Warren Buffett has recently been making headlines with the controversial “Buffett Rule” calling for a tax raise on millionaires.

But this isn’t the first time Buffett has said something interesting politically.

Now is a good time to recount an amusing proposal he made in an op-ed in 2000 about political campaign finance reform. The proposal is both funny and involves some interesting game theory.

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"All will be well if you use your mind for your decisions, and mind only your decisions." Since 2007, I have devoted my life to sharing the joy of game theory and mathematics. MindYourDecisions now has over 1,000 free articles with no ads thanks to community support! Help out and get early access to posts with a pledge on Patreon. .

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The Billionaire’s Buyout Plan

Buffett’s op-ed ran in the New York Times and you can read it in its entiretly at GameTheory.net.

The article begins by pointing out that American businesses spend $200 billion a year to influence consumers, and there are similar special interest groups that use campaign contributions to influence politicians.

Buffett’s offers a proposal to increase individual contributions to federal candidates from $1,000 to $5,000. But additionally the reform prohibits money from all other sources, including corporations and unions.

This would no doubt be politically unpopular, and so Buffett offers a method for getting this bill to pass.

Why should this bill stand a chance in a Congress enraptured with the status quo? Well, just suppose some eccentric billionaire (not me, not me!) made the following offer: If the bill was defeated, this person — the E.B. — would donate $1 billion in an allowable manner (soft money makes all possible) to the political party that had delivered the most votes to getting it passed.

The idea is as follows: the billionaire only donates money if the plan is defeated. But at the same time, the plan makes it in each party’s interest to pass the bill.

Why is that?

Let’s think about the incentives of the majority party. It faces two actions from the minority party:

1. Suppose the minority party opposes the bill. Then the majority party has great control. It could put enough votes to support the bill, but not enough votes that it passes. Then it would win the $1 billion, and since the bill failed, it would maintain its current fundraising power. 2. Suppose the minority party supports the bill. If the majority party opposes the bill and defeats it, then it would lead to reform and it would be handing over $1 billion to its rival. So the majority party has to support the bill. In fact, to beat the minority party, that would mean it would put enough votes to make the bill actually pass.

As you can see, the majority party has to support the bill regardless of what the minority party does.

And the logic is similar for the minority party: it will want to support the bill only when the majority party does not. But if it supports the bill, the majority party will too, to block the chance the minority party wins the $1 billion.

Ultimately both parties have to support the bill. And as Warren Buffett writes:

Given this diabolical application of game theory, the bill would sail through Congress and thus cost our E.B. nothing (establishing him as not so eccentric after all).

It turns out that money can influence Congress for good, if only we could trust that billionaire’s truly had enlightened goals.