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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. I The Coinage of Alexander Alexander III carried out a numismatic as well as political conquest of the ancient Mediterranean and points east. It is clear that both conquests were carefully planned in advance. In 336 BC, when Alexander assumed power after the assassination of his father, Philip II, local coinages flourished in hundreds of Greek city-states and colonies around the Mediterranean. Various weight standards were used, and each locale had its own design or typoi, for example, Athena and the owl in Athens; the Pegasos in Corinth and her colonies in Magna Graecia (Italy and Sicily); the wheat ear in Metapontum; a boy riding a dolphin in Taras; a rose in Rhodes; a nymph carried off by a naked satyr on the island of Thasos; horses in Larissa; the nymph Arethusa and chariot of Syracuse; the hare of Messana. These images conveyed the authority of the local state and facilitated trade within city-states’ zones of economic influence. They 2 Forgeries, retooling, and over-cleaning are sad testimony to the extent to which some people are willing to forego ethical considerations in an effort to alter this inherent fact. 3 This study adds to a growing body of empirical literature related to the economics of art and art auctions; for example, see Ashenfelter and Graddy, 2006. 4 also reflected the identities of Greek city-states and their people. Since the beginning of coinage in the 7th Century BC, rulers recognized the political as well as economic importance of coins. For example, the idea of putting Athena and the owl on the coins of Athens is attributed to Peisistratos, the popular despot who took control of Athens from a ruling oligarchy in the late 6th Century BC. His displacement of the typoi of the oligarch families with Athena, the deity of Athens, was a critical part of his appeal to the populace. Confronted by the need to economically unify his future empire, facilitate transactions, and pay his armies, Alexander invented two universal coin types based on a common weight standard (the Attic standard used by Athens), and in three denominations—two in silver, one in gold. The types and weight standard were carefully chosen to consolidate political support from Greek city states, particularly Athens, which was to be critical for the success of Alexander’s conquests, while at the same time paving the way for the acceptance of the new coinage in the soon-to-be conquered lands to the east, then under Persian control. The three major Alexander coins include a 1-drachm (approx. 4.25 grams in weight) and tetradrachm (4 drachm, approximately 17 grams) denomination in silver and a gold stater (approximately 8.6 grams). At the time of their issue, these coins were demanded for their bouillon value, and the exchange rate of gold to silver was approximately 10:1. Gold staters were not struck at all of Alexander’s mints, and the bulk of the coinage as we know it consists of silver tetradrachms. The two silver denominations share the common type of Herakles wearing a lion scalp on the obverse and, on the reverse, Zeus seated on a throne, holding a scepter in his left hand and an eagle, his symbol, in his right (see Figures 1a and 1b). The wide appeal of Herakles and Zeus as symbols on the new coinage is evident. Herakles was a legendary hero to all Greeks and recognized ancestor to the Macedonian royal house. The representation of Zeus, the principal Greek god, on the reverse of these coins is remarkably similar to the Baal (deity) on Persian coins of the same period. The type chosen for the gold coin was of a helmeted Athena on the obverse and a winged Nike on the back. Athena was the principal deity of Athens, but the design of the helmet she wears is from Corinth. Nike, goddess of victory, holds out a wreath and stylus, an emblem of naval victory, likely recalling Athens’ defeat of the Persians under Xerxes at Salamis 150 years earlier. The coins bear the inscription “of Alexander” (ΑΛΕΞΑΝΔΡΟΥ) on their reverse. The Alexander silver tetradrachm is the focus of this study because it is the denomination for which there are a sufficient number of transactions with the necessary information to estimate a hedonic price model with multiple coin characteristics at a reasonable level of precision. Ancient Coin Supply Today The number and qualities of ancient coins in existence at any given time is fixed, the result of past hoard discoveries. Nevertheless, new coin hoards occasionally 5 are discovered, so the long-term supply is less inelastic, random but influenced to some degree by new search technologies. According to Paul Rynearson4 Coins that are found tend to come as single finds, family caches or large treasury hoards. Single finds are often of low grade and usually bronzes. Family hoards tend to be groups of coins of precious metals, which families entrusted to the eldest male; they were selected specimens of coins circulating at the time. There were no banks at the time, so wealthy families hoarded money in the most precious metal possible. Their coins often were placed in a container, such as a metal box or pottery vessel. Treasury hoards have the largest number of coins in them, at times many thousands. Usually of silver, but sometimes of gold, they are often found in metal boxes. In this type of hoard the coins are usually in the highest state of preservation, as they had not yet been given out in payment to mercenary soldiers, magistrates, etc. Some hoards are unearthed by archeological digs, but most are found by accident, unearthed in farmers’ fields or at construction sites. Archeological evidence accompanying discovered hoards can provide clues about the coins. Groupings of coins in the same hoard provide information on the directions in which coins circulated (often from distant mints; for a fascinating illustration see Price and Waggoner’s 1975 analysis of the Asyut Hoard unearthed in Egypt in 1969). The presence of one or more datable specimens in a hoard can assist in dating other specimens, at least placing a late boundary on their year of issue. Usually this information is lost, however. Laws establishing state rights to discovered hoards no doubt discourage the reporting of the contents of these hoards in most cases. The effect of a new hoard discovery on coin prices naturally depends on the quantity and characteristics of the coins in the hoard. Ancient coinage, unlike its modern counterpart, was struck by hand from engraved dies that produced coins in highly sculpted relief.5 As a result, they are more akin to works of art than to commodities produced in a uniform manufacturing process. Variations in ancient coins available at auctions today occurred prior to striking (the artistry evident in the carving of dies; die defects including wear, rust, cracks, etc., that are transferred to the coins; the quality of the metal used in the coins; ancillary markings including symbols of mints, magistrates, and on rare occasions, signatures of die makers and dates reckoned to some base date; re-striking of older coins whose images affect that of the new die); at the time of striking (weakly-struck coins, shifts in the positioning of the die between strikes of the hammer, off-centered strikes); or after striking (wear of the coin through use prior to being “lost;” ancient test cuts by traders to ensure the metal content of the coin; degradation of the coin during storage, which in the present case typically would exceed two millennia; and preservation of the coin by 4 Personal correspondence. Rynearson is a prominent numismatist and expert on ancient coins; see www.paul-rynearson.com. 5 Jenkins (1990) provides a brief introduction to the methods used to produce ancient coins. These methods changed little until the late 16th Century, when minting machinery was used regularly for the first time in Europe. 6 discoverers, collectors and dealers over a period sometimes as long as several centuries.) Other key factors that may affect modern-day values of ancient coins include the date and place of issue. The coins of Alexander minted at Sidon and Ake in Phoenicia are marked with dates of local eras. At all other mints, coin dates must be induced indirectly. The presence of a magistrate’s name or symbol provides the contemporary equivalent of a date in most cases. The criterion of style is also used. The evolution of Greek art generally provides a reliable basis, in combination with other factors, to establish a chronology of coins. In general, the reverse on posthumous issues of Alexander silver tetradrachms have the legs of the seated Zeus crossed in front of the throne, while on lifetime issues the legs are parallel. Finally, a sequencing of dies often is possible due the economic fact that dies were costly to produce and the technical fact that obverse dies, nested in the anvil, normally outlasted reverse dies, which received the full blow of the minter’s hammer. Overlaps between obverse and reverse dies, together with gradual die wear, reveal the order of striking.6 A comprehensive cataloguing of dies used to produce the lifetime coinage of Alexander appears in the authoritative works of E.T. Newell (1935) and especially Price (1991). II The Hedonic Price Methodology and Data The conventional model of demand and supply in economics treats goods as homogeneous; mark