Robert B. Ekelund, John D. Jackson, and Robert D. Tollison
- Published in print:
- 2017
- Published Online:
- July 2017
- ISBN:
- 9780190657895
- eISBN:
- 9780190657925
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190657895.003.0005
- Subject:
- Economics and Finance, Financial Economics
American art, both pre-1950 art and contemporary works, are examined as investment vehicles in this chapter. This study, unlike others, factors in both buyer’s and seller’s premiums charged by the ...
More
American art, both pre-1950 art and contemporary works, are examined as investment vehicles in this chapter. This study, unlike others, factors in both buyer’s and seller’s premiums charged by the auction house. These transaction costs must be considered when calculating actual returns from utilizing art at auction as an investment. We find that, under various assumptions of these transaction expenses, early American art (pre-1950) provides a modest return of between a negative 3-plus and a positive 2 percent. Contemporary American art, for our sample, yields a far higher return in the range of 18 percent and above. However, contemporary art carries a higher risk than holding a market portfolio, although quite naturally the return must include psychic income. This chapter, moreover, provides clear evidence that early and contemporary American art are two distinct markets.Less
American art, both pre-1950 art and contemporary works, are examined as investment vehicles in this chapter. This study, unlike others, factors in both buyer’s and seller’s premiums charged by the auction house. These transaction costs must be considered when calculating actual returns from utilizing art at auction as an investment. We find that, under various assumptions of these transaction expenses, early American art (pre-1950) provides a modest return of between a negative 3-plus and a positive 2 percent. Contemporary American art, for our sample, yields a far higher return in the range of 18 percent and above. However, contemporary art carries a higher risk than holding a market portfolio, although quite naturally the return must include psychic income. This chapter, moreover, provides clear evidence that early and contemporary American art are two distinct markets.
Robert B. Ekelund, John D. Jackson, and Robert D. Tollison
- Published in print:
- 2017
- Published Online:
- July 2017
- ISBN:
- 9780190657895
- eISBN:
- 9780190657925
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190657895.003.0007
- Subject:
- Economics and Finance, Financial Economics
Chapter 7 presents a dissection of two important issues affecting the art market and the fate of artists: “a death effect” and “bubbles.” Death of an artist is a guarantee that additional legitimate ...
More
Chapter 7 presents a dissection of two important issues affecting the art market and the fate of artists: “a death effect” and “bubbles.” Death of an artist is a guarantee that additional legitimate output will not be forthcoming, the “Coase durable monopoly conjecture.” Evidence indicates that the price path of seventeen artists who died over the sample period rises as the artist approaches death. After death, price may rise or fall with supply and demand, but we find it rises for our contemporary artists. “Bubbles”—rapid price increases—have and do occur in the art market. We find that art price behavior parallel GDP prior to 2008, but rose much faster thereafter. This result, coupled with an increasingly skewed world income distribution and billionaire buying, potentially denotes an “art price bubble.”Less
Chapter 7 presents a dissection of two important issues affecting the art market and the fate of artists: “a death effect” and “bubbles.” Death of an artist is a guarantee that additional legitimate output will not be forthcoming, the “Coase durable monopoly conjecture.” Evidence indicates that the price path of seventeen artists who died over the sample period rises as the artist approaches death. After death, price may rise or fall with supply and demand, but we find it rises for our contemporary artists. “Bubbles”—rapid price increases—have and do occur in the art market. We find that art price behavior parallel GDP prior to 2008, but rose much faster thereafter. This result, coupled with an increasingly skewed world income distribution and billionaire buying, potentially denotes an “art price bubble.”
Robert B. Ekelund, John D. Jackson, and Robert D. Tollison
- Published in print:
- 2017
- Published Online:
- July 2017
- ISBN:
- 9780190657895
- eISBN:
- 9780190657925
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190657895.003.0001
- Subject:
- Economics and Finance, Financial Economics
Chapter 1 introduces the rationale for studying and analyzing the economic aspects of American art as a “category” of art genres and, more generally, it places the market for art in the context of ...
More
Chapter 1 introduces the rationale for studying and analyzing the economic aspects of American art as a “category” of art genres and, more generally, it places the market for art in the context of trade for all goods and services. Art, like all traded goods, possesses credence characteristics, but they are present to a significant degree since the requisite assurance of authenticity is often difficult to determine. The chapter also explains why American art can be segmented for study apart from a “homogeneous” art category and also as two markets—one prior to art produced before 1950, and another that has come to be called contemporary American art. Chapter 1 previews the remainder of the book in which both semi-technical issues, such as artistic productivity, auction estimates, and investments, and narrative issues, including art crime, fakes, art marketing “death effects,” and contemporary art bubbles, are dissected from an economic perspective.Less
Chapter 1 introduces the rationale for studying and analyzing the economic aspects of American art as a “category” of art genres and, more generally, it places the market for art in the context of trade for all goods and services. Art, like all traded goods, possesses credence characteristics, but they are present to a significant degree since the requisite assurance of authenticity is often difficult to determine. The chapter also explains why American art can be segmented for study apart from a “homogeneous” art category and also as two markets—one prior to art produced before 1950, and another that has come to be called contemporary American art. Chapter 1 previews the remainder of the book in which both semi-technical issues, such as artistic productivity, auction estimates, and investments, and narrative issues, including art crime, fakes, art marketing “death effects,” and contemporary art bubbles, are dissected from an economic perspective.
Robert B. Ekelund Jr., John D. Jackson, and Robert D. Tollison
- Published in print:
- 2017
- Published Online:
- July 2017
- ISBN:
- 9780190657895
- eISBN:
- 9780190657925
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190657895.001.0001
- Subject:
- Economics and Finance, Financial Economics
The Economics of American Art focuses solely on critical economic aspects of the full range of American art (as opposed to art produced and traded in the United States). After a brief introduction to ...
More
The Economics of American Art focuses solely on critical economic aspects of the full range of American art (as opposed to art produced and traded in the United States). After a brief introduction to the history of this market, simple economics in both narrative and statistical form is used to plumb a number of important topics and issues. Using a unique sample of 14,000 art auction observations between 1987 and 2013 of eighty American artists born before 1950, several important topics related to art and the marketplace are examined. These include such matters as the age at which artists achieve peak productivity. Further, the authors query whether the undeniably “innovative” art being produced in the United States today is partially related to marketing and modern selling techniques rather than the age-related link most often offered as explanation. Marketing techniques and the “fairness” of auction house estimates are evaluated in this regard. Other aspects of the auction marker, such as “bought-ins” and “burning,” are also addressed. The authors show statistically that there are two basic markets for American art: that produced prior to 1950 and that (post-1950) labeled “contemporary.” Investment in the latter, the authors conclude, may be far more remunerative. The disturbing issues of art crime, money laundering with art, fakes, and fraud are analyzed, with the costs and benefits of such activities in mind, as are the issues of the impact of an artist’s death and the appearance of bubbles in the art market.Less
The Economics of American Art focuses solely on critical economic aspects of the full range of American art (as opposed to art produced and traded in the United States). After a brief introduction to the history of this market, simple economics in both narrative and statistical form is used to plumb a number of important topics and issues. Using a unique sample of 14,000 art auction observations between 1987 and 2013 of eighty American artists born before 1950, several important topics related to art and the marketplace are examined. These include such matters as the age at which artists achieve peak productivity. Further, the authors query whether the undeniably “innovative” art being produced in the United States today is partially related to marketing and modern selling techniques rather than the age-related link most often offered as explanation. Marketing techniques and the “fairness” of auction house estimates are evaluated in this regard. Other aspects of the auction marker, such as “bought-ins” and “burning,” are also addressed. The authors show statistically that there are two basic markets for American art: that produced prior to 1950 and that (post-1950) labeled “contemporary.” Investment in the latter, the authors conclude, may be far more remunerative. The disturbing issues of art crime, money laundering with art, fakes, and fraud are analyzed, with the costs and benefits of such activities in mind, as are the issues of the impact of an artist’s death and the appearance of bubbles in the art market.
