By When Elon Musk became the world’s first trillionaire (albeit briefly), many people objected. They argued that no one should have that much money when others have so much less. As Musk leveraged that fortune in an attempt to shape electoral outcomes, some despaired. Tuesday’s results indicate that was a poor investment, but it’s his half a billion to waste.
Why not? After all, inequality isn’t the same thing as poverty. Consider that there’s a huge salary gap between NFL quarterbacks and NFL punters: quarterbacks earn tens of millions of dollars a year, whereas punters usually earn a few million. But I haven’t seen protests outside of NFL stadiums demanding less money for the “quarterback class” and more for the “punter class.” Punters aren’t poor. That quarterbacks live in even larger mansions isn’t a moral problem.
Maybe you’re thinking the moral problem isn’t simply that someone is richer than others; the problem is that someone is richer because others are poorer. But this thought assumes wealth is a fixed pie. In a market economy, though, it usually isn’t. If an entrepreneur figures out how to manufacture dishwashers for $100 less, millions of people might buy one and make the entrepreneur extraordinarily wealthy. But she only became so by making others better off. Before, customers would only receive a dishwasher in the transaction. Now they have a dishwasher and an extra hundred dollars to buy something else. The entrepreneur got rich by baking more pie, not taking a larger slice for herself.
An increasingly popular argument made by critics of economic inequality focuses on political power rather than consumption. The problem isn’t that the rich can buy a mansion but that they can buy elections. And this does seem worrisome.
One issue with this objection is that it underestimates the importance of organizational advantages in politics relative to economic advantages. Mancur Olson famously argued that small groups enjoy a leg up in political competitions because of incentives, regardless of wealth. Political inequalities will arise even in conditions of perfect economic equality. Even if everyone had exactly the same income and exactly the same wealth, political influence wouldn’t be equally distributed.
Take the case of free trade. Suppose that some domestic producers are unhappy because they dislike the competition from overseas. But consumers stand to benefit from cheaper goods. Notice, though, that the producers have a much stronger incentive to organize than the consumers. They’ll donate to campaigns, hire lobbyists, and call legislators because each of them could lose their livelihoods. But each consumer stands to lose only a few dollars a month if trade is restricted. Even learning about the legislation probably isn’t worth their time, let alone organizing to fight it. The cost of becoming informed and politically active is greater than the benefit, so they don’t do it. Because the producers organize and consumers don’t, we should expect the restrictions to pass.
In this example, nobody was richer than anybody else, yet political power still ended up concentrated in the hands of a relatively small group. And this isn’t some far-out thought experiment. Small groups with concentrated interests routinely outcompete large groups with dispersed interests. This is one of the central lessons of public choice economics. Equalizing wealth doesn’t eliminate the problem because organization is a major source of political power.
Now you might reply that wealth still matters for political influence even if it’s not the only thing that matters. Running a competitive campaign takes money. But this is a different claim than saying that “money buys elections.” Campaign Finance Institute researchers Michael Malbin and Brendan Glavin write, “Money is never a sufficient condition for winning. If the voters do not like what they are hearing, telling them more of the same will not change their opinion.” Indeed, economist Steven Levitt studied repeat candidates for the US House and found that “campaign spending has an extremely small impact on election outcomes, regardless of who does the spending.” Two recent Senate primaries reinforce the point. Abdul El-Sayed won the Democratic primary in Michigan despite a nearly 10-to-1 advertising disadvantage. A couple of weeks later in Florida, Angie Nixon won the Democratic primary even though her opponent, Alex Vindman, outraised her 16-to-1.
While there is a correlation between spending and winning elections, this often reflects that money flows toward stronger candidates who are already more likely to win. That is, money tends to follow winners rather than cause them. Plus, to the extent money does influence elections, it produces greater returns for challengers than incumbents, because the latter are already well-established and well-known. So reducing money spent in elections might actually worsen political inequalities, further entrenching the advantages that incumbents enjoy over challengers.
Lastly, consider that people have the right to spend their money on politics even if their spending gives them unequal influence. More specifically, property rights entitle people to use their property (within legislated limits) to promote political outcomes. You’re within your rights to buy a candidate’s sign and post it in your yard. You can buy a stack of pamphlets arguing against rent control and distribute them to your neighbors to sway their votes. Those with more wealth may be more capable of influencing voters, but that’s not a reason to restrict their right to use their property as they see fit.
Leaving money out of it entirely, some highly influential people may exercise their rights in order to promote their favored political outcomes. Oprah Winfrey, for instance, exercised her right to speak freely when she endorsed Barack Obama for president in 2008. Researchers estimate that her endorsement produced about one million votes for Obama. While a celebrity’s presidential endorsement is far more influential than, say, my presidential endorsement, government officials shouldn’t prevent them from freely speaking in favor of their candidate. Similarly, government officials shouldn’t prevent people from freely disposing of their own property to support their candidate, even if the exercise of some people’s property rights is more politically impactful than that of others.