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Meanings of prices for art.
Determining the value of
contemporary artworks in
Amsterdam galleries
Olav Velthuis
Marc Expensive?
Serge Two hundred thousand.
Marc Two hundred thousand?
Serge Huntingdon would take it off my hands for two hundred and twenty.
Marc Who’s that?
Serge Huntingdon?
Marc Never heard of him.
Serge Huntingdon! The Huntingdon Gallery!
Marc The Huntingdon Gallery would take it off your hands for two hundred and
twenty?
Serge No, not the Gallery. Him. Huntingdon himself. For his own collection.
Marc Then why didn’t Huntingdon buy it?
Serge It’s important for them to sell to private clients. That’s how the market circulates.
Marc Mm hm…
Serge Well?
Marc …
Serge You’re not in the right place. Look at it from this angle. Can you see the lines?
Marc What’s the name of the … ?
Serge Painter. Antrios.
Marc Well-known?
Serge Very. Very!
Pause
Marc Serge, you haven’t bought this painting for two hundred thousand francs?
Serge You don’t understand, that’s what it costs. It’s an Antrios.
Marc You haven’t bought this painting for two hundred thousand francs?
Serge I might have known you’d miss the point.
Marc You paid two hundred thousand francs for this shit?
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INTRODUCTION
Serge and Marc, two characters in Yasmina Reza’s play Art, are looking at Serge’s
recent acquisition: a monochrome, white canvas with a number of diagonal scars.11
Marc is unable to appreciate the artwork one of his best friends bought; in particular, it infuriates him that Serge paid 200.000 francs for it. Afraid that Serge will start
fancying himself ‘in some grotesque way’ as a collector, that Serge values the
Antrios more than him, Marc perceives the price as a major obstacle to their future
friendship. ‘I give a fuck about you buying that painting. I give a fuck about you
spending two hundred grand on that piece of shit’, as Marc would confess later on.
More than just the neutral outcome of a market process, prices are apparently able
to arouse fierce emotional responses.
From an economic perspective, Marc’s reaction is difficult to understand. As the
outcome of the market process, a price is a neutral representation of value; the fact
that prices for artworks are so high, is caused by the fact that each artwork is
unique. Supply is in other words restricted to one, so that demand will determine
the price of the painting (cf. Heilbrun and Gray 1993). Economic theory suggests
that this adjustment process will take place without the interference of any human
action at all. The formation of prices is thus ‘depersonalised’. However, in this paper
I will show that pricing contemporary art involves more intricacies than economic
theory allows for.
From a sociological perspective, Marc’s reaction is less surprising. Pierre Bourdieu has rightfully characterised the art market as ‘a trade in which things have no
price’ (Bourdieu 1993: 74); the economy of the arts is negated. As a part of that
negation price tags are conspicuously absent in gallery spaces, while talking about
prices is considered to be vulgar.12 Pricing, in other words, is far from a neutral
activity. Indeed, the fact that Serge is willing to pay so much money for a monochrome canvas is telling as far as Marc is concerned; to him the price indicates that
Serge wants to become part of a different community, and he fears this will alienate him from Serge.
The main argument of this paper is that in order to understand the price mechanism on the market for contemporary art, we need to take the meanings that prices
have to actors on the market into account. Like anthropologist Robert Prus noted
with respect to price setting on ‘ordinary’ retail markets: ‘Despite its ‘depersonalised’ (…) referents, price-setting is a socially derived activity.’ (Prus 1985: 89-90).
Likewise Viviana Zelizer has highlighted the non-economic meanings of economic
processes. Her research shows that markets for ‘sacred’ goods, i.e. goods with a
11. The painting can be easily identified as a work by the Italian artist Lucio Fontana. Fontana was an avant garde
artist in the 1960s, but his work became in vogue with ‘nouveaux riches’ art collectors from the 1980s onwards.
12. In a more general sense, a number of scholars have noted that the art market is driven by a non-economic
logic (Bourdieu 1993, Moulin 1987, Plattner 1996). Although the explanations for this logic vary widely, what
these studies agree upon is that a gallery needs to reconcile two conflicting roles: the economic role of salesman on the one hand, and on the other hand the artistic role of mediator of innovative aesthetic values and
disinterested patron of the arts (cf. White and White 1965). By denying its economic nature, actors on the art
market succeed in dealing with a good whose values are thought to be non-marketable. Apart from the
absence of price tags, references to commerce are avoided in the gallery space.
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strong humanitarian or symbolic value, are infused by non market values and
extra-economic logics (Zelizer 1979, 1988).
In this paper I argue that prices communicate rich and meaningful messages
about the value of art to consumers, producers and distributors of art. The main
evidence I present is based on interviews conducted with Amsterdam gallery owners;13 furthermore I will draw on eclectic sources such as academic and literary
texts, reviews in art magazines, interviews with artists, collectors or gallery owners
out of books and magazines, guidebooks to the art market for artists, etc. In order
to analyse the meanings of prices that these qualitative data hint at, I draw a loose
analogy between the price mechanism and a linguistic system: the social and cultural meanings of prices are only understandable if we speak the ‘language of the
market’.14
FUNCTIONS
OF PRICES
Rob Scholte, a successful contemporary Dutch artist, once remarked that ‘the only
real thing about art is the price.’15 No matter how difficult it is to assess the value of
an artwork, or how difficult even talking about art might be, the price functions as
the single definite attribute of an artwork. That univocal appearance confers an
attractive, seductive quality on them. As a result the price mechanism serves purposes that surpass the economic purpose of allocating scarce means optimally by
bringing supply and demand for art in line. These non-economic purposes may be
as different as selecting the audience for an artist, describing the development of
an artist’s reputation, characterising the ‘aesthetic eye’ of collectors, or expressing
the status of a gallery in the artistic field. Thus social, cultural and economic values
are intertwined in a complex way.
For instance, sculptor David Smith set his prices so high that only a very small
group of most persistent admirers could afford to buy his work; thus he expressed
a scornful attitude to a world that he believed had too long ignored and disdained
him – and it resulted in very few sales during his lifetime and great misery for his
heirs and the executors of his estate immediately after his death (Grant 1991: 17).
By contrast, social ideals may induce artists to keep prices as low as possible; even
13. Between and April 1998 and June 1999, I conducted 15 semi-structured, in depth interviews with gallery
owners in Amsterdam, 2 with artists and 2 with collectors. The interviews lasted 45 minutes to an hour on average. The selection of galleries was made on the basis of three criteria: members of the two Dutch gallery associations (i.e. Galeriebond, which distinguishes itself as an avant-garde association, and Nederlandse Vereniging voor Galeriehouders, which distinguishes itself as a traditional, more craft-oriented association) are
equally represented; diversity in terms of age and location of the galleries is maximized; finally, the sample is
partially based on a snowball method since appointments with some galleries were made on the basis of
recommendation of gallery owners I had interviewed before. The artists and collectors that I interviewed were
suggested by gallery owners. The transcripts of the interviews have been coded, to which the quotes in the
paper respond (A = Artist, G = Gallery, C = Collector).
14. In a wider sense, my argument can be located in New Economic Sociology, which tries to show that the
‘embeddedness’ of economic action in social networks and cultural institutions has implications for economic
outcomes. According to founding father Mark Granovetter, New Economic Sociology ‘reverses economic imperialism by offering sociological accounts of core economic subjects such as markets, contracts, money,
exchange, and banking’ (Granovetter 1990: 95).
15. Cited by R. Gollin and B. Witman, ‘Jung und Modern, das haben wir gern!’, de Volkskrant 11.4.1998.
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if the ‘pull’ of market demand would induce the artist to increase the price level,
she may resist. One strategy may be to make more work that is inherently cheap
(like drawings or prints); alternatively, the owner of an established Amsterdam
gallery explains the price setting of work of one of the artists he represents as follows:
Look at the difference between something that costs 20.000 or 100.000 guilders: you
will get another audience with either price level, and you may find one sort of public nicer than another, to put it in general terms. Maybe it is more pleasant to sell
things that cost 20.000 guilders, because the people that can afford it are nicer to
deal with and speak to. G11
Apart from the fact that they may operate as a social selection mechanism, prices
can have explicitly cultural meanings. Take the case of Tim Robbins, a heterodox
artist who works with learning-disabled and emotionally handicapped teenagers in
the South Bronx, New York. Because of the exceptional group of people he works
with, Robbins recounts how prejudiced people were about their projects. Remarkably, to prove they defied these low expectations, the artist refers to the price of the
work: ‘I think we have done that – from $5 bricks in 1981 to over $150.000 for a
major work today’; the increased prices mean in other words, that they have been
accepted by the artistic community.
To give another example of these cultural meanings of prices: Sidney Janis, a
famous post-war gallery owner in New York, recounts in an interview how difficult
it was to sell works of abstract expressionist painters when they had their first exhibitions in his gallery. Work by Willem de Kooning was sold for $1800, while a work
by Jackson Pollock cost only $8000 in 1952. Just like Robbins, Janis rephrases the
artistic success of his gallery and the artists he represented in economic terms:
Twenty years later I bought it back for 350,000 dollar and gave it to the Museum of
Modern Art. We sold Blue Poles [by Pollock], a somewhat smaller picture, for $6000,
and eventually it was sold to the Canberra Museum in Australia for a reputed $2
million (De Coppet 1984: 39).
High prices may also serve the purpose of enhancing the preservation of art. The
contemporary German artist Markus Lüpertz stated for instance that:
It is important to take care of the fact that your art becomes expensive while you
are alive. The more expensive your art is, the greater the chance that it survives.16
Collectors may be confronted with this principle when donating artworks to a
museum. The American couple Tremaine, who belonged to the worlds biggest
16. Cited by Olaf Zimmerman, Arbeitstitel: Weniger ist automatisch Qualitat – Strategien des Kunsthandels zur
Qualitatsdefinition, hypertext document, www. Zimmerman-franken.de. Likewise, art historian Frances Haskell has pointed at the symbolic value prices used to have because ‘[t]hey raised the whole status of art in the
eyes of the world.’ (cited by Fitzgerald 1995: 6).
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collectors in the 1980s, occasionally saw work they donated to a museum disappear
in storage space. As a result, the couple decided to sell work to museums rather
than donate them:
With good reason, Emily [Tremaine] thought the museums appreciated works
most if they had to pay for them. When the Metropolitan paid a great price for a
work, people came to see it, and even if tainted by commercialism at the moment,
it was displayed as a major work of art with the full prestige of the museum behind
it (De Coppet 1984: 168).
Although these examples merely illustrate that prices may serve social and cultural
purposes for people involved in the art world, in the remainder of this paper I will
analyze the meanings involved in more detail; paying attention to these meanings
is all the more important since they influence the determination of prices pervasively. First, however, I will present a theoretical framework that enables me to analyze the communicative function of prices.
THE
PRICE MECHANISM AS A LINGUISTIC SYSTEM
The fact that prices are a signaling device has been recognized by some economists. According to Nobel laureate Georg Stigler, prices function as ‘reporters’: they
communicate ‘innumerable messages on the state of supply and demand for each
commodity or service’ (Stigler 1987: 14). If a shortage of a certain good exists in a
certain community, a rising price will communicate this to producers in other
communities. Other economists have argued likewise that:
‘The market process solves the problem of economic calculation by generating
‘signals’ of individuals to orient their behaviour to one another. The institutions
of the market society serve as ‘aids to the human mind’ in their capacity as guideposts to human action within a complex and uncertain world’ (Boettke 1995: 66,
emphasis added).
Even the analogy between money and language has been alluded to by some heterodox economists: markets would be efficient because they are assisted by a monetary language which transmits information ordinary language is unable to transmit (Horwitz 1995: 157).
But whereas economists focus on prices as an economic language, and on the
market as a network for economic information, the case of the market for contemporary art shows that the nature of the information transmitted may also be social
and cultural.77 Semiotics, which is loosely defined as the study of the production
17. In this respect, consumer research seems to be more to the point: ‘While economics has concentrated on
the allocative role of pricing, consumer research literature has emphasized the informative role played by price
whenever consumers make brand choices in markets subject to product quality differences. The accepted
marketing view is that when consumers have very little information on the product, they tend to regard price
as an index of quality.’ (Dorward 1987 : 128).
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and consumption of signs, can provide opportunities to study these meanings of
prices.18 But rather than providing a structural, semiotic analysis of prices, I will
draw an analogy between the price mechanism and a linguistic system by eclectically using the conceptual framework of the Swiss linguist Ferdinand de Saussure.19
Three concepts are central in De Saussure’s semiology: the sign, the signifier, and
the signified.20 The signifier, to begin with, is the empty container of a communicative message. In the case of the word table, the signifier is simply the five letters
this word consists of. The signified is the concept the signifier refers to, in this case
the concept of a table. The sign, finally, is the combination of the concept and the
sound pattern, or, in other words the complex of associations between the signifier
and the signified (cf. Barthes 1957: 252). To give an example: a bouquet of roses is
in itself an empty or ‘meaningless’ signifier. It only becomes a ‘sign’ (of love) when
a particular ‘signified’ or meaning, usually some kind of affection, is attached to it.
How does this approach to language apply to the study of prices? Let me propose
three ways. No doubt the main similarity between language and the price system is
the fact that both start with an ‘empty’ or meaningless ‘container’: the sound pattern in a linguistic system has its counterpart in the numbers a price consists of is;
this number-combination is entirely meaningless. For a foreigner who does not
have any knowledge of English language, the word ‘table’ will mean as little as the
number ‘2500’ on a price label means to somebody who has no knowledge whatsoever of a particular market. Just like the relationship between signifier and signified, the relationship between price and a good is therefore arbitrary: it is based on
convention. For prices of contemporary art this holds because no ‘natural connection’ exists between the price and the artwork; according to most analyses, even
cost of production hardly account for the price of the work (cf. Bourdieu 1993, Plattner 1996).
Because of the so called arbitrariness of the sign both a linguistic system and the
price mechanism imply social activity:
‘A community is necessary in order to establish values. Values have no other
rationale than usage and general agreement. An individual, acting alone, is incapable of establishing a value’ (Saussure 1913: 112, cf. Cooley 1913).
As a result, we need to know the conventions in order to understand meanings of
words as much as of prices. This insistence on the conventions or customs that
shape the distribution of art has also been highlighted by Howard Becker’s
approach of ‘art worlds’ (Becker 1984).
18. Semiotic analysis has already proved useful for the study of meaning in other than linguistic contexts such
as the visual arts (Mechelen 1993) or anthropology (Geertz 1973). Although semiotics has been applied in marketing literature in the last decade, hardly any effort has been made to develop a semiotic perspective in economics (for an exception, see Dyer 1989).
19. Obviously alternative semiotic perspectives are available which partially overlap; the American pragmatist
tradition, and most notably the work of Charles Peirce, is an important counterpart to the continental tradition of semiotics.
20. The terms originally used by De Saussure are ‘sign’, ‘signal’ and ‘signification’ respectively, but the terms
mentioned have become more widely used ever since (see Barthes 1957).
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A second similarity between a linguistic and a price system, is that both have a socalled ‘synchronic’ and a ‘diachronic’ dimension. The synchronic dimension
encompasses the static aspects of the system, or the systematic relations at a certain point in time. How do certain signs relate to other signs in contemporary society, would be a question to ask in that context. The diachronic dimension, on the
other hand, is all about the historical evolution of the system: how did associations
between a signifier and a signified develop in the course of time? As De Saussure
argues, this duality in linguistics is duplicated in economics by the distinction
between study of the economy proper on the one hand, and study of economic history on the other (Saussure 1913: 79). When explaining the meaning of prices on
the art market, this distinction between the synchronic and the diachronic dimension turns out to be fruitful.
The third and most important reason for analyzing the price system from a semiotic perspective is that both economics and linguistics deal with a notion of value.
In fact, De Saussure makes another explicit reference to economics because of it:
‘as in the study of political economy, one is dealing with the notion of value. In
both cases, we have a system of equivalence between things belonging to different
orders.’ (Saussure 1913: 80; emphasis in original text).21
Value, De Saussure argues, is based on a paradoxical principle. On the one hand,
the value of an item involves something dissimilar, which can be exchanged for it;
on the other, values involve similar things, to which a good can be compared. To
give an example: the value of a five-franc coin is simultaneously based on the fact
that it can be exchanged for something different (e.g. a loaf of bread) and compared
to a similar value (e.g. of a one-franc coin; Saussure 1913: 113). This distinction will
also provide an important entry point to the art market.
With these similarities between linguistic and monetary systems in mind, I will
now turn to the meanings my informants on the market for contemporary art
referred to. I will make a crude distinction between meanings conveyed to consumers and producers of contemporary art on the one hand, and diachronic and
synchronic meanings on the other hand.
Producer
Synchronic meanings
Consumer
a. Self-esteem
b. Indicator of quality
- price differences
- price differences
- lack of price differences
Diachronic meanings
c. Self-esteem
d. Indicator of quality
- price increases
- price increases
e. Gift element
- price discounts
21.This analogy has also been noted by Jean Joseph Goux: ‘The remarkable structural parallel between money
and language which De Saussure himself sketches on the basis of the notion of value (…) struck me as a decisive juncture, rich in ramifications.’ (Goux 1990: 2)
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Furthermore, while most meanings of prices are cognitive, in some cases like the
meaning of price-discounts they are of a relational nature. I will show that in an art
world that opposes commercial values, people find ways of communicating noneconomic values via the economic medium of a price. However, this communication process is only meaningful for actors who know the conventions and speak the
language of the market; thus prices constitute a communicative play of a distinct
social group.
SYNCHRONIC
AND DIACHRONIC MEANINGS
Price differences: self esteem for the artist
By comparing their work to the work of their colleagues, prices enable artists to get
some indication of their respective reputation. Just like De Saussure shows with
respect to language, not just the absolute value of their artworks counts to artists,
but also the relative value. Thus, prices convey the social meaning of self-esteem to
the producer of the good. This is all the more important since uncertainty prevails
about artistic quality per se.
Artists may ‘read’ the quality of their work by looking at other prices in the system; as a result the prices, or rather the price difference can be a source of selfreward or self-esteem for an artist: ‘High prices are read as messages sent by the
student to the community which say (…) ‘I am pretty damned good, I am better
than you are’ (Warchol 1992: 324). Here we are confronted with a synchronic meaning of prices, since the inter-relationship of prices is at stake. As a gallery owner
confirms:
The artists that exhibit in my double exhibition space always start comparing
prices, especially if one artist has been active for a longer period than the other one.
You will get remarks like: ‘why is his work worth so much and mine only this
much.’ Indirectly it proves that self-esteem is a major issue for an artist. G2
Price differences: indicator of value to the collector
Obviously prices do not have the same meaning to all actors on the market. To collectors, they have less to do with self-esteem than with the quality of the work.
Exactly because an object is worth so much on the market, buyers may be induced
to attach aesthetic value to it. The idea that ‘expensiveness’ induces people to value
a good has been a major theme in Thorstein Veblens The Theory of the leisure class
(1899). Value, Veblen argues, is informed by ‘pecuniary canons of taste’:
‘Any valuable object in order to appeal to our sense of beauty must conform to
the requirements of beauty and of expensiveness both’ (Veblen 1899: 108).
If beauty and expensiveness are related, this is because we tend to value an object
‘in proportion as they are costly’ (Veblen 1899: 108).
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The main reason why prices contain meanings about the quality of the work, is
because uncertainty prevails as far as aesthetic evaluation is concerned. An important characteristic of the art market is that individual actors do not know the value
of things, and that criteria to evaluate the quality of the work are lacking (cf. Smith
1989). As a result prices are regarded as an odd, but clear measure of quality (Plattner 1996: 15, cf. Prus 1985: 67) A guide to the art market therefore gives the following warning to artists:
In our society, money is a major guide for measuring success. To the public at large,
an artist who is making a lot of money selling paintings or sculptures is a successful artist; there is also the myth that if a painting or sculpture costs a lot of money
it must be a good piece of work. We don’t have to accept these values in our own
personal lives, but we must acknowledge that they have an effect on the developing reputation of every professional artist (Katchen 1978: 78).
Again De Saussure’s distinction between ‘exchanging for dissimilar things’ and ‘comparing with similar things’ is to the point: 5000 guilders on a price tag means on the
one hand that a collector may as well buy a second hand car for the artwork, but at the
same time it enables him to compare this particular artwork to other works he came
across. Just like the artists does, collectors may infer judgements about the quality of
the work from this comparison. Instead of being separate entities, value and price are
thus constituted simultaneously on the art market.
The fact that prices of contemporary art are meaningful to consumers as far as their
aesthetic value is concerned, has a number of consequences. For instance, it creates a
lower limit in the price formation process: ‘Art that is too cheap, is not taken seriously.
A drawing of 100 guilders will be taken less seriously than a drawing that costs 350’, a
gallery owner explained (G4). If a work is priced lower than the customary price level
a collector may be pleased, but at the same time his suspicion about the quality of the
work rises; collectors do not judge art merely by looking at it, but take monetary standards into account as well.
More importantly, the synchronic meaning of prices for contemporary art accounts
for a remarkable anomaly on the art market: the fact that artworks of the same size
within the oeuvre of one artist are priced equally. Even if a gallery owner or the artist
is convinced that some artworks stand out, they will be priced equal to other works of
the same size. Thus the fact that prices are perceived as a marker of quality, influences
the way different works within the oeuvre of a single artist are priced:
It is a code in the gallery circuit to conceal which artworks you value higher than
others. Therefore, you attach equal prices to works of the same size. Pricing according to quality will be done at auction. There it may turn out that some people really
think this photo is more interesting than that one, and that will show by means of
supply and demand. I will not make a judgement about artistic value, however. G2
To price works of the same size differently is doing art history rather than dealing
in contemporary art. G11
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In short, because gallery owners do not want to convey messages about the quality of the work to the audience, they try to refrain from communicating by means
of price differences. Although an anomaly to economic theory at first sight, a rationale does exist for this practice. Attaching a higher price to one work may make
the other works are more difficult to sell, because collectors will consequently
interpret lower prices as a sign of lower value:
[Pricing according to size rather than quality] means that the real hits, the works
that surely everybody wants to have, will be less expensive than they could be. But
you violate another system if you would comply with that. You will have a more
difficult time selling the rest. In fact, you reconfirm that the rest is less desirable.
You should not do that, let them find out themselves. G922
Price changes: self esteem for the artist
One of the major anomalies on the art market is the fact that price decreases are
considered to be impossible: once an artist has achieved a certain price level, it is
difficult to lower them in case sales are lagging behind. This particular feature of
the art market has been widely recognized in academic literature on the art market (Moulin 1987, Plattner 1996), it appears in artist’s guides to the market (e.g.
Chamberlain 1983: 81) and it is furthermore acknowledged by actors on the market. As a gallery owner states it:
There is an absolute taboo on the decrease of prices. I don’t know why, but I guess
it has to do with the idea that art is a sacred good, that it has a certain price and
must be able to maintain that. G7
Although a strictly economic explanation is lacking, in the diachronic meaning of
prices we find several ‘rationales’ for this phenomenon. To recall, diachronic
meanings have to do with the historical development of the price. A 10% increase
in the price level of an artist may be a mere adjustment of an equilibrium price
according to a mainstream economist, but for an artist the diachronic meaning of
the price increase is that his career is developing well. The other way round, a
decrease in prices can mean a discouragement to the artist or a ‘blow’ to his selfesteem.
When Rob Scholte, a famous Dutch artist we encountered before, auctioned off
work of his former fellow artists in 1997, the prices were much lower than they
used to be a decade before. People hypothesized that Scholte was merely doing it
to test the present value of his former friends, but the artist himself stated that he
merely needed money. As an art critic commented:
22. All gallery owners I talked to reconfirmed that they price according to size rather than quality, except for
the owner of one of the oldest and most established galleries in the Netherlands; with her oldest artists, she
reluctantly lets the artist themselves decide about prices (G12).
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Still, for the artists involved it must have been painful how much, or rather how little, their work did on the free market. While prices are kept artificially high in galleries, at auction it is a matter of what a fool is willing to give for it.1313
Price changes: indicator of quality to the consumer
A different explanation for this anomaly considers the consumer rather than the
producer of the artwork. In the first place, a gallery will obviously try to avoid price
decreases because those might upset collectors that have already bought the
work. For the collector, however, such a price decrease not only means that he
made a bad investment; it also tells him that the quality of the work has been overrated. Take the case of a singer struggling to get employed at the bottom end of the
market; by lowering his fee, he will just indicate that he has got trouble being hired
as a singer, and as a result of that struggle-indicating price decrease, potential
demand will be put off instead of attracted (cf. Towse 1992: 213-214). Contrary to
the most basic of economic insights, by lowering the price demand may be
decreased rathern than increased (cf. Plattner 1996, Prus 1985). As a gallery owner
explains:
It is absolutely a taboo to decrease prices. That is psychological: if you bought this
artist in 1995 for a certain price, and now you come back and the price went
down, then you will definitely interrogate me about it. You become uncertain:
‘what is this, how is that possible, what happened to the artist?’ With houses we
accept that, but with artists it is not done. Trust is deteriorating in that case. G6
Conversely, price increases are interpreted as a sign of success:
Raise your prices by noticeable amounts…. You want people to notice your price
increases. This gives the impression that both your credentials and your sales are
improving. (Katchen 1978: 80).
To be sure, the fact that prices can only be upwardly adjusted, has major economic
consequences. A slump in the market, for instance, is responded to by letting sales
decrease or even not selling at all for a while, rather than decreasing prices (cf.
Rouget e.a. 1991: 21);24 furthermore this ‘law of the market’ forms an important
incentive for galleries and artists to start pricing the work as low as possible:
23. Sandra Smallenburg, ‘Veiling ‘Nieuwe Wilden’ uit het bezit schilder Rob Scholte stelt teleur’, NRC Handelsblad, December 2, 1997.
24. As I will show later on, a different strategy in this situation is to give discounts. In the early 1990s, when the
art market collapsed, galleries also dealt with the problem of inflated prices by simply terminating the relationship with some of the artists they represented. In general, if an artist moves from one gallery to another,
more degrees of freedom exist to decrease prices. For a number of artists however, the fact that they got stuck
with inflated prices when the art market collapsed, simply meant the end of their career.
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This decision [about the initial price] which is often made in a couple of minutes, can
have far reaching consequences for the career of an artist… A once fixed price can
reasonably only be adjusted upwards. Only few artists have survived a necessary
descent from high to low.25
Price as gift - collectors
A final example of the meaning of prices is relational rather than cognitive. It
addresses the relationship between a gallery and a collector: prices may contain a
gift element in the form of price discounts. Many galleries maintain long-term relationships with their customers and try to bind a clientele of regular buyers to their
enterprise with the help of several kinds of gifts. A dinner with the artist, the gallery
owner and other collectors after the opening of a show is a customary gift, just like
the arrangement of a visit to the studio of the artist, or special treatment at an art
fair. If market transactions and the objectifying nature of the price mechanism are
contested in the art world, gift giving tends to de-objectify these same transactions.
As a part of this gift economy which accompanies the art market, price discounts are
given to confirm relationships with collectors, usually ranging from 10 to 20 %.26
Of course, the magnitude of the discounts depends on the nature of the relationship
gallery and buyer entertain, with institutional collectors like museums or business
collectors usually getting the highest discounts:
All museums expect to buy at a discount, not only because they are non-profit
educational institutions but also because they know a museum acquisition
enhances both the reputation and the market of an artist (Chamberlain 1983: 85).
If a private collector has a high standing and has a reputation of donating works to
museums, he may get a similar discount.
However, price discounts have more than just strategic importance; they may
mean that the gallery values social goals as well:
When students want to buy something, or people with little money, I am willing to
give a discount, because I find it important that those kind of people can buy art. G3
Finally, whereas the strategic and the social meaning of discounts cannot be
ignored, there are obviously economic meanings at stake as well. In fact, a discount
may simply mean that a show did not sell well ( Prus 1985: 84); therefore price dis25. Olaf Zimmerman, Das Formtief der Kunstmarkt, hypertext document, www.zimmerman-franken.de.
26. Again, the frequent use of price discounts is not specific to the art market. Dorward, for instance cites a
marketing study which indicates that 70% of companies give discounts on a regular basis, and even 80% of the
companies that use price lists. ‘There is, therefore, some reasons for believing that, in industrial selling, list prices often exist as a basis for discounting rather than as prices that customers in general are expected to pay.’
(Dorward 1987: 115).
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counts can be used as a secret route to the price decreases that are desirable yet
impossible under usual circumstances.
I think it is stupid if a gallery would immediately decrease its price. At the
moment that an artist does not sell that well, you’d better give discounts. Especially
because a collector who has paid the initial high price and notices that the work got
cheaper, will loose its faith in you as a gallery owner. G2
CONCLUSION
In this paper I have argued that in order to come to a proper understanding of price
formation, we need to analyse it as a social and cultural process. In particular, we
have to look at the meanings of prices. An increase in prices of the work of a certain
artist may mean that demand exceeds supply from a conventional economic point
of view, but taking the meaning of prices into account it may as well be interpreted
that this particular artist is becoming better than his fellow artists are. The signals
price changes give can in other words be more about the quality of the work, than
about its relative scarcity.
Although the art market may not be representative because of the peculiarities of
the product, the price mechanism of other markets are likely to generate their own
meanings. The fact that prices have meanings may even be a phenomenon that is
so close to us that we fail to notice it when encountered. Think for instance of the
cautious way in which we talk about the income we earn, that is the price our
labour time fetches on the market. Or take the case of food: consumers regard the
quality of a good as inferior as soon as its price decreases under a certain lower
limit, which induces them to stop buying the product (Diamantopoulos and Mathews 1995).
In the case of the art market, meanings of prices cannot be disconnected from
the radical uncertainty about the quality of the product, and the lack of criteria to
establish its value. This uncertainty is a general characteristic on markets for
unique goods (think of collectibles such as coins, wine, old furniture or rare fashion clothes by top-designers). Because of the non-homogeneity of these goods and
their sensitivity to status-driven consumption, prices will be an important marker
of quality on these markets. As a result, an important dimension of economic life,
namely its social and cultural dimension, is magnified in these cases. For even if the
particular meanings of prices for contemporary art that we came across in this
paper can not be generalised, the fact that prices have non-economic meanings
may be a general characteristic of all markets.
Acknowledgement. I am grateful to Viviana Zelizer, Charles Smith, participants of
the ‘Economic Sociology’ Seminar (Princeton University) and Cultural Economics
Seminar (Erasmus University) for useful suggestions and criticism.
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