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MICHAEL L. D A V I S & M I C H A E L F E R R A N T I N O
Department o f Economics, Southern Methodist University, Dallas, T X 75275
Abstract. This paper presents a model in which politicians can increase the probability of election
by making exaggerated claims about the benefits of their own platform - referred to as positive
campaigning - and by exaggerating the undesirable characteristics of their rival - i.e., negative
campaigning. Such lies may be detected at some point in the future and thus result in a costly loss
in reputation. Thus the politician must tradeoff immediate benefits against potential future costs.
Of course this problem is similar to any commercial endeavor - a car maker, for example, is tempted
to claim that his car is better and the competition's is worse than it is. But it is shown that the lack
of transferable property rights to political office makes lying more likely in political markets. It
is also shown that there is a natural tendency for politicians to engage in more negative cam-
paigning.
1. Introduction
Douglas was lying. In fact, Lincoln's views on race relations were very much
in the 19th mainstream, he did not even favor abolition, let alone equality. To
quote again from McPherson (p. 186):
Lincoln spelled out his position with clarity: " I am not, nor ever have been
in favor of bringing about in any way the social and political equality of the
white and black races, (applause) - that I am not nor ever have been in
favor o f making voters or jurors of negroes, nor of qualifying them to hold
office, nor to intermarry with white people; and I will say in addition to this
that there is a physical difference between the races which I believe will for
ever forbid the two races living together on terms of social and political
equality."
3. The model
We begin by assuming that a political issue must be decided in which there are
two clear sides. The politician knows the true nature of these outcomes and so
knows precisely the utility forthcoming to himself under each proposal as well
as the true value that constituents will receive from the success of each side.
Denote the politician's utility under the preferred policy as Up and the utility
under the less desirable policy as U n. Without loss of generality let u n = 0,
with UP > 0. Thus, for example, UP might represent the utility the politician
derives if he is elected as compared with defeat. If the issue is some legislative
proposal U p gives the value to the politician of seeing his position adopted as
opposed to some other.
The politician can influence the probability that the desired proposal will be
adopted by making claims as to the value (utility) that some constituent group
will receive under either side. This constituent group might simply be the voters
or, in the case of a legislative proposal, some special interest lobby that could,
if sufficiently motivated, influence the legislature. Let Vcp denote the value the
politician claims the constituent will receive under the proposal favored by the
politician and Vcn the value the politician claims constituents will receive un-
der the alternative. For example, Vcp might be the additional wealth the politi-
cian promises the voters if he is elected, and Vcn might be the decline the
voter's wealth that the politician claims will result from the election of his op-
ponent.
Assume that the probability of the favored policy being adopted depends
upon the difference in the values claimed under each. That is the probability
that the politician will receive Up is given by p=po+P(VCp-Vcn), with
P'(Vcp-v cn) > 0, where Po is simply the probability of the desired proposal
passing if the politician made no attempt to influence the outcome (i.e.,
P(O) = o).
We assume that during the campaign the constituents do not know the true
value that they will receive under each policy, which we denote Vtp and Vtn.
However, at some time in the future, after the matter is decided, they may ob-
tain better information as to the truth. We denote this realized, expost, value
as Vrp and VTM. Note that in our model as, we think, in the political world the
truth does not inevitably win out - i.e., Vtp need not equal Vtp.
We assume that lying is costly to the politician in that it reduces the value
of his reputation. To capture this, let the function r=R[(Vcp-vrp)2+
(vcn-vrn) 2] represent a measure, in units comparable to utility, of the politi-
cian's reputation. In the simplest case, Up might simply represent the income
the politician will receive under the favored outcome, and R would represent
the expected present value of all future income the politician would receive
from his position. As the difference between what the politician claimed and
what the constituent groups finally observes increases, it becomes more
difficult for the politician to influence future events in his favor and so r would
decline (i.e., we assume R'[.] < 0). As we develop more fully below, -R'(.) is
essentially the marginal cost of lying. Thus, we make the usual assumption that
marginal costs are non-decreasing (i.e., we assume R" (.) _<0).
Notice that in this formulation lying is symmetric in the sense that incorrect
claims as to advantages of the policy the politician wants adopted (or rather
claims that are latter perceived to be incorrect) have the same effect on reputa-
tion as incorrect claims about the issue the politician wants defeated. Notice
also that r may be stochastic, especially insofar as what the constituents realize
expost may be random. We consider this in more detail below. We recognize,
o f course, that this formulation o f reputation is at best a rough summary o f
what is surely a complex and mysterious process. However, since the purpose
of this paper is not to model the process by which constituents decide how
much faith to put in political rhetoric, this formulation is sufficient to make
the points we think relevant.
In our model, therefore, the politician has two decision variables: the posi-
tive claims to b e m a d e about the advantages o f desired policy, V cp, and nega-
tive claims about the alternative, V cn. The expected utility received from a pair
of claims is therefore
We turn our attention next to the question of the optimal deception when all
falsehoods will eventually be discovered. Although this exercise is quite simple
and generates predictable results, it is useful in establishing a benchmark for
comparison with the case discussed in the next section in which some lies will
go undetected. If the constituency eventually discovers the truth about how it
will be affected by proposals, then it is true that V tp = V rp and V tn = V TM. Thus,
substituting into (1), we see that the optimal claims must satisfy
Simply manipulation of these first order conditions confirms the obvious: that
the politician will wish to exaggerate the desirable features of the proposition
that he favors (i.e., Vcp-v tp > 0) while exaggerating the undesirable features of
the negative (i.e., Vcn-vtn < 0). Perhaps more interestingly, we see that there is
no bias towards either positive or negative campaigning in the sense that the
magnitude of the positive lies are exactly matched in absolute value by the
negative lies. 4
3.3. Optimal lying when the truth is hidden
Suppose that constituents can only determine if a politician has told the truth
by comparing the claims that were made against what actually happened. Thus,
only those policies that get passed can actually be tested. Suppose further that
if the claim cannot be tested, the politician's reputation does not suffer. In
other words, if the favorable outcome occurs, then V tp = V tp, and V rn ----V on.
Similarly, if the unfavorable outcome comes to pass, then v r p = V cp and
V TM -----Vtn. This implies that the reputation is also stochastic and so the politi-
cians expected utility function is
(DvCn(.) = -p'(.)[UP+SR[(Vcp-vtp)2]-6R[(Vcn-vtn)2]}
(4.2)
+ [1-Po-P(-)]~SR'[(vcn-vtn)2](vcn-vtn) = 0
If some lies can be hidden, then it will no longer be the case that the politician
will wish to balance negative and positive lies. It is straight-forward to demon-
strate through the usual techniques that an increase in Po causes a decrease in
the claim for the positive side and a decrease in the claims for the negative side.
Thus, as Po increases the positive claims move back towards the truth and the
negative claims move further away from truth.
Inspection of the first order conditions reveals why this is so. In expression
(4.1), the term [po+P(.)]~SR'[(Vcp-vtp)2](Vcp-vtp) represents the marginal
costs of increasing the positive lie. As Po goes up, these costs go up and as lies
become more expensive, fewer are told. In other words, to say that Po has
gone up is to say that the favorable outcome is more likely to come about.
Thus, the politician needs to be more careful about positive claims since these
are more likely to be tested.
In expression (4.2) the term [1-Po-P(-)]~R' [(vcn-vtn)2](vcn-v tn) is positive
and can be thought of as the marginal benefit o f reducing the negative lie. As
Po goes up, this marginal benefit declines. As the benefit to more honesty
regarding the opposition goes down, more lies are told about the opposition.
This result has an interesting corollary that supports our contention o f a bias
towards negative campaigning: in those contests evenly matched before cam-
paigning - i.e., those where Po = .5 - the politician will engage in more nega-
tive than positive rhetoric. To see this, suppose that after the campaign the
9
(vcn_vtn) 2
I
I ( Vcp-Vtp)2
i
.5 Po
Figure 1. Optimal lies as a function of pre-campaign odds of winning.
odds of victory are even - that is Po + p(Vcp-vcn) = .5. It is obvious from the
first order conditions that this implies that Vcp-v tp = -(vcn-vtn). It is, o f
course, also true that when the after campaign odds are even, the pre-campaign
odds must be less the .5. Thus, relying on the results that as Po goes up the
negative lies get bigger and the positive lies smaller, it follows that when Po =
.5 more negative campaigning occurs.
These results are summarized in Figure 1, which shows a graph of the op-
timal level of negative and positive lies - i.e., ( v c n - v t n ) 2 and ( V c p - v t p ) 2 - as
functions of the pre-campaign odds of victory. Here it is seen that the negative
lies increase with the pre-campaign odds and the positive lies decrease. It is also
seen that when the odds start off as even, there is already a bias towards nega-
tive claims.
In the models presented thus far, the politician is assumed to value reputation
even if the proposition fails. We made this assumption in order to demonstrate
that our hypothesis about negative campaigning holds under even highly un-
likely circumstances. In many cases this is obviously untrue. In particular,
reputation as an honest politician may not be o f much value in other occupa-
tions. Thus, if the proposition is whether the politician will be elected, a defeat
may render all reputation worthless. This is especially true when it is unlikely
that a defeated politician will ever be able to run again. As might be expected,
10
this makes lying more extreme and negative campaigning more likely.
Here again, we must consider separately the two cases where expost verifica-
tion is and is not possible. When constituents can verify claims at some point
in the future, the politician's objective function becomes
The only difference between this and the objective function given by (1) is that
here the reputation function is deflated by the probability of success. This is
simply equivalent to lowering the costs of lying and so we expect that there
would be more lying. It is easily shown that in this case the lies are still sym-
metric.
A more interesting (or at least more extreme) result follows when we consider
what happens when constituents can not verify negative claims when the politi-
cian is successful. Here the politician's objective function is
Since this is monotonically decreasing in V cn, the politician will make the
most extremely negative charges about the opposition possible. In other words,
if a victory means that negative claims have no impact on reputation, and if
defeat means that reputation is irrelevant, the politician should set the level of
negative campaigning so as to maximize the probability of victory.
What happens when voters expect politicians to lie and base their expectation
of the truth on a transformed version of the politician's claim, obtained
through some form of Bayesian revision of prior beliefs? In general, this will
reduce but not eliminate the politician's incentives to lie. In our model, the
politician is essentially a Stackleberg leader, making claims to voters whose
political support and evaluation of the politician's reputation is based on a rela-
tively crude reaction to lies which does not take into account the politician's
incentives. If we attribute more complex reactions to voters, this tends to
reduce but not eliminate the politician's ability to make misleading claims.
Consider first a relatively simple case in which voters react to politicians'
statements by revising their priors in a Bayesian fashion, but in which they do
not attribute overt strategic behavior to politicians. Specifically, voters assume
that there are congenitally " h o n e s t " politicians who telPthe truth with prob-
ability ~th and congenitally "dishonest" politicians which tell the truth with
probability ad,O < a d < a h < 1. The politicians report the value of a variable g
11
from which the voters derive utility and which will be subsequently confirmed.
Let the variable take only two values, a truthful value gt and a false value gf.
If politicians' utility is rising in the voter's perception of g, then gf>gt" In
addition, voters have a prior probability 13 that any given politician will be
honest. By straightforward application of Bayes' rule, after the politician
announces gt and the voters conform it, they revise their value of 13 to fit =
ahl3/(ahfi + ad(1-fi)), while if the politician announces gf and the voters later
confirm the values gt, they revise their value of 13to fif = ((1-~h)fi/((1-~h)fi -l-
(1-~td)(1-13)). If is straightforward to show that ~t > ~ > ~f" Thus, the voters'
repeated observation that an individual politician's claims are true or false lead
to an evolution of the politician's reputation, but a gradual one. If politicians
believe that voters reason in this way, it will thus reduce but not eliminate the
tendency to lie. 5
The most general case is one in which both voters react to politicians' claims
by revising their beliefs about politicians' honesty and in which politicians'
claims are made in a way which explicitly recognizes that voters do this.
Crawford and Sobel (1982) analyze a very general case of Bayesian Nash
equilibrium in which one better-informed player (a "sender") sends a possibly
noisy signal to another player (a "receiver '') who takes an action influencing
the welfare of both players. In our case, the politician is the sender and the
voter, the receiver. In general, in full Bayesian Nash equilibrium senders give
receivers noisy information which truthfully indicates a general range of the
sender's private information but not the precise value of the information.
When the sender and receiver have widely differing utility functions, the noise
is greater. This suggests a limited but still present potential for political obfus-
cation, as well as offering the prediction that politicians whose privately held
policy preferences differ strongly from those of the electorate are more likely
to lie.
It remains an open theoretical question whether voters' understanding of the
bias toward negative campaigning leads to an equilibrium which would
eliminate that bias entirely or merely reduce it. Given the general characteristics
of this class of models, we conjecture that a reduction rather than an elimina-
tion of bias is the likely theoretical result. Given that the negative bias is also
due in part to other failures in information markets and in information
processing as discussed in the introduction, it seems likely that persistence of
a bias toward negative campaigning is the most probable practical result, as it
could be sustained by, e.g., the existence of a significant minority of voters who
are somewhat inefficient in revising their priors.
12
5. Conclusions
Notes
1. Of course the property rights to many firms, especially small proprietorship and firms built
on the reputation of a particular individual, are not always easily transferred. See Dick and
Lott (1993) for a discussion.
2. In fact, this is only one example of how the lack of property rights to political office exacer-
bates the principal-agent relationship between politicians and constituents. For a review of
these arguments as well as some empirical analysis of the problem see Davis and Porter (1989)
or Lott and Davis (1992).
3. In extreme cases, the advertiser may adopt a very broad definition of substitute goods in order
to facilitate the negative comparison. In another recent TV campaign for instant oatmeal enti-
tled " W h a t ' s Hot, What's Not", children are informed that consuming the oatmeal will be
more pleasurable than either listening to music played on oversized banjos, folk dancing with
fat people in public squares, or riding a velocipede in formal dress.
4. To verify this result solve (2.1) for P'UP and substitute into 2.2 to obtain, upon cancelling
terms, (Vcp-vtp) = -(vcn-vtn).
5. Laffont and Tirole (1993: 630-634) consider the case of an official regulating public utilities
who is an agent of voting utility consumers and who is responsible for reporting the cost level
of the utility. If the utility makes cost-reducing investments, the voters would like the official
to report the cost reductions immediately so that price reductions can be implemented. The
firm, preferring to keep price high while lowering costs to obtain the benefits of regulatory lag,
may bribe the regulator to dishonestly report high cost to the consumers. In a framework simi-
lar to the one described above, Laffont and Tirole solve for the special case of a n = 1 while
adding appropriate additional structure and conclude that "career concerns may reduce the
government's incentive to collude (with regulated firms)".
6. Lott (1987), for example, has stressed the value of ideology in solving agency problems in polit-
ical markets.
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