Money in Politics: Do Tacit Quid Pro Quo Agreements Exist?

The article, “Political Quid Pro Quo Agreements: An Experimental Study” by Jens Großer, Ernesto Reuben, and Agnieszka Tymula, appears in the July 2013 issue of the American Journal of Political Science. Here, the authors summarize its contents:

Some scholars argue that the amount of money in politics is fairly small compared to the stakes, and campaign donors ought to have little leverage because contributions come from many individuals and typically in small amounts. But there are good reasons to suspect there is some truth behind the common belief that money in politics is undesirable. There are scholars supporting the notion that corporate firms and organized special interest groups are able to secure tax breaks, subsidies, and favorable regulations at the expense of the public via tacit quid pro quo agreements with political candidates. However, it is usually very difficult if not impossible to determine whether or not illegal political quid pro quo happened.

The objective of our article is to study the circumstances under which political quid pro quo occurs and the mechanisms that facilitate it. Specifically, we use game theory and a laboratory experiment to examine strategic situations where a single special interest can transfer money to two competing candidates in order to influence redistributive tax policies. Importantly, the candidates need not respond to transfers, and they choose their tax policies under the shadow of an upcoming majoritarian election where the special interest prefers lower taxes and a majority of voters prefers higher taxes. At the heart of the game is the opportunity of the triad of the special interest and both candidates to collude by exchanging transfers and policy favors in order to profit at the expense of the majority. Like in the field, we do not allow candidates and the special interest to write enforceable contracts. Therefore, quid pro quo agreements must be formed tacitly through observed decisions and self-enforced through norms of trust and reciprocity.

In our experiment, tacit quid pro quo agreements form in about 40% of societies when the special interest and two candidates encounter repeatedly but never with one-shot encounters. Hence, a substantial number of our participants make use of the opportunity to form tacit quid pro quo agreements at the expense of a majority. Moreover, we find that mutual reciprocation between the special interest and both candidates is essential for successful quid pro quo (candidates reward increased transfers with lower taxes and the special interest rewards lower taxes with higher transfers). However, reciprocity between the two candidates is also important (i.e., lowering one’s tax policy if the other candidate’s tax policy is smaller than one’s own). If successful, tacit quid pro quo agreements increase the welfare of the involved triad, while the welfare of the majority decreases. Overall, our experiment suggests that considerable quid pro quo agreements are likely, especially in the form of long-term relationships between single organized special interests (e.g., corporate firms) and policymakers.

Our experiment can be seen as a first step in a line of research into the largely unexplored existence of political quid pro quo and its potential welfare-reducing consequences. Our findings are largely consistent with findings of existing studies that use observational data. However, importantly, the insights we gain are not easily addressed with other methods. For example, we are able to demonstrate the exact mechanism of mutual reciprocation between the special interest and candidates as well as between the two candidates that leads to successful quid pro quo agreements that are harmful for society. These and future insights from various extensions can help us better understand the underlying conditions and consequences of political quid pro quo and improve policies aimed at preventing welfare-reducing special interest influence. In particular, our results suggest the need to take a more careful look at single organized special interests with large economic impact, where favors can be especially harmful.

About the Authors: Jens Großer is an Associate Professor of Political Science at Florida State University, Ernesto Reuben is an Assistant Professor at Columbia Business School, Columbia University and Agnieszka Tymula is a Lecturer in Economics at the University of Sydney.

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The Editor of the AJPS is at Michigan State University and the Editorial Office is supported by
the Michigan State University Department of Political Science and the School of Social Sciences.

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