The economics of american art issues, artists and market institutions

i The Economics of American Art ii iii The Economics of American Art Issues, Artists, and Market Institutions ROBERT B EKELUND, JR., JOHN D JACKSON, AND ROBERT D TOLLISON iv Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America © Oxford University Press 2017 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Library of Congress Cataloging-in-Publication Data Names: Ekelund, Robert B (Robert Burton), 1940– author, Jackson, John D., Tollison, Robert D Title: The economics of American art : issues, artists and market institutions / Robert B Ekelund, Jr., John D Jackson, Robert D Tollison Description: New York : Oxford University Press, 2017 | Includes bibliographical references Identifiers: LCCN 2016052819 | ISBN 9780190657895 (hardback : alk paper) | ISBN 9780190657901 (upub) Subjects: LCSH: Art—Economic aspects—United States Classification: LCC N8600 E39 2017 | DDC 707—dc23 LC record available at https://lccn.loc.gov/2016052819 9 8 7 6 5 4 3 2 1 Printed by Sheridan Books, Inc., United States of America v For Mark, Martha Gale, and Anna and For the late Bob Tollison, whose love, dedication to economics, and influence endure vi vi Contents Preface  xi CHAPTER 1   Markets, Culture, and American Art Economics as a Conduit for Analyzing Culture and Art?  Why a Book on the American Art Market?  Credence: A Central Issue Relating Economics to Art  10 Interesting Questions Posed in the American Art Marketplace  12 CHAPTER 2   Dimensions of the American Art Market The Marketplace of American Art: Early Period  17 Shifting Demand Parameters  20 The American Art Market at the Opening of the Twentieth Century  25 The Armory Show 1913, Stieglitz, and American Modernism  27 Postwar Ascendance of American Art  31 Art, Politics, and Then-​Contemporary Art  33 Changes in the Markets for Contemporary American Art  36 American Artists Used in Formal Studies in This Book  37 Artistic Styles  40 Buying and Selling American Art  44 Auction Sales of American Art  46 The Credence Factor and the Auction Market  49 American Art and Institutional Change  52 16 vi viii Contents CHAPTER 3   Mystery of the Artist’s Nature: Creativity, Age, and Economics 56 The Age-​Creativity Relation and American Artists  58 The Artist and Societal Structures  58 The Economist Speaks  60 Artists Born Prior to 1900 and the Age-​Productivity Hypothesis  61 Artists Born between 1900 and 1960 and the Age-​Productivity Hypothesis  63 Measurement and Model Specification  65 Artists Born before 1900  65 A Fixed-​Effects Model  76 Data on Cohort of Artists Born between 1900 and 1960  78 A Fixed-​Effects Model of Artists Born Post-​1900  83 Is the Growth of “Innovation” Positive through Time?  84 The Use of Anecdotal or “Bibliometric” Evidence  87 Anecdotal Analysis of Georgia O’keeffe  88 Anecdote and Jackson Pollock  90 Schools and Creativity  96 Factors Affecting Creativity  100 CHAPTER 4   American Art, “Experts,” and Auction Institutions 104 Experts, Credence, and the Auction Process  106 Auction Houses and Credence  106 Estimating Auction Bias  107 Buyers’ and Sellers’ Premiums  111 Estimation Procedure  113 A Model for Investigating Bias in Presale Auction Estimates  114 Predicting No-​Sales  121 Are American Paintings That Do Not Sell “Burned”?  125 Premium Manipulations and Auction-​House Profits  130 Artists and Auction Markets  136 CHAPTER 5   Early and Contemporary American Art as Investment Vehicles American Art as an Investment Vehicle  140 Art as an Investment: Conventional Wisdom  142 Returns to American Art Investment  144 139 ix Contents ix Methodological Considerations  145 Repeat-​Sales versus Hedonic Approaches: Pros and Cons  146 Data Considerations in Our Analysis of Early American Art  150 Repeat-​Sales Investment Estimates: Early Period  151 Hedonic Investment-​Return Estimates: Early Sample  156 Investment-​Return Estimates for Contemporary Art  162 Data Considerations in Our Analysis of Contemporary American Art  163 Hedonic Results for Contemporary Artists  164 Repeat-​Sales Results  165 Early American versus Contemporary American Art: Two Distinct Markets  168 Investment in American Art  169 CHAPTER 6   American Art and Illegal Activity: An Economic Perspective 171 Credence and Information Costs  172 Art Theft  173 Art Theft: General Considerations  175 Marginal Benefits of Art Theft  176 Marginal Costs of Art Theft: Apprehension, Conviction, Severity  177 Evolution of the Market for Art-​Theft Enforcement: An Economic Analysis  179 The Market Responds  182 The Economics: Demand, Supply, and Information  184 Fakes and Forgeries  187 Print Forgery  190 The Benefits and Costs of Fakes and Forgeries  192 Credence and Examples of Forgery and Art Crime  195 Fake Detection: Provenance and Science  200 Economists Predict That Theft and Fakes Will Continue  205 CHAPTER 7   The Impact of Death and Bubbles in American Art The Death Effect in Art  208 An Artist’s Death and Economic Theory  210 The Coase Conjecture  210 208 53 354 Index art theft (cont.) return on, 176–​77, 185 sales of stolen art, 176, 184–​85 selection of objects of, 177, 180–​81, 186–87 technology combating, 180, 183–84, 325n44 theft effect, 326n11 art tours, 19, 33–​34, 243, 247 See also art galleries; art museums artvalue.com, 301n2 ashcan school, 25, 92 Ashenfelter, O auction estimates and, 107, 110 “burned” paintings, 125, 126 sales rates and, 122, 312n27 askART.com, 9, 37, 111, 144, 150, 221–​23, 258 Association for Research into Crimes against Art (ARCA), 320n17 asymmetric information, 11–​12, 110 auction houses See also individual houses American art as recent interest of, 10 biased estimates as strategic choice of, 108, 251 constellation of, 46, 310n15 credence provided by, 12–​13, 50, 104, 106–​7, 137 data on, 8–​9, 258 experts consulted by, 50, 104, 106–​7, 122, 137, 308n4 flipping at, 142, 294n15, 315n10 good material sought by, 47–​49, 133, 145 guarantees at, 120, 133, 300n29 investment promoted by, 255 leading, 111… limited warranties at, 51 profitability of, 134–​36, 138 revenues affected by premiums, 130–​36 sales volume at, 2, 119, 227, 228, 233, 239t, 240, 241 seller orientation of, 133 specialization within, 46, 179 success signaled by, 294n14 take by, 47, 110 theatrical tactics by, 119–​20 auction prices See also art prices; hammer prices age-​productivity thesis’s use of, 70 biased estimates of, 13, 104–​5, 107–​21 assumptions about, 308n6 diversity of, 120–​21, 137 in efficient markets, 107–​8 findings on, 108, 109t, 114, 117–​19 masterpiece effect, 110, 121 no-​sales used to find, 110, 114 overestimates, 110, 308n9 strategic reasons for, 108, 119, 251 truth-​telling alternative to, 110 types of, 115, 121 underestimates, 108, 115–​16, 119–​20, 137, 308n8 bubbles assessed with, 233–​38 determinants of, 308n7, 309nn12–​13 explanation of, 47 premiums in, 47, 48t, 105–​6 effects of, 133–​34, 313n35 hammer prices related to, 111, 130–​32, 152 profitability and, 134–​36, 152, 158–​ 59, 165–​66, 317n22 secrecy in, 105–​6 setting of, 111, 112t size of, 317n23, 317n28 as transaction costs, 142, 169, 316n13 supply and demand in, 133–​34, 305n32 auctions See also auction houses; auction prices artistic success tied to, 36 35 Index dates of, 214, 218 by dealers, 21 process at, 47 supply and demand in, 305n32 Australian artists, 214, 327n13 Austrian school, 329n34 authentication, 50, 51, 188–​89, 198, 201–​3, 253, 294n19 liability over, 188–​89, 203–​4, 300n32 questionable, 324n40 via block chains, 324n41 (see also credence) avant-​garde art, 32 Avery, Samuel P., 22 Baade, Robert A., 212–​14, 326n8 Babcock Galleries, 314n5 Bacon, Francis, 2, 180, 291n2 “Banality” (Koons), 319n2 bandwagon effects, 88, 96, 100–​101, 304n23 Barbizon school, 23, 53 Barbosa, Renata Leite, 309n12 Barnett Newman Foundation, 188 barter, 184–​85 Baumol, William, 6–​7 Beautiful Asset Advisors, 3, 314n1 Becker, Gary, 205 Beckert, J., 215 Beggs, Alan, 108, 126, 309n11 behavioral economics, 293n10, 294n16, 309n11, 310n13, 329n30 Bellows, George, 25, 314n4 Bennett, Tony, 326n9 Benton, Thomas Hart, 91–​92 Betty Parsons Gallery, 94 Beyeler Foundation, 321n21 biased estimates See auction prices biases, behavioral, 293n10, 294n16, 309n11, 329n30 bibliometric methods, 86–​91, 94, 96 Bierstadt, Albert, 21, 22 355 billionaires, 227, 231, 233, 239, 241, 243–​44, 255, 292n6, 330n38 Bird in Space (Scharf), 322n23 Biro, Peter Paul, 202 birth-​year cohorts, 38–​39, 62, 76–​78 1900–​60, 63–​65, 78–​84 pre-​1900, 61–​63, 65–​76 Black Mesa Landscape (O’Keeffe), 90f block chains, 324n41 Blumner, Oscar, 28 Bocart, Fabian, 308n4 bonds, 312n29 Bonhams, 46 Bonnard, Pierre, 321n19 Boston Athenaeum, 296n6 bought-​ins See no-​sales Bowen, William, 6–​7 Bowley, Graham, 317n22 Braque, Georges, 306n33 Breitwieser, Stephane, 320n9 Brown, Cecily, 229 Brown, Douglas, 247 bubbles See also art bubbles business cycle’s correlation with, 231 historical, 227, 228, 229–​30 irrationality causing, 227 as pyramids, 249 rational causes of, 230–​31, 231–​32 tulip mania, 227, 229–​30 Burns, Charlotte, 321n22 business cycles, 231, 245 Buttersworth, James E., 196 Caballero, Emilio, 197 Caballero, Terry, 197 Cahiers d’Art, 298n19 Calder, Alexander, 319n5, 324n43 Campbell, Thomas, 242 Campos, Nauro F., 309n12 Canada, 178–79, 320n10 Canyon Suite (O’Keeffe), 197–​98 Capital Asset Pricing Model, 315n35 53 356 Index capitalism evolution of, 59, 256 nature of, 57–​58 Carabinieri, 178 Carles, Arthur B., 28 Case, Karl E., 149 catalogues raisonnés credence through, 106, 183, 202–4, 294n19 particular, 196, 197, 305n32, 324n40, 324n42 problems with, 308n3 Caves, Richard, 7 Center for Arts and Cultural Policy Studies (Princeton University), 316n18 Central Intelligence Agency (CIA), 95 Cézanne, Paul, 2, 300n1, 305n32, 320n13 Chadwick, Edwin, 174 Charney, Noah, 320n17 Chase, William Merritt, 21, 23 Christie’s See also auction houses Contemporary art at, 315n8 credence provided by, 195, 308n4 fake art sold by, 200 guarantors for, 300n29, 313n34 Internet sales at, 318n34 limited warranty at, 51 as market leader, 46, 310n15 pricing at, 111, 119–​20, 313n32 sales volume at, 2 seller orientation of, 133 specialist auctions at, 179 Church, Frederic Edwin, 19, 21, 22 Churchill, Winston, 326n9 civil law, 173 Civil War, 21 Coase, Ronald, 193–​95, 210, 211 See also durable-​goods monopoly Coase conjecture See death effect Coate, Bronwyn, 327n13 Cohen, Patricia, 189 Cold War, 33 Cole, Thomas, 18, 52 commissions, 17, 21–​22 Committee to Investigate Un-​American Activities, 95 commoditization of art, 2–​3 common law, 172–​73 communists, 34, 92–​93, 94–​95 competition, 257–​58 condition of art, 308n7 Congress for Cultural Freedom, 95 Conklin, John E., 195 conspicuous consumption, 30, 170 Contemporary art American, 141–​42, 164–​68, 180, 314n6, 314n8 death effect in, 221–​26 museums competing for, 242–​43 streams comprising, 34–​36, 99 Contemporary art market See also American art market bubble in, 238–​43 explosion of, 10, 37, 54, 101, 233, 243 Convergence (Pollock), 95 Coombes, Jarrett, 326n11 Copley, John Singleton, 17, 178 copyright infringement, 319n2 corruption, 253, 255–​56, 299n22 cost disease, 7, 293n11 counterfeiting See art fakes; art forgeries Cowen, Tyler, 54, 253, 257 craftsmen, artists as, 58–​59 Crane, Diane, 299n27 creativity See also age-​productivity relationship illness and, 102 influences on, 307n40 monetary incentives and, 57, 101–​2 mystery of, 103 357 Index national differences in, 56 nature/​nurture and, 56–​57 price as measure of, 58 schools and, 96–​100, 102–​3 credence See also information costs auction houses providing, 12–​13, 104, 106–​7, 122, 137, 251, 309n12 (see also art experts) authenticity aspect of, 183, 188–​89 catalogues raisonnés providing, 106, 183, 196, 202–4, 294n19, 308n3 as central issue, 10–​12, 104, 172 demand for, 189, 200 in early America, 20, 21 on the Internet, 191 limited production and, 172, 190–​92, 319n3 provenance and, 173, 182, 198, 309n12 questions related to, 11, 104–​5 solutions to problem of, 49–​51, 104, 173, 201–​3 via block chains, 324n41 credence goods, 49–​51 crime, economics of, 174–​75 See also art crimes; art fakes; art forgeries; art theft Cropsey, Jasper Francis, 21, 22 Crow, Kelly, 141 cubism, 28, 305n33 Cueni, Reto, 314n3 cultural economics, 6–​7, 293n12 culture art essential for understanding, 1 of art markets, 3 economic analysis of, 5–​9 literature cascade, 7 currency controls, 184, 185 Curtis, Edward, 319n5 Daguerre, Louis Jacques-​Mande, 296n8 daguerreotype, 296n8 357 Dalí, Salvador, 195 Danish artists, 214–​15, 218–​19 data availability of, 8, 299n23, 303n19 collection of, 37–​44 on age-​productivity relationship, 61, 62, 67, 70, 301–​3 on art investments, 150–​51, 163, 316n20 on bubbles, 233 on death effect, 221–​23 and estimation bias, 107, 110–​11 objectivity of, 8–​9 Davidson, Joseph LeRoy, 33, 34, 247, 298n18 Davies, Arthur, 25, 42, 97 Davis, Stuart, 33 death See also death effect early, 307n39 supply at, 210 death effect, 14, 208–​26 capitalization of information in, 212, 215 components of, 214, 218–​21, 248 as durable-​goods-​monopoly analogy, 209, 210–​11, 248 early death causing, 307n39 empirical issues regarding, 217–​21 empirical studies of, 209, 214–​16 findings on, 216, 224–​25, 248–​49 hump-​shaped profile of, 216, 217–​18, 326n7 life expectancy and, 214–​15, 218–​19 models of, 216, 217–​21, 222–​26 narrow view of, 217–​18 nostalgia hypothesis vs., 212–​14, 327n13 overview of, 208–​9 reputation and, 215–​17, 328n27 uncertainty and, 326n10, 327n12 Degas, Edgar, 325n4 de Kooning, Willem, 43 53 358 Index demand in auctions, 305n32 for credence, 189, 200 factors affecting, 20–​24, 210, 220 law of, 226 manipulation of postwar, 67, 100, 140, 157 prewar, 101 via biased estimates, 105 via hype, 37, 247, 255–​56 via waiting lists, 228–​29, 315n10, 325n5, 326n6 De Marchi, Neil, 7 De Martini, Joseph, 247 Demoissele d’Avignon (Picasso), 304n25 Demuth, Charles, 102 Deresiewicz, William, 59 De Silva, 310n13 De Sole, Domenico, 189–90 Dies, Martin, 95 digital photography, 191 Dimson, Elroy, 314n3 DNA tags, 325n45 Dobovšek, Bojan, 185 Dobrzynski, Judith H., 120, 137–​38 Dove, Arthur, 28, 40, 72–​73, 72f, 73f, 76, 297n14 Dow, Arthur Wesley, 198–​200, 323n37 Doyle’s, 46 Drewe, John, 201 drip painting, 34 Dr. No, 176 D’Souza, Clare, 108 Duchamp Marcel, 27 durable-​goods monopoly, 193–​95, 210–​11, 248, 319n3 Durand, Asher B., 18, 22, 52, 291n3 Eakins, Thomas, 40, 42, 97 École des Beaux-​Arts, 26 economic efficiency, 179, 254, 257, 309n11 economic progress, 15 economics anchoring in, 293n10, 309n11 breadth of, 5–​6, 293n10 creativity studied by, 57 culture studied by, 6–​7, 293n12 efficiency of estimates in, 104–​5, 107, 149 finance theory in, 154 human capital in, 307n40 intangibles studied by, 6 labor theory of value in, 259 marginal analysis in, 174–​75 neoclassical, 6 prospect theory in, 293n10 theory of the firm in, 96–​97 economics of art controversy in study of, 3, 6 issues in, 330n40 literature growing in, 6–​7, 8 progress of, 7–​8, 258–​59 relevance of, 3–​4, 250 Eight, the, 25–​27, 108 Eight Bells (Homer), 75f Ekelund, Robert E., Jr., 108, 110, 122, 209, 213, 218–​19, 313n32, 326n10, 327n12 Eldredge, Charles C., 197 entrepreneurs, 59 estimators and bias See auction prices European art See also Old Masters American art influenced by, 23–​24, 27 impressionism, 28 post-​impressionism, 28 postwar market for, 32 sales in America of, 21, 22–​24 European influence on, 22, 23–​24 Exhibition of Independent Artists, 27 existence, artists’, 1–​2, 194, 292n7, 316n18 expectations, 212, 213, 225–​26 53 Index conditional life expectancy, 214–​15, 218–​19 rational, 231 experience goods, 49, 300n30 experimental artists See age-​ productivity relationship Extraordinary Popular Delusions and the Madness of Crowds (Mackay), 227, 229–​30 fashion art, 255–​56, 258, 299n22 See also innovation FBI, 178, 181, 182, 200, 320n14 Fedderke, Johannes W., 309n9 Federal Art Project (FAP), 30, 31, 297n16 See also Works Progress Administration (WPA) Feld, Stuart, 187 fiction, 176 figure painting, 43 finance theory, 154 financial markets, 315, 316n13 Financial Times, 3 Fine Art Fund, 3, 139 firm, theory of the, 96–​97 First Amendment, 205 Fischl, Eric, 232 Flam, Jack, 20​4 France, 203 Frank, Robert, 88 fraud, 191 See also art fakes; art forgeries Freedman, Ann, 188, 189–90 Free Gallery, 20 Freeman’s, 46 French, Douglas, 230 French art, 21, 23 French artists, 298n19 Freud, Lucien, 2 Frey, Bruno, 192, 306n36, 314n3 Frieze Art Fair, 330n38 Frost Flowers, Ipswich (Dow), 198, 199f 359 Fry, Tim R. L., 327n13 futures markets, 230 futurists, 308n8 Gagosian Gallery, 229 Galenson, David W age-​productivity thesis of, 12, 57–​58, 60 age at peak value in, 302n10 American application of, 63–​65 anecdotal/​bibliometric method for, 86–​91, 94, 96 “one size fits all” assumption of, 76 criticism of, 60–​61, 301–​4 data selection in, 305n22 market institutions neglected, 101–​2 sample splitting, 86, 87 taxonomy in, 71–​72, 76, 307n42 on textbook illustrations, 88 working methods in, 306n38 findings of, 68t, 302n8 international aspect of, 57 methods of, 61–​63, 65–​66, 70, 82, 301n7, 302n11, 302n13, 302n15 O’Keeffe analyzed by, 88–​90 taxonomy of, 60, 62–​63, 71–​74, 76, 78, 141, 300n1, 305n31, 306n38 on textbooks, 88, 304n26 Galli, Tecla Carlotta, 308n8 Galton, Francis, 56 Gambart, Ernest, 23 Gambit, 176 Garber, Pater M., 230 Gauguin, Paul, 200, 291n2, 307n42, 320n19, 322n24 GDP, 233–​38, 245 Geffen, David, 242, 292n6, 295n3 genius as artist type in history, 59 nature of, 56 See also creativity Georgia O’Keeffe Foundation, 197, 203 03 360 Index Gerdts, Abigail Booth, 324n42 Giacometti, Alberto, 201 Gilliam, Sam, 256 Ginsburgh, Victor, 60 Glackens, William, 25, 71 Goetzmann, W., 142–​43, 149, 291n2 Goldstein, Malcolm, 17, 18, 19–​20, 21, 23, 295n5 golf games, 174 goods, types of, 49–​51, 205, 207, 253, 300nn30–​31 Gottlieb, Adolph, 32 Goupil Gallery, 21 government, 6, 34, 254 Goya, Francisco, 322n24 Graddy, Kathryn, 8 anchoring effects, 309n11 guarantors studied by, 300n29, 313n34 sales studied by, 122, 125, 126, 312n27 underestimation, 108 Great Depression, 31, 92, 254 Great Recession, 236, 238 Greenberg, Clement, 32, 94 Griffin, Ken, 292n6 guarantors, 120, 133, 300n29, 313n34 Guggenheim, Peggy, 32, 93–​94 Guggenheim Museum, 242 Guilbaut, Serge, 32, 298n19 Hall, Denis Michael, 28–​31, 45, 295n5 Hamilton, Jonathan, 300n29, 313n34 Hamilton, Juan, 197 hammer prices, 111, 113–​15, 130–​32, 152, 159, 311n20 enhanced, 47, 317n22 Harper, Dennis, 298n18 Hartley, Marsden, 28, 33 Harvard University, 178 Hassam, Childe, 41 Hayek, F. A., 323n39 Heade, Martin Johnson, 196, 322n34 Hearst, William Randolph, 34 Heckman, James, 110, 114, 157, 309n14 hedonic models, statistical analysis Hellmanzik, Christiane, 60–​61, 96, 98, 102, 301n2 Henri, Robert, 25, 25–​27, 53 Herring, James, 19 Higgs, H., 214 Hippocrates, 257 Hirschl & Adler Gallery, 187 Hirst, Damian, 88 Hislop’s Art Sale Index, 216, 224 historiometry, 56–​57 Hodges, William Zachary, 121 home bias, 294n16 Home of the Heron (Inness), 23, 24f Homer, Winslow, 22, 23, 40, 74, 75f, 97, 314n4 Hopper, Edward, 25, 33, 44, 97, 133 as modernist, 297n14 prints of, 88, 191 Horowitz, Noah, 292n5, 299n26 Hoving, Thomas, 172, 187, 196, 206, 207, 243 Hudson River school, 23, 52, 296n7 human capital, 307n40 Hutter, Michael, 88, 304n23 impressionism, 23, 296n11, 297n14 incentives, 57 individualism, 34 information, in Coase conjecture, 212, 214 information costs, 10, 49, 54, 173, 192, 226–​27, 258, 300n30 See also credence optimal information given, 323n39 Inness, George, 22, 23, 40, 97 innovation, 84–​87 abstract expressionism sparking, 141, 162 361 Index age-​productivity relationship and, 60, 64, 82 in art markets, 15, 255–​56, 257 trading activity due to, 163 interest rates, 329n34 International Association of Cultural Economics, 7 International Foundation for Art Research (IFAR), 183 Internet, 191, 318n34, 322n27 Interpol, 181, 186 investment houses, 3, 139 investment portfolios See art investments investment returns See art investments Isabella Stewart Gardner Museum, 173–​74, 319n6 Jackson, John D., 108, 313n32 James Graham & Sons, 314n5 Janis, Sidney, 94 Jimson Weed/​White Flower No (O’Keeffe), 2 Johns, Jasper, 133 Johnson, Paul, 255–​56, 299n22 Journal of Cultural Economics, 7 Julian Weissman Gallery, 188 Kahneman, Daniel, 293n10, 309n11, 329n30 Kallir, Jane, 204 Kandinsky, Wassily, 42, 90 Keane, Margaret, 322n32 Keane, Walter, 322n32 Keats, Jonathon, 322n28, 322n30, 323n39 Kemper, Crosby, 197, 198 Kemper Museum of Contemporary Art, 188 Kennedy, Elizabeth, 27 Kensett, John F., 21, 22 King, Charles Bird, 196 361 Kingsland, William M. V., 178 Knelman, Joshua, 177 Knights Frank Passion Index, 3 Knoedler, Michael, 21, 22, 23, 321n20 Knoedler Gallery, 188–​90, 204, 314n5 Kohn, Melvyn, 178 Koons, Jeff, 240, 319n2, 322n28 Kraushaar Galleries, 297n12, 314n5 Kuhn, Walt, 27, 33, 71 Kunioshi, Yasao, 34, 35f labor theory of value, 259 land owners, 193–​95, 210–​11 landscape painting, 52–​53 laser-​transfer technology, 191 Latin American art, 92–​93, 110, 122, 309n12 law enforcement, 178, 181–​82, 184, 185–86 Lawson, Ernest, 25 legal action, 188–​89, 203–​4, 300n32, 300n42, 321nn21–​23, 324n42 Lehrer, Jonah, 103 Lewis, Norman, 82 Li, Kaini, 308n9 life expectancy, 214–​15, 218–​19 See also death effect Loeb, Daniel S., 313n35 Los Angeles Police Department, 199 Louargand, M. A., 107 Luhan, Mabel Dodge, 297n15 Luks, George, 25, 26f luminism, 23, 296n11 Lynes, Barbara Buhler, 197 Macbeth Gallery, 25, 27, 45 Mackay, Charles, 227, 229–​30 Maddison, David, 214–​15, 218–​19, 327n15 Magness-​Gardiner, Bonnie, 320n14 Mai, Jianping, 3 Mamonova, Elena, 291n2 Mandel, Benjamin R., 170 23 362 Index Manet, Edouard, 307n42 marginal analysis, 173–​75, 177–78, 179, 186, 253 Marin, John, 28, 33, 63 Marinello, Christopher, 182–​83, 320n18 marketing, 318n34, 326n9 market institutions, 16–​17, 33, 57–​58, 59, 250, 306n37 market process, 54, 120, 179, 257–​58 See also capitalism markets See capitalism Marks, Mathilda, 321n19 Marshall, George C., 34 Martin, Agnes, 82 masterpieces, 110, 121, 146, 316n14 Matheson, Victor A., 212–​14, 326n8 Matisse, Henri, 27, 28 McAndrew, Clare, 110, 114, 118, 227 McCarthy, Joseph, 34 McDaniel, J. R., 107 McDonald-​Wright, Stanton, 28 measurement, difficulty of, 56 Mehretu, Julie, 329n33 Mei, Jianping investment returns and, 143, 149, 153–​54, 158, 160 investment service of, 110, 121, 314n1 masterpieces and, 110, 121, 309n10, 316n14 meta-​credence goods, 205, 207, 253, 300n31 See also credence goods Metropolitan Museum of Art, 187, 242–​43 Metropolitan Police, 178 Mexican art, 218 Michelangelo, 195 Milgrom, Paul, 107 Milroy, Elizabeth, 25 modeling of, 113, 114–​18, 123–​24, 126–​27, 128, 131–​32, 135 modernism, 324n40 introduction to the buying public of, 28 museum support for, 30 Modigliani, Amadeo, 203, 291n1, 308n3, 324n40 prices of art by, 2 Mokyr, Joel, 15, 258 Mona Lisa, 319n6, 322n30 Monet, Claude, 296n11, 301n5 money art as, 184–​85 expansion of, 230–​31, 329n34 monopoly, 193–​95, 210–​11, 258 Montebello, Phillipe de, 243 mood, 310n13 Mooney, Kempton, 175–​76 Morgan Stanley, 3, 139 “Moriarty of the Old Master,” 323n38 Morse, Samuel F. B., 18, 296n8 Moses, Michael, 3, 143, 149, 153–​54, 159, 160, 166, 309n10 investment returns and, 143, 149, 153–​54, 158, 160 investment service of, 110, 121, 314n1 masterpieces and, 110, 121, 309n10, 316n14 on transaction costs, 316n13 Motherwell, Robert, 188 Mount, William Sidney, 21 Munch, Edvard, 191 Mural (Pollock), 141 murals, 93 Museum of Modern Art, 242–​43 museums, 241–​42, 325n3 See also art museums Myatt, John, 201 Nadelman, Elie, 28 Naifeh, Steven, 93, 95 narrative analysis, 5, 14 National Academy of Design, 18, 26–​27 Index National Endowment for the Arts, 6 National Gallery of Art, 197, 295n2 nature/​nurture issue, 56–​57 Nauman, Bruce, 116 Nelson, Dafydd, 185 neoclassical economics, 6 Netherlands, 227 network effects, 88, 96, 304n23, 304n25 Neuendorf, Henri, 325n45 Newark Museum, 30 New Deal, 31, 32, 34, 91–​92, 94–​95, 254 new liberalism, 32 Newman, Barnett, 32, 33, 321n21 New School, 93 New York, 311n18 New York City art associations in, 18 art galleries in, 21, 23, 25, 33, 36, 100 as center of art world, 53 lottery system in, 19–​20 resentment of artists of, 33–​34 sociology of, 30–​31 Niagara (Church), 19, 22 no-​sales, 13, 105, 107, 114, 116 auction houses’ interests and, 122 burned paintings due to, 105, 125–​30 price evidence for, 128–​30, 138 probability evidence for, 126–​28 in death-​effect analysis, 221 financial view of, 121, 312n29 institutional view of, 122–​23, 138 in investment analysis, 145–​46, 147–​48, 151, 157, 159–​60, 169 negotiations affecting, 122–​23 prediction of, 121–​25, 312n27 prevalence of, 311n19 nostalgia effect, 212–​14, 326n9 novels, 320n8 Nude Descending a Staircase (Duchamp), 27 363 O’Keeffe, Georgia in the Advancing American Art tours, 33 age-​productivity relationship for, 61, 71 anecdotal analysis of, 88–​90 classification of, 40, 88–​90, 304nn26–​28 forgery case, 197–​98 sales of artwork of, 2, 133, 180 Stieglitz’s representation of, 28 theft of pieces by, 178 tools used by, 304n28 Old Masters, 18, 21, 60 Oosterlinck, Kim, 308n4 originality, 319n1 Orozco, José Clement, 92 pantheon of quality, 229, 241, 247, 299n22 Paris Exhibition, 24, 28 Parke-​Bernet See Sotheby’s Parsons, Betty, 94 passion investments, 3, 139 See also art investments pastiche, 196, 206 Peale, Charles Wilson, 18, 296n6 Pedersen, Anders Jul, 214–​15, 218–​19, 327n15 Perenyi, Ken, 195–​96 Pesando, J. E., 149 Peters, Gerald, 197, 198 Peto, John F., 196 Petterson, Anders, 227 Philadelphia, art associations in, 18 Philadelphia Museum, 296n6 Phillips Collection, 30 Phillips de Pury, 46, 119–​20 Picasso, Pablo, 27, 28, 195 as innovative artist, 300n1 investment in works by, 228, 315n12 43 364 Index Picasso, Pablo (cont.) price of works by, 191, 192 prints of, 94 set-​asides by, 322n31 styles of, 194, 305n29, 305n33, 329n32 textbook illustrations and, 304n25 Pierce, Renee K., 144, 159, 160 Plattner, Stuart, 36–​37 politics, 6, 34, 254 Pollen, Susannah, 228–​29 Pollock, Jackson, 33 as abstract expressionist, 43, 93–​94, 95, 141, 298n20 age-​productivity thesis and, 90–​96 creativity of, 61, 64 faking the art of, 188, 189 as symbol of new American art, 32, 94 in the WPA/​FAP program, 31, 95 Pollock-​Krasner Foundation, 204 Pommerehne, Werner W., 306n36 Portrait du Docteur Gachet (Van Gogh), 291n2 post-​impressionism, 297n14, 324n40 Pownall, Rachel A. J., 310n13 premiums, 47, 48t, 105–​6 effects of, 133–​34, 313n35 hammer prices related to, 111, 130–​32, 152 profitability and, 134–​36, 152, 158–​59, 165–​66, 317n22 secrecy in, 105–​6 setting of, 111, 112t size of, 317n23, 317n28 as transaction costs, 142, 169, 316n13 Prendergast, Maurice, 25, 152–​53 Prentice, David, 108 price fixing, 310n16, 313n32 price indices, 312n27 prices See also art prices; auction prices of illustrations, 304n24 of monopolists, 193–​95 Princeton University, 178 prints, 190–​92 defaced/​destroyed, 190, 325n5 limited-​edition, 172, 211, 319n3, 322n24 theft of, 323n36 productivity See creativity professionals, 59 property rights, 194 prospect theory, 293n10 provenance, 173, 182, 198–​99, 309n12 fake art given actual, 200 falsifying, 200–​201 psychometric data, 56–​57 punishment, 174–​75 Qian, Pei-​Shen, 188 quality assurances, 49–​51 See also credence Quetelet, A., 56 Radnóti, Sándor, 322n28 Ramnarine, Brian, 322n23 rationality in bubbles, 227, 228, 229, 231–​32 constrained, 206, 253, 329n30 death effect and, 327n12 definition of, 226–​27 of fools, 232 recessions, 31, 92, 236, 238 Reid, Ted, 197–​98 religion, 296n9 Renaissance, 58–​59 Renneboog, Lue, 143 reputation, 195 effect on prices at death, 215–​17, 328n27 pantheon entered through, 229, 241, 247 reserve prices, 107, 113, 122, 311nn17–​18 Ressler, Rand, 110, 122, 209, 213, 218–​19, 326n10, 327n12 35 Index Restellini, Marc, 203 Richter, Gerhard, 238–​39 RICO (Racketeer Influenced and Corrupt Organizations Act), 189 risk, 121, 142–​43, 252–​53, 312n29 Robert Motherwell Foundation, 188 Robertson, Iain, 292n9, 295n4, 298n21 Rockwell, Norman, 2 Rosales, Gladfira, 188, 321n20 Rosen, Sherwin, 88 Rosenberg, Harold, 32 Rossel, J., 215 Rothko, Mark, 32, 43, 133, 189 Roy Lichtenstein Foundation, 204 Ruprecht, William F., 313n35 Sacco, Pier Luigi, 308n8 Sakhai, Ely, 200, 323n39 Salerno, Brent L., 240 Salisbury, Laney, 201 sample-​selection bias, 87–​88, 110, 114, 116 Sargent, John Singer, 23 Saville, Jenny, 329n33 Scharf, Kenny, 322n23, 331n6 Schaus, William, 23 Schwartzmann, Allan, 321n22 science, 201–​3 See also technology Scotland Yard, 181 search goods, 49, 300n30 Seated Nude (Weber), 29f secondary art markets See auction houses; auctions Seine at Chatou (Hassam), 41, 42f Seurat, Georges, 307n42 Shiller, Robert J., 149 Shinn, Everett, 25 shock rates, 312n27 shops, art in, 17, 18 Shorter, J., 189 silkscreen processes, 94 Simonton, Dean Smith, 56 365 Siqueiros, David Alfaro, 43, 92–​93 Skinner’s, 46 Sloan, John French, 25, 73, 74f, 76 Smith, Adam, 5 Smith, Gregory White, 93, 95 Smith, James L., 110, 114, 118 social realism, 25, 31, 34, 92, 95 social sciences, reintegration of, 6 Sotheby’s See also auction houses art investment promoted by, 255 Contemporary art at, 315n8 credence provided by, 200, 308n4, 309n12, 323n34 guarantors for, 300n29, 313n34 Internet sales at, 318n34 as market leader, 46, 310n15 material sold by, 318n34 premiums at, 111 pricing at, 119–​20, 313n32 profitability of, 134–​36 sales volume at, 2, 33 seller orientation of, 133 specialist auctions at, 179 South African auction market, 308n9 Spaenjers, Christophe, 143, 291n2, 314n3 Spencer, Ronald D., 204–5, 324n43 Sproule, Robert, 110, 308n5 Stair Galleries, 178 stamp collecting, 314n3 Standard & Poor’s (S&P 500), 151, 157, 165, 166 State Department, 33–​34, 247, 305n30 statistical analysis biased estimates in, 13, 104–​5, 107, 109t, 110, 113–​25 estimation procedure for, 113–​14, 223–​24 fixed-​effects models in, 76–​78, 83–​84, 303n17 hedonic approach to buyer’s premium in, 316n19 for Contemporary sample, 164–​65 63 366 Index statistical analysis (cont.) on death effect, 222–​26 for early sample, 156–​61 vs repeat-​sales approach, 146–​50 robust estimates in, 161 inverse Mills ratio (IMR) in, 114, 116, 157–​58 models for of age-​productivity thesis, 65–​66, 70, 77, 83, 98, 99, 307n43 of art investments, 146–​49 of auctions, 114–​18, 123–​24, 126–​27, 128, 311–​14 of death effect, 216, 217–​21, 222–​26 probit model, 116–​19, 126–​27 repeat-​sales regression, 146–​50, 151–​56, 165–​67 results of of age-​productivity thesis, 68t, 79t, 86t, 302n14 of art investments, 155t of auction houses, 124–​25, 127, 129–​30, 135–​36 of bubbles, 234t, 236–​37, 237t, 238, 238f, 239t of death effect, 216, 224–​25 robustness of, 70–​71, 224, 302n11 sample-​selection bias, 87–​88, 110, 114, 116, 145–​46, 169, 309n10 significance of, 67 stochastic properties in, 118–​19 theory absent from, 102 statistics See data Stebbins, Theodore E., Jr., 322n34 Steichen, Edward, 28 Steinberg, Leo, 32 Stieglitz, Alfred, 28, 45, 53, 63, 178 styles See also age-​productivity relationship; individual styles bubbles in, 228–​29, 232, 246 Picasso’s, 194, 305n29 subject matter, 305n31 Sujo, Aly, 201 superstar effects, 88, 304n23, 304n25 supply factors influencing, 133–​34, 195, 210, 220, 225, 305n32 limitations on, 194, 211 Swann’s, 46 talent, search for, 247, 299n22, 306n37 Tamayo, Rufino, 31, 322n31 Taos school, 297n15 tariffs on art, 24, 28 Tarmy, James, 168, 256 tastes and preferences, 20–​24, 256–​57, 296n9, 306n36, 325n2 Tate Gallery, 201 technology, 180, 183–84, 191, 257–​58, 324nn44–​45 See also science Tenements (Luks), 25, 26f Ten Portraits of Jews of the 20th Century (Warhol), 322n36 Teti, Emanuele, 308n8 textbooks, 88, 304nn23–​26 Thaw, Eugene V., 197 The Broad, 242 The Economics of American Art data collection for, 37–​44 methods of, 5 questions addressed by, 3–​4, 12–​15 rationale and contributions, 5, 9–​10, 252 theft effect, 326 The Heart of the Andes (Church), 19 The Paris Omnibus (Prendergast), 152–​53 The Thomas Crown Affair, 176 The Wealth of Nations (Smith), 5 Thompson, Don, 325n5 37 Index Thompson, Earl A., 230 Thompson, Rex, 110, 114, 118 Three Studies of Lucien Freud (Bacon), 2, 180, 291n2 Throsby, David, 7 Tollison, Robert D., 108, 313n32 tonalism, 23, 296n11 Toulouse-​Lautrec, Henri, 307n42 transaction costs, 142, 169–​70, 314n3, 316n13, 318n34 See also premiums traveling exhibits, 19, 27 treasure assets, 3, 139, 185 See also art investments treasure goods, 6 Truman, Harry S., 34 Trumbull, John, 19 tulip mania, 227, 229–​30 Tversky, Amos, 309n11, 329n30 UCLA, 198–​200 United Kingdom, cultural goods’ value in, 8 Urice, Stephen, 189 Ursprung, 209, 215–​18, 326n7 Utrecht, 185 VAGA, 304n24 Valsan, Calin, 110, 308n5 value/​age profiles See age-​productivity relationship van Gogh, Vincent, 180, 257, 291n2, 307n42 Van Miegroet, Hans J., 7 Vase de Fleurs (Gauguin), 200 Veblen, Thorstein, 30, 88, 170 Veblen effect, 232 verification See authentication views of spreads in, 121, 122–​23, 138, 312n29 367 Von Zuydtwyck, 110 Vose Gallery, 297n12, 314n5 Vosilov, Rustam, 309n11 waiting lists, 228–​29, 315n10, 325n5, 326n6 Walker, William A., 196 Walkowitz, Abraham, 28 Wallack, Todd, 186 War Assets Administration, 34 Warhol, Andy, 60, 94, 240, 294n15, 305n31, 319n5, 322n30, 323n36 warranties, 51 wars, effect on American art, 53 Watson, John Keith, 110, 122, 209, 213, 218–​19, 326n10, 327n12 Watson, Peter, 254–​55, 295n5, 315n8 wealth, price driven by, 227, 231, 233, 239, 241, 243–​44, 255, 292n6, 330n38 weather, 310n13 Weber, Max, 28, 297n14 Weber, Robert, 107 Weinberg, 101, 141, 302n8 birth-​year cohorts and, 62, 76 methods of, 61 Weischer, Mathhias, 329n33 Weissman, Julian, 188 West, Benjamin, 17 Weyers, Sheila, 60 Whistler, James A. M., 22, 23, 60, 259, 314n4 Whitney Museum of American Art, 30, 242, 306 Whittredge, Worthington, 21 Wiermann, Christian, 209, 215–​18, 326n7 Wildenstein Institute, 200, 203 Wolk, Leonard, 310n13 Women of Algiers (Version O)(Picasso), 2 83 368 Index Wood, Christoper, 240 Wood, Paul, 45 Woodpile (Dove), 72–​73, 73f working methods See age-​productivity relationship Works Progress Administration (WPA), 31, 32, 34, 91–​92, 94–​95, 254 World’s Fair, 22–​23, 300n5 World War I, 53 World War II, 53 Worthington, A. C., 214 Zausner, Tobi, 102 Zerbe, Karl, 247 ... Posed in the American Art Marketplace  12 CHAPTER 2   Dimensions of the American Art Market The Marketplace of American Art:  Early Period  17 Shifting Demand Parameters  20 The American Art Market. .. or failure of American artists; 7 How the credence of both buyers and sellers is particularly central to the art market and how the authenticity of a piece of art is established in art transactions... Credence, Fakes, and Opacity in the American Art Market 252 American Art Aesthetics and the Evolution of Market Institutions 253 Is the American Art Market Free and Efficient in an Economic Sense?