Markets in everything the law of one price?

by on September 1, 2011 at 3:20 am in The Arts | Permalink

As an investment, cash is considered a conservative bet. Tonight in Melbourne, a confident buyer took a punt that sometimes, in certain company, cash is worth more as art than money in the bank.

As the opening lot of the Deutscher and Hackett auction, a single wad of $20,000 cash – an artwork called Currency - was sold for $17,500. When the 22 per cent buyer’s premium is added, the total cost comes to $21,350.

The work – by Sydney artist Denis Beaubois, and brought to life with a $20,000 grant from the Australia Council – was divided into two lots of 100 uncirculated $100 banknotes.

Deutscher and Hackett had given it an estimate of $15,000-$25,000, with both extremes sending competing messages about the inflationary value of the work. The notes can still be used as legal tender, according to the artist.

You will note that the winning bidder was not a Swiss bank.  Here is more and for the pointer I thank Zac Gross.

Seth C September 1, 2011 at 3:34 am

Now imagine the art had been sold in a dollar auction…

E. Barandiaran September 1, 2011 at 6:26 am

Tyler, I think this auction proves –again– how wrong Milton Friedman was about the cost of producing fiduciary currency. Friedman argued that because its marginal cost was zero, there was a sort of natural monopoly of fiduciary currency. B. Klein in his paper on The Competitive Supply of Money (JMCB, Nov. 1974) argued that Friedman should have acknowledged the information costs of money supply changes, and therefore recognized the possibility that firms may “deceive” their customers by supplying more money than anticipated. Albeit largely ignored, Klein’s analysis has been relevant to understanding the many national arrangements to supply fiduciary currencies, as well as a world economy in which many government currencies have been competing for a long time.

joshua the postlibertarian September 1, 2011 at 6:52 am

Forget iPads and blenders… those pay-to-bid sites should just go for raw cash… Mary won $5000 for $18.23!!

Dan Weber September 1, 2011 at 7:49 am

Swoopo had cash auctions for a time. As others have said, they weren’t even pretending to not be a gambling site.

Vik September 1, 2011 at 7:04 am

[insert rant about modern art world and hipsters gawking at the "boldness" of the piece as a criticism on capitalist society while whining all the way to the bank]…I am curious to see how Australian tax authorities treat this bundle of cash.

Tracy W September 1, 2011 at 7:08 am

Haven’t artists been doing this sort of thing for decades? Dating back to when the art world decided that the urinal wasn’t just a joke?

steve September 1, 2011 at 8:45 am

I bet that the liberty dollar (declared counterfeit by the U.S. government) holds its value much better over time.

Bill September 1, 2011 at 8:49 am

I am making my own artwork using $1 million Zimbabweian dollars and selling it on e-bay for $1.95 (and of course, charging $10 shipping).

Anon September 1, 2011 at 8:54 am

Is that you Ben Bernanke?

John Mansfield September 1, 2011 at 12:47 pm

“The Currency project is the first work in a series that looks at money as an architecture of possibility. Twenty thousand dollars, consisting of one hundred dollar bills, will be presented as a simple sculptural object to be auctioned through a fine art auction house. The material/money for the work has been sourced from a ‘New Work Established grant’ from the Visual Arts and Craft section of the Australia council for the Arts.
“All currency used in the creation of the work will not be altered or modified and will retain its potential function and value as currency. However each hundred dollar bill will have its serial number recorded to validate it as an authentic part of the work, thereby instilling a cultural value on top of the financial value. The tension between the economic value of the material against the cultural value of the art object will be explored through the process of the financial transaction.”
denisbeaubois.com

From the picture of the work, I don’t see any value that was added to the currency by using it as material for an art object. I predict the above mentioned tension will be completely resolved before long. The part about getting a grant to fund the project and then auctioning it off was clever, though.

How much would Arrival go for?
“Arrival draws comparisons between the atmospheric pressures which impose themselves onto a sealed body / object, as a plane descends for landing, and the social pressures encountered by individuals arriving in a new land. The work comprises of several water bottles crushed by atmospheric pressure upon entry into Australia by plane.”

Jethro September 1, 2011 at 7:53 pm

So the artist starts with raw materials valued at $20,000, and after putting in his creative labour creates an artwork which produces a return to the artist of $17,500. I know art is not like any other manufacturing process, but surely there should be value added at each stage, otherwise what’s the point.

I hope the Australia Council feels like they got $20,000 worth of “community benefit” in return for their grant.

Jack September 3, 2011 at 3:34 pm

Isn’t this basically an option? The strike price is the cash value as cash; and the random asset price is the value as art. Other things equal, the option premium being strictly positive it must sell for more than the original cash value — but then, other things are NOT equal… Interesting stuff

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