Does the Art Market Need to Be Regulated?

by Hrag Vartanian on August 20, 2010

Does the art market need regulation? (image via

It does surprised me that the art market has been unregulated for so long. Considering there is government regulation in so many aspects of our lives, it’s interesting to see that the art world has been given the luxury of self-regulation (which essentially means NO regulation). Well, New York Times blogger William D. Cohan thinks that should maybe end:

Even if buying art is a rich man’s sport, there is still a need for some serious introspection among those who buy and sell art about putting an end to the questionable behavior of some dealers. And if that means that the art market needs to fall under the purview of the Federal Reserve at the newly created Bureau of Consumer Financial Protection — which of course no one in the art market will like — then so be it.

I’m sure many people would be upset by this suggestion but I think it could be a good idea if it includes some practical mechanism that stop exploitation, including more run of the mill stuff like ways for artists to report delinquent dealers.

One commenter on the New York Times post draws parallels between Wall Street’s shady financial products and some artistic ones, though I don’t believe insurance companies actually appraise art and I’m personally a fan of conceptual art:

Just as the ratings agencies have been complicit in the fraud that continues on Wall Street, major insurance companies like AXA and Aetna are complicit in what is happening in the Art World, through appraising and insuring works of “art” for millions of dollars, that in some cases don’t even exist materially — because they are “conceptual art!”

Conceptual art is a dream come true for hustlers, and a new revenue stream for insurance companies, who give credibility to the hustlers. But because there are “no rules” in the art world, who can say they are wrong?

Another commenter points out some facts that may be of interest, though since I am unfamiliar with the data I cannot vouch for its accuracy:

We can thank our tax code for the rich collecting artwork. When artwork is sold it is a 28% tax bracket, which for many years is lower than the rich would pay on capital gains. (With the exception of when President Bush cut the capital gains rate)

Yet, there are those who argue that if we give the rich a tax breaks they will invest it to increase jobs.
People like Jackson Pollack and Picasso can no longer create more jobs.

And I’ll give the final word to this commenter from Seattle, who points out there is a bigger problem with governmental regulation:

Sounds as if these Wall Street savvy businessmen are busy buying up the art worlds equivalent of credit default swaps. The Feds regulating the art markets, really Cohan? There are already laws on the books to deal with fraud but we have seen how well they have worked with Wall Street.
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  • “There are already laws on the books to deal with fraud.”

    This is correct. More laws does not equal more enforcement. I can’t believe it even needs to be said that a National Art Czar could create more problems than it would fix. And really, this from people who think it’s okay to spraypaint other people’s things without their permission.

    • I know you’re against all regulation but I think there are some positive uses of governmental regulation.

      • Funnily enough I kind of agree with you. If the art market was regulated then perhaps justice would be brought to the table. But it could be detremental to some. I’m on the fence about it. I mean the government couldn’t care less about art anyway. And art is about freedom, but not fraud. hmm.
        Love the article

  • I heard a former editor of Art in America say that the four big unregulated markets are art, arms, drugs, and human trafficking. Art is legal, of course, and ideal for money laundering by those engaged in the other three markets. The dark side of the art market bubble, you might say. He also told me that the Chinese have really exploited the arbitrariness of pricing art. I would like to know more about this.

  • This is utter nonsense. If you can’t stand the heat, get out of the kitchen. The government can’t solve the problem of dishonesty and dirty dealings. Watch your own back.

    • The system works for those who can afford lawyers, not for everyone, particularly artists.

      • Wisdom is what is needed, not lawyers. If you know enough to avoid trouble, you don’t need to hire a lawyer.
        And the kitchen I’m refering to is LIFE. Life is not fair. Government regulation will not protect you. With wisdom you will be on top no matter how much money you have or don’t have and no matter who tries to screw you.

        • Kianga, There are aspects of the art market that are tricky even for devoted collectors or professionals. The stories I’ve heard about some photo dealers (making new editions of a negative without notifying buyers, etc) have made me nervous to ever buy photos from anybody but the original artist. Some regulation for things like this would be welcome.

          • Sounds like a good idea to me if you don’t have confidence in the dealer. How would regulation help? People routinely break the law.

          • as a photographer for many many years, i’ve been troubled by the “editioning” of photographs. it has struck me as a direct assault on the whole democracy of the medium … that by having a negative or digital file, the artist can make an infinite number of prints. that always seemed pretty cool to me! now that galleries require editions, this places photography squarely in the marketers realm by falsely creating a market

          • continuing … the notion of editions were created to increase sales. the editions then can and do become “fluid” sold out of 16×20? let’s make a second edition with a minor color shift, a later date and … bingo a new edition appears. to regulate this behavior would greatly benefit everyone as the creator would retain control, the dealer has an endless supply of prints available and the buyer can purchase without fears of inflated or deflated prices. but who would do the regulating? and just because there would be rules … doesn’t eliminate deviant actions.

    • What kitchen are you talking about? The economy that a de-regulated Wall Street screwed up?

  • Morgan

    What would the regulation be exactly?

    Who would stand to lose / benefit?

    I want to say that the underlying problem is that the art world is decentralized with individual players all with very different agendas. No one, it seems, wants to listen or be subject to one authoritative voice or governing body.

  • The question of regulation in the art market is interesting. As to the Wall Street analogies, rather than put the questionable activities of large investment firms under a single umbrella, the best comparison should be made between the actions of the rating agencies and those of the dealers; it was the rating agencies that initially provided incorrect valuations of the financial products the firms were selling. Moreover, creating a federal regulatory body for the art world may not be the best approach if the goal is to more effectively control prices. Instead, should some sector of the art community assist in the development of economic models that more accurately price art works and offer a clearer perspective of what is actually happening in the market on the production and consumption ends? Once such a framework was established, we would most likely be in a better position to assess the real merits of a regulatory body. Just a thought. Hope you dig.


  • Daniel Larkin

    In Paris, a recent scandal ravaged the most legendary French auction house – Hôtel Drouot . Staff stole art work, inflated prices with false bids, and lined their pockets with other dirty tricks.

    “The problem is that honesty is not rewarded in this business,” said Zareh Achdjian, 26, a third-generation antiques merchant and Drouot regular.

    The French Ministry of Justice will take up a more aggressive role in how it enforces the law. But the damage done is bloody – less people will be buying art at Drout.

    I get concerned that a similar scandal in New York would turn off young successful people from becoming art collectors and patrons, from falling in love with the arts.

    It’s fun to throw around anti-elitist arguments – that more regulation will only protect rich people from the risks of their “sport.”

    But it’s now time for fundraiser’s reality check- New York’s Museums and art centers compete fiercely with hospitals, universities, and food banks for funds.

    Do you know how many free hours get slashed and how many programs with underserved youth get dropped? Not enough people care about the arts AND put their money where their mouth is.

    Scandals happen when careful regulations aren’t keeping people honest. The art market plays a huge role in introducing and attracting the next generation of wealthy people to the arts. A scandal like Drout isn’t just bad for the market – it’s bad for the entire sector because it kills interest and dampens passion for the arts. Thoughtful regulation would have a broad impact.

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