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And Here Stephen Colbert Thought He Was Just Being Funny…

September 16th, 2009 · 13 Comments
Incentives · Just For Fun · Policy

I love Stephen Colbert’s “The Word” segment in general, and I particularly enjoyed the one from last night entitled “Let Freedom Ka-Ching.” I guess it’s not really surprising that I take a particular shine to the money-related episodes, but this one does even better, incorporating both money and history for an econgirl double whammy…

To begin his argument, Stephen references the 1907 Tillman Act, which was the start of a long series of legislation on campaign finance reform:

The act specifically prohibited direct contributions from corporations and businesses to political parties and election committees. It was the first law on the books to specifically address campaign funding on the federal level.

Unfortunately for those who wished for an incorrupt government, this law was easily circumvented. Businesses and corporations would give their employees large bonuses with the understanding that the bonus would be given to a company “endorsed” candidate. The corporations thus found a loophole, gained political access, and received an additional tax deduction for “employee benefits.”

First off, score one for unintended consequences. 🙂 Stephen then goes on to cite Santa Clara v. Southern Pacific Railroad (1886) for it’s commonly (mis)cited ruling that corporations are entitled to equal protection under the fourteenth amendment. Stephen’s a smart guy, though, so he points out the technicality:

The question of whether corporations were persons within the meaning of the Fourteenth Amendment had been argued in the lower courts and briefed for the Supreme Court, but the Court did not base its decision on this issue.

However, before oral argument took place, Chief Justice Morrison R. Waite announced:

“The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”

This quotation was printed by the court reporter in the syllabus and case history above the opinion, but was not in the opinion itself. As such, it did not technically – in the view of most legal historians – have any legal precedential value. However, the Supreme Court is not required by Constitution or even precedent to limit its rulings to written statements.

The persuasive value of Waite’s statement did influence later courts, becoming part of American corporate law without ever actually being enacted by statute or formal judicial decision.

I can only hope that the inadvertent tweet about Obama calling Kanye West a jackass will have the same impact. But I digress…Colbert is trying to satirize the point that corporations are people too, but he’s closer to the truth than he thinks. Corporations are essentially a set of contracts. I’ve never quite understood the “corporations vs. people” mindset, since those that benefit from corporations are, in fact, people. Employees benefit in the form of wages. Stock and bondholders benefit in terms of claims on profit. (Before you complain about a company making unfairly high profits, you might want to consider buying stock in that company instead, no?) Corporations are just groups of people coming together to conduct business activity. Yes, corporations often have more power than an individual person would, and people generally don’t seem to like others having more power than they do, but it’s not like action is taken at the expense of the people in order to feed some big corporate monster. Actions are taken at the expense of some people in order to benefit other people. Duh. It’s way too easy to think of the corporation as “the man,” and way too easy to forget that those behind the curtain are for the most part just ordinary people that don’t like “the man” any more than you do. (I am willing to acknowledge, however, that the limited liability nature of corporations serves to unlevel the playing field in some ways.)

So if corporations are people, then they deserve to be heard, right? Again from Stephen, “…they must speak with with the only way they can- through billions and billions of dollars. In 1976, the Supreme Court ruled that money is speech.*” Well now he’s on to something…you may remember that I’ve written before about voting with your dollars– if you think that a corporation isn’t acting in your interest, stop supporting that corporation with your money. Granted, there is a bit of a coordination failure aspect here, but if people figured out how to work together then they could provide incentives to direct resources in the proper way. So if it’s reasonable for people to vote with their dollars, both in terms of using their spending as an incentive and contributing directly to political endeavors, why can’t corporations do the same?

* see Buckley v. Valeo

One argument against this is one of double-counting- since there are limits on the amount that an individual can contribute to a political campaign and corporations are just groups of people, allowing corporations to contribute on their own would allow some people to effectively exceed the limits set forth in law. But the general idea still holds that letting economic entities put their money where their mouths are in order to direct choices isn’t automatically a bad thing.

Since you’ve been patient with me for this long, I figure I should at least give you the clip:

The Colbert Report Mon – Thurs 11:30pm / 10:30c
The Word – Let Freedom Ka-Ching
Colbert Report Full Episodes Political Humor Health Care Protests

I will now enjoy thinking of currency as “paper ballots.”

Tags: Incentives · Just For Fun · Policy

13 responses so far ↓

  • 1 SteveO // Sep 16, 2009 at 5:10 pm

    How about just removing all restrictions on amounts for anyone period. Then people can actually fully exercise their rights to speech, to communicate grievances to their government- and they can do it in proportion to both their value as determined by customers, and their own willingness to part with cash.

  • 2 dick // Sep 16, 2009 at 6:36 pm

    But, corporations aren’t people. You can kill a corporation and still have every person left alive and well. You can even kill every person in a corporation and still have the corporation.

    Beyond coordination failure, there are plenty of other externalities. Markets aren’t as rational as the textbooks say.

  • 3 Scott Ritchie // Sep 16, 2009 at 9:24 pm

    The limited liability issue is the entire problem. Well, that and the principle-agent problem between boards and management: the same force that makes CEO pay unreasonably high will result in the corporation lobbying for politics unsuitable to its stockholders.

  • 4 TomS // Sep 16, 2009 at 11:06 pm

    It is possible to influence corporate behavior without selling your stock. Shareholder are allowed to vote on measures placed before the board. Political donations could be one such topic for shareholder approval. Or more likely, one more topic that shareholders don’t bother to vote on and let executive management do what they will. Sigh.

  • 5 econgirl // Sep 16, 2009 at 11:45 pm

    @ SteveO: Colbert had a legal expert on after this segment that basically made the point that you mention. He pointed out that, if the spending limits are lifted for corporations and not for people, then the government is essentially treating corporations like people more than it is treating people like people. He said that it was more likely that there would be parity in treatment.

    Campaign finance is a tricky issue since we as a nation place value on the notion of “one person, one vote.” If you believe that money has a proportional effect on outcome, then allowing large contributions violates this value. Empirically, there is a correlation between the amount of money raised by a candidate and that candidate’s success. but I am unaware of any studies (please inform me if I am ignorant) that show a causal effect. It could just as well be the case that the more popular candidate is able to collect more money, in which case the limit on contribution is not so much of a problem.

    In general, judging usefulness by willingness to pay is a little problematic because it’s hard to conclude, for example, that Bill Gates “likes” something more than I do just because he’s happy to throw more money at it. That said, in a lot of cases it’s better than nothing.

  • 6 paige // Sep 17, 2009 at 6:12 am

    here’s your causality: advertising distorts demand, it makes people want things they didn’t even know they wanted. therefore, money spent by a political candidate on advertising increases the demand (popularity) of that candidate — so more money in the coffer equals more votes.

  • 7 Chris // Sep 17, 2009 at 9:38 am

    What about people who feed money to corporations through their 401Ks and mutual funds? They can’t easily monitor where their money is going and following that belief, they would not be able to easily divest their money from companies who don’t share their same political belief.

  • 8 Don Gooding // Sep 17, 2009 at 10:05 am

    Scarcity of politicians’ time and attention is a huge problem – it is not infinitely price elastic, and auctioning this extremely limited resource to the highest bidders (corporations and their principals) has the consequence of crowding out interests of “the masses.” That’s one problem.

    The second issue is that “voting with your dollars” generally requires a high market share to have any influence – in general, voting for politicians or corporate ballots are crude indicators of demand, whereas lobbying accompanied by significant contributions are extremely precise and effective tools – a two-by-four versus a scalpel.

  • 9 Dan L // Sep 17, 2009 at 3:30 pm

    “It could just as well be the case that the more popular candidate is able to collect more money.”

    For this to have any meaning, by “more popular,” you must surely mean “more popular in an alternate universe in which no money is spent on campaigns,” otherwise the statement has no meaning. (The meaning was clear, but I wanted to clarify before I disagree.)

    You don’t really believe this, do you? It’s one of those absurd fantasies that we already live in the best possible world. Of course, you can’t really *prove* causality in the social sciences. The best you can do is compare the plausibility of (and evidence for) various explanations of cause and effect. In this case, the explanation of how money influences voting is far more simple, straightforward, and compelling (see paige’s comment, for example), than any explanation of how the “naturally more popular” candidate would consistently raise a lot more money.

    Of course, there is a grain of truth to what you are saying, but that small grain is not enough to present your hypothesis as a reasonable alternative to conventional wisdom. If you really believe it to be reasonable, you should study it. If you can convince the world that the conventional wisdom is wrong, you’ll become famous (and be doing the world a huge favor).

    Interestingly, even if your inflammatory hypothesis were true, it wouldn’t change the corrupting influence of money. Because as long as elected officials *believe* that money buys elections, they will still be influenced by it.

    Your comment has me so worked up that I don’t have the energy to criticize the content of the actual post on the personhood of corporations, which also made me want to hurl.

  • 10 Tim Cullen // Sep 18, 2009 at 1:58 am

    Steven didn’t distinguish between non profit advocacy corporations that are merely a manner for people to come together and pool resources to express an opinion, and say Microsoft.

    The CATO people have a good discussion of this issue. I’m not sure exactly where I come down on Microsoft having free speech rights, but I am reasonably sure there is nothing wrong with a group of people coming together to make a movie via a non profit corporation.

    That is a way for people who aren’t wealthy to gain more influence. Also one man still only has one vote, there is no moral obligation that says that everyone’s speech must be broadcast equally; since people’s attention span, time, the em spectrum, etc are all scarce the only way to achieve this would be to violate the first amendment and limit someone else’s speech.

    And money is speech, because one can’t speak without using resources. How does one publish a book, travel to a radio station, or run a commercial without employing resources?

    Campaign finance is joke, money can never be taken out of politics without infringing on freedoms, all the laws do are protect incumbents who have massive fund raising advantages compared to challengers; and often the laws drive the money into less accountable groups like the Swift Boat Veterans for Truth. At least if money is given to candidates we can hold them accountable for what they say with it at the ballot box, and if it is transparent then if someone gets millions from Microsoft and attempts to pass laws against Apple people can hold the politician accountable as well.

    To end on economics, I’m pretty sure that some of the coarsening of the debate is an unintended consequence of making it harder to donate to candidates whilst people still have a high demand for influencing government; although I’m fairly certain that incumbency protection was quite intended.

  • 11 Harry G // Sep 20, 2009 at 11:41 am

    If corporations have the rights of people such as free speech, then they should have the obligations of people specifically responsibility for capital crimes. If I kill someone the state may put me to death. If a corporation kills someone, the corporation should be dissolved, the employees fired and the stockholders investment forfeited (capital punishment for corps).
    Then, I will recognize corporations a “legal people”.

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