CITYECONOMIST | Dec. 18, 2015–220K Pageviews–Top 10 Posts.

Thank you for reading. The ten most-read posts in December 2015 were:

TECH GROWTH | NYC Firms Top Inc. 5000 List Sep 1, 2014

OBIT | John E. Zuccotti (1937-2015) Nov 28, 2015

OBIT | Adele Wick, Economist (1950-2015) Dec 10, 2015

FOMC | Job Numbers Mean EZ Decision Dec 4, 2015

GLASS-STEAGALL | Why Moyers Likes Stockman Dec 9, 2015

WINE BIZ | NY State Planning to Do a Bad Thing Nov 23, 2015

LOSS | Terror Attacks – Paris vs. 9/11 (Postscript... Nov 16, 2015

NYC More Catholic, Jewish, Muslim Feb 15, 2008

LOUIS XIV | Finance Minister Fouquet's Folly (Upda... Oct 1, 2015

ART BIZ | "Van Gogh Just Sold One Painting" Is a C... Mar 16, 2015

LOSS | Terror Attacks – Paris vs. 9/11

The Physical-Human Losses to Paris Were Smaller than to NYC
 on 9/11, but Economic Losses May Be Greater Relative to Size.

November 16, 2015–As the chief economist for two different New York City Comptrollers in 1993 and 2001, I was required to prepare official numbers for the economic loss to New York City of both of the terrorist attacks on the World Trade Center.

A colleague has asked me – "How do the economic losses from the Paris attacks compare with the New York City numbers for 9/11?"

NYC,  2001. Business leaders in New York City were fearful after both attacks.

• In 1993 it had been comforting that the attack could be dismissed as "the gang that couldn't shoot straight" because the explosives did relatively little damage to the World Trade Center (one post protected the next) and the driver of the rented truck used in the bombing tried to get back his deposit! He was of course quickly apprehended.
• In 2001, it was 100 times worse. The cost of higher insurance premiums and deductibles in 2001, the cost of installing new security protections in offices and residences all over New York City and alternative sites in suburban areas, was far greater. That doesn't take into account the national response of launching a military attack on Iraq. The first official estimate in 2001 of the economic loss to New York City of 9/11 was made within two weeks. It was in a range of $95 to $105 billion, approximately 100 times the economic impact of the 1993 attack. 

The first estimate was made when the loss of life from the World Trade Center alone was believed to be close to 6,000 people. The approach was to estimate the one-time loss of buildings, property and lifetime earnings of people who were killed, and then to add to this the present value of adverse business-location decisions.

Within three months, by the end of 2001, the business consensus on the economic impact settled at about $80 billion, about 8 percent of NYC's current gross product.  The drop in the economic impact estimate occurred because:

• As more survivors were identified, the estimate of the number of dead was lowered from 6,000 to 3,000 (including deaths from the Pentagon attack and all four crashed planes).  
• Early on, the fear was that many businesses would relocate to New Jersey and Westchester County. In fact, many large companies acquired alternative office space in these areas. But few moved out.
• With the election as Mayor in November of a successful member of their own fraternity – Michael Bloomberg – business leaders believed that their fears would be addressed fully and competently.

Paris, 2015.  The threat to Paris and to France from terrorism is greater than in New York City and the United States:

• France is more dependent on Paris than the United States is on New York City. The NYC metro area accounts for 8 percent of U.S. gross product, whereas Paris accounts for one-fourth of French gross product. 
• France is much more dependent on tourist revenue than the United States, and Paris is the main gateway.
• The $17 trillion U.S. economy has well-monitored borders with Mexico and Canada and has invested heavily in Homeland Security. The less-than-$3 trillion French economy must cope with borders – in places porous – with Belgium, Luxembourg, Germany, Switzerland, Italy and Spain, not to mention the high volume of traffic to and from Britain. France has reportedly  suspended its commitment to the Schengen Agreement on open borders, which will entail new costs.

On the other hand, the regional and national alternatives to NYC for large American businesses are greater than for businesses in Paris that wish to remain in a francophone environment. It would probably be harder to pull up stakes from Paris and move to a suburban location or another French city because Paris uniquely dominates France, as London dominates Britain.

Based on these considerations, the Paris of the Hebdo and November terrorist attacks could add up to an economic loss for Paris less than but approaching the percentage estimated for the 9/11 attacks. The 8 percent figure applied to the metropolitan Paris economy would come to nearly $6 billion.

The USA and France.  The attack imposed large costs on the Federal Government – on the Federal Reserve System to fund the liquidity crisis immediately after the attack as well as a $20 billion commitment of grants and loans by the Federal Government to compensate New York City for losses in what was properly considered an act of war.

The cost of the damage to New York City was also spread to the rest of the country via private insurance payouts (insurers were not allowed to hide behind Act of God or Act of War clauses) and higher insurance premiums,

An interesting 2010 article in the journal Peace Economy, Peace Science and Public Policy by USC and Claremont economic professors Adam Z. Rose and S. Brock Blomberg, “Total Economic Consequences of Terrorist Attacks: Insights from 9/11”, concludes that the initial economic loss to the USA from 9/11 was at least $75 billion, or three-quarters of a percent of GDP.  This is not necessarily inconsistent with the New York City number because migrations of businesses out of New York City within the United States would not be a loss to the United States, so the national number could well be smaller than the local number at the center of the attack.

The authors make an important point that was always clear to me, namely that psychological factors are crucial for determining the ultimate economic loss from an attack. As they say:

[W]e, rather than the perpetrators, are the major determinant of the consequences of a major terrorist attack. After 9/11, our resilience was high, but so was our fear [... ]. [S]ubsequent anti-terrorist initiatives at home and abroad were more costly than the direct damage caused by the attack.

The United States has invested $650 billion since 2001 in Homeland Security. The French commitment before the latest attack was a little more than one-thousandth of that. France will have to spend more, and the United States needs to assist. American concern about terrorism is greater now than it was after the Boston Marathon attack.

ART BIZ | Did Van Gogh Sell Just One Painting? (Updated Aug 19, 2018)

Vincent van Gogh, Self-portrait (L) and Brother Theo (R). 
Theo financed Vincent's painting career. Both died much too young.

March 16, 2015–On this day in 1901, Vincent van Gogh's paintings were shown at the Bernheim-Jeune Gallery in Paris, his first major show–11 years after he died–with 71 paintings in the show.

The exhibition made it easier for other avant-garde painters to exhibit, like Gauguin and Matisse in the coming years.

Garrison Keillor tells this story today in The Writers Almanac, and says  that van Gogh sold only one painting in his lifetime. That perspective is repeated many times on the web. It needs to be challenged:

• Dealers often buy paintings and hold them until the marketplace catches up with the dealers' estimate of the paintings' value.
• The quality of van Gogh's art was well recognized by other artists and dealers during his lifetime.
• Vincent's brother Theo–his brother and an art dealer–gave him money to live on and to buy art supplies with.
• Even though Theo was an art dealer, historians describe the money he gave to Vincent as charity. Why?
• When Theo gave his brother money and at the same time took possession of the paintings, he was buying the paintings. 
• Theo invested so heavily in Vincent's expensive art materials and provided enough cash for living expenses that Vincent could not be described as poor.

The full story of Vincent's and Theo's relationship is emerging as van Gogh's letters are transcribed, translated, indexed and made available by the Van Gogh Museum. The details of Vincent's and Theo's finances are becoming easier to follow:

• Yes, The Red Vineyard, now rated the most valuable painting in the world after the Mona Lisa, did not sell until the year before Vincent's death. 
• But before that he did sell a lot of his art–and the relatives who purchased it were connoisseurs. 
• As mention, his art was greatly appreciated by other artists. 
• Theo's charity could be considered an investment in Vincent's art.
• The detailed financial records now available do not show Vincent to have been poor.

If poverty means you don't have money to spend, Vincent van Gogh was not poor. He was often broke, mainly because he denied himself little:

• He spent freely on the materials for his art–paints, canvases, sketching supplies – in addition to the materials that Theo purchased for him at his request in Paris.
• On an impulse he purchased 21 volumes of The Graphic.
• As needed, he paid money for models–in 1882 he was paying his model Sien one guilder per day.
• He moved to where he felt inspired, and purchased what was required to settle in. When he moved at the end of his life to a rented house, the "Yellow House", in Arles he purchased 12 chairs for it.
• He spent money daily on self-indulgences like coffee, tobacco, alcohol, prostitutes (at two francs, F2.00, per visit, sometimes F3.00). [Letters 304, 659, 699, 677 on the Van Gogh Museum Letters website.]

Vincent Sold His Art

Vincent did sell his art to his relatives, who were experts and dealers in art. Theo claimed the right to buy and sell Vincent's art. Vincent had a background in art pricing and he estimated the value of his art highly: 

• Three children of the grandfather of Vincent and Theo van Gogh, also named Vincent, became art dealers. 
• Vincent's Uncle Cor commissioned 12 pen drawings from Vincent for 2.50 guilders ($20) each, i.e., for $240.
• Theo interpreted his willingness to pay Vincent as part of a dealer's bargain with his client.  “I regard the money I give him as payment for his work,” he told Mrs. van Gogh in 1885. We should take him at his word. [Letter 442.]
• In April 1888 Vincent wrote that he valued his best paintings at F1,000 each (about $4,000). The art world eventually met and streaked passed Vincent's own estimate of his paintings' worth.
• Vincent van Gogh had a short career as an artist – he started late and died young. This affected his ability to build up a reputation as an artist during his lifetime. But it also meant his art had scarcity value after he died. If he had lived longer his art would surely have appreciated in value during his lifetime, but an individual painting might not be so valuable today.

Theo Was an Investor

Theo was well positioned in this business, dealing in the 1880s with Oscar-Claude Monet, Camille Pissarro, Edgar Degas, Henri de Toulouse-Lautrec, Paul Gauguin, Emile Bernard, Paul Signac, and Louis Anquetin. When in 1888 Theo sold Gauguin’s Breton Women Chatting for F600, about $2,400, it showed a strong demand for the work of the painters that Theo represented.

Theo valued his brother's paintings and was well-informed about the art market, enough to know how and where he would sell Vincent's art in due course. Theo surely had every intention of making money from them.  He didn't expect that first Vincent and then he would die very young. For him, investing in his older brother was an investment in a long-term, appreciating asset.

The money Theo gave to Vincent wasn't a large percentage of his income and was not, for the most part, a great burden. Theo gave money to his brother affectionately and without any evidence of reluctance. I believe Theo's attitude is that he was investing in Vincent and was willing to wait for a return. Theo must have felt that, taken as a group, he and his clients couldn't lose by investing in his stable of artists. In retrospect, he was absolutely right. He might have even suspected that his brother's art would one day command a higher price than the art of any of the others.

From the letters, it does look like a beggar-to-donor relationship. The reason Vincent wrote so many letters to his brother Theo is that Theo happened to include money with so many of the ones he sent to Vincent. Vincent’s request “Write to me soon” was often a euphemism for “Send me money quickly”.  When Vincent writes “Thanks for your letter”, the context suggests: “Thanks for the remittance”. [See Letter 204 on the Van Gogh Museum Letters website.]

La reconnaissance de la plupart des hommes n'est qu'une secrète envie de recevoir de plus grands bienfaits. (Often translated loosely: “Gratitude is the lively expectation of favors yet to come.”) - François de La Rochefoucauld

I don't think this detracts from Theo's generosity. But it does undermine the idea that Vincent never sold any paintings. His brother Theo was implicitly buying them, one by one, on consignment.

The P&L of Vincent and Theo, 1872-1890

I'm not basing my contrary perspective on a hunch, but on the letters of Vincent and Theo about their yearly profit and loss.

1872. Vincent's first recorded job appears to be at the Goupil & Cie gallery in The Hague at 18. At 19 years old he wrote a letter to a client about a visit in October 1872 to the W. P. van Stockum antiquarian bookstore and auction house, where art was apparently auctioned as well as books. It is family lore, passed on to me by my mother Hilda van Stockum, that Theo worked for the W. P. van Stockum firm, perhaps as what we would call today an "intern". Vincent may also have started working there.  The experience they both would have gained would help explain why Vincent and Theo were hired at a very young age doing sophisticated work for firms based in Brussels and Paris. They must have made a name for themselves as knowledgable about art and about auctions. The van Stockums were well known in the Hague and both Vincent and Theo knew Willem Jacob van Stockum, after whom my uncle was named. He married Carolien Haanebeck, a van Gogh relative. The van Gogh family was well known in the book and art business, but not so much in the Hague. [Letter 001a.]

1873. Vincent earned a good salary in 1873 - 50 Dutch guilders per month in 1873, roughly $400. Theo, four years younger, was paid 38 guilders a month.[FR b2683.]

1876. Both brothers passed on part of their salaries to their parents. When Theo was given a raise and a bonus of 15 guilders ($120) in 1876, he donated some of it for his sister Willemien’s education. [FR b2225-6.]

1879. Vincent lost his job with the art gallery and his replacement jobs were poorly paid - instead, he became a paid evangelist, starting in January 1879, doing Bible readings, Sunday School and visiting the sick. His pay in Belgian francs was BF50 a month, of which he paid out in turn 60 percent of it on rent. [FR b2456-b2457.]

1880. In June, Theo’s support of Vincent is first mentioned. "I learned at Etten that you had sent 50 francs for me; well, I accepted them. … [W]hat else can one do?” His parents also contributed to Vincent's expenses occasionally - in June they sent him a parcel of clothes and F60. In October, when Vincent went to live in Brussels, Rev. van Gogh, his father, sent him BF60 (Belgian francs) a month, of which BF50 was spent on his lodgings. [Letters 155 and 160 and FR b2494.]

1881. Theo’s income rose in 1881 when he was put in charge of the Goupil branch on the Boulevard Montmartre. His father was pleased that Theo could make a bigger financial contribution to the family: "It is really very kind of you to want to pay part of Vincent’s expenses.” Vincent in April 181 was told by his father of Theo's generosity and he said: "I heard from Pa that you’ve already been sending me money without my knowing it, and in doing so are effectively helping me to get along. For this accept my heartfelt thanks." Later: "I damned well hate having to give Pa an account of every penny." [Letters 164, 192, FR b2235.]

1882. The remittances were regularized and were linked to Vincent's living expenses. From June 1882 Theo sent money three times a month on or around the 1st, 10th and 20th of the month. For Vincent these remittances were "most welcome". Sometimes it was F100 ($400) a month, sometimes F150 ($600), nearly ten times what a factory worker was paid in 1870 to support a family of seven. In 1880 a good seamstress earned only about 6 guilders ($48) a week, and a laborer around 10 guilders ($80). The Dutch poor relief gave mothers a maximum allowance of 1.50 guilders ($12) a week, plus bread. [FR b1706]

1883-1887. Vincent paid 14 guilders ($112) a month rent in The Hague in 1883. He preferred having his payments from Theo spread out because that reduced the chance that he would run out of money too soon. With the exception of the years when he was living with Theo in Paris, and in Saint-Rémy,  the payments were made to Vincent monthly. [Letter 234.]

1883. When Theo fell in love with Marie in 1883, he also started supporting her. Later, he increased his spending on his wife Jo and the infant Vincent Willem. [Letter 394.]

1888. Theo reassured his elder brother not to worry about debts: "You talk about money that you owe me and and that you wish to pay back to me. I know nothing of that.” Why not take him at his word? He kept track of his spending so that later he would have a basis for claiming ownership of some of the paintings he acquired. Others he might sell and just keep the dealer's commission.

• In Arles, the sums paid to Vincent rose considerably, to about about F2,300 ($9,200) between his arrival on February 20 and and Gauguin’s at the end of October. 
• Theo also paid for much of the paint and canvas that Vincent needed. He appears to have promised Vincent F50 a week. When Gauguin was visiting, the five remittances were for F100 ($400), plus an emergency payment of F100 before that, so the total from the end of February to the end of 1888 was F2,900 ($11,600), about what Vincent seems to have spent on furnishing the Yellow House. 
• The F250 ($1,000) a month he had to spend compares favorably with the F135 ($540) a month that his friend the postman, Joseph Rollin, had to feed his family of five. 
• From May 1888 on Vincent spent F30 ($120) a month for his hotel and F15 ($60) a month to rent the Yellow House as a studio. 
• He ate his meals in a restaurant for F1.50 ($6) a day.
• In May-September he paid F90 ($360) a month for bed and board (excluding the bar bill). That fell to F60 ($240) a month in the Yellow House. 
• The cleaning woman was at first paid F4 ($16) a month, which rose to F20 ($80) a month when Gauguin was staying there. 
• So Vincent had F100 ($400) over for the rest of the month and F130 ($520) when he moved out of the hotel.
• Vincent ordered his paints and canvas from Paris, through Theo, who therefore paid the bills. Vincent occasionally purchased canvas and stretchers. The latter cost F1.50 ($6) or less each, depending on the size and frames , which cost about F5 ($20) each. [Letters 592, 676, 681, 683, 713, 736, 738, 762.]

1889. In 1889 Vincent wrote: “You’ve given it [money] back to me several times over, both by your work and by a brotherly affection.” In January-May 1889, Vincent paid F21.50 ($86) a month for the Yellow House, renting two more rooms. He also bought a black velvet jacket for F20 ($80), a suit for F35 ($140), and six pairs of socks for F4 ($16). He spent F25 ($100) to install gas in the Yellow House so he could work at night. For Vincent’s one-year incarceration in Saint-Rémy from May 1889, and his stay in Auvers-sur-Oise from May-July 1890, Theo paid F3,310 ($13,240). Vincent's time in the asylum in Saint-Rémy cost F100 ($400) a month. Theo itemized his income and expenditure for 1889, reserving F250 ($1,000) a month for Vincent. That year he also gave his mother F1,000 ($4,000) and Willemien and Lies F678 ($2,712. Vincent felt guilty about Theo’s expenses. In May he wrote: "The money that painting costs, that crushes me under a feeling of debt and of cowardice, and it would be good for that to stop if possible". [Letters 669, 709, 760, 767 and FR b2206. Account book, 44-45.]

1890. In March 1890 Theo sold Vincent’s painting The Red Vineyard to Anna Boch for F400 ($1,600). The painting today is rated the second most valuable in the world. This price was a fraction of the cost of Vincent's painting materials in the 13 months starting in June 1889, as Vincent was filling many canvases with some of his best work. "Vincent’s account" lists slightly more than F900 ($3,600) for materials supplied by the firm of Tasset & L’Hôte, and nearly F400 ($1,600) for Tanguy. Theo meanwhile signed a favorable contract with Boussod et Valadon in August 1890. It was backdated to take effect from 1882, perhaps creating what we call today a “signing bonus.” Theo was paid a salary of F4,000 ($16,000) a year, with a bonus of 7.5 percent of the net profit of the branch he managed, which for 1882-90 came to more than F8,000 ($32,000). So in 1889-1890, he was paid about F12,000 ($48,000) per year. From this Theo paid Vincent an average of less than F2,000 ($8,000) per year, i.e., less than 16 percent of his income. Theo also sent money home to his parents, and thus contributed to the upbringing of his sister and his brother Cor. [Letter 855, Account book 2002, pp. 44-45, 139.]


Without discounting Theo's love of his brother, there is no need at the same time to assume that his support of Vincent was strictly charitable. He knew quality paintings and he knew he was getting value for money. So the talk about "only one painting being sold" omits the fact that so far as Vincent was concerned his work went right out into the hands of a friendly art dealer, who gave him enough money to support himself well.

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Free Biking in Paris

Free Biking in Paris. May is Bike Month NYC, according to Transportation Alternatives, so it's a good time to report on a trip up and down the Seine with my wife Alice using the Velib' ("Velo-libre" or "free bike") system. This is the less-than-a-year-old brainchild of the socialist Mayor of Paris, Bertrand Delanoe. Paris has more than 230 miles of well-marked cycling lanes and the Velib' has been a big success with more than 20 million trips as of this month, or 70,000 trips per day. At this pace, by the first anniversary on the day after Bastille Day, July 15, the Velib' will have attracted an amazing 25 million trips. To add our two more trips to the counter, we first buy a Velib' map, sold at any newsstand. The Google map of Paris has its green arrow pointed exactly to where we decide to join the Seine from the north. We decide to start with the bicycle route on the north (right) bank of the Seine headed east, ride this until the Seine-side bicycle path ends (it goes north), then cross over the Seine and take the bicycle path west on the south (left) bank to the Branly Museum. Our trip has some lessons for New York City and other cities! A friend of mine from Lyons says the free-bike movement started there but Amsterdam had the white bikes years ago and may have been first. The problem in Amsterdam is that the bikes got stolen and were just repainted. Harder to do with the easily identifiable Paris bikes, and anyway they get your credit card and the locks are pretty secure. Washington, DC is experimenting with a much smaller program than the one in Paris. To continue, click here (map and photos included).