Banksy Comments on the Nobel Prize?

by on October 15, 2013 at 10:22 am in Economics, The Arts | Permalink

Mashable: Street artist Banksy set up a stall in New York’s Central Park Saturday, selling his original pieces — worth tens of thousands of dollars each — for $60.

The event was documented on video and posted on Banksy’s website. It took several hours for the first artwork to be sold, to a lady who managed to negotiate a 50% discount for two small canvases. There were only two more buyers, and by 6 p.m. the stall was closed with total earnings of $420.

For comparison, in 2007 Banksy’s work “Space Girl & Bird” was purchased for $578,000, and in 2008 his canvas “Keep it Spotless” was sold for $1,870,000.

What would Fama, Shiller and Hansen say about these asset prices?

Maximizing revenue for non-reproducible art is a matching process, the artist must find the handful of buyers in the world willing to pay the most (see An Economic Theory of Avant-Garde and Popular Art) so perhaps one can explain this as a failure of marketing.

An alternative explanation is that modern art is a bubble, people buy only because they expect to sell to others–take away this expectation and the art doesn’t sell. (Fashions and fads can help the latter explanation a long but there still needs to be an expectation of a future sucker buyer.)

Or perhaps Banksy is commenting on an earlier Nobel winner.

Axa October 15, 2013 at 10:42 am

Are you talking about modern art or gold? I’m confused.

Andrew' October 15, 2013 at 10:51 am

He’s saying that Buffett and Munger should get a Nobel prize some day.

Abe Froman October 15, 2013 at 10:52 am

“An alternative explanation is that modern art is a bubble, people buy only because they expect to sell to others–take away this expectation and the art doesn’t sell.”

Art may also be a means of easily moving assets out of jurisdictional borders. Buy a 2 million dollar Rembrandt, relocate the art abroad and arrange a private sale years later. Not a terribly difficult way to avoid regulatory authorities or one’s creditors. The role of high-priced art in money laundering/asset protection is somewhat unclear… But my guess is that sales on the street in Central Park will not facilitate the same type of re-sale credibility necessary for this ruse.

RPLong October 15, 2013 at 3:16 pm

Interesting point.

Sam October 15, 2013 at 10:54 am

I think the 2nd explanation is closer. I don’t know if I would call it a bubble though. More of a beauty contest dynamic. Some people (the ones you need to match) value the art intrinsically very high. But the fast majority of people value it highly because they know they can arbitrage by being intermediaries in the matching process.

Zaratustra October 16, 2013 at 5:13 am

Wealthy people also like to be seen as sophisticated and tasteful, perhaps to uphold the narrative that they’re rich because they’re a in a better class of human.

Marc Roston October 15, 2013 at 10:54 am

Hansen answer is easy!

These prices fall within the range of admissible stochastic discount factors!

Ray Lopez October 15, 2013 at 11:11 am

Alex you are starting to sound like TC in his prose style. I know you’re like two peas in a pod, but c’mon!

As for this artist, perhaps he is an economist at heart, which also is prone to fashion, or, if you’re a Real Business Cycle type who explains everything with hidden variables, in fact Banksy is rational since the publicity he gets from this stunt will make up for the lost income, in future sales. One of those b.s. “Freakonomics” explanations.

vm October 15, 2013 at 11:48 am

Oh that’s funny, based on subject/style absolutely assumed it was TC as well.

AADL October 15, 2013 at 11:14 am

Fama is quoted today in the Wall Street Journal (“Notable & Quotable”, p. A19 saying:

“…Socialism had its sixty years, and it failed miserably. Chicago theory prospered. Milton Friedman and George Stigler were fighting that battle pretty much alone in the old days….”

Has he never heard of Mises and Hayek? Good thing his prize wasn’t for history.

John Mansfield October 15, 2013 at 11:26 am

When paying the gallery price, do buyers avoid being hugged?

whatsthat October 15, 2013 at 11:38 am

He’s pointing out how silly the art world is.

Adrian October 15, 2013 at 5:58 pm

bingo

Jan October 15, 2013 at 11:40 am

Banksy gonna bank.

This doesn’t seem much different to me than any other free sample or advertising campaign, except that is has a little performance art mixed in.

Marie October 15, 2013 at 12:03 pm

I’m sure the common man simply can’t appreciate the genius politically chic stenciling.

On the collectables end, my daughter has noticed they are phasing out one after another of the tried and true American Girl dolls. Every catalogue seems to be discontinuing one old doll and introducing a new one. We had a little mini-econ lesson, and she’d already checked Ebay and found one of the recently discontinued is selling for $200 used.

Is there any pre-modern parallel with this sad thing we’ve got going, only liking things because we’ve been told other people value them?

Brian Donohue October 15, 2013 at 3:27 pm

“Is there any pre-modern parallel with this sad thing we’ve got going, only liking things because we’ve been told other people value them?”

I believe this is part of The Human Condition.

Marie October 15, 2013 at 4:00 pm

It may well be, and it just looked different in the eras before Beanie Babies!

David October 15, 2013 at 12:07 pm

Of course the key is that the passersby didn’t know these works were Banksy originals. If tourists had known these were genuine Banksy works, then word would have spread pretty quickly and prices would have risen to market levels.

That doesn’t seem like a matching or marketing problem, as much as a product problem.

Of course, that just raises the question of why a work is worthless (or close) unless it’s known to be an original from a famous artist. But that’s a question that’s been explored ad nauseum and I don’t see that this project says anything new on that front.

Marie October 15, 2013 at 6:45 pm

Don’t you think that if an original but not generally recognizable Monet, Cezanne, etc. were being sold on the street for $60 it would be snapped up, regardless of whether it was recognized as an original work by a famous artist?

Eric October 16, 2013 at 11:35 am

Probably not.

This isn’t a fair jab at efficient markets or the art world. A lot of the value is in verification of the artist. If I don’t know if this is Banksy or an impersonator, I take the risk of buying a worthless fake. Therefore, you should have a discounted price.

Second, while this form of art is more easily replicated by an impersonator (which is a jab at modern art prices I suppose…), the masters are also able to be copied convincingly. There have been cases of impostors swindling investors. And famous oils are replicated and sold around Europe all the time. A very small collective of people would actually be able to ascertain fake v. reality. Therefore, no you wouldn’t expect that someone who does NOT recognize the work as original would “snap it up”. It should only be someone with the ability to ascertain the mispriced value. Everyone else is buying something they think is pretty for a price they think is reasonable.

whatsthat October 16, 2013 at 12:06 pm

Yeah but Banksy is not known. He could be a she. Or a collection of he’s and she’s. Authenticity doesn’t enter the picture, so your argument doesn’t hold.

Marie October 16, 2013 at 12:21 pm

When I had a few bucks once upon a time, I bought an original water color from a local artist for $200.

You’re telling me that no one seeing this, unsigned:

http://wp.patheos.com.s3.amazonaws.com/blogs/bibleandculture/files/2013/05/2013-08-24-21.35.28.jpg

on the streets in NY at a stand would be willing to pay $60 for it? Quickly? Not $1,000, I’m sure, but $60?

I certainly might think it’s an original by a nobody or a copy by a nobody and still think it’s beautiful, valuable, and worth way more than $60 because of the workmanship.

I would not consider a stencil of a monkey to be worth much more than the value of the canvas if I painted over it.

Marie October 16, 2013 at 12:21 pm

Oops, an ape.

James October 15, 2013 at 12:17 pm

You really should stop calling it the “Nobel Prize”, since it isn’t. There is no such thing as a “Nobel Prize in Economics”. There is a “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.”

The Nobel Foundation official website always calls it the “Economics Prize”. You won’t find the phrase “Nobel Prize in Economics” anywhere. It’s not correct to call it the Nobel Prize in Economics. Call it what it is: the Riksbank Prize or the Economics Prize.

mofo. October 15, 2013 at 1:13 pm

What is with this pedantic obsession? Normally i can read into this type of non-sense, but this one has me a bit puzzled. Do you think that giving out a Nobel prize for economics somehow cheapens the other Nobels? Does it legitimize economics more than you would prefer? What difference does it make what people call it?

Curt F. October 15, 2013 at 1:50 pm

If tomorrow I were to create and award the first ever Curt F. Prize in Glottochronology in Memory of Alfred Nobel to marginalrevolution commenter “James”, would you then be cool with saying that James was a “Nobel laureate” in glottochronology?

mofo. October 15, 2013 at 3:14 pm

If it was handed out by the Nobel committee, then sure, why shouldn’t i be? Is there something sacrosanct about the original Nobel awards that you feel must be protected? Is that what this is about, that a Nobel in econ somehow degrades the other Nobel’s?

Curt F. October 15, 2013 at 6:46 pm

The Economics prize is not handed out by the “Nobel committee”. It is handed out by the “The Economic Sciences Prize Committee”, as described by http://www.nobelprize.org/nobel_prizes/economic-sciences/prize_awarder/committee.html . In contrast, the Peace, Literature, Chemistry, Physics, and Medicine / Physiology awards are handed out by “Nobel committees for XYZ”, see e.g. http://www.nobelprize.org/nomination/chemistry/ .

I don’t think the Nobel prizes are significantly degraded by a “Nobel” for economics, I just think that if a thing is a thing, you should call it that thing, and if it is not that thing, you shouldn’t.

mofo. October 16, 2013 at 9:06 am

That strikes me as a distinction without a difference. The committee that gives it out is named slightly differently? That’s really the basis of your argument? And it seems you are operating in reverse of what you say: you’d like the thing not to be a thing, so you start calling it something else in hopes that in doing so, you will make it not a thing.

Curt F. October 16, 2013 at 10:51 pm

Yes, the difference in name is absolutely the entire basis of my argument. One of them is a Nobel prize. The other isn’t. Names is what we have been talking about this whole time.

You’re the one shifting the goal posts. You originally said that if an award is handed out by “the Nobel committee”, it should count as a Nobel prize. When I pointed out that there is no such thing as a Nobel committee for economics, you said it is a “distinction without a difference”. My standard for whether a thing should be called a Nobel prize is this: is the name of the prize the Nobel prize? If so, then you should call it a Nobel prize. If not, then you shouldn’t. Your standard for whether to call a thing a Nobel prize is something else, I guess, but you aren’t saying what it is.

mofo. October 17, 2013 at 8:36 am

Shorter Curt F:

“I am a pedantic blowhard who is going to act like the minor differences in nomenclature matter.”

Max October 15, 2013 at 12:57 pm

I would say this is Banksy marketing himself. Every time he pulls a stunt like this he gets his work in the news for a lot more exposure than $420 could buy.

David October 15, 2013 at 2:56 pm

Smart point.

Marie October 15, 2013 at 6:00 pm

The cost, in theory, would be what he could have made on the canvases minus what he did make, right?

Still, since several of those looked pretty much like a five second stenciling job of the same thing, I guess he can just make more.

cpearce October 15, 2013 at 1:41 pm

Isn’t this result pretty much covered by principles-level economics? Supply of art from a certain artist is obviously very limited, so the equilibrium price is at the very high end of the demand curve if all potential buyers are made aware of the opportunity to buy. This is normally done at art auctions, which are attended by the people at the very high end of that demand curve. The average person walking through central park is likely not one of those people. If you sell to a tiny and random segment of potential buyers, you won’t make much money.

Alexei Sadeski October 15, 2013 at 1:42 pm

$420 in one day for a graffiti art street stall sounds like a LOT.

CD October 15, 2013 at 9:06 pm

I was about to say. It’s not a bad day’s take.

What’s also unmentioned is that anyone who did recognize the art would likely assume they were getting fakes.

Anyway, http://www.banksyny.com/ is surprisingly witty.

Marie October 16, 2013 at 9:11 am

There’s a video on the site where folks have come into a neighborhood to take pictures of one of his works, and there’s a group there that is charging them $20 to take the picture. You wouldn’t even come into this neighborhood if you didn’t want to take this picture, he tells them, the picture means something to them, they should give him 20 bucks.

Now that’s something interesting. Was it accidental that he brought together individuals from about as far apart on the economic spectrum as you can get, reasonably?

Alexei Sadeski October 16, 2013 at 1:23 pm

I wouldn’t say that bringing together the .01% and the 1% is such an accomplishment.

Alexei Sadeski October 15, 2013 at 1:43 pm

That’s $120k/yr with 65 days’ vacation!

Tal F October 15, 2013 at 1:45 pm

Art is far more valuable if it is “rare” and hence allows the owner to brag about how he owns one of only a handful of such works. This may have nothing to do with resale value, but the bragging rights are certainly a large portion of the value of high-end art. Banksy did not offer any evidence that these were not fraudulent copies of his work. Given that most of the pieces sold on the street near Central Park are not original works by high-end artists, it is perfectly logical for the passersby to conclude that owning these pieces would not confer the considerable bragging rights that owning a piece bought at auction would..

Marie October 15, 2013 at 6:47 pm

Do you mean art is far more valuable if it is rare, or art seems far more valuable if it is rare?

RPLong October 15, 2013 at 3:17 pm

It helps if you’ve seen the movie Exit Through The Giftshop.

responsible D October 15, 2013 at 4:17 pm

Exactly. It’s a companion piece to Mr. Brainwash.

Bryan Willman October 15, 2013 at 4:00 pm

There’s another real problem in this – the value proposition for any artwork, regardless of who made it, is very variable. So yes, SOME Banksy works sell for a lot of money. That does NOT imply that ALL of Banksy’s works will always sell for a lot of money….

Steve Sailer October 15, 2013 at 4:53 pm

The good think about Banksy is that he’s got plenty of old-fashioned artistic talent, with great hand-eye coordination. So, when he parodies the modern art world, he’s doing it from the perspective of somebody who would have done well as, say, an apprentice under Rubens. That was kind of the point of his “Exit through the Gift Shop” pseudo-documentary about a talentless hanger-on’s attempt to become a conceptual art star. In contrast, whenever Banksy is on screen, he’s doing something with impressive his hands that takes skill and practice.

Andrew' October 15, 2013 at 5:26 pm

Well, obviously those ones don’t come with building. Duh.

Larry Siegel October 15, 2013 at 6:01 pm

Banksy is fooling around and having fun, and here we are analyzing it.

Chip October 15, 2013 at 7:51 pm

Didn’t Damien Hirst get sued for copyright infringement? Did Tracy Emin ever shout into her hand “the idiots at the Tate exhibited my unmade bed!”

Monica October 16, 2013 at 10:46 am

I believe one of the basic tenets of Fama’s work was perfect information. Obviously, the passersby did not have the same information that the artist and boothkeeper had, so the information asymmetry caused disequilibrium.

Jimmy LT October 17, 2013 at 11:52 am

Other than the poor marketing explanation, if you knew about Banksy and saw a stand selling Banksy-esque (?) art for ridiculously cheap prices, (a) would you buy them like a mad man? (b) Or would you assume they’re knock-offs?

The artwork can become two different goods (genuine or knockoff)–depending on the consumers’ beliefs.

Vonvorx October 18, 2013 at 1:22 am

I took this as a comment on the high prices Banksy’s work has attracted. His work is not intended to become this massive thing. The stall was a comment on society (same as all his work) and the people/ideas largely being criticised are the same people/ideas that are snapping up the damn things in the first place.

So, the art, in this case, is not the paintings. They’re not worth tens of thousands, they just get those prices attached to them. I guess I am saying that option two is closer given the context of the artist but still not quite right (as in the entire answer).

Reader October 23, 2013 at 12:56 pm

I’ve always liked Banksy’s stance, putting two fingers up at the corporateness of the art world!

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