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 match.com for criminals.” Continue reading