[Pen-l] dog bites man

["Jim Devine" <jdevine03@xxxxxxxxx>]

["Republican" Corps gain from the GOP's rule! who would've guessed?]

the undercover economist: The economic mysteries of daily life.

Likely Bedfellows
How much do Republican-leaning corporations benefit from Republican
political success? A lot!
By Tim Harford

SLATE / Posted Saturday, June 28, 2008, at 7:04 AM ET

In the early hours of Nov. 8, 2000, the vice president of the United
States, Al Gore, was preparing to deliver his concession speech to a
sodden crowd in Nashville, Tenn. But then the messages began to arrive
on Gore's pager, suggesting that perhaps he wasn't behind at all.
Having previously conceded, informally and in private, Gore called
Bush again to deliver the message that he'd changed his mind. (Oh, to
have eavesdropped on that conversation.)

Nov. 8 was not the only pivotal date in the race. On Dec. 8, the
Florida Supreme Court ordered a recount in certain counties, raising
the chance that Gore would win. On Dec. 13, after the federal Supreme
Court halted the recount, Gore conceded to Bush.

Because these sudden decisions were hard to anticipate, they provide
an excellent test of the value of political connections to listed
companies. If politics means profit, a "Republican" company should
have taken a knock on Dec. 8 but surged on Dec. 13, when the
Republican victory was confirmed.

A recent study by financial economists Eitan Goldman, Jongil So, and
Jörg Rocholl found exactly that: Republican companies beat the market
by 3 percent over the week after Bush's victory was assured;
Democratic companies lagged almost as badly. Goldman, So, and Rocholl
defined "Republican" companies as those with board members who had
previously served as Republican senators or congressmen or members of
a Republican administration, and with no Democratically connected
board members.

Another example: In May 2001, Sen. Jim Jeffords abruptly left the
Republican Party to become an independent senator. That decision
handed control of the Senate and its committees to the Democratic
Party. Seema Jayachandran, an economist at UCLA, studied the market's
reaction and concluded that it was bad news for the share price of
large firms that had donated to the Republicans. The gains to
Democratic donors were not as large, so the total effect was to wipe
$84 billion off the price of U.S. shares.

Broadly, the same story seems to hold true internationally, and Thomas
Ferguson, a political scientist, and Hans-Joachim Voth, an economist,
have shone a light on a ghoulish example. Adolf Hitler was appointed
chancellor of Germany at the end of January 1933 as head of a
coalition government. Thanks to the Reichstag fire, a snap election,
and a constitutional change, the Nazis had a stranglehold on power by
the end of March. The stock market valuation of the (mostly large)
companies that tied their fortunes to the Nazis surged between January
and March 1933.

The question, of course, is why these political connections are
valuable. Innocent explanations are possible. Perhaps the intelligence
and energy that propelled Tony Blair and Al Gore to high office would
have justified their later work with, respectively, JPMorgan and
Apple, irrespective of any political connections. Or perhaps they are
of ornamental value, like a head office draped in marble.

A less comforting possibility is that political connections give
companies access to the regulations that suit them or to juicy
government procurement contracts. Goldman, Rocholl, and So have found
evidence that such contracts do seem to flow to companies affiliated
with the party in power. If so, that is a disgrace, if not entirely a
surprise.

But not every study finds that political connections are a sure route
to profit. Economists Ray Fisman, Julia Galef, and Rakesh Khurana, and
epidemiologist David Fisman, have tried to estimate the value of
personal ties to Dick Cheney. One strategy was studying the share
price of Halliburton—where Cheney was CEO from 1995 to 1999—when news
broke of the vice president's heart problems. The estimated value of
personal ties to Cheney? Zero—"precisely estimated." It would be nice
to feel sure of that.

[perhaps Halliburton gets along with Dubya as well as with the Dick?]
-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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