The Myth of the Unregulated Art Market

William Cohan is a former investment banker who shot to fame with his history of Lazard Freres just as the financial crisis was beginning early in 2007. He followed that book with quick coverage of the fall of Bear Stearns. Johnny-on-the-Spot with bankers, Cohan takes on the art market this weekend in a post for The New York Times. He’s upset by the machinations of dealers who want to sell derivative works by great artists like Ansel Adams and Edgar Degas. This leads Cohan to huff that the art world is unregulated, especially in contrast to the financial world:

Still, much like the controversy over the Ansel Adams negatives, the debate about the Degas sculptures will continue and may spill over into courtrooms. In the meantime, the artworks continue to be bought and sold, for large sums.

This is because, unlike Wall Street, which is now sorting through a new 2,200-page law that re-regulates it, the art market is utterly unregulated. There are few rules, other than the basic ones of commerce and ethics. There is no Federal Reserve Board or Securities and Exchange Commission to pore over Degas plasters. Nor should there be. There is no equating the carnage that the financial markets are capable of perpetrating on us with what the art market can do.

But that doesn’t mean the integrity of this market isn’t damaged every time the authenticity of a high-profile work is reasonably challenged. 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.

This handy art world cliche is silly. The art world is governed by all the rules and regulations of the commercial code. Fraud is fraud no matter whether the buyer is a billionaire or a lunch pail worker. In the case of art, values cannot be determined by referencing other data the way the relative value of financial instrument can be checked. Of course, having just lived through and chronicled an era where the prices of financial instruments–equities, bonds, derivatives and so forth–were so radically out of whack, one would think that Cohan might tread lightly before calling for another commercial sector to be regulated by an agency.

The authenticity of art is regulated by a vast network of scholars and museums. The case of the Norsigian negatives is a terrific example of how well the system works with a hive of experts appearing instantaneously to dismantle claims and offer a convincing alternative theory. In the art market, as the financial markets, it is much harder to apply that sort of expertise to each quotidian transaction. But that’s life. Buying anything is a fraught experience.

A Bull Market in Sketchy Art (Opinionator/New York Times)

Related posts:

1. The Myth of the Orient
2. Can Paris Save the Art Market?
3. Manet and the Founding of Today's Art Market
4. Chinese Art Market Likes Its Options
5. Are There Art Market Leading Indicators?