Snobbery and the Art Market –

Snobbery and the Art Market –

Denied stamp used by Warhol Foundation

Denied stamp used by Warhol Foundation

A few posts ago I wrote about art and the Veblen Effect. The Veblen Effect suggests that the demand for certain goods, such as art, decreases as the price decreases because a more expensive object is associated with greater prestige and greater wealth. Another effect called the snob effect suggests that the demand for certain goods decreases as the number of people who own one of that particular good increases. In other words, the lower the number of people who own a particular good, the greater the desirability of that good. The reason that this is often the case is because people tend to associate an object of very limited availability with social and financial status, prestige and exclusivity. The fewer the people who own or can own a particular object the more exclusive and prestigious that object is perceived to be. Just like the Veblen Effect, the snob effect is especially relevant to art and the art market.

I could have used the work of Damien Hirst as an example of the snob effect but having used Hirst as an example of the Veblen Effect and not wanting to sound like a broken record I will use Warhol as an example instead. There have been several claims over the years that the Warhol Foundation have intentionally denied the authenticity of works submitted to them for authentication that were in fact genuine in order to reduce the number of Warhol works on the market thus increasing the desirability of those works that are available.  The Warhol Foundation ensured that the works they deemed to be fakes would not be passed off as genuine by stamping the word Denied on back of the works.  Although the claims of market manipulation have yet to be proven the fact that the claims have been made is proof that the snob effect is applicable to art and the art market.

Funnily enough, both Hirst and Warhol have harmed the market for particular series of their work by adding works to a particular series or producing further works very similar to those from a particular series after that series was seemingly finished. In some ways, this is like an artist producing a print with an unlimited print run. The desirability of that print would decrease as the number of people who purchase one of those prints increases. The moral of the story is be wary of prolific artists who produce large numbers of works that are very similar. Also be wary of artists who tend to re-use particular themes, ideas or series of works.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

11 Responses

  1. Excellent article….and quite interesting….thanks for posting.

  2. You would think that your Snob theory would be correct as it does indeed apply to most areas of fashionability, such as clothing brands.

    However, the two examples you give (Hirst and Warhol) in fact prove the complete opposite. Over the last decade both artists have seen their values rise inexorably (until the last few months, which have affected the values of 99% of the art world), despite the repetition in their work.

    Hirst and Warhol spectacularly disprove both the snob theory and any notion of inflation in art – if the unlimited print runs you describe were currencies they would become completely devalued, but incredibly that does not happen with these two artists.

    You need to think again on this one I’m afraid.

  3. Will there be another Next Star Artist Competition in 2009?

  4. Hi Joe,

    Thanks for the comment but unfortunately what you say is incorrect. The snob effect doesn’t necessarily apply to every single work of art by a particular artist as is the case with Warhol. In the case of Hirst, however, it does apply to all his work as the market for Hirst’s work has decreased dramatically since the “Beautiful Inside My Head Forever” auction at Sotheby’s. One could be forgiven for believing that the drop in value of Hirst’s work was purely the result of the financial crisis but this was not the case. If the market for Hirst’s work was going to be damaged by the crisis as much as it has then the “Beautiful Inside My Head Forever” would not have been such a success. Now that the “Beautiful Inside My Head Forever” auction is over and so many more people have Hirst works, the demand for his work has dropped dramatically because so many people now own a Hirst reducing the exclusivity and prestige associated with owning one of his works. Further more, if you want an example of an Warhol edition work that has decreased in value because of an addition to the number of works in the original edition then fine out about the case of the “Brillo Box” sculptures. Overall, the snob effect is probably not applicable to a large majority of Warhol’s work but the fact that allegations have been made that the Warhol Foundation have been maintaining demand by reducing the number of works on the market proves that the snob effect is relevant to at least some of the work of Warhol.

    I appreciate your comment and enjoy debating such issues but your theory is incorrect. I will also point out that the percentage of art that has been affected by the global financial crisis is no where near 99%. Also, I am baffled by your comment that Warhol and Hirst disprove the existence of inflation in relation to the value of art.

    Anyway, nice try !!

    Nicholas Forrest

  5. This is an interesting idea and one that my former art history students (who are really business students) have raised quite often in class.

    As a proud Art Snob (see my own blog) I wanted to ask how my form of snobbery….an academic one plays out against your business or monetary model?

  6. Just to finish this point Nicholas, you state as categorical that Hirst’s market has collapsed as a result of the Beautiful Inside My Head Forever auction bringing so much new work onto the market.

    I’m not even sure how you know that Hirst’s prices have decreased dramatically as you have often stated that auction results are just the public tip of an iceberg and that most deals are done privately.

    Even at auction Hirst’s prices have not done what you say. One of his Happy Head plastic skulls sold last month at Christie’s for £73,000, double its estimate and a whopping profit on the £25,000 it cost on the primary market 14 months ago.

    Granted, his lower value, high edition prints did not sell in last month’s auctions, but those are exactly the kind of entry pieces that you would expect not to sell in a global meltdown the week before Christmas. These spot prints have very little to do with the higher end of Hirst’s market, and none of that work has come to auction since BIMHF, so it is impossible to state what has happened to his prices on his defining work.

    To suggest that the success of the auction caused the artist’s market to collapse is an amusing paradox and, if true, is an outcome that would have been easy to forecast in advance. The buyers at the auction were presumably aware of how many new Hirst pieces were in the auction and what effect that would have on his prices. What they clearly didn’t forecast was how serious the economic downturn would become. Two weeks later and the Hirst auction would have been a flop (auctions are no place for the cautious, as you know).

    Don’t get me wrong, it’s obvious that Contemporary prices have pretty much declined across the board but Hirst’s no more than anyone else’s and certainly not for the reasons you offer. To say the recession is playing no part on values is plain silly – it is absolutely the reason for the decline in the entire Contemporary art market.

    I’ll return your ‘nice try’ – you’ve come up with a theory that sounds good until tested with facts.

  7. First of all I didn’t say that Hirst’s market has collapsed as a result of the Beautiful Inside My Head Forever auction, I said that the auction has played a part in the reduction of the prices being paid for his work. I also did not say that the recession is playing no part on values but that the recession is not the only factor contributing to the reduction in values. I can understand your incorrect analysis of the market for Hirst’s market as I am sure that you don’t have any where near the amount of information and intel that I have. Here are some quotes from my fellow art market analysts that back up my theory:

    “An oversupply of Hirst’s works resulting from the “Beautiful” sale will damp his prices at least through next May, ArtTactic’s Petterson said.” from Bloomberg article

    “At the New York auctions, buyers passed on 67 percent of Hirst’s works at the evening sales and 64 percent during the day sessions, according to ArtTactic. The biggest flop was a painting of four skulls, set against a “spin” background. It was expected to fetch at least $3 million at Phillips de Pury & Co. but failed to find a buyer. ” from Bloomberg article

    “Hirst’s work also did poorly at Art Basel Miami Beach, where New York dealer Christoph Van de Weghe says he sold only two of eight works he brought, small “spin” and “butterfly” paintings that went for $160,000 each, less than their asking price of $185,000.

    “The timing is not so good,” Van de Weghe said. “Today I’m telling my clients that it’s better to buy established artists who are dead and won’t produce.”” article

    Sorry Joe, but my fellow analysts have proven my point for me.

    Nicholas Forrest

  8. I think that fine art collectors are losing sight of the real issue on craftsmanship of artists across the board and roped more into commercialisation of works. Viewing works of art as a commodity rather then pinpointing the finer details of hand worked items. Yes the economy is effecting the downturn of all industries, but the focus should be on the onset of skill rather then mess production. So to all the Art Collectors re- think before shying away from the beauty of the hand.

  9. There you go again, leaping to assumptions – you have no idea how much information I have.

    But I did like this quote:
    “An oversupply of Hirst’s works resulting from the “Beautiful” sale will damp his prices at least through next May, ArtTactic’s Petterson said.”

    And what will happen next May? Will some of the works from the auction magically vanish, re-inflating prices?

    Great analysis!

  10. I also disagree with the Petterson’s statement that the prices will rise again in May but that is not the part of the quote that is important. What is important is that Petterson agrees with me that there has been a oversupply of Hirst’s work that has had an effect on the prices being paid for his work.

    Nicholas Forrest

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