Lend out the Pieta to the Louvre?

by on December 4, 2011 at 12:11 pm in Economics, The Arts | Permalink

Asher Meir writes to me:

You wrote once that Italy doesn’t have to sell the Pieta to pay off its debts. But maybe it could create a lot of credibility by putting it in hock. In general, a country could create a lot of credibility by issuing bonds backed by various cultural treasures that they would find it plausibly inconceivable to forgo.

Italy could sell “Pieta bonds”.

Of course it could never work, even though it makes economic sense.  Italy would feel it is being taken advantage of.  Which is precisely the problem behind a lot of other proposed deals too.  Under what conditions could the French government actually keep the Pieta and find the benefits from keeping higher than the benefits from sending back?

The entire “tighter sanctions against the fiscal violators” approach, now on the table, encounters exactly this problem.  It’s already the case that the eurozone is unwilling to pull the plug on Italy.

1 John December 4, 2011 at 12:26 pm

Probably I am missing something, but isn’t the Pieta property of the Vatican?

2 dcous December 4, 2011 at 3:42 pm

Yeah, I thought the same thing when Tyler orignally made the comment. I think the point stands that Italy proper does have a lot of culture it could possibly leverage. However, funny choice of artwork to mention.

3 Daniel Klein December 4, 2011 at 12:27 pm

Reminiscent of Oliver Williamson’s princess hostage, but in that example the princes were ruthless enough to make the story work!

4 somethingblue December 4, 2011 at 12:35 pm

Presumably the long-lived people who are constantly cited as having “bad memories” of Weimar hyperinflation are also old enough to remember when other European countries’ cultural treasures were carted off to Berlin and Paris …

5 Millian December 4, 2011 at 1:21 pm

As Tyler notes, Germany just has better culture.

6 Rahul December 4, 2011 at 1:39 pm

Visit the Pergamon museum (Berlin). Culture? It’s ignominious thievery!

7 affenkopf December 4, 2011 at 3:11 pm

Completely unlike the British museum and other western museums who acquired their all their artifacts completely ethical.

8 affenkopf December 4, 2011 at 3:12 pm

This site really need an edit function.

9 NAME REDACTED December 4, 2011 at 11:55 pm

Best kind of thievery.

10 Phil December 4, 2011 at 12:49 pm

Just write the contract differently. In case of default, it doesn’t get lent it to the Louvre. It gets auctioned to the highest bidder. If you want, it gets auctioned to the highest bidder *in France*.

11 KevinH December 4, 2011 at 12:58 pm

What about a short term carrot tied to a long term stick? What if a country were allowed to sell true Eurobonds if their debt to GDP ratio was less than 1 backed by all countries which met this same requirement. This would be a motivating carrot for countries to get their act together quick, yet this would turn into an easily enforceable stick after countries spent a few years and got used to the lower bond prices the would be hesitant to raise their debt very high or feel an immediate sticker shock. It also protects the impression of local sovereignty, and at the same time the Germans won’t feel like they are guaranteeing anyone who is being terribly fiscally irresponsible. Has this been proposed somewhere?

If you think that is too lofty of a goal, you could start the ratio at 1.2 or something and work the threshold down every year.

12 TallDave December 4, 2011 at 1:40 pm

I’m afraid it would make no difference. Collateral is based on the assumption the state can forcibly compel you to give up the property. Sovereigns cannot be compelled, short of war.

13 Seth C December 4, 2011 at 2:09 pm

You’d need a third party, ideally a Swiss bank, to keep it in escrow. Could be a great draw for Zurich tourism.

14 NAME REDACTED December 4, 2011 at 4:03 pm


15 prior_approval December 4, 2011 at 2:16 pm

‘Of course it could never work, even though it makes economic sense.’
Sure they could, the Italians just need to steal Michelangelo’s Pietà from the Vatican first.

They could ask the British how to make it work – they did it with the ever so charmingly renamed Elgin Marbles.

16 m December 4, 2011 at 3:26 pm

Actually, the French don’t have to keep it. They could just put a sign in front of it that says “Property of France,” along with a guard to police the sign. Italy would pay that loan pretty quick.

17 NAME REDACTED December 4, 2011 at 4:07 pm

There is no way to keep them from defaulting on their Pieta bonds short of war so this method fails.

18 Andrew M December 4, 2011 at 4:07 pm

How much are these artworks actually worth? To the French government, they probably aren’t worth that much. The Louvre in Paris already attracts millions of visitors paying €10 each; I doubt they would feel compelled to pay €11 or €12 just to see an additional exhibit of hocked Italian art. A separate gallery could showcase them; but there aren’t that many suitable locations where the admission fee would cover the cost of the property. Overall, their revenue stream is minimal.

The best value would be on the open market, sold to a private collector. But then Italy could skip out the French middleman and auction their best artworks directly. If they were really cunning they could put them on a 70 year lease (c.f. Chicago parking) and hope that they get them back at the end of the term.

19 Michael G Heller December 4, 2011 at 4:20 pm

“Tighter sanctions against the fiscal violators”.

This is of course precisely the policy recipe that James Buchanan derived from Public Choice analysis, though he might have preferred different words to describe it. Didn’t James Buchanan invent Public Choice? It’s funny, Tyler, that your Public Choice analysis of politics does not lead you to the same logical conclusion. Who’s the better man?

Granted, Ms Merkel has given the impression of being pragmatically wrong about the iniquities of market herd behaviour. A country preoccupied with advancing such bold discontinuous institutional reform is bound not to want to be pushed around prematurely by impatient investors who have no knowledge of or sensitivity for the delicate geopolitical maneuvering underfoot.

Actually my impression is that battling France’s Sarkozy is proving a considerably worse ordeal for Merkel than battling the markets or Italy. But she has handled it with poise.

And Ms Merkel is most certainly wrong on financial transactions tax, and wrong on nuclear energy. She’s only human for goodness sake. A politician can’t be consistently right about everything can she? But let’s not personalize this.

Don’t worry though. All that matters now is that Germany is right about the *priority sequence* of post-crisis pan-European institutional reform — *law first*, fiscal-monetary administration second, democracy third.

Germany is also right about the priority sequence of national institutional reforms required in Southern European nations — *market competition and disciplined state-retreat first* alongside relevant legal reform simultaneous with the new pan-European fiscal-monetary rules. Then top-to-bottom administrative upheaval. Then impersonal democracy.

Above all, Germany is right to reject Keynes. In various respects it is probably true to say that she has more faith in markets than most of the vocal leading and influential Anglo-American economists in UK & USA — who are activist Keynesian engineers almost to a man (noticeably few women among them) — and their rent-seeking allies-of-convenience among their countries’ hubristic desperately-want-a-bail-out business enterprises.

After all Germany and her enterprises are pretty good at mastering the art of being a competitive winner in markets, no? And Germany is these days more of a market society, no? My impression, anecdotal evidence, is that Germany is moving towards the market ideologically, not away. In terms of market freedom it is the bankrupt countries that need to catch up.

20 Vaily December 4, 2011 at 4:31 pm

So it seems that a few days ago every genius has woken up and suddenly discovered Italy has a debt: they didn’ t know it a month ago or it was not a problem? Maybe it would be nice to see all those geniuses trying to understand if Germany counts his public debt as Italy does, or maybe see how much subprime s**t is owned by Deutsche Bank (is German, isn’t it?) or BNP( is Frech isn’t it?) .or maybe it’s more entertaining to come out with stupid articles like this one.
P.S the Pietà Of Michelangelo is in St Peter: that means it belongs to the Vatican not Italy…

21 DKB @ NYU December 4, 2011 at 4:40 pm

Mexico borrowed against oil, and local resources often have strange claim on national sentiment.

22 athEIst December 4, 2011 at 5:50 pm

Don’t pawn shop interest rates on an annual basis reach into the 120% range?

23 pct December 4, 2011 at 6:15 pm

Technically, Italy has no ownership interest in the Pieta. The Vatican is an independent state. Amazing how often bad examples get chosen to illustrate cutesie ideas.

24 dearieme December 4, 2011 at 7:54 pm

“The Vatican is an independent state.” And one with an interesting role in the collapse of the Latin Monetary Union.

25 Ed December 4, 2011 at 8:39 pm

What do you have in mind? Back our debt or we stop propping up the tower in Pisa, and let Venice sink into the lagoon?

Italy’s been after museums to disgorge some of their holdings back to Italy, so I don’t think this is a serious proposal. A good part of Italy’s cultural heritage wound up in the Louvre, much of it arriving due to French armies. But the French were made to give the bronze horses of St. Marks, which the Italians stole from the Greeks, back.

26 Frank December 4, 2011 at 8:45 pm

Anybody remember the Dawes Plan? Or was it the Young Plan? German reparations debts were secured by a Government Owned Enterprise–the Reichsbahn [Imperial Railways], with RB income earmarked to service the debt in case no other recourse was available. One can certainly hock bits of any country’s wealth to guarantee a loan–or, better be done with it– and institute a one-time wealth tax.

The capital levy is a good tax, if not used too often! 🙂

27 Master of None December 5, 2011 at 8:24 am

Re: “Under what conditions…?”

Italy issues “Pieta” bonds to France, and defaults 2 years later. Under the terms of the bonds, the Pieta will be relocated to the Louvre for 100 years, after which it will be returned to Italy.

Kind of like Hong Kong.

28 Floccina December 5, 2011 at 3:09 pm

Perhaps they could make money selling Italian Citizenship to wealthy Asians, Latin American and Arabs.

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