Value of Great Art

Value of Great Art

For the most part, there really isn't much concrete value to art. Take a traditional painting for example, the relevant costs are the canvases and paint. There are of course exceptions such as large-scale architectural designs like Ai Weiwei's Beijing National Stadium (Bird's nest) or Jeff Koon's large chrome sculptures. Still, even then the margins earned by certain artists on these works to many people can seem absurd. Having visited legitimate arts shows and auction houses this semester, what astonishes me the most are these ridiculous prices that are tagged on these works. Millions for a silk-screen depiction of a celebrity. Millions for a toilet. Useless objects brought together through appropriation becomes worth a fortune. Big artists can brand themselves to a point where even their shit can become proportionally worth what it is worth in gold. The modern art industry puts new meaning to "A mans trash is another mans treasure." So the question that continuously goes through my minds is "What drives the high value put upon the art market?" Through the course of the semester, the readings and lectures have shed lights on a variety of forces that influence the perception of art and why it is worth what it is worth. At the end of the day, the art trade works within our current capitalist society so the movement of art culture correlates significantly with some business theories and consumer behavior. The high prices that the elite contemporary art shows go for reflect social structure, business practices, as well as the ability to express current culture.

The most obvious driver for art values is because it is treated as a commodity for conspicuous consumption. This has been true throughout history as seen in beautiful paintings and sculptures in palaces or castles in which nobles show off their elite status through art. This reveals a part of human nature that wants to project their own success to induce pride or to create envy from others. I'm sure some art collectors would not even buy a particular painting if is isn't worth much monetarily

To a certain extent, the prices themselves do not matter, what matters is how much one spends compared to someone else. Because our current society is based on capitalism, money equals to greatness. Therefore a competition naturally arises and art by some means becomes a "Dick measuring contest" between collectors. Often times, the individuals who are capable of spending fortunes bidding on art are big businessmen who worked their whole lives around competing in the corporate world. Competition is how companies become efficient, if one firm does not constantly improve themselves; they are squeezed out of the market. The determination to one-up each other can be seen in the highly anticipated auctions that are a spectacle in itself. I have not actually witness a live auction personally but from what I have seen from shows such as "Storage Wars", things can get quite intense.

On the topic of auctions, the way in which art is traded provides a very transparent view of the market. Because many of the works are auctioned off, each piece of art is essentially sold for the exact amount it is worth, as long as there is a certain amount of competition. If purchasing power between buyers is comparable, the asymmetry of information is eroded between seller and buyer because the buyers are forced to expose the highest value they are willing to pay. Having this ability to sell to the highest bidder is great for increasing the value to the seller because it allows for a version of first-degree price discrimination. As seen in this basic supply and demand curve of a normal product that cannot price discriminate (left), a single price must be charged. There is an area of value that is lost from buyers that would have paid more, and an area that is lost from the buyers that can't afford the product at that price. However, these surpluses are avoided in the publically traded art market by personalized pricing (right)

The price discrimination example does not completely hold true for the art trade because each piece of art is unique so naturally prices would be different, so I looked more towards not why individual pieces of art are worth money, but what makes a particular artist able to produce highly valued art.

There is a reason that the majority of artists do not make it big. If great artists exist everywhere, there wouldn't be the rare group of "elites" that collectors are willing to pay a premium for. Our society loves to adore celebrities and loves to consume the "brand". Fame is often correlated with fortune. In the art world, the brand is the artist and the ones who stand out are showered with extraordinary praise and success. Being an industry that produces luxury goods, the value of an artist is sensitive to positive feedback in which success feeds upon itself. The strong get stronger and the weak get weaker because the market is tippy, but once an artist breaks through the threshold past the vicious cycle of failure, the brand of the artist strengthens and their art value skyrockets.

This tippy market can be compared to the market of digital goods today. Take the company of Apple for example. They have marketed their brand in such a way where consumers are locked into their products because of who Apple is, not necessarily the quality of the their product. A recent YouTube ad by Samsung mocks this consumer culture, depicting a long line of consumers waiting to purchase the next Iphone. Not knowing exactly what comes in the new upgrade, customers blindly commit to the product without question because they care about the reputation more that the product. One customer is worried about the appearance saying, "If it looks the same how will people know I upgraded?" Once again, this reflects the nature of conspicuous consumption in which people buys luxury goods for the sake of buying luxury goods, demonstrating and reaffirming their status. Then a passerby walks past the line with the new Samsung X2 phone that is clearly superior, making the people in line furious of their own brand addiction. It's fun to laugh at these customers in line but then I realized it is a bit hypocritical to be enjoying the mockery considering I am watching the ad on an apple product myself. The point is that something great can easily be missed, just because a brand is not present, as seen by Joshua Bell's unnoticed world-class performance in the subway.

From this point of view, brands of these tippy markets really achieve success not because they produce the best quality, but because they are the first movers, the one that captures the market first and locks