Drivers of art market prices

However, art is a luxury good for which demand increases with wealth, so the demand for art may not be as “rudderless” as Baumol suggested. The spending power of hedge fund managers, Russian oligarchs, Chinese multi-millionaires and even the art budgets of well-known banks helped to propel art prices in the years up to 2008. Artprice, a consultancy, reports that this was reflected in a 47% increase in the number of works brought to auction between 2000 and 2008, with what it described in its review of global art markets in 2008 as “somewhat frenetic” demand lifting the market for emerging contemporary art. The declines in art prices in 2009 confirm that art market price trends can be explained at least in part by changes in the wealth of a....