Why create ads that convey little information?

Television ads for companies, like television ads for political candidates, can either be informative or persuasive. In both cases, the decision to use informative or persuasive ads can be explained in a multitude of ways. Some people claim that the major reason to use persuasive ads is to keep the audience entertained. According to this argument, "In an age where people can TiVo their favorite shows and skip the commercials, people need a reason to watch the commercials, and entertainment is that reason." As a result, for many companies, persuasive ads tend to prevail, because they more effectively entertain their audience than informative ads do.

Alternatively, economics explains the phenomenon of prevalent persuasive ads in a different way. Economics teaches us that informative advertising will increase a company's appeal to those people who truly like the company or would like the company if they knew more about it. Persuasive advertising, on the other hand, because it gives litte or no new information about the company, can use methods that appeal to a wider audience. As such, companies often want to appeal to as many people as possible, so they use persuasive, non-informative, entertaining ads.

Waterfront Ideology

For the past year and a half, my hometown of Alexandria has been in a dispute over the possible rezoning of valuable waterfront properties, currently parks, in favor of building more hotels. This topic exemplifies the complex relationship between ideology and economic interest that, according to Kalt and Zupan, both have strong influence on politicians decision.

The most recent elected Councilwoman Allison Silberberg is publicly against this rezoning: “’We should pause and get it right,’ she said, … She added later that the process should be opened up so ‘citizens are involved from the outset’ and that she would not like to see rezoning of the waterfront.”

Rezoning the Alexandria waterfront would raise the current restriction of hotels, undoubtedly creating economic surplus for the already tourist-driven destination. However, as votes, and countless petitions prove, the members of the Alexandria community do not vote with only economic interest in mind. In fact, for the elected candidates to be acting based on economic interest would be considered shirking, or misrepresenting the people.

Jesse Jackson, Jr. and the Principal-Agent Dilemma

Representative Jesse Jackson, Jr. has recently come under fire for alleged misuse of campaign funds. According to a report on mainjustice.com, Jackson used campaign funds to decorate his Washington, D.C. home. He also allegedly spent $40,000 on a rolex watch for a "female friend." Jackson (D-Illinois) has been charged with misuse of campaign funds in the wake of the scandal. As part of a plea deal, he will be forced to pay back the spent money and resign his post, although the resignation is for unrelated health reasons.

Rep. Jackson's misuse of campaign funds is a classic example of the Principal-Agent dilemma. In this situation an agent is selected to represent and carry out the interests of a principal. The problem arises when the agent does not fulfill the responsibilities to the principal. The agent may take advantage of asymmetric information and use his position to his advantage. A common example is the relationship between the managers and the shareholders of a corporation. In this case, Rep. Jackson is the agent and his campaign donors are the principal. Jackson exploited his role as the representative of his campaign donors' interests. He spent their money on his house, not on his campaign. One has to imagine that this is hardly what the donors had in mind when they signed their checks over.

Post-election campaign contributions?

Already a week and a half past the presidential election, the debate over the role of money in politics continues.  Even though the campaigns are over, elected representatives still receive money from interest groups, including more than $800,000 to 9 lawmakers elect, according to this article from thehill.com.  These groups “bundle” funds together from individual contributors since the FEC places no limits on bundled contributions.  The intention is for individuals to group their contributions together in a lump sum, and that a candidate will be more likely to respond to this lump sum.  According to Rep. Musgrave from Colorado, 

“Picture the candidate. You got a contribution here, you got a contribution there from different areas of the country. … Contrast that with bundling, where all this money comes in. That gives the elected official courage because of their stand on life when the issue comes up.” 

This, however, has created some controversy.  Kathy Kiely, a critic of money in politics argues: 

“People who give in these amounts, they are not just speaking, they are investing.” 

 

In class, we discussed two competing theories of what determines campaign contributions.  The political man view holds that contributors give to candidates whose positions are closest to their own, while the economic man view asserts that contributors give to candidates if their contribution affects the candidate’s position.  In the article, Kiely’s comments about contributions being an “investment” are evidence for this economic man position, which views representatives or candidates as investment goods.  The contributors’ intention is to affect the candidate’s position and ultimately voting behavior.  Also, as evidenced by the article, younger, freshman representatives are more likely to receive contributions since their legislative careers are still young, and they may be easier to influence.  Finally, with regards to bundling, Rep. Musgrave’s comments suggest that individuals have an incentive to organize and cooperate in order to donate money in a more effective, way, in a lump sum.  This implies some shared benefits to organizing, which is another principle discussed in class.  

Who is running for president?

In class we learned that it was rational to be ignorant in terms of knowledge about candidates. A recent poll shows how very ignorant we can be, in that many people do not even know who is running for president.

“A chart on the Google Trends website shows the skyrocketing popularity of a search for the term, 'who is running for president.'"

This makes sense given what we have discussed in class. Because the probability of one’s vote deciding an election is so small, the marginal benefit of voting is infinitesimal, even with a large benefit differential between candidates. In the case of a benefit differential of 100,000 dollars and a p of 1/100,000,000 the marginal benefit of voting would be .001 dollars.  If you look at the opportunity cost of voting just in terms of lost wages and you earned minimum wage, it would take you ($.001/$7.25/hr)*(3600 secs/hr) = .497 seconds (approximately one-half seconds of wages) to earn as much at work as the marginal benefit of voting. Thus, unless you can become informed and vote in less than one-half second, you would be rational to be ignorant (because MC > MB) and not know much more than who the candidates are (if this at all). With analysis such as this, it is easy to see how this trend on Google came about.

Results of Redistricting in California

In 2008, citizens of California voted for a redistricting to be done by a group of volunteer resident voters.  In the past, the district lines had been drawn by people inside California's politics.  But this year, for the first time, the congressional district lines were drawn by a wide array of people in professions ranging from doctor to teacher.  It was clear after the elections that the redistricting had a significant effect on candidate outcomes.  Representatives who had been elected in not the 90s's....not the 80's...but the 70's had trouble getting back into office.  Candidates who had been representing California for years did not get re-elected.  This is because many politicians had a new set of voters to persuade, and a new audience to familiarize themselves with.  This made their campaign that much harder and may very well have pushed them out of office.  Dakota Smith of Los Angeles reported,

"Redistricting really changed the landscape for everyone," said Stuart Waldman, president of the Valley Industry and Commerce Association. "Incumbents had to introduce themselves to new districts. Newcomers had opportunities that didn't exist."

Because the districts regrouped many of the California citizens, some of the incumbents were no longer "incumbents" to the people they were now running to represent.  Their face was no more familiar than that of the challenger.  Thus, the incumbent lost his edge and slid back down the S-curve (shown in Mueller) to where having an effective campaign is crucial.  Now the incumbent was back to square one, or much closer than he had been in 2008, and the marginal utility of each dollar he spent on his campaign was much greater.   Instead of being able to spend money proclaiming his platform, he had to spend money to get people to know who he was.  The incumbent was now on a level playing field with the challenger and only time will tell if the right man won.

US Food Aid and Rent-Seeking Behavior

The economic term "rent-seeking" is a reference to competition for state-sanctioned monopolies. The "rent" is a state-protected stream of revenue and "seeking" constitutes resources that are spent to secure that revenue. Common examples of rent-seekers are power and water companies that lobby for the right to provide services to a given geographical area. The problem is in the competition for securing these exclusive rights. Not all of the competitors will get the right to the business - the losing companies waste money and time trying to persuade legislators who to pick. 

Recently, the US foreign food aid programs have come under attack for rent-seeking characteristics. In an article in The Guardian, it was revealed that nearly 2/3 of the food bought for the $1 Billion US food aid program was purchased from 3 firms. These three politically powerful firms are ADM, Cargill, and Bunge. Together, these firms dominate the global grain trade. 

Concentration in the food aid market would not be an issue except for the fact that many aid experts have questioned whether or not this is the cheapest aid system that could be used:

"Rob Bailey, fellow of the UK thinktank Chatham House said: 'When you have got a process as concentrated and as uncompetitive as what the Guardian analysis reveals, you would expect taxpayers to be overpaying for the services of agribusinesses. We know only 40% of every taxpayer dollar goes on food itself, the rest goes into the pockets of agribusinesses and freighting.'"

The Guardian revealed that the United States still uses a system for food aid distribution that was created in the 1950's, with the vast majority of the food purchased, processed, and shipped by American companies, even if there are cheaper alternatives. Most other donor countries have abandoned this model because it "raises prices, delays deliveries, damages developing countries' markets, and does little to end dependence on foreign assistance."

In addition to the inefficiencies that the Guardian found present in the general structure of the US food aid system, it also found evidence that food aid programs can be manipulated to help firms offload surplus product. This occurs even though the US government has stated that the food aid program "is no longer a surplus disposal programme [sic]." The majority of the commodities shipped as food are, in fact, major grains, but also on the list are 80 tons of canned salmon that went to Laos and Cambodia. In response to a glut, industry groups sent lobbyists to Washington to get the canned salmon on the list of acceptable foods. 

It is ironic that this discussion is about aid - what is the real aid here, and who are the beneficiaries? Is it the food sent to third world countries or is it the protection that ADM, Cargill, Bunge, and other firms receive from the US government? 

Irrational Abstention

Holy polecats!  A Phoenix woman tried to run over her husband with her car because he didn't vote:

Holly Solomon, 28, was arrested after running over husband Daniel Solomon following a wild chase that left him pinned underneath the vehicle.  ...Police said Daniel Solomon told them his wife became angry over his "lack of voter participation" in last Tuesday's presidential election and believed her family would face hardship as a result of Obama winning another term.

OK, people, so this little lady has some anger management issues.  But the real problem here is her ignorance regarding the electoral college: Romney won Arizona!

Super PACs pulled Romeny away from Median Voter

Conservative Super PACs spent gobs of money to get Mitt Romney elected in the general election, but they may have contributed to his problems courting the Median Voter. 

As we discussed in class, the power of Super PAC money in the presidential election forced him to gain the support of the more conservative donors and their Super PACs by using more conservative rhetoric to align with their views. This pulled him further to the right on the policy spectrum, and away from the Median Voter.

This article from NPR claims the influence of Super PACs prolonged the Republican primary, also forcing Romney further to the right.  Both Newt Gingrich’s and Rick Santorum’s campaigns received a second wind from large contributions from conservative Super PACs. Romney had to continue to appeal to Republican voters and conservative activists within the party to secure the nomination. In addition these PACs ran attack ads against Romney in the primary, laying out a strategy for persuasive advertising Obama would use in the general election. The Super PAC that supported Gingrich, Winning Our Future, launched an ad criticizing Romney’s history at Bain Capital. According to political analyst Tim Cooke, these persuasive tactics laid out by republicans helped Obama take a “baseball bat and beat [Romney's] brains in.” He says, “Romney could not recover. The bashing defined him, and he ran out of time to moderate his message from the far-right tack he took to secure the Republican nomination.”

Election for Sale?

Section 20.3 of Mueller's textbook focuses on the rationale behind campaign contributions and the real impact that they exhibit. With over $2 billion spent on the presidential election alone, the 2012 election season, by far the most expensive in history, presents an interesting case study for this material. Mueller predicts that a rational outside group will only provide campaign contributions to candidates if 1) there is a connection between the amount of money received and the probability of electoral victory and 2) there is a connection between a contributing group's policy agenda and the realized votes of the elected candidate.

What makes the 2012 election particularly interesting is that it was the first election after the Supreme Court's Citizens United v. Federal Election Commission ruling, which declared that parts of the existing campaign-finance legislation violated the First Amendment and led to the proliferation of the "super PACs" that inundated this election cycle with limitless outside money. This outside money, though no longer routed directly through a campaign, was furnished with the hopes and expectations on the part of the contributors that Mueller analyzes.

So what's the verdict? Did record amounts of money and advertising influence our nation's choice of president? It's hard to say. This New York Times page reports that super PAC spending by Republican groups outstripped that of super PACs with Democratic agendas. But spending directly by the Obama campaign exceeded that of the Romney campaign. And of course looking at the outcome of an election as solely the product of campaign spending leaves out many important explanatory variables.

Having lived through election season in a swing state, one part of section 20.3 that I think we can all attest to is the diminishing returns to this money. By November, I found myself beyond the upper flat part of the S-curve Mueller describes and into a realm where the only influence political advertisements had was to make me consider abstaining. The real victory for Virginians of all political stripes is that we no longer have to experience a barrage of election advertisements through every medium imaginable. Just in time for Christmas shopping ads in November!

Obama's Persuasive/Informative Ad

"Mitt Romney isn't the solution, he is the problem"

This is probably one of the most hard hitting videos I saw during the campaign.

We talked about different types of campaign videos, persuasive and informative, being in two separate categories.  However I believe the Obama campaign did a superb job of combining the two to deliver a full and complete ad to define Romney using facts and intangibles.  It successfully moved Romney away from the middle ground by using his record, and at the same time, it used his lackluster performance of "America the Beautiful" to persuade voters that he isn't a good sing... guy.


Let's put it this way, he probably wouldn't make the Hullabahoos.

Taking the Initiative

This article from The Harvard Crimson (which has nothing on the Cav Daily, I think we can all agree) explores the effect of pressure groups on ballot initiatives such as the one which legalized marijuana in Colorado last week. As with standard elections, political action groups expend resources to maximize their utility. In essence, money spent on "circulating pamphlets, identifying voters, and other forms of campaigning" figures into pressure groups' political influence function via Becker.
An interesting distinction between campaigning for ballot initiatives and stumping for candidates lies in the necessity for groups to articulate their positions (informative campaigning) on ballot initiatives as opposed to spewing out the standard, bland persuasive campaigning rhetoric that defines candidate-centered elections. For Defend Oregon, the PAC examined in the study, to lobby for/against its ballot initiative, it necessarily must elucidate to voters a clear stance on the issue at hand (tax-breaks for big corporations, in this case). Still, Defend Oregon's website brims with vague sentiments intended to rally every voter around the issue. The group claims, for instance, to be protecting Oregon's "most important priorities"--implying that all Oregonians should support them if their priorities are in order.
Despite its salient messge, this article does fail to fully explain how the study controlled for variables in determining that flyers for ballot intiatives in the 2008 election directly influenced voters.

Sandy Jackpot

While super storm Sandy destroyed much of the New Jersey shoreline, there was a 5.1-mile stretch that was spared.  This year, an $18 million project was completed to rebuild the beach and dunes in front of 30 casinos that line the Atlantic City coastline:

“The government has protected their cash cow, the casinos, at the expense of the people,” said Edsel Coates, 57, whose home near the inlet flooded and roof caved in. “The casinos are receiving preferential treatment and there’s neglect of the average Atlantic City resident.”

 25% of the residents of Atlantic City live in poverty. That is 16% higher than the state average. They are subject to the negative effects of rent-seeking by the casinos. While the casinos were able to lobby the state and federal government for the funds required to protect their beachfront properties, Atlantic City’s largest and poorest neighborhood had their seawall project delayed. The project is scheduled to start soon but the damage has already been done. Problems like this will continue because the casinos will always be able to commit more funds to rent-seeking than the impoverished neighborhood can. What is sad is that, even though the result lacked morality, rent-seeking in this case was technically efficient because, monetarily, the group that benefited the most from the rent received it.

The External Benefit of Skyscrapers

Republican congressman Darrell Issa recently announced that he intends to hold hearings on amending the Height Act of 1910, a piece of legislation that limits the height of buildings and other structures in Washington, DC to 130 feet. Working with DC delegate Eleanor Holmes Norton, Issa has asked the National Capital Planning Commission and the DC government to conduct a study on raising the height limit outside of the city's federal core. 

While opponents argue that raising height limits would ruin Washington’s open skylines, those who support changing the law argue that limiting how tall buildings can be in the city stunts its economic development, while also driving prices for the limited housing and office space to some of the most expensive in the country. So, allowing for taller buildings in DC would promote economic activity and enable both regular residents and the government itself to save money – but that’s not all. In the Slate article, "Skyscrapers in DC Would Be Good For America," Matthew Yglesias raises another important possibility that decision makers considering this law should take into account:

“If housing in the DC area became cheaper, then in effect real compensation of DC-area federal employees would rise (allowing the government to attract better workers) at no cost to the taxpayer.”

Thus, the lowered cost of living that would result from allowing the construction of skyscrapers in DC would result in the important positive externality of drawing higher quality government workers to DC, benefiting not only those who live in the city, but the rest of the nation as well. This suggests that the current quantity of skyscrapers being demanded in DC is too low, since individuals fail to consider the added social benefit of more effective government workers that could result from constructing taller buildings. Perhaps if Issa's opponents looked at the issue in this way, they would be more willing to change their stance. 

Excessive Advertising?

Over the course of this election season, the Barack Obama and Mitt Romney campaigns are reported to have spent over $1 billion on political ads. In class we discussed the high proportion of persuasive campaigning in lieu of more informative campaigning. Persuasive campaigning attempts to get everyone in the distribution to vote for the candidate, rather than attempting to garner the vote of those near the candidate's position.

The article talks about how much the two candidates spent money on airtime and political advertising. The article notes that most of the advertisements have been shown in the same nine battleground states, and most focused on Florida, Ohio, and Virginia. This  observation seems to be in line with the idea that consumer-voters and campaigns would want to spend money in advertising in these areas, in order to sway voters across the spectrum of issues to vote for their candidate.

Also, sorry Virginia. According to CNN, " in an indication of how competitive Virginia is, both campaigns increased their ad spending there in the last 24 hours -- Romney now totals $3.6 million and Obama $3.3 million"

The increased advertising frequency in the battleground states in another example of wasted resources due to lobbying as well!

Scott Brown Ad

In class, we looked at examples of political ads aimed at affecting the presidential election.  The same theory on ads applies to all political elections.  While running for the Senate, Scott Brown's campaign ran an ad that interviewed women who supported him.  Here are some of their reasons:

Woman 3: His record shows that he supports women. He supports families.

Woman 4: When my daughters grow up, I want to make sure that they have good jobs with equal pay, and I know Scott Brown will fight for that.

Woman 1: I support Scott Brown because I know he wants to get our economy moving forward again.

This ad is a persuasive ad.  It is trying to increase the probability that everyone will vote for Mr. Brown.  It talks about very general issues that everyone can agree with such as supporting families, equal pay and improving our economy.  Very few people are against these things, and even fewer people would admit to holding views against families and the economy (especially when running for office).   This ad deliberately paints Brown as a great guy who you'd be crazy to vote against regardless of your political leanings.

Note: the ad does include one statement that could be classified as informative (one of the women asserts that Brown is pro-choice which could discourage some voters from voting for him); however, the ad overall is  a persuasive ad.  

The GOP: too far right to win presidential elections?

            Earlier in the semester, we discussed Down’s Medium Voter Theorem. The theorem explains that candidates, in a two-party system, will converge upon the center of the spectrum. They do not become identical, however, due to fear of losing extremist votes. The reason behind this convergence is that, a predictable stable equilibrium results at the median voter, and capturing the vote of the median voter typically comes hand-in-hand with winning the election.

            This article discusses the very real possibility that Romney lost the election due to the far right position of the Republican Party. The party’s future is uncertain, due to the disconnect between the extreme candidate required to secure a national nomination and the more moderate candidate that the median voter will support. Romney, the once moderate governor from a blue state, was pushed too far to the right in order to “win over the party’s faithful.” The presidential candidate was forced to take stances on critical issues that ultimately cost him moderate votes. Losing these votes is of particular importance in swing states, such as Florida, Virginia, and Ohio, which played a big roll in this year’s election. As discussed in class, capturing the moderate votes is typically a decisive factor in election outcome. Had Romney run emphasizing his more moderate stances on critical issues, rather than the extremist views of the GOP, perhaps the outcome of the election would have been different.

Developement at All Costs

In The Logic of Collective Action, Olsen writes "Patriotism is probably the strongest non-economic motive for organizational allegiance in modern times" (13). In China, nationalism is the rule, and one major object of pride is the new high speed rail system that propels the new upper-middle class between major cities at speeds over 200mph. To many, it represents an industrial revolution. However, when the first tracks were laid, the Chinese were concerned that "steel bands would disrupt the flow of chi." Now, many have lost their lives, health, or loved ones: casualties of the the industrious priorities of a corrupt party ministry. 

One victim said, "The main thing I've come to conclude is that we have to teach our children well... We have to teach them to grow up in a democratic society. China is a one-party state. There is no justice here—it's impossible." 

This man fantasizes about a state in which people matter because they have votes that matter. Democracy gives citizens some influence over government decisions, but, according to Olsen, perhaps not as much as this man may hope. Even if the Chinese people, wanting basic rights and conscientious leaders, were to form one interest group, it would have many traits that hinder success: great size and minimal, dispersed benefits to each member. The opposing interest group, the party ministry, is a relatively small group, where each member has a great deal to gain in bribes and praise (and will therefore be willing to expend a great deal of rent to maintain possession) by following through untested projects. Inequality of interest group power was exemplified when lawyers were reportedly ordered by the government-run bar not to even take crash cases. 

A singular nationalistic mentality no longer describes the attitude of the masses, but there are no institutions to coerce or incentivize this latent group into action.

No Longer the Candidate of Hope and Change

The 2012 presidential election cost an unprecedented amount of money and one part of the advertising is receiving credit for impacting the election: President Obama’s persuasive campaigning about Mitt Romney’s character. Politico writes that:

“Obama and his top campaign aides have engaged far more frequently in character attacks and personal insults than the Romney campaign…[these attacks are] designed to portray Romney as too flawed personally to be a viable political alternative.”

Justifying the ads, an Obama campaign aide claimed that, “None of what the Obama campaign is doing is false. Mitt Romney is a terrible human being, and it’s not hard to make that case with the available facts.”

Mueller describes two types of campaigning: persuasive and informative. With informative campaigning, the candidate informs voters of his or her position, and people vote for the candidate closest to their ideal point. If Obama and Romney only engaged in this type of campaigning then they would have increased the likelihood that some voters would vote for them and decreased the likelihood that others would have.

Obama’s personal attacks were a form of persuasive campaigning intended to increase the likelihood that every voter would vote for Obama. By making Americans believe that Romney hated women or that he was responsible for a woman’s death from cancer or that he did not care about other people, Obama accomplished two things. For voters on the left side of the political spectrum, it increased contributions to the Obama campaign. Even though these voters experienced lower utility because of lower spending on consumption goods, they had a higher expected utility because they placed a higher value on an Obama victory and because the contributions increased the likelihood that Obama would win. These personal attacks increased their expected utility of an Obama victory because Romney seemed so abhorrent. In addition, prior to these personal ads, independent and moderate voters had a small difference in utility between the two candidates. While informative campaigning may have convinced many of them to vote for Romney, persuasive campaigning convinced them not that Obama’s policies were superior, but that his character was. While this change in utility may not have been enough to encourage campaign contributions for Obama, it certainly helped to move votes from Romney to Obama. Obama’s personal attack ads demonstrate the efficacy of persuasive campaigning in influencing electoral outcomes.