Art is often valuable precisely because it isn’t a sensible way to make money. And perhaps as a result, it has become even more valuable of late. Benjamin Mandel, an economist at the Federal Reserve Bank of New York, has been studying the art market because, he says, “it’s a great way to study asset price valuations.” Mandel read reports suggesting that the market was growing at an unsustainable clip. For one thing, prices have gone up far faster than global G.D.P.
But then Mandel realized that we had been looking at the market incorrectly. Fine art, he said, is not really part of the overall global economy. Instead, it’s part of the economy of a small subset of the super-superrich, whom some economists call Ultra High Net Worth Individuals, or U.H.N.W.I.’s. And their economy, unlike ours, is booming. In that alternate world, fine art as a percentage of the economy has stayed stable over the last decade, in part because a flood of new U.H.N.W.I.’s in China, India and other developing nations has entered the art-buying market with great enthusiasm. In 2003, the sales at Christie’s Hong Kong totaled $98 million. Last year, they were $836 million.
The art market, in other words, is a proxy for the fate of the superrich themselves. Investors who believe that incomes and wealth will return to a more equitable state should ignore art and put their money into investments that grow alongside the overall economy, like telecoms and steel. For those who believe that the very, very rich will continue to grow at a pace that outstrips the rest of us, it seems like there’s no better investment than art.
In other words, the art market has grown precisely because of the rise in inequality. And, for the super rich, art turns out to be a very good form of—to coin a term—conspicuous investment.
*The chart above is just silly, since—given changing fads and fashions, artists’ whose work is in and out, not to mention the pieces that are bought and then taken off the market (placed in museums or private collections)—there simply can’t be any measure of the value of “investing in art” over such a long period of time.