9/2/14, "You Lose, We Win: Consultants Profit Even When Candidates Underperform," NY Times, Brendan Nyhan
"Labor
Day signals the beginning of the fall campaign for both political
candidates and the consultants whom they pay hundreds of millions of
dollars to help them win in November. Will these hired guns be held
accountable for their performance on Election Day?
The
experience of John McLaughlin, the pollster for the former House
majority leader, Eric Cantor of Virginia, suggests that the consequences
of consultant failure are often minimal. As the Washington Post’s Ben
Terris noted,
Mr. McLaughlin was “historically wrong” about Mr. Cantor’s defeat in a
June primary, missing the final margin by approximately 45 percentage
points, but hasn’t lost any clients as a result.
A
closer look at the research on political consultants suggests that Mr.
McLaughlin’s experience is typical. Firm reputations and client
relationships are highly consistent over time and show little
responsiveness to results, particularly in terms of the share of the
vote that a client receives, a much more informative metric than wins
and losses.
Why
is the campaign consultant market so inefficient? First, it suffers
from what social scientists call an asymmetric information problem. The
buyers (candidates) know much less about the service being provided than
the sellers (consultants) — the same reason that consumers have a hard
time making informed choices on health care. As a result, consultants
are often hired based on their prominence or relationships with party
insiders rather on than their past performance or other measures of
quality.
Second,
there are few good sources of data about firm performance. Consultant
client lists are often not broadly publicized, preventing firms from
being held accountable for their performance in past campaigns. Though a
few high-profile failures like Mr. McLaughlin’s receive substantial
attention, many other relationships may not be well known, preventing
candidates or other clients from learning about a consultant’s
performance.
The
most widely known analyses of consultant performance are the annual
scorecards published in the industry trade magazine Campaigns and
Elections. The magazine uses firm surveys as well as interviews and
other research techniques to compile a list of consulting firm clients
and the outcomes of their campaigns each election cycle.(Here, for example, is the scorecard from the 2008 edition, which was published when the magazine was known as Politics.)
However,
when my co-author Jacob Montgomery and I compared the relationships
reported in the scorecards with campaign expenditure data later made
available by the Federal Election Commission, we found
that most consulting firms who received payments from candidates were
not listed in the scorecards. As a result, the reported win/loss record
of a firm may be a misleading indicator of its performance in a given
election cycle. (A much smaller number could not be verified, suggesting
that underreporting is a more significant problem than overreporting.)
Another
problem is the focus on the winner of the race. While the outcome of
the race is what matters most to the parties and candidates and thus
receives the most news media coverage, wins and losses are an imprecise
measure of consultant performance. For example, some incumbents might
only be narrowly re-elected in races that they should win easily, while
non-incumbents or other weaker candidates might only narrowly lose. As
the political scientists Gregory J. Martin and Zachary Peskowitz argue,
a better way to think about consultant performance is whether a
candidate received more or less of the vote than we would have expected
given the characteristics of the district and the circumstances of the
race.
Rather
than rewarding vote-share performance, the market appears to respond in
only a limited way to wins and losses. At best, it rewards wins outside
of safe seats. Dr. Martin and Dr. Peskowitz find that firm revenues
increase significantly for wins in potentially competitive races (i.e.,
excluding those in which an incumbent faces an inexperienced
challenger). By contrast, revenue is not significantly affected by
whether a firm’s candidates performed better or worse than expected in
terms of vote share. As a result, underperforming consultants are not
punished and firms’ market shares remain quite steady between election
cycles (as with Mr. McLaughlin’s client list).
What the parties need, as as some have suggested on Twitter, is the equivalent of the value over replacement player statistic
from baseball — some method to better estimate how much value a
consultant adds (or subtracts) relative to a hypothetical alternative
who could be hired instead.
It’s very hard to separate the influence of
consultants from other factors affecting campaigns,
the dissemination of tactics and issues among candidates, it seems likely that the parties
will start demanding results."
"Brendan Nyhan is an assistant professor of government at Dartmouth College."...
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May 15, 2007, "Value Over Replacement Player," Baseball Prospectus, by Derek Jacques
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