Have price and value in the art market parted ways for good?

A cynic, as Lord Darlington famously pronounced in Oscar Wilde’s 1892 play Lady Windermere’s Fan, is “a man who knows the price of everything, and the value of nothing.”

Distinctions between price and value have been an age-old preoccupation of the West’s collecting culture, but right now they could hardly be more relevant. The latest digital collectibles are selling for staggering amounts of virtual money, paintings by young artists are being “flipped” at auction for up to 100 times what they were bought for from galleries two or three years ago. Meanwhile, Old Masters, which dominated the top end of the art trade when Wilde was writing, continue to fall out of collecting fashion, apart from a few heavily guaranteed trophies by famous names.

Has the art market finally reached a point where price and notions of critical and historical value have decisively parted company?

“The fact that some currently popular works of art sell for high prices reflects not a sea-change in the evaluations of art history, but the combination of available money (crypto and otherwise) and excellent marketing. Thus it ever was,” says Michael Findlay, author of the 2014 book The Value of Art, which he is currently revising.

“It is tempting to posit that the art world ‘now’ is vastly different from ‘then’, and that technological innovation coupled with changing social attitudes will mark this year or decade or generation as an inflection point,” adds Findlay, who is a director of the New York dealership Acquavella Galleries, specialising in major-name 20th-century art. But from Findlay’s perspective, recent high auction prices for works “firmly stamped with the imprimatur of enduring interest by the general public, museum curators, critics and collectors” suggest otherwise.

Auction results such as the $12m bid in November for Franz Kline’s 1955 Abstract Expressionist painting, Crosstown, at Sotheby’s $676m Macklowe Collection sale seem reassuring validations of the art historical canon.

But the devil is in the financial detail. The price of the Kline, like that of all the lots in the Macklowe sale, had been propped up by a consignment-clinching global guarantee thought to be as high as $695m—negotiated by none other than Findlay, who brokered the sale of the collection. Crosstown sold to a single bid from one of the many third parties to whom Sotheby’s had offloaded this liability. The painting sold for a price set by the auction house, not competition at the actual sale.

Out of step

Kline’s austere black and white abstracts, traditionally deemed to be art historically “significant”, are out of step with the market’s current Instagram-driven vogue for big colourful paintings. In May, his much larger 1957 abstract, Mister, unprotected by a guarantee, failed to sell at Sotheby’s against a low estimate of $15m, according to Artprice. Would Crosstown have sold for $12m at auction if it had not already been effectively “owned” by Sotheby’s?

“I understand why the auction houses do it, but guarantees make it harder to evaluate the true market value of artists,” says Christine Bourron, the chief executive of the London-based auction analysis company Pi-eX. “Guarantees give the false impression that everything sells and prices keep rising,” Bourron adds.

Back in 1970, when the Metropolitan Museum of Art paid $5.5m at Christie’s, London, for Velázquez’s Portrait of Juan de Pareja, when there were no auction guarantees, the world’s most expensive artists were all long-dead Old Masters. Museum shows and art history courses validated what seemed to be their immutable importance. It was only in 1979, six years after his death, that a work by Picasso sold for more than $1m.

But now museum curation and art history are preoccupied with more up-to-date issues of colonialism, race, gender and identity. This year’s Turner Prize has been awarded to Northern Ireland’s Array Collective, whose virtuous, diversity-exhorting, alcohol-free bar installation prompted The Guardian’s Jonathan Jones to comment, “this year’s prize has put aesthetic achievement pretty low on its list of ‘values’”.

The market has now become the presiding judge of aesthetic achievement. And it is fickle. According to Artprice, as of the end of November, global auction sales of works by artists born after 1985 reached $158m, an increase of 452% on the previous year.

“At present, it becomes almost impossible to objectify the construction of the prices for many young artists, apart from emphasising the importance of the demand for new names,” says Jean Minguet, the head of art econometrics at Artprice. Minguet points to the $2.9m bid at a Sotheby’s day sale in October for the 2021 life-size mixed media sculpture, Nice to meet you, I’m Mr. MiSUNDERSTOOD, with associated NFT, by the 18-year-old Seattle-based artist FEWOCiOUS among the most recent impossible-to-objectify prices.

“This situation marks a break with the past,” Minguet says. “Although there may have been tremendous price surges, an artist’s success was usually rather gradual and price levels correlated with a number of events that legitimised the work, such as museum shows, publications, prizes and so forth.”

In FEWOCiOUS’s case, an associated NFT and an ability to pay in cryptocurrency were all-important in supercharging the price.

At the beginning of December, ERC-721, the non-fungible token standard on the Ethereum blockchain, topped ArtReview’s influential Power 100 list. The 2021 Hiscox Online Trade Report estimates that $3.5bn of NFT crypto art and collectibles have been sold during the first three quarters of this year.

Moments like the recent seeming “wash trade” of a CryptoPunk for an implausible $500m and the chaotic aftermath of the unsuccessful attempt by a DAO (decentralised autonomous organisation), or crypto crowdfund, to purchase a rare original copy of the US Constitution that went on to sell for $43.2m, have underlined how crypto remains the Wild West of the art and collectibles market.

Gold rush

But the analogue art world keeps rushing for the prospecting pans. Sotheby’s Metaverse and Unit London gallery’s Institut are among the several online sales platforms dedicated to NFTs that have recently sprouted up in the bricks-and-mortar art trade. Loic Gouzer, the architect of Christie’s $450.3m sale of the Salvator Mundi in 2017, has launched Particle, a scheme in which the ownership of a Banksy painting bought at auction in May for an already high price of $12.9m aims to be sold off as 10,000 NFT fractions for about $15m.

All this might remind Luddite sceptics with a knowledge of financial bubbles of William Hogarth’s 1721 print The South Sea Scheme, showing a frenzied crowd jostling to climb up on to a merry-go-round, satirising the speculative excitement generated by the ill-fated South Sea Company.

But for Georg Bak, a digital art adviser and curator currently working on SNOWCA$H, a forthcoming group exhibition of digital art at the Kunsthalle, Zurich, NFTs are the breakthrough “trigger technology” that enables the trade in digital art, which he regards as “probably the most significant art of our time”.

“I don’t see a significant difference between the traditional art market and the NFT market,” Bak says. “Trendy artists can become expensive in a very short time and suddenly nobody talks about them anymore. Trend cycles in the NFT art market are probably a bit shorter and currently everything is developing at a very fast pace. I see more and more traditional art collectors, galleries and artists entering the market.”

That may well prove to be the case, and we know NFTs can be very, very expensive. But where, exactly, is the value? Is it in the associated “unique” digital collectible that can be downloaded by anyone on the internet? Or in the smart contract’s all-important bragging rights? Or is it just in having something on which to splash otherwise difficult-to-spend Ether?

When the major mainstream auction houses sell NFTs they often don’t publish estimates, leaving the pricing to the crypto speculators. As for the enduring value of NFTs, and of pretty well everything else that is making serious money in the art market at the moment, no one seems to know.

Even Lord Darlington might have struggled with this one.