What I Don't Understand about Baseball Card Economics

[seanofjapan]

If we are using economic analysis, then I think its worth discussing whether PSA is "too big to fail" within the card collecting market. I think it is and that understanding that fact is the key to explaining why the top end of the market looks so stupid to the rest of us.

When economists use the phrase "too big to fail" they refer to an institution (like a bank) whose failure (bankruptcy) would be a disaster for the economy or a market as a whole. Because of its position, other actors will always step in to bail it out no matter how bad a situation it is in (like the US government bailout of Ford and GM a few years ago).

PSA is kind of in the same situation vis a vis the hobby - too many people with too much money are too invested in PSA (not directly as shareholders, but in a broader sense of owning and putting value in PSA graded cards) to let it disappear no matter how egregious a scandal it gets itself into.

The value of so many cards at the top end of the hobby is determined now more or less solely by the PSA number on the top of the stupid slabs they come in. If the brand were irreparably tarnished or the company went bankrupt (ending the registry, turning off the tap of newly graded PSA cards coming into the market, etc) then that would pose a serious financial threat to a lot of very financially powerful people within the hobby, who are all thus incentivized to prop PSA up by whatever means they have at their disposal and ensure that it survives whatever scandal it is going through at a given time point (in most cases all this requires is that they simply ignore the scandals and keep on buying PSA cards as if nothing was wrong).

Other grading companies aren't at anywhere near the same scale as PSA and would probably be allowed to fail since the value of top end cards in Beckett or SCG holders isn't anywhere near as tied to the holder as it is with PSA cards. Its sort of like PSA has a never ending supply of get out of jail free cards while its competitors don't.

Its a huge problem for the hobby IMHO.