South-Western College Publishing - Economics  
The Value of Beauty is in the Statistical Model of the Beholder
Topic Labor Markets ; Utility and Consumer Choice
Key Words art, productivity, age, price.
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Reference ID: A154420262

News Story What makes a painting by Gustav Klimt worth $88 million? A later Cezanne worth $37 million, but an early Cezanne for only $1.1 million? Usually those differences get chalked up to that aphorism about beauty being in the eye of the beholder. But an economist at the University of Chicago think that the value of the beauty can be statistically modeled.

Most people can't tell you what "great art" is, but they can tell you when they see it. But an economist at the University of Chicago who had researched age and productivity thought that it could be quantified much more thoroughly than that. Aiming for a "unifying theory" of art, he suggested that the value of a work could be based on the painter's productivity throughout his life. For example, someone like Cezanne, who did works over and over again, would be more productive later in life. Therefore, his later paintings should be much more valuable than the earlier pieces. Some people, however, did their best work earlier in life. Those people, like Andy Warhol, would see their earlier work valued more highly than their later work.

This theory has been criticized by many for applying statistical analysis to the one discipline least likely to be quantified. And they argue that it doesn't explain everything in art. This theory doesn't, to be sure. Every model will have its outliers. But for those who want to have a better idea if the painting they like is really worth the $30 million asking price, some statistical analysis may really help.

Questions
Discussion Questions:
1. People who criticize this application of statistical theory to art argue that the theory undermines what determines great art? Why is this?
2. This economist is equating productivity in an artist's worklife to the value of his/her paintings. Are there any analogies to this in a conventional labor market model?
3. Given that there is only one original work available for sale (only one Guernica by Picasso, for example), the supply is fixed. What can we say about elasticity of demand as a work of art becomes more highly valued? Why?
Multiple Choice/True False Questions:
1. According to the article, those who took a long time to produce "great work" should see
  1. The value of their paintings increasing over their worklife.
  2. The value of their paintings decreasing over their worklife.
  3. The value of their paintings remaining the same over their worklife.
  4. The value of their paintings becoming more elastic over their worklife.
2. According to the article, those who produced their best work early in their lives should see

  1. The value of their paintings increasing over their worklife.
  2. The value of their paintings decreasing over their worklife.
  3. The value of their paintings remaining the same over their worklife.
  4. The value of their paintings becoming less elastic over their worklife.
3. Based on the article, what can we assume about "great works of art?"

  1. They are inferior goods.
  2. They are necessary goods.
  3. They are luxury goods.
  4. A and B
Source Leonhardt, David. "The Art of Pricing Great Art." New York Times, November 15, 2006.
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