Wednesday, May 03, 2006

Ayres and Bulow on Lobbying Reform

The U.S. House of Representatives today passed a lobbying reform bill which increased disclosure requirements. Debate over the bill is part of a continuing struggle to draw the line between a person's democratic right to influence the political process and the possibility of implicit corruption that arises whenever cash flows from a private citizen to an elected official.

This might be a good time to recall an intriguing proposal for a better way to control influence-peddling, suggested several years ago by Ian Ayres and Jeremy Bulow. Paradoxically, the heart of their campaign-finance proposal is less disclosure.

Here is a brief description of the Ayres-Bulow plan, courtesy of Steven Landsburg:

What do you get when you cross a law professor with an economist? An idea that's both expensive and impractical? Maybe, or maybe you get just the opposite--an idea that's both practical and efficient. Or maybe you just can't be sure.

The law professor is Ian Ayres of Yale Law School, the economist is Stanford's Jeremy Bulow, and their idea is to reform campaign finance by turning conventional wisdom on its head. While traditional reformers demand full public disclosure of campaign contributions, Ayres and Bulow want to make all contributions anonymous. If you want to give $100,000 to George Bush, go right ahead. You just can't let him know you did it. And therefore, your cash can't buy his favors.

Here, in brief outline, is how the plan would work: A trusted financial institution--say Vanguard--sets up accounts in the names of all recognized candidates. If you want to contribute to Bush, you write a check to Vanguard with instructions to deposit it in the Bush account. Once a month, Bush can see his total--and make withdrawals to fund campaign expenses--but he never sees the deposit slips. If you want to prove you're a big giver by waving your canceled check in Bush's face, there's nothing stopping you--but all he'll see is a check to Vanguard, which for all he knows went directly into your personal account.