And so I'm pretty sceptical about Droit de Suite - policies that seek to redistribute portions of realized capital appreciation in artworks back to the originating artist. At the margin, they reduce incentives for gallery owners, curators, and collectors to make complementary investments in new artists. What are the distributional effects?
- A windfall gain in the current period to established artists at the expense of those who made complementary investments in their success;
- A transfer to those artists who become successful from those who never do;
- For a successful artist, a transfer of income from when he's young and poor to when he's old and established.
Note further that none of this requires that investors are only in it for the money; they're just less able to afford to keep making those investments where the returns are taxed. It wouldn't be surprising if the insult given by the implicit devaluation of their role were as motivating as the reduction in forward-looking returns. But budget constraints do bind too.
@CherylBernstein points to a newly introduced American bill that would implement Droit de Suite in the U.S.
The Equity for Visual Artists Act of 2011, would set aside 7% of the price for works resold for more than $10,000 at major auction houses, such as Christie’s and Sotheby’s, with half the proceeds going to the artists and half to non-profit art museums.If the portion going to non-profit art museums goes into a common pool rather than to the museum that first exhibited the artist's work, or to the museum of the artist's choosing, recipient museums have free-rider problems in making investments in emerging artists. What do I mean? Consider two non-profit museums. The first makes large investments in figuring out which new artists in the community are worth promoting and works hard to help them become successful; the second spends the same amount of money hosting travelling exhibitions from other galleries. The first museum buys a lot of the emerging artists' work and hopes to use earnings from the small proportion that really pan out to help future emerging artists; the second just banks revenues from travelling exhibitions to fund later hosting of travelling exhibitions. The proposed policy takes money from the first museum and gives it to the second, reducing museums' incentives to invest in new artists.
The legislation, as it stands, would only apply to the resale of works at public auction houses “with more than $25 million in sales in the prior year”. Auction houses that operate only online would be excluded, as would private galleries.Prediction: more sales shift to online and private galleries from public auction houses. I have no sense of how costly that is in terms of sale revenue foregone, but if most auctions are coordination games, and everyone's making the flip, it's probably not that bad. The big auction houses will be lobbying hard against the legislation and might find it worthwhile to flip to online-only auctions.
Update: Consider now the case in which curators and collectors really have no effect on an artist's success. In that case, the policy still results in reductions in the amount those folks are willing to pay for a new risky artwork and so still effects transfers from those artists who never become successful to those who do and from artists when they're young and poor to when they're old and successful. But there's less efficiency consequence as the ancillary investments by others are of less value.