Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Wednesday, May 11, 2005

Droit de Suite

The EU has decided that in the future, all artists should receive a portion of the gains if their works increase in value.

Living artists should be allowed to earn royalties from the resale of their work and be protected from "cowboy" art dealers, MPs say.
A European directive due to come into force next year will, for the first time, give artists and their heirs a share of the resale price of works of art, known as droit de suite. It does not apply when an artwork is first sold.
This directive will have two interesting economic effects.

(1) It will surely affect the initial price received by an artist for a piece of art. If people expect that they will have to pay the equivalent of a sales tax on the resale value of their art, it will reduce their willingness to pay for the work when they purchase it. Of course if they think the tax will go to the artist, via droit de suite, that will probably have less of an effect than if they think the tax will go to the gubmnt. For a formal analysis of the dynamics of droit de suite, see this paper.

(2) Imposing droit de suite in some markets will create an incentive for people to resell their art in other markets.

The legislation was bitterly opposed by the Government for auction houses and dealers who said it would destroy the international art market in London because sellers would go to Switzerland and America where such laws do not apply.
Thanks to BrianF for the initial link. Also see The Atlantic Blog for a discussion.

On a related subject, a group of UK artists has formed a co-operative savings plan:

The UK trust would aim to cover 250 working artists, vetted by experts before they join the scheme. They would contribute 20 artworks over 20 years, to be sold when prices are judged to be right.

...In their first five years in the scheme, artists would contribute two works a year, with the rate falling to one after five years and then one every two years for the last ten.

When the works were sold, 20 per cent would go to the running of the trust and, of what remained, half would go to the artist who sold and the rest divided between other artists. Highly successful artists would capitalise on their own talent but also subsidise others who have not fared so well.
There is a very serious problem with shirking in co-operatives: I wonder how the scheme will be policed to keep artists from banking their stuff that doesn't sell.
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