Keynes and Picasso: Stimulative Conspicuous Consumption?
by Bruce Webb
Digby points us to the following NYT piece: At $106.5 Million, a Picasso Sets an Auction Record with what is in one sense an understandable bitter comment “Hey, dead artists need work too.” And as a comment on the odd priorities of our plutocracy a reasonable moral judgement, but as an economic evaluation? Maybe not. And perhaps some of the real economists can fill me in here.
Per the story the last time this work changed hands it was for $19,800. Which should mean that someone is exposed to capital gains on pretty much the full amount of the sales price. Even at 15% that is a reasonable chunk of change. Plus the seller has to put the net dollars SOMEWHERE, even if that is just buying more fine art. Now nothing guarantees that the proceeds will get spent/invested in the U.S., but unless the seller spends it all on tons of Bolivian blow it all gets injected somewhere in the world economy. Meanwhile the buyer had to free up capital from somewhere in order to pay for the painting, and while it is possible this was done by selling assets for a loss, or in the course of a tax-free exchange, chances are good that this ended up with another taxable event and/or unlocked previously unproductive capital. Plus the buyer had to come up with a substantial commission, another taxable event (to the dealer) and one likely to inject some spending of its own. Plus someone is going to receive a good sized insurance premium payment, and who knows the proximate result might be some blue collar jobs going to armed guards.
Now not every instance of conspicuous consumption has benign effects, huge money spent on diamonds, or ivory, or furs from endangered species means dollars ending up in the hands of organized crime or to the extent that there is a difference in the hands of kleptocratic dictators, but the transfer of existing pieces of fine art is on balance pretty benign (as opposed to true antiquities).
Obviously circumstances alter cases, there are a bazillion possible variables that might make this deal actually economically pernicious, but on balance aren’t the odds much better than even that this injection of $120 million (including commission and costs) into the economy has a net Keynesian effect? I am not saying that the path to economic nirvana runs along the road of the worlds top 400 billionaires deciding to spend $150,000,000 each on fine art, or collectible stamps or coin, particularly if they are just selling things back and forth within the same pool, but at a minimum some dollars are shaken free in the form of tax, commissions or wages at each transaction. And it is not like they are crowding most of us out of that particular market, I will never be bidding on a Picasso anything.
There are undoubtedly taxable events produced by this sale. But, the question is what would have happened if the same amount of money had been spent in a different way? And it’s an unanswerable question. NancyO
Bruce:
Nancy brings up the same issue I have been discussing with George in Rebecca’s thread. It appears we are buying more Picassos and speculative Wall Street instruments rather than investing in activities utilizing more Labor and resulting in more consumption and taxes. I am nosey also and wondering what the answer is. Change the pardigm.
How many people are on the street in part because of the rents which paid for the [things like] Picasso?
Building Mc Mansions and an economy depending on inflating [bubblicious] residential real estate was a concentration economic activity and diversion of capital which should have been better spent. Too many eggs in a weak basket.
The ability of the plutocrats to out price things such as Picasso’s or Mc Mansions is a reason that wealth should not be concentrated and that taxes should not encourage builiding Mc Mansions, or rents to buy PIcassos.
Nor should the fed encourage things like Mc mansions.
Mc Mansion bubble is approximately the inflated Picasso headline, neither appeal to allowing the Plutocrats to grow in their share of control of the economy.
As Mr Potter told George Bailey “you think they are people…….” why let the rabble live in anything but my slums paying me rent?
Locking up capital in a CDO or MBS seems different than exchanging $106 mil for what is objectively $100 or so of canvas, stretcher and pigment even in today’s dollars. In the end gambling in a casino is just an exercise in seignorage, churning money so that the house can take their slice, whereas buying a Picasso unleashes the full amount of the purchase into the economy PLUS the commission where investing in derivatives only unleashes the commission plus whatever magical powers live in ‘Liquidity’ as if reducing friction is the entirety of delivering the freight.
It is not zero sum. The seller is still free to deploy the money in a more economically beneficial/equitable way. Or not. But where is the harm in this transaction per se? Timing?
Ilsm the flip side of that is that we tricked the rentier into exchanging $106 mil of excess rents for a piece of canvas with some pigment smeared on it. It takes a pretty extreme application of the Labor Theory of Value even in regards to Picasso’s genius to argue that the rentier got a fair exchange here.
You’re not the first one to suggest jump starting the economy thru the auctioning of art. I was reading Macroman in London, Keynes’ homeland, back when China was offering loans to Greece during the G part of the PIIGS saga. Macroman, still smarting from the British tripling of government debt after their bank bailout, suggested that if the Chinese were interested in things Greek, that Britain should sell them the British Museum.
But I don’t think a roomful of bankers at Southby’s bidding up Picassos is quite what Keynes had in mind.
but unless the seller spends it all on tons of Bolivian blow it all gets injected somewhere in the world economy.
Even if the seller spends it all on Bolivan blow, it still gets injected into the world economy. Dealers have to pay their suppliers, the suppliers have to pay the peasants to haul the stuff across borders and the manufacturers in Bolivia and Colombia. The manufacturers have to pay the poor farmers who grow this stuff. So, even if the guy buys $100 million of the finest white powder Bolivia can make, the money still makes it out into the “real” economy.
Yeah I get that but Pablo Escabar establishing his own private zoo complete with Hippos and billionaires with gold plated anything don’t re-inject money in the same avenues. $1.3 million of powdered rhino horn in a $900,000 receptacle made of African ivory on a rare wood table on a Siberian Tiger rug doesn’t really have the same Keynesian effect as some guy buying Louis Quattorze furniture at Sotheby’s. In the former case velocity is critically controlled by friction.
Except for the resources consumed, the sale of the Picasso is irrelevant to the rest of the economy.
Money is something that is mostly useless except as a medium of exchange, a store of value or a measure of account. A Picasso satisfies these criteria, and so is a form of money. It is not something having intrinsic value, such as a barrel of oil. As a result of the auction and sale, forms of money have merely been rearranged.
So were tulip bulbs money, at one time. And overpriced houses. That is they filled the functions of money, though they were not as liquid. But the relative value of these different forms of money changes with fashion and circumstance. So when these ‘folk’ forms of money lose their value, when their bubbles break, there is deflation. Tulips can no longer be exchanged for (significant quantities of) other goods and services. Houses lose their value, and as they are forclosed, the money supply contracts. And of course the ‘official tender’ has been rearranged, to the ruin of many, and the enrichment of others.
To the point of the article, the sale of the Picasso is mostly irrelevant to stimulation of the real economy. It is in principle inflationary, (there are now two stores of (representational) value each of which can be exchanged for real goods and services, where as before, as per story, there was basically one.) but neither painting nor money need go to act as demand on the actual, substantive economy. But both can be hoarded, saved, kept in the vault, as it were. Where before the buyer might otherwise have spent the money in the real economy, this money may be taken out of the economy by the seller, and then the net effect on the economy would be deflationary. Or the buyer might have saved, the seller spent, and the opposite could be true, the net effect then might be inflationary. But the actual sale of the Picasso is irrelevant to which of these hypothetical scenarios might be the case. The same with money that is ‘shaken out,’ whether it is saved or spent. And it also depends on what this money is spent on.
By the broken glass fallacy, the activity involved in the auction and sale is not stimulatory, but depressive, since nothing is actually produced, but resources are consumed.
Don’t buy it. “but neither painting nor money need go” Perhaps not but quite apart from the transactional costs (commission) the question is whether the money to fund the acquisition was really in an investment contributing to productivity and whether the seller is likely to lock up the proceeds in the same static way. But I still fail to see the problem with stasis for stasis exchange while there is all kind of upside for dynamic changes in the form of new velocity of money.
Now certainly it is true that the buyer COULD have spent the money in the “real economy”, on the evidence he or she had not or else they wouldn’t have had it in the vault to spend at the auction.
Call me naive but the curse of modern economics often seems to rest in the preliminary assumption of “all things being equal” that allows them to reduce everything to the x and y axis. Because as they say ‘everything is simple if you ignore the complexities’. Economists like to imagine themselves as scientists without showing any awareness that physicists are still grappling with the Three Body Problem and trying to exactly reconcile the math and the measurement of the ground state energy of the helium atom (whatever that means). Yet from the outside much of Econ seems to reduce to “Assume Homo Oeconomicus, add fairy dust, then plot the results in two dimensions”
All other things being equal, all other things are never equal. Just ain’t. It’s cheating, you know, to say, Well–No, No, ignore the tiger behind the lady! He’s there, but he doesn’t matter because we’re talking about the what the lady will spend her money on at the green grocer’s! Umm, maybe nothing if the tiger is hungry. What’s lacking in economics, seems to me, isn’t mathematics, but observation of reality. It’s like saying that all we perceive is the shadows on the wall of the cave cast by the ideal objects in some other dimension. Well, said Aristotle, prove it. I’m with Aristotle. NancyO
Bruce
thanks for an interesting post. i think i agree with Greg, though i am not sure i disagree with you. Money that is “hoarded” under the bed, or invested in stocks that appreciate, or in art, or buildings that appreciate.. looks to me like a way of taking “money” out of the economy and confining inflation. That may be a useful function…. until the inevitible crash and some folks who thought they had money “saved” find out that they only had numbers on paper… unless of course they manage to sell their asset for something real before the crash.
On the other hand, I think it does matter what the “money” is spent for. I think “art” might qualify as a real good, to the extent it is not in turn being used to buy things that use resources that could have been used to alleviate real hardship,
on the other other hand, i am not so sure it is necessary that society provide a standard of living to “poor” people that is much above the level that a decent peasant society would provide for itself. That is decent food, shelter, leisure, and culture. No need to divert resources from that millionaire so the poor can buy twice as much at Walmart.
I would say, except that its fun, that it is dangerous to look at the eonomy, and at money, as something we can manipulate by deciding that a hundred million for a Picasso is money that “should have” been spent on shoes for the poor. As long as the poor have shoes. If they have not, there are better ways to provide them than to just take the money, directly, from the rich.
not that anyone will understand this, least of all the rich, who can’t imagine using government, say, as a tool for seeing that the poor have a decent life; or the poor who can’t imagine either that they can have a decent life, or that there is any way to get it except by taking from the rich.
not being a systematic thinker
it occurs to me that i could easily support a luxury tax. so that some items agreed by the legislature to be luxuries, get taxed a pretty stiff amount at the time of their sale. this would provide money for running the state and buying shoes for the poor, without exactly being a robbery of the rich.
someone would remind me that when the government tried to put a luxury tax on yachts the rich stopped buying them and skilled workers were thrown out of work. but in that case “the rich” were operating as a “union” boycotting a product in order to break the luxury tax. without that political act, i don’t think the average yacht buyer would know or care whether a yacht cost a million dollars or a million and a half. it’s the idea of the “tax” that drove them crazy, not the cost.
Greg
i’m not sure why the Picasso would have less “real” value than a barrel of oil. You are going to “enjoy” the Picasso. what are you going to do with the barrel of oil?
(use it to drive to a museum to look at a Picasso?)
“it occurs to me that i could easily support a luxury tax. so that some items agreed by the legislature to be luxuries, get taxed a pretty stiff amount at the time of their sale. this would provide money for running the state and buying shoes for the poor, without exactly being a robbery of the rich.”
No it doesn’t…all it does is shift more money outside the United States, and help build a black economy.
Just one small correction. Capital gains on “collectibles” held longer than one year are taxed at 28%, not 15%.
Just one small correction. Capital gains on “collectibles” held longer than one year are taxed at 28%, not 15%.
Just one small correction. Capital gains on “collectibles” held longer than one year are taxed at 28%, not 15%.
I went to a Picasso exhibit and I thought the guy had talent, for scribbler with odd color selection.
I went to a Picasso exhibit and I thought the guy had talent, for scribbler with odd color selection.
I would not however exchange a portrait of McKinley for any Picasso.
sharky
we could fix that. with a tariff. it is of course a little hard to collect taxes from people who are in a position to game the system or play one government off against another, but the point remains that we need government. governing takes money. we need to collect taxes. rich people have more money than poor people. once you turn to taxing poor people and not rich people, you end up with the ancien regime. and “apres moi le deluge.”
Why is a private party buying from a private party a “Keynesian” event? Doesn’t classical economics recognize the impact of exchange on economic activity? Keynes thought that monetary policy is the tool of preference for controlling swings in economic activity in cases other than when interest rates are at the zero bound – a liquidity trap. Why is this event Keynesian, rather than anything else?
Setting nomenclature aside, what are we really after? Is the question whether buying used stuff creates the same lift to the economy as buying new stuff? The discussion here has identified one central issue – what was the buyer doing with the money prior to the purchase, and what will the seller do with it after the sale? We don’t know the answer to either part of that question. so this point remains unanswerable. One could call the two parties to a specific exchange and ask, but that would not provide a general answer. The other central issue is whether new is the same as used. Simple answer is “no”. Just think of new home sales vs existing home sales. One involves far more activity than the other.
kharris
fair enough. but a used home sale is roughly the same as a new home sale to the buyer. and at an important level what is important is that someone gets a roof over their head. we could pass a law and tear down all old houses and insist that only new houses be sold. that would be a helluva boost to “the economy” the way i think we are looking at it but a real loss to the wealth of the people.
unless you have the idea… as i think we have… that the purpose of human life is to generate “income.”
as for what the buyer was doing.. or going to do with the money… yes, that is the question. he could, i suppose, have donated it to charity. or bought really nice furniture from his local, living, craftsmen and that would have had a different (better?) effect on the economy, but we don’t yet know what the seller is going to do with the money.
in the meanwhile that Picasso was “gaining value” just sitting in a vault, and for some reason that strikes me as not exactly what we ought to mean by growth in the economy. or even non-growth human use of human resources.
I’m not sure what your point is. For the purposes of the question Bruce asked, the example of new vs used homes works as well as it needs to. I chose it because the point about which adds more to the economy is a familiar one, often mentioned in the press when discussing housing data.
I’m not aware of anyone discussing tearing down a Picasso, so I don’t know how the notion of tearing down houses is relevant to the question Bruce asked.
Things that fill some of the functions of money, but not all, are not money. By definition. Things that are held as a store of value are “wealth”. Money and paintings and McMansions are all held as stores of value, so all are wealth. Money is a unit of account. We put little stickers on things that show how much money will be accepted in exchange for them. We don’t, as a standard practice, demoninate groceries in fractions of a Picasso, so a Picasso isn’t money.
But, but, but…when we discussion matters that are too complex to understand all at once, we HOLD other things equal, in order to understand the effect of one or a few factors. To pretend that we can understand complex issues without admitting the need to hold other things equal is cheating. The problem with “all else equal” is similar to the problem of “assuming all producers are price takers”. Some people are too lazy to stop assuming that an keep trying to understand. Many are, apparently, since we’ve had a lot of public economists insist on treating the Econ 101 assumptions as if they are true. But the fact is, we don’t know how to analyze complex issues except by taking them apart, looking at individual elements, and then putting them back together, a little at a time, to discover interactions.
Good models are abstractions from reality. Good models are based on observation, but are still abstractions from reality. If they aren’t abstractions, they’d be useless.
“Money that is “hoarded” under the bed, or invested in stocks that appreciate, or in art, or buildings that appreciate.”
But there are differences there. Money physically hoarded under the bed represents a free loan to the Treasury. Money invested in stocks might or might not be on margin, and if so require locking up enough capital in liquid assets to meet margin calls. But even if not might mean just playing casino where buying and selling does no more than generate seignorage for the brokers (that is why they call it ‘playing’ the market), there being a big difference investing a few hundred grand in your daughters start-up taking stock in exchange and buying shares in an existing Fortune 400 because you think its medium term price gains will exceed the costs of your commission. And money spent on buildings, whether residential or commercial have fairly direct bleed over effects in that they tend to crowd out someone, because if you want to run a brick and stone business you are bound to that degree by the cost of brick and stone storefronts and offices.. But as a practical matter I just don’t see that same crowding out effect from purchase and sale of high end art-work specifically, if nothing else because the supply of starving artists is historically infinite.
Thanks for the attempted correction Bill! And in return I deleted your duplicated posts. But I think you might have this one backwards, though I am open to further correction. Per this site it is long term gains that are taxed at the lower rate:
http://taxes.about.com/od/capitalgains/a/CapitalGainsTax_4.htm
And this one too:
http://www.smartmoney.com/personal-finance/taxes/tallying-your-capital-gains-and-losses-9868/
“The first step is to separate your short-term capital gains and losses from your long-term gains and losses. That’s because long-term gains are taxed at those lower capital gains rates you hear so much about, while short-term gains are taxed at your regular rate (which can run as high as 35%).”
Am I reading this wrong?
Call it Vulgar Keynesianism if you like. Keynes is often cited, fairly or not, as saying that it doesn’t matter whether you are paying one set of workers to dig holes and another set to fill them, but that the key is to get money moving through the economy, which in my terms means unlocking capital. If I trade my Picasso for your two Degas’s in a private transaction obviously nothing it unlocked. But if I was Picasso’s groundskeeper and the Maestro gifted me with some drawings and my grandshildren auction off those scraps of paper for a few million Euro’s suddenly some locked up capital is converted to money moving through the economy and so contributing to its velocity. That is the question boils down to rates and not just moving demand curves up and down the x-y axis.
In the specific case cited someone unlocked $120 million or so in assets in exchange for canvas valued previously at $20,000 (although perhaps carried for insurance purposes at a value far in excess of purchase value. Now this excess $119,980,000 might have been deployed in more economically efficient ways, but the fact that it was available suggests its owner was not in fact deploying it in an optimal way. And in any event it is hard to see the actual probable downside.
“And it is not like they are crowding most of us out of that particular market, I will never be bidding on a Picasso.” But your local art museum, which is probably a non-profit institution with a professed mission to make great art accessible to the public, has been priced out. That is a loss to society, surely, although one that is admittedly hard to value.
And I spent a lot years in and around real estate. A lot of the actual impetus for new construction is the perception that existing housing is selling at appreciated rates, it is not as easy to separate the two as your formulation suggests. I mean building a whole new subdivision of multi-million dollar homes in downtown Detroit would generate more jobs than re-sale of estates in Grosse Pointe, but if the developer has misjudged the market for high end housing downtown, you have a lot of capital tied up for nothing even as the carpenters and plasterers have been paid off.
kharris
generally true, but i think Nancy knew that, and was talking about the folks for whom the assumptions of econ 101 are the universal and final truth.
meanwhile… and i tend to agree with you about analysis, except when you yell at me for the way i take things one at a time… in the real world there is often no time to “analyze” so we have to make instant sums of incomplete evidence and do the best we can.
of course the problem comes when the different points of view each insist they are the only possible point of view. but that wouldn’t apply to anyone here.
kharris
what with jskit and all i have lost track of the question bruce asked. but it was you who brought up new vs used houses. and i have grown used to the idea that you will never understand what my point is.
Money flows in direction opposite to the flow of goods and services. Or money can ‘churn,’ confined just in the financial sector, being exchanged for financial instruments and back again. Consider, for instance, the increase in quantity of money traded in recent years on the Forex. Or money can be held in stasis in a bank vault, or under a mattress. In these cases, that money’s contribution to velocity in the non-financial economy is zero.
I suppose the Picasso’s transaction contributes nominally to velocity, just as it contributes to GDP. But many things figure in the GDP that do not contribute to ‘real’ wealth. Much of the contributions of the financial sector to GDP, for instance, make society no better off, and so much velocity of money is to no real effect.
The sale of the Picasso does not in itself, contribute to the welfare of the rest of society.
coberly
I guess it’s the way I think of things, the essential economy, which proivides food, clothing, fuel and shelter, vs the non-essential economy, which provides us with Picassos and yachts, although the distinction is rather one like bald vs not bald. There’s lots in between. Perhaps “essential” would be a better word, oil is essential to our economy, while a Picasso is not, though even that is fraught with qualification.
Your local art museum is in a position to bid on a Picasso? as opposed to investing that money in local or regional art? Elite much?
Well I was reading it wrong. Sorry Bill I owe you a beer here.
There is a continuum. Some writers have used the word “moneyness” to indicate that some things are more like money than others. The point to saying that some things are more like money and some less is that money lies not along the continuum, but at one end.
If your point is that some things have intrinsic value, or more intrinsic value than other things, then the best way to make that point is to say just that, rather than make a false statement. Calling a Picasso a form of money is a false statement. It can be a store of wealth. It may, in your way of thinking, share a level of intrinsic value with money. Picassos are not a common index of value or medium of exchange. Picassos are not liquid. Picassos are not “money”.
Given a choice between saying things that aren’t true to make a point and finding a way to say something that is true to make the same point, one should find a way to say something that’s true.
Bruce,
My point is that we are looking at a particular transaction in isolation. There is a sort of celebrity fascination, I think, with $120 million sales of non-producting stuff. If somebody bought a rubbertree plantation for $120 millioni, it would not draw our attention.
Your use of “might” and “suggests” makes the point. We don’t know. The availability of finance makes it even more difficult to know anything about the prior or subsequent uses of funds employed in the transaction. If I hold a valuable asset, I can use it as collateral. If I have a large batch of assets, productive or not, I can borrow against them to make the purchase. As soon as we take finance into account, we are utterly lost as to whether the money used in the transaction was deployed in a productive manner prior to the transaction. In a financial system as large as today’s, $120 million can simply arise from nothing. There may have been nothing to “deploy” prior to the transaction.
greg
fact is i agree with you essentially. but think you have made such a good beginning, i’d like to see you go further and contemplate what really is essential in our economy. and kids dragging the strip on saturday night is no different from a rich man buying a picasso, though it uses more oil.
note “no different”.. each of them might think their activity is the whole point of essential.
gref
i would disagree. money should have ONLY accorded value, and that value is the value accorded to it by those who will take it in trade for something “real,” expecting to trade it in turn for something else “real.”
Try making your points more clearly.
Each of them might think their activity is the whole point of the economy.
There’s essential, and then there’s party favors, and I think the idea of an economy is to take care of the essentials most efficiently so there’s the most party favors, and time to party, and at least some for everybody. But then there isn’t a line between the two, and different people have different ideas of essential, and different ideas for party favors.
What is essential is energy, which everything reduces to, and the infrastructure to support its flow through an economy, at least enough to support the essential part of the economy. This includes support of the people who are essential. And of course, one of the essential forms of energy is food. (But in our economy, food is dependent on other forms of energy.)
But when you think about this, you realize the whole idea of essential in an economy is, um, self-referential? The more essential you demand, the less that is essential you have. It sort of falls apart if you analyze it too much. But it is a scale that is still useful, from essential to non-essential,even if the end points are unclear.
There is a continuum, but I don’t think there are clear end points. Now we have fiat currency as the end point. (Debt, the worst kind of money, having driven out all better forms, may be the end point.) Before it was silver certificates that were the end point, and pure fiat money was beyond the end. Before gold certificates there was only specie, and before that commodities.
But I take your point, and the more I think about it, the more I agree with you about Picassos. But I don’t think the line is as sharp as you would have it. As I have tried to point out, a wide variety of objects can serve as money. Indeed, consider our Picasso. The owner could issue shares in his Picasso, a hundred million say, denominated as “picassos,” which would have an exchange value with our fiat currency, the dollar, depending upon the dollar valuation of the Picasso. (Currently the exchange rate would be .939 picassos to the dollar.) These shares could be exchanged with dollars, and serve as money, say among the artistic crowd.
These “picassos” could serve all the functions of money. Of course, these shares are not the Picasso itself. Certificates would be the actual currency, rather as gold certificates represented the gold posessed by the US government. Certificates representing units of labor have been, and are being used, as the basis for some regional currencies. Cigarettes used to serve as money in prisons, and have served, along with other things such as bottles of liquor, as money during periods of runaway inflation. (Our “picassos” might also be desirable as an inflation hedge.)
I think the ‘best,’ most ‘efficient’ money is that which has only accorded value, and no intrinsic value of itself. I use quotes because these forms are also most easily subject to abuse by issuing authorities. Commodity monies complicate accounting, and historically most monies have been of this type, that is having or representing something of usually ‘equal’ ‘real’ value.
Of course, even pieces of paper which are merely ‘accorded’ value, fiat money, represent a demand on a nation’s real production and resources, in a sense are shares in that production and resources, and so, in a sense, are still ‘commodity’ money. The accord must have a relation to reality, a valuation that is created by the government, but defined by the market.
Local art? You are confusing the issue.
But yes, I would prefer that my local museum, on certain esthetic issues, be “elitist.” I want them to display the best art they can. Why exist otherwise?
As it is, my local museums have several Picassos. My understanding is that these were acquired with the help of well-off museum patrons in the form of gifts or bequests. But if Picasso gets too expensive, it becomes more difficult to form these partnerships. Giving a museum $1,000,000 Picasso is much easier than giving it at $100,000,000 Picasso.
greg
i don’t think we are close to the point of having to pick and choose what is essential essentials. meanwhile whatever is traded is “fair” at least for the people doing the trade. you and i might agree that whatever created the “wealth” that is being traded for the Picasso is likely to have diverted resources from better uses, but i think there are better ways to re direct those resources than bitching about “wasting money on a painting” which seems to be the feeling of some commenters here.
harris
you suffer from a rigidity of mind that it is impossible for me to penetrate given the resources available to me. but i assure you that when i try to communicate to my dog i take all the responsibility for making my points clear enough for her to understand. difference between you and her is that she WANTS to understand.
bruce
i think Robert’s point might be that without the hundred million dollar price, his local art museum would not be crowded out of bidding on the Picasso. which is to say “elite” is the consequence of crowding out, not a moral fault of the local museum.
that said, i would agree, let the french and spanish show Picasso in their local museums. we got good stuff here, and we can see the Picasso’s in books.
I agree with most of your comments but I take issue with your history of money. Much evidence supports the idea that the first type of money, used broadly by the public actually was debt based like credit tally sticks. Money was simply an accounting of what was owed but that that was owed could actually be traded. If I was owed wheat and someone else was owed barley I could get the barley he was owed and he could get the wheat I was owed if we traded our debts/credits. Of course this type of money really did represent a form of barter economy which modern debt based money has lost touch with. Once the money thing becomes sought in and of itself it starts to change the economy. People who start simply saving money acquire great power at some point and with that power they start protecting their money at the expense of the real economy. The primary goal becomes preservation of buying power/fighting inflation, which is usually accomplished by a pool of unemployed people to keep labor prices low. Paying people good wages becomes the thing to be fought because higher wages lead to high inflation. I think this is an explanation of why we are where we are today. The powerful savers are fighting, via the bond markets any solution that involves higher wages and lower unemployment and are demanding austerity for others to avoid their own haircuts.
The Getty can crowd out the Met and the Met the SF MOMA and MOMA the Beaverton Art Musum, but arguing that top end multi million art purchases have a crowding out effect a priori is ridiculous.
We may rightfully hate some significant piece of history being priced out of a local museum that might best place it in context, but at some level therre is a disconnect between too collectible and historical artifacts. People who get upset because not everyone 10000 silver coins from a Spanish Galleon end up in a local museum undisplayed miss he point.
I still maintain that the Picasso purchase was more likely to unlock unproductive capital than not. It is not like some future Marie Antoinette buying a 120million Louis worth of bread, burning it in the public square and THEN telling the people of Paris “let them eat cake”.
To repeat in altered form there is a difference between panelling your private study in elephant ivory and covering the floors with Siberian Tiger rugs than buying some canvas, pigment and wood enough for a stretcher.