It often flashes through my mind that I should roll up my sleeves and apply George Akerlof and Robert Shiller’s theory of animal spirits to the workings of the art market.[1] In this context, I usually mull over the five elements of their theory: confidence, fairness, corruption, money illusion, and storytelling. Confidence is easy, as art objects are customarily compared with other valuable assets among which investors can choose. The belief that the value of these objects will always go up because of their limited supply pops up in every boom, during which it is only reinforced by steadily rising prices. The art market is inherently unfair, as witnessed by the utter randomness with which a few lucky artists are thrust into the limelight by top gallerists, museum curators, collectors, auctioneers, and journalists. Corruption is rife in the market, where all the above agents systematically benefit from insider trading in all its forms. Often enough, mind-boggling court cases bring the muck into the open. As is the case with other valuable assets, money illusion sets in whenever the purchase and sale prices of art objects are compared. Inflation is systematically disregarded when fabulous “profits” are cheerfully paraded for all to see. And storytelling is at the very core of the art market. As most of the art objects are recognized as such only on trust, most market agents offer little more than carefully packaged snake oil. All I would need to do to connect the dots would be to examine as an example the colorful career of an artist in the limelight—say, Tracey Emin. Still, I sincerely hope someone will soon beat me to this feat of economic theory.

Addendum I (October 20, 2019)

Ten years later, I have done next to nothing about my wish to make some sense of the art market. In the meanwhile, I have lost much of my interest in the subject. Art, schmart. But I just learned that Robert Shiller has come up with yet another book that would be of great value for such an endeavor, for it focuses on storytelling.[2] I even thought of acquiring the book via Amazon, but I will let my enthusiasm simmer down before the final decision. Narrative economics strikes me as a wonderful subject in general, for humans are storytelling animals. Everything of any importance is transmitted in the form of stories (see, e.g., “Narrative Fallacy Squared,” November 5, 2012). In this context, the workings of the art market are perhaps only an aside. At any rate, I hope Shiller’s new book will spread across the globe at a clip. Perhaps my ideas from a decade ago will catch someone’s attention at long last.

Addendum II (July 8, 2020)

After much hesitation, I recently decided to acquire Shiller’s book on the importance of stories in economic affairs. I ordered it via Amazon, but my order failed over and over again. Apparently, the company was confused about it because my last order came a decade ago or so. In the end, my beloved ordered the book for me, and she brought it to me the last time she came to Motovun. It will take me a while to go through it, though. Shiller has much to say about the importance of stories in human affairs, but I am having hard time discovering anything that strikes my fancy. After all, the Nobel laureate is about economics first of all. Returning to the art market, I have not yet found anything of note in the book, either. Although it is squarely about stories and nothing but stories, this topic is still beyond economics proper. For my sins, I have no intentions to improve the human understanding of the art market. Let the rich manipulate all the others as long and as skillfully as they can (“A Fiat Currency for the World’s Richest,” May 21, 2019). The poor do not deserve any better, anyhow.

Footnotes

1. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, Princeton, New Jersey: Princeton University Press, 2009.

2. Narrative Economics: How Stories Go Viral and Drive Major Economic Events, Princeton, New Jersey: Princeton University Press, 2019.