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"Why is there so little money in U.S. politics?"
That's the title of a famous paper by Stephen Ansolabehere, John de Figueireido, and James Snyder. The abstract of the non-gated version (other versions here) reads as follows:
Thirty years ago, Gordon Tullock posed a provocative puzzle: considering the value of public policies at stake and the reputed influence of campaign contributions in policy-making, why is there so little money in U.S. politics? In this paper, we argue that campaign contributions are not a form of policy-buying, but are rather a form of political participation and consumption. We summarize the data on campaign spending, and show through our descriptive statistics and our econometric analysis that individuals, not special interests, are the main source of campaign contributions. Moreover, we demonstrate that campaign giving is a normal good, dependent upon income, and campaign contributions as a percent of GDP have not risen appreciably in over 100 years - if anything, they have probably fallen. We then show that only one in four studies from the previous literature support the popular notion that contributions buy legislators' votes. Finally, we illustrate that when one controls for unobserved constituent and legislator effects, there is little relationship between money and legislator votes. Thus, the question is not why there is so little money politics, but rather why organized interests give at all. We conclude by offering potential answers to this question.
The bottom line is that today's Supreme Court decision probably matters less than you think. You should see my Twitter feed.
Posted by Tyler Cowen on January 21, 2010 at 03:44 PM in Economics, Political Science | Permalink
Comments
I'm skeptical. Narrowly construing money in politics to mean campaign contributions fails to capture where most of the money is, or rather, where the induced changes in consumption and spending are. If we consider the national and state lobbying apparatus for any given industry and issue, we will find that the money spent in total there dwarfs the money spent by those companies on campaign contributions. More broadly, we should consider strategic actions by corporations to attract or retain government funding to be "money spent in politics". Defense contractors that sited plants and subcontractors in order to generate vested interests in a broad spectrum of politicians have spent money (in terms of opportunity cost) and wasted resources in order to secure political blandishments.
Spending and investment decisions like that would generate the results the paper points to, by comparison actual campaign contributions are rounding errors.
Posted by: Adam Hyland at Jan 21, 2010 4:17:53 PM
Sorry Tyler, even you can't get me to use twitter.
Posted by: David Wright at Jan 21, 2010 4:42:28 PM
@ David Wright: you forgot to mention that you don't even OWN a TV!
Posted by: mike at Jan 21, 2010 4:49:41 PM
It's interesting. Maybe campaign finance reform actually makes the real problem worse. I always figured it had to but never crystallized my thinking around the issue as campaign donations being the way for individuals to compete against lobbying.
The threat of withdrawing support or the threat of being able to marshal support for a competitor may be invisible to the normal accounting.
Posted by: Andrew at Jan 21, 2010 5:01:59 PM
Just heard the following theory on NPR: It doesn't take that much money to intimidate candidates. Just an example of one or two by blowing them out the water and the rest will fall into line. It feels like you could be a model that would give that result -- repeated game wouldn't be enough, though. You'd have to have deep pockets and no limits on spending. But in the equilibrium there wouldn't be much spending.
Posted by: John B. Chilton at Jan 21, 2010 5:08:00 PM
Bravo, Supreme Court, bravo!
Finally, a real victory for speech, not that I expect it to last very long.
Posted by: Yancey Ward at Jan 21, 2010 5:14:03 PM
I would not hail this as a real victory for speach.
I would hail it as a victory for moneyspeach.
Now, as a shareholder, let me have some voice--some speach--on how the moneyspeach is spent.
Or, is that the kind of speach that is not permitted or is silenced?
Posted by: Bill at Jan 21, 2010 5:36:40 PM
Bill
Corporations are still not permitted to directly contribute to politicians from their treasuries. Only "independent expenditures" are now allowed...as in Citizens United..making a movie about a candidate etc.
Posted by: Contemplationist at Jan 21, 2010 5:59:46 PM
Another reason why I think this blog is garbage. This idiot cites one "famous" paper as reason not to worry about the Supreme Court's decision. Is this how economists argue for their position?
Posted by: sammy at Jan 21, 2010 6:45:11 PM
Another reason why I think this blog is garbage. This idiot....
Is this how adults argue for their position?
Posted by: anon at Jan 21, 2010 6:50:05 PM
I would not hail this as a real victory for speach.
I would hail it as a victory for moneyspeach.
What is the difference between "speech" and "moneyspeech"?
(Or "speach" and "moneyspeach".)
Posted by: anon at Jan 21, 2010 6:52:25 PM
Contemplationist wrote: >>Corporations are still not permitted to directly contribute to politicians from their treasuries. Only "independent expenditures" are now allowed...as in Citizens United..making a movie about a candidate etc.>>
Well, yeah, and also allowed is direct campaigning for one candidate, and/or against another. Now a corporation can buy ads that tell us all sorts of truths, half-truths, distortions, misinterpretations, and outright lies about their side and the other side.
Just like the politicians themselves have always done.
But now with much larger budgets.
Posted by: Ken Rhodes at Jan 21, 2010 7:00:05 PM
how about a similar investigation of the effects of lobbyists on public policy vs the effects of individual citizens?
what's odd about the supreme court decision is the extension of free speech rights for a corporation. this looks very much like judicial activism on the part of our justices who for the most part claim to be strict constructionists - a bit hypocritical on their part. nowhere in the constitution are free speech rights allotted to corporations.
Posted by: lj at Jan 21, 2010 7:03:23 PM
No, and it's ludicrous to support the view that this does not matter. Whether or not campaign contributions always lead to particular policy outcomes is irrelevant. The fact - the important one - is that contributions influence elections. More money leads to more ads, which, a large political science literature suggests, influence voters. That is the crux of the ruling today. Corporations, some of which have deep purses, can now spend unlimitedly on as many ads (among other instruments) as they want, anywhere in the country. So, yeah, it really does matter. A lot.
Posted by: WPEconomy at Jan 21, 2010 7:29:05 PM
LJ is right about the issue that corporations are not described as person's according to the constitution. This is just a reminder that the constructionist/judicial activism distinction has always been a false one, and judges are typically motivated by different sorts of ideological interests (which is not to say that they are motivated along the typical liberal/conservative distinction either).
However there is a common law tradition that treats corporations as equivalent to citizens.
That being said it is a mistake to equate money as speech.
Posted by: pj at Jan 21, 2010 7:58:27 PM
"LJ is right about the issue that corporations are not described as person's according to the constitution."
True, but the constitution does expressly protect the freedom to associate, and if people with free speech choose to associate into a corporation it would be an odd outcome indeed if they thereby lost their right to speak freely as a group.
Also, I don't remember any clause allowing Congress to regulate the speech of corporations either. Remember that one of the arguments against the bill of rights was that it was not necessary, because nothing in the Constitution permitted Congress to regulate speech to begin with.
Posted by: Doug at Jan 21, 2010 8:09:14 PM
There is vastly more spending on political speech as a percentage of GDP in Mexico than in the U.S., which is easy to see in border towns.
President Salinas hosted a dinner in 1993 for 30 men who had acquired industries Salinas had privatized. When the President suggested they each contribute 25 million to the ruling party's re-election campaign, they all agreed. Then he explained he meant 25 million dollars, not pesos. That's $750 million from one dinner. Faces fell, but Carlos Slim, now the creditor of the NY Times, rallied support for the President's suggestion, and all 30 eventually agreed to ante up.
Posted by: Steve Sailer at Jan 21, 2010 8:18:57 PM
Isn't the real problem that the majority of people are gullible and actually influenced by 30 second TV spots? If people were reasonable and actually did a bit of research these ads would have little to no effect.
Posted by: Portal Fan at Jan 21, 2010 8:26:26 PM
Ninety-six percent of elections in the United States are won by the candidate with the most money. It's patently ludicrous to claim that this decision won't affect political outcomes.
Posted by: Helen at Jan 21, 2010 8:27:14 PM
Portal Fan wrote: >>Isn't the real problem that the majority of people are gullible and actually influenced by 30 second TV spots? If people were reasonable and actually did a bit of research these ads would have little to no effect. >>
Well, I wouldn't say "THE problem," because I hate to paint a picture with only one color in my palette, but yeah, sure, that's a giant problem. It's bad enough we get all these ridiculous forwarded emails from gullible friends who warn us the sky is falling without checking SNOPES.com first. But at campaign time, we don't even have a SNOPES.pol (i.e., a politics Snopes) to check with.
Posted by: Ken Rhodes at Jan 21, 2010 8:43:30 PM
@steve sailer -- and your point is?
Posted by: babar at Jan 21, 2010 8:53:58 PM
Except... this decision overturned previous precedents, and as such, citing research showing that corporate speech doesn't matter much, when the corporate speech the research is evaluating was done while those precedents were in place, is wrongheaded.
This decision liberalizes the law on corporate speech.
Posted by: Alex at Jan 21, 2010 9:16:31 PM
"@steve sailer -- and your point is?"
Think about the differences between the U.S. and Mexico and you are likely to get some insight into the answer or answers to Tyler's question: "Why is there so little money in U.S. politics?"
Posted by: Steve Sailer at Jan 21, 2010 9:21:08 PM
"@steve sailer -- and your point is?"
Low IQ is correlated with corruption, obviously! Since we are blessed with high IQ, we wont have corruption. Huzzah!
Posted by: dilettante_like_tyler at Jan 21, 2010 9:35:44 PM
You might also view today's decision a different way: corporations are going to be hit up for a lot of money. And, corporations have different views--a small telephone company may have a different view from a cable company. Perhaps corporations will rue the day.
And, don't forget, politicians can take money from both sides. The real loser will be, not the incumbent, but the challenger.
For those who think that it is just Republicans who will win, just remember Bill Clinton still has his rolodex and knows how to work the phones. So, I suppose, does Tom Delay.
But, what I find is interesting, though, is that those who decry rent seeking, government regulation, etc, are the one's who have supported this decision.
Go figure.
Posted by: Bill at Jan 21, 2010 10:21:19 PM
Amen to Doug at 8:09!
People attacking this verdict really need to look at the specific case, which was taylor-made for this decision. It centered around a film made by a non-profit whose whole purpose was expressly political. The law forced the government into the ridiculous position of excersizing prior restraint, trying to stop showings of the film, keep it off the internet, destroy copies -- the full-flegged censorship thing. It really showed how the premise of the law is untenable in a society that respects free speech.
The only way it could have been better would be to have it be a left-wing film. The law would have forbid Michael Moore, whose filmmaking operations is incorporated, from making an anti-McCain film in 2008. Watching the left react to that hypothetical case would have been even more fun.
Posted by: David Wright at Jan 21, 2010 10:24:59 PM
Okay, corporations have the right of free speech -- do they also have the right to bear arms? Are public disclosure laws a violation of their Fourth and Fifth Amendment rights?
Posted by: karl at Jan 21, 2010 10:49:40 PM
Can we constitutionally distinguish between a corporate person if the corporation is a foreign corporation, or the US subsidiary of a foreign corporation. I doubt it.
In other words, how do you like having foreign corporations or their US corporate subsidiaries contributing to US candidates? Do you think some Chinese corporation should be able to contribute? Some Saudi corporation? The corporate subsidiary is a US person entitled to free speach.
This will be interesting.
Posted by: Bill at Jan 21, 2010 11:51:03 PM
@bill: But, what I find is interesting, though, is that those who decry rent seeking, government regulation, etc, are the one's who have supported this decision.
exactly.
free speech and constitutional issues aside, the effect of this decision is going to be that political actors are more beholden to their corporate brethren than ever.
this means bigger rather than smaller government. this means more stupid laws locking in markets for existing corporations by outlawing innovative practices. this means more transfers from the public purse to corporations.
my republican coworkers are very happy about this ruling, but i just don't see that it works in their favor, even if it means that more republicans are going to be elected. i think they are going to be disappointed when they see whose pocket their pols are in.
Posted by: babar at Jan 22, 2010 12:08:58 AM
Hey Chinese, Saudi Arabian and French firms:
Would you like to pay for my Senator’s political ads in our next election? No kickbacks – I promise.
Posted by: Turquoise at Jan 22, 2010 1:35:21 AM
I tend to doubt it. The only way for individuals to garner power is to organize. Isn't that the whole point of politics?
Organization facilitates aggregation of opinion. Money is just one proxy. Considering that people are so distrustful of money makes it likely that other forms of organization still have a per capita advantage.
Individuals are already impotent against politician unaccountability. My organization spent a lot of energy worrying about the new election rules. We were not a corporation. Any additional fixed cost is going to damage the smaller firms more than the larger firms.
The no speech 60 days before an election made a bit of sense in that there isn't time to refute misinformation, but semi-justified are the most dangerous rules. They are not applied fairly and the plausible logic helps them get over on the oppressed minority. There is also a study that I can't remember the reference for (maybe CATO) that showed that the more money spent in elections correlated to better informed voters. On the whole, more information is better even if some of it is suspect.
Also, we are not concerned as a society with the election 60 days from now but the long-term future. It seems likely to me that Republican shenanigans against Kerry piled on the probability that Obama and the Democrats had a solid victory.
Posted by: Andrew at Jan 22, 2010 5:44:15 AM
Now that corporations have the same rights as people, does that mean they can't drink till they're 21? Do corporations need to sign up for selective service? Why don't we just give them a vote? I'm sure when the corporations and the government run in lock-step it'll work out great for the citizens.
Posted by: kxf at Jan 22, 2010 6:18:48 AM
Helen says that 96% of elections are won by the candidate with the most money. This raises two questions immediately: first, is it true? After a quick google search, the only evidence I can find for the statistic is here: http://www.followthemoney.org/press/Reports/Oregon08CloserLook.pdf which seems to refer only to elections in Oregon.
The second question is, even if it is true, which way does the causality go? If people think that funding buys influence, they are obviously going to fund the candidate who is most likely to win. Similarly, if people only give money to the candidate they intend to vote for. There doesn't seem to be any attempt to control for these factors in the paper.
Posted by: John Faben at Jan 22, 2010 6:34:14 AM
Helen,
You wrote:
"Ninety-six percent of elections in the United States are won by the candidate with the most money. It's patently ludicrous to claim that this decision won't affect political outcomes."
But the direction of causation is far from clear. Does candidate X win because he has the most money, or does candidate X receive the most campaign contributions precisely because he is popular and expected to win?
If I am a corporation and expect candidate X to win, it may be in my best interest to make a contribution. This way, when X is considering legislation that will hurt my profits, I can stress my valuable financial support. It is an interesting but little-observed fact that corporations contribute roughly evenly to Democrats and Republicans. Whoever is in power, they want favored treatment.
Posted by: Frank at Jan 22, 2010 7:14:16 AM
http://en.wikipedia.org/wiki/American_election_campaigns_in_the_19th_century#Financing_parties
Posted by: Paul Camp at Jan 22, 2010 7:51:07 AM
How much is spent on Media and Science?
Posted by: josh at Jan 22, 2010 7:53:38 AM
So now corporations can bribe and lie even more and swing politics their way. The final descent of the US into a total plutocracy has begun.
Posted by: dave at Jan 22, 2010 8:56:12 AM
Ninety-six percent of elections in the United States are won by the candidate with the most money.
Source or reference please.
It is no secret among political pundits that if you picked the incumbent in all races you will be correct more than often than not, close to 90% of the time.
If you want competitive elections, especially in House seats, you must have competetive House districts. Most House districts are drawn to favor incumbents. And as a result House districts tend to favor a single party and tend to favor the fringe element in that party ("the base") at the expense of the center.
In Congress, the real cash isn't given to newbies anyway, but to folks who have been on the Hill a while and who chair or sit on powerful committees.
Go to OpenSecrets.org and look at who gives to senior members of Congress. Oh yeah, all the clean hands belong to members of the [your] party.
http://www.opensecrets.org/politicians/index.php
Campaign finance is an incumbent protection racket. And people who believe that campaign finance favors one party at the expense of the other, well, I'm sorry, but you're naive or you've been taken in by the theatre in DC.
Posted by: anon at Jan 22, 2010 9:59:47 AM
Yes, the real mystery is not why our legislative branch is a "parliament of whores" and extortionists, but rather why they're so cheap.
Posted by: outlawyr at Jan 22, 2010 10:07:19 AM
"The fact - the important one - is that contributions influence elections. More money leads to more ads, which, a large political science literature suggests, influence voters."
The point of the paper is to show that the large political science literature likely gets it wrong and contributions don't really influence elections.
Posted by: SR at Jan 22, 2010 10:36:43 AM
I don't understand the liberal anxiety over this decision. The New York Times is a coporation, and Ted Turner owns how many media companies? Last time I checked, the vast majority of the media distribution corporations lean left, some pretty damn far left. They've already had access to the production talent and the distribution networks to create and dissemminate whatever message they wanted to without it being counted against them.
Posted by: MadRocketScientist at Jan 22, 2010 10:41:47 AM
Bill,
Can you justify this:
The law being struck down prevented a corporation, or any other organization, from buying space in The New York Times day after day to advocate for or against a candidate 60 days before an election, and put other limits on the total amounts that could be spent otherwise. However, The New York Times could write editorials in any volume, and at any time, doing the exact same thing.
If you can't justify this, and I don't really see how anyone could, then this law must be either struck down, or editorials also must be suppressed by the government.
Posted by: Yancey Ward at Jan 22, 2010 10:56:56 AM
If you can't justify this, and I don't really see how anyone could, then this law must be either struck down, or editorials also must be suppressed by the government.
But, but, but! The New York Times isn't owned by foreigners! Well, at least not by any overseas foreigners....
And anyway, it was founded by a Republican, so it can't be a real news organization:
http://en.wikipedia.org/wiki/The_New_York_Times
And it is still controlled by a family trust! Talk about undemocratic! Yikes!
Posted by: anon at Jan 22, 2010 11:12:08 AM
I had a nightmare flash before my eyes where "you should see my Twitter feed" became as ubiquitous as "interesting throughout" or "my favorite textbook"
Posted by: D. Watson at Jan 22, 2010 11:48:45 AM
I was amazed to hear Obama slam the judiciary for, in his interpretation, making a big mistake.
Thank-goodness for the separation of powers.
Perhaps instead of fighting the court's support of the 1st amendment, the executive and legislative branches should focus on more transparency for money in politics.
Lobbying is a good thing - its educating. However, when a small interest in society is able to carry out-sized influence to the detriment of everyone else that we have issues.
Posted by: Tony at Jan 22, 2010 1:18:27 PM
The last thing corporate givers want is a spending arms race . . . The biggest beneficiaries of giving limits are corporations. Political giving is an expense, and they want to reduce expenses. Unless it's an industry like school loans or ag, where the industry is a creation of government.
Posted by: bjk at Jan 22, 2010 2:26:44 PM
1. The paper explains that most contributions are personal because corporate contributions were limited by law. Therefore, it provides little support for what might happen once corporations are legally permitted to directly contribute to campaigns or independently campaign.
2. The paper focuses on contributions to political campaigns. It does not discuss the type of "speech" at issue in Citizens United, which is independent of a campaign.
3. Laws that will benefit an individual or firm will generally benefit other individuals or firms in an industry. Accordingly, there is a free-rider "problem" with campaign contributions. Where individuals/firms benefit from others' giving, collectively they will contribute less than is in their collective interest.
4. Many people do not see a difference between corporate PACs and direct corporate giving. (The dissent argued that PACs and corporate PACs were a sufficient means for any association of people to give to candidates without the need to permit the fictional person of a corporation to also give money.) However, with corporations there is an agency problem: the people making the decision to make a political contribution (executives/board members) are not the people who have to pay for the contribution (shareholders). In contrast, the members of a PAC have to spend their own money. Allowing for corporate giving will increase the ability of the already influential to be more influential using other people's money.
5. The paper focuses on roll call votes. However, it should be well-understood that the most important lobbying occurs when a bill is being drafted (or not be drafted) in a committee. This simply cannot be accounted for in roll-call votes.
6. The paper assumes, "a basic prediction of rent-seeking models is that total government spending should explain total campaign spending." To the contrary, campaign spending should be proportional to the expected possible change in government spending or regulation over the next election cycle. If it is highly unlikely there will be large changes to a program or that portion of the budget does not impact business directly (say SS benefit distribution), that portion of the budget would have little influence on expenditures. In addition, seemingly minor regulatory changes could have large impacts on a company's or industries profits, but not have a significant influence on government revenue or expenditures.
7. There are good reasons why political contributions would not operate as an ordinary market. Politicians are constrained both by their constituents and the limits of their own knowledge. An individual can only learn so much about any given issue and can only support an industry position to the extent they won't be seen as controversial or corrupt. Lobbying and campaign contributions are also based on human relationships. Lobbyists of special interests often admit they seek a "seat at the table." If lobbyists are not purchasing marginal changes in legislation, but a "seat" to influence any legislation, the correct market is for the purchase of one of a limited number of "seats" each legislator has.
Posted by: Matt Matson at Jan 27, 2010 4:49:45 PM
Part time money
There's a movement to radically change California government, by getting rid of career politicians and chopping their salaries in half. A group known as Citizens for California Reform wants to make the California legislature a part time time job, just like it was until 1966.
The best place for freelance projects is freelancing sites. Freelancing sites are the best option for part time home based business and freelance jobs. There are many types of work available at freelancing sites……
Posted by: Antony at Feb 18, 2010 7:51:26 AM
