Intrinsic value is a somewhat controversial topic in the investing world. For example, I have read a surprising number of investment articles that offhandedly claim that “gold has no intrinsic value.” I’ve found this viewpoint to be rather odd. After all, if gold has no intrinsic value, then what in the world does? Dictionary.com defines the word intrinsic as “belonging to a thing by its very nature.” This isn’t a bad starting point, but isn’t perhaps as self explanatory as we would prefer it to be. In any case, what follows are my musings on the meaning of intrinsic value and how it specifically applies to the art and antiques market.
In my opinion, intrinsic value always applies to raw materials that can be recycled or reused. Metals most obviously fall into this category. A copper pipe can easily be melted down and fabricated into copper wire or copper roof trim. But other materials can be reused too, although none can be recycled with as much ease or as little waste as metals. Wood, for example, can often be salvaged from its original application and, with some processing, be repurposed into flooring, furniture, structural members or any number of other applications. In fact, there is a thriving industry in reclaiming and reusing old wooden structures like barns or log homes. Precious stones, too, can be recycled. In medieval times it was common for a gem to be pried out its original setting and then remounted. Sometimes the same gem would effortlessly and inevitably don a new, stylistically current setting every century or so, for hundreds of years in a row. And high quality gems are largely treated the same way today, their settings changing regularly with the whims of fashion.
However, just the mere fact that a material can be recycled does not truly confer intrinsic value in my opinion – at least not when talking about antiques. For example, both glass and paper can be recycled, but no one really thinks of these materials as possessing intrinsic value. I think that when talking about antiques there is a minimum monetary value that a recyclable material must attain before it can meaningfully have intrinsic value. I believe this value – admittedly arbitrarily set – is approximately $1 per pound or $2 per kilogram. Setting the minimum value bar here grants intrinsic value to the artistically important copper alloys while excluding iron, aluminum, lead and other, more plebeian metals.
So materials in the art world that possess intrinsic value can be broken down into three broad categories. Please note that the lists of materials I’m going to give here are obviously abbreviated and are not complete or exhaustive in any way. First are the metals: platinum, gold, silver and the copper alloys. Then there are gemstones like ruby, emerald, tourmaline, garnet, etc. and decorative stones like jade, agate, malachite and lapis lazuli. Lastly, I would include fine woods like mahogany, teak, rosewood, walnut and cherry.
When applied to the world of art and antiques, we find that some items naturally have a very high intrinsic value – like a platinum and diamond tiara – while others have little intrinsic value – like a bronze sculpture – and yet others have no intrinsic value at all – like a painting. Now art or antiques do not have to possess intrinsic value in order to be desirable. But, by the same token, art often employs the finest materials at hand and these are often blessed with intrinsic value. All else being equal, a work of art rendered in an intrinsically valuable substance should be more desirable – and hence worth more – than that same work rendered in a common material. And this should even be the case when prices are adjusted for the market value of the intrinsically valuable material used.
So a sculpture cast in solid gold should be innately more appealing to most collectors that the same sculpture cast in bronze, even if their artistry and workmanship are equal. The price difference between these twin sculptures of gold and bronze should be more than just the difference between the melt value of their respective metals. In other words, there should be a premium applied to the price of a work of art or antique produced from intrinsically valuable materials. Now the size of that premium is very much up for debate. But regardless of whether you are a connoisseur or an investor, it is prudent to spend some time thinking about intrinsic value and how it potentially impacts your art and antique purchases.
