Art and the Veblen Effect – artmarketblog.com
No, it’s not a typo or a made up word – there is such a thing as a Veblen Effect. First of all, a Veblen good is basically a type of status symbol that people people purchase because it is expensive and is perceived as an exclusive and luxury item which suggests that they (the purchaser) are wealthy and belong to a high social class. This good is desirable primarily because of it’s cost and the positive effect the item has on people’s perception of the financial and social status of the owner. Therefore, when the cost of a Veblen good declines, the desirability of the good also declines because it is seen as being less exclusive and less representative of wealth and a high social status. Things such as diamonds, expensive luxury cars (Bentley, Rolls Royce) and high end wines are considered to be Veblen goods as is fine art – in particular, contemporary art.
If you think about the contemporary art market during the height of the art market boom, the prices being paid for many of the works by contemporary artists were completely unjustifiable in terms of value for money and the reasons for the rapid increase in price. In my opinion, the best example of the Veblen effect is the work of Damien Hirst whose work appeared top have benefited greatly from the wealthy trophy buyers whose prime motivation was prestige and status. Hirst even hedged his bets by using copious amounts of diamonds to cover the infamous skull and used diamond dust in some of his works. Even if the art wasn’t so great the diamonds are sure to attract those seeking a way of decorating their house with objects that reflect their level of wealth. One could even argue that Hirst was specifically catering for the wealthy trophy hunters by producing works that they would find highly attractive such as the diamond encrusted human skull.
I don’t think that anyone could disagree with me if I was to suggest that the work of Hirst would be less desirable if it decreased in price because that is exactly what we are seeing at the moment. Considering that Hirst was one of the most sought after and desirable artist’s during the peak of the art market boom one would presume that the same would be the case during the market correction. Although there has been a general decrease in the price being paid for works of art across the board there is still plenty of money available and plenty of money being spent on the most desirable works of art. Had the work of Hirst not been able to be classed as a Veblen good then more people would have been snapping up the works currently on the market (regardless of the financial crisis) which can be purchased for considerably less than they they were sold for a year ago. Those discounted works by Hirst that are currently on the market and have been offered for sale over the past month or so are, however, not being snapped up. Now that Hirst isn’t setting various price related records left, right and centre and isn’t appearing in the headlines as the most expensive living artist – the appeal of his work has declined and the gloss is wearing off.
There are plenty of artists whose work could be called a Veblen good but I think Hirst is the best example as he was the most desirable artist at the peak of the art market boom which means that if people weren’t just buying his work as an expensive trophy, he should have continued to be the most desirable artist. And he isn’t.
to be continued…..
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.