A comment on the economics of campaign funds

Abstract

In a recent article in this journal William P. Welch (2.) applied basic economic concepts to the development of a theory of campaign funds. Included in the article was an empirical test of the hypothesis that campaign contributions can be transformed into expected vote percentage through a production function. The foremost objective of this comment is to re-estimate the Welch election production function in a more theoretically appropriate functional form. A distinctive characteristic of an election is that one candidate's actions influence the other candidate's outcome; that is, the output (expected vote percentage) represents a "zero sum game." An election does not depend on the absolute level of each candidate's inputs but upon the relative level of each candidate's inputs vis-a-vis the other. The value of the output will not be affected at all by equal proportion variations in the inputs. A function which describes the election of two candidates must be homogeneous of degree zero. The election production function estimated by Welch does not satisfy the above condition. Furthermore, the Welch approach with insertion of the input values for each candidate into the estimated model will result in predictions of their percent of votes which do not sum to one with probability one. A reformulation of the Cobb-Douglas production function to account for the relative nature of the inputs has been developed by Lott and Warner (1.):