On signing into my email account, I stumbled over this article: "Rare Nickel Fetches $3.7 Million at Auction." I was shocked; I'm always shocked at the prices that people will pay for something so impractical. Granted, this nickel is a "rare 1913 Liberty Head nickel that was featured in a 1973 episode of the television series 'Hawaii Five-O'." It is so rare in fact, that it is one of only five known existing in the world today.
The explanation that I come up with is supply and demand. For a coin collector, it is probably a once-in-a-lifetime opportunity to own this coin, or to even have the chance to own this coin. There is such a low supply of these coins and such a high demand for something so rare, that the price becomes exorbitant. The gain from a collector would be the insurance of having it. When buying the coin, the collector is risking the chance that the coins value will decrease. This is a very low risk, however, because the older the coin gets, the more its value increases, and the more it will sell for the next time.
This makes sense to me. I, personally, don't see the appeal of having a coin that you'll probably never appreciate because it will have to be locked up somewhere, but I understand the concept. What I don't understand, and what this article made me think of is the people who pay millions for a piece of toast that looks like it has a picture of the Virgin Mary...or something like that. I hear those stories and I cringe. Who needs a million dollar piece of toast? If you're going to spend that kind of money because you assume it's holy, and that's your incentive, I would rather you spend it on something that will help others-- because that is holy. I just think that so often, sales like these just seem like a huge, unnecessary waste of money that could be used to help so many.
A,T
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I suppose supply and demand does apply here. But paying millions of dollars for a nickel seems to be throwing the third principle out of the window ("rational people think at the margin"). That does not seem like a trade-off a rational person would make, especially with the economy the way it is. A, T
ReplyDeleteWow, I totally agree that paying that much for a nickel completely kills the third principle. People can be so strange. Granted, it may be their money to spend, but like Cierra said, they could defintely be putting that money to a better and more productive use.
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I have to jump on the band wagon and agree that the third principle is killed here. For something that's worth five cents, I can't see myself paying millions of dollars for it. I don't feel that it's a waste of money because it's clearly important to whoever bought it and he is just following his passion. A
ReplyDeleteIt is quite amazing to see what kind of things people are willing to blow their fortunes on. At times it's actually disappointing because you know that their money could be going to a much better and more legitamate cause. A
ReplyDeleteWhile that is a lot of money to spend on a nickel, it is not like the person is just throwing it away. To them it is an investment. As Cierra said the risk of it decreasing in value is low, and it is more likely to grow in value with age. Also I'm guessing that 3.7 million dollars, which seems like a lot to us, was comparatively less to who ever bought it.
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There seems to be many more important things in life to invest $3.7 million. I would rather get a good education with that kind of money and invest in a nice house. To coin collectors it is the rarity and possession of this prized coin that matters. I also agree that the third principle is not in very good use here. To most people this type of pricing and buying is not very rational.
ReplyDeleteI totally agree with you Cierra, you couldnt have explained holiness any better. Its shocking how people do spend their money on things that seems useless to us but I also agree with Caleb's argument that to such person it is also an investment/ hope that it will fetch a higher price in the future.
ReplyDeleteAgreed, the third principle is disproved here, but maybe not completely. Yes, the incentive here could be owning a valuable piece of history that very few, if any, can say they own. However, like Cierra said, the demand for such a rare treasure is high, and as the coin gets older, the more its value increases. So, in fact, if the person that bought the coin is looking to turn around and sell it in a few years, they will make a profit, because the value will have gone up, therefore also creating the incentive of buying the coin in the first place. So instead of being out 3.7 million, they will have gained a couple million in profit. If the owner does intend on doing this, meaning selling it down the road, that would be a very rational decision. (E,A)
ReplyDeleteI understand that the value of this nickel is high because so few of them still exist, but I've always marveled at the things that become expensive just because of the people they come in to contact with. For example, a water bottle that Justin Timberlake drank from at a concert, or Elvis' comb. Presumably many identical combs and water bottles still exist, but because someone famous used these, someone can sell them for thousands. And someone will buy them! It doesn't make sense to me. I wonder what would happen to our economy if everything that came into contact with a celebrity suddenly shot up in value. We'd have no sense of what value is. A
ReplyDeleteIts weird to think somebody would choose to spend $3.7 million on a piece of metal that was created to only be worth 5 cents. I would like to think putting money towards helping other people would be more productive, but at the same time if i had all that money i know i would buy something for a lot of money that people would think is worthless too.
ReplyDeleteOnce again, I do not understand why someone would find something so pointless so priceless. Acquiring an ancient coin costing 3.7 million dollars is not something I find to be a necessity. Clearly, someone has too much and money and time on their hands. That money could have been put into something more useful for that individual.
ReplyDeleteI understand the supply and demand concept, but sometimes what I'm not so clear on is where this demand comes from. Like many others have said, the coin seems pretty much worthless. I've never even heard of Hawaii Five-O. This definitely isn't the first time I've heard of people paying an inordinate amount of money for something so seemingly worthless...Sometimes I lean toward thinking that people assign worth to utter worthlessness. That idea is hard to put into words... I hope most of you are on my wavelength and get what I'm saying.
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ReplyDeleteI doubt that people pays millions of dollars for a coin only to attain the satisfaction of collection. Perhaps the buyer believed the nickle might become more valuable after several years. That would be a good deal then.
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