Why we like art less when its price goes down

By Anna Somers Cocks | From Editorial & Commentary | Posted: 13.3.08

Now it’s scientifically proven: we really do enjoy expensive things more. In an experiment conducted by Antonio Rangel at
the California Institute of Technology, the brains of 20 volunteers were scanned using functional magnetic resonance
imaging while they tasted five different wines costing $5 to $90 a bottle. But Rangel fibbed, telling them that the cheap
wine was the most expensive, or giving the same price to two different wines.

The scanner showed consistently that the flow of blood to the part of the brain that registers pleasure, the medial
orbitofrontal cortex, increased when the price was declared to be high, not according to the quality of the wine. In case this
got attributed simply to the ignorant palates of the volunteers, Rangel repeated the experiment with members of the
Stanford University wine club and got widely similar results.

What this does is to explain the effect first described by the economist Thorstein Veblen in 1899 when he noted that
certain goods become more in demand as their price rises. Diamonds and luxury cars are an obvious example of this, but
so is art, especially contemporary art.

In the recent boom, for artists whose reputation was still unconsolidated it has been enough for the word to get out at fairs
such as Art Basel Miami Beach that their prices were rising for a frenzy of buying to begin. We have seen this happen with
the Leipzig School and certain Polish artists previously unknown outside their countries of origin. We have probably been
too crude in attributing this boom primarily to speculation in the art market; it is also an expression of the Veblen effect, an
effect that we now know to be physiological.

Rangel’s discovery will be relevant when the recession hits. Here at The Art Newspaper, we have survived two recessions,
1990 and 2000, and we know that a fall in the art market follows a bear market, but always with a certain time lag (in the
past this has been as long as nine months, but we think the cycle will speed up now).

The speculators will try to unload their art, but will have difficulty doing so because the art market not only falls but freezes,
except for the rarest and most widely admired works. This is for two reasons. The thousands of people who still have
money to spend choose not to do so until they are certain that the market has bottomed out. But they are almost certainly
also affected by what we should call the Veblen-Rangel effect from now onwards: they actually find works of art less
attractive as their price goes down.

The writer is General Editorial Director of The Art Newspaper

The report “Marketing actions can modulate neural representations of experienced pleasantness” can be read online at:
http://www.pnas.org ©2008 The Art Newspaper