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In Pathfinder, there are two mechanisms for making a wondrous item have a continuous effect:

What is the difference between these two approaches?

To be concrete, how would I Craft something like a Bag of Holding (CL9) in each of these two approaches, in detail?

My guess:

The first approach would be cheaper and quicker, but would probably require a higher-level caster, and would be limited to the spells that can be made Permanent. The second would be more expensive, but could be done earlier (e.g. with a higher-level scroll).

1st Approach: I would cast the Secret Chest spell on a bag, then cast Permanency on it before the spell duration was over. Permanency has an associated cost, but Secret Chest is not listed. (Is this approach even possible, then?)

2nd Approach: I would pay for the Secret Chest spell (spell level 5, caster level 9). The cost is then (SL==5)(CL==9)(2000 gp) == 90,000 gp.

The 1st approach would appear to be much cheaper, given the costs in the Permanency spell description. That approach might not be possible, however, since Secret Chest is not listed as a spell that can be made Permanent.

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It seems you have some confusion about magic item creation in general. Permanency does not create magic items, it causes the listed spells to become permanent (remember they can still be dispelled, which makes the cost a little unattractive compared to magic items which will resume working).

The crafting feats are the only way to construct a magic item.

So the first approach does not work. The second approach is also wrong but can work. There is a small error in the pricing, as the spell has a duration greater than 24 hours you divide the cost by 2 (so half it). The chart has a few extra rules under that you missed. So your price should be 45,000 gold.

As with any new magic item (one that does not exist in the books) you should talk with your DM and discuss what you plan on doing with it, the cost, and exactly what the abilities will be.

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The difference is that one creates a permanent spell effect, which is limited to the spells in the list in Permanency's description. The second can create actual magic items, including many that cannot be imitated with spells.

Specifically, there's no spell in that list that can create a temporary Bag of Holding effect when cast on a mundane bag, so Permanency isn't useful to make that non-existing temporary spell permanent. (Note that Secret Chest is not in the list, cannot target a bag, and its effect doesn't operate at all like a Bag of Holding does.)

To make magic items, the crafting method is the only method.

To make a mundane item that is the target of a permanent spell effect (limited to those spells allowed, in the description of Permanency), you can use the Permanency method. This won't result in a magic item though, and the spell effect can be permanently removed by a successful Dispel Magic.

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