The workings of the mineral market have fascinated, intrigued, and puzzled me for years. I'm always asking my dealer friends about it, trying to get a "read" on what is going on. Usually I'm looking for tips on which mines are going to close, or what new and fabulous discovery has just been extracted from some remote pit in Bontang, Borneo.

Recently, however, I began to wonder what insights might be gained from applying the laws of economics to the market for mineral specimens. About 25 years ago I studied economics in graduate school, but about all I remembered was some vague stuff about supply and demand. After further investigation, I found that there's been lots written about the economics of the mineral commodity market (e.g., for gold, silver, copper, zinc, etc.), but virtually nothing on how the laws of economics explain the workings of the mineral specimen market. In this article I'll explain some of the basic principles of economics and then apply them to the mineral market to gain a better understanding of the forces at play.

Before you yawn and shut off your computer, I promise to try to make this both easy to understand and as lively and interesting as possible. Fortunately, I learned how not to do this when fighting to stay awake listening to my economics professor (who wore the same suit to class every time we met - a suit described by a fellow classmate as "shower tile blue & green"). Of course, if you do start falling asleep, you can always call your dentist and go in for some drilling.

To keep it simple, I have oversimplified the enormous field of economic theory into five categories. There's lots more, but these principles seem to apply most directly to finding fine mineral specimens for sale.

FREE MARKET SYSTEM
Minerals are bought and sold in what economists call a free market or free price system. This is a market where the government does not regulate or intervene in any way, except to collect taxes (but not on the internet, so far!). In a free market, ownership is voluntarily exchanged at a price determined solely by the seller and the buyer. Both parties must believe they are getting a good deal for this to happen. Because there is no government interference, this system is referred to as a laissez-faire economy (from the French for "let it be"). All the terms used below (supply and demand, scarcity, monopolies, and elasticity of demand) explain the fine points of how this free market system works.

eBay page showing listings for mineral specimens

Example: On eBay, auctions are conducted so that potential buyers can compete to purchase the item. Based on a subjective value judgment, if bidders are willing to spend more than the current bid price, they up the bid. If the price goes too high, they drop out of the bidding. So, eBay is an example of a free market system. Mineral websites that offer specimens for a fixed price are also examples of a free market system, the only difference being that there is no bidding involved.

SUPPLY AND DEMAND
Economics says that prices are determined by the rules of supply and demand. Demand for mineral specimens is a result of the market pressure created by all the collectors who are trying to buy the specimens. Ideally, free competition between vendors vying for buyers' money tends to decrease prices, and quality tends to increase. Buyers "bid" for specimens, and a sale is made when the bid matches the offer. Theoretically, prices settle at the equilibrium point where the quantity demanded (at the current price) equals the quantity supplied. The result is that a seller who charges too much may make a large profit on each specimen sold, but won't make many sales. Conversely, if a dealer charges too little, he'll make lots of sales but will make little or no profit.

5" Dark blue fluorite crystal group, Denton Mine, Illinois

Example: Some of the most beautiful fluorite found anywhere in the world came from mines like the Annabel Lee, Hardin, Rosiclaire, Minerva Mine #1, and many more in southern Illinois. In 1993, the mining companies announced that they were going to shut down the mines, and the last mine closed in 1995. In the mineral world, prices for specimens from mines that close shoot up immediately, in anticipation of short supplies in the future. In the case of Illinois fluorite, the supply pipeline of fine fluorite specimens was very full. In fact it was so full, that it wasn't until 2008 that supplies began to dry up and prices began to go up. In 2009, the price for the really good Illinois fluorite specimens shot up, and in the years since prices have continued to escalate very rapidly. Today, dealers are selling the better specimens at prices 10-fold what they were in 1993.

SCARCITY
Our world is characterized by scarcity. That means that the quantity available of the things we want is limited. In short, there just isn't enough of the really good stuff we all want to go around. To illustrate, here are a couple of phrases suggesting a condition of scarcity for certain mineral specimens that I gleaned from various online sites:

"Choice material now trickles onto the market with any decent specimens from here becoming rarer and rarer to find, especially of good value."

"They are extremely rare on the market for obvious reasons, given the fragility and length of time passed since they were found."

"It is very difficult to find any samples of this mineral on the market today, and until very recently, the locality had not produced specimens in many years."

(Of course, keep in mind that you have to take these claims with a grain of salt!)

Every collector would love to have a "world's best" specimen of rhodochrosite or azurite in his or her collection, but since there can only be one of these for each species, there simply aren't enough to go around (i.e., they are scarce). Really fine, undamaged specimens are always scarce, so demand creates scarcity, and drives prices up.

6.4" Grass green pyromorphite crystals on quartz, Manhan River Lead Mine, Loudville, Easthampton, Massachusetts

Example: In 1999, my digging partner, Dick Holmes, and I collected a bread-box size boulder of pyromorphite at the Manhan River Lead Mine. The bright green color and the large crystal size (for the locality) far exceeded anything that had been collected there since the mines opened in 1678. Aside from the football-size portion of the specimen that now resides in the Harvard Mineral Museum, only 40 other pieces were trimmed out. In all, fewer than a dozen really top-notch cabinet and small cabinet specimens emerged from the find, and the best of these were retained by Dick and me, reducing the supply even further. Specimens with micro-sized green coatings of pyromorphite continue to be found at the mine, but nothing of remotely similar quality has emerged since.

MONOPOLIES
As in other markets (most notably the oil market, which has been controlled by OPEC in recent years), some entrepreneurial mineral dealers strive to create monopolies so they can control prices. Because of the large number of sources for minerals around the world, and the relative ease of getting them to market, these attempts to corner the market typically involve a particularly rare and attractive mineral from a specific locality.

3.2" Gemmy golden barite crystals, Rust Bucket Pocket, Meikle Mine, Nevada

Example: Several years ago, Casey and Jane Jones signed a specimen mining contract which gave them sole rights to the fine golden barites which they mined from the Meikle Mine in Elko County, Nevada. The contract gave them a monopoly on these fine, gemmy specimens. If you wanted to get one (and collectors were lined up to do so), you had to buy it from them. But don't wag your finger and accuse them of having low moral character for setting up a monopoly: They took an enormous risk up front paying for the contract and for the costs of mining the specimens. Remember, the specimens produced could just as easily have been worthless (and all too frequently, that's how it turns out).

ELASTICITY OF DEMAND
Products that are daily necessities, such as gasoline, milk and bread, exhibit inelastic demand, because few alternatives exist, so demand remains relatively constant even if prices increase. From the suppliers' perspective, inelastic demand is a wonderful situation, because even if they raise prices, the quantity demanded doesn't go down. On the other hand, demand for vacation travel, mink coats, and mineral specimens is elastic. This means that as prices go up, demand drops. So, mineral dealers are forced to keep their prices "affordable", because if they are too high, no one will buy their specimens.

In late 2008, the stock market crashed, the mortgage foreclosure crisis was making headlines, gas prices approached $4 a gallon, and unemployment shot up to 10%. People talked about a depression, not a recession. Since then, many mineral dealers have fallen on hard times. The reason? Elastic demand. Many people needed every penny they could scrape together just to fill the gas tank and buy milk for the kids. There wasn't as much money available for non-necessities like mineral specimens. (On the other hand, any serious collector would argue mineral specimens are indeed necessities!) As the economy has improved, and people became less fearful of impending financial doom, mineral buyers have returned to the market, though many are much more cautious then ever before.

2¼"Gemmy pink morganite crystal on 3½" matrix, Darrah, Pech, Kunnar Proivnce, Afghanistan

Example: One day, one of our customers purchased a really fine morganite crystal on matrix, with great pink color. The next day he wrote and told us he had to cancel his order. He had been fired from his job, and could no longer afford to purchase such expensive specimens. A few months later, after he had found a job, he wrote back and asked if the specimen was still available. It was, and a few days later he proudly added it to his collection.

CONCLUSION
Free markets, monopolies, supply and demand, elasticity of demand, scarcity: all are part of the rules of economics which affect every mineral collector and mineral dealer. Understanding them is easy, and offers a perspective on the forces at play that is both interesting and educational. Of course economics isn't everyone's cup of tea. Dick Holmes's father, a retired New Hampshire farmer who is almost 90 years old, would say: "Well, it's a lot better than a kick to the head with a steel-toed boot."