How Much Are 2,088 HR Managers Worth?—Less Than One Painting? [Part II]

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 [continued from Part I]

What’s wrong with spending $142 million on a painting that, to me, doesn’t look much different from mine shown here [which will cost you nothing to display]?

As reported in Part I, that’s what the recent world record-setting winning bid for Francis Bacon’s “Three Studies of Lucian Freud” at Christie’s of London fetched. [No, not the 16th-century philosopher-scientist Francis Bacon and not psychoanalyst Sigmund Freud. Yes, slick marketing use of names.]

If the argument that the $142 million could have done a lot of “good” as charity isn’t compelling, there is the argument that on its own assumptions, free-market “whatever-the-market-will-bear” pricing and purchases not only may not measure up to moral, environmental and social ideals, but also may fail to meet free-market purely economic theoretical standards, e.g., hiring 2,088 HR managers at their average $68,000 per year as a foregone opportunity cost of arguably equal or greater value.

Ideally, any free-market purchase or allocation of resources is supposed to be decided upon only after consideration of all critical information, with that information including all opportunity costs, the costs of determining those opportunity costs and consideration of bonus non-dollar-denominated “utilities” as added value in the form of moral, social or environmental benefits interpreted as “economic externalities”.

Even if that is an impossibly high standard, laissez-faire economic thinking encourages at least exploring alternate choices that yield a higher ROI [return on investment] or choices with equivalent ROI plus nice gains in terms of externalities.

In the spirit of the foregoing critiques, the following criticisms challenge the wisdom of throwing mega-money at the “Freud” painting—or any other painting—and the wisdom of defining “optimal”, “rational” and “fair” in primarily dollar-denominated terms and micro/macro economic utility:

1. $142 million for a painting encourages divorcing rationality from empathy: It champions and entails the counter-intuitive, empathy-resistant ideology that buying a single canvas under fully informed and transparent free-micro/macro market conditions —by theoretical definition—proves it is better, i.e., more optimal, than helping nearly half a million children, perhaps literally saving many of their lives, as well as their futures.

In response to this, there is the classic counter-argument, that when the super-rich can afford both the painting and helping the orphans, they are entitled to indulge their other wants and remaining needs without flak from anyone else.

Fair enough. No one should force them to contribute more—or perhaps even to contribute more as a percentage of their assets than anyone else. But, it is to be hoped that they would be as open to empathy as part of their “rational calculation” and to the extent its related reasoning allows.

If charity or social conscience is not the purchaser’s “thing”, the fact remains that the narrow, purely economic interpretation of “maximized utility” in determining optimality makes, as noted above, the choice between two economically/financially equivalent deals with the same ROI utterly and needlessly indifferent to any difference in moral, environmental or social “external” benefits.

2. It confuses optimality in micro and macro markets: While the $142 million spent on that single work of art may be optimal, rational and fair within the micro-markets of the elite art world, especially given the vast resources of competing bidders, how is it so in “the market” conceived as the totality of all demand and supply of all goods and services in the aggregate global market?

It is one thing to say that pricing is fair or rational within the micro market of art auctions that will charge “what the market will bear”, even when the resources within that market are unequally distributed among the “players”. If you want to bet at Christie’s’ table, be prepared to ante up.

But notice that not only is this a micro-market dominated by the wealthy, it is also a discretionary market, hardly operating on any “need” that the same idealized “rationality” of market theory could or should recognize—unless “rational” is taken to mean “rationed and allocated to the highest bidder” rather than “not nuts”.

But, from the perspective of “the market” understood not as the Christie’s’ elite micro-market, but as the 7 billion of us in the global market for all goods and services, there is nothing rational, fair or optimal in what most of the players, allowed to vote with anything but cash, would see as a colossal misallocation of wealth.

What seems to be overlooked in the conception of “market voting” is that it critically depends upon the companion notions of being able to afford to vote and to have an equal vote on not only who gets what, but also on whether anyone at all or “society” [based on a social contract] should throw substantial, globally scarce resources at it in the first place—either to supply or demand it.

[Note, however, that replacing a free-market mechanism with a central command system or majoritarian resource-allocation voting system is unlikely to satisfactorily address this issue. I leave the task of addressing it, if successfully doing so is possible, as an exercise for other minds.]

Moreover, scant comfort is to be derived from any notion that eventually all that cash will trickle down, through other luxury purchases, down to shop keepers, suppliers and workers, to those who need it most, including starving orphans.

That’s as likely as trickle-down foreign aid from compassionate have-nations to corrupt regimes actually reaching its intended beneficiaries in time, intact or at all. Besides, what is needed in many, if not most instances is immediate flow, not slow trickle.

3. It blurs the distinction between rational seller and rational buyer: You don’t have to have “Adam Smith Rules!” tattooed on your arm to see that on the sale side, selling a painting for $142 million is rational. It’s the demand side that requires logical contortions—by purchaser, by the average conscience, enlightened investors and the macro-market alike.

It stands to reason—precisely the same kind of and standards of reason that are supposed to rationalize throwing such a huge wad at a painting—that it is highly unlikely that there is nothing in the world that $142 million could be invested in that would offer not only financially higher returns, but also morally, socially or environmentally higher ones, e.g., alternative clean energy, compact affordable housing, water management plants or creation of a center for integrated preventive-medicine research.

Even setting compassion, empathy and high moral purpose completely aside, and dodging the thorny question of the relationship, if any exists between the rational and the moral, making a case for the “rationality” and “optimality” of the purchase [as opposed to the sale or re-sale] of “Freud” is not going to be a slam dunk—neither at the personal micro-level nor at the economic aggregate market and societal macro-level.

As a rebuttal, the moral and social neutrality or presumption of “We want what we want; we pay what we can” will only, at best, reiterate or completely dodge the conceptual problems of the “what the market will bear” defense.

4. Free-market mega-prices for paintings encourage reducing value to exchange value: A recent Reuters story about the “Freud” sale, “What’s behind the spike in art sales: vanity, fear and easy money”, confirms that many big buyers spend as much as they do on art only because they expect to make more on a re-sale to others who think exactly the same way.

That Ponzi mentality, focusing on the exchange value of an acquisition, does make the purchase seem less nutty, but it ignores whatever intrinsic value the painting has or subordinates it to what the painting will be worth to the next buyer.

In effect, this reduces the psychological satisfaction or utility of ownership to the pleasure of getting rid of it through a follow-up sale, to that extent reducing pleasure to future pleasure and diminishing the capacity to live in and enjoy the immediate moment in its existential fullness.

This is exactly what happens when the thrill of buying a house, failing to morph into a thrill of paying for it, wears off, leading to endless tinkering with “remodeling”, changing the bathroom tiling for the third time, and pocket-calculator drills to calculate prospective re-sale value that may include the re-sale price of a $142 million painting on a wall, if it comes with the house…

…and if anybody wants it.

Read more in HR Manager

Michael Moffa, writer for, is a former editor and writer with China Daily News, Hong Kong edition and Editor-in-chief, Business Insight Japan Magazine, Tokyo; he has also been a columnist with one of Japan’s national newspapers, The Daily Yomiuri, and a university lecturer (critical thinking and philosophy).