is, algorithmic — progress index. Software progress follows an ideas-production function, run once for the baseline and once for the policy.

ṠB(t) = A[CR(t)]β[SB(t)]γ(2.1)
ṠP(t) = A[(1 − x)CR(t)]β[SP(t)]γ(2.2)

Both arms start from the same initial condition.

SB(0) = SP(0) = S0(2.3)
where
A Research productivity.
β Elasticity of software progress with respect to capability R&D compute.
γ Software feedback — knowledge accumulation and AI-assisted R&D.

The policy enters through one factor. Comparing (2.2) with (2.1), reallocation multiplies the instantaneous rate by (1 − x)β and changes nothing else.

§ 3

Frontier AI capability

Frontier AI capability is modelled with a reduced-form Cobb–Douglas production function over training compute and software.

Mj(t) = [CT(t)]α[Sj(t)]δ,  j ∈ {B, P}(3.1)
where
M(t) Frontier AI capability index.
CT(t) Frontier training compute.
α Training-compute elasticity.
δ Software elasticity.

Since the policy reallocates only R&D compute, training compute is identical in both arms.

CT,B(t) = CT,P(t) = CT(t)(3.2)

Capability cost is therefore the shortfall of the policy capability path against the baseline,

CC(t) = 1 − MP(t) / MB(t)(3.3)

or equivalently, once the common training-compute term cancels,3

CC(t) = 1 − (SP(t) / SB(t))δ(3.4)

The cancellation in (3.4) is why α never needs a value. It is a real parameter of the model that the relative outputs happen to be insensitive to — not an omission.

§ 4

AI risk

Rather than modelling alignment progress explicitly, AI risk is represented with a reduced-form function. Under the policy, risk decays away from its baseline path in proportion to the reallocated share and the time elapsed since the policy began.

RP(t) = RB(t) exp[−λzx(t − t0)](4.1)
where
R(t) AI risk index.
λz Alignment effectiveness under policy impact level z.
t0 Policy implementation year.

The specification supplies no shape for RB(t) and no empirical bounds for λ.4 This implementation therefore holds baseline risk at a normalized index of 100 and draws λ from an explicit working prior, λ ∼ Triangular(0.20, 0.40, 0.60). The AI-risk plate is a sensitivity surface over that assumption, not a risk forecast.

§ 5

Safety benefit

Safety benefit is defined as the proportional reduction in AI risk relative to the baseline.

SB(t) = 1 − RP(t) / RB(t)(5.1)

Substituting the risk function (4.1), the baseline path divides out,5

SB(t) = 1 − e−λzx(t − t0)(5.2)

Increasing x therefore increases safety benefit, and increasing λ makes alignment compute more effective. Both follow from (5.2) alone. Note what (5.2) means for the calculator: the baseline path divides out entirely, so the safety-benefit plate is independent of the assumed shape of RB(t) and depends only on λ, x and elapsed time. The normalization in § 4 constrains the risk plate; it does not constrain this one.

§ 6

User inputs

The reader controls two inputs, and only two.

  1. Compute reallocation share The share x of frontier AI R&D compute reallocated to alignment. The calculator exposes it as a slider over 0 %–50 %.
  2. Policy impact level A categorical selection, z ∈ {Lower, Central, Higher}, which selects a parameter bundle.
z → (β, γ, δ, λ)(6.1)

The mapping in (6.1) carries four parameters, and the shipped bundles carry all four.6 β, γ and δ are drawn from the source’s own triangular ranges; λ is drawn the same way, but from a range this implementation chose, because the source supplies none.

Implementation record

§ 7

Calibration of the bundles

The parameter bundles come from 10,000 × 4 seeded Monte Carlo draws on triangular distributions. Each parameter is drawn independently, sorted,7 and read at the marginal percentile its impact level names.

z β γ δ λ
Low · P10 0.2230.2900.5890.288
Medium · P50 0.3130.4000.7010.400
High · P90 0.4160.5110.8100.509
Table 3Marginal P10 / P50 / P90 bundles from 10,000 seeded triangular draws per parameter. λ is drawn the same way as the other three, but from a working prior rather than a supplied one — see § 4.
Parameter Minimum Mode Maximum
β0.150.300.50
γ0.200.400.60
δ0.500.700.90
λ0.200.400.60
Table 4Working triangular inputs — assumed priors, not Katherine-supplied empirical estimates.8
Monte Carlo protocol
Samples10,000 per parameter
ReproducibilitySeed 20260731
SamplingIndependent draws
QuantilesLinear at (n − 1)q

The bundles rank-align each parameter’s marginal percentile. Seeding the draw makes the same z selection reproduce the same bundle on every run, which is what allows a reader to check a figure against the source.

§ 8

Normalization and scope

Software begins at index 100. The baseline is normalized to index 200 in 2034, so the plates communicate policy divergence — not a dated forecast of absolute capability.9 The normalization absorbs A; unchanged training compute makes α cancel from relative outputs.

The horizon runs 2026–2034 at quarterly resolution. Because the normalization fixes the baseline endpoint, A and CR(t) never appear as numbers: the calculator solves (2.1) for the growth constant that reaches the fixed endpoint, then applies the policy factor (1 − x)β from (2.2) to obtain the policy arm.

§ 9

Limitations and scope of inference

What follows is the shortest honest account of what this model cannot tell you. It is set here, in full, rather than in a disclaimer at the foot of the page, because a reader who takes the plates for estimates will draw conclusions the model does not support.

The bundles are sensitivity cases, not estimates

The triangular ranges in Table 4 are assumed priors chosen by the modelling team. No validated empirical calibration of β, γ, δ or λ exists. Table 3 is therefore a set of sensitivity cases: it answers “how much does the result move if the elasticities are toward the low end of what we assumed?” and nothing more. Read as estimates, the numbers claim a precision that has no evidence behind it.

The bundles are not joint outcome percentiles

Low, Medium and High rank-align each parameter’s marginal percentile. The Low bundle is the vector of P10 marginals, not the 10th percentile of any output distribution. Because the parameters are drawn independently and then composed, the joint probability of the Low bundle occurring is far below 10 %, and the interval between Low and High is not an 80 % credible interval for any plotted quantity.

Nothing here is a forecast

The horizon 2026–2034 is a modelling window, not a prediction schedule. Absolute levels are normalized away by construction (§ 8), so a value on any plate is a ratio between two arms of the same run at the same instant. “Capability is 4 % lower in 2031” is a statement about the model’s two arms; it is not a claim about 2031.

The risk channel rests on a supplied baseline

The source specifies no shape for RB(t). Holding it constant at index 100 is this implementation’s choice, and it is the weakest link in the document. The risk plate should be read as a relative sensitivity path only. The safety-benefit plate is exempt: (5.2) divides the baseline out, so it survives the assumption intact.

Structural omissions

The model has no diffusion or spillover between firms, no lag between alignment spend and alignment effect, no adversarial response to a unilateral commitment, and no cost to coordination itself. Each of those would, in the direction economic intuition suggests, reduce the measured safety benefit of a unilateral policy relative to a coordinated one. The model is silent on all of them, and silence is not a null result.

What the model is for

Within those limits the instrument answers one question well: for a given assumed elasticity bundle, how do the capability cost and the safety benefit of a reallocation trade off against one another over time, and which assumption is doing the work? That is a question about structure, and structure is what a reduced form is good for.

§ 10

Parameter contract

Every symbol in the specification, its role, where its value comes from, and what the shipped model does with it. Every row is implemented; the one still marked is RB(t), which the model supplies itself because the source does not.

Inspect the full parameter contract
Symbol Role Source status Implementation
xR&D compute reallocation shareUser input0 %–50 % slider
zPolicy impact levelUser inputMarginal P10 / P50 / P90 bundle
CRTotal frontier R&D computeExogenous pathHeld constant at CR,0
CR,0Initial R&D compute levelFixed normalizationAbsorbed with A; never a number
CBRBaseline capability-directed R&D computeModel-derivedCR, unchanged
CPR(t; x)Policy capability-directed R&D computeModel-derived(1 − x)CR
x CRAlignment compute the policy buysModel-derivedNot carried as a quantity; enters risk through x
AResearch productivitySet by z / calibratedAbsorbed into baseline normalization
βR&D-compute elasticitySet by z / calibrated10k triangular-draw quantile
γSoftware-feedback elasticitySet by z / calibrated10k triangular-draw quantile
SB(t)Baseline software levelModel-generatedBaseline software series
SP(t; x, z)Policy software levelModel-generatedFirm policy series
S0Initial software levelFixed normalizationIndex 100
CTFrontier training computeExogenous pathEqual across scenarios
αTraining-compute elasticitySet by z / calibratedCancels from relative outputs
δSoftware-to-capability elasticitySet by z / calibrated10k triangular-draw quantile
MB(t)Baseline capability levelModel-generatedBaseline capability series
MP(t; x, z)Policy capability levelModel-generatedFirm policy series
M0Initial capability levelFixed normalizationIndex 100
tTime since policy startModel index2026–2034, quarterly
λzAlignment effectivenessSet by z / working prior10k triangular-draw quantile
t0Policy implementation yearExogenousStart of the modelled horizon
RB(t)Baseline AI risk indexNot supplied by the sourceHeld constant at index 100
RP(t)Policy AI risk indexModel-generatedShown in the AI-risk plate
SB(t)Safety benefitModel outputShown in the safety-benefit plate
SSSoftware progress-rate slowdownModel outputShown in the software-slowdown plate
SGSoftware level gapModel outputReturned in the model contract
CGCapability cost / gap, CC(t)Model outputShown in the capability-gap plate
Table 5The full parameter contract across all six sections of the specification.

Return to the calculator — the instrument this document specifies.