Obama Donors As News

What motivates campaign donations?  Discussions of campaign finance reform are dominated by a private interest theory, that donations are in trade for favors.  Here donations in support of interests besides yours are bad news; they says the candidate has implicitly promised to help those interests at your expense.

The main alternative is a public interest theory, which says we donate to signal private info about candidate quality.  Under this theory people who get private info suggesting a candidate would be good at promoting the general public interest donate money to signal confidence.  Here campaign donations are good news.  Now consider that Big Donors Drive Obama’s Money Edge:

The record-shattering $150 million in donations that Sen. Barack Obama raised in September represents only part of [his] financial advantage. … [It] is compounded by Obama’s ability to continue to raise money through the election because he decided not to participate in the federal financing program. McCain opted in, meaning he received $84.1 million in federal funds to spend between the Republican National Convention and Nov. 4, and he must rely solely on the Republican National Committee for additional financial support. …

The Democratic Party created a separate committee to capture millions of additional dollars from individuals who had already given Obama the most the law allows and who had also anted up $28,500 to the Democratic National Committee. … The Committee … has become a vehicle for ultra-rich Democratic donors to distinguish themselves from the 3.1 million others who have put $600 million behind Obama’s presidential candidacy. … Only a quarter of [this] has come from donors who made contributions of $200 or less. … That is actually slightly less, as a percentage, than President Bush raised in small donations during his 2004 race. 

Obama supporters seem to have these alternatives:

  1. Reject the private interest theory, and thus reject campaign finance reform, or
  2. Accept the private interest theory, and
    • A. See Obama’s donors as an unusual aberration, or
    • B. Agree this is bad news, but see enough other good news about Obama, or
    • C. See this as good news as they share private interests with Obama’s rich donors.
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  • Stuart Armstrong

    Obama supporters seem to have these alternatives:

    What reason do we have for thinking that these are the only alternatives? My first guess would be that Obama supporters donate out of social solidarity and excitement; to feel part of an exciting, telegenic movement. I can think up several other semi-plausible reasons as well.

    Do you have evidence that people donate exclusively for public interest or private interest? Maybe a few interviews of small donors, coupled with some cunningly designed studies that measure the circumstances that encourage or discourage donnations? If not, restricting to those options seems gratuitous.

  • http://profile.typekey.com/barrkel/ Barry Kelly

    I think restricting the possible explanation to exactly one of the posed binary set is completely fatuous and very uninteresting.

  • http://hanson.gmu.edu Robin Hanson

    Stuart, the alternatives are to accept or reject the private interest theory. Unless some of the other theories you can think of offer good reasons to to limit campaign contributions, rejecting the private interest theory is rejecting campaign finance reform.

  • http://www.ciphergoth.org/ Paul Crowley

    It doesn’t seem implausible to posit that a large number of poorer donors each giving less might have interests more closely aligned with those of the majority of the country than a smaller number of richer donors giving more, and thus that the existing caps on donations from individuals are an effective way to make democracy better, and are proving so in this election cycle.

  • http://www.ciphergoth.org/ Paul Crowley

    Registration-free link for this story:

    http://www.cbsnews.com/stories/2008/10/22/politics/washingtonpost/main4538028.shtml

    $200 is much too low a threshold to distinguish richer from poorer donors. To a Presidential campaign, the big distinction is between those donors who immediately max out their donation and those who can’t afford to, so $2000 is a much more meaningful threshold to distinguish between different kinds of donors. I’d be interested to know what proportion of Obama donations come from donors are maxed out or nearly maxed out, and how that compares to other campaigns.

    I can tell you that it would take 260,000 maxed out donors to raise what Obama has raised, and he has 3.1 million donors, but I don’t know how much you can infer from that.

  • http://denisbider.blogspot.com denis bider

    I can see how a selfish agent can use money to influence a weakly contested election in his favor, but I don’t see how a selfish agent can do the same in a strongly contested election, such as the presidential one, to an extent that it would matter.

    You have significant leverage when your money is the deciding factor that gets someone elected, but you have much less leverage when you are only one among very many contributors.

    It seems as though private interest would dominate contributions in weakly contested elections, whereas public interest would dominate contributions in strongly contested elections, such as the presidential one.

  • http://denisbider.blogspot.com denis bider

    I can see how a selfish agent can use money to influence a weakly contested election in his favor, but I don’t see how a selfish agent can do the same in a strongly contested election, such as the presidential one, to an extent that it would matter.

    You have significant leverage when your money is the deciding factor that gets someone elected, but you have much less leverage when you are only one among very many contributors.

    It seems as though private interest would dominate contributions in weakly contested elections, whereas public interest would dominate contributions in strongly contested elections, such as the presidential one.

  • http://hanson.gmu.edu Robin Hanson

    Paul, given your assumptions it seems you should take Obama’s rich donors as bad news about Obama.

    denis, so you’d limit donations in “weakly” but not “strongly” contested elections? I’m not sure how we’d implement that.

  • http://hanson.gmu.edu Robin Hanson

    Paul, given your assumptions it seems you should take Obama’s rich donors as bad news about Obama.

    denis, so you’d limit donations in “weakly” but not “strongly” contested elections? I’m not sure how we’d implement that.

  • http://hanson.gmu.edu Robin Hanson

    Paul, given your assumptions it seems you should take Obama’s rich donors as bad news about Obama.

    denis, so you’d limit donations in “weakly” but not “strongly” contested elections? I’m not sure how we’d implement that.

  • http://hanson.gmu.edu Robin Hanson

    Paul, given your assumptions it seems you should take Obama’s rich donors as bad news about Obama.

    denis, so you’d limit donations in “weakly” but not “strongly” contested elections? I’m not sure how we’d implement that.

  • Roger, FCD

    Robin, you said “rejecting the private interest theory is rejecting campaign finance reform.” This is fallacious in that it excludes the possibility that one can be both for campaign finance reform AND perfectly willing to use the system as is to help ensure that one’s desire comes about.

  • http://brian-jaress.livejournal.com/ Brian Jaress

    What about the theory that people want to help the candidate win, so they give them money to spend on winning, not as a signal but rather as a tool for the candidate to use?

    I thought conventional wisdom was that small donors followed this “tool theory” (I don’t know the real name) while big donors were split between tool and private interest.

    Regardless of whether it’s conventional wisdom, you can’t just leave it out. For big donors, you should also include some kind of status theory. I’m told that many companies regularly donate the same amount to both sides.

  • http://profile.typekey.com/simon112/ simon

    Brian, the companies donating to both sides are presumably implicitly bribing or being extorted by politicians. Status theory would probably make more sense in the context of individual donors.

    Tool theory sounds like a variation on public interest to me.

    Roger: Robin, you said “rejecting the private interest theory is rejecting campaign finance reform.” This is fallacious in that it excludes the possibility that one can be both for campaign finance reform AND perfectly willing to use the system as is to help ensure that one’s desire comes about.

    It sounds like you are taking option 2.A – accepting the private interest theory while simultaneously believing it does not apply to Obama donors.

  • http://jewishatheist.blogspot.com JewishAtheist

    I can’t believe anybody thinks that donating $2,000 or less to a presidential candidate is going to earn any favors. People want to reform campaign financing because they are worried about favors given or expected for large donations.

    Also, it’s entirely reasonable to be against large donations in principle but willing to give or accept large donations given the current state of the rules. Why handicap yourself?

  • http://www.mccaughan.org.uk/g/ g

    Robin, I’m with Brian in thinking that what he calls the “tool theory” is a rather startling omission from your post; for my part, I have trouble imagining myself donating to a political campaign for any other (consciously held) reason. The “public interest” theory you propose seems very implausible to me. (I have no evidence, but then you also offered none.)

    Simon, what in Roger’s comment suggests that he thinks the private interest theory doesn’t apply to Obama donors? And: “Tool theory” seems quite different from Robin’s public interest theory to me; could you explain why you think it’s a variation thereupon?

    An article in Newsweek a couple of weeks ago which said that about half of Obama’s (then) $458M total came from sub-$200 donors. That’s obviously inconsistent with what the Washington Post is saying now, so someone is (or has been) lying; I wonder who. It’s also interesting that in Newsweek on 2008-10-04 it was suspicious and controversial and ominous that so much of Obama’s money comes from small donors, whereas in the Washington Post on 2008-10-22 it’s suspicious and controversial and ominous that so (unspecifiedly) much of Obama’s money comes from large donors. It’s almost as if the one constant thing is that something has to be wrong about Obama’s campaign.

    Which, for some reason, prompts me to speculate on what a remarkable coincidence it is how consistently Robin’s articles about politics and about politically charged topics seem to point to conclusions more favourable to the Republican than the Democratic platform. (Yeah, I know, “politics isn’t about policy”.) There would seem to be some sort of bias there, but it’s open to debate what it is.

  • http://hanson.gmu.edu Robin Hanson

    Brian and g, you don’t have to intend to send a signal for a signal to be sent. Sure you can donate to help a candidate because you think that will benefit you; the question is whether that is because it will help everyone or just people who share your interests. The first case is the public interest case, and the second is the private interest case.

  • Cyan

    Insofar as I have standing to comment on the American election (I’m Canadian), I say that my option is 2B. Come on, folks! This is a pretty small bullet for Obama supporters to bite.

  • Jeremy

    Why pose it in such stark terms? Could not different donors in the same dollar range be motivated in different ways? Why do I have to accept or reject either theory at the expense of the other? They both seem likely true to some extent.

    And you seem to have confused things further with your comment equating public interest with altruism – where does your original description say that the viewpoints of the people helped is what differentiates public from private interest?

  • http://www.mccaughan.org.uk/g/ g

    Robin, of course a signal can be sent without intention; but “we donate to signal” (which is what you wrote) implies intention. (There are varieties of intention — see evolutionary psychology, passim — hence the words “consciously held” in what I wrote.)

    If by “public interest” you mean simply “donating to X’s campaign because you think X’s election will be in the public interest” then, sure, I expect plenty of people do that, but I am unable to see how that is the same thing as “we donate to signal private info about candidate quality”.

    Similarly, “donations are in trade for favors” is prima facie quite different from “people donate to X’s campaign because they think X’s election will be in their interest”, just as when I buy a book I do so because I think having the book will be useful or pleasing rather than because I think that buying it will make the author’s subsequent books fit my tastes better.

  • http://www.ikeepdating.blogspot.com Missy

    I like McCain and Palin. But I enjoy the passion of everyone on the site. I just think if McCain had refused public funds he would have a better chance to turn this economy around. Palin would make a great VP. I would love to see that.

  • eric falkenstein

    I had a legal issue, where I was being charged with taking trade secrets and the plaintiff got to see all my hard drives (terabytes of info back to 1993) and after a couple years would specify the secrets I took, at which time I would then have to defend myself. I told the court, this is costly (no one would hire someone with stolen information because they too would be liable, and I could not prove I didn’t have such information because I had only a vague idea of what the secret could be–something related to finance). Now, many states have laws that prevent plaintiffs from doing this, because it’s pure harassment, and biased towards finding ‘something’ ex post, a classic fishing expedition, whose cost in process is the desired endgame.

    I contacted my state senator and state representative. Not to affect my case, but as this was clearly a bad law in our state, and the federal courts, and many states, had explicit statutes preventing it, I wanted to argue these statutes should exist in our state too, there is no reason not to have these ‘good laws’ in our state. Both told me, in effect, this was not an issue with any chance of getting through. I have a feeling, if I had given them $2000, they would have been more amenable. After all, somehow such statutes got into other states, and it wasn’t out of some greater ‘big picture vision’ by their legislators.

    If I were really rich, I’d be paying regularly, because you will find yourself in court, and you are foolish to think justice is blind.

  • http://profile.typekey.com/simon112/ simon

    The post is about signalling; it makes no difference to the argument of the post whether or not the signalling is the primary purpose of donation or merely a side effect.

    Simon, what in Roger’s comment suggests that he thinks the private interest theory doesn’t apply to Obama donors?

    I interpreted his comment incorrectly. My apologies.

  • http://profile.typekey.com/simon112/ simon

    The post is about signalling; it makes no difference to the argument of the post whether or not the signalling is the primary purpose of donation or merely a side effect.

    Simon, what in Roger’s comment suggests that he thinks the private interest theory doesn’t apply to Obama donors?

    I interpreted his comment incorrectly. My apologies.

  • http://entitledtoanopinion.wordpress.com TGGP

    In Freedomnomics John Lott argued that campaign contributions don’t have much effect on the outcome of an election or the behavior of the candidate once in office. It reminded me of your colleague Bryan Caplan’s attack on the self-interested rational voter theory, although it occupied only a small portion of his book rather than (as with Bryan) the entire thing.

  • http://www.mccaughan.org.uk/g/ g

    Simon, this post does (at least) two things: it makes an argument based on signalling, and it makes claims about why people donate to political campaigns. Are you suggesting that the latter should be ignored because it’s … how shall I put this? … “merely a side effect”?

    I expect the Powers That Be will notice for themselves, but just in case: “Missy”‘s comments above are not only content-free but also spam.

  • http://brian-jaress.livejournal.com/ Brian Jaress

    Robin, you very clearly set up signaling as a motive.

    You also very clearly described “private interest” as “in trade for favors.” There’s a world of difference between buying favors and donating to someone who’s already planning to benefit your group at the expense of other groups.

    Your post really looks like a critique of a candidate disguised as an analysis where the candidate is just a data point. Why contrast Obama and Bush? From what I’ve heard, in terms of total amount and reliance on small donations, they’re near each other and away from everyone else.

    The top two fund-raisers are also the top two in small donations. Doesn’t that seem a little more significant than which one is slightly more or less than the other?

  • Unnamed

    The obvious solution is that people do trade donations for favors if they can, but $2300 isn’t nearly enough to buy a favor from a President.

    We could count this as a version of 2a, where the “aberration” is that Obama’s donors are required to follow campaign finance laws that cap donations at $2300. Or, we could count it as a variation on 1, where we reject the theory that most donations are attempts to buy favors, but still support limits on campaign financing because, in the absence of those limits (which are market-destroying price controls), there will be enough donations-for-favors to be a problem. The non-favor-seeking donors’ motivations aren’t essential here, but they’re probably pretty similar to the motivations of people who donate to other charities & issue groups.

  • Stuart Armstrong

    Stuart, the alternatives are to accept or reject the private interest theory. Unless some of the other theories you can think of offer good reasons to to limit campaign contributions, rejecting the private interest theory is rejecting campaign finance reform.

    Ah, I see; you should have made that point much clearer in your post. The simplest interpretation that I have is that private interest theory is more likely to be correct for large donations. From the point of a politician, too, it is much easier to do a small specific favour that greatly aids one donor, than a large favour that slightly aids lots of small donors at once. Reciprocity, threats, etc… are also much easier for a single large donor.

    I’m not entirely sure what “campaign finance reform” means in an american context, but the implications of the above would be that only large donations are a problem – or donations from a large organised class (say, trade unionists) that share similar interests.

    The obvious legislative fix would be to rule out large donations (easy to do) and to rule out organised small donations (rather more tricky; the first step would be to forbid mass donation campaigns by organisations other than political parties). No idea what the current legal situation is in the US at the moment (and the second fix has some quite troubling freedom of speech implications).

    Brian and g, you don’t have to intend to send a signal for a signal to be sent.

    Sorry there Robin, but your post clearly says “which says we donate to signal private info about candidate quality”, implying that donors were intending to send that signal.

    Paul, given your assumptions it seems you should take Obama’s rich donors as bad news about Obama.

    I would read it that way.

  • http://profile.typekey.com/simon112/ simon

    Are you suggesting that the latter should be ignored because it’s … how shall I put this? … “merely a side effect”?

    Well, perhaps one might not ignore it, but it should be acknowledged that it’s not relevant to the main point of the post.

    Really though, I doubt Robin intended the words “to signal private info about candidate quality” to necessarily mean that the public interest theory excluded the tool theory.

  • gwern

    Missy: I think McCain handicapped himself there, too. Once Obama turned his back on his promise to use public financing like McCain (something that really stuck in my craw, as much as I generally like Obama), continuing to use public financing was just hurting his chances for no benefit. I wouldn’t be surprised if after the election, McCain supporters draw up a list of how McCain sabotaged himself because of confused notions of honor and decency (‘1) didn’t abandon public financing when Obama did; 2) didn’t pursue the Rv. Wright angle; 3) …’)*.

    *(It’ll be too bad in a sense, since you just know Republican strategists are going to conclude that they didn’t go negative or critical enough, and the next campaign is going to be that much more unpleasant to watch.)

  • http://www.mccaughan.org.uk/g/ g

    Brian, I’m not sure it’s exactly a *critique* of a candidate; Robin’s post doesn’t say anything about Obama’s policies or character or competence or anything. But it does seem that an unacknowledged purpose of Robin’s post, as of several of his political posts, might be to help the Republicans’ chances and/or hurt the Democrats’. Though I’d have thought he might have more effective ways of doing that, so perhaps instead we should ask what he’s signalling to whom…

  • Jeremy

    “(‘1) didn’t abandon public financing when Obama did; 2) didn’t pursue the Rv. Wright angle; 3) …’)*. ”

    Didn’t suggest he supports terrorists? Oh wait…