Abstract
The market for paintings by well-known artists is booming despite widespread concern about art crime and difficulties in establishing provenance. Public law enforcement is imperfect, and court cases often are deemed problematic. So how is the thriving art market governed in practice? We analyze the protocols used by the top auction houses to identify and resolve problems of illicit supply—fakes, forgeries and items with defective legal titles—through the lens of institutional analysis. We uncover a polycentric private governance system in which different actors govern distinct but overlapping issue areas, motivated by profit, prestige, or the search for truth. When the financial stakes rise, opportunistic behavior undermines the credibility of private governance. We argue that as litigious, super-rich investors entered the art market, the interaction between public law and the traditional private governance system restricted the supply of “blue chip” art, driving the escalation of prices.
Highlights
Recent years have witnessed an explosion in the prices of prestigious art objects (New York Times 2012; Reuters 2016)
The global art market generated sales of $67.4 billion in 2018, of which the top auction houses Christie’s and Sotheby’s accounted for $7 billion and $6.4 billion, respectively; 40% of total art sales came from items priced more than USD 1 million (ArtBasel 2019)
We show that the tertiary art market shares the key features of previously described polycentric systems, namely, many autonomous competing decision-making centers operating under an overarching set of rules (Aligica and Tarko 2012; McGinnis 2016)
Summary
Recent years have witnessed an explosion in the prices of prestigious art objects (New York Times 2012; Reuters 2016). Some commentators consider art and cultural property crime to be the third largest criminal market after drugs and weapons (FBI 2012; The Times 2014). 143) reports that “around 75% of all stakeholders surveyed agree that ‘authenticity, lack of provenance, forgery, and attribution’ are the biggest threats to credibility and trust in the art market.”. Despite such concerns, the global art market generated sales of $67.4 billion in 2018, of which the top auction houses Christie’s and Sotheby’s accounted for $7 billion and $6.4 billion, respectively; 40% of total art sales came from items priced more than USD 1 million (ArtBasel 2019). The resulting price inflation encourages private agents to innovate and develop better governance solutions
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