The visitor to the Metropolitan Museum of Art in NYC is usually disconcerted when confronted with one of the most famous artwork of the museum created by Damien Hirst: a 213 inches white shark preserved in formaldehyde in a vitrine. The confusion increases when the visitor sees the title of the artwork: The Physical Impossibility of Death in the Mind of Someone Living. Probably the visitor would fall into a state of shock if he/she learned that the price paid for the shark was… 12 million dollars.
Marketing Professor Donald Thompson has recently published a book –The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art– in which he tries to clarify the mechanisms behind supply and demand in the market of Art. It is not an easy question. In a previous post we explained Tom Wolfe‘s theory according to which supply and demand in Art is strongly influenced by an extremely small and elitist group. Contributions from other social sciences also point to other specific characteristics of art [1]. Eric Hobsbawm, historian, suggests that Art is a very particular field in which manufactured and aristocratic productive structures have been preserved. On the other hand, sociologist Pierre Bourdieu claimed that art is a pre-capitalist field that capitalism tries to “capitalize” through mechanisms as the property rights. Can Economics contribute to shed some light on the debate about the way Art works? Definitely yes, and Thompson’s ideas seem very useful in this sense. The author highlights two basic points: the importance of brand image and the problems of information on the demand side.
First of all, some artists, galleries and art auction houses have built an image of brad that allows them to charge a higher price for their products thanks to the prestige and other benefits derived from the brand. Therefore, Marketing plays a very important role.
Second, these prestigious brand institutions also act as a signal of quality for a public that usually does not have the appropriate information or knowledge about art. People tend to think that artworks associated with famous galleries or artists has to be high quality. Obviously, this signaling argument is directly related to the previous point concerning the formation of a brand image.
Given what we have seen so far, a tentative (and certainly risky and hasty) conclusion could try to combine the different visions discussed so far: Art is a field still dominated by a certain aristocracy (le monde described by Tom Wolfe in the previous post) that, using some typical capitalistic tools (property rights, brand image), is characterized by some relevant facts as imperfect information on the demand side or other social influences affecting consumption.
Vast, complex and interesting subject…
[1] I am grateful to my brother Pablo for his help and stimulating comments in this point.
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Publicly Economic 
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