Value of the Colosseum

I have argued that valuation of enterprise – of its capitals – is the mother’s milk of capitalism.  The Caux Round Table’s company assessment metric can be easily used to put probable parameters around future risk, thus permitting a reasonably prudent calculation of a company’s net present value and its total capitalization.

I want therefore to report to you on a recent valuation calculation made by Deloitte of the Colosseum in Rome, completed in 80 CE by the Roman Emperor Titus.  You may find the full report here.

The Deloitte valuation experts estimated a number of different values for the property:

-Social asset value – 76.8 billion Euros

-Transaction value – 1.1 billion Euros

-Existence value – 75.7 billion Euros

-Economic contribution (economic value added – 1.4 billion Euros)

Deloitte undertook this assessment to provide a framework for thinking about cultural heritage – really intangible assets.

The Deloitte report explains:

In addition to the economic contribution, we estimated the visitor value and the existence value of the Colosseum, which constitute its total “social asset” value.  Visitor value is calculated using the market or social value given by the transaction value – the revenue from the sale of goods and services.  In addition to the audience value, public institutions such as the Colosseum provide value to people who do not directly use their services.

Beyond its financial strengths, people may value the Colosseum as “iconic” or “symbolic” or may value the contribution of the Colosseum to the national culture.  Thus, the welfare produced by the Colosseum is certainly more than the financial benefits that it can produce.  Italian residents also place a considerable premium on the non-use value of the Colosseum.

This represents its intangible social value, that we can also refer to as its existence value.  This value is perceived by most Italians and not just those who visit it.  Specifically, this value arises when an individual is willing to pay for the Colosseum though she makes no direct use of it, may not benefit even indirectly from it and may not plan any future use for themselves or others.

On the basis of an ad-hoc survey, we found that about 90% of Italian residents believe the Colosseum is an iconic Italian landmark representing the most important cultural attraction in Italy and that it must be preserved under any circumstances.  We also found that Italian respondents are willing to pay a significant amount of money to preserve the Colosseum. Overall, we estimate the Colosseum has a total social asset value of 76.8 EUR/bn.

Of course, the exercise raises questions about the propriety of putting a price value on something so intangible.  Should we even want to use the “cash nexus’ as a measure of worth of such a work of art or say, a moral achievement?  Or is the question not either or, but when and if?  Specificity, especially when using numbers of monetary equivalents (Bitcoins?), has an impact on human thinking and desiring.  Precision, real or imagined, can give rise to overconfidence and illusions of certainty.

On the other hand, moving our discourse from emotions and other normative abstractions so personal to our psyches to mere numbers permits compromise and eases the way to collaboration through expected gains to be shared as agreed.  Facilitating transactions is not always a bad thing.  Many times, standing on principle, as in who was right or wrong in a marriage dissolution, produces intransigence and the breaking of relationships.  Such is a casus belli between nations when ultimatums are given and then cannot be withdrawn.

As the Deloitte methodology permits, we can move our appreciation of value away from simple buying and selling of goods and services to asking what meaning something has for people, what its more transcendent value might be.  We can think about emotional, psychological and political opportunity costs if we don’t have art, spiritual inspiration or heritage to give our identity concreteness in the world of real people and their real circumstances.

Not everything should be reduced to just money as a measure of value, but putting some proportion on our situations (global warming?) will make for better judgement and optimize decision-making.