Politics and Money... Hmm...

Of all the truisms about politics, one is held to be truer than the rest: money buys elections. Arnold Schwarzenegger, Michael Bloomberg, Jon Corzine- these are but a few recent, dramatic examples of the truism at work. (Disregard for a moment the contrary examples of Howard Dean, Steve Forbes, Michael Huffington, and especially Thomas Golisano, who over the course of three gubernational elections in New York spent over $93 million of his own money and won 4 percent, 8 percent, and 14 percent, respectively, of the vote.) Most people would agree that money has an undue influence on elections and that far too much money is spent on political campaigns.

Indeed, election data show it is true that the candidate who spends more money in a campaign usually wins. But is money the cause of the victory?

It might seem logical to think so, much as it might have seemed logical that booming 1990s economy helped reduce crime. But just because two things are correlated does not mean that one causes the other. A correlation simply means that a relationship exists between two factors- let's call them X and Y- but it tells you nothing about the direction of that relationship. It's possible that X causes Y; it's also possible that Y causes X; and it may be that X and Y are both being caused by some other factor; Z.

Thank about this correlation: cities with a lot of murders also tend to have a lot of police officers. Consider now the police/murder correlation in a pair of real cities. Denver and Washington, D.C., have about the same population- but Washington has nearly three times as many police as Denver, and it also has eight times the number of murders. Unless you have more information, however, it's hard to say what's causing what. Someone who didn't know better might contemplate these figures and conclude that it is all those extra police in Washington who are causing the extra murders. Such wayward thinking, which has a long history, generally provokes a wayward response. Consider the folktale of the czar who learned that the most disease-ridden province in his empire was also the province with the most doctors. His solution? He promtly ordered all the doctors shot dead.

Now, returning to the issue of campaign spending: in order to figure out the relationship between money and elctions, it helps to consider the incentives at play in campaign finance. Let's say you are the kind of person who might contribute $1,000 to a candidate. Chances are you'll give the money in one of two situations: a close race, in which you think the money will influence the outcome; or a campaign in which one candidate is a sure winner and you would like to bask in reflected glory or receive some future in-kind consideration. The one candidate you won't contribute to is a sure loser. (Just ask any presidential hopeful who bombs in Iowa and New Hampshire.) So front-runners and incumbents raise a lot more money than long shots. And what about spending that money? Incumbents and front-runners obviously have more cash, but they only spend a lot of it when they stand a legitimate chance of losing; otherwise, why dip into a war chest that might be more useful later on, when a more formidable opponent appears?

Now picture two candidates, one intrinsically appealing and the other not so. The appealing candidate raises much more money and wins easily. But was it the money that won him the votes, or was it his appeal that won the votes AND the money?

That's a crucial question but a very hard one to answer. Voter appeal, after all, isn't easy to quantify. How can it be measured?

It can't, really- except in one special case. The key is to measure a candidate against... himself. That is, Candidate A today is likely to be similar to Candidate A two or four years hence. The same could be said for Candidate B. If only Candidate A ran against Candidate B in two consecutive elections but in each case spent different amounts of money. Then, with the candidates' appeal more or less constant, we could measure the money's impact.

As it turns out, the same two candidates run against each other in consecutive elections all the time- indeed, in nearly a thousand U.S. congressional races since 1972. What do the numbers have to say about such cases?

Here's the surprise: the amount of money spent by the candidates hardly matters at all. A winning candidate can cut his spending in half and lose only 1 percent of the vote. Meanwhile, a losing candidate who doubles his spending can expect to shift the vote in his favor by only that same 1 percent. What really matters for a political candidate is NOT how much money you spend; what matters is who you are. Some politicians are inherently attractive to voters and others simply aren't, and no amount of money can do much about it. (Messrs. Dean, Forbes, Huffington, and Golisano already know this, of course.)

And what about the other half of the election truism- that the amount of money spent on campaign finance is obscenely huge? In a typical election period that includes campaigns for the presidency, the Senate, and the House of Representatives, about $1 billion is spent per year- which sounds like a lot of money, unless you care to measure it against something seemingly less important than democratic elections.

It is the same amount, for instance, that Americans spend every year on chewing gum.