by Donald Kennedy

Value, Like Good Wine, is Subjective

*Today’s piece is inspired by a sentence I read in Fakes, Frauds, and Flimflammery by Andreas Schroeder (1999).

First some background

Throughout history, economies revolved around establishing the economic value of goods and services. Money was invented to establish a proxy for value, to eliminate the need for bartering in terms of exchanging products between parties. Without money, there would be no buyer or seller, as each person would be exchanging something for something else, being both a buyer and a seller simultaneously. Money solved the problem of how to buy a loaf of bread when all you have to exchange is a cow. In a totally rational, transparent and free market system using currency to represent value, one could conclude that it would be impossible to engage in a profitable endeavor considering everything should be worth the same to everyone.

Value is in the eye

But thankfully, value truly is in the eye of the beholder. A person in a small house with three sofas will put a lower value in the third sofa than a person with a large house with zero sofas. I have an interesting example of value being very difficult to predict in many situations. During an ASEM conference, I stopped in at the St. Louis Art Museum. I was surprised to see so many paintings by Modigliani and how the museum seemed to be making a big deal of it. I knew Modigliani from Art History class, but he was not one of my favorites. Therefore I was shocked to see that 3 of the top 30 highest prices ever paid for a painting by this artist. Someone valued one of his works at $170 million.

The Story of "Emyr de Hory"

Elmyr de Hory lived from 1906 to 1976. He spent much of World War II in prisoner of war camps. Upon his release, he attempted to make a career as an expressionist artist who had studied with some of the more popular artists in Paris. The shaky economic conditions of a war torn Europe proved to offer few customers willing to see value in his creations. De Hory slowly turned to reproducing works and passing them as originals. De Hory did not make very much money forging masterpieces, but unsuspecting art dealers got rich trading in his work. De Hory was good enough that one expert specializing in Raoul Dufy paintings became so familiar with De Hory’s hand that he began rejecting the authentic paintings as fakes.

De Hory was eventually exposed for producing forged works. One dealer, Joseph Faulkner traded many of the forgeries and tracked down a victim who paid a considerable sum for a Modigliani that proved to be a fake. Faulkner offered a full refund to the customer. Some people would value a forgery as worthless and feel cheated. However, this customer did not see it that way. Their rationale was that they had ten years of enjoyment proudly displaying this painting to guests. Some words did not make the painting look any different. The value he placed on the painting somewhat increased by learning the true story behind his possession. The customer simply requested Faulkner certify on the back of the painting that it was an authentic de Hory forgery, which Faulkner readily agreed to do so.

Quick Conclusion

The value of something can be difficult to predict. Finding the difference in value between parties drives the economy.

About the Author

After spending decades in heavy industrial construction, long time contributor Dr. Donald Kennedy, CPEM FASEM continues to work in manufacturing for the foreseeable future.