Amy Whitaker

Artist as Owner Not Guarantor: The Art Market from the Artist’s Point of View

The events of 2016 in which the painter Peter Doig (b. 1959) was sued in US Federal Court for failing to authenticate an artwork for a speculative investor encapsulate a view of the art world from the perspective of collectors and not artists. This paper imagines what would happen if artists were to retain 10% equity in their work in the primary market, rather than receive resale royalties in the secondary market. This idea applies the Coase Theorem in economics, concerning the relationship of property rights, pricing, and trade. Accordingly, those equity shares could trade in a standalone marketplace well before an artwork was sold, providing patronage for artists and more diversifiable art fund structures for investors. Technological systems such as the blockchain (e.g. bitcoin) make such a system timely, by providing cheap accounting and automatic provenance. This proposal stands in stark contrast to much of the writing on resale royalties, which treats payments to artists as welfare or subsidy, or emphasizes a lack of enforceability. In fact, assigning equity shares to artists allows them to participate more accurately, from a free-market-economics standpoint, in the value that their work creates. This realignment of price and value could radically alter and also stabilize the art market in relation to both recent financial crises and the increasing financialization of art objects. Such a system has broad applications to the alignment of price and value in many other sectors of creative work, and beyond.

Democratizing Art Markets: Fractional Ownership and the Securitization of Art

Using unique historical sales data from the Leo Castelli Gallery, we introduce a novel model of evaluating art market returns using first-sale prices alongside auction results. We create a sample portfolio to analyze what would have happened if the artists Jasper Johns and Robert Rauschenberg had retained 10% equity in the work they sold through their dealer in the years 1958 to 1963, which was the start-up phase of the artists’ careers. We find that this retained-equity portfolio would have performed from 2.8 up to 140.8 times better (Rauschenberg) and from 24.9 up to 986.8 times better (Johns) than the S&P 500 over the same period. Modeling equity portfolios for artists changes the fundamental structure of art markets. Because the fractional equity is a property right under the Coase theorem, this system introduces a secondary market for shares in artwork. These shares could trade using a technology such as the blockchain and would allow more democratic and diversifiable access to investment in art markets. Our framework extends to other creative industries in which early-stage work is difficult to value.