“Business art is the step that comes after Art… good business is the best art.” –Andy Warhol, 1975
What determines the value of a piece of art in the modern market? How does the world market of art function? How does art contribute to the economy as a whole? Several theories criticize and clash over the ambiguous factors that determine the value of a piece of art. However, each and every factor that affects the value of art is underlined by the human’s need for art and self-expression. In order to analyze the economic machine behind contemporary and fine art, several factors need to be taken into consideration. The purpose of art, the reasoning behind the value of art, and the business of art all influence art’s role in the economy today.
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The Purpose of Art
“From the cradle to the grave our typical man, even supposing he himself has not the particular sensitiveness to beauty which incites people to care about works of art, will buy and help buy in the course of his life a good many works of art.” –Roger Fry
What is the purpose of art? Humans don’t need art to eat, sleep, breathe, let alone live. The true driving economic force behind the art gallery today is the human’s desire for self-expression. Self-expression can also be associated with personal vanity. For example, a man may purchase a Picasso piece not because of the content of the piece, but to promote his status as a wealthy businessman. While a museum remains as objective as possible when purchasing a piece, a customer or owner uses subjective influences to determine which piece they will purchase. The bizarre combination of subjective and objective influences that decide the ultimate value of a piece of art contributes greatly to the ambiguous and undeterminable behavior of the art market today. While desire and demand for a work of art controls the macroeconomics of the art world, the customers subjective interaction with a piece of art determines the microeconomics of an art gallery.
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The Value of Art
“An artist is not paid for his labor but for his vision.” –James McNeill Whistler
The value of art is almost entirely subjective. The philosopher Jean Jacques Rousseau perfectly describes how the value of art is determined. Rousseau, in several of his works, points out the fact that paintings are non-necessaries, and that ultimately the monetary value of a painting is determined by its envy value. While quality is determined by price, a high price encourages envy, therefore promoting even higher monetary values. As Rousseau states,
Those self-important persons working exclusively for the idle and the rich, set an arbitrary price on their lapri, and as the merits of these futile works exist only in the opinion of the people, and the price itself is part of their merit, one estimates them in proportion of their price.
-Rousseau, Emile
The subjective influences that provide reasoning behind the existence of art ultimately determine the value of a piece of art. Fluctuation of the value of a piece of art is the result of the change of the envy value of a piece of art, which, in turn, is affected by the bidder’s desire for self-expression or self vanity. In order to increase the envy value, as well as the monetary value, of a piece of art, the piece needs to be rendered as exclusive and rare. This argument can be attributed to Adam Smith, a philosopher who challenged Rousseau’s perspective on the value of art. Smith, in contrast to Rousseau, wrote that the value of a piece of art is determined by the “rarity and beauty” of the artist’s talents as well as the “discredit” of the piece. Smith parallels the interaction between an artist and a customer with “a kind of publick prostitution.” By creating this parallel, Smith addresses the issue of the artist deserving to be paid a large sum of money for their services rendered. Rousseau, however, wrote that the salary of an artist was far above what they deserved. While Smith believed that artistic expression was worth a high value, Rousseau asserted that the value of art is merely determined by the envy value of the painting.
-Reference: Economic Engagements of Art, edited by Neil De Marchi and Craufurd D. W. Goodwin.
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Business of Art
“The general public has little concept of the true value of art, so it is our job to educate them by putting a fair price on our work. If I put a rock bottom price on my items, I then contribute to a public opinion of what this type of artwork is worth.” –Vernon DePauw
The origin of the business of art can be attributed to David Rockefeller in 1967 when he founded the Business Committee for the Arts. Since the founding of the committee, the economic standing of the art world has increased dramatically. By encouraging corporations to contribute financially to museums as well as galleries, the Business Committee for the Arts not only promoted the financial welfare of visual art, but also increased the “do-good” status of corporations around the United States. After the creation of the BCA, several other programs devoted to the business of art began to develop. One prime example would be Business Volunteers for the Arts, a program that directly incorporated company executives into art and cultural organizations. By connecting the business world with the art world, Rockefeller began a new facet that greatly contributes to the economic standing of art today.
While the interaction between the art world and corporations covers the grander aspects of the business of art, the relations between the artist, dealer and customer demonstrate the fine-tuning that controls the business of art. Another facet of the business of art is the interaction between the dealer, the artist, and the buyer. By increasing the price of a piece of art, the dealer increases the envy value of the piece and indicates the artist’s success in the art world. The interaction between the dealer and the customer contrasts greatly with that of the artist and the customer. The majority of artists do not create a piece of art in order to receive money- they create art for self-expression and to make a statement to the viewer. While the dealer focuses on the monetary value of the piece, the artist focuses on the significance of the piece. The web of interactions that occur between a CEO, a dealer, an artist, and a customer all contribute to the many facets of the business of art.
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The Art World Today
“Price is the one feature of art that continually makes the front page of the ‘New York Times,’ especially when an escalation in price can be documented.” –Joan Jeffri
By showing the numbers and percentages that describe the economy of art today, one will be able to derive the important role of the art world in the modern economy.
The Global Art Market Share for 2003
| USA | 42 (%) |
| UK | 28 |
| France | 9 |
| Italy | 3.6 |
| Germany | 1.7 |
| Netherlands | 1.7 |
| Australia | 1.6 |
| Switzerland | 1.5 |
| Sweden | 1.3 |
| Hong Kong | 1.2 |
| Others | 6.8 |
Source: Understanding International Art Markets and Management, Iain Robertson
Selection of Top Auction House Prices for a Basket of Art and Antique Commodities
| Artist | Item | Price (million) | Where Sold | Date | |
| Picasso |
|
$104 | Sotheby’s (NY) | 2004 | |
| Van Gogh | ‘Portrait of Dr. Gachet’ | $82.5 | Christie’s (NY) | 1990 | |
| Renoir | ‘Au Moulin de la Galette’ | $78.1 | Sotheby’s (NY) | 1990 | |
| Rubens | ‘The Massacre of the Innocents’ | $76.6 | Sotheby’s (Lon) | 2002 | |
| Van Gogh | ‘Portrait de l’artist sans barbe’ | $71.5 | Christie’s (NY) | 1998 |
The global art economy generated $23.5 billion in 2001.
In Europe, the art trade directly generated 73,500 jobs spread across 28,600 businesses. In the United States, 35,300 jobs were directly generated by 8,800 businesses.
Ancillary economic activity generated by the art economy in Europe and the United States resulted in nearly $3 billion of further stimulus, including the indirect creation of 80,000 more professional and service sector jobs.
-Statistics from: www.kusin.com
Sources:
1) www.kusin.com
2) www.christies.com
3) www.sothebys.com
4) www.tate.org.uk
5) www.moma.org
6) Robertson, Iain. Understanding International Art Markets and
Management. New York: Routledge, 2005.
7) Goodwin, Craufurd D. Art and the Market: Roger Fry on Commerce
in Art. Ann Arbor: University of Michigan Press, 1998.
8) De Marchi, Neil and Craufurd D. W. Goodwin. Economic Engagements
with Art. USA: Duke University Press, 1999.