Re: Postage stamp bubbles; WAS: Closed - End Fund Puzzle

[Galbraith.James@xxxxxxxxxxxxxxx (James K. Galbraith)]

OK, I'll bite on this one. (About time I posted on something substantive!)
The word 'fundamental' troubles me here, since it would appear to imply
something deeper than subjective utility or preference. If not, then
'fundamental' value differs from person to person, and what kind of value is
that? I suppose this is Paul's point, and if so, I concur.

But do we need the word 'fundamental'? If we leave it aside, then there is a
fairly well-specified 'value' of a collectible in Keynes, namely the
expected yield (any rise in price expected to occur, discounted by the
interest rate), minus the carrying cost, and plus the liquidity premium.
The expected yield (at the margin, anyway) and the liquidity premium are
both social, not individual constructs, since they depend intrinsically on
the interaction of agents. JG.

>From Roger Koppl:

>Below is a post by Kevin Quinn and the one by Paul Davidson that Kevin
>was responding to.  Paul says used stamps have no fundamental value
>except in a beauty contest sense.  Kevin says the fundamental is zero
>"since the discounted value of all future `dividends' is zero."  I
>think a stamp has a very well-defined fundamental value, at least in
>a neoclassical world.  To quote a MS I coauthored, "an asset's
>current price will tend toward the discounted sum of its price at the
>end of next period and the *value of* any services it renders in the
>meanwhile" (emphasis added).
*****
James K. Galbraith
LBJ School of Public Affairs
The University of Texas at Austin
Austin TX 78713
Phone: 512-471-1244 (o)
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Email: Galbraith.James@xxxxxxxxxxxxxxx