Just a quick post here. Planetmoney did a good little podcast on the economics of art selling. As an art hobbyist, I found it intriguing because I do occasionally produce canvases, and I do occasionally have an opportunity to try and sell them.
The gist of the podcast is that the return on Bonds is always higher than the physical investment of a piece of art. Well duh. It turns out that one of the metrics of a how a painting is sold turns out to be popular swings in taste. Though not surprising, this can have alarming effects on the price of your art investment. A Van Gogh will always be worth millions, but if French Impressionism goes out of style, that could shave millions of dollars off your investment. Whereas your investment in a bond is by its very nature a fixed investment.
There is one thing that they don't talk about in the podcast which surprised me. Art is very fragile, and very space consuming. One of the things we learn about in economics is that money, by it's very nature has to be fairly easy to store, and it has to be easily divisible and difficult to counterfeit. There is a ton of risk in the art market that what you're buying is a fake, and moreover, if the housekeeper decides to dust the painting with dillouted ammonia, he'll destroy a 20m dollar investment in five minutes! Your whole house could burn down and everything in it, and a bond will still retain its value, so long as the company, or government which backs it continues to exist. It's funny too, because just the day before, "All Things Considered" ran its own podcast on the artmarket and they talked to an art seller whose client had had that very thing happen to him. His housekeeper ruined his investment.