Lemons in the Political Marketplace: A Big-Data Approach to Detect “Scam PACs”

• In Event: Agents In the Politics Industry

Abstract

Scam PACs are political action committees (PACs) in the United States that use the campaign donations they raise to enrich their creators instead of advancing the candidate campaigns or political causes that they purport to champion.

Because campaign donors face difficulty in distinguishing scam PACs from PACs that are backed by bona fide ideological or issue-advocacy groups, and because of minimal existing regulatory oversight, the rise of scam PACs not only undermines PACs’ accountability to donors, but also generates a lemons problem in the broader political marketplace (Ravel and Weintraub 2016). For example, in the 2018 election cycle alone known scam PACs collectively raised $57 million, which could have fully funded 100 average House campaigns.

To understand the nature of scam PACs, I will present to my best knowledge the first empirical assessment of scam PACs that have been identified by media reports, including scam PACs’ distinct expenditure patterns (e.g., abnormally high fraction of spending on operating expenses rather than direct contributions or independent expenditures in elections), the characteristics of their donors (e.g., conservative, elderly small donors), and their networks of financial vendors (e.g., shared political consultants among scam PACs).

Building upon these descriptive analyses, I will then estimate a supervised learning algorithm that systematically distinguishes scam PACs from legitimate PACs in U.S. federal elections, using all itemized donations to PACs as well as PAC disbursements as predictors.

Author

• Zhao Li, Princeton University