Value in Outsourcing Labor and Creating a Brand in the Art Market: The Damien Hirst Business Plan
Haight, Marjorie May, American Economist
Damien Hirst, prominent British modern artist, does not actually make a significant body of his own work. Commenting on his famous series of spot paintings (Figure 1), Hirst describes his personal efforts as "shite." He only painted five of these before outsourcing the work to assistants because "[he] couldn't be fucking arsed to do it" (Hirst and Burn 2001). In addition to outsourcing, according to my research, approximately half of Hirst's total body of work for sale at auction is created in three series of nearly identical works. The three repeated series of works are: "Spots," "Spins," and "Butterflies" (Figures 1, 2, and 3 respectively). The pieces within the series vary slightly by size and in some cases, color, but are distinctly recognizable and artistically unoriginal. In contrast, the rest of Hirst's work follows some over-arching themes, but the individual pieces are for the most part unique, and Hirst seems to play a large part in their creations (Hirst and Burn 2001). When pieces of art sell for millions of dollars at auction, we assume the buyer is spending the money because: they like the specific image, an illustrious artist created it, and they want to be the sole possessor of an original piece. Do buyers recognize these differences in production and subsequently value the two groups of art differently? This paper will examine two groups of Hirst's work, "repeated" pieces and "unique" pieces, in order to determine which type of art appreciates more in value over time. Do unique, Hirst-created works appreciate more because they are one-of-a-kind, or does Hirst's established brand support the prices of the pieces in the repeated series?
Economic evaluation of the art market is a recently developed, relatively unexcavated field. However, it has been gaining more attention in the past 20 years because of exploding auction prices and increasing size of the art market due to globalization. In 1974, Robert Anderson was the first to publish a paper examining rates of return on art. Since Anderson, others have continued to investigate the return on investing in art and correlation to traditional financial markets (e.g., Baumol 1986, Chanel and Ginsburgh 1996, or Worthington and Higgs 2006). Most studies find rates similar to those of risk free assets, such as bonds, with low correlation to traditional financial markets (Worthington and Higgs 2006). These findings make investments in the art market seem intriguing. However, other aspects of art investment, such as damage risk, unpredictable price movements due to fads or trends, and storage/preservation costs must be factored in to the overall picture as well.
My question comparing intrinsic and brand value of art objects takes traditional return on investment studies further, and begins a conversation on how knowledge of a particular artist's production style can be incorporated into purchasing decisions. In order to investigate the rates of return on "repeated" and "unique" works, I will utilize the hedonic modeling methods employed in previous papers (see Chanel and Ginsburgh 1996). Hedonic models are ideal for real assets such as houses, cars, or paintings, which are relatively illiquid and extremely heterogeneous in defining characteristics. I will use these hedonic techniques to construct price indices for repeated and unique art prices as a function of time, medium, and surface area for each group. I will then compare the price trends and rates of return for the repeated and unique works, and assess whether there is evidence of value in creating a brand.
II. Literature Review
Starting in the 1970's, art valuation, traditionally in the hands of the art critics, dealers, and gallery owners, was given a fresh look by economists. In 1974, Robert Anderson was the first to apply econometric methods of valuation and consider art for more than its decorative features. He reasoned that art could be used as a vehicle for investment, and computed a nominal rate of return of 4. …