I agree that the system can't use this argument, but that doesn't mean the argument doesn't work, just like your argument for why your algorithm must defect against a program that always defects.
The difference between my argument and "this statement is false" is that by directly depending on its own truth, "this statement is false" leaves its truth or falsity insufficiently defined. But "this statement is true iff it is provable" depends not directly on its truth but on provability, which is already defined. So I think that my "real world" argument does establish that the statement will be true also within a formal system, even though a formal system cannot establish it with this argument.
Um, "this statement is true iff it is provable" directly depends on both truth and provability. It does refer to its own "platonic" truth value in the "real world".
You know that automated proof verifiers exist, right? And also that programs can know their own source code? Well, here's a puzzle for you:
Consider a program A that knows its own source code. The algorithm of A is as follows: generate and check all possible proofs up to some huge size (3^^^^3). If A finds a proof that A returns 1, it returns 1. If the search runs to the end and fails, it returns 0. What will this program actually return?
Wait, that was the easy version. Here's a harder puzzle:
Consider programs A and B that both know their own, and each other's, source code. The algorithm of A is as follows: generate and check all proofs up to size 3^^^^3. If A finds a proof that A returns the same value as B, it returns 1. If the search fails, it returns 0. The algorithm of B is similar, but possibly with a different proof system and different length limit. What will A and B return?
This second puzzle is a formalization of a Prisoner's Dilemma strategy proposed by Eliezer: "I cooperate if and only I expect you to cooperate if and only if I cooperate". So far we only knew how to make this strategy work by "reasoning from symmetry", also known as quining. But programs A and B can be very different - a human-created AI versus an extraterrestrial crystalloid AI. Will they cooperate?
I may have a tentative proof that the answer to the first problem is 1, and that in the second problem they will cooperate. But: a) it requires you to understand some logic (the diagonal lemma and Löb's Theorem), b) I'm not sure it's correct because I've only studied the subject for the last four days, c) this margin is too small to contain it. So I put it up here. I submit this post with the hope that, even though the proof is probably wrong or incomplete, the ideas may still be useful to the community, and someone else will discover the correct answers.
Edit: by request from Vladimir Nesov, I reposted the proofs to our wiki under my user page. Many thanks to all those who took the time to parse and check them.