I decided to watch the David Laibson video on behavioral economics and relate it to predictions of the contemporary art market.
My final chosen topic is on art auction pricing specifically for the contemporary art market. The fine arts market is notoriously opaque and inaccessible for most lay people due to the excessive amounts of private trading amongst art dealers and consultants. These trades happen outside of the public eye and there is usually no released data on sale prices. Most of the public information we have about the art market is through a few auctions, and these prices are incredibly hard to predict because of our lack of data and the many unaccounted for psychological factors that are present in the market. These items are exactly what Dr. Laibson highlights when he discusses the history of behavioral economics as well as the presence of uncertainty. Until I watched this video, I didn’t fully know what behavioral economics meant. Now, I know that it is a restructuring of classical economics to include psychological factors. This relates directly to the discussion of the art market. Classical prediction models would simply factor in previous sales and trades, but because art value changes so much based on “hype” for a certain artist and popular trends, these predictions are usually not very accurate. Before the advent of machine learning, most art dealers went by their gut feelings - trying to sense which artist would be the next big thing by engaging with the art community personally. Now, with machine learning looking for patterns in areas such as the press, online forums, and advertisements, we have a more quantitative and accurate way of assessing art value. That being said, there is still a lot that has yet to be accounted for. One prominent model for assessing art value is LiveArt, a platform founded by previous directors Sotheby’s and Christie’s. The founders say that while the more nuanced model is able to provide a decent price range for more contemporary works, it is still only a guess. Popularity can rise and fall over night, and there is still too much happening in the art world with our well documented data.
Relevant Citation:
Lawson-Tancred, Jo. “How Do AI-Driven Art Valuations Actually Work?” Critical Edge, 6 Feb. 2023, How do AI-driven art valuations actually work? Accessed 23 Apr. 2024. https://www.criticaledge.art/briefings/ai-art-valuation
Relevant Image
This painting is 眼神 by Chinese artist, Yue Minjun. Currently his work is priced at several million dollars on LiveArt. He is one of the few Chinese artists that are currently taking over the contemporary art market.