How Freakonomics Gets Campaign Financing Wrong

“Money On My Mind” is a monthly column by Jay Mandle. The views expressed here are those of the author, (not necessarily those of Democracy Matters or Common Cause), and are meant to stimulate discussion.

January 2006
By Jay Mandle

Freakonomics, the best-seller jointly written by the economist Steven L. Levitt and the journalist Stephen J. Dubner, is a dazzling display of the insights into the real world that can be achieved by using economic theory. (1) However, when the authors briefly turn to addressing the issue of campaign financing, their analysis is seriously incomplete. Because of this, their conclusion that money does not have an undue influence on elections should be dismissed.

The fact is that private funding in election campaigns has enormous influence. The fundamental problem of their discussion is that the authors entirely neglect the role that private money plays in determining who can run for office. Our financing system’s dependence on private contributions prevents people who do not have access to wealth from running for office. As such, a privately financed campaign system is both discriminatory and unfair.

Levitt and Dubner report on what is presumably an econometric analysis (one that cannot be evaluated however because it is neither provided nor cited). Levitt seems to have examined about 1000 Congressional races in which the same two candidates faced each other in subsequent elections. By selecting matched sets of races, the authors claim they are holding constant what they describe as the relative attractiveness of the candidates. They do so in order to independently examine whether changes in expenditures made a difference in the outcome of the races. Their conclusion is that the role of money has been exaggerated. They write, “some politicians are inherently attractive to voters and other simply aren’t, and no amount of money can do much about it”.

In Levitt’s and Dubner’s analysis, only “attractive” candidates are funded: either incumbents whose attractiveness can be assumed because they have already been victorious; or challengers whose participation in close races is thought to demonstrate their attractiveness. But none of this explains a crucial issue. Why, in the first place, do funders think it is important to provide either incumbents or challengers with money? What motivates contributors and what do they expect in return? When the authors do address this issue, however briefly, they are evasive. Their explanation is that contributions are provided because donors expect to “bask in reflected glory or receive some future in-kind consideration”.

Obviously that last euphemistic phrase obscures more than it reveals. But it indicates that even Levitt and Dubner recognize that funders expect to obtain something of value from politicians in exchange for monetary support. The existence of that quid pro quo of course is one of the reasons why we need to reform the campaign funding system. For in acknowledging that a “future in-kind consideration” will be available to the people who pay the candidates’ bills, Levitt and Dubner implicitly acknowledge that our political system is rigged to favor those wealthy enough to provide campaign contributions.

It should not be thought that this is only a question of corruption. Politics is about policies and programs. The outcome of the political process influences everything we do, from whether global warming is to be arrested to the question of how to reverse the rampant inequalities in our society. The relative handful of wealthy people who provide almost all of the money that allows politicians to run for office do so because they anticipate support for policies they approve of. They are investing in ideological soul-mates. In determining who can run for office, donors therefore possess the power to politically censor points of view with which they are not in agreement. They simply choose not to fund candidates with unacceptable ideas and in the process render those efforts untenable. The range of views that can make it to the political agenda is limited by the preferences of the donor class. If a politician cannot attract support, his or her ideas – no matter how smart – cannot obtain a hearing in the electoral arena. An analysis that fails to consider the power possessed by funders to shape our political discourse is seriously incomplete. But Freakonomics totally neglects that power.

Increasingly Americans have come to understand that with the present private campaign funding system, the most important problems facing this country are going unaddressed. Fixing this will require opening up the political agenda to fresh views. But that will occur only when a new system of campaign funding is agreed upon, one in which anyone with reasonable ideas has the opportunity to mount an effective campaign for office. The most likely way to achieve this diversity of candidates and ideas is a system of full public funding for office-seekers. With that, the veto exercised by wealth over the political dialogue will be broken, and we can get on with a truly democratic debate on how to proceed into the future.