City in debt? Flog the museum! (ctd.)
July 19 2013
In May, I reported on the possibility that the Detroit Institute of Art's collection could be sold off to pay the city's debts. News today that the city has now filed for bankruptcy has raised the threat, although the state of Michigan has been taking steps to prevent such a calamity, as the Washington Post outlines:
In May, the city’s emergency manager, Kevyn Orr, requested an inventory of the DIA’s collection, causing concern among arts leaders that the works could be sold if the city filed for bankruptcy. In June, Michigan Attorney General Bill Schuette issued an opinion that the city’s art could not be sold to pay off its estimated $19 billion in debt, citing the state’s charitable trust law.
The state Senate recently passed a bill that would prohibit the sale of the city’s art unless sold to a comparable institution to further the museum’s core mission. But the bill has yet to become law, and the museum has hired attorneys to advise it on protecting the art.
“I’m obviously concerned,” said Ford Bell, president of the American Alliance of Museums. “We thought that this was behind us in terms of the collection at the DIA, but I’m not an attorney so I don’t know what could happen. This has never happened before.”
The collection is undoubtedly valuable. Graham W.J. Beal, director of the DIA, has called it one of the most valuable in the Western Hemisphere. An independent assessment by the Detroit Free Press estimated that the bulk of the collection could be worth $2.5 billion, although the exact value is impossible to determine because it is rare for so many valuable works to hit the auction block. The DIA has more than 60,000 works spanning centuries, with nearly 90 percent of the pieces in storage.
I bet someone involved in the city's administration will wonder if the 90% in storage can be sold...
Update: Wowee - fast work; The New York Times reports that Christie's is already in on the action:
About a month ago, the institute’s officials were contacted by Christie’s auction house, which asked for an inventory of works and asked if appraisers could visit to assess the collection. It is unclear whether such a visit took place and whether it was creditors or someone else who enlisted Christie’s to begin an appraisal. (Mr. Nowling said that the emergency manager’s office did not do so, and Christie’s declined to comment.)
Update II - Tim Worstall, a fellow at the Adam Smith Institute in London, says (in Forbes), sell the lot, and quickly!
Leave aside the precise legalities of this for a moment. The City’s in the hole for something like $10 billion and one quarter of that amount could be raised by moving around some paint daubed pieces of canvas. That looks pretty much like a no brainer to me as a start. What is it that we’re supposed to care about? A few pieces of canvas or real lives as they are actually lived? Pensioners moving down from known meat from an animal whose species can be assured to the cat food aisle? Retired city workers getting the medical treatment they were promised for 40 years or keep a few paintings that the well to do like to oooh and aaah at? Get the ambulances back on the road, get cop cars to a 911 in under and hour or please the arts establishment?
It’s a toughie really, isn’t it?
Imagine that the paintings are sold: we’re moving two sets of assets from where they have a lower value to a higher. Firstly, we’re moving money into Detroit. Given that whoever buys the paintings will clearly, by the purchase itself, value the painting more than the money being paid for it we therefore know that the money is worth more in Detroit. Similarly, that the painting is leaving the city means that we also know that the money is worth more to Detroit than the painting. So we have moved two assets from places where they are lowly valued to places where they are more highly valued. The money’s worth more in Detroit and the paintings worth more out of it.
And this is the thing: moving an asset from one use to one where that asset is more highly valued is the very definition of wealth creation. So, selling the paintings would indeed be wealth creation.