It's a story involving bubbly prices, lax regulation and shady market practices. If this sounds like a recipe for the next financial crisis, then you are right. It does sound like that. But it's probably not.
The New York Times has an interesting story today about the wild and woolly world of art sales, an $8 billion-per-year business in New York alone. It turns out that your local Sotheby's is a wretched hive of scum and villainy, where the wealthy are bilked out of their cash by shady art dealers. Sometimes auctioneers just stone-cold make up bids until prices get closer to where the seller wants them. Galleries refuse to share their prices. Wealthy people may end up paying millions more for a piece of art than necessary.
Naturally, if you're like me, when you read a story like this, you feel... um... not much? As Dealbreaker's Matt Levine puts it:
There are places where you should think "customers should be protected from various sorts of sharp practices by dealers," and there are places where you should not think that. I guess?
For the record, the sliver of Venn diagram that indicates where Matt and I agree on "places where you should not think" more investor protection is necessary is fairly narrow, I think. But we may have found it in this art-market story: It seems to me that a market in which exorbitantly wealthy people throw around staggering sums of cash for works of art is one of those places.
As Matt points out, some of the abuses in this wildly unregulated market sound very much like standard practices on Wall Street. That could well be bad news, particularly in the market for lightly-regulated derivatives. But if a wealthy art collector ends up paying $100 million instead of $90 million for a Picasso, it seems hard to believe that will end in national tragedy.
You could argue, possibly, that said collector could have spent that $10 million on alms for the poor. But then that art collector probably already has a certain amount of money set aside for "alms for the poor." The rest of it is just wealth redistribution.