Wednesday, April 30, 2008

Price and the Perceived Value of Art: Open Thread

There's a great scene in an episode of Absolutely Fabulous in which Edina buys some art, has it installed in her home, and then invites her boozy friend Patsy over to see it. The scene plays out like this:

The bit in particular that sprung to mind this morning was this exchange:
Patsy: [looking at what Edina bought]: Are you mad?

Edina: Well you don't have to like it, that's not the point, Darling

Patsy: Well how much did this lot set you back?

Edina: Well, I just spent as much as I could, Darling. It cost me hundreds of thousands of pounds.

Patsy: Ah well, in that case, it's fabulous.
The AbFab bit sprung to mind after reading this short article by Anna Somers Cocks, General Editorial Director of The Art Newspaper, entitled: We Like Art Less When Its Price Goes Down. Actually, I think this walking-into-the-room-backwards approach to discussing what folks should expect from the bear market was rather clever of The Art Newspaper, but all the same, it's good food for thought:
Now it’s scientifically proven: we really do enjoy expensive things more. In an experiment conducted by Antonio Rangel at the California Institute of Technology, the brains of 20 volunteers were scanned using functional magnetic resonance imaging while they tasted five different wines costing $5 to $90 a bottle. But Rangel fibbed, telling them that the cheap wine was the most expensive, or giving the same price to two different wines.

The scanner showed consistently that the flow of blood to the part of the brain that registers pleasure, the medial orbitofrontal cortex, increased when the price was declared to be high, not according to the quality of the wine. In case this got attributed simply to the ignorant palates of the volunteers, Rangel repeated the experiment with members of the Stanford University wine club and got widely similar results.

What this does is to explain the effect first described by the economist Thorstein Veblen in 1899 when he noted that certain goods become more in demand as their price rises. Diamonds and luxury cars are an obvious example of this, but so is art, especially contemporary art.
Yes, yes, that's all well and interesting, but here's what I suspect was the true take-away message of the piece, lobbed into the room softly:
Rangel’s discovery will be relevant when the recession hits. Here at The Art Newspaper, we have survived two recessions, 1990 and 2000, and we know that a fall in the art market follows a bear market, but always with a certain time lag (in the past this has been as long as nine months, but we think the cycle will speed up now).
Of course, I might be reading too much into the fact that the article was short and didn't seem to provide much to support its headline...and Anna did wrap it all up nicely, even coining a phrase in the process:
The speculators will try to unload their art, but will have difficulty doing so because the art market not only falls but freezes, except for the rarest and most widely admired works. This is for two reasons. The thousands of people who still have money to spend choose not to do so until they are certain that the market has bottomed out. But they are almost certainly also affected by what we should call the Veblen-Rangel effect from now onwards: they actually find works of art less attractive as their price goes down.
But whether the point was to open up a discussion about the 800-lb. gorilla in the room or to merely explain why folks should be conscious about the irrationality of the "Veblen-Rangel" effect, it does offer a good launch pad for a discussion about perceived value. What in particular I'm curious about (having just worked an art fair) is: If art is less attractive when its price goes down, why do some collectors work so hard to get as big a discount as they can?

Just kidding. I understand the difference.

Consider this an open thread on the connection between price and the perceived value of art.

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Blogger Joanne Mattera said...

Not art, but I guess that explains our former governor's predilections.

Also not art: it helps to explain Manolo Blahnik, Gucci handbags and other designer accoutrements.

As for art, we've all heard the probably-not-apocryphal story about the paintings that went unsold--until the dealer doubled the price and then they started selling like hotcakes.

As for discounts--er, courtesies-- Ed, would you write something on that for another thread at some point?

4/30/2008 09:32:00 AM  
OpenID ericgelber said...

This article appears to be well balanced.

"Finally, remember that art is an asset that holds back inflation. Though it cannot be considered a commodity—it's pretty much the definition of nonfungible—it does behave like gold, another important pseudocommodity. And like gold, which has pulled back from a spectacular run but not crashed, art has room on the downside to consolidate gains. After all, money is always looking for a safe haven, and you can't hang gold ingots on the grand staircase of your house. So art might continue to perform until another sexier asset comes along. In other words, this boom may end not with the bang that everyone expects, but a whimper."

4/30/2008 09:36:00 AM  
Blogger William said...


Beneath the cultured air of refinement may be a rather old struggle. If the cost of the art doesn't rise to a sufficient magnitude, the collector may not feel a sense of pleasure in the risk that it poses to their resources. There was a study of video games published in the Times I believe where men and women played a form of pong that had no immediate rewards, except a very gradual acquisition of territory. Men faired slightly better than women, but both did very well and derived pleasure competing for almost nothing. People experience pleasure from acquiring things according to this study, even imaginary conceptual things like a bit of video game territory.

Buying art poses an absurdly complex and layered version of the video game study. Collectors are acquiring often very material objects that derive value from a number of concepts, none very concrete, at an exorbitant material cost. Instead of negative feelings of loss the MRI study you referenced reveals a positive spike of pleasure in excessive spending. I'm assuming this comes from some risk-taking center (drugs, sex, etc) of the brain, that is almost immediately thrown into conflict with the equal pleasure of acquiring resources. It's almost as if it's equally as pleasurable to seek the discount, regain ground, as it was to take the leap and drop 150,000 on something.

It's a pretty crazy scenario, one that non art world types probably think sounds absurd, but perhaps it 's just acting out age old impulses on in a finely tuned, ritualized manner tempered by the ridiculous amounts of money being spent.

Whatever, but check out the Times study on how people derive pleasure in just the sense of acquisition. In comparison with the wine study, it should make your query more understandable.


4/30/2008 09:55:00 AM  
Anonymous Anonymous said...

What kind of situation does this set up for emerging artists whose art can't quite command the higher prices which mean more beauty? How do we confront that? In that sense perhaps there are many people who don't buy into this idea, unless of course they collect the emergers in hopes that they will hit the big time and that then there lesser price uglier piece will join the ranks of expensive beautiful art (and this strikes me more as personal satisfaction for the collector). Either way kinda sucky for the emergers no?

4/30/2008 10:10:00 AM  
Anonymous Nikolas Schiller said...

Anonymous, as an "emerging" artist, I think my reply might be one possible strategy...

Next month in the District of Columbia is Art-O-Matic, which is a non-juried art exhibition featuring nearly 1,000 artists around the Washington, DC area. As a participating artist I intend on having listing my artwork as name your price.

While each of the prints cost me upwards of $500 to print out & frame, I am going to let potential patrons start at that price and go from there. They can give more if they want to assign extra value to the artwork. Most people will probably pay the least amount possible, but I am fine with that. I am letting the collector chose the value that they believe it to be worth.

This style of pricing can only work for digital artists because they have full control over the number of copies they intend on printing for the edition. Painters and sculptors cannot necessarily price their artwork in this fashion because each creation is a one of a kind, which gives their artwork an intrinsic value. However, digital artists (including digital photographers) are forced to arbitrarily limit the number of copies in order to inflate the value to their artwork.

Would I prefer to sell my artwork for thousands of dollars? Yes, and I have in the past, but more importantly, I've realized that I would rather give more people the opportunity to have my artwork in their homes instead of excluding them because the price is too high for their budget. If this means my "Art-O-Matic edition" is less valuable to erudite art collectors, so be it. At least more people will get to enjoy ownership of my artwork. Ultimately there will be a finite number of prints in the "Art-O-Matic edition," but I will let the market decide that number, and from there the value will be assigned by those choosing to resell my artwork.

4/30/2008 10:21:00 AM  
Blogger George said...

Define "value"

The article is accurate when applied to the price behavior in auction markets, rising prices do increase demand because investors perceive rising prices as a validation of perceived value. However, perceived value can often be wildly incorrect when viewed over a larger time frame, millions of shares of Enron traded at the highs only months before the company went bankrupt.

In other words, it is not only rising prices which affect our perception of value, but sustainability as well, the 'time' factor. Regardless of how distasteful it may be to some, the art auction market is one of the ultimate metrics of artistic "quality" but only when viewed over an extended time.

Over the shorter term, price fluctuations up or down, are probably more about market dynamics than anything else. Essentially the art market is a big casino for the rich and artists are the producers of the "chips" for the game.

4/30/2008 10:23:00 AM  
Blogger Donna Dodson said...

I too think emerging artists are collected for more rational measures like how long did it take the person to make this? how much did their materials cost? how good is it- how much skill is involved? how much does work cost that is done by the people that they studied with? how much does a similar piece of work cost done by an artist of similar experience? how unique is the piece? i once heard it takes 8 times of seeing a piece for a person to buy it- so i suppose they are also asking themselves, would i get bored looking at it after awhile? does it intrigue me? how do i feel about it? it is mysterious to me?

4/30/2008 10:24:00 AM  
Anonymous Anonymous said...

that sounds like a decent strategy for the Art o matic but how many of those types of exhibition oppurtunitites exist? I am imagining not many.

Edward, do you subscribe to this belief, and how do you see it effecting galleries picking up emerging artsists? I assume that somehow, and this is without having run my own gallery, that galleries and gallerists perpetuate this myth in various ways, some even mentioned above, it is after all a business.

For emergers it seems there is a difficult balance between asking too little (for want of selling and getting art and nam out there) and feeling undervalued in the short term, or asking for too much and having people believe its not worth it and you're a egotistical blow hard.

Do Gallerists indictate the "right price" to artists?

4/30/2008 10:40:00 AM  
Blogger George said...

As for art, we've all heard the probably-not-apocryphal story about the paintings that went unsold--until the dealer doubled the price and then they started selling like hotcakes.

FWIW, I personally know this to be true in at least one case involving a very fameous artist. "Hotcakes" might be pushing it, but artworks which were previously unsold, sold.


4/30/2008 10:57:00 AM  
Blogger Edward_ said...

Edward, do you subscribe to this belief, and how do you see it effecting galleries picking up emerging artsists?

If by "this belief" you're asking do I artifically raise prices to make work more attractive, the answer is no. I actually take a longer-term view on pricing, knowing that the market is cyclical and gravity will have its day. As Anna notes: "The speculators will try to unload their art, but will have difficulty doing so because the art market not only falls but freezes," and when it does, the artists hurt the most are those whose prices rose too quickly.

4/30/2008 10:59:00 AM  
Blogger George said...


Uh, what do you mean by "perceived value?"

4/30/2008 11:37:00 AM  
Blogger Edward_ said...

Uh, what do you mean by "perceived value?"

Yeah. Good question. Perhaps that term is not quite right.

What I really mean is one's perception of whether a work is worth the price. Meaning, more specifically, the connection between how much cash you part with to own a work and how much you are happy with your purchase. "Value" here being more aligned with how content you are that you own the piece.

If there's a better term to discuss this idea please do share. I'm happy to update the post. IANAE (I am not an economist. ;-))

4/30/2008 11:41:00 AM  
Blogger Donna Dodson said...

More questions people ask themselves and more reasons to buy art... context- how much do other pieces of art sell for in this gallery? in this show? from this artist? do i know the artist and want to buy the work to help them out and because i like the work and can afford it?

4/30/2008 11:47:00 AM  
Blogger George said...


I am not an economist. ;-) that's ok, neither am I. I thought that's (whether a work is worth the price) what you meant, it's one reasonable definition of value.

I'm a speculator, so the dynamics of speculation in the art world make sense to me.

You open up another view on the question of what it is that we value in art. The points being made about 'how much is paid' and 'how satisfied' the collector is are only oblique metrics for indicating that we have found some value in this particular artwork, enough value to make us part with our cash (the metric)

The real question is, outside of its commodity value, what do we really value in art? How is this cultural value determined and how lasting is it?

4/30/2008 11:57:00 AM  
OpenID artphile said...

Great question George. Monetary value and personal value are easy to identify, but cultural value is difficult because it needs some historical perspective to know whether the work strikes a chord.

I would say that Cultural value is usually determined by the artistic community (artists, gallerists, curators, critics, scholars) who have an understanding of artistic quality and can analyze why a work remain relevant over time. But there really isn't a specific measurement of cultural value.

Thinking back on works that I would consider "culturally valuable" I would say that they tend to represent an evolution in artistic thought. Impressionism, Post Impressionism, Surrealism, Conceptualism are all shifts but it's difficult to know that a real change is taking place until it's already happened.

What about subject matter? Does a work that gives a different perspective on a culturally significant event have cultural value? Does Andy Warhol's painting of the girl from Vietnam have more value than the original photo? Does Banksy's painting of Warhol's girl with Ronald McDonald and Mickey Mouse have more value than Andy Warhol's painting? (Speaking of Banksy, is a work is a work "culturally valuable" if celebrities attend your opening and no one knows who you are?)

4/30/2008 02:54:00 PM  
Blogger Chris Rywalt said...

I used to start the bidding on my drawings on eBay at US$10. The most I ever got was maybe $25, I think. A curator suggested I put them up starting at $100 and see what happens; I never tried. Maybe I should.

4/30/2008 05:30:00 PM  
Blogger Joseph Giannasio said...

Welcome back Ed,

could this thread be some indication that you may have seen some signs at the NEXT fair to indicate "gravity is starting to take effect?

We all know Art is making something from nothing and giving it value. value vs. perceived value most likely boils down to the difference between need and want or Wha!nt. The trick to the art market is making someone think they wha!nt the art, the ability to pull of a jedi mind trick on collectors would be a useful skill at fairs.

There's also the vicarious experience aspect

in Interview with a vampire Claudia is looking at a woman undress and Lestat asks "Do you want her?"
and Claudia answers "No, I want to be her".

Anxiously awaiting Bambino's "See and Be Seen" Chicago report

4/30/2008 05:32:00 PM  
Blogger Joanne Mattera said...

Yes, we want Bambino and we want him NOW!

4/30/2008 05:51:00 PM  
Blogger George said...

artphile, I'm glad you picked up on my question, I was afraid it was read as being directed at Ed only. It's a question I don't have an answer for, but I have spent many hours discussing the general topic with a close friend.

I used the term 'cultural value' to separate it from speculative, commodity or monetary value, the latter being easily understandable and of little interest to me as an artist.

So if we lump everything else into cultural value, I think we are going to find that how it functions it is complex chain of interrelated events. When someone says 'artistic value' I think we all probably visualize a chunk of territory we are willing to defend, I suppose you could say it's a function of our taste. So at one level we have something akin to a personal definition for artistic value, by both the producer and the consumer.

At the personal level, the manifestation of activity based on a personal artistic value, making or collecting for example, may occur at some sublevel of the overall cultural activity. This is by no means insignificant, for it acts to preserve a larger number of threads for cultural values in times when they may be less appreciated.

On a lesser level, artistic values may become debased in the service of self aggrandizement by one of or both the producer and the collector. This set of values primarily act in the service of keeping up with the Joneses, like the clip. "I don't know if it's art, but if must be good, I paid a fortune for it." This is a peculiar subset, for there may be significant cultural value in the artwork, or not and it's just a passing fad.

But, in the end, it is the culture above all else which decides what it considers to be good art, art that has cultural value and art that it (as a collective) is willing to support. It is the culture which decides that it is interested in 'subject matter' or not not. These 'aesthetic' decisions may not be reasoned out until after the fact, but occur on the run as the advanced guard of the culture responds to the historical moment. There is an avant guard, it is more atomized than before, but they lead the way for the rest of the culture.


4/30/2008 06:10:00 PM  
Blogger Chris Rywalt said...

Some research discloses that the drawings going for good money on eBay are completely lacking provenance but "signed" by someone -- Klimt, Schiele, Picasso, lesser known artists like Lempicka or Muhlstock.

Seems to me someone needs to dust off Elmyr's name and make a killing at online auctions....

4/30/2008 07:55:00 PM  
Blogger Pretty Lady said...

This is a very simple issue. The vast majority of people value what they pay for, not the other way around.

I used to give paintings away to friends who liked them; I didn't have much storage space, and didn't have a dealer. They were all happy and thanked me and hung them up and everything--then when they moved, they often left them behind.

Finally I made a rule that I would not let a piece out of my possession for less than $500. (My prices are higher now, this was ten years ago.) People were just as happy and thrilled to have them, and durn tootin' they're STILL happy to have them.

It is a rare person indeed who can truly value a work of art based on perception of its essence alone. Everybody else needs money.

4/30/2008 10:41:00 PM  
Blogger Lisa Hunter said...

This is something I see in the Montreal art market. We have what should be an ideal situation: there's lots of government support for the arts, so art prices in galleries are very low compared to New York. But even when the art is outstanding (and it often is -- come visit!), many collectors balk at buying it. They'd rather buy something second-rate and more expensive that's been shown in New York.

4/30/2008 10:47:00 PM  
Blogger zipthwung said...

I have some cabbage patch kids for you, if you want. Lets make a deal. You know you want em.

4/30/2008 10:52:00 PM  
Blogger Troy Camplin said...

I wonder if this would work in selling poetry. Perhaps I'll offer to sell my poems for $10,000 each on eBay.

5/01/2008 10:32:00 AM  
Blogger George said...

Poetry, the last bastion for the starving artist.

5/01/2008 10:38:00 AM  
Anonymous Bill P said...

I think I may be immune to this phenom. For the past 5 years, I have stopped buying work in galleries. Instead, I have taken the opportunity to pillage the lower end auctions, scooping up work by mid-career artists whose market has either devalued or disappeared. This has been an exciting strategy that has breathed some new life into my collection.

My interest in contemporary art started in the mid 80's, but I was just a high school kid with zero dollars and giant eyes. I continued to pay attention throughout my college years, trolling the galleries and salivating over works that were outside my reach. Naturally, when I landed a solid job I began collecting, but I was bothered by the sense of longing (fetishism?) I felt for those works I'd fallen in love with back before I could officially play in the game. Now, those same items I professed my love to are being offered up at auction for considerably less than they were sold for in the galleries.

I've learned that, over time, certain artists fall from favor withtin the market. This fall is no indication of quality (crap artists are able to sustain their markets as well as good ones), just an manifestation of collector/curator whimsy.

The current overheated gallery/art fair market has priced me out of, and soured my love for, a game I was used to playing in. But I can't put my passion to bed, so I've turned to auction houses like Phillips and Rago to continue to bolser my collection. A number of the works I've recently added to my collection were originally exhibited in prestigious museums shows like the Biennial and the Carnegie International, ALL FOR UNDER $900.

So, no mattter what anyone says about people liking things that cost more, I know in my heart that I am MUCH happier adding to my collection knowing that I've done it at a considerable value. Perhaps this is the voice of a true collector? I'd like to think so.

5/02/2008 12:31:00 AM  
Blogger artchick said...

Bill P...
You are the PURE and PERFECT collector...I wish I had 100 just like you.

5/10/2008 12:22:00 PM  
Anonymous Jim, not Vincent said...

Interesting subject, of course that's subjective. I imagined myself walking through a Michigan Ave. "Art Gallery", you know the
ones, they emphasize the fact that
you will receieve a "Certificate
of Authenticity" with your purchase. Scanning the walls I come to the conclusion that the
works I can least afford must be the ones that are the most desireable, and any I might be able to afford must be the "Runts
of the Litter". I know what you are thinking, I am measuring the subject with a warped yardstick.
This is my perception.???
I once read that Dear Vincent may
have sold one of his paintings
during his lifetime, maybe not, yet
after his tragic death, eventually
sales began, that's when his extended "Family" began quarreling
over ownership. "Perception"
Amadeo Modigliani could not get the
erudite Parisians interested in his
portraits during his lifetime, yet
after his death the dealers in the funeral procession thru the streets of Paris quarreled over who
had first crack at his left-overs.
Of course these two examples lean
heavilly on Supply & Demand.
Old Groucho Marx once quipped that
"He would never join a club that would allow him as a member"
I guess what we hang on our walls depends heavily on the opinion of others. I don't know how Joan Miro
got away with his "Doodling" between breakfest & lunch, that
dealers shuffled off to the public
as "Fine Prints" NAMES FOR SALE
HERE, Mon. thru Fri.noon til 6 pm

2/22/2011 07:37:00 AM  

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