Wednesday, April 2, 2008

Economics 1, moral outrage 0

Is there a "right" price for any good or service? Can the market mistakenly value something below or above that "right" price? That's the question raised in the March 31 issue of New York magazine in the tale of the fall of prominent art gallerist and artist Larry Salander. Most of the article details a web of business deals and alleged acts of fraud that left Salander bankrupt and in as much as $100 million in debt. But the catalyst for his downfall was Salander's belief that masterpieces of art wrongly trade at prices lower than those offered for pieces of contemporary art -- and that he could change that fact all by himself.

“Our society now values a Warhol for three times as much money as a great Rembrandt,” he thunders, referring to the latest auction reports. “That tells me that we’re fucked. It’s as if people would rather fuck than make love.”

He says the last sentence slowly, emphasizing each word.

“That’s the difference between the Warhol and the Rembrandt,” Salander continues. “Being with Rembrandt is like making love. And being with Warhol is like fucking.” ...

As a house for serious nineteenth- and twentieth-century art, the gallery had settled into a proven, commercially successful formula. But over the last decade, as the art market underwent a seismic shift, Salander noticed a particular gulf opening up between the markets for postwar and contemporary art, and most art created before Impressionism. New art suddenly started going for far more than older, established masterpieces. Many of the newly rich collectors preferred to spend their hedge-fund wealth on more recent, name-brand artists. A Jasper Johns was soon worth twice as much as the Metropolitan’s Duccio, the Madonna and Child purchased by the museum for as much as $45 million in 2004. An oversize sculpture of costume jewelry by the art star Jeff Koons was valued higher than a Tintoretto, an El Greco, or a clutch of Courbets.

To Salander, this development was a moral travesty. It was also a business opportunity. As he obsessed over these market dynamics, Salander eventually came to believe that the very survival of great art was at stake. By 2005, he had determined to be the first dealer to do something about it. He would risk his gallery’s established reputation as a nineteenth- and twentieth-century house by investing heavily in old-master and Renaissance art. He would make some money and, if his plan worked, save the contemporary market from itself.

Salander put his large fortune and reputation on the line to acquire classic works of art. His end game was to sell a (supposedly) newly identified Caravaggio, Apollo the Lute Player, for $100 million. The staggering price was set as a counter to the sum paid for a diamond-encrusted skull by contemporary artist Damien Hirst.

I have to admit to a certain sympathy with Salander. I share his preference for classic art -- particularly his personal taste for Canaletto -- over much modern art. Most of the work produced over the past century or so leaves me cold. I'd much prefer to wander through the Metropolitan Museum of Art than MOMA. But having personal preferences at odds with those of the majority of people just means that you can get what you like at a relatively reasonable price; it doesn't augur success for setting out with force of will and moral zeal on a crusade to readjust the relative prices of art in the market to reflect your own values.

Price isn't a moral matter; it's a reflection of what hundreds, or thousands, or millions of people are willing to pay for goods and services. We might wish that the public at large was willing to pay more for Rembrandt than Koons or for the labor of teachers than professional baseball players, but trying to force a number one way or another doesn't change the variables, such as supply and demand, that go into setting that number where it is. You might, over time, try to shift the culture and alter people's taste, but you can't arbitrarily decide that a Caravaggio must be worth as much as a Hirst.

By trying to replace the laws of economics with his moral outrage, Salander inevitable set himself up for padlocked doors, empty bank accounts and a host of lawsuits. Salander was doomed before he ever began accumulating his horde of masterpieces.

The story of Salander's downfall ends on an ironic note: contemporary artist Jeff Koons, of all people, is busily acquiring art by old masters. But Koons isn't trying to force prices up to some morally superior level; he's simply building his collection, probably anticipating naturally rising increases in monetary value in the future. By working with the market rather than trying to transform the market, Koons may help to gently nudge prices for classic works upward where Salander dashed himself against the rocks of economic laws.

Note: The Tuccille family's long-standing interest in classic works of art is documented here. Yes, my grandfather really did stash a fortune in stolen works of art behind a false wall in his basement. You just can't make that shit up.

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