Department of Agricultural and Resource Economics University of California, Davis Valuing the Numismatic Legacy of Alexander the Great by J. Edward Taylor Working Paper No. 07-002 Revised July 2007 Copyright @ 2007 by J. Edward Taylor All Rights Reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Giannini Foundation of Agricultural Economics Valuing the Numismatic Legacy of Alexander the Great J. Edward Taylor University of California, Davis∗ Revised: July 2007 Abstract The conquests of Alexander III (“The Great”) transformed the economic as well as political landscape of ancient Greece and Persia. It produced a prolific coinage, part of which survives today. This paper uses a hedonic price modeling approach to analyze auction prices of the major coin type of Alexander the Great. The findings make it possible to identify the effects of specific coin characteristics on realized auction prices, sellers’ reservation prices (auction price estimates), discrepancies between realized and estimated prices, and the variability of auction prices around predicted prices, or auction price surprise. The findings reveal that similar considerations shape estimated and realized prices, but bidders consistently value positive coin characteristics more highly than do sellers. Realized auction prices, the difference between realized and estimated prices, and auction price surprise are increasing over time, particularly for the highest grade coins. ∗ I am greatly indebted to Yoko Kusunose for her valuable research assistance; to A.J. Gatlin, the creator of CoinArchives.com, and the Classical Numismatic Group (www.cngcoins.com) for making the data available in electronic form and offering helpful guidance throughout this project; to Paul Rynearson for his valuable comments and mentoring in the art and science of ancient numismatics; and to my son, Julian, for his kid’s enthusiasm and insights into ancient coins. The paper also benefited from insightful comments by Scott VanHorn and Avis Taylor. Image: Lifetime Alexander the Great silver tetradrachm minted at Tarsos, c. 327-323 BC. Valuing the Numismatic Legacy of Alexander the Great Recognizing the economic and political importance of having a uniform coinage, Alexander III ("The Great") quickly took over existing mints in the places he conquered and produced a prolific coinage. For example, Price (1991, p. 369) writes: “When Alexander arrived in Cilicia he found a well established Persian coinage produced from Tarsus by the satraps. The silver staters displayed the figure of Baal of Tarsus, seated and holding his flowering sceptre...the same engravers clearly turned from cutting dies for the Persians to producing those of the imperial Macedonian coinage. Details of the throne, drapery, and figure can be closely compared in the two series, and it is certain that the mint began to strike the Alexander series without any serious break in production...immediately after Alexander’s arrival in summer 333 BC.” At other sites, most notably Alexandria, new mints were established where none had existed before. During Alexander’s reign from 336 to 323 BC, a huge volume of three coin types were struck at no fewer than 26 mints, from Amphipolis in what is now Macedonia to Alexandria and Babylon, with silver and gold bouillon principally from treasures captured from the Persians. After Alexander’s death, Greek rulers and cities throughout the former empire produced the same coin types at new mints. In all, about 114 different mints produced Alexander coins over a period of 250 years, including many imitative issues. The last “Alexanders” were minted at Mesembria (Thrace) around 65 B.C. A large but unknown number of these coins have been discovered in hoards scattered throughout the Mediterranean region, evidence of both the abundance and geographic scope of the trade they facilitated.1 Today there is a lively trade in Alexander coins via on-line auctions, from eBay to numismatic auction houses in the United States and Europe. From an economic valuation perspective, these coins are of interest for several reasons. First, they are of uniform weights and typoi (designs), carefully chosen by the ruler for economic and political purposes (see below). This makes the coins of Alexander comparable in ways that other, more diverse ancient coinages (or, indeed, most items sold at art and antiquities auctions) are not. Second, the volume of contemporary sales of Alexander coins exceeds that of any other ancient coin variety, ensuring a sufficient sample size with which to study the factors determining the value of these coins today. Third and most importantly, despite their basic uniformity, these coins exhibit substantial diversity in terms of the times and mints at which they were struck, the artistry and quality of the dies that shaped them, and their degree of 1 The basic reference on ancient Greek coin hoards remains Thompson, Morkholm and Kraay, 1973. 2 preservation. Because of this, auction prices of the same basic Alexander coin type can vary by a factor of 40 or more. These large price disparities tell us that people do not demand ancient coins; they demand coins with particular characteristics, for which they are sometimes willing to pay a high price at auction. The view in economics that individuals receive satisfaction from, and thus value, specific characteristics of goods is called “hedonic price theory,” named after the Greek word for pleasure. The interplay of a particular coin characteristic’s supply and demand in the market determines the price that people are willing to pay for the characteristic, that is, the characteristic’s hedonic price. Characteristics that are in great demand but short supply (like “superb-grade struck during the king’s lifetime”) fetch a high price, while characteristics that are more common or not in demand (“low-grade, posthumous”) command a lower price. There are some recent precedents using statistical techniques to study the auction prices of ancient coins. Charles Shahar’s (2006) fascinating study of the facing- head drachms of Larissa used one-way analysis of variance (ANOVA) to compare the mean estimated and realized prices of coins of different grades, artistic quality, scarcity of reverse types, defects, and year and currency of auction. It does not provide estimates of the effects of specific traits or combinations of traits on the price, though, controlling for other factors. A less formal but similar approach was used by Terrence W. Faulkner (2004) to compare the prices of Elagabalus imperial coins sold by major auction houses and on e-Bay. David Chiszar, et al. (2004) and Chiszar and Hobart M. Smith (2000) tested the correspondence between estimated and realized prices at the Triton IV and III auctions, respectively. Their regression approach allows us to see how an increase in the estimated price affects the realized price; however, it does not control for characteristics of the coins, which are likely to affect both. The approach most similar to the one used here is that of John G. Matsusaka’s study of how selected characteristics affect the market price of the “Tribute Penny” of Tiberius. Although not characterized as such, it can be called a type of hedonic price analysis. In contrast to ancient numismatics, numerous studies have used the hedonic method to value the traits of other heterogeneous goods. Perhaps the most common and well-known uses of hedonic price analysis are in real estate, to answer such questions as “What is a view worth? A good school district? A remodeled kitchen? A third bedroom or second bath?” These studies recognize that house prices are heterogeneous and shaped by the supply and demand of a complex array of housing characteristics. A Golden Gate Bridge view can add hundreds of thousands of dollars to the price of a Berkeley hills home, and the relocation of a corporate headquarters in a small town can drive up the prices not simply of houses but, disproportionately, of houses with characteristics that are demanded by executives’ families. Recently, hedonic price models have been used to study wine prices. What does a Napa or Bordeaux appellation add to the price of a bottle of wine? An additional year of aging? A high score from Wine Spectator magazine? Understanding how the characteristics of wines affect prices, of course, is critical to a vintner’s success, 3 because in many cases these characteristics can be altered during the wine-making process. Coin dealers are forever confronted by the challenges of placing values on coin traits, asking such questions as “What is the added value of a superb extra-fine versus fine grade? A rare mint? A strike from a particularly artistic die? A signature of the famous diemaker Kimon? Provenance from a well-known collection?” On the negative side, by what amount does a flaw (weak strike, double strike, porous coin surface, or test cut) detract from the value of a coin? Not uncommonly, combinations of characteristics must be considered, for example, a superb lifetime issue or a coin well struck from an artistic die but with minor porosity or die rust. A fundamental difference between ancient coins, on one hand, and houses and wines, on the other, is that the characteristics of ancient coins are fixed, changing only as new hoards are discovered.2 The combination of uniformity and diversity makes hedonic price analysis an ideal tool to identify “what’s in the price” of ancient coins and how buyers and sellers value specific coin traits.3 This article reports the findings of a hedonic price analysis of all specimens of the Alexander the Great tetradrachm (silver 4-drachm piece) sold at the Classical Numismatics Group (CNG) auctions between 2001 and 2006, a total of 805 transactions with realized prices ranging from US$95 to $5,750.