Greenland’s Unfair Valuation

Today’s NYT Deal Book goes through the ‘thought experiment’ of valuing Greenland. After analyzing the Virgin Islands purchase in 1917 and Alaska’s in 1867, their ‘expert’ concludes that “buying Greenland ‘would be the deal of the century.’”

A couple problems occur to me. First, the Virgin Islands is diminutive (738 square miles) and even Alaska is 20% smaller (665,000 sq. mi.) than Greenland’s landmass (836,000 sq. mi.). 

Second, the Deal Book’s valuations of Greenland at $12.5 billion based on the Virgin Islands deal and $77 billion based on the Alaska deal are way out of whack. They use the dollar value today method and consciously ignore the inherent value of the land and its underlying extraction value going forward. 

Probably a more useful (and more accurate) example is the purchase of Manhattan in 1626. The Lenape sold the island to a Dutch colonist for $24, a pittance then and now for 22.7 square miles of under appreciated real estate.

A year ago Richard Florida, a Bloomberg reporter, put that unfair valuation in perspective. “A paper in the Regional Science and Urban Economics estimates that in 2014, the developable land in Manhattan—excluding parks, roads, and highways—was worth between $1.54 and $1.95 trillion, for an average of $1.74 trillion.”

Anyone want to bet “the deal of the century” collapses in acrimony, if the government of Denmark counters Trump’s ‘proffer’ of what amounts to felonious theft with a demand for $2.32 trillion… a slight increase given in today’s dollar value due to inflation and the absolute disparity in square miles? 

Oh, and would those MAGA-naughts in Congress be willing to fork over $2.32 trillion to buy Greenland in a fairly valued deal? I kinda doubt it.