Leveling the Playing Field? The Role of Public Campaign Funding in Elections

Source: Tilman Klumpp, Hugo M. Mialon, Michael A. Williams, American Law and Economics Review, Advance Access, First published online: April 16, 2015
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From the abstract:
In a series of First Amendment cases, the U.S. Supreme Court established that government may regulate campaign finance, but not if regulation imposes costs on political speech and the purpose of regulation is to “level the political playing field.” The Court has applied this principle to limit the ways in which governments can provide public campaign funding to candidates in elections. A notable example is the Court’s decision to strike down matching funds provisions of public funding programs (Arizona Free Enterprise Club’s Freedom Club PAC v. Bennett, 2011). In this paper, we develop a contest-theoretic model of elections in which we analyze the effects of public campaign funding mechanisms, including a simple public option and a public option with matching funds, on program participation, political speech, and election outcomes. We show that a public option with matching funds is equivalent to a simple public option with a lump-sum transfer equal to the maximum level of funding under the matching program; that a public option does not always “level the playing field,” but may make it more uneven and can decrease as well as increase the quantity of political speech by all candidates, depending on the maximum public funding level; and that a public option tends to increase speech in cases where it levels the playing field. Several of the Supreme Court’s arguments in Arizona Free Enterprise are discussed in light of our theoretical results.