Jean-Michel Basquiat, Untitled, 1982. Courtesy of Sotheby's.
The average life expectancy for a woman born in 1915, the year that gave us Cuban-American painter Carmen Herrera, was 57 years. At 102, Herrera is now nearly twice that old. According to research economists Robert B. Ekelund and John D. Jackson, she is probably right in the sweet spot to enjoy the “death effect” on prices for her artworks—despite being alive and painting.
Ekelund and Jackson say the death effect—traditionally conceived of as the price bump an artist gets after her death—is actually only observable for living artists, and only in the five years leading up to an artist’s death. In redefining the “death effect,” their research helps explain rising prices for a large cohort of prominent artists reaching advanced ages.
“It has everything to do with the [buyer’s] assessment of whether the artist will overproduce or spoil the market of what they buy,” said Ekelund. “If an artist is 95 years old, you know pretty well that the supply is going to end pretty soon, and the supplier can’t spoil the market.”
In their recent book The Economics of American Art, Ekelund and Jackson, both professors emeritus at Auburn University in Alabama, and the late Robert D. Tollison lay out the case for what could be more accurately called the “betting on a forthcoming funeral effect.” By examining auction records for 17 American post-war artists, they found that, on average, prices rise steadily in the five years preceding an artist’s death, and plummet the year she or he dies.
The theoretical underpinnings for their conjecture are simple, but sophisticated in their application. Prices are governed by the interaction between supply, the quantity and quality of a good or service, and the demand for it. In the art world, demand for an artist is influenced by many factors, such as critical reception, museum shows, and which collectors or institutions own works. But over the course of an artist’s lifetime, supply is governed chiefly by one factor: the artist who produces the work.
The Artist’s Monopoly
Forgeries aside, that makes an artist, in an economic sense, a monopolist. And here’s where economic theory comes in, courtesy of Nobel Prize-winner Ronald Coase. In an important 1972 paper titled “Durability and Monopoly,” Coase proposed that a supplier with a monopoly on a durable good (say, a painting intended to last over time), can take certain actions to assure buyers that she or he will not “spoil” the market by flooding it with a surplus of goods. This serves to maintain a stable price. For example, the monopolist can create contracts stating she will not produce more than a certain amount annually.
Surely nothing could assure a collector more that an artist’s supply is limited than knowing her death is a few years away. But, Ekelund and Jackson point out, once an artist dies, a number of other factors might affect the supply of works immediately following death: Anticipating the popularized notion of prices increasing after an artist dies, collectors might bring an increased number of works to market, or the artist’s dealer might announce a number of works for sale and flood the market. The unpredictability of post-death supply makes it impossible to measure a post-death death effect, although it is likely that a rush of supply onto the market contributes to the fall in post-death prices documented by the researchers. By contrast, an artist’s output tends to slow as she or he approaches death, due to physical limitations.
Ekelund and Jackson tested their hypothesis by examining 6,118 auction records for paintings created by 17 post-war artists (14 of whom were men) who died between 1987 and 2013. For the artists examined, they found a steady uptick in price of 6% on average in the five years preceding death, followed by a roughly equivalent drop in the year of their death, a fall of 26% on average. After that, prices typically began to climb again. They controlled for factors such as size of the painting, the age of the artist, and the medium. Ekelund, in an earlier study of Mexican artists, had found a similar pattern.
Of course, once a general consensus is established that a deceased artist belongs in the canon, the prices for her or his (mostly his, historically) work can skyrocket, as demand rises alongside dwindling supply. See recent sales of Leonardo da Vinci’s Salvator Mundi for $450 million or the $110.4 million paid for a Jean-Michel Basquiat painting last year for extreme examples of this phenomenon in action.
Age Ain’t Nothing but a Number
Other scholars have demonstrated how the age of an artist at death affects prices, finding an “inverse U shape” (in other words, a rise then a fall). In their research, the peak age-at-death, in terms of an artist’s price and reputation, is 70—old enough to have garnered critical acclaim, not so old that one is forgotten. “The death of young artists actually decreases the price of their works of art, whereas the death effect is positive for older artists and disappears for artists who die at a very old age,” wrote Heinrich Ursprung and Christian Wiermann in their 2011 paper “Reputation, Price, and Death: An Empirical Analysis of Art Price Formation.”
Ekelund and Jackson found an inverse-U pattern for artists’ prices over the course of their lifetimes, with prices peaking at age 47, on average. But for an actual death effect, age was irrelevant. The 17 artists studied had a death effect regardless of their age, from Basquiat, who died of a heroin overdose at 27, to Agnes Martin and Andrew Wyeth, who each died at 92.
What This Means for Artists
Ekelund and Jackson said many artists, intentionally or not, deploy certain strategies that create a death effect—a restriction of supply—during their lifetimes. For example, Robert Rauschenberg frequently changed styles, which served to limit the amount of work in any given style or period of his career, although arguably he and other artists change styles because, well, that’s what artists do. Highly recognized artists can also set up museums in their lifetime, as Pablo Picasso did, to assure buyers that a substantial portion of their output will be removed from the market.
Artists and their dealers can (and often do) think strategically about output, and can structure contracts to ensure that the dealer has the right to buy a work back from a collector who eventually wants to sell it, rather than let it remain in the open market.
“They want to give the impression that there’s not going to be overproduction by these artists,” Ekelund said.