Today’s New York Times carries an argument by an economist that Detroit’s art collection should be sold. Is this evidence to support the old saying that “an economist is someone who knows the price of everything and the value of nothing”?
It is kind of shocking to see how the author, Robert H. Frank, a professor at Cornell, calculates that it costs $1200/hour to have people looking at a $200 million Bruegel. But he does this by positing a world in which “interest rates return to normal levels — say, 6 percent”. In other words, a world in which Detroit might not have become insolvent because its pension assets would have been earning a return sufficient to pay off all of the commitments that Detroit’s politicians have made. The economics professor posits that the museum is open 2000 hours per year and that 5 people per hour would view the painting. that’s 100,000 people. http://www.dia.org/about/facts.aspx says that the museum received 600,000 visitors in the 2013 fiscal year. So that’s 1/6th of the visitors viewing this particular highlight of the collection. If we were to posit 2 percent interest rate and that half of the visitors view the painting, the foregone interest would instead be $4 million and the cost per viewer $13 (less than a ticket to see the next Avengers movie).
The art in this museum was donated to the city. If it is liquidated to pay for pension and other commitments this will presumably discourage future donors of property, since every state and local government in the U.S. is at risk of insolvency (promising to pay out unknown and unknowable amounts of future cash but without having a printing press for dollars).
Would anything change for the city via a $200 million cash infusion? We could look at Detroit’s past performance. Was the government capable of squandering comparable amounts historically with no benefit to citizens? We could look at Mark Zuckerberg’s donation of $100 million to the Newark schools. Did that result in better-educated students? Politicians can always give out cash to people who help get them elected/reelected. But it is tough for a politician to justify giving a painting from the city’s art museum to a beloved crony.
What do readers think? Should Detroit sell off the next generation’s chance to look at these famous paintings so that $18 billion in liabilities is reduced to $17 billion? Certainly it would spice up the museum if they had to go out and buy contemporary art and exhibit the old masters only by special loan.