The National Trust, which helps preserve England’s heritage, is pleased with itself. The Trust announced last week that a painting of a raffish Dutch gentleman wearing a white feathered hat, on display at Buckland Abbey, is in fact a self portrait by Rembrandt.  The discovery followed restoration  and expert assessment of the picture by scientists and art historians.

        At the time news of the work’s provenance broke, I happened to be visiting Eurostat, the Luxembourg based organisation which tries to keep Europe’s books in order.  So my thoughts naturally turned to the question of the  impact of this event on Britain’s national accounts.

        The National Trust estimates that the value of the painting is £30m. There is of course no intention of selling it –  the Trust is legally prohibited from selling many of its properties although that restriction does not apply in this particular case.

  Readers familiar with International Financial Reporting Standards will recognise that the £30m figure appears to be a ‘level two’ estimate of fair value. Although there is no direct evidence on what a buyer might pay for this particular Rembrandt, its value can be inferred from market transactions in similar assets.  Curiously, however, a specific statutory exemption for the National Trust allows it to ignore that fair value in compiling its accounts.

But that exception does not apply to Britain’s national accounts. Nor does IFRS help resolve the question which national accounts statisticians must determine. Or the similar issue that should concern those who draw up and interpret company accounts. Who created that £30m value – and when?

The restoration and evaluation by the National Trust transformed an item of modest worth – a work by an ordinary Dutch master might command a modest six figure sum – into one of the most valuable pictures in the country.  But it seems absurd to credit the operations of the National Trust, or the gross domestic product of the UK in 2014, with adding almost £30m of value:  it was plainly Rembrandt, not the National Trust, who created the work.

So perhaps Eurostat should be demanding a restatement of the national accounts of seventeenth century Holland.  (In fact there weren’t any – the first such calculations were those William Petty made for England twenty-five years later).  But Rembrandt’s self portrait wasn’t worth the equivalent of £30m in 1635. Self portraits are not a very marketable proposition and, although he sold some of his work at high prices, Rembrandt was a better painter than businessman. His commercial portrait business left him bankrupt.  Perhaps the credit for value creation  should go to  subsequent generations of art dealers who made Rembrandts prized objects. 

      Van Gogh notoriously failed to attract patrons for his work during his lifetime but its value would today run to many billions.  Was this value established by him, or by his sister-in-law Johanna Bonger, who became his highly successful promoter. Or was it created by the museums, galleries and collectors displaying  his work?

These issues may not seem to matter much because fine art is a small proportion of economic activity.  But exactly the same issues apply to the treatment of financial services, which certainly are a large proportion of economic activity. (That contrast is in itself illuminating)

The economic purpose of the financial services industry is to establish a market  for securities representing underlying productive activities.  What part of the value that is created relates to original productive activity, (what Rembrandt, or Steve Jobs, did); to  the promotion of that activity (what Johanna Bonger did, or Morgan Stanley does); or to the discovery of inherent but unappreciated value (the  achievement of the National Trust, or Warren Buffett)?

The general principle is to distinguish profits from services which add to the value of an object or activity (Rembrandt’s craftsmanship) from those which result from changes in expectations of value (the Dutch tulip bubble which was in progress as he wielded his brush). That principle is useful both in understanding the sources of corporate success and measuring the productive capacity of an economy. It is a principle difficult to apply in the fine art market – or the finance industry.  But my instinct – and I suspect the instinct of most other people – is that while we need the services of dealers, varnishers and critics, what we need most of all is Rembrandts.