Damien Hirst - Artist and Economist ?

Thursday, September 30, 2010

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Quite a few of us are aware of the huge prices commanded by Damiel Hirst’s artworks, a zebra in a tank of formaldehyde sold for just over £1.1m, half the estimated price. But are we as clear about price and the value of a good as Hirst?

The Arts pages in the press are often full of amazed comments about the prices paid for art works. It isn’t worth it, it can’t have that value. Similar headlines and comments are generated about the sale of garages or parking lots in Bath or Battersea.

Hirst sells dead zebra artwork for £1.1m

Even a sketch for a later exhibtion, was sold by a cab driver for £15,000 this year. How much would you have bid for the name plate unveiled by Gordon Brown at Lehman Brothers European HQ which was on sale yesterday?

Cab driver sells Hirst sketch for £15,000

But are we as clear about price and the value of a good as Hirst?

Not so many of us are aware that this artist has a clear command of the linkage between value and the price of a good, whether it is a bar of soap, a ticket to watch Manchester City play Manchester United, a seat at an England vs New Zealand Rugby international, a parking lot in Bath or the auctioned commemorative plaque unveiled by Gordon Brown.

Brown plaque from Lehman Brothers.

Hirst’s economic clarity was outlined in a recent article by David W. Galenson , a professor of economics at the University of Chicago.

“I have proved it to myself that art is about life and the art world’s about money. And I’m the only one who . . . knows that. Everyone lies to themselves to make it seem like it’s the other way. But it isn’t.”

‘He is not troubled by the fact that the market determines the value of art: “I’m one of the few people in the world who can say, ‘I know what everything is worth.’...Everything in the whole world is worth what anyone else is prepared to pay for it. And that’s it. Simple.” ‘

Hirst’s economic clarity was outlined in a recent article by David W. Galenson , a professor of economics at the University of Chicago.
Economics and modern and not so modern Artists

Galenson also reviewed how the entrepreneurial action in 1874, of Auguste Renoir, Edgar Degas, Claude Monet, Camille Pissaro and Paul Cezane helped to break down the monopoly of The Salon in Paris. These artists organised an exhibition of their innovative paintings, and gave viewers and buyers access to a new market.

“1874 began a new era, in which the reputations of important advanced artists would no longer be created in the Salon, but in independent group exhibitions. After 1874, the Salon would no longer determine whether an aspiring artist could have a successful professional career; a larger and more diverse group of patrons would make this decision, in a more competitive market setting.”

The buyers were new collectors, wealthy middle class industrialists not just from Paris but Britain and The United States of America, ready to buy paintings from the Impressionists and Post-Impressionists. The market had widened, art collecting was no longer the preserve of governments, and the aristocracy.

“The existence of an independent, competitive market for art prompted a change in critical attitudes toward prices. In 1878, for example, in Defence of the Impressionists, the critic Théodore Duret declared that “it is necessary that the public who laughs so loudly over the Impressionists should be even more astonished! — this painting sells.”

The Impressionist and Post Impressionists had a sound grasp of economics; they took a risk, opened up their exhibition and waited for viewers and buyers. Like Hirst and others, they have found that price depends on what the buyers are willing to pay. Outraged comments from art critics, and the media about the shocking new images, often encourage art lovers to visit an exhibition and view the work, and make up their minds to buy.

It was unsurprising that Hirst’s words were taken up by The Adam Smith Institute’s Tim Worstall. Adam Smith Institute praise for Damien Hirst

“There is no such thing as a “true” value of anything, no independent measure of what something is worth. There is only the sometimes arbitrary and always subjective values placed upon a thing by those capricious creatures, human beings, that value only to be measured by what people are prepared to pay for that thing.”

Art also raises other economic issues.

What about forces driving prices of Impressionist paintings and Hirst sculptures? Limited supply and competing buyers drive the price, but artworks are also bought as hedges against inflation, so there is an element of speculative demand which influences price.

Students of economics and art could also weigh up the role of economic rent, the multiplier effect and the desirability of imposing a capital gains tax.

Whilst you are on the way through to the exit via the gallery shop, try and consider the significance of derived demand for fridge magnets, post cards, catalogues, and T shirts.

The alternative title was Damien Hirst and loads of Monet…

Tags: demand, prices, entrepreneur, price, risk, value

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Damien Hirst - Artist and Economist ?

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