The cynical “death effect” somewhat demystified.
Pssst! If you’re one of those who share articles but don’t actually read them, all you need to know is that: you shouldn’t trust any of those sales peeps telling you that “the artist is getting old and fairly tired, so it’s the right moment to buy.” Or at least it’s not that easy… Hence the need to read the article!
Is a piece of art more valuable when the artist dies? Our common sense would make us say “yes, obviously”. This is the death effect: a link between the artist’s death and the rise of its artworks’ prices.
Is the death effect proven?
Robert B. Ekelund and John D. Jackson, two American economists would say we are wrong. This supposable price bump does not occur after the artist’s death but five years prior. This would explain why the curve of prices of some pieces increases in parallel with the ageing of artists.
Studying 17 American post-war artists, Ekelund, Jackson and Robert D. Tollison came to the conclusion that it would be more appropriate to talk about a “betting on a forthcoming funeral effect”. Why is that?
These are the rules of the game between supply, quantity and demand. It seems coherent that the more the artist grow old, the less he would be able to produce. In this sense, if less artworks are provided in the market, prices will raise.
Who said art wasn’t related to economy?
The economic theory explains that if you are the only one on the market providing a certain good — you’re a monopolist. Thanks to this position, you are the one acting on the price you impose AND on the quantity you supply. As a piece of art becomes rarer with time flying, the price increases. On the contrary, when an artist dies, the market is often flooded with its artworks, the offer outnumbers the demand and the price falls.
Examining 6,118 auction records for paintings, Ekelund and Jackson showed that during the five years preceding death, artists experienced a steady rise in artworks’ price of 6% on average. On the contrary, after their death, the price was dropping by 26%. However, one may note that prices can raise again — or even skyrocket — after a certain time.
The older, the better?
70 years old: this appears to be the best time to bow out. According to some scholars, the age at death would also impact prices, following an “inverse U shape”. Death effect would only be positive for old artists — not too old, but not too young as well. However, an inverse-U pattern was also found by Elekund and Jackson proving the contrary: prices may fluctuate during the life of an artist, but at the moment of its death it is irrelevant: some of Basquiat’s paintings, who died at 27 years old, have been sold for hundreds of millions of dollars.
Artists: orchestras of their own success
Finally, artists themselves establish strategies by restricting the number of artworks they produce. Indeed, they can change their styles, providing only a few pieces in a specific wave or give some pieces to museums such as Pablo Picasso did — which will then never get into the market.
Consequently, by controlling this, they have more chance to enjoy the benefits of the death effect while being perfectly healthy.