Does Money Really Buy Elections? A New Marketplace Podcast

Mitt Romney in New Hampshire Jan 7, 2012. (Photo: WEBN-TV)

Mitt Romney won big in New Hampshire, but his opponents are vowing to push on in South Carolina. Which means stepping up their pleas for cash. In an e-mail to supporters, Rick Santorum wrote:

We must show real progress tonight and redouble our efforts … That’s why my campaign launched the “Game On” Moneybomb, and why we need your help right now. As you already know, we are facing serious and well-funded opposition for the nomination.

That’s the kind of language that confirms one of the biggest truisms in politics: money buys elections.

But how true is that truism?

That’s the question Kai Ryssdal and I tackle in our latest Marketplace podcast. (Download/subscribe at iTunes, get the RSS feed, listen live via the media player above, or read the transcript.)

In a paper that tried to isolate the effect of spending in campaigns, here’s what Steve Levitt found:

LEVITT: When a candidate doubled their spending, holding everything else constant, they only got an extra one percent of the popular vote. It’s the same if you cut your spending in half, you only lose one percent of the popular vote. So we’re talking about really large swings in campaign spending with almost trivial changes in the vote.

What Levitt’s study suggests is that money doesn’t necessarily cause a candidate to win — but, rather, that the kind of candidate who’s attractive to voters also ends up attracting a lot of money. So winning an election and raising money do go together, just as rain and umbrellas go together. But umbrellas don’t cause the rain. And it doesn’t seem as if money really causes  electoral victories either, at least not nearly to the extent that the conventional wisdom says. For every well-funded candidate who seems to confirm that money buys elections (paging Michael Bloomberg), you can find counterexamples like Meg Whitman, Linda McMahon, Steve Forbes, and Tom Golisano.

And take a look at the Iowa caucuses last week. Rick Perry was the top spender, buying $4.3 million worth of ads — which got him only 10 percent of the vote. Santorum, meanwhile, spent only $30,000 on ads (the least of any candidate) and practically tied Romney — who spent  $1.5 million this time around on Iowa ads, versus $10 million in 2008.

In this podcast, you’ll also hear from one former big-spending presidential candidate who’s now convinced that money isn’t what matters most: Rudy Giuliani.

GIULIANI: I tell candidates, it’s always better to be the candidate with the most money, but you can win without it.

Here’s where you can listen to Marketplace on a station near you.

Audio Transcript

Kai RYSSDAL: And so it’s done, the New Hampshire primary. Mitt Romney had it wrapped up pretty early last night. So all the who got how many votes and what does it all means in the grand political scheme of things, has been done to death by now. So we’re not gonna.


RYSSDAL: We’re going to do the story our way - campaign finance a la Freakonomics. Our once-every-couple-of-weeks chat with Stephen Dubner, the co-author of the books and the blog of the same name. It’s all about the hidden side of everything. Hey Dubner, welcome back.

Stephen DUBNER: Hey, Kai, thanks for having me. So we’re all wildly surprised that Mitt Romney won big last night, aren’t we?

RYSSDAL: Yes, yes. Wildly surprised.

DUBNER: And it’s just as obvious why Romney’s been winning, right? At least if we listen to his rivals. Here’s Newt Gingrich, who came in a distant fourth place last night:

RYSSDAL: All right.

GINGRICH CLIP: Now we have to go back and, uh, figure out how you run in an environment where you clearly have two guys who are gonna say things that aren’t honest and who are going to spend millions of dollars doing so.

DUBNER: And here’s Rick Santorum, who finished fifth in New Hampshire:

SANTORUM CLIP: I’m a little behind the curve in the sense that Gov. Romney has been spending a lot of money.

RYSSDAL: Well, it’s not like they’re wrong right, Dubner? I mean, Romney does have deep pockets. Just today, right? His campaign said they’ve raised almost $24 million in the last three months, in the last quarter.

DUBNER: That’s right, and so that makes more than $50 million for 2011.  And in previous campaigns that he’s run for senator, governor and president, Romney’s spent $54 million of his own money. But you know who else put a lot of money into their campaigns? Let me give you a few, uh, lovely names: Steve Forbes ... Linda McMahon … Meg Whitman. And you know what? None of them won anything, did they?

RYSSDAL: O.K., so this is the hidden side of everything part, is that where we’re going here?

DUBNER: This is the hidden side of everything. Here’s what I want to tell you today, Kai: Money does not buy elections. At least nowhere near what we’ve always been told. Here’s Steve Levitt, my Freakonomics co-author. He once conducted a study of congressional elections, where he tried to isolate the effect of campaign spending from all the other factors:

Steve LEVITT: When a candidate doubled their spending, holding everything else constant, they only got an extra one percent of the popular vote. It’s the same if you cut your spending in half, you only lose one percent of the popular vote. So we’re talking about really, really large swings in campaign spending with almost trivial changes in the vote.

RYSSDAL: All right, here’s the thing: Steve Levitt, very nice guy, knowledgeable economist...sadly though, I don’t believe him. Cause if you look, it’s always the guy with the most money who wins.

DUBNER: You’re right; it is almost always the guy with the most money who wins. That is what we know as correlation without cause. So let me explain: When it’s raining out, everybody’s got an umbrella, we know that. Those things are correlated. But you know what, the umbrellas don’t cause the rain, we know that too. Here’s the thing: Winning an election and raising money do go together, but it doesn’t seem as though money actually causes the winning either. It’s just that the kind of candidate who’s attractive to voters also ends up, along the way, attracting a lot of money and the losing candidate, nobody wants to give money to that guy.

RYSSDAL: Right, it makes sense, but what happens when you tell politicians this? I mean, this isn’t a message they don’t want to hear, right?

DUBNER: Yeah. No politician’s going to step forward and say, “Please don’t send me your money; I do not want it; I will not use it.” You know, look, campaign fundraising has become an arms race and as in any arms race, the first casualty is logic, right? But let’s look past new Hampshire and back to Iowa last week. Here’s some good evidence for these politicians. Rick Perry spent $4.3 million on advertising there -- nearly triple what Romney spent -- and got only 10 percent of the vote. Rick Santorum, on the other hand, spent only $30,000 for ads in Iowa, and he lost to Romney by just eight votes. So, so much for the money argument.

RYSSDAL: All right, so far this is a lot of you talking about politicians and money -- did you actually talk to any politicians about money?

DUBNER: Well, you think they’re going to come out and say, “Nah, I don’t need the money.” I did find one former politician. At least he says he’s former. You remember Rudy Giuliani, I gather yeah?

RYSSDAL: I do: twice the mayor of New York City and for like five minutes in 2008, the front-runner.

DUBNER: That’s right. Well, I asked him if money buys elections:

Rudy GIULIANI: So campaign spending doesn’t mean anything, because you can spend it incorrectly. I have lost an election by spending it wrong. I won an election, my first election that I won, I won when I was outspent $16 million to $2 million, in a Republican primary. We can see recently in Mike Bloomberg’s election. Mike Bloomberg spent $100 million dollars! And he won by 4 percent!

DUBNER: So I asked Giuliani what advice he would give to candidates:

GIULIANI: I tell candidates, it’s always better to be the candidate with the most money, but you can win without it.

RYSSDAL: So to finish the sentence, it’s better to be the candidate with the most money because that means you’re the most popular, right? People like you the best.

DUBNER: That’s exactly right. It’s like saying it’s better to be the radio show host with the most money, but really, what you want to be is the most popular.

RYSSDAL: Sometimes that goes together, I don’t know.

DUBNER: Sometimes it does.

RYSSDAL: Stephen Dubner, is the website. He’s back in a couple of weeks. Dubner, we’ll see ya.

DUBNER: Thanks, Kai.

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  1. Eric M. Jones. says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 8 Thumb down 31
  2. John says:

    Does money buy elections? Ok, maybe that’s inconclusive. How about policy? Does money buy that? That seems like the more relevant question.

    Well-loved. Like or Dislike: Thumb up 52 Thumb down 2
  3. Craig says:

    The study in question seems to be done on Cognressional elections, furthermore on elections for the House of Representatives. You are applying those results to a national election. The differences between the two types of elections in terms of media and communication with voters could have a signficant effect on the usefulness of money in an election.

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  4. aepxc says:

    Can we say that money is necessary but not sufficient? Spending a lot will not guarantee and election win, but spending a only little (e.g. people love you and give lots of money to your campaign, but you just give that money to charity) will very likely prevent you from being elected.

    Well-loved. Like or Dislike: Thumb up 8 Thumb down 1
    • Dan says:

      I think that is a fabulous idea. Canidates raise money and instead of spending it telling what great people they are they simply go out and be great people by helping charities out.

      oh and I agree with that other thing you said.

      Thumb up 4 Thumb down 1
  5. Marcus Lynn says:

    Money matters more than 1% of the vote the study claims. The biggest impact of money is scaring off quality opponents. This is why most incumbents in Congress rarely face a serious challenge–but when their seat cones open we often see a rather competitive race. Money helps INCUMBENTS enormously.

    Thumb up 6 Thumb down 2
  6. Quinton says:

    What about the Super PAC phenomenon? Candidates no longer have to moderate their message because someone else can do the dirty work. It’s been speculated that’s one of the reasons Rick Perry got so little out of the money he spent in Iowa, all his declared advertising (“Rick Perry approves this message”) was positive, while he didn’t have the Super PAC to throw the mud (the way Mitt Romney may or may not have). Sounds like a nice Phd dissertation for some Poly Sci grad student

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  7. Marcus Lynn says:

    Also…Regression analysis is vulnerable to missing data issues. Also it only takes 2-3 rich but stupid candidates to weaken the statistical findings.

    Thumb up 3 Thumb down 2
  8. b goldstein says:

    I have a ton of questions about this article:

    The 1% number, does it mean candidate a goes up from 49.4% to 50.4% or A goes to 49.9% and B goest to 50.1%

    Is this true in primaries of multiple candidates — whereas if there are seven candidates splitting the votea 1% is more significant.

    Does this apply throughout the candidacy or is there a point which is more important (i.e. making the candidate a household name)?

    If I raise 1k and my opponant raises 128k does that mean that he will be 7% higher (statistically)?

    Thumb up 3 Thumb down 1