Aboriginal Art and College Cost Bubbles - Fastweb

Aboriginal Art and College Cost Bubbles

Mark Kantrowitz

December 15, 2011

Aboriginal Art and College Cost Bubbles Aboriginal Art and College Cost Bubbles

What does Australian aboriginal art have to do with college costs? Read on.

When I was a research scientist at a software laboratory over a decade ago, I purchased a few paintings by aboriginal artists during a trip to Australia to present a paper at an international computer science conference.

Australian aboriginal art is intriguing because it is both primitive and contemporary at the same time. The paintings, known as dreamings, convey meaning through abstract symbology. But this also contributes to the beauty of the artwork.

For example, Seven Sisters Dreaming is a painting that tells the story of the Creation Time, when the stars and the planets were once people and animals. The seven sisters are pursued by a Jakamarra man named Jilbi, the morning star in Orion’s belt. In a final attempt to escape, the women turn into fire at Kurlunyalimpa and ascend to the heavens to become stars. Today they can still be seen wandering the skies as the seven stars in the constellation Taurus (Pleiades). The Seven Sisters Dreaming is also a stunningly beautiful and abstract painting of the night sky. There is very little light pollution in the central Australian desert, so aboriginal artists are able to see and depict the soft glowing stars and dark patches of the Milky Way with crystal clarity.

Although I bought the paintings because I liked the art, they have become some of my best investments, appreciating significantly in value over the years. The paintings gained in value even though aboriginal artists tend to paint the same dreaming again and again and again and again.

A Rare Book Price Bubble

About a year ago I began looking for an out-of-print book about the Wandjina cave paintings. According to aboriginal traditions, the Wandjina are rain spirits from the Dreamtime who came from the sky to create the world and its inhabitants. According to UFO conspiracy theorists, the cave paintings are proof that our planet has been visited by aliens from another world. The Wandjina do look like little alien beings wearing space suits, with big black eyes and a flat slit of a nose. They are reminiscent of the gray aliens from science fiction and alien abduction stories. Or they could just be drawings of owls.

The book, The Art of the Wandjina: Aboriginal Cave Paintings in Kimberley, Western Australia, by Ian M. Crawford (Oxford University Press, 1968) is expensive because it has been out of print for many years and is a collector’s item. I paid $175 in July 2011 for a copy of this book, about two-thirds of the normal price.

Since I didn’t cancel the book fetch request, I continued to receive email messages alerting me to available copies of this book. The increases in price, however, were absolutely insane. On September 21, 2011, a copy was available for $913.28 plus shipping, about two to three times the normal price. Then I received an alert on November 25, 2011 for a copy priced at $1,278.59. Then alerts for copies priced at $1,790.01 on December 2, 2011, $2,314.23 on December 6, 2011 and finally $4,188.74 on December 8, 2011. The last price is 24 times what I paid just five months ago.

The book may be rare and out of print, but it just isn’t that valuable. The rapid price appreciation is ridiculous. These weren’t even for mint copies of the book.

The most plausible explanation for this bubble is automated pricing. Pricing rare books is difficult, so some sellers base their prices on what other vendors are charging. There are many possible strategies. One strategy involves setting prices at a premium above the prices charged by competitors. Another strategy involves setting prices at a discount off of the lowest listing price, to try to sell inventory quicker. But when two or more sellers adopt such strategies, the pricing models can interact, locking them into a feedback loop with prices that escalate with each successive iteration. (This can happen even if one seller sets prices at a discount and the other at a premium.) Notice how the $1,278.59 price is precisely 40% higher than the $913.28 price and the $1,790.01 price is precisely 40% higher than the $1,278.59 price.

This example illustrates some aspects of a pricing bubble. A bubble occurs when there is a disconnect between the selling price and the intrinsic value of the product. This often happens when pricing is based on prevailing market prices and not on the product’s cost or other fundamental measurements of value.

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