243 Pricing prices

A powerful new challenge to the neoclassical school of economics has come out of a study of prices for new works of art by the Dutch sociologist Olav Velthuis. Velthuis finds that prices are not just amounts of money, but symbolic indicators, "social, cultural and moral" entities. This applies to more markets than just that for art. Schwartz is impressed, but wonders whether this truth is enough to pull the rug from under the feet of the Chicago school. See also Schwartz’s low-key celebration in words of the fortieth anniversary of his arrival in Holland on 5 November 1965.

In Menno Meyjes’ film Max (2002), an avant-garde art dealer in Munich in 1918 is asked why his paintings are so expensive. The answer is one of the brilliant quips that make the film so remarkable. “Otherwise no one would buy them."

Olav Velthuis’s entertaining book Talking prices: symbolic meanings of prices on the market for contemporary art (2005) is full of dealer’s explanations of this kind, many of them as funny as Max Rothman’s. Indeed, one thing I admire in Velthuis is that he was able to keep a straight face in his interviews with Amsterdam and New York art dealers. I would have lost it if an art dealer told me that “he only sold art to people who expect to … grow from it spiritually." At least one of his interviewees had the same explanation as Rothman for his hefty prices. A bargain price “makes [collectors] nervous, they think it should be … higher."

That notion is one of the elements of the unwritten “pricing scripts" Velthuis reconstructs, formulas employed by art dealers, sometimes unconsciously, for putting a price on new works of art. They need scripts because they are made nervous by the fargoing freedom they enjoy in pricing an item for which no previous market exists. Another unvarying script article, aside from asking non-trivial amounts, is that all works of the same size be given the same price. Readers: if you trust your judgment, make use of this rule! At the opening of a show, go for the best work in the size class that matches your budget. (Whether your choice is really the best you may never know. One interviewee told Velthuis that “the first work people buy is one I would never have guessed.")

Velthuis is playing for far higher stakes than just analyzing and explaining art prices. He is also out to pull the rug from under the entire neoclassical school of economics. Such as the provocatively hard-nosed William Grampp, who in his book Pricing the priceless: art, artists and economics (1989) argues that “economic value, strictly speaking, is the general form of all value, including that which is aesthetic." There is only one arbiter of value, and that is the market.

Velthuis will have none of this. As the title and subtitle of his book make clear, he takes seriously the rhetoric and non-monetary meanings attached by sellers to art prices. “Their stories told me that the value of prices in social life cannot be underestimated; a price is not just an economic, but also a social, cultural, and moral entity."

In previous debates between hard and soft investigators of the art market, the softies used to claim that art formed an exception to the soulless laws of market economics. Not Velthuis. Granting – even insisting – that art prices are like others, he bets for the whole pot. “The interpretive approach that I have advocated in this book,“ he writes, “provides a richer understanding of what markets are about" than the neoclassical model.

Richer it certainly is. But reductivism also has its charms, especially when it comes to money. I don’t think Grampp would give in to Velthuis, and I’m not sure that I do, to either of them. But this is surely one of the more enjoyable debates in economics, and Talking prices a delightful as well as important book on its own.

© Gary Schwartz 2005. Published in Loekie Schwartz’s Dutch translation in Het Financieele Dagblad, Amsterdam, 5 November 2005

On 27 October Derk Snoep, the subject of Schwartzlist 242, died of cancer. He called me after the column appeared to thank me. We both knew without saying it that the column was my way of taking leave of him with a tribute during his life.

Derk was one of those I was planning to invite to a party today. On 5 November 1965, forty years ago, I arrived in the Netherlands with a one-year study grant. Except for the usual kind of travel and a year in Santa Monica at the Getty Center, I have never left. I wanted to celebrate with the people I met in the first few weeks after my arrival. Forty years in Holland, forty years with Loekie, hitting 65, worth a party. Not Derk’s illness, but the pressure of my work, mainly the (extended) deadline for my book on Rembrandt, kept me from going ahead with the plan. Perhaps next year, otherwise I’ll wait until the fiftieth anniversary of my arrival here.

Some of the changes in the world over those forty years can be illustrated by telling about the forty days leading up to 5 November 1965. In September, with my savings from a $3.50-an-hour summer job as researcher for the Bollingen Foundation and the first $222 check of my Kress Fellowship, I bought passage from New York to Le Havre on the S.S. France. Because the other passenger with whom I was supposed to share the cabin failed to show up, I had it to myself for the entire, luxurious four-day crossing. At the going-away champagne party in my cabin, I got a last, confidential word of advice on living in Europe from my historian friend Kennie Cahn. “When the shit hits the fan, stay out of the Ardennes." I’ve kept this in mind since, although the Ardennes these days look like one of the safest places to be.

In Paris, I checked into the Hotel Danube on the rue Jacob, where my sister Carol lived, who was working as a photo model. After a few days of museumgoing and looking up friends, I rented a Renault 8 and took Carol off for a three-week trip to Italy, where she had never been. Having lived in Rome for the summer of 1964, I still had fresh contacts there and in Florence. After another few days in Paris, including shaking hands with Harold Lloyd in a bar, dancing next to Brigitte Bardot without noticing her and other excitement, I took the train to Utrecht. That part of the trip has changed the least. I took a room in the Domhotel, in the genteel, 19th-century station neighborhood of Utrecht that was demolished in the 1970s to make way for the monstrous shop-and-office complex Hoog Catharijne. (Today, a room in a hotel of the class of the Domhotel would cost two months worth of the 1965 Kress and two weeks worth of a present-day student grant.) I soon found out that $222 exchanged into 800 guilders, about twice the median monthly income in Holland at the time.

The winter weather of 1965-66 was miserable. The sun hardly shone; there was a constant cold drizzle. Within weeks, I met Loekie and my life changed. Today is sunny and warm.

Responses to Gary.Schwartz@xs4all.nl

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