The intraday fluctuations on Monday (using Intrade's contract for a bailout passing in September) imply the bailout makes a bigger difference (closer to 25% on the S&P 500). That evidence should be better because the news changed 3 times while the markets were trading. But I'm unconvinced that Intrade and the stock market had the same expectations - Intrade had been saying since Sunday evening that the bailout had about a 20% chance of passing in September, but all the comments from supposedly informed people said the vote was more surprising. If the bailout passes and unemployment exceeds 7.5% by the end of 2009, that will be weak evidence that the bailout was desirable. I'd still say there were better alternatives, such as briefly relaxing bank capital requirements, unless the government claims to have made money on the bailout in five years. Or maybe we could tie some of the compensation paid for the people running the bailout to how much money the bailout makes or loses.
With today's snapback, the Dow lost 777 and regained 485.
As of this evening, Intrade says the probability of a bailout bill passing by Oct 31st is 85%.
(777-485)/(1-.85) = 1,946. So a bailout bill makes an expected difference of 2000 points on the Dow.
Of course this is a bogus calculation, but it's an interesting one. Not overwhelmingly on-topic for OB, but it involves prediction markets and I didn't see anyone else pointing it out. I hope the bailout fails decisively, so this calculation can be tested.
PS: Bryan Caplan understands Bayes's Rule: It's not possible for both A and ~A to be evidence in favor of B. So which of the two possibilities, "unemployment stays under 8% following a bailout" and "unemployment goes over 8% following a bailout", is evidence for the proposition "the bailout was necessary to prevent economic catastrophe", and which is evidence against? Take your stand now; afterward is too late for us to trust your reasoning.