Our story starts in the Netherlands with a museum director who wanted a painting by John Constable. In London, an art dealer had precisely what he was looking for. The two got together and agreed that the painting would be sent to the museum.
There was one glitch.
Paying For the Painting
The museum could not pay for the painting. However, by showing the painting to several donors, the director secured the purchase price. He just had to wire the money to the seller.
But then the unexpected happened.
The museum received an email that changed where the money was to be sent. Instead of its original destination, the $3.1 million was wired to Hong Kong. And then it disappeared.
The museum says the Constable painting belongs to it because they sent the money. The seller says it is the legal owner of the Constable since it never got paid. Each side says the other was hacked.
A court recently declared the museum could not sue the art gallery for negligence. But they need to decide much more. Someone has to own the Constable painting.
The court will decide.
Our Bottom Line: Private Property Rights
In a market economy, clearly articulated private property rights are crucial. Only then can goods and services be bought and sold with minimal transactions costs. Only then will owners be willing and able to improve and innovate. And, only then, would a buyer be willing to transfer the purchase price.
At first, the art gallery and the Dutch museum could negotiate the sale of the Constable because everyone knew who owned it. Now, until the courts clarify ownership, that painting is going nowhere.
It will remain at the Rijksmuseum Twenthe in Enschede, Netherlands:
Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.