## Saturday, April 27, 2019

### Bayes likes Mayor Pete

Who has the best chance of beating Donald Trump? A clue can be found using Bayes Theorem.

Here is the logic. Let A be the event that a candidate wins the general election, and B be the event that a candidate wins his or her party's nomination. gives us the betting market's view of P(A) and P(B). It is a safe assumption that P(B / A) = 1, that is, a candidate can win only if nominated. We can then use Bayes theorem to compute P(A / B), the probability that the candidate will win the general election conditional on being nominated.

So here are the results for P(A / B) as of now:

Buttigieg 0.80
Biden 0.77
O'Rourke 0.67
Sanders 0.65
Booker 0.60
Yang 0.60
Harris 0.57
Warren 0.44

That is, the betting markets suggest that Mayor Pete would be the strongest candidate if nominated, with Joe Biden close behind. (Of course, these numbers will bounce around as the prices in betting markets change.)

By the way, when I did a similar calculation in 2006, Bayes liked Barack Obama.

## Tuesday, April 23, 2019

### Tariffs raise the prices of domestic goods too

There is a nice article in the NY Times about the Trump tariffs imposed on washing machines. It should be useful as a classroom illustration.  This snip-it caught my eye:
It is hardly surprising that the tariffs drove up the price of foreign washers. Perhaps more unexpectedly, they also prompted American manufacturers to raise their prices.
This fact should not be unexpected to anyone to anyone familiar with the textbook analysis of tariffs. When foreign and domestic goods are close substitutes, increases in the price of foreign goods caused by tariffs raise the price of domestic goods. See Chapter 9 of my favorite textbook.