autographed books, fire, Friedrich Hayek, insurance, Richard Ebeling, Safeco
An Insurance Story
Categories: Business Economics Information Goods, Intellectual Property
By David Henderson, Dec 25 2021
I thought I had told this story on EconLog before but a thorough search convinces me that I haven't. It's a story about how an insurance company treated 3 of my lost books from a devastating fire.
In February 2007, a fire destroyed the 19th-century wooden building in which I had my office in Monterey. I don't know if I would have lost everything if I had got in soon enough, but days and weeks later, with the rain coming down (my office was on the top floor) pretty much everything was destroyed. Early on, the Monterey city manager, Fred Meurer, refused to let me go into the building. When I pointed out that someone had offered free use of his cherry picker so that I wouldn't have to touch the floor (which easily could have fallen through), Meurer came up with another objection: asbestos. I pointed out that one couldn't get badly sick from asbestos with the little exposure I would have. Meurer didn't budge.
That's the bad news.
In what also looked like bad news, I was underinsured. I had a computer, printer, 6 file cabinets full of files, a nice couch, 4 nice wooden book shelves, and about 1,500 books. The representative from Safeco, my insurer, agreed with me that I would easily hit the $14,000 limit on my policy and so he sent a check right away for $8,000 so I could quickly set up everything I needed in a new office. I told him that I had 3 autographed books from Friedrich Hayek and a few from Milton Friedman, who had died 3 months earlier. He told me that since I was already at the $14,000 loss point, I wouldn't get any extra for those books.
Then, about a week later, he called and told me that he had found a provision in my insurance policy that he and I had both missed: I was allowed up to $10,000 for "fine art." "And let me read you the definition of fine art," he said. It included books autographed by famous authors.
He then told me that this wasn't his specialty but Safeco dealt with a company that specialized in valuing autographed books. He suggested that I send him my estimate of value. I came up with a number of $200 per book, figuring that no one could say that was too high. I also told him that meanwhile I had discovered that my autographed books from Milton Friedman were at home and at my campus office.
About a week later I was flying to Baltimore Washington International Airport (BWI) from Monterey on Delta. I was on sabbatical and I was about to spend about 10 weeks of the sabbatical with the economists at George Mason University. (Thanks to Don Boudreaux, then chairman of the economics department, for letting me have an office.) The flight was from Monterey to Salt Lake City and then from SLC to BWI. As soon as I got off the flight in SLC, I turned on my flip phone and the phone rang. The woman on the other end told me that she was from the company hired by Safeco and she was calling to discuss the value of the Hayek books.
"I notice that you said you thought they were worth $200 each," she said, "how did you come up with that?"
Oh, here we go, I said to myself. They're going to dispute even that.
"I figured no one could argue that they weren't worth at least $200," I replied.
"I know something about the value of books autographed by Hayek," she responded.
"You don't get it," I replied, "these weren't just books autographed by Hayek; these were books autographed by Hayek to me."
"Mr. Henderson, you don't get it," she replied, "these books aren't worth $200 each; they're worth $2,400 each."
I was dumbfounded. This conversation occurred as I was walking to the gate for BWI. I thanked her and hung up.
"How much would I have to pay to upgrade to first class?" I asked the Delta employee.
"$300," he answered. So I did. Spending 4% of my $7,200 windfall seemed about right.
Note: The picture above is of Hayek autographing my copy of his Studies in Philosophy, Politics, and Economics at the second Austrian economics conference at the University of Hartford in Hartford, Connecticut in June 1975. This was 6 months after Hayek had been presented with the Nobel Prize. Studies was one of my favorite of Hayek's books. The photographer was Richard Ebeling. I had the picture as a book mark in my copy of another of my favorite of his books, Individualism and Economic Order. So of course it burned in the fire. I regretted that mainly because when I taught "The Use of Knowledge in Society," I had showed the students the pic of Hayek and me. A few years later, Richard Ebeling emailed me and attached the above picture, asking if it was I. I replied that yes it was, and I love him.
Burgin on Hayek, Friedman, and the Great Persuasion
Angus Burgin of Johns Hopkins University and the author of The Great Persuasion talks with EconTalk host Russ Roberts about the idea in his book--the return of free market economics in the aftermath of the Great Depression. Burgin describes the reaction to Hayek's Road to Serfdom, the creation of the Mont Pelerin Society, and the increasing influence of Milton Friedman on public policy.
raja_r
Dec 25 2021 at 12:42pm
"Spending 4% of my $7,200 windfall seemed about right."
Is it a windfall though? Didn't you just lose books worth $7,200 in the fire?
Dec 25 2021 at 1:32pm
My answer: I had tagged this is a loss for which I wouldn't get compensated. So relative to that, it was a windfall.
Second answer: You could point out that I had coded it as a loss for which I would be compensated $600. So the windfall was "only" $6,600.
By the way, not that this is relevant to your question, but in those days, given that I was trying to pay substantial bills for my daughter's college education, if someone had offered me $1,000 apiece for each book, I would have said yes on 2 of them.
Mark Brady
And that's $7,200 in 2007 dollars!
The Road to Serfdom (1944) signed by F. A. Hayek to Karl Popper. $400,000 + free shipping within the U.S.
Raptis Rare Books in Palm Beach, Florida, offer three signed copies of that book here: https://www.raptisrarebooks.com/?s=Hayek&advsearch=2
Of course, an offer for sale doesn't mean that anyone would pay that sum for it. And I'd say that $400,000 is pushing it!
Question. Was there underlining in any of those three books destroyed in the fire?
I think you mean 2021 dollars. Thanks for trying to bail me out, Mark, but, of course, the $300 added airfare was in 2007 dollars and so is directly comparable, without adjustment, to the $6,600.
I think $400k for that book is pushing it too.
There was underlining in all 3 books. With 2 of them, Studies, etc. and The Road to Serfdom, I had no idea when I got them in the late 1960s, that I would ever have them autographed. The 3rd, The Constitution of Liberty, is a more interesting story. In about mid-May 1970, after I had graduated from the University of Winnipeg, I had flown down from Winnipeg to Chicago on a Sunday to visit people at the University of Chicago the next day. On Sunday afternoon, I found a used-book store in downtown Chicago that was being forced out by eminent domain and had a major sale. I found The Constitution of Liberty selling for, I think, $1.50 or $2.00. It was in close to mint condition. I bought it. I noticed that there was a name written at the front and it looked like Hayek's signature, but I said to myself, "Ya, right, who would sell that?"
When a friend of mine went to Germany and Austria that summer, she told me she was going to drop in on Hayek. I asked her to take my copy of Road to Serfdom and ask him to autograph it. She did. When she went to see him in Freiburg, he was sick and so she dropped it off with an address to send it to. A few weeks later it arrived, and the signature was awfully close to the one in my Constitution of Liberty. Being young and foolish, I marked it up anyway, just less than I would have.
Mactoul
I wonder how these objective valuations done by valuers fit in with economic theory in which all valuations are subjective.
David Seltzer
Look at the market where they are traded. Isn't an equilibrium price subjective? How are Picasso paintings priced?
Your Name: required
Email Address: required, not displayed
required, not displayed
Website URL: optional
COLLECTION: BUSINESS ECONOMICS
The article you're reading is part of Econlib's Business Economics collection. Explore other Business Economics articles:
Should Corporations Be Woke or Fascist?
Italy vs Amazon
Alberto Mingardi
Capitalism Breeds Innovation: A Hallmark Christmas Movie Moment
Sarah Skwire
The Two-Front War on Techtopia