Value: A viewpoint on collecting
J. W. Courter
There are several theories why some goods and services are wanted or needed more than others and considered desirable enough for people to work or give up something else to get them. The most significant theories to explain market values have been:
- Aristotle-Goods or services are valued the same as what is given in trade for them.
- Karl Marx-Goods or services are valued at their cost of production.
- Adam Smith-Goods or services are valued at what they will bring in trade or "exchange."
- Austrian School-Goods and services are valued by individuals, as judged from their personal (subjective) viewpoints.
The Austrian School of Economics developed the modern subjective theory of value and applied it to the problems of economics. Its founders were Carl Menger (1840-1921), Friedrich von Wieser (1851-1926), Eugene von Bohm-Bawerk (1851-1914), Ludwig von Mises (1881-1973) and Friedrich A. Hayek (1899). All were born in Austria. I have studied writings of Mises, Hayek and their students.
The Austrian theory of value holds that the value of economic goods is in the minds of individuals and therefore is neither constant nor inherent in the goods themselves; that values of the same goods vary from person to person, and from time to time for the same person. Value is not intrinsic; it is not in things (although some things may have intrinsic value in our economy). Value is within the human mind. Value is reflected in human conduct. It is not what a man says about value that counts, but how he acts.
A person makes a judgment of value based on his wants, tastes, desires, feelings,
choices, or preferences which cause him to act in a certain manner at a given
time, situation and environment in an attempt to substitute conditions he
prefers for those he considers less satisfactory. This judgment of value
is personal and subjective and is not open to proof or disproof. It can only
be identified by an action from which it is influenced.
Value is always relative, subjective, and human. Value is never absolute, objective or divine.
Individuals always believe what they have, and are not trying to dispose of, is more valuable in "use" to them personally, under the circumstances, than it would be in "exchange." Thus when they do decide to make a trade, it is because they believe what they are offering to exchange is worth less to them personally than what they expect to receive in return. Barring force, fraud and mistakes in judgment then, both parties will consider themselves to have gained as the result of a voluntary trade.
On a simpler note, my dictionary defines value as "the relative worth, merit, or importance...that quality of anything, which renders it desirable or useful."
Measures of Value. Historically measures of value have been a standard weight of a commodity, such as gold or silver. Even so, no commodity is free from changes in value due to the supply of it or demand for it. Establishing a reliable measure of value has been a major problem of countries, politicians, and kings. The problem continues, as measures have not been perfected. Today, we tend to think in terms of dollars but they are fiat and in reality, are paper instruments of debt. The value of our dollar has depreciated for more than 60 years. Let's review other day-to-day factors that affect "value."
Utility. Originally utility was the sole reason for buying most items. The importance was given to its capacity to produce a desired effect such as light (lamp), heat (stove or fuel), or a station wagon (you have lots of kids to carry). Many antiques have lost their utility value as our technology and world changed. I think of whale oil lamps, fleams, glass insulators, and carriage clocks for example. Aladdin kerosene mantle lamps possess considerable utility value today and I suppose that is one of the principal reasons why they are still manufactured.
Intrinsic Value. Things like gold, silver, copper, diamonds, and precious stones have historical value, as they have often been measures of value. Gold jewelry always has a value based on gold content regardless of the workmanship or artistic value of the piece. Things that possess "intrinsic" value often are a "store of value" and are used as a medium of exchange for other goods (i.e. they became money).
Workmanship. Skills that turn raw materials into things people need add value to those materials. I think of cabinetmakers, glassblowers, silversmiths, and craftsmen who created our furniture, glassware, tea service, and cathedrals, for example. The numbers of our expert artisans have diminished to the point where workmanship may not be effectively reproduced. Things like veneer and parquetry work, glass cutting, goldsmith, and carved furniture have become "lost arts" and consequently are especially valuable.
Provenance and Pedigree. Historical attribution often adds a premium to the object. The label of a maker, the bill of sale, an autograph, quality known to be associated with the maker, or even previous ownership are examples that document the importance of provenance.
Rarity. There is no question that rarity plays an important role for collectors
in determining value. This is especially true in coins and stamps. Consider,
however, that there must be enough items for collectors to collect; otherwise
can one of something be so rare as to be extremely valuable?
Often it is the least costly or least valuable item, commonly made, that ends up being the rarest. These items may not have been popular when they were made, few may have survived, they were breakable or not saved, or they tended to be used frequently and consumed. Consider things like chalkware items, fragile Christmas ornaments, glass oil lamps, tin toys, and paper ephemera.
Condition. The only acceptable condition is perfection when we purchase something new. The item must be and function as intended. We generally do not buy things that are repaired, restored, or do not function as "guaranteed." Think about that crescent wrench, your television, VCR, electric blanket, etc. In contrast, we will buy antiques or collectibles that show signs of wear, chips, missing parts, and a certain amount of damage. The rarity, workmanship, or provenance of the item may well over come these defects.
Market Awareness. Most collectors study and read to improve their knowledge.
They may start out with a nostalgic reason, "I remember that as a kid," but
study and appreciation take over and you accumulate more than one as the
Inflation. I must add inflation to the equation of factors that challenge our concept of value.
Inflation is a large increase in the quantity of money, which results in a drop in purchasing power of each unit. Simply put, more dollars are needed to buy the same object today compared with ten years ago. This is why antiques and yes, even Aladdin lamps, have been "stores of value" and inflation hedges during the last forty years. Inflation tends to drive investors to tangible assets, such as fine art and antiques (or other commodities). We can often buy an older lamp or piece of furniture with fewer dollars than a newer one. And the workmanship of the older one may be better!
Age. Generally older objects have greater value to collectors than those
recently made. Rarity, provenance, and other factors (above), including nostalgia,
all greatly complicate the desirability, familiarity, and perhaps affordability.
30-Year Rule. This leads me to comment on the 30-year rule. Harry Rinker, editor of Warman's Americana and Collectibles and popular author and lecturer on antiques, says, "For the first thirty years of anything's life, all its value is speculative." This rule applies directly to collectibles and things manufactured (i.e. limited editions), especially to be collected.
Thirty years allows time for the vast majority of objects to be used, discarded or deteriorate. Also, there has been sufficient amount of buying and selling to establish a steady market by collectors who have become rich enough to buy back their childhood.
Appraisal. The principles of valuation in professional appraisal practices are discussed and defined in a useful manual by the American Society of Appraisers. In addition to most points discussed above, this book defines important concepts such as fair market value, replacement value, liquidation value, cash value, estate value, and donation value.
I conclude by saying yes, we can and sometimes do pay too much by placing a personal value on an object or house that is out of proportion with the values set by others. That is why we study auction results, evaluate quality, and attend conventions, read, and compare opinions with others who are knowledgeable in the field. We buy and enjoy our purchase because we have valued it higher than owning the money that we exchanged (paid) for it.
In the final analysis, the value of any object or good is worth exactly what a willing seller and a willing buyer agree to exchange it for at any given moment in time.
Albertson, Karla Klein. 1989. Real vs. Artificial Value: What is an antique actually worth? Antique Review 15 (10):26-27.
Anon. 1989. A Handbook on the Appraisal of Personal Property. Am. Soc. Appraisers, P. O. Box 17265, Wash. DC 20041. 192 pp.
Greaves, Bettina B. 1975. Free Market Economics, A Syllabus. The Foundation for Economic Education Inc. Irvington-on-Hudson, NY 10533. 242 pp.
Greaves, Percy L. Jr. 1974. Mises Made Easier. Free Market Books, Dobbs Ferry, N.Y. 157 pp.
Mises, Ludwig von. 1963. Human Action, Third Revised Edition. Henry Regnery Co., Chicago. 907 pp.
Rinker, Harry. (Editor) Warman's Antiques and Warman's Americana and Collectibles. Warman Publishing Co., Willow Grove, PA 19090.
Copyright (c) J. W. Courter 2003 (adapted from publication in The Mystic Light newsletter, 17(5):1990, which covers antique and Aladdin brand lamps).