The Electric Commentary

Sunday, March 18, 2007

Money = Speech

When I talk to any person who is in favor of "campaign finance reform" like the McCain-Feingold Act, they almost always say something like:

I'm all for free speech, I just want to regulate money.


This is like saying that you are for "free speech" but you would like to regulate writing utensils. It is a sentence that shows a great ignorance about the nature of money, and an even greater ignorance about the nature of freedom.

Money is simply a proxy for trade, nothing more. The default for trade is the barter system, in which I'll trade you some butter for your guns. Bartering is difficult sometimes. After all, you may not want to trade an entire gun every time you need some butter. Maybe you don't need that much butter, and butter spoils after a while. To solve this problem we invented money. Money improves on barter in several ways, but three of the more important way are that:

1. It allows you to trade your labor to the person who values it most, even if they cannot trade back the specific good that you desire,

2. It simplifies trade so that instead of striking a deal with 10 people to get eggs, milk, sugar, shortening, baking powder, food coloring, cocoa, butter, etc., you can trade with one person to get money, and then acquire the rest of the goods at your leisure.

3. It allows you to trade your labor now, for goods tomorrow. This is not just a matter of convenience. It also allows for investment.

Money is simply a proxy for whatever it is that you wish to trade for.

When the McCain-Feingold act passed, the government was telling you that if you are going to spend your money (in other words, trade your labor) on certain types of political speech, you would need to follow certain rules. You can only trade some of your labor to the candidate directly. You can't trade your labor for time in front of a camera, in print, or on a radio station a certain number of days before an election unless you start, or donate to, a specific kind of corporation.

This is ridiculous. Trade is your only means of procuring certain services. Congress, through this act, basically said:

You still have free speech, just grab a milk carton (as long as it's under 14 inches high) and start speaking on your local street corner. Sure you can't buy any space in the New York Times, or on prime time television, but you can still speak.


When the Supreme Court, in one of it's worst rulings ever, upheld this law it basically said that if you wanted to engage in political speech close to an election, you were not permitted to engage in trade (except in limited circumstances defined by congress).

Milton Friedman once famously wrote that no one person in the world can build a pencil:

"Nobody knows how to make a pencil. There's not a single person in the world who actually knows how to make a pencil.

"In order to make a pencil, you have to get wood for the barrel. In order to get wood, you have to have logging. You have to have somebody who can manufacture saws. No single person knows how to do all that.

"What's called lead isn't lead. It's graphite. It comes from some mines in South America. In order to make pencils, you'd have to be able to get the lead.

"The rubber at the tip isn't really rubber, but it used to be. It comes from Malaysia, although the rubber tree is not native to Malaysia. It was imported into Malaysia by some English botanists.

"So, in order to make a pencil, you would have to be able to do all of these things. There are probably thousands of people who have cooperated together to make this pencil. Somehow or other, the people in South America who dug out the graphite cooperated with the people in Malaysia who tapped the rubber trees, cooperated with, maybe, people in Oregon who cut down the trees.

"These thousands of people don't know one another. They speak different languages. They come from different religions. They might hate one another if they met. What is it that enabled them to cooperate together?

"The answer is the existence of a market.

"The simple answer is the people in South America were led to dig out the graphite because somebody was willing to pay them. They didn't have to know who was paying them; they didn't have to know what it was going to be used for. All they had to know was somebody was going to pay them.

"What brought all these people together was an enormously complex structure of prices - the price of graphite, the price of lumber, the price of rubber, the wages paid to the laborer, and so on. It's a marvelous example of how you can get a complex structure of cooperation and coordination which no individual planned.

"There was nobody who sat in a central office and sent an order out to Malaysia: 'Produce more rubber.' It was the market that coordinated all of this without anybody having to know all of the people involved."


The US government now requires that, if you wish to speak close to an election, you build the pencil yourself.

"We don't want to regulate speech, just money," they say.

Then why is it that they only want to regulate the money that goes to buy speech?

8 Comments:

  • I'll admit that I don't even know enough about McCain-Feingold and its effects to know if I favor it or not (I have a slightly favorable perception of it though). Nonetheless, I think your economic argument is highly unconvincing.

    First, the parallel, although graspable, fails to explain enough about McCain-Feingold to illustrate how the points line up.

    Second, it just makes some side analogy based on the idea that completely uninhibited market freedom is good. Now I didn't take economics classes in college like you did, but I know that the unregulated market isn't the solution for everything.

    Third, St. Patrick's weekend wasn't even over when you wrote this. Thus, it may have similar origins to your flawed beer-pong analogy, which was actually a more convincing argument.

    By Blogger Scott H, at 11:41 PM  

  • That's not quite right though. For one thing, this is not an analogy, it is an explanation of how money actually works, but I will use an analogy to explain further.

    The first thing that this reminds me of is the drinking age. Congress (probably, due to the 21st amendment) has not power to create a national drinking age expressly, so instead they do it indirectly by bribing states with federal highway funds.

    In the same way campaign finance reform skirts the first amendment by regulating the implements of political speech, the Fed uses the spending power to skirt the 21st amendment with regard to a national drinking age.

    By Blogger PaulNoonan, at 8:07 AM  

  • I considered this the analogy:
    "The US government now requires that, if you wish to speak close to an election, you build the pencil yourself." The Milton Friedman part explains/culminates in the analogy.

    I got that Congress was restricting speech indirectly through money. I guess I was looking past the "We don't want to regulate speech, we just want to regulate money." (not an exact quote) point and addressing the whether that means McCain-Feingold is bad. I thought it relied on an underlying logical step that McCain-Feingold is bad because it regulates speech, which without more said relies upon the argument that regulation of anything is not a good idea. I think that elections - with a one-time commitment, long spans in between choices, very imperfect information, and ever changing group names - may be high risk for repeated market failures or short term market failures with a steep cost. Speech has other restraints upon time, manner, and place that are considered constitutional.

    I also think that the act could be (again I'm no expert) could be construed as allowing speech, but NOT allowing money to elevate the speech of individuals or single entities with large amounts of money to use it to shout louder than everyone else. So it is a rule saying that we're going to have a wide open debate, but no megaphones in the last 20 minutes except the candidates who get to use the mic. Is that banning speech or just saying shout all you want, but for the last part before we vote we're not going to have a contest of who paid the most for their megaphone? Because the money doesn't necessarily buy the right to speak, it just buys the right to be noisy.

    By Blogger Scott H, at 9:38 PM  

  • I agree with you, but I think you're assuming the right to spend money equals free speech. In this case I would agree with you, but that is taking on a very large definition of free speech.

    One could argue that spending money on anything equals free speech. Spending money on drugs equals free speech, spending money of guns equals free speech, being forced to pay taxes even though you disagree with the government violates free speech, and so on. Even if all technically true, that would broaden the first amendment's interpretation much more than it is normally adn reasonably interpreted. (I'm not saying that a broader interpretation isn't also reasonable.)

    It is troubling that this law limits poliitical speech, even though on the surface it seems good because this way "evil corporations" won't be able to buy candidates. Especially now with the internet though, I don't think we have to worry about providing reasonably equal access to the news papers or the airwaves. Besides, it seems to me that a free press should be the ones reporting on all candidates, although admittedly they will sell space to the highest bidder. That is why we have more than one newspaper though, and no laws against new newspapers starting up.

    So in conclusion, I agree with your opposition to the law, but think the stongest argument is that it restricts or limits otherwise lawful political speech. The argument that it restricts speech to the extent that it restricts money, while valid, requires that everyone agree that spending money always = speech.

    I also think its productive to acknowledge that this puts "big business" or any goofball with money to burn at an advantage, which is pretty "unfair." That is too bad, but its still the best of all options, in my opinion.

    (As a side note, I do believe that it is constitutionally permissible for laws to require the identification of who is paying for political adds. While this is forcing somebody to speak in a certain way, and therefore a violation of pure free speech, it is a reasonable interpretation and compromise between allowing people to speak to the public, but also allowing the public to know who is speaking to it.)

    By Anonymous Anonymous, at 10:01 AM  

  • I don't think that you can make a plausible argument that spending money on drugs = speech, but I do think you could argue that spending money on drugs = drugs. In general, I believe that your money is whatever you intend to spend it on, and if the government was prohibited from restricting drugs, I would also be against their use of restricting money to restrict drugs through the back door.

    Money is such an easy target for government, because it can become anything and is always necessary. I am always very suspicious of banning spending of any kind, as it will always be the second best way to ban anything. It begs the question, why aren't you simply banning the object/activity?

    By Blogger PaulNoonan, at 11:12 AM  

  • Good point. But, it seems that the judtification for Feingold/McCain is that spending so much money has the effect of a heckler's veto by drowning out and therefore preventing the free speech of others. This is of course a fact question with no answer: how much money must be spent before someone is substantially "drowned out?" Can you even drown somebody out if you're not physically standing next to them and shouting?

    Ask five different Court of Appeals and you could get five different answers. That is why I think sticking with speech = speech is the best way to argue. That would have a greater liklihood of focusing the question in a court case, for example. "Would this one political advertisement, that I was not allowed to run because of the law, infringe anyone else's right to free speech?" I think that the money = speech argument is a little more prone to being characterized as "first off, does money equal speech, and, even if it does, does all the money I spent on speech drown out all the money someone else spent?"

    Let the people who are oppossed to limitless spending on speech be the ones to argue that they are not banning the advertisement, but rather only the money used to pay for it, as oppossed to us having to argue that when they are banning money they are really banning speech.

    By Anonymous Anonymous, at 3:37 PM  

  • "Money is such an easy target for government, because it can become anything and is always necessary. I am always very suspicious of banning spending of any kind, as it will always be the second best way to ban anything. [ good point ] It begs the question, why aren't you simply banning the object/activity?

    Good question. I think the last paragraph of my last answer is relevant to that. Perhaps it is not because it is the speech that is intended to be banned, but rather that the money is believed to be overwhelming the underlying goal of political speech: exchange of ideas. Also, I believe that the Act is not a complete ban, but restricts what kind of organizations can speak and from where they get their money, which suggests that the goal may be to have the number of people behind an idea be what increases it's volume instead of the number of dollars.

    By Blogger Scott H, at 5:01 PM  

  • "its volume"

    By Blogger Scott H, at 5:03 PM  

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