The record-setting price of Pablo Picasso's Women of Algiers did not seem to be a matter of much excitement at Christie's, which announced the $179 million sale with a casual tweet.
That may be because art dealers expect prices to keep rising. "I don't really see an end to it, unless interest rates drop sharply, which I don't see happening in the near future," one said.
Pablo Picasso’s Les Femmes d’Alger (Version ‘O’) realized $179,365,000, a #worldauctionrecord for any work of art ever sold at auction— Christie's (@ChristiesInc) May 11, 2015
Those of us baffled by that astronomical price tag might be surprised to learn that he’s probably right – and that the rising price of art can tell us about global inequality.
First it’s a simple question of supply and demand. There are only a limited number of Picassos in the world to buy, but the number of people that can afford them – and are prepared to pay for them – is increasing. Those who can afford it might be able to pay increasingly high prices because they are getting richer. Bank policy like the European Central Bank’s money printing progamme, is intended to boost asset prices. Those with assets benefit.
Neil Irwin of the New York Times said that if the maximum proportion of wealth someone would pay for a painting is 1 per cent, there would only be 50 people on the Forbes Billionaires List who could afford the 'Women of Algiers'.
The last time the Picasso was auctioned, in 1997, it cost $12.3 billion. There are more than four times as many people who could afford to bid on the painting now. But in that same time the painting has made a 462 per cent gain.
The same metric can be used to explain the price increases of anything that is limited supply, such as real estate, cars or wine: the richer the rich get, the higher the bidding, and the greater the divide between the super rich and the poor.
Even with all the money in the world, art prices are still a matter of taste. The Picasso’s new owners must be hoping it doesn’t go out of style.