David Galenson has a study of the relationship between artists and the art market in The American, the journal of the American Enterprise Institute. In his conclusion, after showing the consistent history of cupidity in the art world where artist’s reputations have regularly been built through the monetary value of sales and commissions, Galenson has some sharp words for art critics.
What is disappointing, however, is how poor the quality of the art world’s economic discourse remains even in the post-Warhol era. It continues to be fashionable among many critics and scholars to claim that art markets are irrational, and that prices have no value as indicators of artistic importance. These claims are both ignorant and foolish. Art scholars must overcome their distaste for economics, and become more sophisticated in examining how changes in art markets have influenced artists’ attitudes and behavior. If they don’t, they will continue to be unable to keep up with the artists.
He might as well have addressed his words directly to Souren Melikian whose recent screed in Art + Auction against auction house guarantees once again confirms that Dr. Melikian is an erudite scholar but a poor economist:
The third-party guarantee system is an inflationary device. It artificially raises prices by granting consignors unreal estimates and evading the risk by bringing in investors ready to pick up the bill in the event of a mishap. It also tips the scales in favor of sellers and auction houses acting as their agents against buyers, who are effectively made to pay whatever the vendor and the auction houses want them to.
Bear in mind that the market is now dominated by newcomers with limited understanding of the intricacies of the auction world. They turn for advice to auction house specialists perceived as experts and consult them about the price they should pay, unaware that the said experts have a stake in the game.
The condescension in these remarks provoked art market observer Josh Baer to anger:
Who is Melikian trying to protect here? His objections voiced in the article all reflect artworks in the seven-figure range and up. There is no little old lady in this scenario — it’s one millionaire aagainst another, all of them with advisors, lawyers, and the full due-diligence. So who is it that he’s afraid is getting screwed? New money? Old money? Who cares, and what business is it of his or ours?
Arti$ts and the Market (The American)
In a Booming Market, Danger Looms (ArtInfo.com)