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. Ben says:

    You are truly fascinating and clever guys, but sometimes it seems like you try too hard to come up with novel or counterintuitive results and in the process fly right past obvious facts. In this case, in making their claim that fundraising ability is not a significant factor in winning elections, Dubner/Levitt completely ignore the initial “Invisible Primary” phase of the campaign when election day is still far off and would-be candidates need to convince donors to give them money so they can mount a campaign in the first place. No money, no campaign, no electoral victory — how’s that for a causal model? And unless you think those early donors are representative of the voting public as a whole, what does that say about our democratic process? (I also agree with many of the points already made by previous commenters.)

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  2. Jon says:

    You can’t get elected if nobody knows who you are. Money buys ad time which gets name recognition. That’s where the significance of money is most important, and the threshold of spending on the national stage is very very high. Without money, a no-name candidate has almost no chance of getting elected.

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  3. Brian Dirk says:

    Could it be said that Fundraising for the primaries is a sort of prediction market for the early elections? Obviously the later elections are swayed by the results of earlier elections – who would vote for someone who hasn’t won or got close on earlier elections? But it would be interesting to hear if these fundraisers work like a prediction market.

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  4. Seth says:

    I thought this was well-known. How much money is spent is not as important as how much money is raised and the source of that money. It makes sense that a candidate able to raise a lot of money from smaller donations from lots of people is a good indicator that candidate will get a lot of votes.

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  5. Will says:

    Mr. Dubner,
    You fall to some of the common fallacies I generally entrust you to spot.
    1) Primaries are not elections. Mobilizing primary voters is an entirely different task compared with mobilizing a general electorate. In recent history, about 95% of congressional ELECTION winners outspent their opponents – and 2-3% of the upsets see a small difference on dollars spent by both sides.
    I don’t believe there has been a significant study on the effect of primary spending in presidential races in recent history. And as Craig pointed out before me, your statistics are representative of House races. But if we want to apply a general principle, primary voters are generally consistent voters (i.e. they turn out every year), are at generally somewhat supportive of each of the primary candidates, but holds stronger views than the average citizen. The general electorate has independents and opposition party voters that can be swayed. Money is needed to reach out to these potential voters. Primary voters seek out information themselves, so spending is less effective.

    2) Your coauthor’s statistic seems extremely flawed.
    a) Percentage of the popular vote does not account for voter turnout. But the more one spends, generally, there greater the voter turnout is. That is the true measure of the efficacy of spending (save shooting the moon by driving up voter turnout by the opposition (with inflammatory ads/views or other poor decisions).
    b) Candidate spending is like an arms race – the more one spends, the more his opponent will. Why? High spending elections are generally hotly contested elections (why spend the money if you’re going to win anyway? You can always save it for later). Both candidates high spending results in high voter turnout on BOTH sides, and thus a smaller margin of victory (voter share).
    c) There is a well documented phenomenon of diminishing returns in campaign spending (i.e. the more you spend, the less effect it has). Should a campaign cut their spending in half, it by no means would result in a reciprocal loss of voter share.

    3) Your observation that attractive candidates also attract donations is true, but you are missing a key element: campaign donations are often seen as an investment. You are investing in the candidates victory. But investments have risks – in this case the candidate losing. If you see that your candidate has already raised lots of money, it is a safer investment (with less return, as always). If your candidate is not fundraising well, it is seen as a risk, like investing in a less competitive company (one that seems doomed in the near future will see a sell off). So large donations can buy an election by making the opposition appear to be a losing investment to the many smaller potential opposition donors, making competition unlikely if not impossible.

    There is a reason that campaign spending has proliferated so much in the past few decades. It works! The correlation may not prove 100% causation, but it certainly suggests a significant amount, more than I believe you give credit for.

    Mr. Ryssdal, your convictions are accurate. Best of luck in the world after Market

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    • Jarjar says:

      The neat thing about the paper is that Levitt controlled for opponent spending when he crunched the numbers. (though I’ve no idea how he got enough data to do this). Turns out it’s not really an arms race and the bang you get for your buck isn’t changed by how much money your opponent is blowing through.

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  6. twobeef says:

    Let’s say I have a local election where both candidates only have $5,000 each to spend on ads. A major donor decides he needs something from government here, so he donates $40,000 to the campaign. By your equation of “doubling campaign dollars equals +1% vote,” and I’m assuming that each 1% gained for one candidate is a 1% loss for an opponent, you’ve just gained a six point swing in a favorable direction. And if you’re trying to start a major business here, you may have just won an election for your guy with kickbacks on the way.

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  7. Jarjar says:

    Hard to argue with Levitt’s article. The big shocker is that his sample of rematch elections is representative of all congressional elections. I’d have thought that the only candidates willing to try again after losing to the same person from last election would be who don’t know when to hang up their hat. But looks like they’re just like any other politician.

    One caveat to keep in mind for anybody reading this who thinks they can make a successful bid for a house seat on $50. The paper may say that an extra $100 grand only gets you somewhere between 0.1% and 1.0%, but you still need a nice bank roll for these numbers apply to you.

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  8. John Mulholland says:

    I think it would be fascinating to look at how the Utah Caucus system makes money much less relevant, especially as we have removed several incumbents.

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