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Is there any link between top art prices and classic economics?
Have the top art prices anything to do with classic economics? According to market expert and author of ‘Art of the Deal’, Noah Horowitz, your investment in art is as good as your holdings in bonds, albeit with higher risk. But, that’s not so bad, emphasizes a major New York collector, especially if you’ve nowhere else to park your money. And then bonds aren’t that great to look at! Isn’t so?

At this critical and challenging point of time, when only the 1 percent has spare cash to burn, investing in art is more about the cultural value of money, and of art than about finance; about underlining the intrinsic Social Meaning of Money. So the dollars spent at extravagant Art Basel art fair in Miami are more of ‘cultural dollars’, explains the great Princeton sociologist, Viviana Zelizer. This underlying perception makes them obey their own strange rules. Otherwise why would an ambitious customer spend whopping $575,000 for Ai Weiwei’s perplexing pile of battered stools converted into a nest? Why would Ellsworth Kelly’s blue lozenge on a white rectangle fetch $1.5 million? Is a glass cabinet carrying surgical instruments created by Damien Hirst really worth $2.5 million?

In spite of the big celebrity names associated with these objects - and whatever their perceived artistic worth - any curious observer would still wonder: Stools, for good half a million dollars? And three times that for a ubiquitous plain paint on canvas? So ‘why is art so damned expensive?’ This is the question posed in a thought provoking essay recently published in The Newsweek courtesy The Daily Beast. “There’s a pile of simple, and basically unsatisfying, explanations, notes the columnist Blake Gopnik, who discussed the topic with several renowned market players and analysts to dig out the answers. He has worked as chief art critic with The Washington Post before serving as an arts editor-critic in Canada. He has done a doctorate in art history from Oxford University, and has extensively researched and written on topics related to both culture and aesthetic.

Despite the flatlined economic conditions, the international art market has been literally roaring. Total worldwide sales touched a record of $5.8 billion in the first half of 2011, up almost 34 percent from the corresponding period in the previous year, according to Artprice.com. The online research company mentions that 663 works soared past the significant million-euro mark during that time period, 200 more than in the first half of 2008 that held the earlier record. Have the top art prices anything to do with classic economics? If I can’t sell something, I just double the price.” That’s what Ernst Beyeler, the great Swiss dealer who helped found Art Basel, reportedly said.

When Gopnic quizzed the Phillips de Pury auction house chairman, Simon de Pury, as ‘why’s art so damned expensive?’ he emphasized that a bigger picture was always worth more than a smaller one. He pointed out you would pay a hefty premium for a work once possessed by someone famous, apart from that something shown in a museum was worth extra (premium). “But such explanations only tell us why one object might sell for more than another. They don’t tell us why so many buyers in Miami spend more on a picture than the rest of us spend on a house,” the essayist notes. Sociologist Mitch Abolafia, who has studied Wall Street financiers’ methods, states sometimes money speaks for itself. As a trader told her, with glee in his eyes, ‘Well, you can’t see it, but there’s money everywhere in this room.’ It was probably a generalized excitement about money that she could also feel.

And that’s exactly the excitement we all draw from expensive art. One ardent collector, who believes that art should be purchased for art’s sake, acknowledges happily basking in the ‘glow of prosperity’ his purchases exude once their value has gone up. “We don’t really consider art an investment. In fact, we get a psychic reward,” reveals Eli Broad, a renowned collector based in Los Angeles. (He bought some early Cindy Sherman photos for a modest $150,000 at the Basel.) In a way, aesthetics forms the solid bedrock the art market. But, for lack of any other reliable yardstick, they tend to get tallied in dollars. A major dealer in New York once told Velthuis, the respected Dutch sociologist, art collectors ‘permanently have to explain to themselves as why they spend so much money on it, sometimes up to 40 percent of their net worth.’

It can be argued that most collectors spend their surplus millions on art because they have a genuine belief in its aesthetic value. And the easiest way to gauge the aesthetic ‘sense’ of an art purchase is to check out the ‘cents’ the thing is selling for. When you’re looking for great art, you may spot it simply by its price tag. Of course, top collectors aren’t simply shoppers like anyone else. If they spend right, they can buy the status of cultural patron. No one looks up to you for buying a fleet of Bentleys, but do possess a flock of Richard Serras, and you well become a supporter of culture, Gopnic concludes.