Museums Can Break Art Spiral : Prices: If institutions would be willing to sell now and then, they could check the rise of philistines with a commodity mentality.

When the price of something goes up, the supply of it increases. That is the consolation offered by economists throughout the ages. A higher price for apples will induce more people to grow apples. But no such consolation is available in the case of paintings by dead artists. The skyrocketing prices of art masterpieces will not produce more masterpieces. A few may come out of hiding, and perhaps a forgery or two will add to the world’s enjoyment of great art until they are exposed and denounced. But the main economic effect of the price explosion is to transfer wealth to present owners of art masterpieces.

Economists call the mistaken feeling of increased wealth caused by general inflation “the money illusion.” The inflation in art prices is slightly different: Call it “the Manet illusion.” When an Impressionist painting thought to be worth $15 million is suddenly worth $30 million, the world is not $15 million richer. However, the owner’s claim on the world’s existing wealth has doubled.

For this reason, it’s hard to understand all the hair-pulling about the terrible effect of the masterpiece price explosion. After all, most art masterpieces are owned by institutions owned, in turn, by the public--or at least dedicated to serving the public interest. “From the point of view of American museums, the art-market boom is an unmitigated disaster,” wrote Time’s art critic Robert Hughes late last year. But why? Museums are the OPEC of art. They have a virtual monopoly on old masters and own a largeproportion of the Impressionists, post-Impressionists and so on. Economically, they are by far the biggest gainers from higher art prices. So why have so many art mavens entered their blue period?

The reason, of course, is that museums only buy art, as a rule. If museums could only overcome their anti-selling fetish, they could exploit the enormous power the art boom has given them. They might use this power three different ways.

First, to break the back of the art market. The market is already shaky. There was talk of Picasso’s “Au Lapin Agile” breaking the world record of $53.9 million set two years ago by Van Gogh’s “Irises”; yet it went for $40.7. Revelations about fancy financing arrangements and other manipulative practices by the auction houses make it look increasingly like a classic speculative bubble.

If the high priests of the art world really think that exorbitant prices are turning art into a commodity, corroding aesthetic sensibilities, spreading philistinism like a plague and so on, nothing could be easier than bursting the bubble. The fact that most great paintings are permanently off the market is what keeps prices so high. One museum alone, such as the Metropolitan or the National Gallery, could probably create a crash simply by threatening to dump a Van Gogh or two.

Second, rather than destroy their own new-found wealth, museums might wish to exploit it more efficiently. At any level of art prices, museums can afford almost any painting they want, provided they are willing to sell others. High prices don’t prevent museums from improving their collections--merely from expanding them indefinitely. And a visitor can’t help noticing that the major museums are already, er, full.

Since the commercialization deplorers note that the philistines are especially partial to inferior works by big-name painters, museums have a golden opportunity for a sort of aesthetic arbitrage.

Third, if museum trustees really believe that great paintings are insanely overvalued financially--but undervalued aesthetically--they may want to consider selling off their inventory and not replacing it. If you wouldn’t pay $50 million for a Van Gogh, why should you keep a Van Gogh you could get $50 million for? Use the money for the homeless, or art education, or some other worthy cause.

It ill behooves Americans to fret that we are losing great European paintings to the Japanese. How did we get them? As William Grampp wittily points out in his recent book on the economics of art, “Pricing the Priceless,” works of art have been moving West “for millenia”: from the Middle East to Greece and Rome in ancient times; from Italy to Northern Europe; in the 19th Century from Europe to the American East Coast; more recently across America to Texas and California; and now to Japan. Some day, Grampp predicts, they’ll all end up back where they started. All the more reason for museums to think of their collections as assets to be used shrewdly, not as sacrosanct national treasures.