27 Norman J. Ornstein, Thomas Mann, and M.J. Malbin, Vital Statistics on Congress: 2001-2002, (Washington, D.C.: The American Enterprise Institute, 2002). Reed and Schansberg found that the U.S. House of Representatives experienced a large, sudden increase in tenure during the mid-1970s. After examining alternative explanations such as increased gerrymandering or increased congressional compensation, they concluded that the increase in tenure length arose from suddenly “greater incumbent advantages as the source,” (198). W.R. Reed and D.E. Schansberg, “The Behavior of congressional Tenure Over Time: 1953-1991,” Public Choice, 1992, 183-203.
28 John R. Lott, Jr., “Campaign finance reform and electoral competition,” Public Choice, 2006, 263.
29 McCarthy raised a total of $11 million in 1968, an amount that was equivalent to almost $55 million in 2000. By contrast, George Bush had raised $67 million by the first primary in 2000. George Thayer claims that “The bulk of McCarthy’s campaign funds came from a wealthy few.” See George Thayer, Who Shakes the Money Tree, (New York: Simon and Schuster, 1974) 92. Among those making these donations were Stewart Mott, Jack Dreyfus and his wife, Marin Peretz, Ellsworth Carrington, and Alan Miller. “David Hoeh, the organizer of McCarthy’s New Hampshire campaign, recalled later that a single ‘financial angel’ saved their media effort at a crucial point” (CATO, A Free Speech Kind of Thing, http://www.cato.org/pub_display.php?pub_id=5331). For information on the number of donors giving to Bush see Michael Isikoff, “The Money Machine,” Newsweek, January 24, 2000, 46.
30 Four years later, George McGovern was able to continue his 1972 presidential primary campaign against four other senators, several congressmen, and a governor solely thanks to extremely large donations from a single person, Stuart Mott. Mott provided McGovern with a total of almost $600,000 ($212,361 in donations and $377,500 in loans that were likely forgiven). See “Who’s Who Among the Big Givers,” Time, October 23, 1972.
31 If regulations reduce the amount raised and spent on campaigns, the benefit for incumbents will decline the longer the rules are in effect, though the initial impact will never be offset. While equal reductions in spending during the election benefits the incumbent because of his relatively large stock of reputation, over time as restrictions affect the amount raised and spent in more and more of an incumbent’s past elections, the stock of reputation that the incumbent has in future elections will decline, thus somewhat reducing the gap between the incumbent’s and the challenger’s total reputation.
32 The case was Victoria Jackson Gray Adams, et. al. v the Federal Election Commission, et. al. The brief was largely based on an article Stratmann had co-authored with Francisco Aparicio-Castillo, “Competition Policy for Elections: Do Campaign Contribution Limits Matter?” Public Choice (2006).
33 Given his assumptions, Stratmann’s theory holds true for cases in which a well-qualified candidate competes against a lesser qualified one. But in races between two candidates of equal quality, reducing the amount of available information about the candidates would increase win margins and lower competitiveness.
34 “Bowen wants changes to initiative system,” Sacramento Bee, September 6, 2006.
35 John R. Lott, Jr., “Campaign finance reform and electoral competition,” Public Choice, 2006, 263-300. The information on expenditure limits is available in an earlier working paper version of that paper.
36 Ibid. States with such regulations for state offices during at least part of the period examined by that study included: California, Colorado, Hawaii, Maine, Massachusetts, Minnesota, Nebraska, New Hampshire, Oregon, Rhode Island, Vermont, West Virginia, and Wisconsin.
37 Levitt and Dubner, Freakonomics (2005 Ed.), 11-12.
38 Congressional Quarterly’s CQPolitics.com offers an analysis of the 60 races determined by less than 10 percentage points (http://public.cq.com/public-content/2007Jan3-Chart.pdf). There are some uncontested races where fund-raising levels will generally not affect the races’ outcome. In these races, however, incumbents will often raise money to assist other candidates from their party. Thus even in uncontested races fund-raising can still be productive.
39 Http://www.nydailynews.com/front/story/485008p-408347c.html.
40 “Clinton Enters ’08 Field, Fueling Race for Money,” New York Times, January 21, 2007.
41 For a small selection of this research see: Gary C. Jacobson, Money in Congressional Elections, (New Haven: Yale University Press, 1980); Kevin Grier, “Campaign Spending and Senate Elections, 1978 - 1984,” Public Choice, December 1989,201-19; Gary C. Jacobson, The Politics of Congressional Elections, 2nd ed. (New York: Little, Brown, 1987); John R. Lott, Jr., “The Effect of Nontransferable Property Rights on the Efficiency of Political Markets: Some Evidence,” Journal of Public Economics, vol. 32, no. 2, (March 1987): 231-246; and John R. Lott, Jr., “Explaining Challengers’ Campaign Expenditures: The Importance of Sunk Nontransferable Brand Name,” Public Finance Quarterly, vol. 17, no. 1, January 1989: 108-118.
42 John Carlson and Kirby Wilbur are the two Seattle areas radio talk show hosts who are being sued. Ralph Thomas and Andrew Garber, “Talk-radio case heard by state high court,” Seattle Times, June 9, 2006, and George F. Will, “Speechless in Seattle,” Newsweek, October 9, 2005, 72.
43 In 1976, federal House races spent $71.5 million, Senate races spent $44 million, and presidential races spent $160 million. By 2004, federal House races spent $660.3 million, Senate races spent $496.4 million, and presidential races spent $1,016.5 million. Adjustments for inflation and population growth were obtained from the consumer price index and the U.S. Census. Joseph E. Cantor, Congressional Campaign Spending: 1976-1996; CRS Report for Congress, August 19, 1997. Herb Alexander, Financing the 1976 Election, 1979, 166.
44 Much of the discussion in this section is based on John R. Lott, Jr., “A Simple Explanation for Why Campaign Donations are Increasing: The Government is Getting Bigger,” Journal of Law and Economics, vol. 42, no. 2, October 2000, 359-393.
45 The Bureau of Economic Analysis at the U.S. Department of Commerce, https://bea.gov/bea/newsrel/gdpnewsrelease.htm.
46 John R. Lott, Jr., “A Simple Explanation for Why Campaign Donations are Increasing: The Government is Getting Bigger,” Journal of Law and Economics ., vol. 42, no. 2, October 2000: 359-393. These numbers hold true even after accounting for factors such as personal income, term limits, population, the closeness of races, the number of candidates running for office, and how closely divided party control of the state government is.
47 “Soros’s Deep Pockets vs. Bush,” Washington Post, February 1, 2005.
48 Ibid.
49 Ibid.
50 Byron York, “America Coming Together Comes Apart,” National Review Online, August 3, 2005.
51 “Turned-off voters shouldn’t be a big surprise,” Editorial, The Pantagraph, Bloomington, Ill., November 1, 2006.
52 Lee Covan, “Negative Campaign Ads,” The Early Show, CBS News, October 24, 2006.
53 Supreme Court Justice Anthony Scalia notes: “A report prepared for Congress concluded that the total amount, in hard and soft money, spent on the 2000 federal elections was between $2.4 and $2.5 billion. J. Cantor, CRS Report for Congress, Campaign Finance in the 2000 Federal Elections: Overview and Estimates of the Flow of Money (2001)” McConnell v. Federal Election Comm’n (02-1674) 540 U.S. 93 (2003) 251 F.Supp. 2d 176, 251 F.Supp. 2d 948. Data on the Federal government’s expenditures is available from the Office of Management and Budget (http://www.white-house.gov/omb/budget/fy2004/hist.html).
54 “Procter becomes nation’s largest ad spender,” The Business Courier (Cincinnati), June 26, 2006. The Proctor & Gamble Company Annual Income Statement (http://www.hoovers.com/procter-&-gamble/—ID__ 11211,period__A—/free-co-fin-income.xhtml). This comparison was first made by the political scientist Herb Alexander.
55 “No need to choose sides, some donors give to both gubernatorial candidates,” Associated Press, August 4, 2006.
56 Gabriel Kahn, “PACs
Hedge Bets, Contribute Twice: Even Robb, North,” Roll Call, October 24, 1994. The same article notes that “AT&T’s political director, Donald Goff, insisted that it was against his company’s policy to give to both candidates in a race. However, he said, ‘in a contested primary, you might see money going to both candidates.’”
57 Press release, “Double-giving in the Presidential Campaign,” Public Campaign, March 3, 2000 (http://www.publicampaign.org/pressroom/2000/03/03/whoever-wins-they-win).
58 Much of the discussion in this section is based on Stephen Bronars and John R. Lott, Jr., “Do Campaign Donations Alter How a Politician Votes?,” Journal of Law and Economics, vol. 40, no. 2, October 1997: 317-350.
59 John R. Lott, Jr., “Campaign finance reform and electoral competition,” Public Choice, 2006, 272-273.
60 This quote, and the succeeding ones from Murry, Farrell, Karpinsky, and Tobin, were made in interviews with the author.
61 These included Americans for Democratic Action, the American Dental Association, the National Rifle Association, the Realtor’s PAC, the National Association of Home Builders, United Auto Workers PAC, the National Association of Automobile Dealers PAC, United Food & Commercial Workers International Union, and Lockheed Employees PAC.
62 “Ex-Tyco Officers Sentenced,” Washington Post, September 20, 2005.
63 Much of the discussion here is based on John R. Lott, Jr., “The Effect of Conviction on the Legitimate Income of Criminals,” Economics Letters, vol. 34, no. 12, December 1990: 381-385; John R. Lott, Jr., “Do We Punish High Income Criminals too Heavily?” Economic Inquiry, vol. 30, no. 4, October 1992: 583-608 and John R. Lott, Jr., “An Attempt at Measuring the Total Monetary Penalty from Drug Convictions: The Importance of an Individual’s Reputation,” Journal of Legal Studies, vol. 21, no. 1, January 1992: 159-187.
64 Ibid.
65 McCries is a professor at the John Jay College for Criminal Justice. See David Henry, “Junk-bond wheeler-dealers face dishonor of life after prison,” Chicago Sun-Times, February 18, 1992.
66 A federal appeals court later overturned his conviction. See “Justice Reaches into Allenwood,” Wall Street Journal, May 4, 1990.
67 Devlin Barrett, “Merrill Lynch Assistant Pleads Guilty to being Paid for Keeping Secret Information on ImClone,” Associated Press, October 1, 2002. “Facts about Peter Bacanovic,” Associated Press, July 16, 2004. “Soap Opera,” New York Post, September 20, 2006, 12. Case Digest, “Stewart Conviction Upheld,” New York Law Journal, January 12, 2006, 22.
68 “Martha Stewart and Peter Bacanovic Agree to Settle SEC Insider Trading Charges,” SEC News Digest, August 7, 2006. Administrative Proceedings of the SEC, 34-50284. In the matter of Peter Bacanovic. File No. 3-11615. Securities and Exchange Commission. Http://www.sec.gov/litigation/admin/34-50284.htm.
69 “Two Arrested in LAX Rape Case,” Duke Chronicle, http://www.dukechronicle.com/media/storage/paper884/news/2006/04/19/News/2.Arrested.In.Lax.Rape.Case.Players.Maintain.Innocence-1861119.shtml?norewrite200701041334&sourcedomain=www.dukechronicle.com
70 Ed Bradley, “Duke Rape Suspects Speak Out,” 60 Minutes, CBS News, October 15, 2006 (http://www.cbsnews.com/stories/2006/10/11/60minutes/main2082140.shtml).
71 “Living a Nightmare: LAX Players Speak Out,” Duke Chronicle, http://media. www.dukechronicle.com/media/storage/paper884/news/2006/07/19/MLacrosse/Living.A.Nightmare.Lax.Players.Speak.Out-2132857.shtml?sourcedomain=www.dukechronicle.com&MIIHost=media.collegepublisher.com.
72 “Duke Offers to Reinstate Finnerty, Seligmann for Spring Semester,” Duke Chronicle (http://media.www.dukechronicle.com/media/storage/paper884/news/2006/12/11/News/Duke-Offers.To.Reinstate.Finnerty.Seligmann.For.Spring.Semester-2600229.shtml?sourcedomain=www.dukechronicle.com&MIIHost=media.collegepublisher.com). At the time of this writing, Nifong has been removed from the case, but the three players are still awaiting trial for charges of kidnapping.
73 Data show that a person’s income drops dramatically upon arrest, even before a conviction. For example, those charged with anti-trust offenses face an average drop in income of about 60 percent at the time of arrest. Walter M. Grant, John LeCornu, John A. Pickens, Dean H. Rivkin, and C. Roger Vinson. “Special Project—the Collateral Consequences of a Criminal Conviction,” Vanderbilt Law Review, vol. 23, October 1970, 929-1241.
74 Bryan Burrough, “After the Fall: Fates are Disparate for those charged with insider trading,” Wall Street Journal, November 18, 1987.
75 David Henry, “Stubborn taint of Wall Street scandals clings to the innocent and guilty alike,” Newsday, February 9, 1992.
76 Grant, et. al, “Special Project,” 929-1241.
77 President’s Commission on Law Enforcement and Administration of Justice. Task Force Report: Corrections. U.S. Government Printing Office, Washington (1967), 88.
78 Velmer S. Burton, Jr., Francis T. Cullen, and Lawrence F. Travis III, “The Collateral Consequences of a Felony Conviction: A National Study of State Statutes.” Federal Probation Quarterly 33 (September 1987): 52-60., 55. See also Benson, Michael L. “The Fall from Grace: Loss of Occupational Status as A Consequence of Conviction for a White-Collar Crime.” Criminology 22 (November 1984): 573-594.
79 Levitt and Dubner, Freakonomics, 69.
80 Jonathan Karpoff and John R. Lott, Jr., “The Reputational Penalty Firms Bear for Committing Fraud,” Journal of Law and Economics, vol. 36, no. 2, October 1993: 757-758. The money lost to environmental crimes is typically borne by those directly affected by the pollution.
81 Jonathan Karpoff, John R. Lott, Jr.,and Eric Wehrly, “The Reputational Penalties for Environmental Violations: Empirical Evidence,” Journal of Law and Economics, vol., no. 2 (October 2005): 653-675.
82 This is over $100 million in 2005 dollars. See Karpoff and Lott, “The Reputational Penalty.”
83 Karpoff, Lott, and Wehrly, 2005.
84 I owe this example to Benjamin Klein who taught me industrial organization when I was a graduate student at UCLA in the early 1980s.
Chapter Three: Government as Nirvana?
1 Harold Demsetz, “Information and Efficiency: Another Viewpoint,” Journal of Law and Economics, April 1969, 1-22, and Joseph P. Kalt, “Public Goods and the Theory of Government,” Cato Journal, Fall 1981, 565-584. The title of this chapter is taken from Demsetz’s paper.
2 Ian Ayres and Barry Nalebuff, “Stop, Thief!” Forbes, January 10, 2005. Http://www.forbes.com/forbes/2005/0110/088_print.html.
3 Ayres and Levitt, “Measuring Positive Externalities from Unobservable Victim Precautions: An Empirical Analysis of Lojack,” Quarterly Journal of Economics, February 1998, 43-77.
4 Steve Levitt made this claim when he presented his paper on this topic at the University of Chicago.
5 This does not imply that the politicians would be bought off by LoJack or its competitors. Rather, it reflects politicians’ natural desire to pass legislation that benefits the people and companies in their communities.
6 The comparison between open carry and LoJack is not exact because open carry may benefit people without guns if those with the guns can protect them.
7 Milton Friedman, “The Role of Government in Education,” Economics and the Public Interest, 123-153, Edited by Robert Solow, New Brunswick, NJ: Rutgers University Press, 1955.
8 Note, however, that if only certain cars like Porsche were to use LoJack, there would be no free-riding problem because there’d be no benefit for anyone except Porsche owners. Additionally, one might assume that putting a “protected by LoJack” sticker on cars that have LoJacks would solve the free-riding problem, However, this would most likely spur a black market in such stickers for use by free-riders who don’t actually have the device.
9 Thomas H. White, Financing Radio Broadcasting (1989-1927), in United States Early Radio History (http://earlyradiohistory.us/sec020.htm).
10 Ibid.
11 Waldemar Kaempffert, “Who will pay for broadcasting?: A frank and searching outline of Radio’s most pressi
ng problem and the possible ways to solve it,” Popular Radio, December, 1922, 236-245.
12 Steven N.S. Cheung, “The Fable of the Bees: An Economic Investigation,” Journal of Law and Economics, 1973.
13 Harold Demsetz, “The Exchange and Enforcement of Property Rights,” Journal of Law and Economics, October 1964, 15.
14 Mary Muth, Randall Rucker, Walter Thurman, and Ching-Ta Chuang, “The Fable of the Bees Revisited: Causes and Consequences of the U.S. Honey Program,” Journal of Law and Economics, October 2003, 479-516.
15 National Taxpayers Union, “Who Pays Income Taxes? See Who Pays What: For Tax Year 2004,” National Taxpayers Union Foundation, (http://www.ntu.org/main/page.php?PageID=6).
16 See also Joseph P. Kalt, “Public Goods and the Theory of Government,” Cato Journal, Fall 1981, 565-584.
17 Rawle O. King, “Federal Flood Insurance: The Repetitive Loss Problem,” Congressional Research Service, June 30, 2005.
18 Owen Ullman, “High Risk Life, High Expense to Taxpayers: Federal Disaster Aid Makes It Feasible to Build In Harm’s Way,” USA Today, July 24, 2000, 6A.
19 Ibid.
20 Bert Ely, “Savings and Loan Crisis,” The Concise Encyclopedia of Economics (http://www.econlib.org/library/enc/SavingsandLoanCrisis.html), and Edward J. Kane, “The Gathering Crisis in Federal Deposit Insurance,” The MIT Press; New edition (August 9, 1985).
21 Bill Redeker, “Mount Hood Climbers: What Price Glory?” ABCnews.com, December 12, 2006 (http://abcnews.go.com/US/story?id=2720158&page=1).
22 “After Mount Hood tragedy, Ore. lawmaker wants mountain locators,” Seattle Post Intelligencer website, http://seattlepi.nwsource.com/local/6600ap_wst_climber_safety.html.
23 Prior to Kelo, eminent domain had also been used to develop blighted neighborhoods. For a related discussion, see Sonya D. Jones, “That Land Is Your Land, This Land Is My Land . . . Until the Local Government Can Turn It for a Profit: Analysis of Kelo v. City of New London,” BYU Journal of Public Law, Fall 2005, 139-165.
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