Guest Post: The Potentially Perverse Effects of Campaign Finance Disclosure Laws

Professor Michael Gilbert from the University of Virginia Law School contributes the following guest post:

Since at least the 1970s, proponents of campaign finance regulations in the United States and elsewhere have supported mandatory disclosure of monies spent on politics.  Notwithstanding some significant loopholes, those proponents have in many respects gotten their way in the United States and many other countries. Much of the enthusiasm for disclosure is based on the notion that it helps combat a certain kind of corruption—the exchange of campaign support for policy favors. Publicizing the flow of money to politicians exposes illicit relationships and quid pro quos.  In Justice Brandeis’s famous phrase, “Sunlight is said to be the best disinfectant.”

This logic is correct but incomplete.  Disclosure does indeed provide information that officials and the public can use to combat corruption.  But, as Ben Aiken and I argue in a new paper, corrupt actors can also use that information to overcome an impediment to illegal exchanges:  lack of trust.  Private parties cannot sign enforceable contracts with politicians for quid pro quos. Instead, they must trust one another—if I give you the money today will you deliver the vote tomorrow?  That need for trust means that both sides to a potentially corrupt exchange must assess one another’s credibility. Disclosure laws can, perversely, help foster that undesirable trust. After all, disclosure of campaign donations reveals which parties reward compliant politicians; this same disclosure, combined with politicians’ voting records, reveals which politicians reward their financial supporters most consistently.  Through those channels disclosure can bring conspirators together and reduce the uncertainty that inheres in illegal transactions.  As a colleague put it, “disclosure is like for criminals.”

All of this means disclosure has cross-cutting effects.  It raises the price of corruption by increasing the likelihood of exposure, but it can also raise the benefit of corruption by increasing the certainty that parties to corrupt transactions will keep their promises.  When the second effect trumps, disclosure increases corruption.

An example illustrates some of these ideas.  In 2010, Representative Eleanor Holmes Norton cold-called a lobbyist and left a message stating that she was “handling the largest economic development project in the United States” and that her “major work on the committee and subcommittee has been essentially in your sector.”  She also stated she was “candidly calling to ask for a contribution.” Why did Norton solicit that particular lobbyist?  Because the lobbyist had made contributions to other members of her committee, and Norton was “frankly surprised” that she had not received a contribution herself.  How did Norton know about the lobbyist’s other contributions?  She hasn’t said, but disclosure records seem like a good guess.

Of course, this observation about the potentially perverse effects of disclosure laws raises a host of new questions, perhaps most prominently why corrupt actors might prefer disclosure (pursuant to formal legal requirements) over other sources of information about credibility. We explore many of these questions in the paper. Our main point, though, is that disclosure might combat corruption—or it might exacerbate it. At a minimum, its corruption-fighting potential is weaker than commonly supposed.

1 thought on “Guest Post: The Potentially Perverse Effects of Campaign Finance Disclosure Laws

  1. The idea that disclosure could have perverse effects is quite interesting. However, I’d guess that the biggest issue with disclosure is not actually that elected officials and those who want to influence them can see whether their voting patterns match the industries that fund them. Instead, it is that the elected officials can know for sure that a particular lobbyist or group is funding them in the first place. Disclosure comes in two kinds: one where the information is publicly released, and another, far more limited kind when the candidate can see their own books. In New York Judicial races, there are restrictions on the judicial candidate even knowing who her/his donors are; the concept is that they could not be a corrupt judge if they don’t know who is trying to influence them.

    Of course, even when the candidate cannot see her , big donors would have an incentive to tell elected officials that they are donating, but if there is no way for the elected official to verify this, is may increase trust issues and therefore reduce corruption.

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