- The Washington Times - Friday, March 23, 2001

Last of two parts.

Campaign reforms never worked the way their proponents claimed, and never will. To understand why, it helps to view campaign financing as a matter of economics.

Economists teach that government is an instrument for buying things collectively that are difficult to purchase individually, such as defense. But political markets are inherently flawed. In political markets, consumers (voters) are allowed only infrequent choices between two package deals, and the actual contents of these policy packages are often mislabeled. There is little variety in federal services, which tend to be "one size fits all." And unlike voluntary private markets, there are no guarantees behind political promises, and no practical opportunity to sue for fraud.

The theory of public choice, developed by such scholars as James Buchanan, Gordon Tullock and Mancur Olsen, helps explain why campaign reform will always be a quixotic disappointment. Two of the most relevant theorems concern the rationality of voter ignorance and the reason why smaller interest groups dominate the broader public interest:

(1) Rational Ignorance: Voters understand that each vote is nearly always insignificant, having no impact at all on what the government will do. The rarity of exceptions (such as a few counties in Florida last year) proves the rule. The insignificance of each vote means it is entirely rational to not invest time and money becoming well-informed about politics and policy. And that, in turn, means the burden of information costs must be borne by sellers by political entrepreneurs.

Informed voting requires information, which is costly. If attempts to reduce the cost of campaigning were ever successful, that would necessarily leave voters even less informed. Knowing this, reformers dismiss campaign information as biased and uninformative, echoing an old elitist theme that ordinary Americans are easily duped by advertising in general. The way to improve the quality of campaign ads is to stimulate political competition, by allowing individuals to support new challengers and new parties as generously as they like.

(2) Few dominate many: Members of the general public have an infinite variety of diverse interests. That makes it impossible to organize all consumers for effective political action. Smaller groups with an intense interest in a few specific laws or regulations are much easier to mobilize. That is why organized interests always have disproportionate influence over all governments. Because the U.S. government is allowed to hand out many favors tariffs, tax breaks, subsidies, antitrust suits it attracts wasteful "rent seeking."

Lobbying, not campaign gifts, constitute by far the largest sums of money gambled on influencing the government. Hard dollar campaign contributions are relatively modest, compared with lobbying costs, and soft dollars almost trivial. There is no evidence campaign finance reforms have held down the cost of campaigns, as outraged reformers are the first to point out. If reforms ever did curb campaign contributions, then lobbying, issue ads, and courting the influence of media and entertainers would become even more dominant forms of political expression.

To gain wealth, people must either produce it, steal it or use political clout to get it from someone else. Most of the federal government is devoted to the latter process i.e., redistribution through the tax and regulatory system, including antitrust. Some interest groups invest in politics to gain special favors, mainly through lobbying but also issue ads and campaign contributions. Others invest defensively to avoid being the target of another redistributive coalition. Tilting the way campaigns are financed enhances the political influence of some interest groups at the expense of others, but it does nothing to get the government out of business of handing out favors and penalties. Politicians keep claiming to have found a new way to get the special-interest money out of politics, but they are not being entirely candid.

Alan Reynolds is director of economic research with the Hudson Institute and senior editor of the Institute's magazine, American Outlook.

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