Transparency or Lack Thereof

Daniel Grant has a good article in the Huffington Post on secrecy and the lack of transparency in the art market today.  Grant states that both auction houses with behind the scenes loans and guarantees as well as in upper market galleries where sometimes it can be difficult to find an asking price.

There has been some recent discussion on the preference of using auction figures as they are one readily available in most cases and two have at least the appearance of being more transparent. But that is not always the case and it is not unusual for an auction house to arrange financing and credit terms that allows a bidder more flexibility in bidding. Additionally, much of this information is never revealed to the buying public.

The article is good stating reference point on transparency in the art market, and appraisers should understand the impact of a lack of transparency when valuing. 

Grant states

Economists who have studied the art market find little to like about secrecy, which they refer to in their published work as "information asymmetry." "Secrecy in a market prevents the market mechanisms from working as they should," said William Baumol, a professor of economics at New York University. "The loans and guarantees and overall secrecy are a form of manipulation by the auction houses to increase their profits." Put another way, "secrecy keeps you from knowing you're paying too much," said Rachel Campbell, an economics professor at the University of Maastricht (Holland) and an advisor to London's Fine Art Fund, the premier hedge fund in the art investment field.

To read the full Huffington Post article, click HERE.