{image source: Guernica 1937, by Pablo Picasso: historylists.org }
Conventional wisdom tells that art emphasizes selflessness overlooking the economic value of the work that artist produces. Since renaissance art has been perceived as a freedom of expression or a manifestation of cultural heritage of society. Street artist and political activist Banksy claims that art is not a commodity that can be sold of purchased, at the same time his replicated street mural work is being sold and purchased and skyrocketing prices.
Unlike any commodities such as agriculture, oil, or manufactured goods, art has a quality of uniqueness. Unlike, say sugar that can be replaced with honey or jaggery; art piece is irreplaceable. Since art is unique and there is no equivalent substitute for each produced piece, Economist Adam smith argued it is impossible to value them.
This very aspect of being unique, art is subjected to marginal utility as there is no specific consumption pattern, such that demand for certain type of artwork is unpredictable. This gives uncertainty to return on investments of goods produced. Although each art piece is unique there is infinite variety and there is no fixed consumer market of any variety.
Investing in fine art can be risky. It is not guaranteed that all art will appreciate. The transaction costs of buying and selling art are huge. If one is investing in high end art than one should also be getting insurance against, theft, fire, earthquakes, etc. Many forms of art also have complex storage requirements (temperature, humidity, light sensitivity etc.).
An investor can never be sure what the future value of the art they are buying will be. Art that is rare is more valuable and particularly if it is an original piece as opposed to a reproduction.
So, why and how art is being sold at such high prices ?
The rarity of a work of art is what gives it value, so an original will always be worth more than a reproduction. Several factors determine the value of art, the size of the edition (that is, the number of prints the artist makes of one work), the significance of the work, the condition of the print, social and historical background and whether it is signed and numbered by the artist.Original art holds its value over time and do not depreciate.
Yet, art market is highly oligo plastic market. Artist’s name becomes the brand ambassador of it’s quality. As a winner takes all market, the art market is structurally pivoted to privilege the privileged, whether it’s a gallery with a powerful brand, an artist with a strong position in the socioeconomic institution, or an art collector with a consolidated status. Consequently, the winner takes all logic functions as a mechanism continues to reinforce the existing power configurations, making it highly inaccessible.
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