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Thursday 23 November 2017

Do Bad Stamps Drive Out Good?

Gresham’s Law states that bad money drives out good. The basic idea is simple. Suppose I have two gold coins in my pocket, made of the same quality of gold. But one has been clipped at the edges where someone has taken a little bit of gold off (someone who has done that to lots of coins and so has accumulated a pile of gold). Which coin do I spend first? Gresham’s Law says that I will try to pass on the clipped coin and try to keep hold of the unclipped one for as long as I can. Likewise, if old silver coins circulate alongside cheap alloy ones, then people will start saving the silver ones hoping that the silver will soon be worth more than the face value (it may already be worth more than the face value). Why give away silver when you could give away alloy?

I thought of Gresham’s Law thinking about Russia #1. There are people who collect Russia in mint condition and Russia #1 is a problem. It is rare in mint condition and people used to say to me that it does not exist mint. So there is demand and no supply. As a result, for a very long time, people have taken pen-cancelled copies of #1 and chemically removed the pen cross. They have washed the stamp and, in some cases, they have gummed it. These stamps are then offered as mint copies, and still are, and they sell – basically, as “spacefillers” to mint stamp collectors. In the December David Feldman auctions, you can find two examples:

Lot 41768 described as (*) … very good margins, very good gum, at front some surface rubbing at the positions of slight ink traces, a very presentable example, various sign. incl Th. Lemaire  Estimate 3000 euros

Well, that’s more or less telling you that this was a used copy which has been cleaned and gummed. Before that alchemy was accomplished, the stamp was probably worth 300 euros, since it does have nice margins. But it did not have surface rubbing before it was cleaned. Three thousand euro is a lot to pay for someone’s work cleaning, rubbing, and gumming this stamp. So why not look for something cheaper, for example and next up:

Lot 41769 described as (*) … large margins all around, unused no gum, usual penstroke removing, otherwise excellent fresh example. Estimate 500 euros

The margins aren’t quite so good on this stamp as on the previous one and the alchemist hasn’t bothered to add gum and hasn’t been so successful in removing the ink cross. But forced to choose, someone looking for a space filler might prefer to pay 500 than 3000, the bad stamp trumping the slightly better. Before it was treated, this stamp was probably worth 200 – 250 euros.

But suppose you want the real thing? The real gold coin. Well, then you have to go to Lot 70107 which gets a whole page to itself. There you are offered a stamp which has a * not in brackets and with exceptionally large and even margins - and three certificates stating that the gum on the reverse is original. The estimate is 20 000 – 30 000 euros.

So are you going to buy the good stamp or the bad stamp - which isn't mint in any sense of the word even though it gets a (*) - to fill that annoying space for Russia #1 mint?
On ebay, there are hundreds of stamp issues where bad stamps have really driven out the good and where people looking for spacefillers are quite happy to buy the fakes and forgeries on offer from sellers who seem to make a good living out of it.

1 comment:

  1. I'm not a big fan of "the Free Market explains EVERYTHING" theories, but in this case I think it can work both ways. If the price difference between "good" (say, a modern MNH stamp) and "bad" (the same stamp, but MH) is small, everyone will go for the good stamp: good stamps drive out bad stamps. And in fact, I think that these days you can't give away hinged modern stamps. But for older stamps the price difference becomes substantial and some people will start opting for the "bad" stamps.
    For a mint Russia #1 the price difference is astronomical, so there is a substantial market for "bad" stamps.
    The forgeries are another matter, I think. There's a lot of sheer ignorance (or optimism) at work there. There have been dozens of Imperial and Soviet "color proofs" offered on eBay during the past two years. All fake, but they look just authentic enough to tempt people to gamble...