Shubik, M.

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24 Dealers in artMartin Shubik[H]e said to Bauer the antique dealer: ‘A man as scholarly as yourself shouldn’tbe a dealer, it’s horrible to be a dealer.’ To which Bauer replied: ‘Between you andme there’s no difference; I’m an intellectual dealer and you’re a dealing intellec-tual.’ Berenson never forgave him that. (Gimpel, Diary of an Art Dealer, p.248)Art has been collected by the elite since Babylonian times; there is evidencethat it was sold either by auction (Shubik, 1983) or by dealers in ancientRome. Possibly the emergence of modern dealers may be attributed to theDutch and Flemish dealers selling to a well-to-do middle class (Montias,1988, 1996). Along with the post-1700 explosion of population and educa-tion, the size and nature of the art market has now enlarged and changedto the extent that there is a literature on the emergence of an internationalart market where the comparison of art as an investment commodity isconsidered. Its role as a suitable investment has been debated (Baumol,1986; Goetzman, 1993).In the current world, art is sold by auction, by dealers or directly by artists.It is bought by museums, some institutions and many individuals (primarilyby the well-to-do). As the appreciation of much art depends on education,fashion, culture and perception, critics and experts play an important roleboth in influencing taste and in providing expertise and evaluation.How many art dealers are there? How is an art dealer defined? Are artdealers a breed apart or are they just ordinary merchants?1 One does notneed a special degree or a professional society certificate in order to becomean art dealer. The appellation of art dealer tends to be self-selected. In theUnited States a quick rough estimate of the size of this selection is providedby the yellow pages of the local telephone book. A search of the listings ofall 50 states (and DC) for the year 2000 yields around 29200 institutions inthe classified section under ‘Art Galleries, Dealers and Consultants’. Theselistings include sellers of souvenirs whose business, for the most part, is foritems under $100, and a large group of galleries handling new artists withdiffering emphasis on conventional or avant garde taste where typical prices(in the United States) range from $500 to $4000. Many of these can bedescribed as local (Plattner, 1996), hence there are several natural taxo-nomic distinctions which are worth making. They include dealing with liveor dead artists (financial analogy, primary and secondary market), high orlow ends of the market and local, national and international markets.194A rough feeling for the distribution of dealers in the United States isgiven by looking at the top five states and cities. We note that California isfirst in number of self-proclaimed dealers, but in terms of monetary volumeNew York is still considerably ahead. The yellow pages yield the following:California, 4289, New York, 2244, Florida,1997, Texas, 1464 and Illinois,996. The top five cities in the listing were New York, 1255, Chicago, 459,Los Angeles, 452, San Francisco, 436 and Santa Fe, 291. In terms ofnumber of galleries, Los Angeles, San Francisco and Chicago are not farapart and Miami with 287 is just behind Santa Fe.Another and much more restricted form of definition of dealer is theaffiliation of a gallery to special art dealer associations. A perusal of thewebsite of ‘The Leading Art and Antique Dealers of the World’ lists over50 associations, such as the Fine Art Dealers Association with 32 members,The National Antique and Art Dealers Association of America with 42galleries listed, The International Association of Dealers in Ancient Artand the Society of London Art Dealers.Like many standard retail markets, entrance into competition is moreor less open. The levels of employment are low, often only two or threeemployees to a gallery. Employees frequently work part time. The largerexpenses are rent and inventory. The smaller galleries (such as the artist gal-leries) often also serve as the artist’s home. The level of both entry and exitis high, although not as high as in restaurants. Granting this, from the view-point of economics, one might ask if there are any special features of thetrade in art which make the study of the art market and its dealers basicallydifferent from that of grocery stores or dry cleaners.Unlike the evaluation of many consumer goods, the problems in the eval-uation of the worth of an art object are far more dependent on culturalnorms and social acceptance than the perceived needs of the consumer. Thedemands by a consumer for baked beans, bread or clean laundry are rea-sonably well given. There is less need for taste makers and experts andblockbuster exhibitions to promote clean laundry than for taste makers topromote Old (and to create new) Masters. The art market has a componentof conspicuous consumption which is lacking in many other markets.There are possibly five distinctions worth making about types of dealersin the art market: souvenir merchants, artist dealers, collector–connoisseurdealers, amateur dealers who may operate at a loss, and businessmendealers utilizing their own expertise or paying experts. These categories mayeasily overlap. For example, a souvenir store and art gallery may be linkedin a single site.The souvenir market, be it in New York, Paris, London, Los Angeles orelsewhere, may or may not stress the cachet of art in order to sell its moreor less mass-produced prints of the Eiffel Tower or Westminster or theDealers in art 195Statue of Liberty. Standard product consumer economics holds. Bothpricing and production fit standard easy entry mass market models. In con-trast with the mass market, original art is highly individualized.New art is brought to the market primarily in two modes: either by theartist acting as his or her own dealer or by professional dealers who tend tohandle the product of no fewer than five or ten and no more than 30 liveartists. In both instances pricing is highly experimental and most frequentlyis based on a price set by the artist, possibly with suggestions from thedealer. If nothing sells after a few months, the price may be adjusted down;or in some instances a dealer may suggest that the artist try a higher priceas some dealers believe that there are buyers who associate price withquality, not vice versa. If nothing sells for one or two seasons the artist maybe dropped by the dealer. Most dealers handling new artists split the salesproceeds at around 50–50, plus or minus 10 per cent. In general, dealershandling live artists try to carry next to no inventory. The paintings are onconsignment from the artist. Although inventory cost may be low, theadministrative costs (and pleasures) of dealing with, mentoring and nurtur-ing living artists may be high. The interpersonal skill required by dealers inhandling living artists, especially unknowns or new artists, is far differentfrom the necessary expertise of those who either handle the art of deadartists or handle a few well established, but living, artists. Historically therehave been some notable galleries promoting new artists who have achievedwide recognition and financial success. In France, Durand-Ruel playedan important role in support of the Impressionists; in New York, morerecently, Castelli played both a key and a profitable role in promotingmodern art. A problem confronting the middle-size gallery which bringsalong new artists is that, when some new artists become successful, theymay leave the gallery for a larger and more business-oriented one.In interviews with dealers in Santa Fe (Shubik, 1992, 1997) it was foundthat many dealers were collectors who were led into becoming dealers, inpart, ‘to feed the habit’. The dealer was an expert in, and collected, the artbeing sold in the gallery. In some sense, part of the art being sold belonged,at least for several years, to the dealer’s personal collection. The educationallevel in a sample of 44 dealers was that approximately 80 per cent had a BAor higher degree, and in several instances were former university facultymembers.Because art collecting and art events have a high social cachet, there aresome gallery owners whose families are independently wealthy and forwhom the gallery operation may be deemed to be, in part, a social activityor hobby. It is difficult to obtain financial information concerning these gal-leries and the possible subsidization of loss and the tax consequences.The middle-size galleries that deal with dead artists try to minimize196 A handbook of cultural economicsinventory that is owned. One way of doing this is to act as a representativeor agent for estates. Collections which are bought may be bought by a con-sortium of dealers. Furthermore, items are often sold before they arebought. Among the bigger dealers with rich, regular customers, the dealerhas a reasonably good idea of what can be sold to a specific customer. Thus,when an item appropriate to the tastes of the customer appears, it is boughtand sold with little inventory exposure. This observation is amusingly illus-trated in the biography of Jacques Seligman, written by his son:Without preliminary greeting, he (Count Moise de Camondo) put out his handand said,‘Congratulations Jacques, I understand you have just bought Versailles!’Without an instant’s hesitation, my father replied, ‘Thank you, thank you,mon cher ami, but you know you’ve heard only half the story. What you haven’theard is that I’ve already sold it!’ (Seligman, 1961, p.15)The financially large and successful galleries are run by businessmen whomay also be art experts, but have considerable talents as salesmen. Theymake liberal use of experts and consultants. The relationship between inde-pendent experts and dealers frequently poses an ethical grey zone, as isamply illustrated in the relationship between Lord Duveen and BernardBerenson (Simpson, 1986), it having been suggested that Berenson receivedseveral million dollars (ibid., p.222) from 1917 to 1938 under a secret agree-ment between them.In today’s world and easily as far back as the 1880s, the major gallerieshave been international, but it was in the 1880s that the European dealerssuch as Seligman, Gimpel, Wildenstein, Duveen and others had the oppor-tunity to become international in their development of major Americanmillionaire collectors of the ‘Golden Age’ such as J.P. Morgan, Rockefeller,Huntington, Frick and Mellon. In this period forgery flourished, not onlybecause of the lack of standards and expertise among the customers, butalso as a way to circumvent regulations against the selling of national arttreasures. This was achieved by smuggling out the original and replacing itwith a reproduction. The French and Italians were highly skilled in the pro-duction of ‘antique’ furniture as well as paintings.A good middle-size gallery may measure its revenues in a few milliondollars, whereas a major international gallery such as Galerie Beyeler ofBasle could have revenues of the order of a hundred million. As most gal-leries are closely held individual proprietorship and tax records are privi-leged information, it is difficult for an economist to obtain accurateestimates of sales and revenues.One of the major concerns in the economic understanding of retailing ishow current prices are formed. Interviews with dealers indicated that, forDealers in art 197previously traded art, the most recent auction or gallery price serves as animportant benchmark, along with the availability of close substitutes andtheir last posted price. The price that first goes up in the gallery is an edu-cated guess as to what the dealer thinks he can sell it for. It was suggestedthat higher priced art is ‘sold not bought’. This placed an emphasis ondisplay, promotion and cultivating relationships with a core of regular cus-tomers. Another difficulty in considering pricing is that many modificationsof price are present, but are not reflected in the reported trade (these includecredit and buyback arrangements). Furthermore, there appears to be a con-siderable variation in attitudes towards discounting the posted price.The emergence of computerized inventory and pricing lists, togetherwith cheap and rapid international communication, has produced a single,unified world market for recognized masters. But in contrast with the stockmarket, the product differentiation even among paintings by the samepainter is far larger than among stocks. Hence several of the key factorswhich go to make up smoothly functioning market prices are not present.Art is not easily fungible and its ‘productivity’ is not easily calculated.Some insights into dealers and their motivations can be gleaned fromsurvey comments and from the literature. A few are given below:Jacques Seligman had broader conceptions; he believed that an art dealer couldbe both a connoisseur and businessman. (Seligman, 1961, p.6)I don’t sell what I like,I sell what will sell. (Comment of a financially successful dealer in Santa Fe.)Spitzer . . . made a fortune which enabled him to achieve the dream of all dealerswho love their metier – retirement to collecting for his own pleasure. (Seligman,1961, p.14)[Duveen’s] success stems from his taste, his boldness, and also his gift of organ-ization . . . To make up for his lack of knowledge, he surrounds himself with allthe great experts. (Gimpel, 1966, p.225)It is really pitiful to see how most of the people who want to buy pictures setabout it. More often than not they are advised by persons who are either foolsor rogues, so they buy horrors at very high prices. Yet I, who want to trade fairlyand prevent my clients from falling into traps, have the utmost difficulty in suc-ceeding. I have to fight all the time against the people who stand to gain byclosing their eyes to the truth. (Paul Durand-Ruel, 10 December 1869)Who becomes a dealer and why? The imperatives appear to differ con-siderably from the decision to become an artist, but they do not appear tobe solely economic. The reasons offered from the questionnaire of theSanta Fe survey are as follows:198 A handbook of cultural economicsMoney and ego.Personal satisfaction from working with artists and art works.It just happened.Interest in art coupled with providence.Single most important element that characterizes my life is art.To create a new vehicle for exhibiting and promoting a strong (and important)aesthetic point of view.Lucrative, high profits, contact with interesting people, fun.I have an underlying passion for art. I was painting but I found it lonely. I solda friend’s painting from my studio and got hooked.Knowledge and interest in art as a social and political process . . . the businessof art is of great interest to me . . . also ties in with social and political issues.Enjoy working with fine art and do make a living.We love the arts . . . our goal was to bring museum quality art to Santa Fe.It has to be for love, certainly not for money.In order to utilize my interest in the arts and humanities in combination with myexperience in retail selling.Evolved as a career from lifelong interest and training in art.Love the business.Good business opportunity and love of art.Economic motivation plays a far larger role among dealers than amongartists, yet it is by no means necessarily the driving force, although it isprobably the most important. The art market provides a challenge to boththe merchant and the economist. The product is frequently unique, andtastes and fashions are in constant flux (as is amply illustrated by the pricehistory of paintings of artists such as Alma Tadema, an English Victorianpainter who enjoyed wide acceptance and high prices in his lifetime, fol-lowed by a great eclipse in prices and a recent recovery). Innovation andreinterpretation are always present, thus the entrepreneurial salesmanshipand social networking skills called for from dealers in art are far greaterthan in the retailing of more mundane consumer products.Note1. The direct interview, samples and counts presented here are based primarily on UnitedStates information, while most of the secondary source readings cover primarily GreatBritain, France, the United States and Italy.See also:Chapter 1: Anthropology of art; Chapter 5: Art prices; Chapter 60: Visual arts.BibliographyBaumol, W. (1986), ‘Unnatural value of art, investment as a floating Craps game’, AmericanEconomic Review Papers and Proceedings, 76, (May), 10–16.Duveen, J.H. (1938), Secrets of an Art Dealer, New York: E.P. Dutton.Gimpel, R. (1966), Diary of an Art Dealer, Translated from the French by John Rosenberg,New York: Straus & Giroux.Dealers in art 199Goetzman, W. (1993), ‘Accounting for taste: Art and the financial markets over three cen-turies’, American Economic Review, 83 (5), 1370–76.Montias, John Michael (1988), ‘Art dealers in the seventeenth-century Netherlands’, Simiolus:Netherlands Quarterly for the History of Art, 244–56.Montias, John Michael (1996), Le marché de l’art aux Pays-Bas: XVe–XVIIe siècles, Paris:Flammarion.Plattner, S. (1996), High Art down home, Chicago: University of Chicago Press.Seligman, G. (1961), Merchants of Art: 1880–1960, New York: Appleton-Century Crofts.Shubik, M. (1983), ‘Auctions, Bidding and Markets: An Historical Sketch’, in M. Shubik, R.Engelbrecht-Wiggins and R. Stark (eds), Auctions, Bidding and Contracting: Uses andTheory, New York: New York University Press, pp.33–52.Shubik, M. (1997), ‘The Santa Fe Art Market: Dealer Dynamics’, unpublished, New Haven,available from author.Shubik, M., with the assistance of J.K. Shubik (1992), ‘Art dealers: Santa Fe, Taos andAlbuquerque’, Santa Fe Institute.Simpson, C. (1986), Artful Partners, New York: Macmillan.200 A handbook of cultural economics

Dealers in art

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