Tuesday, December 26, 2006

The Ouroboros (or "Is Transparency in the Market a Good Thing for Art?")

In a rather sensationalistic, but somewhat anticlimatic, article, the Art Market Editor at The Art Newspaper, Georgina Adam, bemoans "the poor transparency of the art market, despite its huge—and growing—value."

All attempts to measure it accurately, to predict its performance, to analyse it, either through sectors, individual artists or “baskets” of works of art, have floundered.
I read the article with anxiety because its headline roared, "Why you cannot trust dealers’ prices—or auction results either," only to find that the article then focused on the perhaps least common of examples of pricing (record-breaking private sales between private collectors brokered by dealers). To be fair, the article does delve into the interesting question of whether auction prices (supposedly the only transparent metric in the art world) are exactly what they seem (although, again, it uses the rare exceptions to live up to its hype):

But even with auctions there’s often more than meets the eye. For example, Cézanne’s Rideau, Cruchon et Compotier, 1894, was sold at auction for $60.5m (Sotheby’s New York 1999), but the deal was never completed, and the still-life was later resold for “significantly less” to Steve Wynn. Most lists of the most expensive paintings sold at auction still cite, somewhere in their nether regions, Van Gogh’s Irises, 1889, which sold for $53.9m in 1997. In fact the work didn’t sell—Sotheby’s lent half of the price to the Australian tycoon Alan Bond to buy it. He never paid up and the painting ended up in the Getty, for—you’ve guessed it—an “undisclosed price”.
Overall, though, its headline is misleading, IMO.

More than that, the conclusion Ms. Adam arrives at got me wondering whether or not the call/search for more transparency in the art market isn't contributing to the accumlative commodification of "Art" in general. Has the market, like the legendary serpent devouring its tail, entered a vicious cycle in which the more its self-appointed monitors worry about predicting "its performance," the more artwork that meets market expectations will rise to "the top," and the more art becomes a predictable investment, the more those investing will come to expect (demand) greater transparency, ad infinitum?

After all, today, who exactly is demanding the art market be measured "accurately, to predict its performance, to analyse it, either through sectors, individual artists or “baskets” of works of art." Who even talks like that in the context of "art"?

I know the answer to that question, of course. My only question here really, is what's left when the hungry serpent reaches its head?


Anonymous Anonymous said...

On the other hand, greater transparency might be better for artists on the lower tiers. If people see that the Big Names aren't really selling for the inflated prices they appear to be, maybe more collectors would be willing to move down the chain and buy art from less Blue Chip artists.

I happen to think capitalism is a real mess, especially in the art world. But since it seems we're stuck with it for now....

12/26/2006 10:52:00 AM  
Blogger Tyler said...

The Art Newspaper silly and irrelevant? Well, I never!

12/26/2006 11:19:00 AM  
Blogger Edward_ said...

The Art Newspaper silly and irrelevant?

One does begin to wonder who they assume their readership is, I'll admit.

greater transparency might be better for artists on the lower tiers. If people see that the Big Names aren't really selling for the inflated prices they appear to be, maybe more collectors would be willing to move down the chain and buy art from less Blue Chip artists.

Not sure that would be the result, Chris. Nice thought, but...my concern is, well, let me phrase it this way:

Today, many young artists feel the best way to grab attention and get ahead of the herd is to be progressive in subject, technique, media, etc. Quality plays a big role, but strategy is equally important when there are so many talented artists working.

How do they know this, because they've seen how other artists before them were selected from the herd and thrown up to star status. There's a mix of factors for any given current star, but generally the formula is discernible because so much late 20th Century critique had gone into making it so (this or that artist is important because he/she is bleeding-edge, or smartly retro, or some other designation that requires a good grounding in the critique to identify and/or elevate).

I feel that profitability, if it becomes one of the inescapable factors that makes artists stars, will be equally dissected, discernible, and calculatable. (To some degree that's what the art market/gallery system is supposed to be doing, but the lack of transparency prevents anyone from totally manipulating the system the way the markets for other commodities are manipulated). It other words, it's still highly subjective, which is good because it leaves a good deal of room for artists to speak up and tell the dealers/critics/etc. what they believe is important, rather than having that group receive some weekly report that makes the artists' opinions irrelevant.

Or something like that. I'll admit I'm responding more on gut than analysis here.

12/26/2006 11:38:00 AM  
Anonymous Bill said...


Reading your response here is sort of like hearing myself think out loud about some of my motives. In this market, I actually have a voice, though it's increasingly clear that I must address the age issue as belligerently as the other factors. I've always imagined my fictional artist character, William, to be just ahead of me on the curve, and I think there's another aspect of the art world to explore (exploit?)

Anyway, we need to talk about this...the age question and the increasing push to make the art market operate under the same rules as the stock market. I'd prefer the bizarro rules of the art world than the business world anyday.

12/26/2006 01:47:00 PM  
Blogger George said...

I would assume the art market behaves like other markets. If this is the situation, then Chris’s trickle down conclusion is most likely not the case. The art market appears to be tiered into price ranges. I would suspect that collectors of art in the higher price ranges do so for certain reasons, one of which may be economic. Investors will invest in $100 stock rather than a $1 stock because they perceive the higher priced issue has less risk, it has proven itself in the market. (This is not always true but it is the perception)

The collector buying ‘blue chip’ art, may also buy artworks by emerging or mid range artists with a portion of their funds. However it seems unlikely they will change their overall buying approach just because of price fluctuations. When prices in the higher price ranges weaken they are able to get better value for their investment dollar. Additionally, price weakness in the high end affects pricing in the lower to mid ranges as well. The pricing parameters may shift, but I believe buying psychology will remain roughly the same.

The issue of "the poor transparency of the art market…" is an interesting one. What is being called for here? More regulation? Aside from the monitoring of outright fraud, regulation is not good for the market, it increases the cost of doing business. From an investment standpoint, people need to do their homework. I would suspect that the art market has similar parallels with the equities market, where investors often do less research than they should and often buy based upon emotion. These factors are psychological and cannot be regulated away.

The types of market driven analysis that Ed is referring to, recalls the lame decision making processes in the film industry. It works to some extent, but look at what you often get as a result. Ed went on to examine the strategizing by artists which I think is interesting. It’s not so much the strategizing, but the flexibility that artists (as a group) have to shift their focus (strategies) fairly quickly which can confound a strict market analysis algorithm. It’s our job as artists to keep them guessing.

12/26/2006 02:57:00 PM  
Blogger Tim said...

There is a reaon that economics is called the dismal science.

12/26/2006 04:24:00 PM  
Anonymous Anonymous said...

George sez:
Aside from the monitoring of outright fraud, regulation is not good for the market, it increases the cost of doing business.

I sense an ideology here more than a well thought out opinion. I think regulation can be good and bad. Of course, to paraphrase P.J. O'Rourke, when regulators control what's bought and sold, the first thing bought and sold is regulators.

Personally -- ideologically -- I'm more of a fan of transparency than secrecy. I think everything should be public. But that's just how I am. It's not entirely grounded in any logical argument.

Your critique of my trickle-down conclusion, though, looks about right to me. I'm probably incorrect.

12/26/2006 04:26:00 PM  
Blogger George said...

Chris, It’s actually less of an ideology than it is my opinion. I think the art market is just fine the way it is. Could it be more transparent, yes. Would this make much of a real difference in how things are bought and sold? I’m not sure, my opinion is that I doubt it.

Certainly some kinds of regulation are warranted, even necessary. In cases of monopolies or where companies exceed the bounds of fairness (yes, hard to define exactly, catch the gist, ethics) it makes sense. On the other hand, every time the stock market crashes, there is a cry for more regulation. Some of the SEC regulations addressed issues of ethics and fraud, or attempted to reign in certain practices which could create dangerous situations of imbalance. None of these regulations can alter the fact that human behavior will act in an irrational and unpredictable manner, hence the internet bubble.

One could take the same view towards the art market. The major difference is that in a collectibles market, there can often be irrational buyer responses over a particular artwork. Since the artworks are usually one of a kind, we see headline price behavior. These moments of irrational exuberance are usually limited to a small number of artworks, their record prices are less significant to the overall market.

Today’s art market is in an exuberant period, more or less across the board. As I see it this is more of a psychological issue than anything else. Buyers are willing to step up to the plate and pay the asking price. Obviously this cannot continue forever, the real estate market would be another situation with similar psychological buying over the past few years. Eventually people regain their senses and ask themselves some hard questions about how they are valuing their purchase. and prices are reigned back in. The fear of ‘missing out,’ not being able to get the new condo, or the hot artwork, will push prices higher. As long the buyers have the fear of missing out, they will buy impulsively rather than wait to see if ‘better prices’ come along. You can’t regulate away irrational behavior.

12/26/2006 05:09:00 PM  

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