“I Could Do That” Well, You Didn’t. Here’s Why Art Is So Expensive

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Have you ever wondered why some works of art are so expensive? Of course, you have. And at least once, you claimed that even you could do that when you saw a painting by Jackson Pollack or Mark Rothko. We won’t bother explaining why those artworks are “good” here, that’s another topic. Instead, we’ll try to answer the lingering question in your head: Why the hell do they cost a fortune?

The painting below, “Interchange” by Willem de Kooning, sold for about 300M USD in 2015.

At first sight, it doesn’t seem anything more than a bunch of random brush strokes on a canvas. But what made it so special? More interestingly, what made it worth 300M USD?

First of all, we need to face this simple truth: Product and commodity are two different things.

www.willem-de-kooning.org

Like every “product,” a painting is more than just the sum of the materials which were used in its making. A product can be differentiated and value can be added by the manufacturer as well as through branding and marketing.

There is almost nothing in this world today that is priced at its “intrinsic value.”

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Everything you can think of is priced based on supply and demand. In other words, current market value determines the price, rather than the intrinsic (actual) value. And that is also true of art.

Scarcity, for example, is an important factor.

www.metmuseum.org

You don’t see too many van Goghs running around, do you? So especially when it comes to dead artists, scarcity is a real factor. It dramatically affects pricing.

When it comes to living artists, other factors are involved.

www.pablopicasso.org

Whether or not the artist is dead, any specific artwork is unique, of course.  Michelle Gaugy, art gallery owner, author, and art consultant explains:

“... artists and dealers do things in an effort to create value—the perception that the art has present, or future potential, value. They facilitate getting the artist's work written up by magazines, put into museums, or placed into well-known collections. This gives the artist's work third-party blessings—kind of like having your significant other approved by the family before he proposes, or the vintage car signed off by five mechanics before you write the check. It doesn't really mean the significant other won't leave you or the car won't break down two blocks later, but you feel reassured.”

And of course, paintings are priced in relationship to each other within the marketplace.

www.metmuseum.org

It’s not different from food or furniture. Apples aren’t priced in relationship to toys, nor are chairs to TVs. It’s the same with art. Each painting is bought, sold, and priced within individual marketplaces.

Now let’s see how billionaires and the fashions of the super-rich keep values sky high.

www.ibiblio.org

The art market has seen a massive growth in size over the last 25 years and it reflects the nature of wealth today. Georgina Adam from BBC says:

"The sheer amount of money in private hands allows billionaires spread throughout the world – to indulge in a highly competitive sport to bag the best artworks. And after all, if you can spend nearly $1bn on a yacht, as the Russian billionaire Roman Abramovich is supposed to have spent on his floating palace Eclipse, another few millions for a trophy picture is not that much."

"You can build another yacht, you can’t get a top Monet, Cézanne, or Raphael made for you – you have to vie with other collectors when one appears on the market."

theredlist.com

The business of selling art has also been modified by the arrival of new economies, and it’s no longer dominated by the US.

"The fashion for private and state-sponsored museums has also been driving the top end of the market," Adam says.

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"Buying art, for many of today’s newly wealthy, also gives access to a glamorous lifestyle. There is an endless round of art fairs, biennales, auctions and events all over the world to attend, where galleries and auction houses put on the most glittering parties. Fashion magazines, luxury goods and watch companies pile in, as well as banks, who are increasingly watching art as a new asset class. In some countries such as China or India, art buying is considered first and foremost for investment, rather than for passion or as a hobby."

In sum, a very small number of rich people are driving the market. And as Adam says, what they’re interested in is not always appreciating the artwork. They mostly see it as a kind of investment.

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But sadly, we can’t talk about such big numbers for young and lesser-known artists. The art business today, seems to be a rich man’s game.

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