What can art teach us about economics?
Portrait of Joseph Haydn. Source: Royal College of Music
People often discuss the economics of art – how supply and demand can raise the prices of Renaissance or Impressionist works to insane levels, or how ironic it is that great paintings can’t be sold for much while the artists are still alive. But art has something else to tell us about the productive process. There’s a lot that we just don’t understand.
For example, in history we see artistic centers grow and develop – like 5th century BC Athens, or 15th century Florence, or 18th century Vienna – whose artistic achievements have endured for centuries and have had a lasting cultural impact. These communities weren’t highly populous. They had, at their peak, perhaps 100,000 people. But they produced sculpture and paintings and music that billions have enjoyed over the centuries and that have retained an enduring market value.
“Water Lilies” by Claude Monet. Source: Wikipedia
Now, naïve theories of economics say this should not be possible. They didn’t design a more efficient plow or invent anything that improved our economic productivity. Economic value is supposed to reside in the ability to produce a stable and growing cash flow. But there’s something different about the arts where small numbers of highly gifted people can come together in a white-hot center of creativity and innovation that explodes outwards to change the world – arguably more than assembly lines and smart phones.
If we’re trying to figure out what makes Silicon Valley work or how to turn around Detroit or how to maintain London as a financial hub in a post-Brexit UK, we should try to understand Pindar’s Athens or Monet’s Normandy or James Joyce’s Dublin. Because before we can manage wealth, someone has to create it. And creation is a miracle.
Douglas R. Tengdin, CFA