{"id":1407,"date":"2014-07-14T12:43:50","date_gmt":"2014-07-14T19:43:50","guid":{"rendered":"http:\/\/www.artsjournal.com\/worth\/?p=1407"},"modified":"2014-07-14T12:47:22","modified_gmt":"2014-07-14T19:47:22","slug":"the-cost-of-owning-an-art-collection","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/worth\/2014\/07\/the-cost-of-owning-an-art-collection\/","title":{"rendered":"The cost of owning an art collection"},"content":{"rendered":"

\"Hmm,<\/a>Scott Sumner reckons the cost to the City of Detroit in owning (or giving away to a nonprofit) the collection at the Detroit Institute of Arts is about $185 million per year<\/a>. He obtains this number not through looking at the cost of maintaining the collection, and paying the necessary personnel and building costs, but simply through foregone interest, assuming that cash invested in financial instruments could yield 5% return per year, and that the art could be sold for $3.7 billion. If we lower the assumed 5% and\/or $3.7 billion, then the $185 million per year figure also falls – the math is simple.<\/p>\n

But the concept isn’t. Let me give an example. A couple I know just recently sold their home in Vancouver, Canada. They had become ’empty-nesters’, and considered moving to an apartment. They owned the house outright, having paid off over time a 30-year mortgage, bought for a low price in 1970. The average house price in metro Vancouver is now $670 thousand<\/a>. They had become used to the pleasure of having no mortgage payments to make, but were now facing the prospect of paying rent to a landlord. Could they afford the expense? After all, except for property taxes and maintenance, they could live ‘for free’ in the house.<\/p>\n

But that’s a mistake. Living in a house in Vancouver, even with no mortgage, is very<\/em> expensive. That’s because you have, on average, $670 thousand dollars of capital tied up that could otherwise be earning a return elsewhere. There is an opportunity cost to having your capital invested in home-ownership, even when you have no mortgage. And that must be taken into account when comparing renting vs owning (as this handy calculator<\/a> from the New York Times<\/em> does).<\/p>\n

And so, in thinking about the ownership of a significant collection of art by Detroit (or any city), the opportunity cost of the capital should be taken into account, along with all the other costs and benefits of preserving the collection in that place.<\/p>\n

Does that mean they ought to sell the art? I’m not saying – I don’t have special insight into how people of that city value having the collection. Should they consider all the costs and benefits in making the decision? Absolutely.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Scott Sumner reckons the cost to the City of Detroit in owning (or giving away to a nonprofit) the collection at the Detroit Institute of Arts is about $185 million per year. He obtains this number not through looking at the cost of maintaining the collection, and paying the necessary personnel and building costs, but […]<\/p>\n","protected":false},"author":3,"featured_media":1409,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26],"tags":[],"class_list":{"0":"post-1407","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-issues","8":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/07\/DIA-opportunity-cost.jpeg","jetpack_shortlink":"https:\/\/wp.me\/p3dIW5-mH","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1577,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/10\/art-and-the-estate-tax\/","url_meta":{"origin":1407,"position":0},"title":"Art and the estate tax (updated, again)","author":"Michael Rushton","date":"October 7, 2014","format":false,"excerpt":"The New York Times reports on the Elkins case, involving a victory for a wealthy family in a legal fight with the IRS on estate tax owing on a valuable art collection. This is the quote that caught my attention: \u201cMy genuine view is this is a great result for\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"'cause I'm the taxman...","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/IRS.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/IRS.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/IRS.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":363,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/02\/museums-amusement-parks-and-cable-tv\/","url_meta":{"origin":1407,"position":1},"title":"Museums, Amusement Parks and Cable TV","author":"Michael Rushton","date":"February 24, 2013","format":false,"excerpt":"Should museums charge visitors according to the length of their visit? \u00a0In a recent paper Bruno Frey and Lasse Steiner argue they should. We pay per hour when we park our cars, so why not when we go to view art? This question came to mind during the recent flare\u2026","rel":"","context":"In \"bundling\"","block_context":{"text":"bundling","link":"https:\/\/www.artsjournal.com\/worth\/tag\/bundling\/"},"img":{"alt_text":"\"Zero marginal cost, you say?\"","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/02\/Family_watching_television_1958-300x279.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":528,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/03\/museums-are-not-expensive\/","url_meta":{"origin":1407,"position":2},"title":"Museums are not expensive","author":"Michael Rushton","date":"March 26, 2013","format":false,"excerpt":"New York's Metropolitan Museum of Art is being sued for strongly suggesting that its \"recommended\" donation for entry is in fact required of visitors. Associated Press reports: 'The museum was designed to be open to everyone, without regard to their financial circumstances,' said Arnold Weiss, one of two attorneys who\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"a bargain!","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/03\/met-prices-300x199.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1767,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/12\/price-discrimination-in-the-air\/","url_meta":{"origin":1407,"position":3},"title":"Price discrimination in the air","author":"Michael Rushton","date":"December 26, 2014","format":false,"excerpt":"Two articles this week on price discrimination by airlines, both written in the context of how crummy the low-priced options are. Slate's Alison Griswold writes: In a paper published last summer on strategic consumer behavior, a pair of researchers found that advance, online purchases of discounted airline tickets were disproportionately\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"so civilized","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/12\/airplane.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/12\/airplane.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/12\/airplane.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":1129,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/03\/the-future-of-nonprofits\/","url_meta":{"origin":1407,"position":4},"title":"The future of nonprofits?","author":"Michael Rushton","date":"March 16, 2014","format":false,"excerpt":"Commercial or nonprofit? In studying the cultural sector one of the key questions asked is why we see both kinds of firms in the arts, where nonprofits are more concentrated in some sub-sectors than in others, and I pose the question to my students: how does an entrepreneur choose the\u2026","rel":"","context":"Similar post","block_context":{"text":"Similar post","link":""},"img":{"alt_text":"zero marginal cost?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/teapot.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/teapot.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/teapot.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":1189,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/03\/deaccessioning-as-a-singular-event\/","url_meta":{"origin":1407,"position":5},"title":"Deaccessioning as a singular event (updated again)","author":"Michael Rushton","date":"March 26, 2014","format":false,"excerpt":"The Delaware Art Museum is planning on selling some works to pay off debt. The New York Times reports here, noting that \"selling works to pay for operations or capital projects is widely considered an ethical violation, a betrayal of a museum\u2019s role of holding art in public trust\" (and\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"in debt","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/DAM.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/DAM.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/DAM.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/DAM.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/1407","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/comments?post=1407"}],"version-history":[{"count":0,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/1407\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media\/1409"}],"wp:attachment":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media?parent=1407"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/categories?post=1407"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/tags?post=1407"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}