The catalyst: Economics professor Neil De Marchi began to teach the course in the early 1990s as an outgrowth of his fascination with the art market and the ways in which it fits and breaks traditional economic theory. “It’s a beautiful context to inject a bit of critical thinking and skepticism into students’ previous economics coursework,” he says.
The gist: The course highlights the roles of major players in the modern art world and the market currents that sway them. While De Marchi emphasizes application of microeconomic concepts, he also wants his students to see that theory has its limits. For instance, the cost of production of a painting or sculpture is seldom a reliable determinant of price. Rather, sale price is driven largely by what economist Adam Smith called “fancy,” a subjective measure of desirability with little predictive power.
The twist: De Marchi is quick to point out that the art market is notorious for its utter lack of transparency. “It’s the largest worldwide market that is almost entirely unregulated,” he says. Accordingly, students spend time examining dubious practices in the marketplace, from forgery to collusion.
Assignment list: Students write a series of short response papers analyzing contemporary art issues, such as the rise of online auctions and the investment potential of modern artists. The latter half of the semester focuses on a fifteen-page research paper, completed in small teams on a topic of choice. Readings drawn on throughout the class consist of economics literature and art-market case studies.
What you missed: Midway through the semester, students played a virtual art collecting game, engaging in transactions with their classmates to acquire a fantasy art collection. The exercise allowed students to practice some of the same bargaining strategies and price-evaluation methods used by art gallerists and dealers.