BY George Pendle in Opinion | 01 OCT 08
Featured in
Issue 118

What Price Fame?

The art market, insider trading and judging greatness

BY George Pendle in Opinion | 01 OCT 08

Bids are taken by telephone for a work by Andy Warhol at Christie's, New York (2006)

The current craze for books of lay economics and social psychology shows no sign of abating. Following the lead of Malcolm Gladwell’s The Tipping Point (2000), James Surowiecki’s The Wisdom of Crowds (2004) and Stephen Dubner and Steven Levitt’s Freakonomics (2005), a legion of imitations – such as The Black Swan (2007) by Nassim Nicholas Taleb, Dan Ariely’s Predictably Irrational (2007) and Nudge (2008) by Richard Thaler and Cass Sunstein – have been published that use psychological explanations or economic methodologies to look at situations that neither economists nor psychologists typically study.

Thanks to these books, we now know that groups can be smarter and more innovative than individuals, and that snap judgements are often preferable to well-thought-out ones. Conventional wisdom is regularly turned on its head, and the surprising causes of familiar phenomena are revealed. Readers are offered a new view of the world and of their place within it. Yet despite the seemingly omnivorous appetite of the genre’s authors – case studies vary from the cheating tactics of sumo wrestlers to the economics of drug dealing – the art world has largely been ignored.

On the face of it this is not too surprising. Art-making has traditionally been accepted as an unquantifiable field. Yet David Galenson, an economist at the University of Chicago, recently declared in The New York Times that economic methods can now be used to judge the ‘greatness’ of works of art. By following the hypothesis that ‘important artists are innovators whose work changes the practices of their successors’, Galenson studied 33 art textbooks published between 1990 and 2005 on the assumption that the most important works would merit the most illustrations. This allowed him to declare Pablo Picasso’s Les Demoiselles d’Avignon (1907) the single greatest work of art of the 20th century, followed by Vladimir Tatlin’s Monument to the Third International (1919–20), and Robert Smithson’s Spiral Jetty (1970). In part, Galenson believes that such a calculation has become viable only because of the increasingly sophisticated trade in art works over the last 100 years. Touched by market forces, art has, like any traded commodity, become quantifiable.

Galenson’s explication of what was previously thought of as indefinable has gained him much criticism from within art circles but also the support of such illustrious cheerleaders as Gladwell himself. After all, the investigative theorizing of such books as The Tipping Point is meant to clarify just such chaotic and mysterious phenomena as the artistic process.

This is not the first time that Galenson has attempted to plumb what many believe to be unfathomable depths. In his book Old Masters and Young Geniuses (2005) Galenson declared that all artists could be split into two categories: ‘conceptualists’, who make radical innovations in their field at a very early age, and ‘experimentalists’, whose innovations develop slowly over a long period of experimentation. It should be noted that Galenson used auction sale prices to judge their most important works – the greater the sum of money a work of art was sold for, the greater the innovation on display within it. But while this use of money as an aesthetic scale was only a secondary aspect of Galenson’s main hypothesis – that artistic achievement can be measured – it is the principal and overwhelming focus of the economist Don Thompson’s The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art (2008).

Using market terminology, Thompson sees art as a hostage to financial concerns. The popularity of unconventional formats in contemporary art is an example of ‘disruptive innovation’, an attempt by beleaguered young artists to create and inhabit a segment of the art market unpopulated by established, older artists. Art works are described as ‘positional goods’, status symbols that show off a collector’s taste and wealth. Meanwhile prices are ruthlessly fixed by a monopolistic élite of dealers and auction houses.

Thompson delights in exposing how the art market is rife with what in a financial institution would be described as insider trading. For this there seems to be no solution. In most other markets, scarcity or quality drives up prices. In the art market, which is dealing in goods with no intrinsic value, prices drive up prices.

Part of the reason for the success of such books as The Tipping Point and Freakonomics is their optimistic tone; the chaos of the world can be understood, we just need to engineer a change in our perception. The $12 Million Shark …, by comparison, offers a darker, more pessimistic view, in which conventional wisdom – that the art market is increasingly divorced from genuine artistic ability – is only confirmed and deepened.

Worrying about the commodification of art is not exactly a new pastime. Karl Marx wrote: ‘Works of art, which represent the highest level of spiritual production, will find favour in the eyes of the bourgeois only if they are presented as being liable to directly generate material wealth.’ Yet for those who think that the presence of an art market necessarily thrusts a bourgeois complacency on their work Thompson, offers something of a double-edged palliative. ‘The art trade’, he declares, ‘is the least transparent and least regulated major commercial activity in the world.’ If art is a commodity, he suggests, it’s not too dissimilar from the kind of unregulated commodity that’s cut with rat poison and powdered glass and sold on street corners by sinister, dead-eyed pimps.

George Pendle is a writer based in Washington D.C., USA.