Wednesday, November 21, 2012

Yin and Yang of the Value of Art

Does aesthetics or the market determine the value of art? Two articles on November 19th each represented one side of the debate. “Occupy Art” reflected on criticism of the investor-collector mentality that cares less about aesthetics than rate of return on artworks, and “Art as an investment” outlined an array of opportunities and financial products that derive from the art market. Will there be a dominant force or harmony in the passion and pragmatics of art collecting in the 21st century?
“Occupy Art” happened to appear in the U.S. edition of Reuters, while “Art as an investment” appeared in the South China Morning Post. Western and Eastern perspectives were distinct. “Occupy Art” passionately suggests that tastes, or lack thereof, of high-end “collectors” control the market and have degraded the practice of collecting. “Art as an investment” takes a pragmatic look at the ways in which art has developed as an asset class.
What do sales prices of $250 million (Cezanne’s The Card Players), $140 million (Pollock’s No. 5), $120 million (Munch’s The Scream), $87 million (Rothko’s Orange, Red, Yellow) say about the quality of the art? While the prices may seem extreme, at least each of the sales, which occurred over the past decade, reflects vetting through a history of ownership. What do sales prices of $8 million (Hirst’s The Physical Impossibility of Death in the Mind of Someone Living) and $33.7 million (Koons’ Tulips) say about quality of the art? The artists appear to have a following of wealthy collectors who somehow decide on the financial value of the artworks. “Occupy Art” refers to the “art market oligopoly system,” in which money and perceived prestige guides acquisitions.
The multibillion-dollar art market offers a spectrum of investment options. Masterworks, many with market values over $10 million, are the “blue chips,” with paintings by Pablo Picasso and others selling for over $100 million. Although, reportedly no work acquired for over $30 million has ever been resold at a profit. “Art as an investment” points out options to mitigate risk in art investing. Indices, such as the Mei Moses Art Index, and on-line statistics, such as Artindex.com, provide more transparency in the art market but fall short of comprehensive risk assessments. The Fine Art Fund Group in London and Art Futures in Hong Kong offer shares in diversified portfolios of artworks, but art funds of major banks have folded in the past couple of decades. The success of the market over the past two years notwithstanding, art is still developing as an alternative investment.
On the other end of the spectrum, “affordable art” comprises prints, by recognized artists such as Henri Matisse and Andy Warhol, which sell on-line at Costco and “penny stock” works by aspiring artists that are increasingly accessible through on-line galleries. In the present-day art market, on-line access to affordable art creates the possibility of crowdsourcing aesthetics as a complement to the rarefied perspectives of art critics and high-end collectors. It’s yet to be seen if and when the volume of trading develops into a significant share of the $60 billion international market and whether decisions follow aesthetics or profitability.
The two articles, and the debate that lies in between, characterizes the broader political economy of cultural property. On the political side, artworks and monuments play a role in cultural identity, which causes conflict in calls for repatriation and is put at risk when political violence targets monuments. In economics, China’s increasing share in the art market and the financial potential of contemporary art in emerging nations illustrate a relationship between cultural property and development.
Perhaps the passion and pragmatics of art collecting can serve as a barometer of sorts for the political economy of cultural property?

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