Guiding the buyer: the early days of investing in art


For picture credit, see end of article.

Where did the idea of art as an investment begin? Dr Sandra van Ginhoven of the Duke Art Law & Markets Initiative (DALMI) at Duke University, Durham, NC, has been conducting research into the history of the art market, with particular interest in what insights can be gleaned for the present day market. She told Private Art Investor what she has discovered.


It may come as a surprise to modern day collectors that some dealers were introducing the idea of art as an investment to the public as early as 1780.

“This idea predominates in today’s discussions about buying art, but this idea goes further back in time than most assume,” says Dr Sandra van Ginhoven, who recently worked with doctoral student Hilary Cronheim on an analysis of auction catalogues and sales records from art auctions held in Paris from 1764 to 1780.

“One dealer, François-Charles Joullain went as far as to publish the first repeat-sales index: a list of the past prices of 365 lots of paintings from 59 prominent collections, openly recognizing the importance of price information for the market.

“This is why in our study we found that, in addition to describing the paintings and highlighting their desirable visual characteristics in the sales catalogues (a practice now lost), dealers also started to place emphasis on information about the paintings. This information seemed to be value-holders and presented the paintings as a good investment.”

Cronheim and van Ginhoven were also surprised to discover that French was not the predominant origin of paintings sold in the Parisian auction sales during the period they studied. Parisian dealers were selling predominately 17th-century Dutch and Flemish paintings in the 18th-century French art market.

“We can see in this already the beginnings of the internationalization of the auction market,” says van Ginhoven. “We are investigating what drove this internationalization. Paintings by French artists of the time did not dominate the market as it had been previously thought; we would call this primarily a market for Old Master paintings.”

They also found that during this time, French dealers introduced the sales catalogue as a marketing tool, where the descriptions of the lots centered on the visual aspects of the paintings. Dealing in Old Masters paintings meant dealing in paintings whose creators were long deceased.

“These artists could not insist on their intentionality in the judgments made about their works. Dealers took advantage of this and steered the public by pointing out what made works valuable. They even encouraged buyers to explore and develop their own particular preferences, and to evaluate them upon seeing the paintings for sale. All this was basically a way to amplify the demand for Old Masters works.”

The works circulating during the period studied told Cronheim and van Ginhoven a different story from what they had expected, and this dealer behavior confirmed for them that it is very important, for earlier periods as well as for the contemporary situation, to assess precisely what people buy, regardless of whether they are prominent collectors or one-time buyers and within the whole price spectrum.



The growth of affordable art


An important aspect of Cronheim and van Ginhoven’s research was sales of “affordable art”, which allowed them to identify a widespread and general interest in paintings during the time period studied.

“There were several outlets accessible to people,” says van Ginhoven. “Our study shows that there were paintings for many pockets sold at auctions. The minimum price recorded was 1 livre (roughly the price of a gallon of wine). But 50% of paintings in the study sold for 150 livres or less, and 25% the paintings for 40 livres or less.”

For the sake of comparison, some statistics suggest 150 livres was roughly equivalent to a skilled laborer’s monthly salary. Half the lots sold studied could be bought under that person’s monthly salary. However, there were exceptions: a painting titled The Departure of the Hunting Party by Dutch painter Philips Wouwermans (1619-1668) sold in 1777 as part of a pair for a total of 10,6660 livres (or 5,550 livres each) – equivalent to three years’ salary for a skilled laborer. The same painting sold at Christie’s in 2010 for US$1,847,786.



The power of the sales catalogue


To become active in the auction market some buyers needed—others simply benefited from—the written sales catalogues to substantiate the purchase. The descriptions gave some guiding principles to judge the lots for sale.

“The combination of reasonable disposable income and good advice could result in a nice painting at the home of the general enthusiast,” says van Ginhoven. “By including all price categories and participants in the market, the approach of our study also allows us to confront motives for buying art.”

For instance, symmetry, balance and a saturated hanging characterized hanging schemes at private homes. These hanging schemes exploited the visual characteristics of the works of art to communicate with one another, and subsequently compose a coherent whole.

“For us, this connects to the premium given to the visual qualities of the objects. And we also see that dealers emphasized these visual qualities in their descriptions.”

During this time period, art as investment was starting to stick but was not the prevailing motive for all participants in the market. That is why statements like “polished finishing” worked towards a purchase, because that trait is based on viewing pleasure—a confirmed driver of sales.

In contrast, in the contemporary market for Old Masters, Cronheim and van Ginhoven observed a huge gap between the very expensive works deemed of quality that only ultra-high net worth individuals or important museums can aspire to acquire, and the numerous works that go largely undetected when potential buyers do not have all the information they need to form their own assessments about the works offered for sale.



Historic drivers of sales


During the period studied, Cronheim and van Ginhoven found that, in addition to information about the artist, school, medium, size and school, information about the provenance of the work, mentioning engravings done after the paining, the polished finishing and an emphasis on the number of figures in the composition were all associated with higher prices.

“We interpret our current findings as indicator that these traits were associated with a premium in prices,” says van Ginhoven. “For example, a well-known and prestigious previous owner or collection made the work more attractive—perhaps gave the work a certain aura—and people were willing to pay a premium for it.”

More importantly, they found that this strategy of using extensive descriptions of the works in the catalogues also allowed buyers to acquire knowledge and transfer it to similar works for which otherwise they would not have placed a bid. For instance, “coluorful” paintings animated with “numerous figures”, with landscape elements and of a “good execution” were all dealers’ buzz words for desirable traits to which buyers seemed to have paid attention.

“These are traits that buyers could choose to spot and adopt as benchmarks in their own decisions on whether to bid for other works for sale,” says van Ginhoven. “Dealers fashioned these descriptions and used them to visually describe affordable as well as the most outstanding paintings.”


Lasting habits


In the catalogues of today, we expect to find certain information in a well-organized and consistent manner, but during the 18th century dealers were experimenting, with very elaborate descriptions of the lots for sale – and no pictures of the work.

“Interestingly, throughout the century, dealers progressively tested and included an increasing amount of information about paintings for sale,” says van Ginhoven.

“For instance, this is the time when provenance information and known engraved reproductions entered the lot descriptions, and stayed with us. When known, 18th-century dealers mentioned the artist’s name and school of painting, the dimensions, and the medium, and they included the name of the previous owner of collector who had owned the piece, and also remarked that some paintings were known though engravings that circulated in Paris and were sold in shops. This information remains in present-day catalogues.”

In contrast to the present day, however, dealers also described what was depicted – titles were invented later. As part of these descriptions, they remarked on aspects such as the vividness of the colors, the number of figures represented, the type of landscape elements and atmospheric effects in the background, the good execution and polished finishing.

In addition, dealers sometimes gave biographical information about the artist, especially when not known to the public as a way to introduce the artist to potential buyers, and they sometimes related the paintings to the works by other better-known artists as a way to suggest comparisons or potential pairings.

“These are statements that have been abandoned in present-day catalogues, in favour of more verifiable facts or more “objective” characteristics about the paintings. In the place of aesthetic judgments or merits of the artwork, we now find the image reproduction.”

Dr van Ginhoven adds that some interesting similarities can be drawn between the period studied and the present day. Both are periods of an exponential growth in the auction market. For example, during the period studied, the number of sales rose dramatically from an average of 5 per year before 1760, to an average of 11 in the 1760s, rising to more than 35 a year in the 1770s and onwards.

“Also, much like the main auction houses today, a few dealers also dominated the market then. More than 150 dealers were active in the market between 1675 and 1789. The four dealers we studied collectively organized 56% of the total painting sales. Much like it is today but not in the same proportions, according to our analysis, it mattered for overall revenues and prices fetched who the dealer organizer of the sale was. The law of one price did not hold, which is what current studies also tell us about today.”

Dr van Ginhoven’s studies are ongoing, but it is clear that the power of the auctioneer to shape sales patterns has held sway for several centuries. What will happen as more sales shift to the internet promises to be an interesting new chapter.



Picture credit: Walknboston/Creative Commons license