Bad for art

What can it mean that a pastel drawing sells for $120m?   The economic function of this object is to create value inside the head of people looking at it; if it’s bought on speculation for resale, that function has to be anticipated for a subsequent buyer someday. It’s not copyrighted, so the value has to be the excess of value over that created by a good reproduction, of which there are lots in circulation.  At 5%, it has to be $6m per year to justify this price, or $684/hour working 24/7, four times that 9-5 weekdays. The odds that it will be on display anywhere on any terms every hour of every day forever are pretty slim, so let’s go with 2200 museum hours at $3K/hr.

How many people can be really looking at this piece at once; it’s not very big.  Maybe four, each of whom has to find it worth more than $10/min.   There are certainly people who would pay that, but if they are spending two minutes each, we need 120 of them every working hour, or a quarter million a year, again forever.  No, it’s not the greatest work of art ever made, whatever that could mean, and not in the top thousand despite its poster appeal and legs as a meme.

This transaction is completely ludicrous.  It properly exposes the whole culture of fine arts to ridicule as a game of poseurs, ignorant speculators, and predators that has nothing whatever to do with what paintings are about, or what art does for us, and that it should be a front page story as a serious event  does a little bit to damage the quality of everyone’s engagement with art.

 

Comments

  1. DaveH says

    All true but I can’t help thinking that this particular piece says a whole lot about what we currently value, i.e. fear and terror.

  2. matt wilbert says

    The buyer is paying for a well-known, rare collectible, not for art in the sense of disembodied aesthetic quality. That is completely usual at the high end of the art market, so I can’t see this as any kind of milestone.

    • Maynard Handley says

      The buyer is ACTUALLY buying a bright flashing sign that says “I am richer (and therefore better) than you”.
      Since the people the buyer wants to impress mostly follow the same rules of this particular glass-bead-game, the buyer has achieved his/her goal.

      You’re welcome to complain about the silliness of the game but:

      (a) It’s not COMPLETELY silly. If I spend my $120 million on a watercolor, and you spend your $120 million on bronze sculpture, we can both feel smug that we’re the better, more cultured, individual. If we only spend the money on things that can be quantified, there is the unfortunate fact that one of us will come out ahead — you have the bigger plane, my submarine can go deeper — and that’s an outcome no-one really wants.

      (b) In the old days this money would have been spend on raising an army and chivvying the kingdom next door. I think we can all agree art-collecting is better or almost everyone. Heck, I personally would rather have this money spent on conspicuous consumption than on buying legislators or buying companies, which are the two other main options these days.

      • Matt says

        The psychology of collecting is a weird thing. People are willing to spend outrageous sums on their pet hobbies–including $2.3 million for a stamp called the Treskilling Yellow, $2 million for Jimi Hendrix’s 1968 strat, etc etc. In many many cases, these items enter private collections anonymously. Most expensive artworks sit in private homes with relatively low-key buyers. This would seem to undermine the argument that these purchases are for status.

        I don’t think this market is quite so much about showing off as it is about expressing one’s ability to own something rare in a field you’re interested in. Only a very few people in the world would care about a yellow stamp or a guitar, so it’s not about impressing the general public with wealth.

        All of this is true of art collectors too. Purchasing a Jeff Koons isn’t something that will gain you stature among the general public. But among the perhaps 5,000 Jeff Koons enthusiasts in the world, it might enhance one’s cred. And, if you like Jeff Koons and have a spare million, it might make you feel happy to have one of his steel puppy dogs in your living room.

        There’s a far weirder psychology going on here than Michael O’Hare or Maynard Handley or Josh G. seem to imply.

  3. Keith Humphreys says

    Michael,

    There is another index of financial value, which is what could you borrow against it…I suspect that is a lot more than 10 years of museum tickets.

    • Michael O'Hare says

      If that index isn’t reflecting potential value creation, it’s either a bubble or the art is being used as money but without the backing of a government that makes an engraving of Ben Franklin “worth” $100. Either way, it’s substance abuse, not all that far from using it to write your shopping list on.

      • Keith Humphreys says

        I am not sure what you are using as your basis of comparison. If I own a piece of art that I can sell for some amount, it’s worth that amount. To say that what something sells for tells us nothing about its monetary value doesn’t seem logical to me. This doesn’t change my view that much “art” (i.e., a vacuum cleaner on a stand) sells for a ridiculous amount in my own eyes…but I am not the setter of economic value for the world’s art.

        • Dennis says

          My wife and I recently visited a large art museum east of the Mississippi. While there, we saw a late 20th C sculpture that was a metal box. Yeah, a metal box. There was a red line on the floor around the box noting that it was “Art”, and we ought not sit on or otherwise deface the box.

          My wife looked at me and said, “If they have to have a sign on it saying it’s Art…”

          And I replied, “I think it’s installed upside down.”

          • Ohio Mom says

            I’d say you must have been in Cincinnati but our late 20th c metal box sculpture with the taped line around it on the floor, and little sign announcing it is a piece of art, is very clearly installed right-side up.

  4. Josh G. says

    It’s positional competition, a result of more and more money being concentrated among the top 1% and thus available to bid up the price of scarce goods. Similar things have happened with other types of rare collectibles as well: for instance, in 1978, a rare 1913 Liberty Head nickel (only 5 specimens in existence) sold for $200,000 at public auction; the same coin was re-sold several times over the following decades, and at the most recent sale, in 2010, it fetched over $3.7 million. That’s much faster than the rate of inflation ($200,000 in 1978 is about equal to $660,000 in 2010). Again, a result of rich people having more money than ever before to throw around. At least this kind of competition is less destructive than other things they might be doing with that cash.

    • Michael O'Hare says

      Good point. These are all transfers, no more destructive than a bunch of rich people passing around money at a poker game or on the golf course. No real economic resources are consumed when JJ Gotrocks extracts a bunch of money from S McDuck, unless McDuck is a much wiser investor (creates more wealth) than JJG. The damage is caused to something else, namely our cultural patrimony of art and appropriate engagement with it.

      What mystifies me a little is why the buyer of this object (and the second and third highest bidders, if known) want to publicly identify themselves as parvenus who know nothing about art and are stupid and insecure enough to be gulled by selling them evanescent social status that anyone with money can buy. but go figure…

      • Keith Humphreys says

        Michael wrote “What mystifies me a little is why the buyer of this object (and the second and third highest bidders, if known) want to publicly identify themselves as parvenus who know nothing about art and are stupid and insecure enough to be gulled by selling them evanescent social status that anyone with money can buy. but go figure”

        If you assume these people sit around worrying what college professors and art critics think of them, it is indeed inexplicable. But if you assume they care that the press and other rich people know how rich they are, their behaviour is perfectly understandable.

    • Betsy says

      I agree, it’s just the bidding-up function at work here. Two or three people with more money than one knows what to do with, literally, want the same thing … and haven’t anything better to spend the money on.

      It’s not “worth” that kind of money in any sense other than that someone with that kind of money will trade the pile for it.

      Which does demonstrate that money isn’t fungible when it’s in different hands. To be fungible, it has to be capable of being spent equivalently. Here, there are a few outliers that would spend it so; but not a real market in the normal sense.

  5. Bloix says

    Your comment about the existence of good reproductions is apt for this work, which reproduces very well – the original does not provide anything more in the way of an aesthetic experience.

    This is even more true of the works of Andy Warhol. Art critics will tell you that part of the experience of many Warhols is that the hand of the artist in its creation is imperceptible. Yet an “authentic” Warhol of this sort can be worth tens of millions of dollars, while another work that is literally indistinguishable is worth nothing.

    • Matt says

      Or another work that is literally indistinguishable can be worth millions. Look at the work of Sherrie Levine, an appropriation artist. Her entire body of work is based on making exacting duplicates of photographs, or “re-photography” as she calls it. Since this is the declared medium, collectors will pay tons of money for exact duplicates of Walker Evans photos, made by her, titled “After Walker Evans.”

  6. Dan Staley says

    I see this along the line of the superyachts and supercars and superhouses and Dubai architecture. The rich are getting richer and letting us know about it.

    .02

  7. BM says

    An entrepreneur friend of mine was the sort of person who interacted with, and benefited from, venture capitalists. He commented that, at some level, the thing the ultrarich really spend money on is “something to talk about”. You go to the golf course with your venture-capital buddies; one of them says “I’m excited about this private-spaceflight startup”, another says “I’m excited about my alma mater’s Hong Kong campus”, and you say “I met these ex-Nokia engineers who are going to upend the RFID industry”.

    I wonder if there’s a distinction about what *different sorts of rich people* actually find interesting. Are they interested in status symbols, or in concrete creation of value, or in intellectual stimulation? This is entirely my imagination, by I find it easy to picture why Henry Ford or Andrew Carnegie, by the nature of how they earned their money, found interest and conversation in concrete-value-creating things—schools, businesses, public institutions. My mental picture of an i-banker or hedge-fund-trader does NOT include intellectual curiosity, hard work, or value creation—rather, I tend to view the whole business as a collection of status-seeking frat boys shaking hands with other frat boys, while finding greater and greater fools to sell meaningless tokens to. They wouldn’t be *interested* in spending $120M on some boring factory, or hotel, or school—those don’t sound exciting at all—but a $120M status token? With an arbitrary history of monetary appreciation? That’s what catches your eye.

    (Sorry, my biases are on display again … )

  8. dave schutz says

    One of my fave rich Texan stories is about a guy who got took by a forger, bought a number of very expensive fraud paintings. As did a bunch of his Texas friends. The guy was unmasked, his friends threw away their paintings. He kept them on his wall. Asked ??? he said, “I bought them because I thought they were beautiful. They are still beautiful”. I like that guy.

  9. says

    Old Master drawings are exhibited in light so dim you can hardly see a thing, because they are considered to be easily damaged by bright light. Does the same hold for pastels? If so, that puts a low upper bound on the number of people who can look at them under good conditions.

  10. R Johnston says

    If there’s one thing made clear by stories like this one it’s that a top marginal tax rate in the 70%-90% range would have absolutely no negative effects unless you consider people whining about taxes to be a negative effect.

  11. curious says

    Can it really be said that “The economic function of this object is to create value inside the head of people looking at it”? Maybe there is no economic function to art – or maybe the real problem is that money is so “cheap” for the .01% that it creates no effective bar to spending it frivolously and we should really be thinking about the economic function of money when its usefulness as an objective store of value has been so completely distorted that it means one thing to 99.99% of its holders and something very different to the .01% who control such vast quantities of it.

  12. BM says

    With numbers as big as $120M, my macroeconomic innumeracy kicks in. I need a real-world comparison point—let’s find one in the arts. In round numbers, it costs about $100,000/y (teacher salary, benefits, supplies, overhead) to run one studio-art classroom, so a $2M endowment would support one such classroom in perpetuity. Los Angeles Unified School District includes about 60 high schools. Quite neatly, $120M is exactly what you’d need to install an new art class, in perpetuity, in every public high school in Los Angeles.

    (I admit that “philanthropy idea A is clearly better than your private indulgence B” is an easy shot.)

  13. Bird says

    Expensive art serves to avoid some countries’ inheritance taxes. It has no other purpose.