Motivations for political contributions

I came across this paper by Sanford Gordon, Catherine Hafer, and Dimitri Landa, who write:

Do individuals give political contributions simply because they derive an expressive or other consumption benefit from doing so? Or are they attempting to influence policy outcomes? If the consumption view is correct, then political donations are just another means by which citizens participate in the political process (unequal to be sure), and need not imply improper or undemocratic influence. In contrast, donation decisions that are driven by an investment motivation, especially when they are made on behalf of small but economically powerful minority interests, naturally raise concerns about the possibility of an undemocratic exchange of policy for dollars.

We [Gordon et al.] propose a strategy to distinguish investment and consumption motives for political contributions by examining the behavior of individual corporate executives. If executives expect contributions to yield policies beneficial to company interests, those whose compensation varies directly with corporate earnings should contribute more than those whose compensation comes largely from salary alone. We find a robust relationship between giving and the sensitivity of pay to company performance, and show that the intensity of this relationship varies across groups of executives in ways that are consistent with instrumental giving but not with alternative, taste-based, accounts. Together with earlier findings, our results suggest that contributions are often best understood as purchases of “good will” whose returns, while positive in expectation, are contingent and rare.

The empirical part of the paper looks cool–I have no experience looking at this sort of data and so can’t really say anything beyond “it’s cool.” (Well, I will say that I’d like to see a scatterplot to make it clear at a glance what their data are saying.) But I do have some thoughts on the general framework. They consider political contributions as “consumption” or “investment”–which, as far as I know, follows the mainstream of the discipline, but I have a problem with this approach.

I just don’t really see the clear distinction between “consumption” and “investment” in this context.

If someone is contributing from an “expressive or other consumption benefit,” presumably this person is giving to the candidate whose policies he or she favors. (Perhaps there are some people who give to the other side for reputational reasons, for example an oil company executive who happens to be a Democrat might give to a Republican so he won’t stand out in the crowd, or a college professor might donate to Obama to fit in, even if he’s actually a McCain supporter. Or maybe it could go the other way too, that someone would donate $20 to the other side just to get a reputation for being unorthodox. But I imagine this sort of thing represents only a very tiny minority of contributions.) Conversely, someone who’s donating as an investment probably thinks that his or her candidate is good for the country as a whole. As the authors note, the translation of unequal financial resources to unequal political resources is a potential distortion of the democratic process–I just don’t understand this distinction, especially in light of the fact that voting and small-dollar political contributions are rational to the extent that the voter or contributor believes that his or her preferred candidate will benefit the general good.

4 thoughts on “Motivations for political contributions

  1. Andrew,

    I wonder whether your questions really boils down to an issue of confusing terminology. The authors seem to spell out the distinction fairly clearly in the following passage:

    "The difference between consumption- and investment-oriented political expenditures comes
    down to the following: expenditures in the former category are never expected to yield pecu-
    niary returns for the donor, whereas those in the latter may do so under certain conditions."

    This seems to be a real and legitimate distinction to draw, even if one finds the labels they attach to the alternatives unclear. Another way of putting it might be that investment is assumed to be self-interested, while consumption is not?

  2. The analysis is based upon consideration of expected personal return on "investment", not on general social return. They aren't looking at the general populace and donations of $20, they are looking at corporate executives and donations of (often) much higher amounts.

    I don't think they're expecting generalizability across donation levels (e.g. down to $20 donations) as much as they're looking for generalizability across large donations by other actors.

  3. Hi Andrew,

    Thanks for the post — we're glad you enjoyed the paper. Two comments: first, this paper came out in last November's issue of Journal of Politics, so we wanted to pass along an updated link:

    Second, on the distinction between consumption and investment: we think of "investment" as a purchase of direct benefits or favors in a political marketplace, as opposed to an expressive action.

    You note that contributions may be rational to the extent that the contributor believes his/her preferred candidate will benefit the general good. We agree that if these are the contributor's preferences, and the contributor feels good about contributing to the general good, then contribution is surely rational. We simply wish to draw a distinction between contributions motivated by those sorts of preferences (which, following Ansolabehere, De Figueiredo, and Snyder (2003), we call "consumption") and more strictly economic motivations, in relationship to which a rational contribution is "investment."

  4. I guess I'll have to read the paper (oh, the horror), but on its face the question "Or are [people who give political contributions] attempting to influence policy outcomes?" seems crazy. Of COURSE we are attempting to influence policy outcomes! We're trying to get "our" candidate elected, because we think he'll have better policies!

    My wife and I struggle every election season — they last forever now, of course — to balance our political contributions against our charitable ones, since (de facto) increasing one of them means decreasing the other.

    So, yeah: most of us are trying to influence policy. I know there are people out there who donate because they expect that their company will get favored treatment so they'll make their money back, but this must be a small fraction of donors (although perhaps a substantial fraction of donated money)!

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