November 30, 2006
Norman Rockwell and the Explosion of Wealth Posted by John Steele Gordon at 12:30 PM EST It was quite a sale at Sotheby's yesterday. The previous record for an Edward Hopper had been $2.8 million, set in 1990. Yesterday one went for $26.8 million. The previous high for a Norman Rockwell, set just last May, was $9.2 million. His Breaking Home Ties went last night for $15.4 million. The Norman Rockwell painting has the sort of story behind it that no novelist could ever contrive, although I expect that didn’t affect its sale price. What interests me about the sale, however, is this. Back in 1961 the Metropolitan Museum of Art in New York, shelled out about $5 million to buy Rembrandt’s Aristotle Contemplating the Bust of Homer. The price was considered so extraordinary at the time that Time magazine ran a cover story on the purchase. Great Rembrandts rarely if ever come up at auction these days, so what that painting is worth today is anyone’s guess. (The current world-record price for a painting, a Jackson Pollack, is $140 million.) But even adjusting for inflation, the Met undoubtedly made a very good investment. While most assets have been appreciating over the last 50 years, one class of investments has, on average, done much better than more conventional stocks and bonds: those investments that have an absolutely fixed supply. There are only so many old master paintings, and most have, like Aristotle, now disappeared into museums, beyond the reach of even the most well-heeled collector. Norman Rockwell and Edward Hopper painted only so many paintings. Likewise, rare books, vintage wines, and prewar Manhattan apartments have an utterly fixed supply. And the amount of wealth created in the last 50 years has skyrocketed beyond what anyone would have predicted. In 1982, in order to make the then brand-new Forbes 400 list, you needed a net worth (if I remember correctly) of $82 million. To be sure, $82 million today will still keep the wolf quite comfortably far from one’s door, but $82 million wouldn’t get you onto the Forbes 4,000, let alone the 400. That list this year had an admission price of over $1 billion. So the number of people with serious money to spend on things like paintings and rare books has been increasing rapidly while the supply has not increased at all, indeed decreased. You don’t have to be Adam Smith to figure out what happens if there is an ever-increasing demand for a fixed supply: Prices rise. If there is enough demand and a very small supply, prices go past the moon. Some, of course, have risen further than others. In 1961 Rembrandt was already the iconic Old Master, and his paintings always sold at top-of-the-market prices. But in 1961 Norman Rockwell was very much alive (he died in 1978), and his reputation among the largely self-appointed cognoscenti of the art world was dismal, dismissed as a mere illustrator, and a hopelessly sentimental one at that. Rockwell still doesn’t impress the art world much. The Metropolitan Museum, probably the most comprehensive art museum in the world, does not have a single work by him. But the art market is not the same thing as the art world, thank heavens. The Met had to shell out $5 million for its Rembrandt. But the family that sold the Rockwell yesterday for $15.4 million, bought it in 1960 for (are you sitting down?) $900. Even allowing for an approximately five-times inflation since then, it has appreciated by a factor of more than 3,000. Not even Warren Buffet’s Berkshire Hathaway has done that well in the stock market.
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