How much should Donald Trump pay for Greenland?
Have you ever thought of the question "How much does Greenland cost"?. Nope even we had not until now.
We want to start this off by saying that we are no expert when it comes to putting a price on countries. This president of the United States brought the topic up and we are simply exploring it for educational or entertainment purposes. (mostly the latter).
(In case you don't know Donald Trump has expressed some interest in buying Greenland)
Valuation and pricing are two very different concepts. Price is what you are paying for something whereas value is what it is actually worth. This article is more about price rather than the actual value. (It is hard enough determining a price. The value would be worse)
We look into different methods and ways one can look into pricing Greenland.
1.Price the land
The cost of land per acre depends on a number of factors. The first one would be what type of land is one looking at. In the United States, developed land where housing and roads are located was valued at an estimated 106,000 per acre. Underdeveloped land was estimated at $6,500 per acre, and farmland at only $2,000 per acre. (https://247wallst.com/). The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,080 per acre. (Usda.gov)
Greenland has land close to 535.3 million acres. They have a population of only 56171 people. That means that every 9530 Acres you will find someone. Another way to look at it is 9530 acres are occupied by people.
Taking the $106000 per acre cost for these 9530 acres we get, a rough valuation of 1 Billion.
Now almost 534.3 acres of land is left.
The remaining land though is where it gets interesting. According to an article by Washington Post, Greenland is melting away which is leading to massive reserves of river sand. This sand is in high demand for concrete. Furthermore, the countries oil and mineral reserves are largely unexplored. With increasing temperatures, Greenland may become more habitable in the future. Having said all that Greenland does have growing unemployment and gets help from Denmark.
Even if we assume a price of $1000 per acre we get close to 534 Billion. The total amounts to 535 Billion Dollars.
2. Price through population
Wikipedia defines the value of life “as an economic value used to quantify the benefit of avoiding a fatality. It is also referred to as the cost of life, the value of preventing a fatality (VPF) and implied a cost of averting a fatality (ICAF).
Recently, the family of a man who died in Milwaukee jail was paid $ 6.75 Million dollars. (The root). This is just one example of a situation where a price needs to be put on the life of a human. Ge
Different agencies in the United States come up with different estimates. If you type cost of a life, Wikipedia shows up and on further research, you get these numbers. (for the USA).
$9.1 million (Environmental Protection Agency, 2010)
$7.9 million (Food and Drug Administration, 2010)
$9.2 million (Department of Transportation, 2014)
$9.6 million (Department of Transportation, Aug. 2016)
Even if you take the 6.75 Million and multiply it by Greenland's population you get Three hundred eighty-three billion sixty-nine million two hundred fifty-thousand.
3. Price as a business
One of the obvious ways to price Greenland will be to treat it as a business. If you have studied finance you may be familiar with a discounted cash flow evaluation. While we can consider growing the economy to perpetuity since we are pricing we look at a PE multiple.
The average price-to-earnings ratio among Standard & Poor’s 500 companies is about 21.3. Greenland though is not an average company.
After all, it has tons of uninhabited land (which as of now is ice). Studies done by NASA scientists suggests that glaciers in Greenland are melting at exponential rates due to the warmer water and air. Leaving the science aside this will lead to a potentially habitable land. Furthermore as mentioned above, the river sand is in high demand.
If you believe that we are not going to be able to keep a check on Global Warming then Greenland may actually be a good investment. (climate will get better too)
Still, it is impossible to randomly assign a multiple and so I don't quite see pricing Greenland using a multiple possible. If we take a multiple of 60 and the GDP as 2 billion ( removing Denmark's contribution from it) we get a valuation of close to 120 Billion Dollars. (very subjective though).
The conclusion probably is that there is no conclusion here. Putting a price on a country is a very difficult task. There are numerous variables such as military, corruption, currency risk, and so on which have not even been factored in any of these three methods.
This article instead of trying to price Greenland has always been about potential ways you can try to price it.
Also, it does not matter, as Greenland is not for sale.