09 September 2008

Will McCain raise taxes?

Greg Mankiw calculates the probability that McCain will raise taxes, using data from the Intrade prediction markets, which have contracts for who will be elected president and for what tax rates will be in the future. It seems pretty likely.

Of course, the error on these markets is pretty high, and the calculation requires subtraction, which just amplifies these errors. But it's an interesting thought. (And I have to admit I've played around with trying to extract conditional probabilities from prediction markets myself.)


Anonymous said...

Right, and the issue of a Democratic congress that will -- despite the bi-partisan promises we hear plentifully -- likely be uncooperative with a Republican president.

I always find it disconcerting that we take a Presidential candidate's position as the gospel truth of what he will do in office -- particularly when we know he'll face an opposing Congress, as McCain would. Have we forgotten that the office of President is in the executive branch of the government? Sure, the President is the figurehead of his party. He can introduce bills. He can exert some influence on lawmakers. And he may even veto bills. (But he has to face both the risk of an override, and the revenge that Congress will surely impose on his policies.) But at the end of the day, the President is not a lawmaker. How can we trust those promises?

Of course, that means we can put more faith in Obama's promises. Not that I'm saying who to vote for. I for one don't care for some of his policies, and knowing that they are likely to happen should he be elected is an extra deterrent for me.

Anonymous said...

But the calculation of that probability is clearly wrong! he calculates the unconditional probability of a tax hike, and calls it a conditional probability, "conditional on McCain winning."

Anonymous said...

Sorry, I read it wrong