Forecasts and Decisions on Economic Pacts in Mexico

Abstract

For the last nine years, the Mexican federal government has followed a policy of building agreements (pacts) between the main economic groups for the sake of economic development and social stability. During 1995, under the North American Free Trade Agreement and other economic and political forces, the pact policy has been under unusual pressure. In this article, national agreements are modeled as the outcomes of political conflicts. The model generates a probabilistic forecast of the type of agreement (from sustainable pacts to paper pacts to no pact at all). A basic modeling assumption is that each group can choose between helping to bake the cake and fighting to get a larger share of it, and that the desirability of each type of agreement will be largely determined by that choice. Using the forecast, we build a decision model for choosing the best set of current gains and expectations that the government can offer to other actors.

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References

1. Bruce Bueno de Mesquita , David Newman , and Alvin Rabushka , Forecasting Political Events: The Future of Hong Kong (New Haven, CT: Yale University Press, 1985).

2. Bruce Bueno de Mesquita , “The War Trap Revisited: A Revised Expected Utility Model,” American Political Science Review, 79:156-177 (1985).

Further details and extensions are presented in idem, “Decision Making and Probabilistic Forecasts of Conflict Outcomes” (Ph.D. diss., Stanford University, 1994).

4. Ley-Borrás , “Probabilistic Forecasting of Political Events.”

5. Ley-Borrás , “Decision Making and Probabilistic Forecasts.”