contemp fine art market

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STUART PLATTNER / NATIONAL SCIENCE FOUNDATION A Most Ingenious Paradox The Market for Contemporary Fine Art How quaint the ways of paradox! At common sense she gaily mocks! —Gilbert and Sullivan, The Pirates o/Penzance, Act II THIS ARTICLE IS about a market where producers do not make work primarily for sale, where buyers often have no idea of the value of what they buy, and where middlemen routinely claim reimbursement for sales of things they have never seen to buyers they have never dealt with. Welcome to the market for contemporary fine art. I will describe the quality of economic decision making in the art market and explore the issues of per- sonal identity, economic rationality, and consumer risk. At the most abstract level, this is a standard economic- anthropology analysis of behavior that appears to be economically irrational but which makes sense when the full cultural context is understood. While the specif- ics are different, the basic economic processes are simi- lar to those in markets for any luxury or collectible items (cf. Rheims 1980; Savage 1969). The ethnographic material presented here is from a study of artists, deal- ers, and collectors in St. Louis, Missouri, in 1992, which is taken as a representative example of local art markets below the dominating center in New York City. Fine Art as Commodity While most people may interpret the term art mar- ket as connoting the high end of New York's (or Paris's or London's) elite galleries and auctions, in anthropo- logical style I will focus on local markets, where the bulk of the nation's artists, dealers, and collectors par- ticipate. 1 Serious, professional fine artists make what I call "museum quality" art, which could in principle be STUART PLATTNER is the program director for cultural anthropology, National Science Foundation, Arlington, VA 22230. exhibited in the hegemonic center of New York City and in major museums, and be sold by elite galleries in art centers in this country and abroad. New York is hege- monic because aesthetic/art market value is created by the attention of key critics, curators, dealers, and col- lectors. Art not shown in New York loses value for that reason alone, irrespective of the features of the work itself. The overwhelming majority of artists do not enjoy much, if any, commercial success. These artists make art because doing so affirms their identity as artists, not because they expect to earn a living from it. Although dedicated artists may dream of supporting themselves from the sale of their art, most earn a living by teaching (if they are lucky) or by a range of occupations from graphic designer to waiter or taxi driver, or else subsist from the regular earnings of spouses. Fine art is a special sort of consumer good whose existence is supposed to "expand civilized conscious- ness" (Simpson 1981) and whose possession is sup- posed to demonstrate the owner's high cultural standing. This is because art, as a nonutilitarian good, occupies a higher cultural position than merely useful things. 2 When they enter the market as commodities, art objects are "Veblen goods" that often signal the owner's high cultural status (Veblen 1934). A high price functions as an indicator of high elite value rather than as a result of scarce supply and high demand. Buyers of contempo- rary art range from connoisseurs whose knowledge and love of contemporary art is so impressive that they can and often do become professional dealers, to people who care as much for their art as for their furniture, see- ing both as decoration. While many art-world partici- pants like to claim that art is a unique commodity, this analysis will show that the strange elements of the mar- ket are understandable as the results of standard issues, identity and risk. The paradox of the introduction will be clarified as the interplay of different goals and con- straints that are familiar in many situations in addition to the art world. American Anthropologisf\QQ(2)A$2-4Q2. Copyright © 1998, American Anthropological Association.

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Page 1: Contemp Fine Art Market

S T U A R T P L A T T N E R / N A T I O N A L S C I E N C E F O U N D A T I O N

A Most Ingenious ParadoxThe Market for Contemporary Fine Art

How quaint the ways of paradox!At common sense she gaily mocks!

—Gilbert and Sullivan, The Pirates o/Penzance, Act II

THIS ARTICLE IS about a market where producers donot make work primarily for sale, where buyers oftenhave no idea of the value of what they buy, and wheremiddlemen routinely claim reimbursement for sales ofthings they have never seen to buyers they have neverdealt with. Welcome to the market for contemporaryfine art.

I will describe the quality of economic decisionmaking in the art market and explore the issues of per-sonal identity, economic rationality, and consumer risk.At the most abstract level, this is a standard economic-anthropology analysis of behavior that appears to beeconomically irrational but which makes sense whenthe full cultural context is understood. While the specif-ics are different, the basic economic processes are simi-lar to those in markets for any luxury or collectibleitems (cf. Rheims 1980; Savage 1969). The ethnographicmaterial presented here is from a study of artists, deal-ers, and collectors in St. Louis, Missouri, in 1992, whichis taken as a representative example of local art marketsbelow the dominating center in New York City.

Fine Art as CommodityWhile most people may interpret the term art mar-

ket as connoting the high end of New York's (or Paris'sor London's) elite galleries and auctions, in anthropo-logical style I will focus on local markets, where thebulk of the nation's artists, dealers, and collectors par-ticipate.1 Serious, professional fine artists make what Icall "museum quality" art, which could in principle be

STUART PLATTNER is the program director for cultural anthropology,National Science Foundation, Arlington, VA 22230.

exhibited in the hegemonic center of New York City andin major museums, and be sold by elite galleries in artcenters in this country and abroad. New York is hege-monic because aesthetic/art market value is created bythe attention of key critics, curators, dealers, and col-lectors. Art not shown in New York loses value for thatreason alone, irrespective of the features of the work itself.

The overwhelming majority of artists do not enjoymuch, if any, commercial success. These artists makeart because doing so affirms their identity as artists, notbecause they expect to earn a living from it. Althoughdedicated artists may dream of supporting themselvesfrom the sale of their art, most earn a living by teaching(if they are lucky) or by a range of occupations fromgraphic designer to waiter or taxi driver, or else subsistfrom the regular earnings of spouses.

Fine art is a special sort of consumer good whoseexistence is supposed to "expand civilized conscious-ness" (Simpson 1981) and whose possession is sup-posed to demonstrate the owner's high cultural standing.This is because art, as a nonutilitarian good, occupies ahigher cultural position than merely useful things.2

When they enter the market as commodities, art objectsare "Veblen goods" that often signal the owner's highcultural status (Veblen 1934). A high price functions asan indicator of high elite value rather than as a result ofscarce supply and high demand. Buyers of contempo-rary art range from connoisseurs whose knowledge andlove of contemporary art is so impressive that they canand often do become professional dealers, to peoplewho care as much for their art as for their furniture, see-ing both as decoration. While many art-world partici-pants like to claim that art is a unique commodity, thisanalysis will show that the strange elements of the mar-ket are understandable as the results of standard issues,identity and risk. The paradox of the introduction willbe clarified as the interplay of different goals and con-straints that are familiar in many situations in additionto the art world.

American Anthropologisf\QQ(2)A$2-4Q2. Copyright © 1998, American Anthropological Association.

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THE M A R K E T FOR CONTEMPORARY F INE A R T / S T U A R T P L A T T N E R 4 8 3

A Model of Local Art Markets

This article focuses on the market for local or non-investment art as distinct from the market for blue-chip,or investment-quality, art. I will define local art marketsconceptually by two dimensions: the motives of produc-ers and the knowledge of consumers. This will lead tothe local-art-market model of identity producers, mak-ing art commodities because they love the work, andrisk-averse consumers, many of whom might valueoriginal art on their walls but who do not enter the mar-ket because of their ignorance of economic value in art.

In the standard market situation, producers offerthings for sale primarily because they want income, andbuyers have access to enough information to assess thevalue of the things they seek (see Table 1). The marketfor most manufactured commodities, such as new cars,is a good example. The producer is in it for the money,with no pretense of building culture. The buyer knowsthe reasons why a Mercedes costs more than a Mer-cury—better engineering, finer materials, and more ex-pensive manufacturing quality overall, as well as the pa-nache of the name. Consumer risk is normal becausemotives are congruent—producers want to make thingsthat consumers want to buy. If consumers do not buytheir goods, producers may blame the buyers' ignoranceand short-sightedness rather than their own faulty prod-ucts, but there is little cultural or institutional supportfor a continued failure to make things that people do notwant to buy.

Markets where producers are involved mainly formoney but where consumers do not know the value ofthe product—either because of structural features orbecause the rules of value are confused, contested, orunclear—are also familiar to us: for example, the mar-ket for a boatload offish, as described by James Wilson(1980). Here the buyer as well as the seller cannot knowthe value of the fish without unloading the boat, whichof course involves deterioration in the quality of theproduct. In these sorts of asymmetrical informationsituations the market will fail without institutional sup-port, because buyers will not buy and sellers will not

sell at a price they both agree is fair. The solution is todevelop mechanisms to deal with the risk, such as per-sonalized, equilibrating long-term economic relation-ships (see Plattner 1985).

Some producers make work primarily becausetheir identity and self-respect are defined by their work.These people may want to make money, but their in-volvement with their work derives from identity ratherthan money. They may be said to be addicted to theirwork—economists use the term psychic income. Someethnographic quotes from St. Louis artists will illustratethis point:

It's not a job at all; it's what I do, it's what I am. So basicallyI spend as much time as I can here [in the studio]; it comesbefore anything else. . . . My strongest feeling is that I makemy art because I'm driven to, I have to. If I don't make it,you might as well lock me up in the crazy house. If nobodybuys it, nobody reviews it, that's OK, I don't need it. On theother hand, it's wonderful to be noticed, wonderful to havepeople want your work. [Artist who supports herselfthrough freelance media work]

When I'm doing my artwork, I'm not saying it's like apsychiatrist, but it keeps me sane. [Artist with full-timefaculty job]

An artist who is able to support himself from sellingpaintings summed it up this way:

Given a choice between selling everything we do withoutexhibiting it and being able to show everything with nosales at all, we would go for the second option. [McGarrell1986-.12]3

This sort of personal identity relation to one's workis of course not limited to artists. Most people know pro-fessionals such as some academics who work very hardand single-mindedly without much attention to their in-come. For example, a young academic colleague toldhis mother of the publication of his first professional ar-ticle. Her question, "How much will they pay you forwriting that article?" showed her misunderstanding ofhis goal of advancing scholarly knowledge.4 Likewise,friendly advice to artists whose work does not sell tomake more popularly acceptable work, perhaps pictures

Table 1Types of markets

Producers' (sellers') main return from production

Consumers' rules of commodity value Monetary goals and market supply Identity/psychic goals and social supply

Clear, uncontested rules, adequateinformation, physical attributesdominant

Confused, contested rules, inadequateinformation, social attributes dominant

Developed market, rich infrastructure,manufactured commodities (e.g.,automobiles)

Underdeveloped market, poorinfrastructure, agrarian societies (e.g.,used cars, perishables)

Professions (e.g., academics), investmentart

Local art markets

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of cats and dogs, ignores their major problem of estab-lishing and maintaining identities as fine artists. Iden-tity producers like academics and artists certainly valueincome, but they normally would not consider increas-ing their income by other work, such as selling real es-tate, instead of practicing anthropology or making art.They rationalize their lower income by affirming theiridentity as cultural producers advancing the public cul-tural heritage instead of economic producers advancingtheir private economy.

Markets for the products of identity producers canbe distinguished by the clarity of the rules of value. Con-sumers of the work of investment-quality contemporaryartists, whose work is commonly sold at public auctionin elite auction houses such as Sotheby's or Christie's,have full information about price trends and prior sales.Certainly each piece of art is unique, and people com-monly lose money buying "blue-chip" art, but that is be-cause they misjudge the market in the same way thatthey could misjudge the market for pork-belly futures,not because the rules of value are opaque. Similarly, col-lege deans assure faculty that the reasons why profes-sors are paid differently from each other are in principleclear and established, if in practice they are complex,often confidential, and contested.

The rules of aesthetic value are unclear for theoverwhelming majority of local art that has not enteredthe elite market. The average upper-middle-class con-sumer with enough disposable income and culturalcapital to value buying original art would be totally at aloss to explain why one watercolor painting is worth$300, another $3,000, and a third $30,000 while the size,shape, quality of materials, and other visual attributesmay not vary significantly. None of the pieces wouldhave the public-auction record to establish their invest-ment quality. How is a buyer to know why this large wa-tercolor of flowers in a vase on the dining room table isa bargain at $25,000 while this practically identicalwork on paper is overpriced at one-tenth the cost? I de-fine this market of identity producers and confused con-sumers as a local art market. It is composed of an enor-mous number of producers relative to their actual salesand a relatively tiny number of consumers daringenough to enter the market.

The Growth of Local U.S. Art Markets

The U.S. art institution of artists, exhibition spaces,art schools, and art dealers grew explosively in thepost-World War II period (until the market crashed in1990) as a consequence of the country's enormousgrowth in wealth and the influx of European influences.In this section I will outline the growth of the U.S. artworld, which resulted in the current plentiful supply of

artists. In later sections I will discuss collectors anddealers.

New York art became dominant in the world mar-ket during this period.5 At the same time, the conflictover value that had been growing in the art world sincethe end of the 19th century developed into our currentpostmodern state of affairs, where the dominance ofany single theory, genre, or form is questioned. Whilethe rules defining excellence in art were becoming moreconfused and contested, the number of people makingart was increasing dramatically. More and more peoplewere making art to sell to the fewer and fewer peoplewho felt confident that they knew what to buy.

U.S. art moved from the fringes of "bohemian" lifetoward the center of middle-class values during thepost-World War II period. Sharon Zukin pointed outthat high prices for the few successful artists' work "en-abled them for the first time in history to make a livingoff a totally self-defined art" (1982:96). Zukin cited theartist Larry Rivers, who said, "One could go into art as acareer the same as law, medicine, or government" in theearly 1960s (1982:97).6 The sales prospects for art seemedso rosy that the avant-garde dealer Samuel Kootz put onexhibitions of paintings at Macy's and Gimbel's depart-ment stores (Marquis 1991:235-236). Even Sears andKorvette's (a discount store in New York City) tried tosell art between 1966 and 1971 (Zukin 1982:99-100).Zukin argued that art had become a part of middle-classlife. Artists "saw the same world that the middle classsaw: a 'continuous past' made by rapid social and tech-nological change, the passing of industrialism . . . and amass production of art objects and cultural standards"(1982:97).

By the 1990 census, 213,000 adults in the UnitedStates identified themselves as "painters, sculptors,craft artists, and artist printmakers." Between 1970 and1990, the number of artists increased by 145 percentwhile the number of those in professional occupationsat large increased 89 percent and the number in all jobsincreased 55 percent. An increasing number of artistshad higher education. By 1989 there were 1,146 institu-tions in the United States offering bachelor's degrees invisual and performing arts, and 362 institutions offeringmaster's degrees.7 Between 1970 and 1989, these institu-tions graduated 733,099 students with bachelor's de-grees and 157,982 with master's degrees in the visualand performing arts. Of these I estimate that 42 percentof the bachelor's (307,900) and 33 percent of the mas-ter's (52,134) degrees were in the visual arts.8 On an an-nual basis, this is an average of around 16,205 bache-lor's and 2,744 master's degrees in the visual arts alone.9

The increase in educational opportunities was par-alleled by museum construction. More than 2,500 newmuseums opened between 1950 and 1980 (Marquis1991:275). Fifty-eight percent of 749 arts organizations

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(museums, art centers, and corporate collections) stud-ied by Diana Crane were founded after 1940, and overone-third were founded after 1960 (1987:6). Between1960 and 1975 the number of dealers and galleries listedin the New York City telephone book almost doubled,from 406 to 761. Crane examined the date of origin of290 New York galleries she identified as specializing inavant-garde contemporary American art. She found that80 percent of them were started after 1965. She alsosummarized estimates of one-person exhibitions peryear in New York, which increased from 800 in 1950 toalmost 1,900 in 1985.

The growth in the postwar U.S. economy allowedmany corporations to use some of their wealth for artcollections. Beginning in the 1960s, corporations of allsizes increasingly began to collect art (Martorella 1990).While most of these collections were closed to the pub-lic, the IBM corporation opened a public exhibitionspace in New York which put on important shows.10 Ex-cept for the very largest and wealthiest, most corpora-tions did not have specialists on their staffs. A newniche in the art market was created for "art consult-ants," who specialized in buying art in bulk, as well as incurating and conserving corporate collections.

State legislative appropriations to state arts agen-cies went from a national total of $2.6 million in 1966 to$292.3 million in 1990 (reduced to $214.7 million in1992). By any measure, the growth in public investmentin the arts has been impressive. The increased wealth ofthe U.S. economy was clearly associated with a boom-ing interest in the arts. The high end of the market, con-sisting of elite gallery and auction sales of investmentquality art, led the stratospheric rise until it crashed in1990. The causes of the crash are not relevant to this ar-ticle (see Watson 1992 for an analysis), as neither theboom in prices and sales nor the bust were as extreme inthe local art markets as they were in the center. How-ever, the crash did reinforce the perception that buyingart is a risky proposition, best left to those who trulylove what they collect.

The van Gogh Effect

The United States in the post-World War II periodwas a mighty engine for creating and viewing fine art.But by all available measures the vast majority of artistscould not earn a living from sales of their art. In the St.Louis case, for example, the census category of "paint-ers, sculptors, craft artists, and artist printmakers" to-taled over 2,200 in 1990. In my 1992 study I identifiedabout 800 artists as "serious" fine artists, meaning theywere somewhat active in showing art and in arts organi-zations (I assume the rest of the people censussed werecommercial and craft artists). Fewer than 40 showed

their work in galleries outside of the city, and only aboutfive showed in New York, both standard criteria that art-ists use to identify "real" artists. Perhaps one percentcould support themselves from the sale of their art, therest subsisting from teaching either full- or part-timeand from other art-related jobs. Practically all the art-ists who were not working full-time as teachers or inother jobs relied on the incomes and health insurance ofspouses with steadier incomes.

There are few comparable empirical studies of theeconomic success of fine artists. Charles Simpson, inhis study of SoHo artists, estimated that 94 percent ofthe artists in New York "are not . . . significant sellers"(1981:58). One national survey was done in 1988 in 10 lo-cations across the United States, from New York City toLos Angeles. Information was reported from question-naires returned by 4,146 respondents in all art fields, in-cluding the visual and performing arts and literature.Seventy-nine percent reported earning $12,000 or lessannually from art (Jeffri 1989). A 1978 National Endow-ment for the Arts (NEA) study of 940 visual artists inHouston, Minneapolis, Washington, DC, and San Fran-cisco reported that 88 percent of painters returning mailquestionnaires earned $10,000 or less from art (NEA1984).

How can all these artists maintain their identityproducing art that nobody buys? The key to under-standing this is best shown by the cultural history of thework of the postimpressionist artist Vincent van Gogh.Although his brother was an art dealer in Paris, the cen-ter of the art world in the late 19th century, van Goghsold only one painting in his lifetime. His work was de-spised and dismissed by all but a few faithful friends andsupporters. One hundred years after his death, his por-trait of his psychiatrist, Dr. Gachet, sold at Christie'sNew York auction house for the staggering price of$82.5 million, the highest price ever paid for a work ofart in a public sale. Even if contemporary artists do notknow these specific facts about van Gogh, fine arts cul-ture is constructed upon the story of the rejected artistwhose work is ultimately recognized for its greatness.

Van Gogh is the most commercially successful ex-ample to date of work stemming from the impressionistmovement in art, which has been influential in shapingthe modern art market.11 Impressionism developed inParis during the latter half of the 19th century. The im-pressionists showed their works in a series of exhibi-tions independent of the official salons, culminatingwith their last group show of 1886, which finally estab-lished their acceptance by key critics and collectors.Their work was originally seen as scandalous, rejectedby the art authorities and reviled by the public. But theywere supported by a few key dealers and friendly crit-ics. The dealers' gallery exhibitions labeled the impres-sionists as a unique art movement and highlighted them

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apart from the masses of paintings in the salons. Al-though much of the publicity was negative, the artworkwas both well-known and notorious. In a modern mar-keting sense, the impressionists, their dealers, and theircritics created their own brand name (e.g., Green 1987).

The world market for contemporary fine art at thattime was centered in Paris, where prices for contempo-rary paintings could be fabulous. Meissonier, the preim-pressionist French Academy art star, sold a painting toVanderbilt in 1887 for the current equivalent of $1.5 mil-lion, and a painting by the preimpressionist Barbizon artstar Millet sold in 1890 for the current equivalent of $5.2million (the artist had died in 1875). By 1912, a paintingby the postimpressionist Degas sold to a U.S. collectorfor $95,700 (equivalent to $5,000,000 currently), a worldrecord at the time for a work by a living artist.

The impressionist movement (and its precursors)in art demonstrated that dealers and supporters ofavant-garde artwork could enjoy significant profits. Thedealer Durand-Ruel believed in their importance andbought their paintings in exchange for subsistence sti-pends. This great dealer lived to see prices reach ex-traordinary heights. A group of elite young Frenchmenknown as the "Bearskin" collecting club bought impres-sionist art collectively, beginning in 1904. In 1914, afteronly ten years, they auctioned the collection off for fourtimes what they had paid. A quarter of the auctionedworks were bought by members of the Bearskin groupthemselves, who complained that they would havebought more but for the high prices (Watson 1992).These fabulous profits from the purchase and resale ofworks of art that were so recently disparaged, and thecultural legitimacy that implied, had a great impact onthe modern art world.

The Death of Critical Authority in the Art World

The impressionists and their successors showedthat going against the received wisdom in contempo-rary art could be profitable for artists, dealers, and col-lectors. Potential taste-makers in society learned thatthe negative opinions of major critics and gatekeepers,who had dismissed the impressionists' work because ofits perceived crucial flaws and inadequacies, did notnecessarily undermine the eventual success of the workfrom an aesthetic or market perspective. Impressionistart went from being so outrageous that coachmen onthe street were seen loudly insulting a Monet painting ina gallery window to being valued, respected, and emu-lated in a relatively short period of time.12

This was a powerful lesson. Work rejected by bothelite and popular taste could prove to be a good aes-thetic choice as well as a profitable investment withouttoo long a wait. If the critics of impressionism were so

wrong, if their cries of almost moral outrage over the ap-parent incompetence of impressionist artists turned outto be merely the complaints of orthodoxy incapable ofaccepting change, then the claims of other critics aboutineptness or fraud in contemporary work could be sus-pect also.13 This proved to be the case with succeedingart styles such as abstract expressionism and pop art inthe United States decades later. Perhaps the most fa-mous case was the Robert Scull auction of pop art in1973, where work that was recently disparaged sold forup to 90 times its original purchase price of just a fewyears before. There were many similar cases of extraor-dinary appreciation of avant-garde art prices in thepost-World War II era, until the art market crashed soonafter the van Gogh sale in 1990.

The van Gogh effect on aesthetic authority is exem-plified by a contemporary critic in Artnews, a majorcontemporary U.S. magazine. He concluded a 1993 re-view article on the work of the controversial artist JeffKoons with these words:

Most of the . . . objects struck me . . . as purposely dumband perverse, acid, totally aware criticisms of the needs andpreferences of the Great Western Unwashed and of theattitudes of smirking, sophisticated collectors willing topay huge prices in order to mock the bad taste of theirinferiors. [Littlejohn 1993:94]

This is pretty serious and negative. But the final wordsof the critic's essay are surprising:

But that's not the way they strike [the artist] Jeff Koons... or,indeed, the way they strike many of his critics. If thesethings seem to you either desirable or profound, I know ofno way to persuade you that my response is worthier thanyours. [Littlejohn 1993:94, emphasis added]

Of course, it is the critic's job to persuade readersof the salience of his or her taste. The abject admissionthat this critic had "no way to persuade" means that hehad no theory of good and bad in contemporary art, noaccepted set of aesthetic values to which he could refer.I think this lack of hegemonic values is part of the im-pact of the impressionists' success.

People gradually realized after the impressioniststhat much art criticism, meaning pronouncementsabout art quality by elite connoisseurs, had lost itsauthority. If so many of the "important" critics and curatorswere so wrong about the impressionists, why should to-day's commentators be different? This caution primar-ily affected those who were negative about newwork—why should they be any less wrong than theirpredecessors who rejected the abstract expressionists,pop artists, conceptual artists, or practitioners of anyother of the styles that aggressive artists and dealerspushed on the art-buying public? The underlying lessonwas that it is dangerous not to "embrace the new." If arespectable authority did not appreciate the new art,

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and it later became successful through the efforts ofother critics, curators, marketers, and collectors, theso-called authority risked looking foolish. This fear en-couraged an (un)critical rush to be the first to recognizethe merit of the newest trend (which then engenderedits own backlash of critical complaints that "the em-peror had no clothes," that much of contemporary art is,in fact, aesthetically vacuous; see Hughes 1991).

The mistrust of a dominant critical authority led toa problem: the only available short-run measure of artis-tic significance, aside from the opinions of critics andcurators, was market success. The market defines suc-cess in the present, and the lesson of the impressionistswas that market failure today does not necessarilymean that the work will have no artistic significance inthe future. Van Gogh's fall and subsequent rise has beentaken to heart by the art world. The preimpressionistacademician Meissonier, the Victorian Alma-Tadema,and the many artists like them who were stars in theirlifetimes, whose work sold for the contemporary equiv-alent of millions, yet whose aesthetic significance istrivial now, are important lessons. Artists today mightnot remember their names, but the lesson that absenceof market success in the present does not have to meanfuture artistic irrelevance permeates the value systemof the contemporary art world. Good artists do not nec-essarily sell paintings, and all of the paintings thatsell—even for high prices—are not necessarily good.Only the long run of history can affirm aesthetic signifi-cance. This understanding encourages artists to perse-vere in the development of their work and to not be dev-astated by negative criticism or market rejection.

Postmodernism

Although I argue that the problem of identifyingvalue in paintings flourished after the impressionists,this experience is part of a social change that has trans-formed the nature of contemporary high culture. Cul-tural life is "postmodern," meaning that the aestheticrules that governed modernist art (including all the artsfrom architecture to music and literature) have losttheir hegemonic authority (Herwitz 1993). Self-referen-tialism, pastiches, and other sometimes playful andironic values govern the high end of contemporarytaste. Thus, the general cultural environment is no helpfor someone looking for clear rules of value in culturalproducts. Pop art, op art, earth art, installation art, perfor-mance art, minimalism, pattern-and-decoration, photoreal-ism—art styles have whizzed through the art market at whatseems to be lightning speed. A collector may enter a gallerywhose high white walls and impressive spaces connote a sa-cred place to find small, brightly colored cubes of wood at-tached to the walls or the floor strewn with mass-market

candies. These works may have price tags of $2,500, or$10,000, or even more. The dealer says this is brilliantwork, made by an emerging artist who will soon be animportant force in the New York art world, a newWarhol. What is one to do? Serious, committed collec-tors find themselves in the position of the St. Louis con-noisseur who admitted,

It's always hard to say [about a new work of art], "Oh boy,this is rotten," because then you have to eat your words acouple of years later.

I have argued so far that the U.S. economy has sup-ported a fantastic and dispersed growth in art institu-tions and art producers in the past half-century at thesame time that the longer history of the high-art markethas weakened the hegemonic authority of critics andvalue-authenticators. This has produced the currentsituation in local art markets of many serious, "identity"art producers who are unable to make a living by mak-ing art. The reason is that potential collectors are fright-ened out of the market by the consumer risk involved inbuying local fine art. I now turn to the collectors' situ-ation, the difficulties in interpreting the price of con-temporary art, and the role of dealers.

Collectors: Legitimacy and Risk

The consumer standard of reducing risk in buyingart is whether the art has "legitimacy." The best way toexplain this is by the case of a St. Louis banker whobought art occasionally but was not sophisticated. Thebanker remembered buying his first painting while onvacation in Michigan in the 1950s. The gallery was ask-ing $500, the equivalent of almost $3,000 in current dol-lars. He called the Guggenheim Museum in New YorkCity to ask "if they knew of this artist." Whoever hespoke to recognized the artist's name and said that hewas a "legitimate artist":

It makes common sense. I'm buying the painting because Ilike it, but I don't want to be had. I don't like makingmistakes. It would be different if I went to [X, a local dealer]where I know the gallery. If I'm buying a diamond, I wantto be sure the diamond is flawless. I can't see that, I haveto rely on the dealer. I bought the painting because I likedit, and my ideas were supported by the fact that he [theartist] had some recognition, he had legitimacy.... Iwanted to be sure I was doing the right thing.

Collectors, like shoppers in any market, seek secu-rity by consulting trusted experts, by reading publica-tions about the work, and by seeing the work marketedin larger markets. One collector mentioned consideringapiece of art:

It had been on the cover of Life magazine, one of the"emerging fine American young painters."... It had legitimacy,

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the guy was on the cover of Life So I bought thatpainting.

A lawyer told how his confidence in the value of somework was raised:

The next piece I bought.. . [was by] a young artist in NewYork. [The local dealer] called me up and said that he washaving a show and that there was a piece he wanted me tosee. And he was very excited about it, and showed me thepiece, showed me some articles published in art magazines,an interview with [the artist] and told me more about him.And I went ahead and bought it [for $4,500] When I wasin San Francisco . . . I went to [an art] gallery and she hada [piece by the artist] and that was a real wonderfullyreinforcing moment for me, and increased my respect for[the local dealer's] opinions. Also, again, it made me feel aconnection to an art world that's larger than St. Louis.

Legitimacy means status in some markets largerthan the local place, so that the buyer's interest in thework is shared by a larger set of collectors. Potentialbuyers are reassured by the knowledge that the work issold and written about in a wider social context than theone in which they see it. The larger the set of people whoknow about that artist's work, the more likely a buyer isto find someone with whom to discuss the work and in-crease his or her own enjoyment, and the less likely heor she is to be deceived about the work's value.14 If theprice initially seems too high but the dealer provides in-formation about sales of comparable pieces by that art-ist at comparable prices, backed up by museum exhibi-tions and published reviews or citations in books andarticles, then that piece's cost is set into a context thatsupports the value.

The concept of legitimacy points to two aspects ofthe economic value of art: the current price and the re-sale potential. The collector must assess the currentprice-value equation to decide whether the stated priceis appropriate for that particular piece of art. How is oneto know what a fair price is?

Explaining the Price of Artworks

On the broadest level, the style of the work affectsthe price. Contemporary realism is less expensive,other things being equal, than other styles of painting,and art-crafts (high-art work in craft materials such asclay, glass, or fiber) are cheaper than sculpture andpainting, for example. (Crane 1987, table 6.2, gives dataon auction prices by art style in painting.) Some collec-tors find themselves driven out of painting and into art-crafts by the high prices. They shift their collecting intonewly emerging art-craft areas where they feel that theyget more "masterpiece" value for their dollar.

Now, I can buy a pot for $5,000 [made by] one of the threeor four world's top ceramists. Do you see? Now, not that

painting is not worth that on today's market, and I don'tmean to denigrate the work in terms of decreasing theprice, but by comparison there is a disproportionate valueof the dollar in the market. And . . . we can acquire master-pieces in clay that we could not acquire in painting.

The "other things being equal" include factors inthe history of an artist's career. The more shows andprizes won and the loftier their level of prestige; thehigher the elite status and number of galleries handlingthe work; the higher the connoisseurship of other col-lectors owning the work; and the more articles, mono-graphs, and other media attention, the higher the prices.Within any artist's price level, the physical attributes ofthe work, such as whether it is on paper or canvas if apainting, its size, medium, the existence of multiples,and the use of expensive materials all affect the cost ofa specific piece.

Bruno Frey and Werner Pommerehne (1989: ch. 6)tried, but I think ultimately failed, to explain the vari-ation in art prices in the elite, international market.15

They coded auction prices for the works of 100 "top" in-ternational contemporary artists from 1971 to 1981,chosen by their high standing on several measures of ac-complishment. Their regression analysis explained thevariation in the price of 987 works of art by a complexfactor they called the "aesthetic status" of the artist, es-timated by coding the artist's style—pop art, op art, newrealism, and so forth—number of exhibitions, prizesawarded, years of experience, and past prices. Theyalso coded other factors, including the medium (sculp-ture, painting, graphics), quality of material, size of thepiece, advertising activity of the gallery, real rates of re-turn from stocks and bonds, income, inflation, whetherthe artist's gallery was one of a small set of avant-gardegalleries, and whether the artist was alive. Their regres-sion accounted for about three-fifths of the variance,but the price variable alone accounted for 60 percent ofthe outcome. Explaining current prices by past prices isreasonable but not very enlightening about the causesof the past prices, which is the crucial question. Thecombined effects of the important nonprice variablessuch as style, history of exhibitions, and prizes ex-plained less than 10 percent of the variance. While onemay quibble about technical details of their analysis,Frey and Pommerehne have done about as well as any-one in identifying the major factors that determine highprices in the elite market for contemporary art, andtheir analysis seems valid also for local markets.

When all is said and done, the explanation of pricesis not well understood and the difference between anartist who is "hot" and one who is not either in local orelite markets is fairly enigmatic. After the fact, the suc-cess of gallery and museum shows and the attention ofthe media trace the course of an artist's prosperity.Dealers and connoisseurs use this information to assess

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prices. But it seems extraordinarily difficult to predictsuccess before the fact. Leslie Singer (1990) found thatonly one in three artists whose careers began withshows in elite galleries made it to the auction market, areasonable definition of artistic market success. Ofcourse the majority of artists never show work in pro-fessional galleries, only an insignificant proportion ofthose who show at all then make it into elite galleries inany urban area, and proportionally fewer yet make it inthe New York market. The information base of priorshows, reviews, prizes, and collectors needed to assessthe price of local art is very thin, which appears to in-crease the risk for local buyers as compared with buy-ers in the hegemonic centers of the art world. Many lo-cal buyers feel that they are better off shopping in thecenter. A St. Louis collector was typical:

I don't go looking in galleries in St. Louis. I generally feelthat if I'm going to look, I'm going to go in New York, whereI can see what really is going on.

But the truth is that except for the proportionally fewpieces of investment-quality art which are auctionableand have a resale value, most art sold—even in NewYork—is "local" in the sense that it has no resale value.The problem of valuation is general throughout the artmarket, below the blue-chip, investment-quality level.

Dealers: Splitting the Deal

The difficulty in assessing value in local art markets isshown by market conflicts over the responsibility for spe-cific sales. Dealers who represent artists commonly in-sist on a monopoly over all regional (or national) salesof that artist's work, meaning they demand their com-mission (typically 50 percent of the gallery sale price)on all sales. Artists commonly face the dilemma of whatto do about sales to personal acquaintances. An ex-treme example would be the sale of a work in the artist'sstudio to a client who has never set foot in the gallery orspoken with the dealer. Dealers insist on a (sometimesreduced) share of such sales on the grounds that theirsponsorship of the artist and support of the artist's ca-reer through advertising and exhibitions helps to estab-lish the value of the work in the market (in the absenceof the record of exhibitions, prizes, presence in elite col-lections, and publications ideally found in the metro-pole). Therefore, they argue, the dealer should be reim-bursed from all sales, even to persons they have nevermet.

The flavor of the decision making is exemplified byone successful St. Louis artist describing her negotia-tion with her dealer over a commission on a sale thathappened outside the gallery (this artist's income is as-sured by her professor's salary)-

I said, "You didn't get this [sale] for me." I said, "I got this,and besides, I got it before you were even in my life." Andhe said, "Yes, bu t . . . you know, you wouldn't be who youare if you didn't have [me as yourj dealer." And I said, "Well,of course."

And I always give him half of anything that I sell here intown. I've been very clean about this. But this bothered mea little bit . . . . I said, "Look, you're my hobby. Making theart is my job, selling it is really a hobby." And I said, "You'rea very expensive hobby." On the other hand, it works outvery well. He's been real good for me. .. . Since January I'vemade $20,000 I'm doing fine.

What he did was, he gave up half of his half. So he took25 percent... of the sale price. . . . So I wrote him a checkfor $500 and now he's happy. I don't think he's happy, hewanted more than that. I said $2,000 for the piece. Half ofthat would be $1,000. Half of that would be $500.

In cases of conflict, artists will interpret the gal-lery's role more narrowly, expecting the gallery's in-volvement in the transaction by recruiting the customerand making the sale, while the dealer expects a cut of allsales. Clearly this is a situation where relative powerwill count—the artist with no other dealers and fearsthat he or she will be dropped from the gallery faces adifferent practical and ethical dilemma from the artistwith a national reputation, dealers in other cities, andthe facility of joining other galleries.

The shoe is on the other foot in conflicts betweendesigners and dealers over a share of art sales. Interiordesigners will offer to decorate their client's walls withart in the same way that they help them choose furni-ture. Their status in the contemporary art world, where"decorative" is often an insult, is fairly low. A dealer inSt. Louis told me his opinion of designers: "Designersare evil, hateful people. Write that in your notes." Hiscontempt was not for their aesthetic taste, but for theirbusiness practices:

Designers are the type of people, that, let's say, I [as acustomer] hired a certain designer to help with my livingroom, for instance . . . let's say that then I walk into [X]gallery, and. . . on my own, I buy some art . . . . Then, I'll callthe designer, or the designer checks in on me. Because they[designers] have this sixth sense of when something likethat comes down. And they'll show up at the door. "Oh, youhave new art, where did you get it, oh, its fabulous, de-da-de-da." Then, all of a sudden, the [X gallery] director heregets a phone call from the designer, "Oh, isn't it wonderful,that worked out so nicely, now you owe me ten percent."

The dealer felt that the designer had no right to thecommission, because the designer was not involvedwith the behavior directly leading to the purchase. Thedesigners would argue that they steered the client to-ward that gallery in the first place or gave their aestheticapproval to the gallery's work, which allowed the dealto happen. In such a circumstance, dealers may pay therequested cominission to forestall the designer influencing

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the buyer to return the piece or spreading rumors thatthe dealer does not cooperate with designers in general,which could hurt their business. Thus, dealers arehoisted by designers on their own profit-sharing pe-tards.

The economic responsibility for an art transac-tion—the identity of the persons who made the dealhappen—has been made subject to interpretation, sothat profits can be negotiated between interested ac-tors. The designers' claim that they deserve a share ofthe deal because their design advice somehow legiti-mized the client's purchase from the gallery is analo-gous to the dealers' claims that they deserve a share ofartists' studio sales because the gallery connection le-gitimized the value of the artist's work. In both cases theclaim is put forth that it is the legitimization of value bya social relationship, and not merely the direct marketsearch and choice leading to the sale, that deserves fi-nancial reward.

Consumers or Connoisseurs? The Market forLemons

The ability of art market middlemen to split dealscomes from their claim to possess "taste" or knowledgeabout value which the consumer lacks. Connoisseurs—dealers and expert collectors—understand the marketforces that determine price differences between works:the different history of museum shows, prizes, publica-tions about the artist, and other separate factors studiedby Frey and Pommerehne. Experts can estimate the ef-fect of these factors on knowledgeable buyers' interestin the work and willingness to pay the price. But this in-formation is not readily apparent to an average buyer inthe local market.16 There is a disparity in the informa-tion available to the dealer-seller and to the buyer of artwhich places the buyer at a disadvantage and allowsprices to be used as signals of quality. The more localthe market, the less supporting information about com-parable sales and prior bona fides such as exhibitions,prizes, and publications exists and the stronger thepurely social valuations become.

As is the case in other markets where the estimationof value in a particular transaction is difficult, yet theparties intend to maintain a long-term economic rela-tionship, profits are shared or equilibrated (see Plattner1985). Wilson (1980), for example, showed that pricesare renegotiated between boat captains and fish pack-ers after the deal is made, the boat unloaded, and thefish sent to market. His explanation for this flexibilitydeals with the specific conditions of the market. Theperishable product, significant transactions costs, andunpredictable retail prices favor the establishment oflong-term relations, which facilitate steady supplies on

a basis of trust in the long-term fairness (or lack of a bet-ter alternative) of the ultimate price. The specifics ofthe two markets—one for fine art, one for fresh fish—could not be more different. Yet both situations involvecommodities whose market value is hard to evaluate atthe time of the sale and trading partners who value anenduring market relationship over a short-run profit.

George Akerlof (1970) explained the importance ofasymmetrical information in markets in a seminal paperin the economics literature. Using the example of theused-car market, Akerlof pointed out that sellers ofused cars know if they are "lemons" or "cream-puffs,"but buyers do not. Both cars may be equally polishedand have similar mileage, but the seller knows that theengine or transmission is bad in one car and good in theother. Since this knowledge comes from using the car,the buyer cannot know it, and, if rational, will only offerthe value of a lemon for any car. Since the seller of acream-puff knows the car is worth more than a lemon,and is equally rational about money, the seller refusessuch a low price. Thus the market fails in formal eco-nomic terms, since sellers and buyers meet but cannotcome to terms.

Akerlof discusses several solutions to this eco-nomic problem (see also Plattner 1985: ch. 5, 1989: ch.8). The solution followed in the art market is for collec-tors to establish personal relations with dealers as wellas artists. But it takes time to personalize transactions.Since few people love art enough to spend the timeeither learning the information they need in order tomake sensible purchasing decisions or developing a re-lationship of trust with a dealer, the total size of the mar-ket for contemporary fine art is smaller than might beexpected by income distribution alone. This explainswhy art buyers are a small sector of the elite and of themiddle class, all of whom might be expected to want touse art purchases to validate their relative status (seeHalle 1993).

I have argued that artists with aspirations to art-his-torical significance—the "high end" of the art market-do not make normal economic commodities. Art pricesare not standardized across physical characteristicssuch as size and media. Since collectors learn to appre-ciate art in a social process, their own aesthetic reactionto the work tends to be influenced by esteemed sourcesof information such as other admired collectors, elitedealers, critics, and curators (each with a personal in-terest—aesthetic or economic—to further). Prices forart not of "star" status cannot function in the normalway, as manipulators of demand, since the consumer in-formation needed to evaluate prices is hard to master.This creates the paradox of Veblen goods, that raisingprices may stimulate demand among consumers hungryfor the status that possession of high culture goods issupposed to give. The other side of the coin is that

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lowering a price does not raise demand as it does fornormal commodities, but instead lowers demand, as itsignals an artist whose career is declining (Towse1992).

Aspiring artists work hard for low incomes becausemaking art is an essential part of their identity as artists.The postmodern condition of aesthetics—the absenceof a dominant theory of good and bad in art—coupledwith the price boom of the past 40 years, means thatbuyers see art as an investment good, yet lack a theoryof value to guide them in specific choices. The informa-tion asymmetry between dealers and art buyers and therisk faced by buyers limits the size of the art market forlocal, noninvestment art. The lack of a dominant popu-lar theory of artistic value allows the nature of an arttransaction to be mystified, so that interested partiescan successfully demand a share of a deal they had nodirect hand in. While at first sight the art market seemsunique, on closer examination the paradoxes have simi-larities to other market situations where comparableconstraints are found.

Implications for Economic Anthropology

This article has sketched a market where peoplespend significant amounts of money to buy objectswhose value they cannot be sure of, and where peoplespend significant amounts of time to make commoditiesthat few people are willing to buy. Anthropologists maythink that these situations are unique to wealthy socie-ties and are not relevant to the people we usually study,who live closer to the subsistence line and worry moreabout putting food on the table than art on the walls. Butcertainly the attitude that the quality of one's work ismore important than the price received for it has had along history in the field, since the earliest economic an-thropologists explaining the logic in why natives did notproduce for the colonial market. Identity producers inthis article are similar to noncapitalist producers in dualeconomies. The consumer risk that this article has de-scribed is also similar to the risk of engaging in eco-nomic transactions in developing economies, where le-gal and financial systems are not well developed. Thistransactional risk in some economies facilitates en-clave sectors and ethnic trading specialization, wheretrading is embedded in enduring social relations thatserve to facilitate trust. In both cases, a driving force forthe shape of the institution is the inequality of informa-tion available to buyer and seller, which heightens riskin transactions.

New research is needed for both producer and con-sumer sides. We need to study how individuals situatethemselves along the dimension from identity- to profit-oriented producer. Is possession of upper-middle-class

cultural capital a necessary (it clearly is not a sufficient)condition for a creative worker to become an identityproducer? Careful ethnographic study of a sample of ca-reers should help to suggest causes of artistic as well ascommercial success where purely statistical analyseshave had limited success (see Csikszentmihalyi et al.1984).

Similarly, we need more fine-grained study of theconsumer risk involved in buying commodities wherethe cultural value may be great but the popular theorydefining commercial value is not available. What are theactual processes whereby consumers spend many thou-sands of dollars for objects of whose value they are es-sentially ignorant? How do the social mechanisms usedto authenticate value change in different contexts?Again, careful ethnographic studies of transactionsshould be useful in advancing our understanding of thismysterious yet relatively common act.

Notes

Acknowledgments. This article is based on a longer studypublished in Plattner 1996. Some of this material was pre-sented at the 1995 Society for Economic Anthropology meet-ing in Santa Fe, New Mexico. I am grateful for the criticalcomments of Phyllis Plattner and Frank Cancian on priorversions of this material.

1. Census figures show that New York's share of the na-tion's visual artists declined from 13 percent in 1970 to 7percent in 1990. The combined share of the three largestmarkets, New York, Los Angeles, and Chicago, declined from25 percent in 1970 to 16 percent in 1990 (NEA 1994).

2. This article is not concerned with the history of thisstrange notion. Interested readers will find a good introduc-tion to the question of how high art became divorced fromordinary market concerns in Woodmansee 1994; Becker 1982gives a seminal view of high art as socially constituted;Bourdieu 1984 provides the classic statement of high art asthe exclusionary cultural capital of the elite; and Bright andBakewell 1995 offers a collection of current ethnographicessays on high and low art. See also Rheims 1980 for a de-lightful book of anecdotes about his life as an auctioneerdealing in heirlooms from the Paris elite; also see Savage 1969for a more analytical view of the same market in England.

3. McGarrell was a full professor in the art school at Wash-ington University in St. Louis.

4. The parallel is not exact because academic articles arenecessary for tenured job security, while the typical artistworks in an informal economy with no institutional rewardsfor exhibits of artwork.

5. Guilbaut's (1983) wonderfully titled How New York Stolethe Idea of Modem Art gives an analysis of the politicalimplications and roles of the newly ascendant art world.

6. The popularity of high art was not unprecedented, andreminded some art world participants of the boom and bustof the 17th-century Dutch markets, when paintings as well astulip bulbs were sold by lottery and auction (see De Marchi

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1995; Montias 1987). Likewise, Zukin's claims of unprece-dented recent status for artists are extravagant, as manyartists enjoyed middle-class status in many places and peri-ods of history (e.g., Campbell 1976; Macleod 1996). Rivers andZukin notwithstanding, art students still joke that no one'sfather ever sat them down and said, "Your mother and I wouldbe most happy to see you consider a career as a sculptor."

7. The Master of Fine Arts (M.F.A.) degree is the terminalprofessional degree for artists. This data is from table 3-42 ofthe 1990 Sourcebook of Aits Statistics: 1989 and tables 3-2and 3-4 of the 1992 Addendum to the 1990 Sourcebook, bothpublished by the National Endowment for the Arts.

8. The estimate is based on averaging two years of databroken down by subfield, given in the NEA publication(1990).

9. For comparison, in 1988-89, there were 30,293 bache-lor's degrees in English awarded; that same year 37,781bachelor's degrees were awarded in the visual and perform-ing arts, of which 16,172 were in fine arts. In 1988-89, 4,807master's and doctoral degrees were awarded in English and8,989 master's and doctoral degrees in the visual and perform-ing arts, of which 2,924 were in fine arts.

10. Until it was closed in 1994, a victim of the decliningprofits of the company.

11. While technically classified by art historians as postim-pressionist, van Gogh's art is auctioned under the general"impressionist" rubric. The precise attribution is not relevantto this analysis. "The name 'Impressionist' was in the greattradition of rebel names. Thrown at them initially as a gibe to. . . insult them, it was adopted by the group in defiance .. .and made into a winning pennant" (White and White1965:111). The changes in the market for art in the late 19thcentury that foreshadowed impressionism are discussed inGreen 1987; comparable changes in England are discussed inMacleod 1996.

12. According to the biography of the dealer Daniel-HenriKahnweiler, by Assouline (1988).

13. For example, the director of the Metropolitan Museumof Art discussed the lack of agreement about the criteria ofexcellence in contemporary art, saying, "I think the changebegan with Impressionism.... There's no consensus aboutanything today; even the notion of standards are in question"(Wallach 1997:36). This lesson did not apply to classical or"old master" art, where the opinions of established expertsare crucial.

14. See Adler 1985 and Rosen 1981 for an economic analy-sis of markets where insignificant differences in talent canbring huge differences in economic rewards because of theeffects of shared consumption.

15. See also Schneider and Pommerehne 1983.16. This is a problem in the elite New York market as well,

but the closer one gets to blue-chip work with an extensivepublic record of auction sales, the more the information isavailable to buyers. Bourdieu (1984) and his followers believethat the limitation of the human capital necessary to appreci-ate fine art is part of the hegemonic processes elites use tolimit access to their high status. Empirical studies like Halle(1993) do not support this simplistic generalization, sincemost elite persons are as ignorant about and disinterested infine art as the masses.

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