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По умолчанию A look at art through the lens of economic theory



Theory is aging more slowly than vain practice. Therefore, the proposed article, although not new (2003), but for a long time will remain valid. Contains nteresny review of Western studies artrynka.


A look at art through the lens of economic theory

demand in the market of fine art

Yuri Avtonomov

... at the mention of that in economic science for almost half a century has successfully developed and there is such a discipline as "economic theory of culture", many ... not be able to keep surprising, and even smile. "What can an economist, with his notions of man as a rational, value and maximizing entity, recognized in such irrational and difficult-to-any quantitative estimates - and hence an optimization principle - the areas of human activity, such as culture and art?" We will try to answer this issue through the market works of art, looking at him through the prism of economic theory, more precisely, in terms of demand for cultural goods.

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What is the art market?

The structure of the art market is usually a series of hierarchically related sub-levels, in relation to which the artist's career looks like a gradual transition from lower to higher. In turn, buyers are trying to predict which of the artists most likely to be able to make this transition, in the empirically quite reasonable expectation that the price of his work will increase significantly [1].

At the "primary" market, individual artists offer their own work galleries, exhibitions of local significance, the small dealers and private collectors: this market is essentially decentralized. "Secondary" market is concentrated around major cities centers of art, such as London, New York and Paris. Its participants - rather well-known artists who manage to reach this level, respectable gallery owners, public museums and private collectors. The highest level is the international art market, the institutional framework which are auctions with a worldwide reputation.

Market structure changes from level to level. The primary market for competitors: a proposal from the beginning artists greatly exceeds the demand that keeps prices relatively low. Despite the fact that professional artists are spending more than a considerable effort, money and time to develop their skills (to use economic terminology, invest in their human capital), as corporations, they, unlike doctors or lawyers, lack of institutional mechanisms to validate their own reputation in the eyes of buyers. The trend is that in comparison with other areas of "artisanal labor" they generally do not exist and there is no sufficiently effective coordination mechanisms that would limit the market supply.

In the secondary market and supply and demand is much more concentrated. At every single geographical segment of the market at the same time there is only a small number of artists. By virtue of the fact that, firstly, the average price of a sufficiently high and, secondly, the commercial success is heavily dependent on the ability to professionally assess the cultural value of work and future market prospects of the author, the number of both individual and institutional buyers is also limited. The current in the secondary market dealers and galleries have great market power, and very often the terms of the contract with the artist include the duty to coordinate any of the last exhibition of his work with the gallery and gallery transfer of exclusive rights to sell his work. Gallery in this case serves as both a monopsonist (sole buyer) with respect to the artist and as a monopolist with respect to the buyers of his work. The upward trend in concentration increases and that the galleries and dealers who deal with the most successful artists, attracting increasing attention as buyers and other artists. These powerful players may have a significant impact on the reputation of the artist, and hence on the expected future value of his work.

What determines the demand for works of art?

Consensus on the classification of the motives of consumers of works of art, as well as on the significance of these or other reasons, does not exist. In the most general terms we can say that the monetary assessment of their value is formed with the participation of three different in nature and character groups of factors.

The first is most associated with specific physical properties of the objects themselves: as ordinary, commonplace things, they bring to the owner a certain value. Van Gogh painting on the wall catches the eye, even if we do not know whose hands it belongs.

Most relevant to the "original" art market, where the proposal are the work of numerous lesser-known authors, this component has on the willingness to pay for now stable and unambiguous effect. This study confirms the demand for paintings, based on a statistical analysis of sales of paintings in galleries and at auctions, the stable statistical dependence of the price pattern of size, technique and circumstances that determine its rarity (the artist belongs to a certain stylistic direction, the number of existing copies of the picture) . In contrast to the insidious arguments as "aesthetic quality", the "utilitarian" characteristics are closely correlated with the cost of production of cultural goods (size, technique, material), the size of their offers or rarity [2] - Last, but not by value - more or less amenable to objective evaluation.

The cultural value, copying and counterfeiting

The second group - perhaps the most interesting for an economist - is the most mysterious. Factor influencing the price of cultural goods in that group - is embodied in the object of "cultural value". As part of a long tradition of research in the field of culture the true value of art was taken to consider as that of the aesthetic, artistic or other cultural properties of the object. This approach is similar in type to the theories of "natural" or "fair" price in the classical political economy. In the past two or three decades, it gradually replaced by typical of postmodern relativist approach, broaden the range of objects, endowed with cultural value, but he gave no any alternative criteria for its identification and assessment. Fearful of compromising "scientific" status of their discipline, economists, with few exceptions [3], try not to consider cultural values in detail.

Be that as it may, if you remember all the incidents in the history of art, when it is in apparent favor with critics and the public work subsequently experienced a dizzying rise of popularity, it becomes clear that the mysterious relationship of cultural values of the object with its market valuation is a tricky, but so an interesting subject for economic research. Among the most attractive aspects of the cultural values of economists - the authenticity and the associated problems of copying and counterfeiting.

Historically, the debate on the issue of copying and counterfeiting dominated by the views of art historians and lawyers. And those and others in their rejection of copying come from ideological reasons: for the first copy is pointless and even harmful, because it transmits a unique "aura" of the object, for the second copy infringes the intellectual property rights and is the author of the fraud in relation to consumers. Note that in many cases the viewer is no longer able to distinguish the original from a copy, moreover, it is not always possible even with the help of sophisticated technical means. For some of the most famous works of art to highlight what is left of the primary products after various copies, modifications and upgrades, was just difficult. Recall the numerous copies of the Mona Lisa, four of which may be owned by Leonardo, and his own famous Last Supper in Milan, repeatedly restored and partially restored. These copies and revisions have become an equal part of the history of their originals.

So, finally, is up? The senseless and pernicious fraud, which must be burned with a hot iron? Nasty, but an inevitable element of the evolution of art? And maybe, in a sense, even good for the artistic community?

As to this question can answer academic economics?

To begin with, that from an economic point of view up generates at least three positive effects:

First, the appearance of copies and imitations means that the original demand, make a copy of it kind of advertising. If the copy legally, the author may receive royalties from the sale of copies (this is most important for composers). And even if the copies are illegal, they play the role of advertising, popularizing the author's original work and raising the price of his future works.

Secondly, the copy is an extremely important method of learning, for example for beginning artists, and also allows the experts and the most sophisticated part of the public to polish their skills.

Third, citation and interpretation are integral parts of artistic creativity, and lack of recourse to the works of predecessors, no doubt, would be greatly impoverished the world culture.

Of course, copying and counterfeiting, and generate negative consequences for the market, which would be appropriate to separate the effect of demand and supply of artistic works.

In terms of demand the number of copies and fakes increases uncertainty for investors who expect the future price of their acquired products will grow. In case the work will be purchased copy, the price will drop dramatically, the reasons why, at first glance, not too obvious - in fact none of its physical properties do not undergo any change. The reason becomes clear when we look to the cultural value of work - a copy, compared with the original, devoid of historical and spiritual value, because when it was created had no place or has been violated "the ritual of creation, for people having a value in itself. The thesis of the value of creative expressive ritual sounded in a report on the recent conference of the International Association of Economic Theory of Culture (ACEI) in 2002: the authors Marco Causi, Massimiliano Mazzanti and Anna Montini told about the results of a poll of visitors of the restoration area of frescoes in the Cathedral of St. Francis of Assisi, that weekend was open to the public. They found that people were willing to pay a non-zero price for the possibility to be present at creation (in this case the re-establishment) of a work of art, which suggests that the ritual of creation may be independent economic value.


Uncertainty increases the transaction costs for purchases related to the identity of the authenticity of the work. Significant amounts of these costs, in full accordance with the expectations of economists, create institutions that allow to conclude transactions with greater efficiency. On the market there are dealers who are not likely to risk their well-established reputation, such as major auction houses, specializing in high-quality authentication works. Possible consequences of error in assessing the authenticity may also be specified in the contract between the buyer and seller.

On the supply side, up the obvious way reduces the profitability of creative activity. However, early career, when creativity is manifested most clearly, the motivation of artists is often an internal ( "art for art's sake") and some reduction in prices due to copying of works will not always be critical to their suggestions. Money becomes more important at later stages of career, when the artist's works, with rare exceptions, skill begins to prevail over the works of [4]. Overall, however, it is unlikely that high income is an effective means of systematic maintenance of creativity, and in this light, the desirability to ensure that income to the heirs of the artist after his death is questionable.

A work of art as a financial asset

Third group of factors relates to the demand for works of art as an asset. Many researchers noticed that some of the cultural benefits of a private nature, such as works of fine art, have the properties inherent in capital assets, maintaining and increasing their value with vremenem.Blagodarya what data are available for sale at auction, and the fact that this question is close to the standard domain of economic science, the problem of return on investment in works of art received very wide coverage.

Empirical studies show that the average rate of return on investment in the secondary (gallery) and tertiary (large auctions) art market significantly less than the rate of return on other assets with the same degree of risk. For example, William Baumol, using a set of data about sales of paintings by more than 300 years, has calculated that the real rate of return on the average investment in paintings, resold two or more times during the period from 1652 to 1961 amounted to 0,6%. For comparison, the real rate of return on virtually risk-free bonds of the British Government for the same period amounted to 2,5%. Ranking data on the length of time interval between sales showed that a significant gain or loss can only be obtained in a relatively short time interval, in the long term rate of return also tends to zero.

John Stein held a similar study for the period from 1946 to 1968, estimating the nominal increase in the value of pictures in 10,5%for the year, against 14.3%of annual profits from speculation on the stock market. He also found that the cost of works of art, contrary to popular opinion, the changes in line with general trends for the stock market (or pro-cyclical, which means the impossibility of building risk-free portfolio of paintings and securities) and unsystematic risk on these investments is high enough. This conclusion is confirmed by Olivier Chanel, which is exploring the possibility of arbitration [5] between the financial market and the art market according to Mayer compendium (25 300 transactions with the works of 82 renowned artists, years 1963-1993) and indices of Standard & Poor's, FT Actuaries, Nikkei and INSEE, finds that the art market followed the general trend of the stock markets with a lag (a lag) between one and four quarters with no systematic deviations, and the movement on the American, English and Japanese stock markets were "the cause" [6] movements the art market, but not vice versa.

Most authors stress the fact that the scatter in the growth of value of works of art far exceeds that for financial assets, and almost all offer to treat the risk-adjusted difference between the average yield on investments in art and other assets as a measure of customer value brought by a piece of art to its owner.

Of course, in a quantitative sense, to research rates of return on investment in works of art should be treated very cautiously, at least from the fact that used in the analysis of auction prices are describing only a portion of the total market and almost no work does not account for the substantial market transaction costs. In addition, the behavior of market participants systematically deviates from the prescribed axioms of rational choice and violates the assumption of subjective expected utility maximization. Private collectors are heavily influenced by "the effect of ownership" and irrationally perceive irrevocable and opportunity costs [7]. Corporate collecting too often moved by more personal, non-profit company interests of its top managers, but the behavior is characterized by a number of museums heavily quantifiable institutional anomalies. All these anomalies can not be fully neutralized by arbitration because of the high risk, transaction costs and other factors that make the art market unattractive to speculators.

Because of the extremely high transaction costs associated with the acquisition of paintings at auction, prices are leveling arbitration is hardly possible, the question arises: Can we speak of a single international art market? The answer will probably sound like "more likely than not." On the one hand, empirical studies confirm that in the long term prices in the international art trading floors - in London, New York and Paris - are moving in unison. Once established at the first sale of paintings from the auction price further drifts in accordance with the general market trend, and if at some point in time one of the market is experiencing an external shock, the shock spread to other markets. However, there are persistent differences in price levels for similar work at different auctions, in particular, noted that prices at the auction Kornfeld in Switzerland, as well-known dealers that consistently exceed the average European and sredneamerikanskie and, more surprisingly, the prices of similar works at Sotheby's consistently higher than at auction Christie's, despite the fact that they are held in one city.

In summary, it can be argued that economic analysis of the behavior of agents in the art market is appropriate to distinguish those properties of the object, which characterize it as a decorative object or the benefit of current consumption (in the first place, it is the aesthetic properties), and those who characterize it as an asset . This cultural consumption of the individual demonstrates an obvious "effect depending on the path of development» (pathdependence) [8]. Also important is the reputation of the artist. It significantly correlates with the expected profitability of the product and at the same time is an indicator of people's opinion about its merits as a true work of art, decoration and the carrier of cultural values.

Depending on whether it prevail among market consumer or investment reasons, the demand for works of art may be differentially sensitive to the change of parameters such as the level of uncertainty, transaction costs, changes in taxation and state regulation of the market. Thus, increasing uncertainty and transaction costs are sensitive to the speculators have less impact on the collectors, because the pleasure for which they acquire and hold in their own works of art, does not depend on fluctuations in their current and future market valuation, and the future resale of their acquisition, they do not plan. Stringent restrictions on the circulation of works of art, causing the regionalization of the market, also contributed to growth in the share of net collectors. In general, the more buyers in the market, driven by internal motivation, the lower the equilibrium level of profitability. Conversely, a market dominated by "pure speculators" leads to equalization of net average rate of financial profitability of investment in works of art and other assets.

The demand for art objects may vary over time depending on the genre. For example, the portraits at the time of their writing are usually little interest to the buyer (excluding direct customer and the people close to him). Subsequently, if an artist becomes popular, the genre paintings loses value. Changes in public tastes, such as hostility to religious subjects, connected with martyrdom, or a still life paintings of battle with the image of bat game that are not, for whatever reasons, politically correct, driven from the market of private collectors and lead to the dominance of its institutional collectors - the museums, whose interest is mostly in the plane of art history. The activity of speculators in such cases increases only when they can anticipate changes in taste that quite unlikely.

Of course, economists are still very far from resolution of the many puzzles encountered in attempts to apply economic thinking to analyze the field of human activity. But this does not mean that the answers do not look. Ultimately, issues of economic theory of culture, perhaps, is surprisingly close to the problems of modern post-industrial economy, which economists need to cope, to their explanations, and forecasts are still listening.

[1] William Baumol and Leslie Singer estimated the probability of such a transition, and it was very small

[2] The rarity of general played a crucial role in the evaluation of works of art, as the latter to a large extent serve as a sign of social status of the owner and as such are of interest both for experts and connoisseurs of art, and just for the elite. However, there is reason to believe that the recent works of art all the same to a greater extent are investment goods.

[3] David Trosbi in his recent book offers EconomicsandCulture assessment framework of cultural values, separating it from the aesthetic aspects of the social. The former he considers aesthetic (beauty, harmony, form) and symbolic (ideas, feelings and impressions that an individual can read in the object) value, while the second - the spiritual (value object to members of a cultural community), social (development of the human consciousness nature of its society and its place in it), historical (the ability to object to reflect the lifestyle of people during its creation and improve people's understanding of this through its link with the past) and the value of the authenticity of the object.


[4] However, referring to specific examples, we can note the existence of the most controversial evidence about the nature of the motivation of authors. See, for example: Throsby D. Economics ... P. 105-106.

[5] Arbitration - the operation for the simultaneous purchase and sale of one or more assets in different markets, bringing riskless profit due to differences existing in these markets prices.

[6] Under the "causal link" here refers to the results of statistical test of causality by Grenzheru.

[7] irrevocable costs (sunkcosts) - costs that can not be met with rejection of the transaction (business, project), with which they were connected. For example, you spend the time or rendered services you can not return or sell back. Opportunity cost - the situation where the subject makes the choice in favor of some variant of its opportunity costs are equal to the value of the best of the options from which he refused.

[8] One of the foundations of economic theory is the explanation of human behavior defined by the persecution of their goals (preferences), with varying restrictions, in respect of cultural values is not always wise. For example, such an attitude will not help us answer the question why, with constant restrictions of three with equal opportunities for people, originally selected as a leisure activity, such as musicals, one becomes a lover of jazz music, the other changes its choice in favor of the opera, and the third does no longer interested in such a sight, and in his spare time, prefers to watch TV. The fact that the reasons lie not in changing some of the restrictions are not observed by us, and in the evolution of their artistic taste, caused by, among other things, and the history of their cultural consumption.

"Untouchable reserve" 2003, № 6 (32)
http://magazines.russ.ru/nz/2003/6/a10.html



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Старый 18.05.2009, 15:33 Язык оригинала: Русский       #2
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I want to raise this very interesting topic, can someone not yet read.

And also to draw attention to this quote: "However, early career, when creativity is manifested most clearly, the motivation of artists is often an internal (" art for art's sake "),....... The money becomes more important at later stages of career when the artist's works, with rare exceptions, their skills begin to predominate over creativity. "

Not once noticed that many artists are beginning to well and have a "loaded", but really to the creative development, are capable units.



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Старый 18.05.2009, 15:54 Язык оригинала: Русский       #3
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Yes, and it would be nice to make a heading of "flipping through the old pages, sometimes article 10 years old again become relevant.



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Старый 08.10.2009, 09:08 Язык оригинала: Русский       #4
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Цитата:
For example, William Baumol, using a set of data about sales of paintings by more than 300 years, has calculated that the real rate of return on the average investment in paintings, resold two or more times during the period from 1652 to 1961 amounted to 0,6 %. For comparison, the real rate of return on virtually risk-free bonds of the British Government for the same period amounted to 2,5%. Ranking data on the length of time interval between sales showed that a significant gain or loss can only be obtained in a relatively short time interval, in the long term rate of return also tends to zero.
Stranno, chto nikto ne obratil vnimanie na eto. Nesosotoiatel'nost 'investitsii v iskusstvo v tselom bylo neodnokratno dokazano.

Na arte mozno delat 'den'gi (uzkoi gruppe spetsialistov), no daze sravnit' s rynkom tsennyh bumag nel'zia.
__________________
www.anmedicalrecruitment.com.au



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