Relative Value in Art

Felix Salmon submits:

Call me old-fashioned, but I'm one of those people who gets very excited when I find a negative correlation between price and quality. The cheaper option is also the better option? Count me in!

There's a long tradition, however, of pundits of all stripes bemoaning such situations wherever they find them. Portfolio's economics blogger Zubin Jelveh has found a great example from art dealer Richard Feigen, wherein the great man bellyaches about how dreadfully unfair it is that Damien Hirst can sell for more than Titian, when Hirst is basically just "flashy materials, a pretentious title, and platoons of security... derivative, a businessman promoter."

Why the hate? One can see it too chez Jeff Bercovici today, where Portfolio's media blogger fulminates over the advance received for James Frey's latest novel:

Frey is a hack... If he were an "immensely talented writer," one of the 17 publishers who rejected Pieces when it was packaged as a fiction manuscript would have bought it... a book by a crummy, dishonest writer... of no cultural value...

In the arts, it seems, people are generally OK with the idea of a talented artist toiling with minimal remuneration in a garret somewhere. The art market in particular is predicated on the idea that an astute collector with a fine "eye" can discern talent and pick up great work at low prices, before that work is subsequently ratified by art-world consensus and becomes enormously valuable.

But the flipside of great cheap work – which is mediocre expensive work – is treated as some kind of egregrious violation of Natural Law, to be denounced with vehemence and volume until the rest of the world comes to its senses.

It doesn't make a lot of intuitive sense: if everybody else is wasting their money on crap, that just means they're not driving the good stuff up to unaffordable levels, which in turn means that the good stuff remains within reach. But human nature doesn't always work like that.

Consider two wine collectors of modest means who spend the 1970s building up two impressive cellars full of fine old vintages, each one collecting the wine he loves. The first, Alan, buys vintage port; the second, Barry, buys vintage Bordeaux. Fast-forward to today: the port has gone nowhere in value, while the Bordeaux has gone through the roof. Which collector is happier? Alan knows that every time he drinks a bottle he can replace it at similar cost, while Barry knows that drinking one of his bottles carries an enormous opportunity cost and that he'll never be able to afford to buy such a thing again. Yet Alan still resents Barry, while Barry thinks himself very clever and far-sighted.

The key is what finance types would refer to as relative value. Alan resents Barry because if he'd bought Bordeaux rather than port, he could sell that Bordeaux today and use the proceeds to buy enormous amounts of his beloved port. And Feigen resents Hirst because he's convinced that over the medium term he could make an absolute fortune if he was somehow capable of going short Hirst and long Titian. But of course you can't short an artist – and if you could, that would only serve to increase the upward pressure on that artist's prices.

Personally, I think that Feigen wrong in any event, especially when he rails against Warhol:

I knew Andy Warhol, and liked him, but a genius he was not. Notwithstanding that, a private sale of his Turquoise Marilyn at $80m followed the $72m Christie’s sale.

Feigen is very impressed by "Titian’s essential place in art history, even since his own long life-time, of his influence on generations of artists." But the fact is that Titian's influence on the artists of today is essentially zero, while Warhol probably has greater influence on the artists of today than any other artist, including Duchamp.

The art world, I think, has moved on from the age of venerating Old Masters, and endless museum galleries of brown paintings by long-dead Europeans are rapidly losing their attraction. Today's art lovers pay little heed to the connoisseurship of old, and prefer the vibrancy and immediacy of contemporary art. Naturally, many of the overpriced artists of today will be worth very little when the bubble bursts. But I suspect that the amount of money being spent on 20th Century art will remain, for the foreseeable future, orders of magnitude greater than that spent on any other period. Titian may yet overtake Hirst, but old art, in general, is not going to overtake the most exciting and accessible art of the post-war period.