pareto improving campaign finance policy this paper argues that campaign finance policy in the form of contribution limits and matching public financing can be pareto improving even under very optimistic assumptions concerning the role of campaign advertising and the rationality of voters the optimistic assumptions are that candidates use campaign contributions to convey truthful information to voters about their qualifications for office and that voters update their beliefs rationally on the basis of the information they have seen the argument also assumes that campaign contributions are provided by interest groups and that candidates can offer to provide policy favors to attract higher contributions

the impact of campaign expenditures on political competition in the french legislative elections of 1993 we use regression analysis to estimate the effect that campaign money had on the votes of challengers and incumbents in the 1993 elections to the french legislative assembly incumbent candidates can at best expect to win 1 01 of the popular vote for each extra franc they spend per registered voter in their district challengers can expect to win at least twice as much as this simulations show that if campaign spending ceilings were halved incumbents would have gained an extra ten percent of the popular vote over their closest challenging rivals the regression analysis also suggests that voters react negatively to candidates who rely heavily on their own money for their outlays and reward candidates who rely on contributions from private individuals these results suggest that campaign spending ceilings may inhibit political competition and that voters may resist a candidate who relies on narrow sources of funding

campaign spending and senate elections 1978 84 this paper uses a sample of recent senate election results and estimates vote equations that show challenger spending hurts and incumbent spending helps incumbent re election while both types of spending have diminishing returns the effects are asymmetrical challenger spending is more productive at lower levels of spending but incumbents can spend greater amounts more profitably than can challengers these results can explain why senate incumbents spend money why they typically outspend their challenger and why incumbents who can outspend their challenger would tend to be against spending limits or public financing

patterns of political action committee contributions to the 1980 campaigns for the united states house of representatives our most robust findings can be summarized as follows u the spatial location of candidates is important in determining the pattern of campaign contributions many pacs and all pac types except agricultural cooperatives contribute in a manner highly consistent with a simple spatial model there is little giving by an individual pac to candidates at opposite ends of the dimension there is no instance of a pac contributing to incumbents located at each end of the dimension and only to challengers of incumbents in the middle or vice versa contributions against incumbents i e to challengers of incumbents are often spatial mirror images of a pac s giving in favor of incumbents though this statement must be tempered by the fact that the large majority of pacs give relatively little money to challengers few pacs give money to both challenger and incumbent in the same race giving in open seat races is if anything even more spatially consistent than in races where an incumbent is running while many individual pacs exhibit patterns of contributions consistent with the ideological dimension the data for 1980 suggest that there was no particular bias toward one end of the spectrum or the other taking all pacs together essentially eliminates the effect of the location variable in the regressions giving in races with an incumbent on the ballot was overall balanced across the dimension there are however ideological distinctions even among groups as broadly defined as the fec categories for the corporate labor and trade membership health groups the incumbent s location on the ideological dimension is an important explanatory variable even when other factors specific to the incumbent are considered of course ideology matters to nonconnected groups too they just tend to balance each other off in positive money though not in negative on average corporate and trade groups favor conservative incumbents and opponents of liberal incumbents labor pacs do the opposite except for labor pacs party is not an important variable in explaining positive contributions once the incumbent s voting record is taken into account for contributions to challengers however party is significant corporate nonconnected and trade pacs gave to opponents of democrats labor pacs did the opposite the expected closeness of the election is always an important variable both positive money and contributions to challengers increase as the probability of a strong challenge increases this suggests that pacs are sensitive to the potential impact of contributions on electoral outcomes although committee assignments have some importance in explaining campaign contributions by pac categories their net effect is never strong except in the case of cooperatives this is almost certainly because of the diversity of interests represented by pacs in every category except coops which are essentially one giant pac of milk producers we would surmise that competitive forces in the house result in most members having a portfolio of committee assignments that provides maximum advantage vis a vis each member s constituency it would therefore be surprising if overall committee assignments by themselves pointed to significant differences in generating campaign resources being chairman or ranking minority member of a committee has no impact on campaign contributions other things equal seniority as measured by number of consecutive years in office has a complicated role for positive contributions seniority has a nonmonotonic effect with contributions being higher for the most junior and most senior members ceteris paribus than for incumbents with average seniority negative contributions however are not significantly related to seniority

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

computational economics and economic theory substitutes or complements abstract this essay examines the idea and potential of a computational approach to theory discusses methodological issues raised by such computational methods and outlines the problems associated with the dissemination of computational methods and the exposition of computational results we argue that the study of a theory need not be confined to proving theorems that current and future computer technologies create new possibilities for theoretical analysis and that by resolving these issues we will create an intellectual atmosphere in which computational methods can make substantial contributions to economic analysis

estimating the effect of campaign spending on senate election outcomes using instrumental variables o examine the traditional view that challenger spending is more effective than incumbent spending 7 i reestimate the effects of spending using instrumental variables that affect a candidate s ability to raise campaign funds such as candidate wealth levels hhen the endogeneity of candidate spending levels is properly taken into account the marginal effects of incumbent and challenger spending are roughly equal in contrast to previous research showing that because of higher marginal returns to challenger spending the incumbent s spending advantage cannot explain high incumbent reelection rates this article shows that in an average senate election the incumbent s spending advantage yields a 6 increase in the incumbent s vote share that incumbent spending wins elections has direct implications regarding the consequences of campaign finance reform my findings imply that equalizing spending levels may significantly increase incumbent defeat rates and caps on candidate spending may improve the chances of challengers in american congressional elections incumbents routinely win reelection even in the 1994 republican landslide change in the partisan makeup of congress occurred mainly through open seats switching from the democrats to the republicans a common explanation for high congressional reelection rates is the large campaign spending advantage enjoyed by incumbents it is widely believed that challenger spending is very important but there is surprisingly little evidence in the academic literature that incumbent campaign spending has an important effect on congressional election outcomes in light of the substantial effort incumbents devote to fundraising as well as some nagging methodological questions about existing academic studies the effect of incumbent spending on election outcomes remains an unresolved issue accurately measuring how incumbent spending leads to votes is of obvious importance politicians want to win elections and so if money matters then this will influence their behavior if campaign spending effects are trivial then concerns about politicians being

flexing muscle corporate political expenditures as signals to the bureaucracy when corporations and their employees spend money in the political arena to what extent are they purchasing special treatment complaints about the deleterious effects of corporate money in politics are ubiquitous in american political discourse however in order to pinpoint the place of these expenditures in american democracy and to appreciate fully the consequences of various reform proposals itiscriticaltoidentifytheprecisemechanism through which any preferential treatment might occur in this spirit scholars have suggested that corporations make political expenditures because they hope to influence government behavior through either explicit quid pro quos with legislators for constituency service or favorable votes baron 1989 grossman and helpman 1994 2001 improved access to legislators hall and wayman 1990 langbein 1986 or enhancement of the electoral prospects of sympathetic incumbents pooleandromer1985 empiricalevidenceverifying a definitive relationship between expenditures and specific policy change unfortunately has proven elusive in a recent review essay ansolabehere de figueiredo and snyder 2003 116 conclude contributions explain a miniscule fraction of the variation in voting behavior in the u s congress they suggest thatcontributionsarebetterthoughtofasconsumption goods that fulfill a desire to participate in politics than as investment in a political marketplace

asset pricing and asymmetric reasoning we present a theory and experimental evidence on pricing and portfolio choices under asymmetric reasoning we show that under asymmetric reasoning prices do not reflect all types of reasoning some agents who observe prices that cannot be reconciled with their reasoning switch from perceiving the environment as risky to perceiving it as ambiguous if they are ambiguity averse these agents become price insensitive results from an experiment show that consistent with the theory i without aggregate risk mispricing decreases as the fraction of price sensitive agents increases and ii with aggregate risk price insensitive agents trade to more balanced portfolios

a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

corporate campaign contributions repeat giving and the rewards to legislator reputation abstract are politicians who follow a strategy of reputational development rewarded with high levels of corporate campaign contributions reputational clarity could help to reduce uncertainty about a candidate and lead to greater campaign contributions from favored interests alternatively such clarity could alienate those who disagree and prevent the politician from obtaining contributions from groups on both sides of an issue we outline an approach that considers conditions under which a politician would or would not prefer reputational development and policy stance clarity and consistency in the context of repeat dealing with special interests our proxy for reputational development is the percentage of repeat givers to a legislator using data on corporate political action committee pac contributions to members of the u s house during the seven electoral cycles from 1983 84 to 1995 96 we explore a variety of alternative hypotheses and find that greater reputational development is rewarded with g

some talk money in politics a partial review of the literature the financing of political campaigns is an area of active scholarly study i review some of the recent literature and discuss important methodological issues that arise in empir ical research on campaign expenditures and campaign contributions the effects of campaign expenditures and advertising on candidate and ballot measure elections are summarized as are the impacts of contributions on contributors welfare many states have changed their campaign finance laws in the past few years and i describe work that exploits variations in these laws a discussion of the strategies used by interest groups to allocate their campaign contributions provides insights into contributors motives

competition policy for elections do campaign contribution limits matter this paper examines whether campaign contribution restrictions have consequences for election outcomes states are a natural laboratory to examine this issue we analyze elections to assemblies from 1980 to 2001 and determine whether candidates vote shares are altered by changes in state campaign contribution restrictions we find that limits on giving narrow the margin of victory of the winning candidate limits lead to closer elections for future incumbents but have less effect on the margin of victory of incumbents who passed the campaign finance legislation we also find some evidence that contribution limits increase the number of candidates in the race

committee assignments constituent preferences and campaign contributions committee assignments constituent preferences and campaign constributions the familiar economic model of regulation as developed by stigler 1971 peltzman 1976 and becker 1983 posits an essentially frictionless market process for regulatory policy formation in which a single regulator legislator chooses policy to maximize net support from competing groups in this paper we extend the supply side of this model by considering the effect of legislative institutions and unorganized constituent preferences on the ability of incumbents in the house of representatives to serve specific interest groups we then test this formulation by examining the recent history of interest group campaign contributions to these legislators our theoretical model concentrates on how a legislator allocates time between serving specific interest groups outside his district and serving his constituency we do not model interest group decisions directly assuming simply that they purchase their desired amount of service from the lowest cost suppliers our model sorts legislators by the supply price at which they can serve a particular group this price depends on the preferences of the voters in the legislators district and the productivity of the legislator in producing policy service for each group 1 the empirical section tests the model by examining the pattern of interest group campaign contributions to house incumbents from 1978 through 1984 our regression analysis tends to confirm both implications of the theory first the pattern of campaign contributions from specific interest groups to legislators is shaped by the division of substantive legislative and regulatory jurisdictions represented by the system of house standing committees second voter preferences influence the pattern of contributions by affecting the supply price at which a legislator can offer policy to interest groups legislators with sympathetic or indifferent constituencies are able to offer a lower price and are therefore able to attract larger sums than those with hostile constituencies these results are important for two reasons first the influence of congressional institutions such as committees on policy is not widely accepted while several studies faith levins and tollison 1982 weingast and moran 1983 weingast 1984 grier 1989 and robert 1990 have documented the effects of changes in a particular committee on policies under its jurisdiction this work considers the jurisdiction of only a single committee in each case 2 by examining the linkages between congressional committees and political action committees pacs we investigate whether interest groups act as if committees have power second while the chicago model of regulation emphasizes correctly in our view that policy is the result of vote maximizing calculations and the incremental balancing nature of any equilibrium the model is imprecise about which sets of preferences are most important in determining the levels of policy or the size of changes in policies focusing on committees promotes a parsimonious specification of both the political players members of the relevant committee rather than the entire congress and the pivotal voters committee members constituencies more than the nation determining specific policy outcomes the paper is organized as follows section i reviews some issues on the nature and sources of committee influence in the u s congress the second section incorporates committee assignments into a theory of decision making by interest group investors sections iii and iv describe our data and estimation technique and present the empirical results the fifth and final section discusses some implications and conclusions of this research i committee power in congress legislators differ substantively by virtue of their committee assignments committees in congress and particularly in the house of representatives possess disproportionate power over the policy areas in their respective jurisdictions have the right to hold hearings and recommend budget allocations for the bureaus in their jurisdiction goodwin 1970

rent seeking and market structure comment if the firms in an industry are to be successful in raising money to influence government two conditions must be met 1 there must be sufficient rents available from government decisions regarding that industry to make such expenditures worthwhile and 2 the industry must be sufficiently concentrated to avoid a free rider problem in fund raising this argument though seemingly intuitively appealing has been under recent empirical attack this paper seeks to restore the parapets

money and votes reconsidered congressional elections 1972 1982 the evolution of congressional campaign finance over the past decade is characterized by steady growth in campaign spending and other notable changes in campaign finance practices the main purpose of the research reported here was to determine whether these changes have altered the effects of campaign spending on election outcomes this required reexamination of auxiliary questions concerning how sending effects operate and can be measured it also required facing the limits of what analysis of aggregate campaign spending data can tell us about money in elections replication of ols and 2sls analyses of campaign spending effects produced solidly consistent results over the six congressional elections held between 1972 and 1982 taken at face value the evidence is overwhelming that the challenger s level of spending has a strong impact on the vote whereas that of the incumbent has virtually no impact at all but the evidence remains open to doubt on two grounds one is the probable inadequacy of the 2sls model or perhaps any possible model leaving the issue of simultaneity bias unsettled if bias remains the estimates exaggerate the electoral effects of the challenger s campaign expenditures the issue cannot be resolved with more of the same data but rather requires data of a different sort surveys taken over the course of a sample of campaigns would do the trick meanwhile i think it would be foolish to make policy on the assumption that bias is in fact substantial the greatest likelihood remains that restrictions on campaign money will have the general effect of hurting challengers jacobson 1979 the other doubtful albeit equally stable finding is that incumbents do not gain votes by spending in campaigns no incumbent seems to believe it and there is at least circumstantial evidence from for example the 1982 elections that their skepticism is quite justified if so the problem lies in the limits of what aggregate data of the kind analyzed here can tell us few incumbents do not spend heavily when they are strongly challenged if both candidates spend beyond the point needed to become thoroughly familiar to voters then the substance of the campaigns the contents of campaign messages become the dominant factors incumbents may need to spend money in order to change the message as new circumstances arise to frame new issues that would help them most or damage them least to win the battle of establishing the real issues like nonincumbents sitting members may sometimes need to spend beyond a certain threshold to remain competitive but nearly all of them do so when the necessity arises so aggregate spending data are largely uninformative how the money is spent rather than how much is what matters the two most notable developments in congressional campaign finance have opposing implications national party organizations particularly the republican have assumed an increasingly important role in financing campaigns greater central control leads to a more efficient distribution of the party s collective campaign resources which among other things promises to raise the overall level of electoral competition it also leads to more coordinated campaigning with greater emphasis on national themes and programs thus it should foster more cooperation and loyalty among fellow partisans in congress but pacs have also grown in numbers and in financial importance because most concentrate on gaining access to incumbents they do little to make elections more competitive because they usually pursue narrowly defined interests their influence fragments the congress and weakens party coalitions in this and other ways parties and pacs are natural rivals the most consequential decisions taken in the next round in campaign finance policy will be those which affect the relative importance of parties and pacs see u s congress 1984 for comments on this and other current campaign finance issues

a new approach to measure tactical voting evidence from the british elections although tactical voting attracts a great deal of attention it is very hard to measure as it requires knowledge of both individuals voting choices as well as their unobserved preferences in this article we present a simple empirical strategy to nonparametrically identify tactical voting patterns directly from balloting results this approach allows us to study the magnitude and direction of strategic voting as well as to verify which information voters and parties take into account to determine marginal constituencies we show that tactical voting played a significant role in the 2010 election mainly for liberal democratic voters supporting labour moreover our results suggest that voters seem to form their expectations based on a national swing in vote shares rather than newspaper guides published in the main media outlets or previous election outcomes we also present some evidence that suggests that campaign spending is not driving tactical voting

media markets special interests and voters abstract this paper examines the role of mass media in countering special interest group influence i use the concentration of campaign contributions from political action committees to proxy for special interests capture of us senate candidates from 1980 to 2002 and compare the reaction of voters to increases in concentration in two different types of media markets in state media markets and out of state media markets unlike in state media markets out of state markets focus on neighboring states politics and elections thus if citizens punish political capture increases in concentration of special interest contributions to a particular candidate should reduce his vote share in in state counties relative to the out of state counties where the candidate receives less coverage i find that a one standard deviation increase in concentration of special interest contributions to incumbents reduces their vote share by about 0 5 to 1 5 percentage points in in state counties relative to the out of state counties robustness checks suggest that these results are not driven by omitted senator characteristics or by differences between in state and out of state counties along dimensions other than the media environment

money talks deterring quality challengers in congressional elections j 4t e examine the role of incumbent fundraising in deterring strong challengers we construct vf v a signaling model in which incumbents can use fundraising strategically to ward off w v quality challengers we show however that only under very limited circumstances will there be an observable relationship between fundraising and challenger quality therefore previous empirical tests for deterrence have systematically underestimated the effects of fundraising in decreasing electoral competition our analysis also suggests that by making fundraising easily observable federal election commission regulations may encourage candidates to overinvest time and resources accumulating large war chests instead of governing

what do campaign contributions buy deciphering causal effects of money and votes in the 1987 1988 election cycle political action committees pacs spent 176 6 million on candidates who competed for a seat in the house of representatives what do pacs buy when contributing this money if campaign contributions are rational allocations of a contributor s income campaign expenditures could increase both the probability that the contributor s preferred candidate is elected and the likelihood that if elected the candidate will vote in the interest of the contributor most studies do not find that incumbents expenditures have a significant positive effect on the number of votes incumbents receive 11 14 15 17 29 the evidence that contributions influence congressional votes is mixed most studies find weak or no support for this hypothesis for example kau rubin and keenan 17 find that contributions from businesses mattered in only two of the eight votes they analyzed others argue that campaign expenditures play no important role in the voting decision of congressmen 5 9 12 31 the lack of finding of significant effects of money on votes has been explained with the need for better models to explain campaign contributions 5 however the theoretical developments of for example ben zion and eyton 4 bental and ben zion 3 and baron 2 have not been incorporated in the empirical analysis of the effect of campaign contributions on the voting behavior of legislators empirical models that test this relationship must allow for the endogeneity of campaign contributions for the dichotomous nature of the dependent vote variable and the nonnegativity constraint of campaign contributions most empirical work in this area utilize models that do not incorporate these restrictions in this study i plan to incorporate these aspects of the data generating process into a more detailed model of the effects of campaign contributions on congressional votes of all the reported empirical studies on this issue only chappell 5 uses a model which can properly assess the impact of money on votes chappell finds that campaign contributions do not affect votes in congress when his more detailed econometric technique is used the best test of the theory results if votes have a clear economic payoff to contributors benefits of the votes are concentrated and costs are

internal rationality imperfect market knowledge and asset prices we present a decision theoretic framework in which agents are learning about market behavior and that provides microfoundations for models of adaptive learning agents are internally rational i e maximize discounted expected utility under uncertainty given dynamically consistent subjective beliefs about the future but agents may not be externally rational i e may not know the true stochastic process for payoff relevant variables beyond their control this includes future market outcomes and fundamentals we apply this approach to a simple asset pricing model and show that the equilibrium stock price is then determined by investors expectations of the price and dividend in the next period rather than by expectations of the discounted sum of dividends as a result learning about price behavior affects market outcomes while learning about the discounted sum of dividends is irrelevant for equilibrium prices stock prices equal the discounted sum of dividends only after making very strong assumptions about agents market knowledge

political reform and trade policy abstract the welfare effects of partial restrictions on political competition are investigated in a model in which two candidates receive campaign contributions from import competing industries in return for tariff protection ceilings on allowable contributions per industry may be welfare worsening particularly if the contributor elasticity is high because they induce candidates to seek additional contributors restrictions that reduce the number of industries allowed to contribute may also worsen welfare because candidates respond by increasing contributions and tariff protection for each active contributor the results suggest that the ability of candidates to circumvent partial restrictions may eliminate any potential benefits

market structure and campaign contributions does concentration matter a reply economic rents may be obtained through the process of market competition or be obtained by resorting to governmental protection rational firms choose the least costly alternative collusion to obtain governmental protection will be less costly the higher the concentration ceteris paribus however high concentration in itself is neither necessary nor sufficient to induce governmental protection

campaign finance and voter welfare with entrenched incumbents two candidates compete for elective office each candidate has information she would like to reveal to the voters but this requires costly advertising the candidates can solicit contributions from interest groups to finance such advertising these contributions are secured by promises to perform favors for the contributors should the candidate win the election voters understand this and elect the candidate they like best taking into account their expectations about promises to special interests there is an incumbency advantage in fundraising which is sometimes so great that the incumbent faces no serious opposition at all introducing partial public financing through matching funds improves voter welfare in districts that have advertising under the decentralized system while it can reduce welfare in other districts the optimal policy must strike a balance between these two effects

on the existence of rational expectations equilibrium abstract we prove a theorem on the existence of rational expectations general economic equilibrium when agents condition on prices as well as on private information and maximize the expectation of a state dependent utility function the key to the result is a new idealization of what it means for a set of empirical distributions to support agents expectations this idealization depends on the notion that agents compare their expectations with continuous versions of the random empirical distributions that are generated by the workings of the economy the existence theorem covers all strictly concave utility functions arbitrary distributions of the state variable and situations in which the dimension of the state variable is large relative to the number of commodities

why is there so little money in u s politics in this paper we argue that campaign contributions are not a form of policy buying but are rather a form of political participation and consumption we summarize the data on campaign spending and show through our descriptive statistics and our econometric analysis that individuals not special interests are the main source of campaign contributions moreover we demonstrate that campaign giving is a normal good dependent upon income and campaign contributions as a percent of gdp have not risen appreciably in over 100 years if anything they have probably fallen we then show that only one in four studies from the previous literature support the popular notion that contributions buy legislators votes finally we illustrate that when one controls for unobserved constituent and legislator effects there is little relationship between money and legislator votes thus the question is not why there is so little money politics but rather why organized interests give at all we conclude by offering potential answers to this question this abstract was borrowed from another version of this item

partially revealing rational expectations equilibrium in a competitive economy abstract a class of pure exchange economies is considered in which some agents are informed of private information and others are uninformed existence of a partially revealing rational expectations equilibrium ree is proved without restricting attention to particular functional forms for utility functions and probability distributions without introducing noise into the model and without departing from the standard definition of ree the equilibrium is robust in the sense that if the primitives of the economy are slightly perturbed the economy continues to have a qualitatively similar ree with somewhat stronger assumptions placed on the economy the equilibrium is also the unique measurable ree

the implications of unverifiable fair value accounting evidence from the political economy of goodwill accounting abstract i study the evolution of sfas 142 which uses unverifiable fair value estimates to account for acquired goodwill i find evidence consistent with the fasb issuing sfas 142 in response to political pressure over its proposal to abolish pooling accounting the result is interesting given this proposal was due in part to sec concerns over pooling misuse i also find evidence consistent with lobbying support for sfas 142 increasing in firms discretion under the standard agency theory predicts such unverifiable discretion can be used opportunistically

interest groups campaign contributions and probabilistic voting this essay develops a simple model to analyze the impact of campaign contributions on electoral policy decisions of candidates for office interest groups here are firms that select contributions under the assumption that candidates policies and opposing groups donations remain unaltered candidates however recognize that their policy choices affect contributions campaign contributions are used by candidates to affect policy oriented voters perceptions of candidates positions in this framework the introduction of campaign contributions may affect candidates electoral policies and if they do then they benefit surely exactly one of the two interest groups

electoral and financial effects of changes in committee power the gramm rudman hollings budget reform the tax reform act of 1986 and the money committees in the house most rational choice theories of legislatures locate the source of committee power in the restrictive procedural rules that enforce committee jurisdictions however there is no empirical support for this claim further there is little evidence for the natural implication that membership on more powerful committees confers electoral benefits i address these puzzles by exploiting the occurrence of major budget and tax reforms in the mid eighties these reforms provide a natural experiment for measuring the electoral and financial consequences of changes in committee power i show that the procedural rule changes instituted by the gramm rudman hollings budget reform caused an increase in campaign contributions to members of the budget committee and led to a reduction in the vote share of members of the appropriations committee this heretofore unrecognized effect of the gramm rudman hollings budget reform on the welfare of members of the house rivals that of a more widely recognized policy shock th

exchangeability and its economic applications abstract the symmetry possessed by exchangeability is the key to its usefulness the methods that are used to comprehend reality will edify insofar as they reflect this symmetry this is true of theoretical models empirical methods and algorithms indeed if the design of mechanisms is by rearrangement of natural matter their survival value will depend on the degree to which they retain the symmetry of the original matter this comment encompasses complex machinery and sophisticated political social and economic institutions the paper simply embroiders this observation

using repeat challengers to estimate the effect of campaign spending on election outcomes in the u s house previous studies of congressional spending have typically found a large positive effect of challenger spending but little evidence for effects of incumbent spending those studies however do not adequately control for inherent differences in vote getting ability across candidates high quality challengers are likely to receive a high fraction of the vote and have high campaign expenditures even if campaign spending has no impact on election outcomes to avoid that bias this paper examines elections in which the same two candidates face one another on more than one occasion differencing eliminates the influence of any fixed candidate or district attributes estimates of the effects of challenger spending are an order of magnitude below those of previous studies campaign spending has an extremely small impact on election outcomes regardless of who does the spending campaign spending limits appear socially desirable but public financing of campaigns does not

interest group competition and the organization of congress theory and evidence from financial services political action committees we develop a positive theory of how interest group competition shapes the organization of congress and use it to explain campaign contribution patterns in financial services since interest groups cannot enforce fee for service contracts with legislators legislators have an incentive to create specialized standing committees which foster repeated dealing between interests and committee members the resulting reputational equilibrium supports high contributions and high legislative effort for the interests contribution patterns by competing interests in the congressional battle over whether banks can enter new businesses support the theory which also has implications for term limits and campaign reform

validation of the venture evaluation model in korea abstract this article examines the validity of the venture evaluation model in korea by directly comparing the relative importance of evaluation criteria on the funding decision with the relative importance of factors influencing venture s empirical performance specifically we first identify the relative importance of evaluation criteria based on whether a deal is accepted or rejected current evaluation model next we derive the relative importance of those criteria revealed in the empirical performance based on the success failure of ventures that overlap with the deals originally used as accepted cases performance based model finally to better understand the differences between the two models we measure the general perceptions of venture capitalists on the importance of those criteria without regard to specific deals normative model to identify potentially important criteria we reviewed the existing related studies on evaluation criteria and we interviewed 10 venture capitalists as a result we selected 31 evaluation items the questionnaire consists of two parts and deals with the following four cases in part a 1 1 case 1 general perceptions concerning the 31 criteria in part b 2 2 case 2 one of the most successful ventures 3 3 case 3 one of the least successful ventures 4 4 case 4 one of the rejected ventures using a five point scale we asked the respondents to rate the 31 criteria based on their general perceptions without referring deals case 1 and on the specific deals they had handled cases 2 3 and 4 to prevent any firm or respondent from affecting the results more than it ought to we distributed the questionnaire to each firm in proportion to the investment amounts we also asked the respondents to fill out only one questionnaire including four cases seventy four venture capitalists including 10 interviewed responded to this questionnaire they have worked as investment directors or managers in the top rated 20 venture capital companies selected according to investment amounts on the basis of the ratings of 31 criteria for the previous four cases we developed three investment models first the current evaluation model reveals which criteria are more important in deciding whether or not to fund the model measures the relative importance of evaluation factors in discriminating between the accept case 2 and case 3 and the reject case 4 decision second the performance based model consists of the relative weights of evaluation factors influencing the two performance categories success case 2 and failure case 3 this model shows the relative importance of evaluation criteria that are reflected in the venture s empirical performance finally we identify the normative model revealing the venture capitalists general perceptions concerning the importance of individual criteria in light of their past field experiences case 1 by comparing the three models we find that the importance of these criteria revealed from venture capitalists perceptions and empirical performances is fairly similar but not sufficiently reflected in the actual deal evaluation in particular the entrepreneur related characteristics are not considered the most important in evaluating venture proposals according to the current evaluation model but they do turn out to be the most important factors in evaluating empirical performance this is in strong contrast to the findings of some existing studies which contend that the entrepreneurrelated criteria ultimately determine the funding decision instead the result confirms the previous assertion that the evaluation of managerial capability is the most challenging task in the venture selection process in the current evaluation model financing ability is considered more important than either superiority of product and technology or production capability contrary to venture capitalists perceptions and empirical performance results therefore it seems necessary to raise the level of specialization of venture capital firms through the acquisition of managerial skills from developed countries and by enhancing the technical background of individual venture capitalists

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

historical perspectives and the interpretation of unemployment jn the last decade the levels of unemployment in industrialized countries have risen dramatically rates now are typically two and in some cases three and four times those prevailing in the 1950s and 1960s the fact that these new higher levels are widely tolerated suggests that our thinking about the meaning and significance of unemployment has changed enormously over the period such a change is certainly present in the thinking among professional economists in the 1960s the standard view was that the unemployed represented unutilized resources their existence in an economy where the vast majority of people had unsatisifed wants was seen as a major social paradox and the most important unsolved intellectual puzzle of the capitalist economic system this fed the rationale for keynesian countercyclical fiscal policy and government deficit spending the government could reasonably print money in order to hire the unemployed because the resources absorbed in the process were essentially free goods today a good number of professional economists certainly in the united states but to a lesser extent throughout the world have come to view measured unemployment in industrial economies as an artifact in at least three senses it is a statistical artifact of a measurement process that classifies as unemployed people who are not really available for work it is an institutional artifact of a system of social insurance and public welfare that encourages an extension of the process of job search and it is an artifact of the language that uses a term which in everyday parlance means forced idleness for activities that have important productive functions akin to the functions of inventories information processing and investment associated with the utilization of capital goods these interpretations to be sure hardly constitute a consensus about the meaning of unemployment but they are no more diverse than the range of views that underlay the older orthodoxy and for policy makers and economic researchers they carry a single message there are many more serious problems toward which to direct attention these new views about unemployment were developed out of a set of ideas originally associated with the chicago school of economics where the emphasis at once positive and normative was placed on the competitive market as the gover a review of alexander keyssar out of work the first century of unemployment in massachusetts cambridge cambridge university press 1986 and robert salais nicolas baverez and b6nedicte reynaud l invention du chomage histoire et transformations d une categorie en france des annees 1890 aux annees 1980 paris presses universitaires de france 1986

does negative advertising affect giving behavior evidence from campaign contributions abstract this paper contributes to a growing literature that explains why individuals contribute to political campaigns we build a panel dataset that follows contributors from primary to general elections to quantify the persistence of giving in political contests those who gave to winning candidates in the primary were most likely to contribute again in the general election next we use an instrumental variable strategy to document that within party negative advertising decreases the probability that individuals contribute to their preferred party in the general election regardless of whether they initially contributed to a winning or losing primary candidate

the economic consequences of political donation limits the economic consequences of limits on political donations depend on the degree of political competition donors who are ideologically aligned with candidates decide how much to contribute to their own candidate they may benefit from rent seeking by their own candidate but dislike rent seeking by the opposition increased rent seeking by politicians thus generates campaign contributions for themselves but also mobilizes donations to the opposing candidate potentially to a greater extent this latter effect acts as a deterrent to rent seeking when contributions finance electoral campaigns and positively affect election chances when political competition is low incumbent donors outnumber opposition donors and limits reduce rent seeking when political competition is high donors are equalized and laissez faire reduces rent seeking consistent with these hypotheses data from the us states suggest that limits are associated with better policies and stronger growth performance at low levels of political competition whilst laissez faire is preferred when political competition is high

rational expectations equilibrium with econometric models we prove the existence of general economic equilibrium under uncertainty when agents form econometric models of the relationship among their private information prices and the state of the environment the functional form of each agent s model is specified in advance with a finite number of parameters to be determined agents are then thought of as performing linear least squares estimation of the parameters equilibrium requires not only that markets clear but also that each agent be using the vector of parameter values which within a compact convex set of parameters gives the least squares best fit to the data that is generated by the working of the economy when agents adhere to their models

a simple explanation for why campaign expenditures are increasing the government is getting bigger abstract this paper shows that most of the large recent increases in campaign spending for federal and state offices can be explained by higher government spending this result holds for both federal and state legislative campaigns and gubernatorial races and across many different specifications the irony is that those who seem most concerned about the level of campaign expenditures are also frequently the ones who most strongly support increasing the size of government evidence is also examined on whether it is the composition and not just the level of expenditures that determines campaign expenditures and whether higher government expenditures similarly results in more candidates competing for office finally by focusing on the symptoms and not the root causes of ever higher campaign expenditures this paper argues that the current public policy debate risks changing the form in which payments are made rather than actually restricting the level of competition

should we tax or cap political contributions a lobbying model with policy favors and access abstract this paper develops a model of political contributions in which a politician can either sell policy favors or sell access access allows interest groups to share hard information with the politician in support of their preferred policy here selling access maximizes policy utility while selling policy favors maximizes total contributions imposing a binding contribution limit makes it more likely that the politician sells access which can improve expected constituent welfare however a contribution limit distorts the signals associated with the contributions which tends to result in worse policy alternatively a tax on political contributions can ensure that the politician sells access without distorting his information therefore from the viewpoint of a representative constituent a tax on contributions is strictly preferred to a contribution limit or no reform the politician however may prefer regulation in the form of a contribution limit even when a tax is better for the constituent

political competition with campaign contributions and informative advertising this paper presents a theory of political competition with campaign contributions and informative political advertising policy motivated parties compete by selecting candidates and interest groups provide contributions to enhance the electoral prospects of like minded candidates contributions are used to finance advertising campaigns that provide voters with information about candidates ideologies voters update their beliefs rationally given the information they have received the paper uses the theory to analyze the welfare economics of contribution limits such limits are shown to redistribute welfare from ordinary citizens to members of interest groups jel d72 h40

the determinants of industry political activity 1978 1986 c ampaign contributions made by corporate political action committees pacs are increasingly important and controversial in u s elections influence purchasing is often alleged by pundits and campaign finance reform is continually debated in congress in the academy social scientists have analyzed the allocation of interest group monies and have looked for possible impacts on legislation few however have tried to explain the total contributions of economic interest groups we shall analyze variations in contributions across industries and over time with an empirical model based on organizationally constrained profit maximizing behavior we assume that corporate pac contributions in an industry are raised to enhance industry profits subject to the constraints of organization costs and freeriding incentives our empirical work covers 124 industries over five election cycles from 1978 through 1986 both the costs and benefits of political activity vary across industries we argue that the benefits of political action are determined by direct contact with the government as a regulator or purchaser of industry output by government s ability to ameliorate adverse market conditions and by the industry s ability to solve collective action problems without government assistance the costs of industry political action arise mainly from collective action problems because effective political activity often requires concerted action by the constituent firms in each industry we also make a methodological contribution previous studies use statistical techniques that suffer from sample selectivity bias or else force the probability of acting politically to be explained by the same set of coefficients as is the amount of action taken we explain and employ a technique that accounts for both problems the results are consistent with the theses that industries follow investment oriented goals in deciding the amount of political action to undertake and that collective action problems are important constraints on industry political activity we can explain between 60 and 80 of the variation in contributions in our sample first we review existing work on corporate political activity particularly papers examining patterns of aggregate pac spending by industry then we present an organization cost constrained industryprofit maximizing model based on a comparison between an idealized zero organization cost industry and the more realistic case where organizing collective action is difficult the independent variables used in the analysis are also discussed and defined next we discuss the dependent variable and total industry contributions and explain our statistical method then the results are presented followed by a discussion of industry structure and political activity to make clear how our results can explain different contribution patterns we give examples using five actual industries

are contributors rational untangling strategies of political action committees empirical public choice literature and casual observation suggest that the behavior of political action committees is remarkably unsophisticated meaning that pacs give to those legislators who would support their interests anyway thus it is suggested that contributor behavior deviates from rational behavior which is a cornerstone of economic analysis in this paper a switching regression model is estimated that allows for strategies of pacs to vary for different contribution recipients i analyze the behavior of farm pacs over three election cycles in contrast to previous findings i find that contributor behavior is not inconsistent with rational behavior contributors who attempt to influence the voting behavior of members of congress give the most money to legislators whose constituency interest suggests that they are likely to be undecided on how to vote and pacs give less money to legislators who represent districts with larger farm populations because those legislators are likely to vote in con

campaign advertising and voter welfare this paper investigates the role of campaign advertising and the opportunity of legal restrictions on it an electoral race is modeled as a signalling game with three classes of players many voters two candidates and one interest group the group has non verifiable insider information on the candidates quality and on the basis of this information offers a contribution to each candidate in exchange for a favorable policy position candidates spend the contributions they receive on non directly informative advertising this paper shows that 1 a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive 2 although voters are fully rational a ban on campaign advertising can be welfare improving and 3 split contributions may arise in equilibrium and if they arise too often they are detrimental to voters

the political economy of the us mortgage default crisis we examine the effects of constituents special interests and ideology on congressional voting on two of the most significant pieces of legislation in us economic history representatives whose constituents experience a sharp increase in mortgage defaults are more likely to support the foreclosure prevention act especially in competitive districts interestingly representatives are more sensitive to defaults of their own party constituents special interests in the form ofhigher campaign contributions from the financial industry increase the likelihood of supporting the emergency economic stabilization act however ideologically conservative representatives are less responsive to both constituent and special interests jel d72 g21 g28

campaign contributions and congressional voting does the timing of contributions matter theoretical and empirical studies do not address whether campaign contributions from more than one election cycle are important for congressional voting behavior further they do not address whether campaign contributions from different periods have different effects on legislative voting behavior this paper analyzes the cumulative effect of campaign contributions over two time periods moreover this paper studies the importance of the timing of contributions for legislative voting behavior ten roll call votes on price supports and quotas for various farm commodities in 1981 and 1985 are analyzed most of the estimated contribution coefficients are statistically significant the results show that without campaign contributions farm interest would have lost in five of the seven votes that were won moreover contributions that were given at approximately the same time as the vote have a larger impact on voting behavior than contributions that the legislator received one or two years prior to the vote copyright 1995 by mit press

campaign spending with office seeking politicians rational voters and multiple lobbies abstract i introduce a microfounded model of campaign finance with office seeking politicians a continuum of voters and a large number of heterogeneous lobbies lobbies make contributions to politicians according to a common agency framework politicians use contributions to finance their electoral expenditures voters are not fooled by electoral expenditures they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians the model is used to i determine the relation between campaign spending and the deviation from the median voter s preferred policy ii show the informational value of lobbies contributions iii evaluate the welfare implications of restricting campaign spending and iv interpret the empirical finding that campaign expenditures have a very low effect on election outcome although in equilibrium advertising provides voters with useful information under reasonable parameter values a ban on campaign contributions makes the median voter better off journal of economic literature classification numbers d72 d82 m37

the market for congressional votes is timing of contributions everything this study utilizes the timing of campaign contributions to identify whether the objective of political action committees pacs is to influence congressional votes or solely to elect a preferred candidate the results show that pac behavior is consistent with an attempt to purchase congressional votes and to influence elections contributions increase in the weeks surrounding legislative events of importance to pacs and elections the magnitude of increased contributions is examined the article also addresses the lack of legal enforcement mechanisms in vote for contribution agreements it develops hypotheses regarding the timing of contributions as an inexpensive mechanism to assure contractual performance hypotheses are tested regarding pacs incentives to mitigate potential cheating by legislators on such agreements results show that pacs use the timing of contributions as a mechanism to prevent legislators from reneging on vote for contribution trades

bailout for sale the vote to save wall street this paper provides a public choice analysis of the 2008 banking bailout in the united states the paper introduces heterogeneity of congressional districts into the common agency problem in special interest politics district heterogeneity implies district specific electoral constraints on legislators ability to collect rents from and cast dissonant votes in support of special interests an empirical analysis examines legislative voting on the initial bailout proposal using campaign contributions to legislators from special interest groups and the importance of financial services for employment within congressional districts as the main explanatory variables the empirical analysis corrects for possible endogeneity bias using valid instruments and considers several intuitive sub sample estimations as alternative methods for addressing the endogeneity issue the paper provides empirical evidence that campaign contributions from the financial services sector influenced legislative voting on the banking bailout