I had planned to chop up a DayGlo abstract painting using an axe. You might call it art criticism. I called it “making kindling”. It never happened. The painting was consigned to the log pile, judged noxious and unsaleable by my mother, inheritor of a modest art collection. A visiting dealer spotted the painting at The Matriarch's pad before I could do the “Here's Johnny!” thing. Shortly after, he sold it on commission to a collector for a few thousand pounds.
The dealer, an expert on lesser-known British modernists, thought the picture was worth money. As a result, someone else did too. Art, lacking practical utility, can be either worthless or priceless. The opinion of industry insiders crucially underpins both designations and all price points in between. This is particularly true for modern art, in which verisimilitude has been largely jettisoned as a criterion of excellence in response to its cheapening by photography. The power of experts to confer value reaches its zenith in the contemporary art market, the stomping ground of such former enfants terribles as Damian Hirst and Jeff Koons. Here, expert validation counterbalances the ability of living artists to expand supply.
Running a gallery or an auction house would be a licence to print money, were it possible to buck the economy. Dealers and auctioneers succeeded in this feat for a year after the credit crunch. Last autumn, like Wile E. Coyote in the cartoon, they looked down and saw that they were running on thin air. Prices for contemporary art have plunged 40 per cent since, according to one estimate. Next month's influential Frieze art fair in London should signal whether the rising tide of economic recovery is lifting prices and volumes in the art market.
Any tyro collector entering the fray at Frieze should first read The $12m Stuffed Shark by economist Don Thompson. The book wryly anatomises how dealers, auction houses and high-profile collectors confer value on art and then maintain or increase it. Professor Thompson sees the contemporary art industry as a machine for building brands that help collectors feel good about paying large sums for a pickled elasmobranch. Expensive artworks are positional goods for the super-rich, he argues, signalling membership of that group and superiority to the merely wealthy. It is misguided to complain that, at $5.6m (€3.9m, £3.4m), a Koons sculpture of Michael Jackson cuddling his chimp Bubbles, is overpriced. Were it not excessively expensive, it would not be desirable to collectors.
However, such stratospheric prices, like Rome, are not built in a day. According to Prof Thompson, a successful London or New York dealer should be able to sell the work of a promising new artist for £3,000-£6,000 a pop. If demand supports a second and third show, prices rise to £10,000-£12,000 per work. A superstar dealer – such as White Cube in London or the New York-centred Gagosian empire – will multiply these prices appropriately.
The imprimatur of a good dealer is well worth the 50 per cent sales commission that artists bitch to their mates about. Dealers offer reputation by association. They may sell works at steep discounts to “branded collectors” such as Charles Saatchi in an extension of this strategy. The death-ray hauteur of the “gallery girls” who staff art shows supports the aura of exclusivity.
Auction houses, dominated by Sotheby's and Christie's, previously helped to ratchet up prices by guaranteeing a minimum price for collections sold when connoisseurs died, divorced or became disaffected with art. These guarantors played the same role as an investment bank lead underwriting a securities issue. The only difference was that pictures of screaming popes rather than eurobonds were on sale.
