The Art Value Chain:
The Network of Fungible Value

"Capital goes where it's wanted, and stays where it's well treated." --Walter Wriston, former CEO of Citibank

The Function of the Art Market: Intangibles, cultural capital, and fungible value

  • Art market exists to convert intangibles and cultural capital into fungible value: Bourdieu meets marketplace.
  • Cultural capital follows the ordinary law of capital, summed up in "Wriston's Law":
    • "Capital goes where it's wanted, and stays where it's well treated." (--Walter Wriston, former CEO of Citibank)
  • See the Artprice Art Market Insight site for quantitative analyses of art market indicators.
  • See Artnet, Art Market Watch articles.
  • Auction house websites

The "art value chain": cycles of market validation and valuation (the way it works).
Always ask "what adds value, or allows for value accrual."

  • Artist works to get established with artworld credentials (art school, insertion of work/medium/materials in artworld context, dealer and curator attention, media attention in artworld context, grants, first shows).
  • Galleries validate work in shows for which they already have collectors, or they attempt to show work that think they can entice collectors to buy. Galleries with trend-setting or edgier reputations will often make a new scene for work not yet in the commercial marketplace, making a market in new work.
  • Art marketing requires publicity and manipulating perceptions and context for art works. Media attention creates the buzz factor (reviews, photos in fashion magazines, etc.): the more media references accrued for an artist or work, the higher the perceived value.
    • The media cycle adds value through circulation and objectification in discourse: putting art in media discourse circulates the objects and constructs them as desirable, scarce, and signs of cultural or symbolic capital.
  • The power of collections. Private collectors, curated corporate and institutional collections validate work in high-visibility purchases, which create prestige value by association with wealth (especially the "right" collectors, validated in the artworld).
    • Wealthy prestige collectors and collections: influence on museums, shows, price of works.
  • Grants and awards, on sliding scale of prestige, add value to artists' work, bring wider validation and recognition.
  • Museums validate artists' status and collectors' collections of work (shows of private collections, often with follow-on donations to museum by the collectors), further enhancing prestige, perceived market value, and ultimate cash value in follow on exchanges (private sales, auctions, or tax deduction value as gift to museum).
  • Museum shows of artists' works in private collections, or shows of newly purchased work, validates the works by the same artist (or movement, technique, etc.) currently in the marketplace and increases the value by being in prestigious museum collections. Museum context is treated as highest validation, since it takes the work out of circulation (except for rare cases of deaccession from museum collections) and makes it "priceless."
    • Works on loan to a museum show or a traveling, curated multi-museum show increase in value from context and representation in an exhibition.
  • Auction houses validate ultimate cash value in getting "highest possible price" for a work when enters private marketplace. Auction house context provides glamour, prestige, elite setting, competition for art commodities by the wealthy, and validation of work as serious commodity.
    • First appearance of artist's work at auction is like a IPO in the stock market, a publicly known and referenced price.

Art as an Investment

  • How does art become an investment asset?
  • Taking account of fungible value and transferring it to liquidity: how can art values be managed as an asset and then made liquid (exchanged for cash) like other investments?
  • Tracking the investment value of art: art databases, auction records.
  • Art investment vehicles:
  • Most Private Investment Banks have art advising and art investing services now as part of wealth and asset management services

Martin Irvine
© 2004-2009
All educational uses permitted with attribution and link to this page.