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ACCOUNTING FOR TASTE: THE ECONOMICS OF ART

ON NOVEMBER 11, 1987, less than a month after stock prices on Wall Street saw the largest one-day decline in their history, Vincent van Gogh’s Irises sold at Sotheby’s in New York for $53.9 million. At the time, this was the highest price ever paid for a work of art. And while the Irises sale may be the most dramatic manifestation of the disconnect between the financial sector and the art world, such incongruities are more the rule than the exception. As recently as February 5, 2008, as the Dow Jones lost 370 points (its steepest decline in a year), Sotheby’s London brought in £117 million ($231 million) at its modern and Impressionist art sales. Sixty percent of the lots went for prices above their high estimates. In spite of copious amounts of research on the topic, no economist has ever been able to prove that art prices consistently follow the stock market’s upward or downward movements.

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