What’s an Art Collector to Do? : Economics: Peter Watson has written a book that charts the ups and downs of the art market through history.

British writer Peter Watson got a great book offer during the height of the art auction frenzy. His editors at Random House envisioned a fact-filled tale that would convey the excitement of the ‘80s art boom, but Watson didn’t grab the deal.

“I was almost certain that the market would collapse because it was so overheated,” Watson said, during a recent trip to Los Angeles. “If it did, a book on the ‘80s would look dated, so I proposed a book on how we got to the present situation. I wanted to produce a book that would say, ‘It started here. This is what happened. This is why the art market takes the form it does.’ ”

The result is “From Manet to Manhattan: The Rise of the Modern Art Market,” a 592-page analysis of the economics of art, complete with charts of record-setting prices and graphs of the market’s trajectory.

Watson begins with a behind-the-scenes account of the sale of the world’s most expensive painting--Vincent van Gogh’s “Portrait of Dr. Gachet,” which was sold for $82.5 million on May 14, 1990, at Christie’s New York. But he soon plunges into history, examining auction houses, dealers and collectors over the past 100 years in a lively narrative.

He makes dozens of points that may rattle--though surely not surprise--various constituencies of the art crowd. For starters, Watson argues that moralistic attempts to divorce art from money are sheer folly. Price is not the most important thing about artworks, but neither is it negligible, he contends. And while price and quality are not the same thing, they are related.

“The link between art and money is intimate and longstanding. . . . As this history of the art market will show, dealing, economics, politics and the law have all played a significant part in the development of taste--at least as important as the part played by collectors, who are themselves, after all, subject to economic and political events,” he has written in the book’s preface.

But he also counsels his readers, “Forget about ‘investing’ in art. If money is all you are interested in, look upon the art market as a speculator’s market. Wait for a boom and then act quickly. This may not be a very attractive position to take, morally or aesthetically, but it is what the evidence suggests.”

Art in general performs only about half as well as other forms of investment, according to Watson’s calculations, and the track record of contemporary art is even worse. “The very nature of contemporary art is that most of it is a lousy investment,” he said in the interview. “It’s fair to say that 90% is going to crash.

“It has always been like that,” Watson said, pointing out long-forgotten artists whose works were hot sellers during their lifetimes. “It’s bound to happen. If this year’s people are the hottest there is and it follows that next year’s people are the hottest there is, this year’s people will stop being hot.”

What’s a contemporary art collector to do? Enjoy your passion, Watson advised. “It’s almost as if people have forgotten the point of art is to move you and the pleasure of living with it day in and day out,” he said.

For collectors who are determined to “invest” in contemporary art, Watson advises, “If you look back over 100 years, you find that contemporary art tends to go in schools. . . . What you get are artists developing in twos or fours or sixes, like the Impressionists, like the Blaue Reiter, like Hockney and the London School, like the Abstract Expressionists. What you should do is wait for this to happen and then listen to the artists. The artists invariably know who among them is the best or the better.

“But we have to face the fact that since the 1960s, there may have been no great artistic movements,” he said. “What’s happened since Pop art and Minimal art? Nothing. We’ve got Neo Geo and Neo-Expressionism and so on. But nobody thinks Sandro Chia is a great painter. . . . The critics who say there are no great artists around are right.” This is not a unique situation, according to Watson. “There were no great artistic movements in the middle part of the 19th Century, say between 1840 to 1860,” he said.

Watson believes the current economic climate is a depression rather than a recession. “But if you are a true collector, it’s just as interesting a time as it was in the boom days,” he said. “There have been some fascinating collections that have come up for sale, not just in paintings but in prints and books and so on. What you need to do is discover areas that are not as expensive as paintings and then buy works where there’s very obviously a lot of virtuoso craftsmanship. You’ve got very complicated ivories, enamels and fantastically intricate furniture.”

Art prices must stabilize at the pre-boom level that existed around 1986 before the market can move forward, he said. “We’re not there yet, but I think the sales we’ve seen recently (Impressionist auctions in New York and sales of Cezannes and a Kandinsky in London) show that we’re getting there and that people are beginning to feel that they like collecting again. I think the market will pull around this time next year, but I think it will come to the auction houses first and the dealers about 18 months after that.”