title for Collectibles note
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to 1959

to 1984

to 2004

2005 -

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Capital &



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Droit de


& Fraud

& Spoliation


section heading icon     overview

This note considers circulation and pricing of cultural commodities - old master paintings, sculpture, manuscripts, prints, antiquities and other collectibles.

It covers -

  • experience - the psychology of collecting, status, corporate art collections and galleries
  • turnover - how big is the art market and other collectibles markets?
  • returns - investment in collectibles such as fine art
  • creators - production and discovery of collectibles
  • business - dealers, auctioneers and regulators
  • gatekeepers or cheerleaders - questions about authentication, scholarship, journalism and policing
  • curators - museums, libraries, galleries and other institutions as custodians and creators of value
  • works - profiles of trade in particular works
  • values - valuation principles and practices
  • indexes - art sale indexes and other information sources
  • theft and other loss
  • insurance and finance
  • to 1959 - landmarks in pricing of collectibles to 1959
  • to 1984 - landmarks to 1984
  • to 2004 - landmarks to 2004
  • 2005 - and from 2005 onwards

It supplements discussion elsewhere on this site regarding Droit de Suite, the Dot-com Bubble, Forgery and Indigenous Authenticity Marks.

It also provides points of reference for the discussion of domain name prices, hedge funds and private equity funds.


The following pages consider circulation of cultural commodities, in particular questions about prices and trade in the fine arts.

Circulation is of interest because it offers insights about -

  • the operation of markets, including the behavioural finance evident in a succession of bubbles and in speculative trading in domain names
  • disagreements regarding rewards and risks for creators, consumers and intermediaries, including debate about schemes such as Droit de Suite and about intellectual property as an incentive for production or merely as a signal of the community's respect for creativity
  • the shaping and exploitation of taxation regimes, with Australia for example providing concessions in capital gains tax (CGT) treatmment of art and offering incentives for donation of particular commodities to specific institutions
  • the subversion and cooption of gatekeepers and custodians, with art museums for example being an integral part of the market rather than entities operating in a different sphere
  • media representations of elite and popular culture, capital, innate value and investment opportunities
  • changing patterns in aesthetics and critical esteem: yesterday's superstars (Alma-Tadema, Salvator Rosa) are often today's dreck and tomorrow's rediscovery, today's pickled shark with a million dollar price tag is tomorrow's shark soup?
  • contingencies such as forgery, misrepresentation, spoliation and restitution
  • financial mechanisms such as hedge funds or private equity funds (and difficulties facing specialist Art Investment Funds).

     frozen money?

Art can have a direct personal impact without any consideration of context. One can for example be moved by a Rothko painting or Shostakovich quartet without any awareness of the creator's career. Appreciation of a Klimt portrait or Pre-Columbian ceramic is not dependent on any sense that they are postcards from another world, although understanding of the culture in which an item originated and of the ways that it has been viewed in the past may enrich a contemporary's experience.

Everyone reading this page, for better or worse, lives in societies where people are accustomed to assign monetary values to objects and to intangibles. Quantification remains the rage, whether that's in terms of 'best seller' and 'top ten lists, risk analysis in health systems, the "most expensive" painting (or teddy bear), or econometric studies purporting to show that dying young after a burst of creativity is a good career move for both visual artists and James Dean epigones.

It is unsurprising, then, that many people conceptualise cultural commodities in terms of dollars: how much the item cost, how much the owner would receive if the item was sold, which items are increasing in price, which are increasing at a faster rate than others. That conceptualisation is underpinned by tax regimes and by scholars and curatorial institutions. Prices matter and in practice many cultural commodities are frozen money.

Some items are expensive because of 'innate' attributes, for example the precious metals and other material used in their construction or because they embody particular aesthetic values. Those values may or may not prove durable over time and a sceptic might argue that some leading art works are essentially famous for being famous.

Some items are expensive because of association: the tureen used by Marie Antoinette (more so than that used by Maria Theresa), the letter from George Washington or Michael Jackson, props from Gone With The Wind, the upright piano used by John Lennon (US$2.08m).

Some are expensive because they are rare, either because they are unique productions (eg a painting) or because formerly abundant supplies have been winnowed by time. Some stamps and coins, for example, fetch million dollars prices merely because only one or two examples are extant.

Rarity presupposes authenticity. As noted elsewhere on this site some societies are more concerned than others to privilege originality in creation of works and transmission of an authentic 'original', a transmission that often means that the original is more bruised than a fine contemporary copy.

Those attributes reinforce perceptions of value, with a spectrum of collectors competing for 'desirable' items and markets catering for the circulation of such items. Such markets often feature speculative buying, with for example individuals and other entities purchasing items in the expectation that prices will increase sufficiently to provide that buyer with a substantial profit when the item is sold.

That expectation reflects a recognition that supplies of some items are finite (eg most of the output of particular artists has disappeared over the past 300 years and much of the remaining work has been absorbed by art museums). It also reflects belief that demand will continue, even increase in future. Such belief is often rational, given the rarity of aesthetic revolutions and the conservativism of scholars and curatorial institutions (which tend to relegate works to their basements when fashion changes rather than unloading them onto the market).

Prices rise and fall. Fluctuation in what is paid for items - and for broader esteem given to genres, schools and individual artists - reflects factors such as changing fashions in what is 'great art' (or merely what is currently underappreciated and thus an investment opportunity), marketing by intermediaries, interest rates and emulation of peers. Peaks in the prices highlighted in the final pages of this note thus reflect factors such as

  • competition among JP Morgan and his peers at the turn of last century for canvases by Old Masters (and for now forgotten treats such as maiolica and boulle)
  • low interest rates, permissive lending by financiers and expectations that good times will continue to roll during booms since the 1939-45 War (for example the US in the mid 1960s and 1980s, Japan in the 1980s property bubble)

     appreciation and investment

The following pages indicate that some lucky or sagacious people have enjoyed substantial gains through appreciation in the market value of art works over the past century.

The same figures, however, also illustrate declines in value - whether in nominal or real terms. Some belle epoque masters have yet to regain the prices achieved during the 1880s; paintings by Alma-Tadema and his contemporaries for many years were an embarrassment rather an embodiment of a million dollars.

William Baumol's landmark 1986 'Unnatural Value: Or Art as a Floating Crap Game' in the American Economic Review compared the prices of 500 paintings sold more than once over a 410 year period (1652 to 1961), concluding that when inflation is considered fine art returned a mere 0.55% per annum.

Subsequent research by Mei & Moses indicated that over the past 50 years fine art provided an average annual return after inflation of 8.2%, somewhat less than the 8.9% annualised return of the Standard & Poor's 500 Stock Index. A Guercino, Klimt, Kokoschka or even a Warhol is of course a much more pleasing wall decoration than a share of IBM, Bond Corporation or BHP.

John Picard Stein's 1977 'The Monetary Appreciation of Paintings' in 85(5) Journal of Political Economy 1021-1036 offered an even bleaker view for economic rationalists, arguing that on average, fine art provides a net return for durable services (less insurance and maintenance costs, adjusted for tax and liquidity considerations) of 1.6%.

Limited supply (eg as Old Masters increasingly migrate from private hands to institutional collections) and the canonical status of particular artists/schools means that some works have exprerienced less volatility than others. William Goetzmann thus demonstrated that during the post-1990 art market slump Old Masters suffered less (down by 16%) than contemporary (down 40%) and Impressionist (down 51%) works.

That is consistent with observations in The Worth of Art: Pricing the Priceless (New York: Assouline 2001) by Judith Benhamou-Huet, Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art (Princeton: Princeton Uni Press 2005) by Olav Velthuis and 'The monetary appreciation of paintings: from realism to Magritte' by Luc Renneboog & Tom Van Houtte in 26(3) Cambridge Journal of Economics (2002) 331-358.

The latter concludes that

art investments underperform equity market investments owing to the high risk of investing in art and its high transaction costs, resale rights and insurance premia. In addition, the Markowitz efficient frontier shows limited diversification potential for art.

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version of December 2006
© Bruce Arnold
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