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Nate's model does not prove, or even provide much evidence, that money buys health care policy. All Nate has shown is that monetary contributions from insurance PACs are positively correlated with voting against a public option for health care.  But, as students learn in introductory statistics courses, correlation is NOT causation.  Cause is a much more difficult thing to show from observable data, even in physical science, let alone the more subjective social sciences.  

Nate's analysis really just shows that monetary donations from insurers tends to go more to legislators that vote for things insurers like.  That's no different than saying that monetary donations from progressives tend to go to candidates that progressives like.  It does not at all imply that policy is in any way sensitive to the amount of such donations.  

To show cause you need two things that Nate lacks: a theory and data proving a one-way relationship between the correlated factors.

First, let's talk theory.  Nate implies a common, if cynical, theory about how the world works: that policy responds to financial contributions.  It might be true, and a whole field of economics and political science, called political economy, is devoted to studying the relationship between wealth and policy. (Harvard's Dani Rodrik is the probably scholar best known for his work in this area, particularly regarding whether it can be shown that money buys trade policy.) But in order for it to be true, you have to prove two things:  1) That there is a unique equilibrium where policy outcomes equal financial contributions, and 2) that observable data back up the theoretical existence of such a "market-clearing" equilibrium.  

Nate does neither with his simple regression analysis.  Saying that money buys policy is the same thing as saying that the policy-making process is just a market process, like markets for commodities.  But markets only work when they clear -- when supply and demand for things converge to an equilibrium, usually shown by a price of one thing relative to another thing, like money.  If there is no unique equilibrium, then you usually have little reason to believe that a market will ever tend to clear, which is the same thing as saying that prices (or contribution amounts) have anything to do with supply and demand for things.  That's why academic economics articles spend so much effort on upper-level math before making a usually simple point with basic regression analysis: the calculus proves the theoretical existence or not a single equilibrium in an equation where supply=demand. Nate didn't do that, and much economics lit on the subject doubts whether unique equilbria can be found in most real-life circumstances of so-called policy "marketplaces," making it problematic to conclude anything from his regression.

But even if there was reason to believe that health care policy acts like a marketplace and that there exists a price level of donations for which policy can be influenced, his regression analysis doesn't even show that.  He hasn't proven the absence of endogeneity, which is the problem of both independent and dependent variables affecting each other. In this case, he hasn't proven that donations by insurance companies to legislators weren't "caused" by the legislators' prior relationships and commitments instead of their votes being "caused" by the donations.  The legislators who opposed the public option might very well have always opposed such things, and their donations from insurance companies already reflect that before any of the present discussion of the current policy ever came up.  

Endogeneity is usually an unobservable factor, so only a well-specified and compelling model of how the world works can provide good evidence that endogeity between two variables doesn't exist and causality can be concluded from correlation.  There are, however, statistical techniques that can be used, particularly instrument variable regression analysis, from which direction of causality can be deduced, but Nate didn't use it. A good model for Nate's purposes would require evidence that money is being donated at or around the time of the vote -- that the legislator is being bribed.  But that evidence doesn't exist, and when it does, it's usually part of a criminal investigation such as in the case of the ex-Governor of Illinois.

Most analysis of how policy gets formed and implemented show that money helps, but finanical contributions are only one variable factor among many, and often not the most important ones, that influence public policy outcomes.

by santiago on Fri Jun 26th, 2009 at 12:30:50 PM EST
Santiago--see above.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Sat Jun 27th, 2009 at 03:14:12 AM EST
[ Parent ]

A good model for Nate's purposes would require evidence that money is being donated at or around the time of the vote -- that the legislator is being bribed.  But that evidence doesn't exist, and when it does, it's usually part of a criminal investigation such as in the case of the ex-Governor of Illinois.

I get your points, but I think you read too much into this.

The thrust of his work was, as I understand it, to show a correlation and some possible predictive utility. To expand this to a charge of bribery is excessive- even if the poisonous influence of money on policy is supported by a few centuries of experience. Or is that Millenium?.

Consider as well that, viewed from a purely economic point of view,  a decade or two of corporate contributions made to the right legislator (as defined by -chosen by- the best professionals in the business) is often money well invested in the game of influencing policy, for the corporation. A vote made today, without even a dime in recent payments, to advance that corporation's interests is a good investment for the legislator. Nothing will ever be proved, because the connection is filtered through the human psyche, and tenuous beyond modeling, so far.

As for investigations where evidence exists, ---"where it does, it's usually part of a criminal investigation"---in an alternate universe, perhaps. Or perhaps in Spain, till The Obama finds a way to tighten the screws enough.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Sat Jun 27th, 2009 at 03:42:03 AM EST
[ Parent ]
Consider as well that, viewed from a purely economic point of view,  a decade or two of corporate contributions made to the right legislator (as defined by -chosen by- the best professionals in the business) is often money well invested in the game of influencing policy, for the corporation. A vote made today, without even a dime in recent payments, to advance that corporation's interests is a good investment for the legislator. Nothing will ever be proved, because the connection is filtered through the human psyche, and tenuous beyond modeling, so far.

What this means is that political activism pays dividends, but that is true of all kinds of activism, not just organizing by corporate interests. It does not mean that the amount of financial contributions has any causal relationship to policy outcomes, and it does not even mean that the wealthy have advantages because of their financial resources, even if we all know that it must be true.  My point is that Nate's attempt to use statistical analysis to insinuate a cause-effect relationship between money from insurers and voting on public health care is flawed and shows no such thing for the simple reason that the statistical model he used is unable to show the direction of a relationship between variables. (There are, however, methods that can show such direction.) There is simply no reason to believe that monetary donations have affected voting on this issue based on the data presented.  

It is just as likely, based on Nate's data, that the legislators have always been against public health care and might have even influenced insurers to oppose it too instead of supporting public competition, just like they have somehow managed to convince insurers to donate to their campaigns year after year.  Nate is choosing only one possible interpretation of his regression without explaining why the others can't be possible.  He therefore shows no impact from lobbying on health care voting.

by santiago on Sun Jun 28th, 2009 at 02:29:58 AM EST
[ Parent ]
Corporations depend on arguments like yours that miss the context. They can sell a drug or product that they know is addictive, causes cancer, or whatever, but the burden is placed on the public to prove the causative link, rather than on the corporation to prove their non-existence.

The solution involves actions like properly funding and removing corporate influence on (in the US) the FDA and to engage in campaign finance reform, but as those are non-starters, and given the asymmetry involved, this is one case where I'm willing to make policy based on correlation alone.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Jun 29th, 2009 at 01:48:15 AM EST
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What matters is truth or fiction.  The facts don't provide any evidence that specific policy outcomes is in any way sensitive to the amount of campaign contributions.  Rather, ideological outcomes of elections that affect a broad array of policies are more sensitive, but that doesn't help explain much about the specifics of a public option or not.  If you want to halt corporate influence, then you've got look elsewhere.  Otherwise you're doing nothing to stop it.
by santiago on Tue Jun 30th, 2009 at 02:34:17 PM EST
[ Parent ]
That's something of a leap there: From saying that there is no evidence (which is true for certain values of "evidence") that contributions do not buy policy, to saying that contributions do not, in fact, buy policy.

The latter implies that there is good reason to believe that contributions do not buy policy, whereas the former merely says that there is no good reason (presented here) to assume that it does.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jun 30th, 2009 at 04:05:45 PM EST
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Fair enough.  The evidence presented by Nate's piece and the diarists' analysis of it don't make the case they believe it does - that money buys policy outcomes.  Other evidence might make that case.
by santiago on Tue Jun 30th, 2009 at 04:34:12 PM EST
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