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Money In Politics

Summary:
The silver standard, one hundred and Thirty pieces of Silver’s thought “In evaluating fundraising for congressional candidates, the model now places more emphasis on contributions received within the candidate’s state. Fundraising is a highly nationalized activity these days; Democrats in California and New York regularly contribute to Senate campaigns like that of Democrat Jaime Harrison of South Carolina, who raised a record amount of money in 2020 but nonetheless lost to Republican Sen. Lindsey Graham by 10 percentage points. As such, our analysis finds that a dollar received from within a candidate’s state is about five times as valuable as a dollar received outside of it in predicting the eventual election outcome.5 That’s why the model now

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The silver standard, one hundred and Thirty pieces of Silver’s thought

In evaluating fundraising for congressional candidates, the model now places more emphasis on contributions received within the candidate’s state. Fundraising is a highly nationalized activity these days; Democrats in California and New York regularly contribute to Senate campaigns like that of Democrat Jaime Harrison of South Carolina, who raised a record amount of money in 2020 but nonetheless lost to Republican Sen. Lindsey Graham by 10 percentage points. As such, our analysis finds that a dollar received from within a candidate’s state is about five times as valuable as a dollar received outside of it in predicting the eventual election outcome.5 That’s why the model now applies that ratio, multiplying any funds raised from voters within the candidate’s state by 5, when assessing which candidate has the fundraising edge.”

Big if true. This is an extremely important discovery (if valid). This is not the first time that I consider Silver not just a data nerd but an important contributor to political science. The reason is that the distinction between in-state donations and out-of-state donations can be used to identify the causal connection between money and political success.

Politicians clearly consider fundraising to be extremely, extremely important. This is unfortunate as it gives rich people more power than nonrich people, basically for the same reasons that bribery is outlawed (and the interaction clearly is partially legal bribery as explained very explicitly by Donald Trump and Betsy DeVos). Notably, presidential candidates in 2008, 2012, and 2016 were seriously hurt when things they said at fundraising events became public (“clinging”, “47%” and “deplorable”). Clearly, they feel they have to speak differently to donors and are willing to run risks to convince donors that they are special and are hearing what the candidate really thinks (also I think each gaffe was an effort to pretend to agree with a donor who had strong views about the other side as donors tend to do).

However, all of this is based on the assumption that campaign funds cause political success. The causation obviously could run the other way — popular candidates get support in the form of dollars and in the form of votes. Their popularity causes them to be elected. It also causes them to raise a lot of funds, which do not cause much. Successful fundraising is a signal, not a causal factor.

Silver reports an estimate that fundraising is 80% a signal and that just looking at the correlation of funds raised and electoral success would lead a fool to overestimate the effect of money on voters’ behavior by a factor of 5.

In-state fundraising is a sign of support within the state. Out-of-state fundraising is less of a sign of support by the people who actually vote in the election. A dollar is a dollar no matter it’s the origin

[extremely successful politician Vespasian said  “Pecunia non olet” — or “money doesn’t stink” ]

If money causes candidates to get votes, the origin of the money doesn’t matter. If popularity causes candidates to get votes and dollars, the origin of the money matters.

The 80% signal might be an underestimate. Out-of-state popularity should be a hint of something not wholly uncorrelated with views within the state.

The reason I am so excited is that I think US democracy would be more nearly functional if politicians weren’t so convinced that success in fundraising causes electoral success.

Robert Waldmann
Robert J. Waldmann is a Professor of Economics at Univeristy of Rome “Tor Vergata” and received his PhD in Economics from Harvard University. Robert runs his personal blog and is an active contributor to Angrybear.

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