Rethinking Markets

Pulling back the curtain here a bit on what sociologists do, rather than what sociology is. Students are participants in the project, not as research assistants (it would be more efficient and more sane for me to actually hire a couple grad students if this was the route I wanted to go), but as participants. It is a rough go at a small collaboration across disciplines, and to make less mysterious what it is that professors actually do.

The aims of the project (and the course) is to understand how market intermediaries make markets possible. That is, what are the organizational, institutional, and cultural practices that make it possible for markets to look the way that they do? My initial aim is to see art specialists and art advisers/consultants as key agents in this regard. This is part of a larger aim to understand how appraisers of fine art, real estate, finance, all do their work. And how what appear as self-regulating, natural markets are a result of that work. For the most insider-y of readers, it is organizational sociology + cultural institutionalism + social studies of finance. These are the waters we ply.

The initial research proposal is available as .pdf or MS-Word document.

This week was our first ‘real’ class (as opposed to the intitial class, where I hemmed and hawed through most of it, trying to explain what I wanted and whether we would even have the class to begin with. Actually, scratch that. I say ‘um’, ‘like’, and ‘so’ terribly often in every class). In it, we talked about this proposal, what it contains, what it lacks. I am now revising it, but it seemed to me that there were a number of excellent suggestions. They focused on limits on the commodity itself, the key participants, and the differences between trying to predict prices and understanding how prices get ‘made’. Here are some of the more interesting things we’ve come up with:

First: What should be the limits or contours to the commodity we are studying?

We are torn, theoretically, between researching art that is close to ‘unique’ and art that is recognizable as art but leads us far afield. For instance, some art is endlessly reproducible: digital photographs, recorded music, even casts of sculpture, prints and posters. We are tentatively going to include photography but not music, include sculpture and ‘high end’ prints but not posters (Peter likes lithographs, but not posters; photographs but not postcards..what does Peter like?).

What we intend is to treat this as a puzzle – how do specialists and others turn the commodifiable (in the economic sense of largely reproducible) into either unique or quasi-unique commodities (in the sociological/anthropological sense of things that can be bought and sold)? We include photographs because we already know that there may be interesting work in making editions. Likewise sculpture.

We still have to ‘explain’ someone like Takashi Murakami, whose KaiKai Kiki project (to turn art into mass merchandise) seems to undermine the link between art as a cultural good and uniqueness. But this is a decision we seem to be OK with.

In the same vein, we intend to exclude collectibles from the project. That is, there are many things that are sold at auction at high-end art auction houses. But we do not want to study collectible guns or other kinds of craft art. There is something to take away from these things theoretically, for instance the ways ‘ordinary’ objects acquire provenance by way of their ownership by someone famous or ‘important’. And this is not a way to say that gorgeous 19th century furniture is not art. We may run into the difficulty here that Art Nouveau is painting and sculpture and jewelry and glass and architecture. But as a general guideline, we are studying art that conforms to broad categories and conventions of the field. Are there compelling reasons to include jewels and furniture?

Second: Who should be included?

Currently, I think we should include the intermediaries (specialists, advisors). Students think we need to talk to collectors as well. This is linked to the third main set of problems, that is, should we be trying to predict market prices for art or trying to understand the ontological make-up of art prices? If we want to understand why someone pays $104 Million for a Giacometti, we need to talk to collectors. But if we want to understand how markets work, maybe less so. In addition, collectors are challenging to find, where advisors, specialists, IRS appraisers, all work in organizations that are relatively stable.

On the other hand, Ana T. made a good case in class for either including the primary art market or at least including galleries as a venue for pricing re-sold art. I find Velthuis’ Talking Prices to be pretty convincing; but the front-room/back-room split that is evident in the avant-garde primary market is perhaps less so in galleries where re-sale makes up a significant percentage of sales. So perhaps auction specialists are too limiting.

Finally, we have some questions for specialists, some of which I have asked, others I haven’t. Sebastian wants to know what specialists have in mind when they value art. Is the specialist really thinking about the estimate as a price that commensurates across all kinds of art? What are the limits of this (I would initially suggest in my findings that they commensurate within categories, but not across them).

And what happened with that Giacometti? There the specialists were off by a factor of 10! What happens when estimates are very very wrong, either way too high or low? In other words, what can we learn from ‘failures’ to estimate the market prices?

Finally, Emily thinks we need to at least look at auction design, and the ways that the auction itself elicits the prices that people pay for fine art. This is ground covered pretty well by Charles Smith (in Auctions), and my own experience with actual auctions is that they are interesting for a bit but then quickly become a sublimely weird kind of boring. And the literature on auction design is both voluminous and dominated by experimental economists. Is this the best point of entry for us?

All in all, a productive class. I’m curious to hear what people think about what went right with the proposal and what is going wrong. Revisions to include some of these ideas are in the works. Comments are welcome welcome welcome!