“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.

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.

@ David Wright: you forgot to mention that you don't even OWN a TV!

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.

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?

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?

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".)

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.

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.

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.

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.

@steve sailer -- and your point is?

"@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?"

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.

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?

@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.

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.

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.

http://en.wikipedia.org/wiki/American_election_campaigns_in_the_19th_century#Financing_parties

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.

Yes, the real mystery is not why our legislative branch is a "parliament of whores" and extortionists, but rather why they're so cheap.

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.

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!

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.

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.

I don't think the money are few.I bet that the politicians tell us that the money are few so they can do different things.There for I guess we need to start put our minds to work and find something which can bring us money without being dependent on government.I found something like this.Easy Money

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