the quirks of the art market: part 2/3

art market analysis: a few supply- and demand mechanisms at play

So, what does one collect or want to collect? This is a question that can go many places, but starting chronologically is an easy way to break down the market.

Many dealers and buyers shy away from purchasing art that is generally older than the 1800’s. This is for many reasons- much of the art produced before then is already in museums or collected, but it is also about the cost of maintaining the piece. With the introduction of synthetic paints and dyes, along with the Industrial Revolution, paint ingredients could withstand more light, wear and tear.

In contrast, if you were to purchase an Old Master or a 16th century triptych, then light, humidity and temperature would be significant factors in keeping and conserving the work.

This is neither cost effective nor one bit glamorous. What the paint is applied to also matters. Certain woods warp, crack, and dry, and canvasses can be poorly prepaired, in horrible frames that were made cheaply. Paper stock can be of the acidy and porous ilk. Nails can rust, a canvas can tear, and moving a work that is quite old is a delicate and expensive process. Even the ultra-wealthy don’t want to deal with the hassle of transporting, protecting and dealing with such things. They leave it to museums.

Now, for the glitz: the annual Impressionist and Modern Art auctions at Christie’s and Sotheby’s sell what is often the most “buyable” works by artist starting in the mid-19th century all the way to modern art, which ends roughly in the 1960’s- almost an entire century of very valuable pieces. The hottest artists include such names as Van Gogh, Picasso, Renoir, Sisley, Degas, Cezanne, Matisse, Seurat, Giacometti, Rothko, Lichtenstein, de Kooning, Johns, and Warhol. These are the artists that will get prices upwards of €38.5 million (£31M), and they are the drivers of the frenzy that we often see in the art market.

art market analysis on the commodisation

Art, having been a hot commodity for about three decades now, has a limited supply of these prime-time artists. That’s why when a Rothko comes on the market, it can easily get the $89.6 million that Orange, Red and Yellow fetched this May, or why Edvard Munch’s The Scream sold for $120 million- Rothko’s are harder and harder to come by, and this was the first Scream to be bought and taken outside Norway- the other three Screams are all in their native country. Pieces from these artists drive the rest of the pieces upward in price- it’s a domino effect, if you will. Once Orange, Red and Yellow is gone, it probably won’t come back up for auction for a long time. This combination of limited quantity combined with the ultimate want to own a noteworthy piece will create the sort of energy that can lead to absolutely insane numbers racking up. When there aren’t any more decent sizes Edgar Degas works, we begin auctioning off his sketches, even if they aren’t quite up to task of being true, quality representations of his best work. What’s more, they’ll command high prices still, simply because they are done by somebody noteworthy to have in one’s collection.

As a result of this lack of availability in the art market, it acts and reacts differently than most of our other markets. Where stock brokers trade millions of shares, art buyers and dealers work with a significantly smaller number of works. That’s where the contemporary art market comes in- when it’s all said and done, the works that are worth having are usually already snatched up, and new artists have chances to make their names, for several reasons.

The elite who possess the capital to spend on art do not just want a well-curated collection of classic pieces every viewer will enjoy. They want to seem avant-garde, ahead of the curve, and witty.

Putting in a piece that shows taste but a taste for the slightly off makes the investor seem on top of their game- even if the piece was actually chosen by a rather persuasive dealer or buyer for the client. This all-encompassing human need to seem interesting and worthwhile is shown in this sector of the art market.

Contemporary art seems to not follow any rules. There are various shades of absurdity, and there are various artists that cater to certain audiences. The Young British Artist movement produced a contemporary art star, Damien Hirst, known for his love of the macabre, the capitalist, and the mass-produced.

His formaldehyde creations of animals sliced in half vie with his butterfly wing pieces, combining our sense of the surreal with our love of the absolute odd. What is the point of depicting a cabinet of pills? The question in contemporary art is not “why” but rather “why not”, it seems. The problem with investing in contemporary art is the heavy amount of fees at auction or while buying from a dealer, the not-quick turnaround of investment, and the sometimes interesting adjustments that must be made to deal with the art.

An excellent piece of literature on investing in the contemporary art market, The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art and Auction Houses greatly clarifies all of the sometimes foggy terms used in the art market. The author, Don Thompson, describes how returns on art aren’t actually what we imagine, and how even the most well curated of collections, when auctioned, will rarely make more than a 12% return on the investment per year, if the investor is lucky, and the auction house markets the collection well, etc. These are all all factors that make investing in art more of an emotional rather than a rational venture at the end of it all.

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Contribution by Kate van Genderen

Carrier, David, “On the Possibility of Aesthetic Atheism: Philosophy and the Market in Art”, MIT Press, Leonardo, 18, 1, 1985.
Melikian, Souren. “Rothko Leads a Record Contemporary Art Sale”, New York Times, 9 May 2012,
Ng, David, L.A. Times, “Alberto Giacometti Sculpture Breaks Record” Los Angeles Times, Feb 2010,
Thompson, Don, “The $12 Million Stuffed Shark: The Curious Economics of Contemporary Auction Houses”, Aurum Press Ltd, London, 2008.
Velthius, Olav, “Talking Prices: Symbolic Meaning of Prices on the Contemporary Art Market”, Princeton University Press, New Haven, 2005.