International Art Markets

Art, the product of human creativity and skill learnt by study and through practice and observation. The question arises, can we quantify an artistic product to its equivalent market value as argued by William Grampp in his article Pricing the Priceless: Art, Artist and Economics or is this a crude method of determining the real value of artistic work as pointed out by Pierre Bourdieu in his article, The Field of Cultural Production: Essay on art and literature? In this essay we will try to understand the key dynamics of the art market by basing our emphasis on how the art market resembles other markets and its relationship to the general trends in the economy.
The value of an artistic work is almost, if not in all cases, purely subjective. For example, take a painting whose intrinsic value is the paint and canvas, both of which do not amount to much. But when this painting is mounted on a wall in a gallery display, the viewers of the art pieces will determine the price of the piece of art based on taste. This factor at times tends to set such prices that would be illegal in most market industries, since they would be outstandingly too high. This is according to Allison Schrager‘s point of view in the article, High-end Art is one of the most manipulated markets in the world. Ben Lewis pointed this out in his documentary, The Great Contemporary Art Bubble, and how the Art Market was different from other markets in that it lacked the external oversight (government intervention) that might prevent some of the speculation and secrecy (backroom dealings) that he had discovered.

Just like in other market industry that trades in manufactured goods and providing services, the Art Industry has an investment potential, this therefore means, one can hold a financial interest over the industry with the main motive of creating wealth as any typical entrepreneur would do (Waller, 1981). It was similarly reported by Ben Lewis, “…the enthusiasm of the industry was exploited by some clever businessmen. They made the art much more expensive and created a casino-like market around the art.” The main goal of an investor in any field including the renowned real estate industry is mainly driven by profit maximization. The case is similar to investors in the art industry, wealth creation. This has seen the art industry slowly attracting investors and also governments including the art industry in budgetary allocation. In addition to this, synchronous art generates a fair sum of the total national revenue hence economically resulting in increased national wealth (O’Neil, 2008).
Before the 2008 market bubble, there was an unexpected crave for contemporary art, in which art pieces sold at the record breaking prices of thirty pounds, a new limit! To fully understand the art market and its relationship to the general trends in the economy, it is critical that we focus our attention to the art market ‘bubble’ of 2008. A market ‘bubble’ is defined as the growth of individual markets at such rapid rates that their eminent ‘bursting’ is almost unavoidable as a bubble would if too much air is blown into it (Kräussl, Lehnert, & Martelin, 2016). Reasons for the contemporary art boom as pointed out by Ben Lewis’ report were;-
Unusual market prices
Rampant Speculation
Secrecy or backroom dealings and
Tax breaks involving the whole art world.
During this period of the art market boom, there were reports of art paintings being resold many times the initial value, at auction bids, in a span less than a year (Kräussl, Lehnert, & Martelin, 2016). The above reason may have been attributed to the effect of media advertising. The advertisement may then have resulted in a certain euphoria and desire to own art products. As a result, art products were on high demand and according to the great fool’s theory, there was always a fool in the market ready to pay a higher price (Clarke, Grampp, Frey, Pommerehne, & Wilson, 1992).
Transparency has been a major buzz kill in the contemporary art market, as there have been evident shoddy dealings in the contemporary art market where much of the art was being mass produced and sold to the highest bidder. This has seen the special privileges our society gave to art and artist being trampled on and exploited. One of them being that art possesses a distinct aspect of heterogeneity, where one artistic work is unique from the other. Due to issues of transparency and controlling price manipulation, having a register of listings of who owns what and who paid for what seems like an effective tool. Therefore, the setting of all auction records as they occur proves to be an elaborate statistical method for detecting market ‘bubbles’ and creating a level of transparency.
When comparing the art market and the resemblance it bears to other markets, it should be noted that the art market has rather distinctive characteristics of its sales happening through a house auctioning event. Unlike other markets where prices are determined through procedural calculations of the return needed to make profits and considering the relative demand of the product in the market economy, the art market prices are subject to manipulation e.g. through artist branding and gallery shows. Price manipulation in other markets would evidently lead to shortages in supply of commodities and general market inefficiency (Gérard-Varet, 1995). The art market has the characteristic speculative dynamic that would keep it going while other markets crush.
Take an example of a Fish market, producing a common necessity for a certain community, and has fallen subject to the aspect of price manipulation and as a result price of fish is considerably raised to an amount considered unreasonable. Higher prices would result to less fish being demanded; this will consequently cause the supply of fish to be cut short and finally due to market inefficiency, a new market equilibrium point is set to adjust for the price change and to ensure market efficiency. On the other hand the whole industry would collapse and have difficulty recovering.
In conclusion, whether or not art can be quantified to its equivalent market value is surely a matter of personal opinion. Based on the arguments presented above, any work of art can be monetarily quantified to an amount someone is able to give up for that piece of art. In the rarest cases where the artist would not accept any amount of money, no matter how large, for his work, is a personal choice that may have been influenced by culture or morals, and is most entirely an individual’s decision.
References
Clarke, R., Grampp, W., Frey, B., Pommerehne, W., & Wilson, D. (1992). Pricing the Priceless: Art, Artists, and Economics. The Economic Journal, 102(412), 670. http://dx.doi.org/10.2307/2234323Fillitz, T. (2014). The booming global market of contemporary art. Focaal, 2014(69). http://dx.doi.org/10.3167/fcl.2014.690106
Gérard-Varet, L. (1995). On pricing the priceless: Comments on the economics of the visual art market. European Economic Review, 39(3-4), 509-518. http://dx.doi.org/10.1016/0014-2921(94)00057-7Kräussl, R., Lehnert, T., & Martelin, N. (2016). Is there a bubble in the art market?. Journal Of Empirical Finance, 35, 99-109. http://dx.doi.org/10.1016/j.jempfin.2015.10.010O’Neil, K. (2008). Bringing art to market: The diversity of pricing styles in a local art market. Poetics, 36(1), 94-113. http://dx.doi.org/10.1016/j.poetic.2007.12.002Waller, B. (1981). Exploring the Art Market. Art Journal, 41(2), 171. http://dx.doi.org/10.2307/776473