How the Art Market Works

The art market (circa 2010) sounds eerily similar to the bond market (pre-2008):

In September of 2008, the British artist Damien Hirst sold a collection of his own artwork at Sotheby’s. The two-day sale, entitled “Beautiful Inside My Head Forever,” consisted entirely of Hirst’s own artwork, and netted a staggering $201 million, helping to make him one of the world’s wealthiest artists. (His net worth today is estimated at nearly $380 million.) How in the world did art — especially contemporary art — get so expensive?

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It’s often characterized by behind-the-scenes wheeling and dealing, designed to maximize profit. Investors in New York, say, might see an opportunity in contemporary Chinese art. They form an investment consortium, which hires a buyer to find artwork in China. After the collection is put together, the investors work to get the artworks exhibited in art museums around the world. Then, Horowitz writes, “the body of work, now a museum-quality ‘collection,’” is sold in turn to another dealer or auction house, and eventually at auction to other art buyers. All the players work together to transform little-known artworks into valuable assets; even the museums are caught up in the process, though often unknowingly. All this is possible because the art market brings two contradictory elements together: on the one hand, huge sums of money; on the other, objects that have no intrinsic, easy to determine monetary value. (Sound familiar?)

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