Art zealots' belief in high prices is nothing but blind faith
With no way to judge whether art is overvalued or undervalued, it cannot be regarded as an investment, making it purely a speculation
"Masterpieces will always reach record prices."
SCMP, November 26
I was once religious and I have a pretty good understanding of how religions work. It's all about keeping faith and scorning fact. Whatever you do, make sure to busy yourself elsewhere when someone asks, "How do you know?"
It also helps to have the religious quartet at hand - sacred priest, sacred temple, sacred mumble and sacred book. These do wonders for supporting faith and suppressing fact.
The art world doesn't have a sacred book, of course, but it does have its priests - auctioneers in just the right garb of tie and jacket with just the right confident academic manner (Steven Murphy fits the bill), accompanied at auction by aproned acolytes scurrying about to perform the mysteries.
It also has its sacred temple and altar (auction room and display easel) and it certainly has its sacred mumble. Years of careful study are required to learn how to talk art, more yet to learn how to sell art.
Most of all, the art world distinguishes itself as a religion by practised evasion of the critical question. Just how do you know, Mr Murphy, that masterpieces will always reach record prices?
The fact is, of course, that he does not and cannot know. It is a matter of faith alone, just as in any religion. And it is this fact that disqualifies art as investment and makes it purely a speculation.
When you buy an investment property you get a stream of rental income from it and you can use this to set the value of the property. If, for instance, you think a proper return on investment is 4 per cent, you value the property at 25 times the net annual rental income.
You may accept a lower return on the reasoning that building values generally rise with inflation, or demand a higher one for the risk that town councils find it easy to pillage landlords. These figures will also go up and down over time as the general yield structure of your economy changes.
In all this, however, yield and capital value are set on the same benchmark of money, and you value the one in terms of the other. The difficulty with art is that its yield comes in thrill of appreciation, and the art world isn't happy to accept a capital value in the same coin. Try bidding 10,000 expressions of joy for a Monet and see how far you get. The art world wants money.
But the sad fact is that in money terms all you get from art is cost. You must pay for insurance and storage. You could perhaps get a money yield if you charged the public to see your Monet, but on any reasonable ticket price and yield you couldn't value a Monet this way at even a tenth of the cost it would fetch at an art auction.
This doesn't mean Monets are overvalued. There is no such thing as a fair value for a Monet except perhaps in feelings of wonder. In money terms any Monet is as overvalued or undervalued at one dollar as it is at a billion dollars. In money terms a Monet does not have value. It has only price and this price is established only by the whim of the person who bids it.
Art prices are admittedly holding up quite well at present. The newly rich like to adorn themselves with art. Money yields have also been so low recently that people increasingly mistrust the capital value of financial assets. This does tend to prop up the art market.
But in the end it's all based on blind faith alone. Tomorrow prices could crash and never come back to present levels.
I have the answer, however. Go visit the Musee d'Orsay on the banks of the Seine in Paris. It has some lovely Monets. You'll also find some in that home of stolen Asian artefacts, the Metropolitan Museum of Art in New York. I promise you thrills, joy and wonder.