Constructing the Valuation of “Art” as Economic & Social/Cultural
As a financial asset, art frustrates and counters the contemporary desire to simplify all economical transactions to spreadsheets, quantifiable formulas, and graphical analyses. This level of investment in a single asset class cannot be attributed to irrational and unpredictable behaviors on the part of a few; through this paper, I aim to construct a rational and predictable explanation for the valuation of art by questioning both (1) How and why an artist gains art-world significance and becomes recognized as valuable; and (2) How and why large discrepancies exist in the valuation of artworks produced by a single artist. Drawing from the theory of Pierre Bourdieu, I understand art as a unique asset in that it cannot be adequately explained or rationalized as just one type of capital, and instead must be understood as simultaneously operating as a form of economic, social, and cultural capital (Bourdieu). The aim of my analysis is to construct a model of valuation that brings together the economics of art valuation with the social, cultural, and emotional aspects of art valuation.
In 2014, the international art market broke its previous pre-recession yearly revenue record from 2007 of $51 billion, bringing in nearly $54 billion over the course of the year. It is of course indisputable that we ascribe value and capital to art; we can look back to the cave art of our ancestors 40,000 years ago to confirm the importance of art as a function necessary to the very survival of mankind (Robertson, 13). However, in a time where the art market is a multibillion-dollar industry, and where a single painting can bring in over $100 million at auction, it is worth critically questioning how, and why, we ascribe value and capital to art, to specific artists, and further to specific works of art within an artist’s larger oeuvre. As a financial asset, art frustrates and counters the contemporary desire to simplify all economical transactions to spreadsheets, quantifiable formulas, and graphical analyses. This level of investment in a single asset class cannot be attributed to irrational and unpredictable behaviors on the part of a few; through this paper, I aim to construct a rational and predictable explanation for the valuation of art by questioning both (1) How and why an artist gains art-world significance and becomes recognized as valuable; and (2) How and why large discrepancies exist in the valuation of artworks produced by a single artist. Drawing from the theory of Pierre Bourdieu, I understand art as a unique asset in that it cannot be adequately explained or rationalized as just one type of capital, and instead must be understood as simultaneously operating as a form of economic, social, and cultural capital (Bourdieu). The aim of my analysis is to construct a model of valuation that brings together the economics of art valuation with the social, cultural, and emotional aspects of art valuation. Using the explosive but short-lived career of Jean-Michel Basquiat (1960-1988) as a case study and understanding art as not only financially valuable (as economic capital), but also emotionally and societally valuable (social and cultural capital), I examine the value of Basquiat as an artist and the value of specific artworks within his larger body of work (Bourdieu).
PART 1: The International Contemporary Art Market: Economic, Social, and Cultural Capital
The international contemporary art market is ultimately an imperfect market, defying the assumptions that define market efficiency in economics; as scholar Iain Robertson explains: the art market “is an imperfect and asymmetrical place in which prices fail to reflect all published and unpublished data. The assumptions that the irrational trades of art-market players are cancelled out by rational arbitrageurs, that prices instantaneously adjust to available information and that indices capture all economic activity do not apply” (Robertson, 232). With a commodity such as oil or lumber, we can assume with predicable certainty demand: the public will continue to demand at a constant pace unless massive economic and political shifts occur which would be foreseen beforehand. In the case of art, demand is not nearly as predictable or consistent because there is such a small body of potential buyers and because there are so many barriers to access, which constrict the social and cultural value attributed to art by the majority of the public. Barriers to access are consciously enforced: top galleries are extremely selective about who they will sell certain artworks to and when they will do so, meaning that an individual cannot simply purchase an artwork because they have the money to do so. Barriers to access are also culturally and conceptually maintained: auction houses make access to past information and prices difficult to attain, many sales are private and thus go unrecorded, and a great deal of knowledge is required in order to justify value (Robertson). In trying to rationalize and predict the art market, it ultimately becomes a question of demand: so long as there is demand at certain price points, the market will continue to exist.
Understanding demand is not possible from a solely economic approach because ultimately, art collectors are not the same as non-industry art investors and these differences must be accounted for in their financial valuation of the asset. The difference in the amount that an art collector is willing to pay than a non-industry art investor is the difference in risk and reward that the art collector is willing to take on above the non-industry art investor. An art collector has a different risk tolerance because the art collector has different measurements of reward: not only financial reward, but also personal emotional reward and cultural/social capital reward, neither of which can be quantified through a financial valuation or numeric equation. The goal of any investment is to limit risk and maximize return, and in the case of art the purchaser must establish a comfortable balance between risk and reward, which will look very different from that of a non-industry investor (Robertson, 223). Risks to consider include: variability in taste and preference, macroeconomic market fluctuations, inflation, the heterogeneity of the asset, the limited pool of buyers and low demand, illiquidity, the cyclicality of the market, the lack of market transparency, and the imperfections that are built into the market (including: some sales are private, information is not easily accessible and historical information is not public, and unsold artworks are not recorded) (Robertson, 223). Prices are also a product of external considerations, including macroeconomic movements and larger financial market and international and national political contexts (Robertson).
Looking at art from the financial perspective through which we traditionally value assets and investments, the reward does not outweigh the risks. Thus, we must integrate into our model of valuation the social and cultural capital of art at the societal and at the individual level. Since price of an asset is traditionally a function of supply and demand and since demand is dictated by value, we must ask who and what dictates value. In the international contemporary art market, value is largely a function of taste and approval, which is controlled by a limited body of institutions and by the opinion of a few key individuals. Within the art-world, certain galleries, museums, international festivals and fairs, auction houses, critics and writers, and collectors can give institutional validation, and the weight of their opinions corresponds with the institution’s hierarchical positioning. We must still ask how the art-world creates value for certain artists and artworks, and interrogate whether we can predict and rationalize these decisions.
PART 2: The Basquiat Case Study: Giving “Color” to the Blackbox of Value
In the span of a decade from 1978 to 1988, Jean-Michel Basquiat went from being an anonymous street artist operating under the pseudonym SAMO illegally vandalizing the walls of Lower East Side building and the subway trains of New York City, to an internationally acclaimed art-world celebrity whose paintings set record prices at auction and were exhibited in top museums and galleries around the world. Basquiat’s rapid ascent, while exciting and impressive, is not at all irrational or unpredictable, but rather reflects the relationship between economic capital and cultural/social capital when valuing an artist or artwork. Figure 1 is a concept map that visualizes the various nodes that comprise the art-world network system. Drawing from Professor Irvine’s The Artworld as a Network System and the Institutional Theory of Art, I have identified here six broad categories: (1) Publications, Literature, & Theory; (2) The General Public; (3) Art Economics & Finances; (4) Properties of Artwork; (5) Artist; and (6) Art-World Institutions: Museum, Auction House, Gallery, and International Art Fairs & Biennials. Each of these nodes can be further unpacked, and each subsequent node represents smaller inputs that contribute to the art-world network and to the value of an artwork. Not only have I visually integrated the economic value of art with the social/cultural value, but I have also illustrated the importance of scale and the necessity of understanding value from the scale of the individual artist and artwork to the scale of the international art market, both historically and today.
In the Spring of 1984 at a Christie’s auction of contemporary paintings, Basquiat’s painting Untitled (Skull) fetched a then-record price $19,000, a price impressive for any artist at the time, nonetheless a twenty-three year old artist of color who had only been discovered a few years prior. Painted in 1982, Untitled (Skull) had originally been purchased for $4,000 in 1983 from a small group exhibition called Fast at Alexander Milliken Gallery in New York City. Later this May, Sotheby’s will auction this same painting with the expectation that Untitled (Skull) will set a new record for the artist and hammer at over $60 million (Maneker). Basquiat’s current record price at auction was set by Christie’s in May of 2016, when Basquiat’s Untitled of 1982 fetched $57,285,000 (Embuscado). During this coming auction cycle, Sotheby’s will also sell three additional Basquiat artworks in the day sale: Lot 119, Untitled (‘Bird’) of 1982, has a price estimate of $500,000 to $700,000; lot 185, Untitled of 1982, has a price estimate of $600,000 to $800,000; and lot 192, Untitled (Oreo) of 1988, has a price estimate of $700,000 to $900,000. How do we rationalize purchasing a painting at $57 million? How do we predict the future value of a painting at an estimate that exceeds $60 million? How do we account for such a large discrepancy in the price of one Basquiat artwork over another?
How do we understand Basquiat’s value as an artist? Key to understanding Basquiat’s success is a familiarity with him as an individual, with his artwork, and with the New York City emerging art-world scene of the 1980s. Basquiat was extremely ambitious and motivated, famously asserting to Al Diaz, his close friend and co-conspirator of SAMO: “Al, I know that I’m going to be a famous artist, and I think that I’m going to die young” (Jean-Michel Basquiat: Painter to the Core). Basquiat’s raw, artistic energy and charismatic personality fit in perfectly with the Lower East Side club and alternative arts scene of the time; many of the artists and individuals that Basquiat met through this club and alternative arts culture also became well known, such as Keith Haring and Kenny Scharf. It was through this network that Basquiat was able to integrate himself into the larger New York City arts scene, which during the 1980s was especially permeable as alternative culture was being embraced by the more tight cuffed art-world. Basquiat’s ability to accrue recognition and credibility allowed him to cross over into the institutionalized art world and gain economic and political legitimacy and value. In Figure 2, I have constructed a comprehensive timeline of this crucial decade in Basquiat’s life and career as an artist from 1978 to 1988. This timeline specifically draws attention to different factors that contributed to his value as an artist and to the value of his artwork, both historically and today: (1) Influential actors (artists, gallerists, friends, collaborators, girlfriends); (2) Other artists featured in group shows alongside Basquiat; (3) Locations: travel destinations, galleries, clubs, and shows; (4) Artworks; (5) Motifs, symbols, signs, and themes Basquiat employs; and (5) Media and criticism. Unsurprisingly, many of the artworks that are mentioned in the timeline as crucial during his own lifetime are also those that have fetched the highest prices at auction (Figure 3) and also those that are currently in top museums (and thus have accrued immeasurable social and cultural capital), illustrating the relationship between social/cultural capital and economic capital.
How do we understand the value discrepancy of one artwork over another? My findings here are based on research and grounded in the auction results for Basquiat as found on Artnet. Because the auction house is the art-world institution that most transparently establishes the value of an artwork and an artist, this provides a helpful framework by which to understand the value attributed to Basquiat (Robertson, 241-242). Figures 3 and 4 below, which state the highest paid prices for Basquiat at auction alongside the lowest paid prices accordingly, offer statistical data to support my findings (Artnet). Artworks are identified and valued by their internal characteristics: condition, provenance and exhibition history, subject matter, rarity, demand, scale/size of composition, materials/medium, and critical reception/literature. While some artists might have extensive careers in which they primarily work in the same mediums and materials, the same subject matter, on the same scale, etc., Basquiat is a helpful case study because the short-span of time in which he worked limits the body of works that can be examined, and because of the incredible variability in the content, composition, medium, and scale in which he worked.
Discrepancy in the valuation of Basquiat’s artwork is most visibly a product of the medium/materials employed, the scale and composition of the artwork, the context within which the artwork was produced, the provenance and exhibition history, and the critical reception/literature of the artworks. Figure 2 – the color-coded valuation timeline – begins to de-blackbox the role that different factors play in the valuation of an artwork by Basquiat by taking apart the specific factors that contribute to value and addressing them accordingly. Specifically, those artworks that have unique circumstances of production, unique exhibition histories and provenances, or unique narratives attached to them are likely to accrue more art-world value. In the case of Basquiat, a larger scale generally correlates with a higher value. Greater variety and complexity in medium and materials also generally correlates with higher value. For example, works executed with materials such as acrylic, oilstick, metallic paint, and spray enamel on mediums such as canvas or wood panel are valued much higher than works executed with pen, graphite, pencil, or colored pencil on paper or in poster form (Artnet).
Another important factor in valuing any painting that is not clear from a timeline construction, but that is perhaps most easily visible when actually interacting with the artworks is the subject matter and composition. Basquiat employed recurring motifs that permeate his artworks throughout his career, and these signs, symbols, colors, words, and gestures suggest interpretive references and offer biographic indications of time, place, and emotion. This sign-system not only facilitates the viewer’s process of meaning-making when interfacing with an artwork, but also contributes to the valuation of the artwork and correlates to the capital ascribed to the painting. Generally speaking, those paintings that are executed on a larger scale and include a greater and more complex sign-system are perceived as more valuable (Figures 3 and 4, Artnet). This semiotic approach not only uncovers “signs and symbols as systems of expression, meaning, reasoning, and cultural memory”, but also reveals the shortcoming of language as a modeling system for all human communication and activity (Irvine, The Grammar of Meaning Systems). Basquiat’s non-linguistic and unregulated system allows him a degree of complexity, universality, and individuality not afforded by language, which must conform to both our limited ability to express – as we are governed by semantics, grammar, discourse, the human language; we are bound to a sequential, linear representation of thought – and to our limited ability to communicate – as we are limited to communication with those who speak the same language and abide by the same culturally constructed terminologies and structures of communication).
Revisiting our driving questions How do we rationalize purchasing a painting at $57 million? How do we predict the future value of a painting at an estimate that exceeds $60 million? How do we account for such a large discrepancy in the price of one Basquiat artwork over another? we can begin to offer explanatory evidence and construct a rational argument. Ultimately, looking from solely a financial perspective, art cannot be rationalized as a rational or sound investment decision. Once again, the distinguishing factor here is the social and cultural capital and the emotional significance that art holds, which cannot be immediately detected by the marketplace or quantified in a financial analysis of supply/demand or risk/return, but that rationalize the prices at which art is bought and sold. When deciding to buy a work of art, the consideration is: the opportunity cost (cost of lost chances to invest money elsewhere), and the “psychic” returns (the enjoyment and emotional benefits that the artwork has) (Robertson, 235). When constructing a rational and predictable model for art valuation, we must integrate economic capital and social/cultural capital at the societal and individual level, as I have done visually in Figures 1 and 2, and as I have done with the Basquiat case study in this analysis.
FIGURE 1: The Art-World Network System: Integrating Economic Capital with Social/Cultural Capital at Different Scales
(snapshot provided, please click the link for the full timeline)
Bourdieu, Pierre. “The Forms of Capital.” In Soziale Ungleichheiten (Soziale Welt, Sonderheft 2), edited by Reinhard Kreckel, translated by Richard Nice. 183–98. Goettingen: Otto Schartz & Co. Web. 1983.
Embuscado, Rain. “Here Are Jean-Michel Basquiat’s Most Expensive Works at Auction.” Artnet News. 16 May 2016. Web.
Irvine, Martin, Dr. “The Grammar of Meaning Systems: Sign Systems, Symbolic Cognition, and Semiotics.” CCTP 802 Art and Media Interfaced. Georgetown University: Communication Culture & Technology Program, Web. 6 May 2017.
“Jean-Michel Basquiat: Painter to the Core.” Jean-Michel Basquiat: A Guide. Christie’s Auction House, 03 May 2017. Web.
Maneker, Marion. “Sotheby’s Ups the Ante with $60m Basquiat Head.” ArtMarket Monitor. 19 Apr. 2017. Web.
Robertson, Iain. Understanding art markets: inside the world of art and business. Abingdon, Oxon: Routledge, 2016. Print.
Van Maanen, Hans. How to Study Art Worlds: On the Societal Functioning of Aesthetic Values. Amsterdam: Amsterdam University Press, 2010.
FIGURE 1: The Art-World Network System: Integrating Economic Capital with Social/Cultural Capital at Different Scales
Irvine, Martin, Dr. “The Artworld as a Network System and the Institutional Theory of Art Martin Irvine.” CCTP 802 Art and Media Interfaced. Georgetown University: Communication Culture & Technology Program, n.d. Web. 6 May 2017.
FIGURE 2: Deblackboxing Basquiat by Re-Coloring his Decade of Fame
“Artist Timeline.” Jean-Michel Basquiat. The Estate of Jean-Michel Basquiat, n.d. Web. 5 May 2017.
FIGURE 3: Basquiat Price Results at Auction: Price Descending
Auction results for Jean-Michel Basquiat: Price Descending. Artnet. 8 May 2017.
FIGURE 4: Basquiat Price Results at Auction: Price Ascending
Auction results for Jean-Michel Basquiat: Price Ascending. Artnet. 8 May 2017.