An Experimental Study of Alternative Campaign Finance Systems : Donations , Elections and Policy Choices

We experimentally study the effect of alternative campaign finance systems – as characterized by different information structure about donors – on donations, election outcomes, political candidates' policy choices, and welfare. Three alternative campaign finance systems are considered: a full anonymity (FA) system in which neither the politicians nor the voters are informed about the donors' ideal policies or levels of donations; a partial anonymity (PA) system in which only the politicians, but not the voters, are informed about the donors' ideal policies and donations; and finally a no anonymity (NA) system in which both the politicians and the voters are informed about the donors' ideal policies and donations. We find that donors contribute less in the FA system than in the PA and NA system, and candidates are less likely to deviate from their ideal policies under FA than under the PA and NA systems. The effect of donations on the candidate's policy deviations differs in FA from that in PA and NA. Specifically, in the FA system larger donations lead to smaller deviations from the candidate's ideal policy; but in the NA and PA systems, larger donations lead to larger deviations. As a result we observe that the donations lead to a centrist bias in the candidate's policy choices, i.e., donations are more likely to make extreme candidate move to the center than to make centrist candidate move to the right. This centrist bias is present more robustly in FA treatments. Finally, we find that donors greatly benefit from the possibility of donations regardless of the finance system. Voter welfare remains virtually unchanged under the PA and NA systems, especially when there is competition among the donors. Our findings provide the first experimental evidence supportive of Ayres and Ackerman's (2002) campaign finance reform proposal. Hanming Fang Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 and NBER [email protected] Dmitry A. Shapiro Belk College of Business University of North Carolina at Charlotte 9201 University City Boulevard Charlotte, NC 28223-0001 [email protected] Arthur Zillante Belk College of Business University of Carolina at Charlotte 9201 University City Boulevard Charlotte, NC 28223-0001 [email protected] “Just as troubling to a functioning democracy as classic quid pro quo corruption is the danger that officeholders will decide issues not on the merits or the desires of their constituents, but according to the wishes of those who have made large financial contributions valued by the officeholder.” — U.S. Supreme Court, McConnell v. FEC [540 U.S. 93 (2003)] “Sunlight is . . . the best . . . disinfectant.” — Justice Louis Brandeis, Other People’s Money (National Home Library Foundation, 1933, p. 62), quoted in Buckley v. Valeo [424 U.S. 1, 67, n. 80 (1976)] “Just as the secret ballot makes it more difficult for candidates to buy votes, a secret donation booth makes it more difficult for candidates to sell access or influence. The voting booth disrupts vote-buying because candidates are uncertain how a citizen actually voted; anonymous donations disrupt influence peddling because candidates are uncertain whether givers actually gave what they say they gave. Just as vote-buying plummeted with the secret ballot, campaign contributions would sink with the secret donation booth.” —Bruce Ackerman and Ian Ayres, Voting with Dollars: A New Paradigm for Campaign Finance (Yale University Press, 2002, p. 6)