Why the “Superstar Economics” of the Art Market Is Its Biggest Threat

As written by Artsy’s Claire McAndrew:

At least 20 notable galleries closed up shop in the first six months of this year, some after decades of working in the art market. As an economist observing the art market for the last 20 years, I try to stay objective about the trends I see, but a gallery closure still gives me an emotional pang. I’ve been lucky enough to have interviewed hundreds of gallery owners in the course of my research, and I can safely say they tend to be very smart, knowledgeable, and passionate about what they do. They’re also extremely hard-working, and often underpaid compared to similarly educated counterparts in other industries.

What can be done about this accelerating trend of gallery closures, which, as I’ve observed before, poses a grave danger to the art market ecosystem as a whole? I believe the answer lies at least partly in collaboration, both between small and large galleries, and between a variety of different actors in the art market. But before we identify potential solutions, let’s examine why the art market is especially vulnerable to the logic of “superstar economics,” and what that means for galleries going forward.

Why superstar galleries dominate the art market

The superstar phenomenon is pervasive in the art market.  My research of the last few years has documented the increasing dominance of the top end of the market. A very small number of artists, and the galleries representing them, drive the bulk of sales value, while others struggle to survive.

While this top-heavy bias has increased over the last 10 years, the superstar effect has been observed for at least a century. In his 1920 book Principles of Economics, British neoclassical economist Alfred Marshall wrote:

“There never was a time at which moderately good oil paintings sold more cheaply than now, and there never was a time at which first-rate paintings sold so dearly. A business man of average ability and average good fortune gets now a lower rate of profits on his capital than at any previous time; while yet the operations, in which a man exceptionally favored by genius and good luck can take part, are so extensive as to enable him to amass a huge fortune with a rapidity hitherto unknown.”

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