The downside of outside spending: Candidates are hard to shop for

Mitt Romney's campaign understands that almost every reasonable scenario for victory includes winning Ohio, Virginia and Florida—a troika that, along with all the states safely in the Republican column, would award the challenger 266 electoral votes, four shy of the magic number. Campaign spending figures published by National Journal verify this in no uncertain terms. Since May 1, the Romney campaign and its allies have spent more on advertising in these three states than in all other competitive states combined. The same is true of the Obama campaign, whose clearest path to victory involves denying Romney any one of these battlegrounds.

Where the campaigns blow their overflowing fountains of cash is only half the story, of course, due to the torrents of outside spending flooding this campaign. Overall, the Republicans and their supporters have outspent the Democrats $257 million to $218 million since May. This is a little misleading, however, because of a simple economic fact: The marginal value of a campaign dollar is significantly higher if raised by the campaign than if raised by a super PAC.

Outside spending groups are not allowed to coordinate with campaigns, though they can coordinate with one another and operate in the same political reality. In an era of incredibly precise political targeting, however, outside spending that is not privy to a campaign's precise strategies and messaging is not as effective. Consider the difference between spending $100 on yourself and having a friend buy you something for $100, especially if this well-meaning friend is not legally permitted to ask you what you want. Economists call this the "deadweight loss of Christmas."

While outside groups have also concentrated money in these three crucial states, it is not to the same lopsided degree. Here are the states with the top spending by both campaigns and super PACs:

As you can see, the majority of Romney's spending is outside of his control. In these 13 states, which account for the bulk of all advertising, his campaign has spent $107 million, compared to $150 million spent by outside groups. He cannot control where outside groups spend money on his behalf. Even though he has never had more than a tiny likelihood of winning Michigan, outside groups have spent more than $8 million there in the past four and a half months. He also cannot control the message. Some outside groups are dinging Obama for being too cozy with Wall Street, while others are saying he is overregulating Wall Street. This is a divide that is likely to grow between now and Election Day.

Follow the state-by-state and overall presidential predictions in real time with PredictWise.com.

David Rothschild has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. Follow him on Twitter @DavMicRot.