Don't Follow the Money

On Tuesday night at Christie's auction house in New York, "Nude, Green Leaves and Bust" (1964), a painting created in one day by Pablo Picasso, sold for $106.5 million, the most ever paid at auction for a work of art. Here are ten things to think about regarding the event:

1. Economically, most of the "arts" are about selling a million things (books, tickets, CDs, downloads, etc.) for a dollar. Art is about selling one thing (an art object) for a million dollars.

2. In contrast to, say, the prices of cars, "used art" (called the "secondary market" in the art world) costs a lot more than new art (called the "primary market" in the art world).

3. Buying something at auction means that you paid more for it than anyone else was willing to pay.

4. The worst art is usually bought for the most noble reason: Somebody wants to have it around to look at. The best art is usually bought for the least noble reasons: trophy-hunting or investment.

5. In an ascending market (and the high-end art market, over the long haul, ascends), the right old art at the right price is a good investment. It used to be said (in the pre-Euro days), that in times of great inflation, the French put their money on their walls.

6. There are always only three basic money stories in the art world: People are paying about the right prices; people are paying too little; people are paying too much.

7. Money stories in the art world translate something that most people don't understand (e.g., why is Picasso considered all that good?) into something they do understand--a sum of money. The bigger the sum of money, the "sexier" the story in the bargain.

8. Don't think too closely about the type of person who'd have a hundred mil lying around with which to buy a Picasso at auction.

9. The economist William D. Grampp pointed out in his book, "Pricing the Priceless," that the value of the work of 99 percent of artists promptly descends, at their deaths, to zero.

10. "Charlie Farquharson," the hillbilly anchorman on the old TV show, "Hee-Haw," would introduce that week's news by saying, "It's the same old news, only it's happening to different people." Likewise, art auctions feature the same old art, only it's being sold to different people.