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In this part of the program, you may be noticing that we are standing at the intersection of money and art. This week, an Ansel Adams photograph of Yosemite National Park sold for $722,000. It was the most ever paid for one of his images. NPR's David Kestenbaum with our Planet Money team reports that art prices can be mysterious, even for people in the business.

DAVID KESTENBAUM: On the wall of the Winkleman Gallery in New York City are photos that look like they might be by Ansel Adams: a muscular tornado churning across a field, an iceberg - except that it's not actually a tornado or an iceberg. Here's gallery owner Ed Winkleman.

Mr. ED WINKLEMAN (Owner, Winkleman Gallery): He builds these models out of everyday materials in his studio. So, for example, what looks like a tornado is actually steel wool. What looks like an iceberg is all made out of sugar.

KESTENBAUM: That's pretty great. Wait, let me look closer at the tornado.

Mr. WINKLEMAN: Foreground, it looks like grass and bushes, is all made out of parsley.

KESTENBAUM: That tornado photo by artist Matthew Albanese, you can own it for much less than an Ansel Adams - $1,200, including the frame. And who knows? Matthew Albanese might've put more labor into his photos than Ansel Adams did.

Ed Winkleman, the gallery owner, also writes a blog to try to demystify the finances of the art world. And he says when you start working with a new artist, there's always this awkward moment. You'll be staring at their painting or photograph, and then you have to put a price on it.

Mr. WINKLEMAN: OK. So there really is a system.

KESTENBAUM: Yep, a system for pricing art - at least for new emerging artists, like the artists at Winkleman's gallery. And it has almost nothing to do with how good the art may be.

Mr. WINKLEMAN: Okay. So it depends on the scale.

KESTENBAUM: The size, you mean?

Mr. WINKLEMAN: Yes.

KESTENBAUM: All right. Bigger costs more?

Mr. WINKLEMAN: Yes.

(Soundbite of laughter)

KESTENBAUM: What if it's small and super detailed and beautiful?

Mr. WINKLEMAN: Well, the scale is one aspect. So there's like three criteria, scale, what I would consider intensity. As you said, that's very small and super detailed. It took a lot more time.

KESTENBAUM: So scale, intensity, third criteria, what he calls medium. Is the sculpture carved out of wood or marble? How many copies are there?

Mr. WINKLEMAN: If it's a photograph and you have multiple editions of it, it's going to be less expensive. Oil paintings in general are known to be about twice as expensive per square inch over the same artist's drawings.

KESTENBAUM: Really?

Mr. WINKLEMAN: Yes. So...

KESTENBAUM: So, early in an artist's career, art is priced more or less like a commodity, like a ball bearing or a kilogram of rice. But if people start to buy your art, if people are waiting in line to buy your next sculpture, the rules change. It could sell for a lot more.

Mr. WINKLEMAN: It's a matter of how many people want the next one that comes. Classic supply and demand.

KESTENBAUM: And this is why in 2005 a shark in formaldehyde by artist Damien Hirst sold for a reported $12 million. Rich people wanted to own the shark, they bid against other rich people, and the price went up to $12 million.

Now the bidders may well be thinking, I can probably turn around and sell the shark for even more. But William Baumol says not so fast.

Professor WILLIAM BAUMOL (Economics, New York University): I am professor of economics at New York University.

KESTENBAUM: Baumol is 88 years old. He studied the art world for a while and he says art is different from other things like commodities or even stocks or bonds. Those prices, you can try to calculate them. Art prices, good luck.

Prof. BAUMOL: They depend in swings and human taste. And I am absolutely convinced that there is nothing about human taste can be called, quote, "rational."

KESTENBAUM: Baumol wrote what is now on often quoted paper, the title: "Unnatural Value: Art Investment as Floating Crap Game," where he analyzed sales records from auction houses over 200 years. Here's what he found: art rarely beats out stocks and bonds.

Prof. BAUMOL: Art was a good investment if it paid off in aesthetic benefit. But in terms of dollars, you were much better off buying stocks and bonds.

KESTENBAUM: That makes sense, he says. People buy stocks and bonds purely as investment, so the price should reflect what people expect to make off the investment. But art, you get to hang it on your wall so youre paying for that as well.

Now, art investors can get lucky. But if you page through the historical records you can find artists like David Roberts. Who is David Roberts? Roberts was a Scottish painter who died in 1864. A critic writes, quote, "In the heyday of mid-Victorian romantic taste, the water colors of David Roberts were the delight of kings."

But 70 years after his death, one of his paintings sold for just 10 guineas, almost nothing.

David Kestenbaum, NPR News.

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