Greed as a Source of Polarization

The political process in the United States appears to be highly polarized: evidence from voting patterns finds that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme lobby groups and are directed to the most extreme candidates. Is the rise in campaign contributions the cause of the growing polarity of political views? In this paper, we show that, in standard models of lobbying and electoral competition, a free-rider problem amongst potential contributors leads naturally to a divergence in campaign contributors without any divergence in candidates' policy positions. However, we go on to show that a modest departure from standard assumptions | allowing candidates to directly value campaign contributions (because of \ego rents\" or because lax auditing allows them to misappropriate some of these funds) | delivers the ability of campaign contributions to cause policy divergence.