high end art market

Economics Economics Questions
1

I was wondering what sort of economic effects the high end art market has on the economy in general. I was arguing with some sort of socialist types, and they were saying that rich people do not create wealth for others, they accumulate wealth. ‘look at some of those russian billionaires, all they buy is land and expensive art in order to protect their value, who does that help?’

I am not really sure how the market can respond if there is a huge increase in demand for something of fixed supply like the amount of Van Gogh paintings, other than just having the prices go up. More people becoming art brokers?

Also I was wondering if a group of rich people were more or less just trading expensive pieces of art, for millions of dollars amongst each other. Say 10 people, 9 pieces of art, and one briefcase of 5,000,000. And it just sort of goes in a circle. Would it be fair to say that this situation, as long as it continued, would raise the purchasing power of money of everyone else in the economy to a level higher than it would be if all the art didn’t exist?

2

buy is land and expensive art in order to protect their value, who does that help?’

the people they buy them from?

3

yes well I brought that up, but they said, “that is just rich people selling to other rich people”

so I said, well its certainly possible that the rich person who now has less land and more cash will look to build a factory with his new money, but even if they just only buy stuff from other rich people, this does not destroy wealth.

4

they are objecting to two ‘rich’ people trading stuff?

5

that is essentially what they saying, but why put words in their mouth:

6

Except we all know that the rich don’t re-invest their money into productive activities.

This is outrageous? who does he think owns the capital goods that are part of most productive activities ?

How does that stimulate growth that benefits society?

lots of reasons. for one, the possibility of enjoying ones wealth is a big inducement to create wealth, and to be productive.

If some rich twat buys a Titian or Picasso,

Are we to imagine that someone spends millions to buy a picasso, so that the person that receives the millions can go and spend millions on buying a picasso, and on and on? or do none of the people getting cash for selling their picassos buys thing that this fool you are talking to classes as ‘growth stimulating’

7

I tried to say that AT WORST and at looking at it from a very short term perspective, trading amongst rich people could be growth neutral. The argument that it actually destroys wealth is beyond ridiculous.

8

Its not like the high price of a van gough painting disturbs the capital structures the masses use… The very best you can do by outlawing high art prices is going back in time and forcing van gough to be a farmer. Not much utility…

9

Bill Gates and Warren Buffet don’t reinvest their money.

Only poor people buy stocks. Only poor people are venture capitalists. Only poor people dig for oil and open new Wal Marts and all other businesses. Only poor people hire each other nowadays. The rich don’t anymore, unlike when Marx was around complaining about it.

Not sure what he means by a fixed asset. But it sounds like it’s a piece of a business, as is a share. In other words, they are providing the money for businesses to grow, workers to get hired, consumer goods to be produced. Those hoarders!

And just let the land lie there. It makes those Russian millionaires so much wealthier paying property tax on a piece of desert. Oh, you mean they develop the land, and make it more useful to society? Yeah, that’s hoarding for you.

The other posters addressed this very well. Not to mention that it’s the rich man’s money, why are you obsessing about what he does with it?

Offshore in a bank that uses the money to invest in profitable [= consumer pleasing] businesses. They would gladly stick it in a bank in the US, if not for the govt taxing them to death.

Would that were so! Every dollar they take out of circulation and hoard makes the dollars in my wallet more valuable, as it increases their purchasing power, by the law of supply and demand. This may take some explaining, but maybe your friend will get it eventually.

This is a very true statement. Consumption [=buying stuff, anything, not just Titians and Picassos, but plasma TVs, burgers, anything] does NOT stimulate growth. Consumption is the REWARD for hard work. Keynesians don’t believe this, but the resources on this site explain it.

What stimulates growth is underconsumption, saving money and then investing it.

But why pick on the rich buying a Titian? When your friend goes shopping for anything at all, he is not stimulating growth or benefiting society either. He is benefiting himself, of course, but I don’t begrudge him that. he worked for his money, as did the rich man. [Rich people are not being attacked here for stealing, right, just for buying whatever strikes their fancy, just like your friend].

There’s a nice LOL for you. How does buying something wreck the economy? Buying is neutral to the economy, neither harms nor hurts it. Not buying and investing instead helps the economy, but do we expect to impose on people what to do with their money? How is that different from theft? They did their part earning the money, in whatever honest way they got it. Now don’t be jealous and niggardly, and let them enjoy it.

10

If that were true all productive business’s would fail due to their vampiric practices of siphoning the wealth out of them. Business’s only become successful due to cleverly placed capital accumulation, IE re-investment. Rich people only get rich one way, and that’s by accumulating capital and collecting the productive profits off it. The very concept of a business being successful implies more re-investment as opposed to capital consumption.

Now if this were true they wouldn’t earn any productive rent on the property they own. The accounting profits they gain as a capitalist is a representation of the productivity of their land. No rich man is going to invest into a piece of property to let it sit idle, unless he gains some other metaphysical profit that we cannot account for. The land still returns utility in some form or another, and as far as investments go. The capitalist buy’s land to earn a profit off it. IT can only grant a profit however when pleasing consumers.

Your friends seem to be disconnected somewhere. The problem is it may not be worth your time explaining to them that they are not giving concise explanations of reality, but instead have fabricated a false demon in their mind that they feel they must attack. Depending on how wedded they are to their beliefs you may not get far.

A few points shown above though should be easily refutable, even still some folk choose not to acknowledge your arguments. They simply have too much time and emotion invested.

On a side note, who better to own expensive art than the “Rich” who have the resources capable of maintaining and preserving them? I would rather a rich man own, care, and maintain expensive relics of the past than socially and collectively distribute priceless works to random people of which who have no desire to maintain such master-pieces.