Why Picassos are going to keep selling for record-breaking prices

Pablo Picasso's REUTERS/Darren OrnitzA man pauses to look at Pablo Picasso’s ‘Les femmes d’Alger (Version ‘O’)’ (Women of Algiers), estimated at $US140 million, at a media preview for Christie’s May 11 impressionist, modern and contemporary art sale.

This week, an art collector paid almost $US180 million for a single artwork by Pablo Picasso

That’s a record for a public sale of art (though not close to the actual record if you include private sales).

Over at the Upshot, Neil Irwin folds this into the inequality story: the rich are getting exponentially richer, while most people see their incomes stagnating. And you can see how much richer the wealthy are getting by looking at skyrocketing art market prices: 

One of the most important findings of the leading economists who study inequality is that wealth and incomes at the very top are “fractal.” What they mean is that when you zoom in on the upper end of wealth distribution, patterns repeat themselves in an ever more finely grained pattern.

Partners at law firms who are in the top 1 per cent of all earners have seen their incomes rise faster than successful dentists who are in the top 10 per cent. But by a similar margin C.E.O.s of large companies who are in the top 0.1 per cent are seeing incomes rise faster than those law firm partners. Hedge fund managers in the top 0.01 per cent are similarly outperforming the C.E.Os.

And the kind of people who can comfortably afford to pay a nine-figure sum for a Picasso, the top 0.001 per cent, say, are doing still better than that. You can draw that conclusion by reading the work of the French economists Thomas Piketty and Emmanuel Saez. Or you can form it by looking carefully at the market for the work of a certain Spanish painter.

He goes on to point out that the number of people who are able to “afford” the painting  — assuming they are willing to pay “1 per cent of net worth” and their net worth according to the Forbes billionaire list is correct — has increased by a lot since it was last sold in 1997. 

More very wealthy people, continuously getting wealthier, means the price for very rare luxuries are going to skyrocket. We shouldn’t be surprised to see more record prices for art, jewellery, wine, classic cars, and other prized collectibles. 

At least until they go out of fashion.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.