The Economics of Art(icle)

There are increasingly few safe investments. The fluctuation of the stock market in recent weeks has reminded us just how tenuous our understanding of “value” truly is. Even our dollars, the very way that value is represented, continuously depreciate with every transaction. While we may imagine the financial value of a work of art is protected—safeguarded by the timeless aesthetic attraction of Rembrandt or Caravaggio—fades, changing tastes, unusual actors, and the not-so-dead-authors has resulted in an incredibly complex market. To introduce students to this complexity, in the final weeks of winter term, the Hood Museum hosted a lecture entitled The Economics of Art that explored the art market and determinants of value.

So what determines the monetary value of art in the market? According to the panelists: who the artist is—reputation drives the majority of value. If they are known as “the next big thing,” naturally, their work will be in higher demand and the artist will be inclined to produce more works. While this understandably drives an increase in price, one quirk of the market is that this increase in price does not necessarily lead to a decrease in demand as predicted by the laws of Econ 1. As the artist attracts more attention and sees an increase in price, it is common that they are offered more exhibits and shows which attract the attention of institutional buyers and more significant collectors. However, some forces can detract from the price regardless of the artist. If the medium is not considered “fine art” at the time, then there will be significantly less interest in the work. For example, photography was long considered an amateur form until its “emergence” in the 1980s. 

There is a significant difference in the behavior of institutional and private collectors. As a non-profit university museum, the Hood’s collection focuses not just on the monetary or even aesthetic value of pieces but their cultural importance and role in supplementing our curriculum. Price is almost exclusively considered when buying works and selling items from the permanent collection is rare and only acceptable if done to purchase other works. To deaccession—i.e., selling works to pay the electric bill—is a mortal sin to curators. Further, smaller museums like the Hood can not compete with exorbitant prices paid by motivated private collectors and are forced to leverage their institutional role in the market. As museums provide a service to the artist and their dealer, offering up and coming artists the chance to have their work seen, they are often inclined to offer a discounted price.

Finally, political and social trends affect collecting practices as well. For instance, the museum owns a large self-portrait of Chuck Close, a famous photorealist against whom several allegations of sexual misconduct broke in 2017. While the curators still display the piece, believing it to be valuable in motivating a discussion, there are debates about its adjusted financial value. While nothing has changed its aesthetic worth, as so much of value is tied to reputation, there are understandable concerns. Following the allegations, sales of his works have come to a halt with buyers hoping to “ride out the storm” on their investment. 

This event was originally to be followed by a lecture on April 9th concerning provenance; however, it was canceled for obvious reasons. For the time being, Hood programming has moved online, and these authors highly recommend we partake.