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Saturday, January 23, 2010

Does money affect elections and have political influence? by Dr. Doulas O. Walker

Newspaper article: Court decision opens floodgates for corporate political spending
“The Supreme Court on Thursday opened wide new avenues for big-moneyed interests to pour money into politics in a decision that could have a major influence on the 2010 midterm elections and President Barack Obama’s 2012 reelection campaign.
The long-awaited 5-4 decision overruled all or parts of two prior rulings by the court that allowed governments to restrict corporations and unions from spending their general funds on ads expressly urging a candidate’s election or defeat. But the decision upheld disclosure requirements for groups like the one that brought the case.”

Web Site Politico (21 January 2010).

Academic article: Why is there so little money in U.S. politics?

“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.”
Stephen Ansolabehere, John de Figueiredo and James M. Snyder, Jr., "Why is there so little money in U.S. politics?" Research Paper, Massachusetts Institute of Technology (June 2002).

The authors are all professors at MIT.

Gordon Tullock (1922-) was for many years Professor of Law and Economics at George Mason University. He is a prolific author of more than 150 papers and 23 books on a variety of economic and legal subjects but is best known for his work in public choice theory, which uses modern economic analysis to study questions of political science. Not a trained economist, he nonetheless received an honorary Ph.D. in economics from the University of Chicago, where he received his J.D., and has served as President of several professional economic associations. He was recognized as a Distinguished Fellow by the American Economic Association in 1998. Many feel (not least, Tullock himself) that he should have shared in the Nobel Prize in economics received by James Buchanan in 1986 for work on the contractual and constitutional bases for economic and political decision-making. This slight is attributed by some to the fact that Professor Tullock does not hold an earned Ph.D. in economics and is a modern conservative.

The common perception of American politics is that money has tremendous influence on the political process and campaign fundraising is seen as warping public policy in the direction of those financing election contests, as reflected in the news article above. It is true that large -- better, huge -- amounts of money are thrown into the election and legislative process by special interests and their lobbying activities are intense and at times corrupt. But Tullock's work and studies carried out of political financing challenge the assumption that money in politics has an inordinate influence on public policy.

In economic theory, there are two problems with the argument that of inordinate influence. First, theory would suggest that, given the value of the stakes involved in the political process, literally hundreds of billions of dollars in government spending, much more money should be involved. There are of course legal limits to how much can be contributed in a political race. But there are so many ways around these restrictions it still remains surprising that much more money is not involved in politics.

Second, given the high returns to the money actually involved in supporting political activity, the question arises as to why many more firms, industries and individuals are not participating in lobbying efforts and bribing public officials. After all, a small, really insignificant, investment in lobbying (or a small bribe) can result in a multi-billion dollar contract. There are no barriers to entry to lobbying, so given the potential returns one would expect much larger campaign contributions to be made and much more lobbying to take place.

One reason put forward for the limited influence of special interests is the relatively large role played by individuals in the political process. People give to political campaigns for many reasons and few if any are expecting direct benefits. Many are involved merely to express their political preferences and participate in the social functions surrounding political events and candidates. Both supporters and candidates are also sensitive to perceptions of corruption, and candidates and office holders making decisions do not want to appear biased to special interests or unduly unfair. Campaign contributions of individuals, although small individually, when taken together are significant and tend to weaken the leverage of rent-seeking donors. Wealthy contributors may well seek to influence general policies, as contrasted with rent-seeking donors wanting special favors, but may have the same broad policy preferences as more modest donors. Also, statistical studies seem to show that the level of campaign contributions is related to the general level of income in an area or state, not the level of government spending, which would support the idea of a limited role for money in politics.

In the grand scheme of politics it is quite possible that interest groups give a little and get a little, but the relationship between what they give and what they get is not direct and not certain. But overall, expenditures by one side in a policy debate generate expenditures by the other and they tend to cancel each other out. In the end, the real role of money is to educate and persuade and its influence gets tempered as the policy debate continues.

There is also evidence that money buys access, not policy decisions, and access affects the edges of a policy decision, not the core. Interest groups are also aware that it is cheaper to simply support candidates that already favor the positions they would like adopted. Why donate a lot of money to influence directly someone who, were he elected, would vote in the way you desire with or without your money?

It should also be noted politicians look to avoid controversial votes (e.g., the collapse of health care reform in the U.S. should be no surprise) and in the end make marginal adjustments, not big changes.

Clearly, money is important in politics and money has considerable influence on politics. But one should not rush to the judgment that the entire process is corrupt. Studies by Tullock and others show that donations to an individual legislator do not change that legislator's voting behavior. Party ideology and district interests and preferences of the legislators are far more important determinants of how they vote than campaign contributions.

The effect of today's Supreme Court decision on public policy is likely to be far less than most people believe.

Thanks to Tyler Cowen of Marginal Revolution for the pointer to the MIT article.

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