Today’s New York Times carries an argument by an economist that Detroit’s art collection should be sold. Is this evidence to support the old saying that “an economist is someone who knows the price of everything and the value of nothing”?
It is kind of shocking to see how the author, Robert H. Frank, a professor at Cornell, calculates that it costs $1200/hour to have people looking at a $200 million Bruegel. But he does this by positing a world in which “interest rates return to normal levels — say, 6 percent”. In other words, a world in which Detroit might not have become insolvent because its pension assets would have been earning a return sufficient to pay off all of the commitments that Detroit’s politicians have made. The economics professor posits that the museum is open 2000 hours per year and that 5 people per hour would view the painting. that’s 100,000 people. http://www.dia.org/about/facts.aspx says that the museum received 600,000 visitors in the 2013 fiscal year. So that’s 1/6th of the visitors viewing this particular highlight of the collection. If we were to posit 2 percent interest rate and that half of the visitors view the painting, the foregone interest would instead be $4 million and the cost per viewer $13 (less than a ticket to see the next Avengers movie).
The art in this museum was donated to the city. If it is liquidated to pay for pension and other commitments this will presumably discourage future donors of property, since every state and local government in the U.S. is at risk of insolvency (promising to pay out unknown and unknowable amounts of future cash but without having a printing press for dollars).
Would anything change for the city via a $200 million cash infusion? We could look at Detroit’s past performance. Was the government capable of squandering comparable amounts historically with no benefit to citizens? We could look at Mark Zuckerberg’s donation of $100 million to the Newark schools. Did that result in better-educated students? Politicians can always give out cash to people who help get them elected/reelected. But it is tough for a politician to justify giving a painting from the city’s art museum to a beloved crony.
What do readers think? Should Detroit sell off the next generation’s chance to look at these famous paintings so that $18 billion in liabilities is reduced to $17 billion? Certainly it would spice up the museum if they had to go out and buy contemporary art and exhibit the old masters only by special loan.
There are only so many people and institutions who purchase multi-million dollar artworks. If Detroit tried to sell the collection over a short period of time, it would likely flood the market, and depress their value. Even if the collection is valued at > $500M now, if it’s all sold over the course of a year or two Detroit would likely collect much less than that.
J: http://dealbook.nytimes.com/2014/01/22/loebs-criticism-of-sothebys-has-some-valid-points/ says that the total worldwide art market was 43 billion euros ($60 billion) in 2013. So it does seem as though the collection could be sold over a 2-3 year period without moving the market too much (unless the DIA is heavily concentrated in one artist, which I don’t think that they are).
Detroit should obviously sell the art. It’s not like whoever buys it is going to set fire to it or put it through a shredder – a private owner who pays $200 million for a painting is undoubtedly going to take really good care of it and probably show it off in the future. So unless you think there’s something uniquely important about this art only being shown to “the next generation” *in Detroit*, nothing is being lost. If some guy in New York buys it, it’ll be seen by people in New York when he loans it to his favorite museum there; if some guy in London buys it it’ll be seen in London. Detroit needs the money far more than it needs the weirdly specific bragging rights that come from being able to say “we’ve got an original Bruegel hanging in one of our buildings!”
Sell the art. It’s a pretense they can’t afford. I would like a collection of Hudson River School art in my library. No can do. As Glen R. says above, the new owner is far more likely to provide proper care and feeding for such valuable art. Detroit can’t keep the street lights on. Not likely their curators, staff engineers (if they have any?), and budget are up to maintaining proper archival conditions (temperature, humidity, lighting, security). If the city ever gets its head above water, better to provide the next generation roundtrip bus fare to Chicago or the MET (Metropolitan Museum of Art, NYC). Or do what I do, buy prints.
Forget the money. Do it for the sake of the art. It needs to be evacuated from a city where civilization has collapsed and recreational arson is a common hobby. Even if the politicians just spend all the proceeds on hookers and cocaine, the world will be better off because the art is out of Detroit.
People (who have little to no direct experience of Detroit) lately read the news about Detroit and imagine that the problem there is that the government is bankrupt. Which is sort of like a man, who has recently flagrantly betrayed both the government and the Mafia, who is dying of cancer, who has a stroke, and is made so anxious by the confusion of the stroke that the anxiety gives him a heart attack, complaining about stubbing his toe on the automatic door on the way into the emergency room. He has indisputably injured himself, and if it’s on the side of his body that isn’t completely numb, it probably hurts some, but no sane person aware of the facts could possibly imagine that it’s even close to being on _the list_ of his meaningful problems. Likewise, the fact that the government of Detroit is out of money.
Lelnet: I wonder when we find a politician honest enough to say “I spent most of the money on hookers and cocaine… the rest I wasted.”
You guys are harsh! But I don’t think that you’ve answered the question in my original posting as to what practical good the money from selling the art would do. Yes Detroit needs $18 billion and I can see that $18 billion would help but I am not sure how $1 billion would help, given that the city has already obtained bankruptcy protection.
Separately, it looks as though while the city may be selling art it will be using taxpayer funds to help out a professional sports team owner build a new stadium: http://www.theguardian.com/world/2014/mar/29/detroit-bankrupt-red-wings-arena-divides-community (good quote: “The odds that Detroit will make back anywhere close to the amount of money it is spending are astronomically small,” said deMause. “It’s almost impossible to think of a worse way for them to spend the money.”)
Becoming wealthy by reselling donations is the new big thing. It’s not unlike the millions of dollars people are donating to kickstarter projects, to create startups that the founders then sell to Facebook for $2 billion. If people are willingly giving away their stuff to help CEO’s get rich & they see that as the only way to survive, who’s to stop them.
NYT has a problem of scope. Things that make sense economically for an individual or company don’t make sense at the level of a city or country. A big city’s lifeblood is it’s ability to attract new residents. Certainly jobs and low crime would help Detroit more and selling their cultural artifacts will only hurt it, especially among the group most likely to gentrify Detroit: artists. In the same way, spending money to ensure that a professional sports team moves to or stays in Detroit makes sense at the city or state level, while a low-income person buying season tickets to see that team wouldn’t.
Chip: The folks who have looked most carefully into stadium spending have concluded that it never makes sense for the general public, e.g., see Field of Schemes.
I would be interested in knowing the number of you above who have actually visited the DIA in recent memory. Are you even aware that some of the art cannot be removed, such as the Diego Rivera mural? Do you know that the suburbs passed a millage a few years ago to keep the museum solvent? The museum does not cost the city anything at all to run. Raiding the collection is basically destroying what little civilization the city has left.
I say: sell the paintings, exhibit some good reproductions. Get more Leonardo da Vinci and Richard Corben.
http://www.philosophersmail.com/190214-capitalism-sotheby.php
The money will surely disappear fast into the hole in the ground that is Detroit economy. But modernizing an art museum will be fun.
I’m with John Klein and Phil. Folks are harsh. It does not make sense economically or socially to sell. Detroit needs to become much smaller, geographically and financially, but selling off the collection which is still one of very few and very valuable of Detroit’s social treasures, that has very low costs for the city, as John points out, and little actual, current, financing cost as Phil points out, while suffering pretty high transaction costs, and plugging old pension liabilities, is not a smart move. Hoping that whoever buys the collection will be loaning to “NYC or London” is both wishful thinking and useless to Detroit – useless because Detroit should worry about the next generation of Detroit not, NYC, London, or for that matter Abu Dhabi or Shanghai; but wishful because these billionaires may instead hang the painting in their office in a Macau casino, or Vegas, or their mansion in Connecticut as likely as loan it for an extended period to the Met.
If they sell the art won’t that money just go to pay off creditors? If they keep the art and proceed with bankruptcy won’t the debts be wiped clean, or at least reduced. Seems like they should at least hold onto the art until the courts are done with them. Then sell it if they need to pay down the remaining debt.
Personally I would be very pissed if I donated expensive art to a museum and they turned around and sold it to benefit the city. If they sell I can certainly see that effecting future donations.
Here’s one view of this same debate from the UK.
http://www.adamsmith.org/blog/tax-spending/art-museums-are-simply-too-expensive-sell-everything-and-close-them-down
‘Having costs higher than benefits is also known as destroying value, something which is properly known as “making us all poorer”.’
Hmm. I don’t know. Assessing benefits and costs is not always as straightforward as it might seem.
I’m a Michigan resident, living in the suburbs some 20 miles from Detroit proper. I have been following this semi closely.
If forced, I would self identify as a Libertarian, and in general I strongly support what Kevin Orr, the emergency manager is trying to do. It’s a total no win situation for him and he certainly has a lot of people crying foul.
I certainly do not believe that the art collection should be held sacrosanct.
My logic is as follows… while I’m not a fan of union protectionism, the constitution of the state of Michigan does explicitly declare the pensions of the city employees as being impossible to void or change after the fact.
The Federal bankrupcy judge decided that restriction didn’t apply, as the bankrupcy proceedings are in Federal court, not the State courts. Still, I have to believe the will of the people, so serious about protecting the pensions that it was written in to the State Constitution.
No such protections are written about the art collection, obviously.
While I don’t expect this line of logic to actually apply to law, and the bankrupcy proceedings, I do believe the intent is important and should be respected.
In response to Mr. Gebhardt, the vast majority of the art is actually not available for sale (I forget the exact percentage, but it was well over 50%). That art was donated, or is on loan, with restrictions that do not allow it to be sold. The only pieces that can be sold are those that the Museum itself actually owns.