Very entertaining mock-auction of contemporary version of the Scull sale: http://www.reuters.com/video/2011/04/29/adam-lindemann-and-amalia-dayan-at-the-a?videoId=205719776&videoChannel=1004
Adam Lindemann poses a good question: is it possible to generate the 16% unlevered annual return on a work of art for the next 35-40 years? Amalia Dayan says it’s absolutely possible because today the art market is huge. Lindemann points out that a big market also means big competition, to which Dayan responds with confidence that despite the size of the market, there remains the fact that there are always only a limited number of people who have the eye and resources (the right information, art advisor, etc.) that enable them to choose the right artworks. However, she rightly reminds the audience of that choosing right is not necessarily choosing based on figures. She says that “you have to buy what you love,” as cliché as it may sound, is just true. In Lindemann’s conclusion, he shares his thought that the art market is unlike any other market because art collecting is in itself another art form, and because art is not always rational, the art market does not always behave on established laws and sometimes quite unexpectedly. Thus the numbers alone cannot guide one as to which artworks to invest in.
I agree that numbers are not always an indicator of a work of art’s present value or of the future. However, money seems to be an indispensible factor that drives the art market. Modernism is already a century-old phenomenon, and since its start, the speculative quality of art and its possibility for generating financial profit has long been recognized. Although art prices do not consistently follow the stock market's upward or downward movements and seem relatively impervious to big failures, the economy does affect the art market, as seen in the 1990 art market crash.
Velthius reports that he saw a change in attitude of the artists and the collectors after the 1990 crash; they bought and sold artworks based on their eye and their preferences and avoided extreme pricing and hype. However, all that they had abandoned came right back, and art is now more expensive than ever. Today’s art collectors, who buy art to gain access to a social world, have tremendous surplus capital. Increase in capital flown into the art market has resulted in high pricing of art, but as Velthius points out, perhaps more important problem lies in “the erosion of egalitarian values.” Middle-class collectors have been wiped out by multimillionaires that now dominate the market, and art collecting has been becoming more and more an exclusive pursuit. Since the status the collectors seek is entirely dependent on name and reputation of the artists whose works they buy, a lot of the buyers are going after a small number of artists, which leads to huge differences in income among contemporary artists.
Moreover, the existence of waiting list indicates that demands for art are high and prices could go even higher if dealers than now chose to. But gallerists choose not to because keeping demand at a high level prevents volatility, which is exactly what dealers want to avoid. They also argue that waiting list is a means to control the home of the artworks they sell to make sure that they end up with “royal” buyers. According to Velthius, what these dealers do not seem to admit is that collectors of this day are far from being “royal,” because they operate on speculation of financial gains more so and more often than pursuit of aesthetic pleasure and civic duty. And since the art world is running on the capital of the extremely wealthy few, if this top tier of elitist group chose to withdraw from the art market for economic or other reasons, another crash will be all but inevitable. This will incur great damage on the part of art dealers and artists, for they will lose economic and symbolic capitals, worsening the situation and leading to further degradation of art. Therefore, as the art market continues to base itself on celebrity culture, which is prone to give way at some point, and grow more exclusive as to be dependent on only the few wealthy collectors, I don’t see why another crash in the art market should not occur.
Reference
Olav Velthuis "Accounting for taste: Olav Velthuis on the economics of art". ArtForum. FindArticles.com. 21 Jan, 2012. <http://findarticles.com/p/articles/mi_m0268/is_8_46/ai_n31487376/pg_5/?tag=content;col1>.