An economic analysis of the contemporary visual art market in Australia, 1972-1989.

The analysis of the market is undertaken in both theoretical and empirical terms. The theoretical analysis finds that the dynamics of the art market are important but are difficult to formalise; the primary market is one where prices are set administratively; the secondary market, auction market, is the one where market-clearing occurs; success in the art market will come only to those artists whose works can command the same price in the secondary market as is set in the primary market; the overall market operates with considerable lags so that it may take many years before artists' work appear in the secondary market; and the dealers in the primary market play an important role as intermediaries. The results of the empirical studies carried indicate that the returns to owning art over the period, 1972-1989 have been high and higher than the returns to financial assets. The results of the Portfolio Study confirmed by the results of the resales aspect of the Auction Price Study and by examination of the performance of individual artists. The justification of public support for contemporary visual art is not very strong. Considerable doubt has been cast on the value of the proposed Droit de Suite scheme because the basis of the scheme that artists are exploited cannot be substantiated; artists have difficult in making first sales; most resales do not result in capital gains; the potential costs of a collecting scheme are substantial; and the introduction of the scheme will reduce the current demand for contemporary visual art. The criticisms of the Australia Council have been accepted as the activities of the Council work to advance the interests of artists and contribute to the oversupply in the market.