Art Markets Class

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1. Course description

We’ll analyze art from the point of view of an economist (main premise), and we will understand the economy through the point of view of artworks.

Economics of Art:

This course uses the perspectives and tools of economics to analyze questions arising in connection with culture and the arts. What economic forces influence the creation, presentation, preservation and ownership of art? Should support for the arts be provided through private patronage, philanthropy, or public sector support (i.e. taxes)? How does the mechanism of support for art affect the productivity and creativity of the artist? Does art make a good investment for an individual? If so, why do art museums require donations and public support? What are the impacts on economic vitality and local economic development of cultural and arts organizations? When these impacts arise, how can (or should) they be used for public policy? 

Art of Economics:

Here we will discuss art forms that arise from different economic systems. Our focal points will include the role of art as a tool for economic policy; the role of censorship; culture and economic development. In this section we will also create some art projects that represent economic concepts.

 2. Goal of the Tutorial

The goal of this tutorial is to allow you to build upon the tools you’ve acquired in your theory courses and learn to carry out economics research. Class meetings are structured around discussions of the assigned material rather than lectures. Be ready to participate, discuss, comment on, and lead. I am here to facilitate debate among you. Also be prepared to write.

3. Course Requirements:

a. Prerequisites:

Ec10ab (Principles of Economics); Statistics 104 (or equivalent), and Economics 1010a or 1011a are required. You must have taken or concurrently be taking Economics 1010b or 1011b.

Economics 970 may not be taken as Pass/Fail.

b. Readings

There are three books that are required texts.

1. James Heilbrun and Charles M. Gray. The Economics of Art and Culture, 2nd edition. Cambridge University Press. (HG)

2. Clare McAndrew (ed). Fine Art and High Finance: Expert Advice on the Economics of Ownership. Bloomberg Press. (CM)

3. Don Thompson. The $12 Million Stuffed Shark. The Curious Economics of Contemporary Art. Palgrave Macmillan. (DT)

We will also read articles published in scholarly journals.

4.  Expectations & Grading:

You will be evaluated based on your class participation and writing assignments. You will have something due every week in this class.

a. Participation:                       10%

b. Responses:                          10%

c. Short paper:                        15%  

d. Photography portfolio:       10%

e. Discussion leader:               10%

f. Term paper:                         35% (Proposal 5%, Prospectus 10%, Final term paper 20%)

g. Empirical Exercise               10% (4 problem sets due on Stata, each 2.5%)

4. a. Participation

Attendance, attention and class participation are required. 2 free absences (either with a medical excuse or not); and starting with the 3rd time, you lose 1% grade with each absence.

Ex 1: If you miss class twice and bring me doctor’s report for the third absence, you lose 1%.

Ex 2: If you miss class twice and do not bring me a doctor’s report either time, you do not lose your grade. 

Take-away: Use your “free passes” for when you’ll actually need them.

4.b. Responses

Class participation is complemented with a 2-paragraph response paper for each starred date. The starred dates have a student presenter. We’ll have 10 such dates, you’ll write 9 responses, with 1 free pass.

i.e. Response grade is 2% + # of responses submitted, for a maximum of 10%.

Responses are not graded for content- mere submission is enough.  Responses are due at 10 am of the day they’ll be discussed. The idea is to get you contribute to the discussion when your friend is presenting. What is a response paper? A handout will be uploaded on the isite.

4.c. Short paper 

There will be 1 assigned paper, a 5-7 page writing assignment, answering a question that will be assigned to you (as opposed to the Term Paper, for which you’ll pose your own question). 

4.d. Portfolio

You’re asked to create a portfolio of photographs depicting Micro and Macro concepts. Detailed instructions are to follow. Your portfolio is due right after Spring Break, on March 25 in the beginning of class. You will also prepare a presentation with your portfolio submission. 

4.e. Discussion leader:

Over the course of the semester, each student will present one of the assigned reading collections to the class and lead a class discussion. In the reading list below, the lectures available for presentation are denoted with an asterisk. In the second week of class, you will sign up for a day to present. In early April, each student will also present his/her term paper topic to the class.

4.f. Term paper:

Proposal (5%, 1-2 pages)

Prospectus (10%, 4-6 pages) The prospectus provides a roadmap for your term paper. It motivates and describes your research question and hypothesis, discusses related work. The Prospectus will consist of a literature survey.

Research Paper (20%, 12-18 pages, not including tables/graphics) You will write the paper on a topic of your choice. You will pose a research question and formulate a hypothesis, conduct cogent empirical analysis, and synthesize/present your results in an academic paper. More details will be provided in the second week of class.

4.g. Empirical component (10%)

There is a mandatory empirical component in this class: You have to attend 4 sessions of data analysis training via a software called STATA. Attendance is outside of regularly scheduled class time and is mandatory. There are also 4 problem sets.  

  • The schedule Stata tutorials are on the following dates at 8.30-10.00 am, room TBA.

February 6

February 18

March 4

March 25

Tutorials are taught by James Mahon. At the beginning of each tutorial, James allocates 30 minutes to discuss previous problem sets.

  • The 4 problem sets are due on:

February 14

February 26

March 13

April 2 

More on the Stata isite: 

5. General Policies

This syllabus is a contract. Deviation from policy is not allowed.

  1. Lateness Policy:
  • Presentations may not be late. During Portfolio presentation, lecture discussion leader, or your proposal presentation, if you’re not ready to present, you’ll lose your grade.
  • For written work, you’re allowed to be late up to 48 hours for 1 of the assignments. Every written work submitted late starting with the 2nd time, you’ll lose 1/3 of a letter grade per day, or a fraction thereof.

Use you “lateness option” wisely. We have 4 written assignments due: 1 short paper, Term Paper Prospectus (with a presentation), Term Paper Draft and a Final Term Paper.

Ex: You submit your short paper on time, Term Paper Draft is 1 day late, and Final Term Paper is 1 day late.

Your short paper is graded fully. Term Paper draft is graded fully (protected by the lateness policy). Final Term Paper loses 1/3 of a grade.

You may not apply your “lateness option” retroactively. i.e. If short paper is late (15% of your grade), and your Final Term Paper is late (20% of your grade), the free pass will be applied to the short paper, because it’s the first late assignment.

  • The Empirical Exercise may not be late. Any late submission will lose the 2.5% grade.
  1. Correspondence: Best way to reach me is to show up during office hours. Email is a second-best solution. You will receive a response within 24 hours during the week. I don’t respond to emergency email the night before assignments are due.
  2. You are encouraged to study together and discuss ideas. However, all writing assignments have to be completed individually and citations must be used properly.
  3. Online activity is not allowed during lecture. You may use your laptops to take notes only.
  4. Integrity. Harvard has a clear Code of Academic Integrity. It’s your responsibility to familiarize yourself with the code, and to follow it to the letter:

In particular, you are expected to:

  1. Maintain a professional, respectful environment
  2. Be courteous to myself and your peers
  3. Not disrupt class (be quiet if entering class late, turn off electronic devices, do not chat). You may keep your laptop on during lectures, only if you plan to take notes relating to Art Econ. Other online activity is not permitted.
  4. Not present work that’s not your own

 Weekly Class schedule:





Work Due


Feb 4




Why did you choose Art Econ? Your background and particular interest in art; why we study the Art Market




Feb 6



Stata session #1



Feb 6

Players & Environment


  1. “The $12 Million Stuffed Shark.” (DT)
  2. “Branding and Insecurity.” (DT)
  3. “Branded Auctions.” (DT)
  4. “Branded Dealers.” (DT)




Feb 11

How do Economics and Art Intersect

  1. Frey, B. “What is the Economic Approach to Aesthetics,” 2001. In Rational Decision Making in the Preservation of Cultural Property, ed. Baer, N.S. and Suikars, F. Dahlem University Press, 225-234.
  2. Baumol, W. “The Arts in the “New Economy,” 2006. In Handbook of the Economics of Art and Culture, ed. Ginsburgh, V.A and Throsby, D. Elsevier.
  3. An overview of the Arts sector (HG Chapter 1)
  4. Growth of the Arts sector (HG Chapter 2)


Response 1


Feb 13


  1. Audiences for the Arts (HG Ch 3)
  2. Consumer Demand: an Introduction (HG Ch 4)
  3. The Characteristics of Arts Demand and their Implications (HG Ch 5)
  4. Art and Money (DT)
  5. Pricing Contemporary Art (DT)
  6. LA galleries reframe the recession, LA Times




Response 2


Feb 14




PS # 1 due


Feb 18

Valuation & Appraisal

  1. An Introduction to Art and Finance (CM Ch 1)
  2. Art Appraisals: Prices and Valuations (CM Ch 2)


Response 3


Feb 18



Stata Session 2



Feb 20

 Pricing & Valuation


My Kid Could Paint that






  1. Museums (DT)
  2. The Market in the Works of Art (HG Ch 9)
  3. The Economics of Art Museums (HG Ch 10)
  4. Timeline: Museums and the recession, ArtInfo


Response 4


Feb 26



PS #2 due


Feb 27

Private or Public Funding

  1. Should the government subsidize the arts? (HG Ch. 11)
  2. Public and/or private support for the arts in the United States, Canada, and Western Europe (HG Ch 12)
  3. Frey, B. “Public support”, 2003. In A Handbook of Cultural Economics, ed. Towse, R. Northampton, USA. 389-398.

Response 5


Mar 4



Stata session 3



Mar 4

Financial Considerations in Art Funding

  1. The Government and the Art Trade (CM Ch 7)
  2. Art and Taxation in the US (CM Ch 9)

Response 6


March 6



Angrist, J.D & Krueger, A. B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, vol. 106(4), pages 979-1014, November.

Short Paper due


Mar 11

Economic System, Government and Creativity


  1.  Frey, B. “Creativity, Government, and the Arts”, 2002. De Economist, 150, 363-376.
  • Economic Systems and the Arts (PPT lecture)




Mar 13


  1. Art and Artists (DT)
  2. Damien Hirst and the Shark(DT)
  3. Warhol, Koons and Emin (DT)


PS #3 due

Response 7





Spring break



Mar 25



Stata session 4



Mar 25



Portfolio presentations

Portfolio due


Mar 27


Optimal Auction behavior

An English auction in class



Apr 1

Auction Houses and Price fixing

  1. Christie’s and Sotheby’s (DT)
  2. Choosing an Auction Hammer (DT)
  3. Auction Psychology (DT)
  4. The Secret World of Auctions (DT)
  5. Auction Houses vs Dealers (DT)
  6. Ashenfelteer, O. and Graddy, K. “Art Auctions,” 2010, CEPS Working Paper No. 203 .
  7. Ashenfelter, O. and Graddy, K. “Anatomy of the Rise and Fall of a Price-Fixing Conspiracy: Auctions at Sotheby’s and Christie’s,” 2005. Journal of Competition Law and Economics, 1(1), 3-20.


Response 8


Apr 2



PS #4 due



Apr 3



Present your term paper proposal in 5 minutes

Proposal due


Apr 8



  1. Frey, B. “Art Fakes, What Fakes? An Economic View,” 1999.  Institute for Empirical Economic Research, University of Zurich, mimeo.
  2. Fakes (DT)
  3. The Illegal Art Trade (CM Ch 12)

Response 9


Apr 10

Legal Issues (Copyright, Appropriation, Provenance)


PPT lecture (we’ll discuss various court cases regarding copyright issues)



Apr 15

Returns: A case study

We will have a financial analyst talking about diversification


  1. Beggs, A.  and Graddy, K. “Failure to meet the reserve price. The impact on returns to art,” 2008. Journal of Cultural Economics, 32, 301-320.




Apr 17

Art as an Investment

  1. Frey, B. and Eichenberger, R. On the Rate of Return in the Art Market: Survey and Evaluation,” 1995. European Economic Review, 39, 528-539.
  2. Contemporary Art as an Investment (DT)
  3. Art Price Indices (CM Ch 3)


Draft term paper due

Response 10


Apr 22

Collecting for the future


Herb and Dorothy



Apr 24

Collecting for the future

We might replace this class.


  1. Chanel, O. “Is art market behavior predictable?” 1995. European Economic Review, 39, 519-527.
  2. Gerard-Varet, L.A, “On Pricing the Priceless: Comments on the Economics of the Visual Art Market,” 1995. European Economic Review, 39, 509-518.
  3. Ashenfelter, O. and Graddy, K. “Sales Rates and Price Movements in Art Auctions,” 2010, Princeton University, mimeo.




Apr 29

Closing remarks.

  1. End Game (DT)



May 5




Term Paper due at 5 pm