Thursday, February 12, 2009

Ethical Apples to Oranges

In reading through Michael Wilson's entertaining recount of the recent debate on whether "the art market is less ethical than the stock market" (sponsored by the Intelligence Squared US series at Rockefeller University and featuring Dealer Michael Hue-Williams, collector Adam Lindemann, Christie's deputy chair Amy Cappellazz, Chuck Close, Jerry Saltz, and dealer Richard Feigen), it struck me as odd that none of the participants were reported as pointing out that the central assumption of the debate makes no sense. (Disclaimer: you can download the entire transcript in PDF format from the Intelligence Squared website; I have read parts, but not all, of it [it's 83-pages long].)

But let me back up. The word ethical is defined as "being in accordance with the rules or standards for right conduct or practice, esp. the standards of a profession" and, yet, as Michael reported:
Feigen, up first, argued that the art market is relatively unethical because it lacks regulation and offers buyers little protection.
But, according to the definition, the art market can only be seen as "unethical" if those practicing in it do not adhere to the rules or standards of the profession already in place. Whether or not the market lacks regulation compared with some other market is irrelevant to this question. Only after regulations are imposed or self-imposed by those in a profession can you use them to then measure ethical behavior.

The closest any of the participants seemed to have come in acknowledging this was when Cappellazzo said, “I don’t think regulation ensures ethical behavior.” Otherwise they seemed to see the question as either moot
Close, speaking next, attempted to redirect the debate by arguing that the value of art is not determined by money at all (a point that earned him a ripple of applause) and that the ethics of its marketing were therefore somewhat moot. Even if its financial value can be manipulated, he argued, its long-term significance comes from artists rather than buyers and sellers.
or apparently to be determined by anecdote rather than data:
Hue-Williams, just off the last plane from a snowbound Heathrow, steered things back to the nitty-gritty with a recollection of having been stiffed on a potential big-deal purchase in his early days.
None of which is the participants' fault, if you ask me. The debate was poorly framed. In his introduction to the debate, the Chairman of Intelligence Squared U.S., Mr. Robert Rosenkranz, noted:
[T]there are bad apples in every basket. But that’s not really the thing that interests us and why we picked the language of this debate.

It’s really the ethical issues revolving around two ideas. And one idea is secrecy and the other idea is manipulation.
The problem with framing the debate this way is that it already asserts (the validity of which seems to have gone unaddressed) that how professionals in the art market handle secrecy and manipulation can be/should be judged by comparing it with how professionals in the stock market handle secrecy and manipulation, despite the lack of regulations in the former. Rosenkranz does go on to ask the questions that logically must come first, "Should those kind of practices be illegal?" but the answer seems to have been pre-decided as "Yes" in the framing of the debate.

Rosenkranz asks eventually the question that would have been a better central question, in my opinion: "[D]oes the art market operate in a generalized sense with high ethical standards or not?" But to ask if the current market is ethical or not by comparing standards of secrecy and manipulation with those now in place (but not always so) in the stock market is to measure the ethical behavior of one industry with regulations on such matters to the behavior of another without those regulations. In other worlds, apples to oranges. This is highly problematic in my opinion if your audience is then leaving the debate with a conclusion about how un/ethical the professionals in the unregulated market are. Until you have regulations in place, you can't do that.

Labels: art market, ethics


Blogger George said...

Chuck Close says: "... And the artist is trying to explain to him why he has to have an occupation to support his profession. And that’s really where the art world is at. Most people, most artists make this work whether anybody wants it all, makes it year in and year out with little visibility, no critical attention and little financial support. Most artists, by nature, are mediocre. There are no undiscovered geniuses. Take my word. There are no undiscovered geniuses. There are many undiscovered competent artists, just as competent as the artists who are famous and we all know. There are no charlatans. If somebody wanted to be a charlatan the last thing they would do is go into art. There are many other ways..."


2/12/2009 10:05:00 AM  
Blogger George said...

Amy Cappellazzo muses: "... I will get to sort of support and defend the position and place of the auction house as sort an ethical player, but… In reading the proposition over and over again, “The art market is less ethical than the stock market,” of course I had to read this multiple times and I had to analyze every word."

She had to look up what ethical means? Hello, what's not to understand here?

2/12/2009 10:20:00 AM  
Blogger George said...

Amy Cappellazzo goes on, saying: "...So while there is—in the art world there are too many different rewards, the reward structure is fractured and varied. Whereas in the stock market, presumably there is a singular reward which is financial compensation. [p.22]

This is a highbrow description of Three Card Monte.

Financial compensation is the "singular reward' for the auction houses. All those other varied and different "rewards" are tools used to gain and obscure the fact that financial rewards are the primary goal.

2/12/2009 10:35:00 AM  
Anonymous Anonymous said...

A year ago we talked about "regulating the arts" in this forum...finally the idea is reaching art mainstreet.


2/12/2009 10:54:00 AM  
Blogger George said...

Amy Cappellazzo: "Art is not a pure commodity, it’s not an ordinary commodity." [p.21]

No but interestingly, it has some characteristics of another, less than pure, "commodity" sold by both Christie's and Sotheby's, real estate.

2/12/2009 11:00:00 AM  
Blogger Edward_ said...

I got an email behind the scenes that led me to feel I should note that I'm not in any way at all advocating for dealers to cut ethical corners just because there are no formal regulations. On the contrary, I feel it behooves every dealer to adhere to as strict a code of personal ethics and operate honestly as possible to avoid having to formalize regulations.

2/12/2009 11:40:00 AM  
Blogger mary-klein said...

How ethical is the art market?

I think it’s as ethical as the individual participants and the immeasurable quality of their intent. The artist’s sincerity in working from a very real internal imperative to create, the collector’s true primal love for the artist’s work and the dealer’s genuine understanding of these two disparate parties can come together in one of the most ethical of human interactions.

I also think the converse of the above statement is equally true. That is, if one of the participants lacks sincerity in their role, the system degrades accordingly.

You can judge how ethical the art market is by discerning the true intent of each party.

Good luck with that.

2/12/2009 12:19:00 PM  
Blogger George said...

Jerry Saltz starts off with: "But when we’re standing here talking about secrecy and
manipulation instead of sorcery or prestidigitation or you’re talking about, you’re upset because we’re not regulated. I don’t want us ever to be regulated. This is the art world…people. Am I yelling? This— [LAUGHTER] If this were the industry, that side would be right. But this is the art world, and a world is a place that has a vision, that has problems. The market is a place obviously that people exhibit junkie-like behavior."

Jerry Saltz finishes with: "But…I think you just have to let the art world be what it is. The rethinking of it has to be look at the huge white cubes that we now have. Look, that they may not be enhancing the journeys to art, but may have become content in themselves. The same way that the talk about the market, hollows out art. It takes your eyes off the prize, the way Amy and Chuck were talking about, and you’re stuck talking about a red herring, something that to be perfectly honest, not one person this room, not them… [PAUSE, LAUGHTER] got into the art world to do. Each one of them is here because they love art."[p.34]

Bless him.

2/12/2009 02:08:00 PM  
Blogger George said...

I'm being a hog today, but the linked pdf is worth a read.

My thoughts...
First off the premise of the discussion was flawed. There is really no logical comparison between the art market and the stock market. One might be able to draw a comparison between the real estate market and the art market.

The stock market functions because "stocks" are fungible, like a dollar bill, one share is functionally the same as another. Real estate and artworks are not fungible, both are unique objects which can be bought and sold. Because of their uniqueness, the value of any given object may vary from similar objects. Establishing "value" is a considerably different process with art or real estate than it is with stocks.

Because there are a limited number of auction houses, they will have to bear the brunt of the ethics question. While certainly there are unscrupulous gallerists they appear to be a small percentage of the whole. Unfortunately, the auction houses have been complicit in activities which test the bounds of ethics. To suggest that they are interested in more than "financial rewards" is open to debate.

None the less, I am opposed to more regulations other than what are applied to the retail industry as a whole. The main problem is that there is no way to prevent stupid behavior. If anyone here thinks that the stock market is "safe" because it's regulated by the SEC, think again.

All the various shady practices within the art world have their counterparts within the the stock market. The best advice I can give to a new stock market investor is "Think like a criminal"

We had a nice art market bubble for reasons identical to the other financial bubbles in the world. There was a lot of loose money floating around and a bunch of went to play in the art market.

For example Hugh Grant bought a painting "Liz" by Warhol for $3.5M in 2003 and sold it for $23.5M in 2007. This is a compound rate of appreciation of 61% a year. To understand what this means, $3.5M compounding at a 61% rate becomes a trillion dollars in a dozen years, clearly an irrational expectation.

2/12/2009 02:40:00 PM  
Anonymous Gordon Fraser said...

Interesting issue to think about in conjunction with Davey Hickey's recent piece in the Feb issue of Art in America regarding art as luxury item and the breakdown in the system for valuation. Thanks.

2/12/2009 04:05:00 PM  
Blogger zipthwung said...

I'm sure Im misreading something but "ethics" is generally defined as something that exists across categories or conceptual realms. Or is that morality?

Like Platonic solids, which are as abstract as money.

But the ethics of the art world, while not codified, are taught - in schools and the streets.

There is a definite code. And some people laugh at it and make tons of cash while hypocriticly pretending they are art lovers. I;d say at least 25% of the art world is seriously business minded.

That's being charitable.

What disrupts this un/ethical world is power - and money has power, both in means of production and distribution of production.

Artists have skills - and ideas, but the desire to execute those ideas becomes disrupted by the environment. Motivations is not merely victorian inner necessity (what aristocratic hogshit!)

I believe the Marxist theory books have a lot to say about this. I can understand not wanting or knowing eough to talk about this fascinating realm of theory (I;m Adam Smith all the way bro!), but it does strike me as particularly diletantish and dishonest to talk about ethics without talking about the core ideas underlying the "discussion."

In other words, this is an insiders game masquerading as a transparent ethics comittee.

A shell game indeed.


But why perform this theater? Because the art world needs funds and is in danger of losing credibility with its investors?

I don't think that's it. Because it wasnt it three years ago or five years ago or fifteen or 10 years ago when people were having the same sorts of discussions, whos root cause was; what makes art have value?

I dont know - but Chuck Close playing the authentic artist (intrinsic value) bugs the fuck out of me. When was the last time CC took a "risk" as the art world likes to call anything whos value is in doubt (extrinsic value)?

Basicly this is a another cynical morality play designed to aggrandize the power players and subjugate the masses.

No geniuses?

Then what?

Grey wool pajamas and two meals of vegetarian mush followed by line drawing practice?

Where do I sign up?

2/12/2009 06:00:00 PM  
Anonymous Cedric Casp said...

Every aesthetic comes with ethic.

It's one highly potential role of the artist to underline this, to bring on issues of ethics concerning art, the artworld or the world in general.

Not a lot of artists are interested into that, because like everybody else they simply struggle to survive (each for his own), or they refuse to accept ethics as pertinent to what they do (why would they? In art, aesthetic always have the first word, and quite often the last).

Cedric Casp

2/12/2009 06:30:00 PM  
Blogger George said...

Ed finishes with: "This is highly problematic in my opinion if your audience is then leaving the debate with a conclusion about how un/ethical the professionals in the unregulated market are. Until you have regulations in place, you can't do that."

A big problem with this debate was that the six panelists were "all from the New York and London art world. This gives them credibility about the mechanics of the art world but leaves me with the feeling they know little about the stock market.

The manipulations which occur on a daily basis in the stock market make the art market seem like child's play.

In both cases, the 'winners' are those who understand what motivates the other participants, allowing them top buy or sell at an advantageous price. At any given moment, the process of "valuing" something is a function of price history, the market condition and desirability as compared with competing investments. How value is determined is both an analytical and psychological process and becomes a truth only at the moment of transaction.

All of this stuff applies to transactions of either art or stocks, people act emotionally and irrationally and there is no way to save them from this. If the art market is "regulated" it is not going to make the art market "safer."

What is "good" or fashionable, will always remain an opinion. Value may be inferred from past sales history but it is also subject to the irrational actions of the players and changes in market conditions.

I think the audience response is not particularly meaningful and I would not use it as a argument to initiate some form of regulation on the art market. What might have been more interesting would have been a direct discussion of what ethical questions need to be addressed and changed by agreement

2/12/2009 07:25:00 PM  
Blogger zipthwung said...

I don't think ANY of these panelists are the best people to be listening to when it comes to ethics.

Just my opinion.

But yeah, the question is framed badly, which obfuscates the real questions.

Indeed all this writing has done the same by perpetuating the misunderstandings rather than reframing the argument.

2/12/2009 07:41:00 PM  
Blogger The Reader said...

Perhaps there's a more general problem with the debate format. As a kind of exchange that rarely allows for qualified agreement it is difficult to imagine how such a format might produce anything other than a series of polarized views from the participants.

The larger point being that there is a complexity to most issues which is very difficult to access if you ask people to agree or disagree with a simple proposition. I think artists, and the art world more generally, could learn a lot from the ways that commerce and knowledge are structured in other sectors of society but that kind of info is probably not going to come out of a debate.

2/12/2009 11:18:00 PM  
Anonymous Anonymous said...

I'm gonna have to disagree with Ed on this one. Ethics doesn't derive from the rules of a profession, per se. It has become associated with markets and professionalism, but ethics is really something we learn from cultural mores. It should be rooted in our basic respect for other human beings, and then extend to our business transactions and professional codes. So to say that ethics doesn't apply to the art world or the art market is putting the cart before the horse.

2/13/2009 10:01:00 AM  
Blogger Edward_ said...

Well, we're gonna have to agree to disagree then. I see it in the reverse. "Ethics" are specific to certain industries/contexts. Let's look at it from a large scale and then more detailed perspective.

Take spying, for example, where secrecy is not considered a negative, but a requirement. Or politics, in which manipulation is the very task at hand. Secrecy and manipulation are considered negatives in matters where money is involved, but not in matters where security or ideology are involved. So matters of "basic respect for other human beings" are relative.

Taking two industries where money is involved, however, such as the stock market and the art market, if we argue that it's fine to compare the ethics of one with that of another, we have several problems with regards to how we value art. For example, it's ethical in the stock market to make objective decisions based on the bottom line. No one has any right to cry foul if you legally sell all your stock in a company you no longer believe in, but everyone will cry foul if you're a museum and you sell artwork you no longer believe in. So there is an additional emotional/cultural obligation component to the ethics of the art market we don't see in the stock market, meaning they're not strong parallels to start off with.

Then, you have the matter of "business transactions and professional codes." The central ethical issue in the stock market is insider trading. If you are in possession of information about a company, you are not legally permitted to act upon it (in terms of buying or selling its stock) until such time that information is made public, because doing so could vastly impact the value of the stock held by other people, putting hundreds or thousands of other people at a huge disadvantage in a field in which every investor is legally to be treated equally. While there are transparency issues in the art world, there's no where near the potential for widespread impact based on insider trading type actions. There are potential consequences of significant magnitude, but how to "regulate" such matters is not yet settled, and until such time as they are, it's illogical to me to suggest this or that practice is decidedly unethical. If, for example, you own a piece by an artist you know a curator is interested in mounting a major exhibition by in a major museum, you possess insider information (that exhibition has not be made public yet). Would you be obligated to not sell that painting if you really needed the cash? What if you had decided to sell before you learned of the exhibition, is it unethical to wait until after the exhibition is made public to sell, so the value goes up? Who sets these rules? Shouldn't they be determined by the common good? How do you measure that for the art market?

Too many questions remain for folks to conclude one way or the other that the art market is more or less ethical than the stock market. The first question, to my mind, is simply whether the art market should be more regulated. I agree with Jerry Saltz that we should resist that because of the cultural/emotional value part of the equation.

2/13/2009 10:30:00 AM  
Blogger zipthwung said...

You can redefine ethics from somethinng that is universal (morality/social mores) to something specific (professional rules) or you can ask why ethics, why now?

"No one has any right to cry foul if you legally sell all your stock in a company you no longer believe in but everyone will cry foul if you're a museum and you sell artwork you no longer believe in"

I think a better analogy (analogies are dangerous) would be you can change your business model (identity) but museums can't change their mission (identity).

I like that because it puts it in human terms. If business is inhuman or transhuman or psychotic - then art for you is the conscience - a mirror shadow cabinet to the parliament of commerce.

"So there is an additional emotional/cultural obligation component to the ethics of the art market we don't see in the stock market, meaning they're not strong parallels to start off with."

But they are parallel. If business lacks ethics, that's because no one is there to enforce them.

Increasingly, though, businesses are relizing th importance of ethical branding (green technology, political investing, pro bono projects).

I don;t think it is art's role to be the ethics committee, though.

But I don;t see lack of ethics as making the comparison between markets "weak."

They are two different cultures, each with their own ethical standards - but there can be only one ethic, and we all agree on that, or we agree to disagree, and tha tmeans two separate but equal art worlds - one built around contingentfinancial instruments, the other built around rock soid knowledge generation and creative insight. core values bro. Sorcery. Mystical truths. Secret handshakes. Golden cups. Arks. Pirate gold. Satanic pacts. Cold war treasure. Secret rooms. Forbidden knowledge.

Or so the panelists would have you believe.

2/13/2009 01:43:00 PM  
Blogger George said...

What was the point of this debate?? Why now? No one ever asks these questions when prices are increasing.

If two parties strike a deal for an artwork and both are happy on the agreed upon price, the two parties would be inclined to say the deal between them was was 'ethical' If we accept this idea for a moment and then add a second factor. Suppose one of the parties is terribly rude to the other, this is something outside the 'deal' and while it may be unpleasant it probably wouldn't suffice to make us say the transaction is now unethical.

One major difference between the art market and the stock market is how the underlying asset is priced. Since stocks are fungible, any share is considered identical to any other share (of the same class) the market price can be established without selling the shares you own. Stock prices fluctuate on both whim and the underlying fundamentals, most of the time on whim. But even allowing for random price movements it is still possible to know what the buy/sell price is on a share of stock at any trading moment. You can sell very close to the advertised price.

Artworks are fundamentally difficult to value. First, with unique artworks, no two are alike so it is impossible to establish the "value" for a specific artwork without an actual transaction occurring. Valuations are approximations based on prior market history, the quality of the individual artwork, provenance and the demand at a particular point in time. This is totally unlike the stock market which can post an actual buy/sell quote at any moment of the trading day.

If we look at the various parameters which one might use to value an artwork we will immediately run into problems with price history. This is true because artworks are illiquid, and change hands infrequently, so a price for an artwork sold in 2006 establishes a data point at a market peak and is probably not valid today. Prices have fallen because demand has contracted, and visa versa.

Anyone who has read the discussions here would have to agree that there can be a considerable dispute over the "quality" of a given artwork. Moreover, evaluating the quality of an artwork may be subject to the pressures of current taste, what's in and what's out, at least on the sale day.

Both the above points create an opportunity for specialists who can help to determine the value or desirability of a given artwork for collectors who cannot establish these points for themselves.

An art dealer, or gallerists, can serve this function and it creates a relationship between the dealer and the collector which is based upon a trust between both parties, a belief that the other party will exhibit ethical behavior.

The auction house does not have this personal bond, it is a corporation which attempts to establish value for an artwork through a open bidding process. The auction participants have a right to expect that the bidding process will be conduced ethically, fairly, by the auction house. They cannot expect that the other bidders will be ethical, and this is generally not the case.

The difficulty of establishing the value of an artwork at any given point in time makes the art auction market potentially more volatile especially in periods of stress. It also makes the art market vulnerable to manipulative or unethical behavior (but I doubt such manipulations are any worse than what occurs in the equities markets.)

However, the inherent volatility of the art market in both times of exuberance and in times of stress, may make the auction markets appear manipulated or irrational when what they may just be is irrational and illiquid. The business of an auction house is to create a transaction and collect a commission. Since the commission is a percentage of the selling price, it is to the advantage of the auction house to see the price rise as high as possible, even if the price appears irrational.

The gallerists can act as a stabilizer in this process since it is to their advantage to maintain a stable price over time. By establishing a personal relationship with their collectors it becomes in the gallerists best interest to act ethically with both their artists and their collectors.

2/13/2009 05:05:00 PM  
Anonymous Anonymous said...

i thought whether to post this or not but...
with all due respect i do think blogs have had their day. what comes next, well, anyone's guess. probably something more to the point, or less -- less to do with hierarchy.
cute ways to invent stats is, well, not that intelligent, as i see it.
i'd dump it, save your time for better things...

But the focus on your artists is great. That why i click by.


2/14/2009 09:37:00 AM  
Blogger zipthwung said...

i just read holland cotter's article in the times.

It reads so "in the loop" and yet it perpetuated the myth of the artist, and the market.

I'm not sure what Holland Cotter is trying to say by perpetuating this kind of fabled myth of the self supporting artist.

I'd say most artists make little or no money off of their work after expenses (student loans, materials, rent, travel).

If you consider only the artists that make over ten grand or so, even then I don't see the economy as significantly effecting the status of the common artist unless laid off or "downsized."

Unless we say that artists are only artists if they make money or show in art fairs.

Which contradicts HC's idea that artists should "start" making "crazy" (non commodity) art.


It makes him seem either out of touch or toungue in cheek. Either way I don't think it's ethical.

If you perpetuating myths you are lying (the kind of lies that delude people into burdening themselves with student loans).

If you are tongue in cheek you are participating in a form of aristocratic elitism hardly suited for a national newspaper dedicated to news (truth), nor even an ivory towered theory laden rag such as October.

Shame on you Holland Cotter.

2/15/2009 02:34:00 AM  
Blogger George said...

Hi zip, happy new year.

I also read the HC article and I'm surprised nobody else has commented on it.

Whatever, it made the top ten list on the NYT which is unusual for: a piece of this ilk. It came off to me as a panic but romanticized.

I'm wondering what everyone else thinks, including Ed

The Boom Is Over. Long Live the Art! by Holland Cotter, NYT 2/15/09

2/17/2009 11:06:00 AM  
Anonymous Alex Novak said...

I think some of the issues facing the "art world" (and I might suggest there is also an "art market") might not all be ethical, but legal.

There are many regulations concerning the auctions that have been greatly abused, but are difficult to enforce--even if there were an inclination to do so. For instance, sham bidding does seem to raise its ugly head on some artist's work. But even the more softer "support" of dealers for their artists at auction sometimes appears, at least, to border on the disturbing, if not strictly unethical or illegal.

The connections between dealers, collectors and museums have, for a long time, been highly inbred and the results are not pretty.

There are issues in the arts--whether or not it can be compared to Wall Street. That's really the crucial point. And greed is still greed. I see little difference between a Damien Hirst and a Wall Street Banker, especially given Hirst's firing 18 staff members after making hundreds of millions of dollars. This is why you have Republican idiots bashing the arts: we make such easy targets sometimes.

2/22/2009 11:23:00 PM  
Blogger Bromo Ivory said...

While the "arts" are not finance, whenever any auction for anything misrepresents a price - through sham bidding, giving 'loans' to collectors to bid up pricing, and so forth - it brings back the days before the SEC where insider trading, market cornering were not uncommon. The art of raising capital became much easier when such practices were abandoned since it allowed small investors to participate without being ripped off by those on the inside.

While I don't think the art world is quite the same, it would be interesting to see how the results and public would react to a more transparent secondary market. I wonder if it would bolster prices overall or not? I am wondering if some of the current slide in fine art pricing is this hidden subsidy going away as auction houses lose money.

2/23/2009 11:48:00 AM  

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