-- Posted by Neil H. Buchanan
In an exchange of Dorf on Law posts recently, Professor Dorf and I expressed our disagreements with various philosophical justifications for orthodox economic, cost-benefit approaches to analyzing social problems. (My posts are here and here. Professor Dorf's post, sandwiched between those two, is here.) The immediate motivation for our posts was a NYT column by famed ethicist Peter Singer, who offered a highly stylized, loaded numerical example clearly designed to show that some moral dilemmas should not be especially controversial.
In particular, Singer described two alternative recipients of a philanthropist's money: a fund that will be used to build a new wing on an art museum, or a fund dedicated to curing victims of a blindness-causing disease called trachoma. Properly deployed, Singer informs us, $100 could prevent one person from experiencing 15 years of blindness. Singer then says that, even at ten times the cost, "in my judgment, and I bet in yours, seeing the new wing still would not be worth" the consequences.
I will leave it to readers to go back and read the posts here on Dorf on Law, if the spirit moves them. Unsurprisingly, Professor Dorf and I approached the matter from different directions, relying on our respective academic training, and landed at pretty much the same place. (Singer's example is powerful, but we both concluded that he fails to make the case for his economistic approach more broadly.) Here, I will briefly answer a query that arose on the comments board.
Part of the broader argument in my posts (drawn from a letter to the Times's editors) was that the long-term social benefit of supporting the arts is difficult to measure, but it is especially important to a society's moral health (including the likelihood that its citizens will even think to make moral choices in the first place.) A frequent commenter, in response to Professor Dorf's post, posed a much more pointed question. Notwithstanding the long-term benefits that the arts bestow on a society, what should a government do when it is extremely cash-constrained? In particular, what would Professor Dorf and I say to the leaders of the City of Detroit, who are dealing with a municipal bankruptcy in a city that owns a major art museum, the Detroit Institute of Arts (DIA). Should they sell the art to pay the bills?
The easy answer, of course, is that the city should receive help from the state and federal governments, making a fire sale of the city's assets unnecessary. We have good reason, however, to think that this will not happen. Detroit represents everything that the Republican Party hates (even before Republicans were further addled by the Tea Party movement). It is heavily black, it is a Democratic stronghold, it is a base of -- indeed, the virtual birthplace of -- unionism. The state government has been taken over by the new wave of Republican extremists, who add extra venom to the usual city/suburb (black/white) hostilities that Detroit and other cities regularly experience. Republicans in the federal government would hardly view Detroit as a priority.
So, the choices appear to come down to either cutting city services (which are already so defunded that it takes an hour for ambulances or police to respond to the average 911 call in Detroit), reducing the modest pensions of the city's retired civil servants, or selling assets like the art in the city's museum. What, the commenter asked, would we choose? Detroit's leaders obviously would not buy art today, for financial reasons, so should they not sell the art that the city owns, for the same reasons?
Professor Dorf responded: "As a psychological matter, the 'endowment effect' means that not buying
the art feels quite different from selling it. However, in this case,
it's not different enough, so I would think the right thing to do is to
sell the art to reduce the pain inflicted on municipal retirees etc." I added in a comment: "Although I would find it excruciatingly difficult to sign off on selling the Detroit Museum's collections, I would do so."
The commenter then asked a follow-up question: "Why is it excruciatingly difficult to sign off on the sale of the collection? I
understand Mr. Dorf's 'endowment effect' but I still argue from an
economic point of view that there is no difference between not selling
the collection and receiving a gift of $1 billion which is used to buy
an art collection." Good question.
In thinking about this question, I start from the premise that things will get better in Detroit, at some point. If they do not, then what we are observing is simply the final death rattle of a once-great city. In that case, deciding to sell the art would be difficult in the sense that it is difficult to admit an unpleasant reality. It is one thing to know that it is truly over, but the finality of it all is brought home by this type of decision. Still, if Detroit is now really "all dead" (as Miracle Max would put it, in The Princess Bride), then selling off the art to good new homes is just a matter of good liquidation management.
What, in my mind, makes it excruciating to think about selling the museum's art, is the idea that a potentially revived Detroit will be much better off with an intact art museum. This is not about an endowment effect. It is based on the idea that a great art museum is a unique asset, difficult to build and easy to destroy. It is highly likely that Detroit will have to sell the art for a lot less than it is worth, because the financial emergency facing the city is so dire. So, part of the difficulty, purely from a financial standpoint, is that it will be difficult to undo the fire sale, once the art is gone. Not impossible, but the kind of thing that almost always makes it a bad idea, taking account of all financial considerations, to engage in one-time sales of assets to pay ongoing expenses. If you do not think you should own the asset, you should sell it without consideration to broader financial needs. But if you do not think you should sell it as a general matter, then you should try not to sell it just to pay the bills.
The simplest analogy here is to a family that could buy groceries by selling family heirlooms. Generally, we try to avoid being in such a position, but sometimes disaster strikes. If it is possible to find a pawn shop, from which one can simply repurchase the family's heritage at the same price when times improve, then that is one thing. If, instead, the family will have to buy back for $10,000 what it sold for $500, then that it obviously quite a different matter.
It might not be different enough to mean that the family should not still sell, but the calculus changes. In one sense, therefore, my sense that it would be excruciatingly difficult to sell the art is based on my sense that I do not know -- and I cannot imagine that anyone truly knows -- how reversible this decision would be. Faced with nothing but bad choices, I still might approve the sale. But it is hardly obvious, even in this situation, that such a decision is really in the long run best interest of the city and its people. (Again, I am assuming that there is a possible long run for Detroit.) Keynes's famous line, "In the long run, we are all dead," of course, is what could force Detroit's hand.
I do not, however, think that it is accurate simply to say that Detroit's leaders might have to make that difficult, excruciating choice. In a sense, my hesitation is based in part on what I referred to above as "the easy answer": getting help from the state or federal governments. It is at least possible that this is a political stare-down, and that at some point people will realize that killing off a major city, even one as hobbled as Detroit, is a bad idea as a matter of state, regional, and national economic and social policy. Selling, or even merely hocking, the family silver might make it less likely that a better policy will be adopted. I am not saying that I view it as likely that help is on the way to Detroit, but I do not view it as a zero (or even only 10%) probability.
So, if I were in a decision-making position, it would be excruciating to think about selling the DIA's art to pay the immediate bills. There are more moving parts to that decision than it initially seems, and all of those additional considerations counsel at least extreme caution in undertaking something so radical as selling a major civic asset. Being extremely cautious is not the same thing as completely ruling out a course of action, but it is an excruciating choice.