Overview

The Art Market is where culture meets capitalism. It’s a strange, unregulated market where a canvas can sell for $450 million.

Core Idea

The core idea is Subjective Value. A painting has no intrinsic value (it’s just canvas and oil). Its value comes from consensus, scarcity, and status.

Formal Definition

The global marketplace of buyers and sellers of art.

  • Primary Market: Buying directly from the artist (Galleries).
  • Secondary Market: Reselling art (Auctions like Sotheby’s).

Intuition

  • The Veblen Good: Art is a luxury good. The higher the price, the more people want it (status symbol).
  • The Lottery: For every artist who makes millions, 10,000 make nothing.

Examples

  • Salvator Mundi: Sold for $450 million. Was it really by Da Vinci? Does it matter?
  • Banksy: Shredded his own artwork at auction. It doubled in value.

Common Misconceptions

  • Misconception: Price = Quality.
    • Correction: Price = Hype + Scarcity + Provenance (who owned it before).
  • Misconception: It’s a good investment.
    • Correction: It’s high risk, illiquid, and has high transaction costs.
  • Economics: Supply is fixed (dead artists don’t paint), demand fluctuates.
  • Money Laundering: The art market is often used for this because it’s opaque.

Applications

  • Investment: Art funds.
  • Tax Evasion: Freeports.

Criticism and Limitations

  • Commodification: Turning culture into an asset class ruins the art.

Further Reading

  • The $12 Million Stuffed Shark by Don Thompson