What is interesting to me is that this market has basically oscillated between 5% and 73% on essentially no information difference so people have wildly different credence about their beliefs about other people's beliefs.

I have also personally confirmed that ChatGPT is liable to give this answer if prompted, roughly half of the time.

Could you share the exact prompt, model, and response?

@TheAllMemeingEye

@Balasar Full response:

One way to approach the problem is to ask: “By what percentage do we need to reduce imports so that the value of the reduced imports equals the current trade deficit?” Under simplifying assumptions, you can use the following steps:

1. Define the Trade Deficit Ratio

Let:

• TTT = trade deficit (in dollars)

• MMM = total import value (in dollars)

Then the trade deficit ratio is:

D=TMD = \frac{T}{M}D=MT​

This ratio tells you by what fraction of current imports you’d need to cut spending to eliminate the deficit.

2. Use Import Demand Elasticity

Assume that a tariff ttt (expressed as a fraction) increases the price of imported goods and reduces the quantity demanded. If the price elasticity of demand for imports is ε\varepsilonε (using the absolute value, so ε>0\varepsilon > 0ε>0), then a tariff ttt causes the import volume to drop approximately by:

ΔMM≈−ε×t\frac{\Delta M}{M} \approx -\varepsilon \times tMΔM​≈−ε×t

Here, the negative sign indicates that an increase in price reduces the quantity demanded.

3. Set the Reduction Equal to the Deficit Ratio

To “even the playing field,” you’d want the percentage drop in imports to match the trade deficit ratio DDD:

ε×t=D\varepsilon \times t = Dε×t=D

Solving for ttt:

t=Dεt = \frac{D}{\varepsilon}t=εD​

4. A Specific Example Calculation

Suppose:

• The trade deficit is 25% of total imports, so D=0.25D = 0.25D=0.25.

• The price elasticity of demand for imports is estimated at 0.5.

Then the required tariff rate is:

t=0.250.5=0.50or50%t = \frac{0.25}{0.5} = 0.50 \quad \text{or} \quad 50\%t=0.50.25​=0.50or50%

Important Caveats

• Simplifying Assumptions: This calculation assumes that the entire burden of the tariff is passed on to consumers and that demand elasticity remains constant.

• Economic Complexity: In reality, trade deficits are affected by many factors (e.g., exchange rates, income levels, global supply chains), and high tariffs may trigger retaliatory actions and other economic distortions.

• Policy Considerations: Setting tariffs to offset a trade deficit is a blunt tool and could lead to unintended consequences in international trade relations and domestic prices.

This calculation provides a starting point, but any real-world policy decision would need a far more detailed analysis, including broader economic impacts and political considerations.

Pretty sure it's coincidental

@birdbatch That's a bold bet considering the market is about what other people think

@Balasar I'm aware but I figured:

1) I have decent confidence that most non-trading Manifold users will agree with me
2) Even if I'm wrong about that, I can easily tell myself "oh, they were just ignorant" and still feel perfectly fine with myself if I lose my stake here