Many have warned about the grave dangers ofmoney in politicsin the US. However, does this theory fit the data? Let’s test it out.

Since this is a test case, we should make it really really clear-cut. For example, even if money is super-important in politics, any one billionaire won’t get everything he wants. There could be another billionaire wanting the opposite. But if a whole bunch of billionaires got together, and said they all wanted the same thing, then you’d expect them to win if money really mattered.

Likewise, if a billionaire wants something, but he’s quiet and keeps it to himself, nothing will happen. So we should choose a case where billionaires are being really loud and actively lobbying for something. That way, we know that Congress knows what they want.

And similarly, we should pick something that’s at least moderately popular, and isn’t too big of a change. Even if Congress were in the pockets of Charles Koch or George Soros, they still wouldn’t vote for something really extreme, like 99% tax rates or abolishing the military. There are about 200,000 pages in the US Code, so for our test case, let’s also pick a proposal that changes, say, four or five of them.

Fortunately, the last year has given us a perfect ‘experiment’. Nine of the richest companies in the US, with a total valuation of $1.4 trillion, all got together and said exactly what they wanted. To make sure everyone knew, they even took out a full-page ad in the New York Times. And their idea was even pretty popular, with 60% of Americans in favor.

Result: nothing.

Okay, so maybe powerful national politicians can’t be pushed around by wealthy corporations. But let’s take an even more extreme example. Let’s take a big, powerful, multi-national corporation, with piles of money and powerful friends, against a little local government that nobody knows about. And sometimes the media or the courts will “fight for the little guy”, so let’s take a case where they aren’t involved.

Last year, Google wanted to build a bridge over a creek, between two Google office buildings. Nothing special, just an ordinary twenty-foot bridge, to save people from making a long, polluting car trip on congested Highway 101. But, to build it, they needed the permission of the Mountain View City Council. Result: denied.

The denial was ostensibly for environmental reasons, even though the bridge would save thousands of miles of polluting car travel. So Google offered to conduct an environmental impact review, to prove the bridge was green-friendly. But even that was denied.

To illustrate how extreme the disparity is here, let’s examine a few key statistics:

Google budget: $45,860,000,000

Mountain View budget: $87,000,000

Google employees: 49,430

Mountain View employees: 378

Google is also Mountain View’s largest employer, and owns 11% of Mountain View’s real estate by valuation. According to the money-in-politics theory, the City of Mountain View should be bending over backwards to please them. Yet, this isn’t what we see at all.

The money-in-politics theory has been formally tested, by famed economist Steven Levitt. Political campaigns are normally hard to experiment with, since there are many “uncontrolled variables” – did Barack Obama win because of all his donations, or did people donate because he was a popular candidate? And so Levitt looked at were races where the same two candidates ran against each other multiple times. He found that, in Congressional races where candidates spent about $250K (1990 dollars), every $100K spent got another 0.3% of the vote, a tiny amount.

Reading the newspapers, one hears about powerful people making political donations. One might surmise that the donations cause the power – first you donate, then you become powerful. However, looking more closely, this seems like a cause-and-effect error. People, for the most part, first become powerful, through some as-yet-unknown process. Then, after they have power, they start donating to campaigns. Attempts to do it the other way around have tended to not work so well.