Economics, Business, and the Arts

Australian Conference of Economists Canberra, July 10-12, 2018 Kathryn Graddy Thank you

§ Thank you for inviting me to give the keynote at this national conference § Australia is a leader in the implementation of Artist’s Resale Rights and in researching the work of indigenous artists § I am thrilled to be here presenting on the importance of my field of research in cultural economics

• brandeis.edu/global Outline

• Research in cultural economics • The effect of death and bereavement on creativity • , the extraordinary 17th century art critic • Immigrant artists and their effect on the native artistic population (work in progress) • Use these examples to demonstrate the importance of interdisciplinary work in business, economics and the arts

• brandeis.edu/global Death, Bereavement, and Creativity

§ Primary Question: § Does the death of a close relative or friend increase or decrease creativity?

(“Death, Bereavement, and Creativity” Forthcoming, Management Science, with Carl Lieberman)

• brandeis.edu/global “Bereavement Enhances Creativity”

§ Picasso's good friend, Carlos Casagemas, committed suicide in 1901 § His suicide launched Picasso into his Blue Period of painting § Picasso's Blue Period was characterized by somber works in monochromatic colors § In 2000, Woman with Crossed Arms broke a record for Picasso paintings by selling for about $62 million

• brandeis.edu/global • brandeis.edu/global Les Femmes d'Alger – Version 0 (Sold in 2015 for $179.4 million)

• brandeis.edu/global “Bereavement Inhibits Creativity”

§ CEO immediate family deaths are negatively correlated to firm performance: Bennedsen et al. (2006) § Subjects who report having recently experienced a death or illness in the family do less well on a simple numerical task designed to measure productivity: Oswald et al. (2015) § Manet never finished his 1867 painting, "The Funeral," started after the death of his good friend Charles Baudelaire

• brandeis.edu/global Psychologists and Flow State

§ Rollo May § One of the first researchers to describe the experience of being in a creative state § Intensity of awareness, heightened consciousness, obliviousness to the environment § Mihaly Csikszentmihalyi § Psychologist who coined the term "flow state" § People feel at peak when they are most creative

• brandeis.edu/global Sample and Data

§ 33 French Impressionists and 15 Modern American Painters § Collected auction prices on over 12,000 paintings from Blouin's Art Sales Index. Auction Dates: 1972 to 2014 § Death dates were gathered from § Oxford Art Online, reading both Grove Art Online and the Benezit Dictionary of Artists § printed biographies § artist websites § genealogy websites

• brandeis.edu/global Some Examples

Father Mother Wife1 Wife2 Child1 Friend Friend Friend 1 2 3 Claude 1871 1857 1879 1911 1911 Monet (1840-1 926)

Pablo 1913 1939 1955 1901 1913 1915 Picasso ( 1881- 1975)

Alice 1946 1954 1927 Neal (1900-1

984) • brandeis.edu/global Event Study

§ Each sale is an observation on painting i at time j

§ Dependent Variable: ln(Price)ij § Variables of interest:

§ Prior1i ; Prior2i ; Prior3i= Painted 1, 2 or 3 years prior to death.

§ Currenti = Painted in year of death

§ After1i ; After2i ; After3i= Painted 1, 2 or 3 years after death § Control Variables: Artist, year of sale, painting-date, cohort-age fixed effects

• brandeis.edu/global • brandeis.edu/global • brandeis.edu/global • brandeis.edu/global • brandeis.edu/global Roger de Piles

§ A seventeenth century art critic who decomposed an artist’s work into the areas of drawing, color, composition, and expression and rated each of these areas on a 20 point scale § His ratings were published in his 1708 work, Cours de peinture par principes in a table known as his "balance des peintres" § First, a little bit about Roger de Piles…

(“Taste Endures! The Rankings of Roger de Piles (†1709) and Three Centuries of Art Prices” Journal of Economic History, 2013)

17 • brandeis.edu/global Other Art Critics on de Piles Ratings

§ As described in Ginsburgh and Weyers (2008), Julius von Schlosser, the leader of the second Vienna school of art history, hates the ratings § The art historian Ernst Gombrich described the exercise as a "notorious aberration"

18 • brandeis.edu/global Puttfarken on DePiles

§ … he was at his worst when he tried to be most systematic. His Balance des Peintres […] is an attempt to assess the achievement of the major artists since in very much the same way in which teachers would assess their pupils’ class-papers[…]. Only Rubens and Raphael qualify for a high mark with sixty-five out of the maximum of eighty; Poussin has to be content with only fifty-three, an[d] Michelangelo looks like a total failure with a mere thirty-seven out of eighty

19 • brandeis.edu/global Artist Comp Draw Color Exp Total Raphael (1483-1520) 17 18 12 18 65 Sir Peter Paul Rubens (1577-1640) 18 13 17 17 65 Domenichino (1581-1641) 15 17 9 17 58 Agostino Carracci (1557-1602) 15 17 13 13 58 Annibale Carracci (1560-1609) 15 17 13 13 58 Lodovico Carracci (1555-1619) 15 17 13 13 58 Charles Lebrun (1619-1690) 16 16 8 16 56 Francesco Primaticcio (1504-1570) 15 14 17 10 56 Van Dyck (1599-1641) 15 10 17 13 55 Correggio (1494-1534) 13 13 15 12 53 Nicolas Poussin (1594-1665) 15 17 6 15 53 Francesco Vanni (1563-1610) 13 15 12 13 53 (1488-1576) 12 15 18 6 51 Rembrandt (1606-1669) 15 6 17 12 50 Giulio Romano (1499-1546) 15 16 4 14 49 Eustache le Sueur (1617-1655) 15 15 4 15 49 Leonardo Da Vinci (1452-1519) 15 16 4 14 49 Il (1518-1599) 15 14 16 4 49

Pietro da Cortona (1596-1669) 16 14 12 6 48• brandeis.edu/global Artist Comp Draw Color Exp Total Pietro da Cortona (1596-1669) 16 14 12 6 48 Hans Holbein the Younger (1497-1543) 9 10 16 13 48 Otto van Veen (1556-1629) 13 14 10 10 47 Taddeo Zuccaro (1529-1566) 13 14 10 9 46 Federico Barocci (1526-1612) 14 15 6 10 45 Andrea del Sarto (1487-1530) 12 16 9 8 45 Albrecht Durer (1471-1528) 12 16 9 8 45 Francesco Albani (1578-1660) 14 14 10 6 44 Del Piombo (16th C) 8 13 16 7 44 Pietro Buonaccorsi (1500-1547) 15 16 7 6 44 Pordenone (1483-1576) 8 14 17 5 44 Francesco Salviati (1510-1563) 13 15 8 8 44 Veronese (1528-1588) 15 10 16 3 44 Guercino (1591-1666) 18 10 10 4 42 Giovanni Lanfranco (1582-1647) 14 13 10 5 42 Abraham van Diepenbeck (1596-1675) 11 10 14 6 41 Jacopo (1544-1628) 12 9 14 6 41 (1593-1678) 10 8 16 6 40 Daniele da Volterra (1509-1566) 12 15 5 8 40

• brandeis.edu/global Artist Comp Draw Color Exp Total Federico Zuccaro (1540-1609) 10 13 8 8 39 Giorgione (1477-1510) 8 9 18 4 39 Giovanni da Udine (1487-1564) 10 8 16 3 37 Luca Giordano (1632-1705) 13 12 6 6 37 Michelangelo (1475-1564) 8 17 4 8 37 Il Parmegiano (1504-1540) 10 15 6 6 37 Girolamo Muziano (1528-1592) 6 8 15 4 33 Pietro Testa (1611-1650) 11 15 0 6 32 Jacopo Bassano (1515-1592) 6 8 17 0 31 Peeter Jansz Pourbus (1510-1584) 4 15 6 6 31 Sebastien Bourdon (1616-1671) 10 8 8 4 30 Pietro Vannucci (1445-1523) 4 12 10 4 30 Caravaggio (1571-1610) 6 6 16 0 28 Giuseppe Cesari (1568-1640) 10 10 6 2 28 Jacopo Palma (16/17th C) 5 6 16 0 27 Giovanni Bellini (1427-1516) 4 6 14 0 24 Lucas van Leyden (1494-1538) 8 6 6 4 24 Giovanni Francesco Penni (1488-1528) 0 15 8 0 23

• brandeis.edu/global The question

§ Was Roger de Piles a successful critic?

• brandeis.edu/global The Data

• Art Sales Index: This dataset starts in 1920 and goes through 2010, with over 4,000 observations • Reitlinger’s Economics of Taste (1961, 1963, 1971). The time span of this dataset is from 1740 to 1960, with over 600 observations § The number of illustrations in Gardner’s Art Through the Ages (2011) § The number of words allocated to various artists in the Benezit Dictionary of Artists, accessed from Oxford Art Online

• brandeis.edu/global The Sample

The Wikipedia's Metro- Incomplete Gardner's politan list of Art Museum Most Vasari's De Pile's Through Important Lives Balance the Agesa of Artb Old Mastersc (1568) (1708) (2012) (2012) (2012) Total Artists 265 58 90 149 230

Number of 21 58 23 30 35 artists in de Piles' table Number of 0 13 4 9 7 artists in de Piles' table who died after 1649

• brandeis.edu/global § Word Counts: DePiles vs. all artists on Wikipedia’s list § The average number of words for de Piles’ rated artists is 1091 and the average number of words for artists that are included in this list but not included in his list is 649 (a statistically significant difference). Clearly, he had some ability to choose artists. § But, if we then compare the average word count of de Piles’ 58 rated artists (1091) with the word count of the 58 artists with the highest word counts that were not rated by de Piles, the average word count for these artists is 1288, which is statistically significantly higher than the word count for the de Piles’ sample at the 10% level.

26 • brandeis.edu/global Ability to Choose

§ Clearly, de Piles had some ability to choose artists, but in hindsight, he did not find those artists from that era that are considered most important by today’s standards

27 • brandeis.edu/global Separate Returns for High and Low Rated Artists

§ Used the median overall artist rating (44) in the entire dataset as a break point § Artists whose overall ratings are greater than the median are included in one dataset, and those whose overall ratings are less than or equal to the median are included in the other dataset and returns are calculated from constructed price indices

28 • brandeis.edu/global Nominal Returns to de Piles' Artists

Overall De Piles' De Piles' Return Combined Ratings >44 Combined Ratings<=44 De Piles' return: 1740-1960 1.83% 1.97% 1.55% De Piles' return: 1920-2010 6.45% 7.32% 3.53% De Piles' return: 1951-1999 10.00% Baumol's return: 1652-1961 1.30% Goetzmann's return: 1740-1960: 3.00% Mei and Moses' return: 1950-1999 12.25%

29 • brandeis.edu/global Results

§ Overall de Piles’ returns are similar to average returns calculated elsewhere on broader databases § De Piles’ higher rated artists outperformed his lower rated artists § Both results contradict the usual poor performance by “experts” § The fact that several centuries later, de Piles' top rated artists statistically significantly outperformed de Piles lower rated artist over a 90 year period is astounding

30 • brandeis.edu/global Changing Tastes

• The characteristics were estimated by decade in the Art Sales database and by 20 year periods in the Reitlinger database • Statistically rejected that the ratings coefficients are identical • All ratings coefficients other than composition are jointly significantly different from zero

• brandeis.edu/global Reitlinger Data

Drawing Color 0.3 0.3 0.25 0.25 0.2 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0 -0.05 -0.05 Coefficient on Color Coefficient on Drawing -0.1 -0.1 -0.15 -0.15 -0.2 -0.2 1750 1800 1850 1900 1950 2000 1750 1800 1850 1900 1950 2000

Composion Expression 0.3 0.3

0.2 0.2

0.1 0.1

0 0

-0.1 Coefficient on expression -0.1 Coefficient on composion • brandeis.edu/global -0.2 -0.2 1750 1800 1850 1900 1950 2000 1750 1800 1850 1900 1950 2000 The Designo vs. Colore Debate

§ Started with Plato and in many ways culminated at the time of Vasari in 1568, with the establishment at that time believing that the importance of a painting lies in its design rather than its execution § De Piles broke with this tradition and emphasized the importance of color § He appears to be correct!

• brandeis.edu/global De Pile’s Conclusion

§ Over 300 years later, De Piles ratings are still very relevant • De Piles decomposed each artist’s oeuvre into the four characteristics of drawing, color, expression and composition, and rated each of the categories numerically § This decomposition and then numerical ranking is a discipline followed by very few critics, and a discipline that may improve critical accuracy

34 • brandeis.edu/global Immigrant Artists: Enrichment or Displacement with Karol Borowiecki

►Immigrants have played an outsized role in the development of art and culture in the United States. ►During and after World War II, New York City became the center of the modern art world, largely due to European immigration. ►The impact of migrant artists on these developments has not been, however, established formally before. ► Specifically, we want to measure the effect that immigrant artists have had on the growth of artististic occupations in these cities.

...... • brandeis.edu/global ...... Albert Bierstadt (born in Solingen, Prussia, in 1830), Yosemite Valley, 1865. Sold for

2.5m USD (2014)...... • brandeis.edu/global ...... • brandeis.edu/global ...... Mark Rothko (born in Dvinsk, Russian Empire, in 1903), No. 6 (Violet, Green and

Red), 1951. Sold for 186m USD (20.14.)...... • brandeis.edu/global ...... Literature Review: US Migration

►The role of immigration on native workers has been a topic widely studied by labor economists and historians. ►Early studies primarily concerned with the possibility of displacement effects of native low-skilled workers by immigrants (see for example, Borjas (1987 and 1994) Card (2001) and Dinardo and Card (2001)). ►More recent studies have focused on the effects of immigrants on innovation and technology clustering. For example Kerr and Lincoln (2010) rule out displacement effects in high technology industries. Employment and invention increases through the contribution of immigrants.

...... • brandeis.edu/global ...... The data: US Census

We use the 1% sample of the US Census and American Community survey, collected every 10 years since 1850.

Using the occupation variable (OCC1950), we identify the following occupations for the household heads as artistic: Artists and art teachers, Authors, Musicians and music teachers, Actors and actresses, Architects, Dancers and dancing teachers, and Editors and reporters.

...... • brandeis.edu/global ...... IV estimation: Primary Instrument

►Historic settlement patterns as measured by the previous 10-year proportionate change in immigrant population ►Identification assumption: Immigrants in artistic occupations will be attracted to areas that see increases in the number of individuals with the same cultural and linguistic backgrounds as themselves, inducing artistic immigrants to settle in areas with a fast-growing immigrant population.

...... • brandeis.edu/global ...... IV estimation: Secondary Instrument

►As described by Gustave Michaud (1904) immigrants are pulled by 1) acquisition of property and 2) religious freedom ►We proxy religious freedom with the number of lagged clergymen in a particular city ►Identification assumption: The lagged number of clergymen is correlated with the relative growth rate of immigrant artists, but only influences the relative growth rate of natives in artistic occupations through artistic immigrants.

...... • brandeis.edu/global ...... Conclusions

This paper seeks to measure the effect that immigrant artists have had on the growth of artistic occupations in U.S. cities.

The long time series, allows us to look for very long term effects.

Immigrants have played an outsized role in the development of art and culture in the United States. We find that cities that experienced migrant inflow, see also a greater inflow of native artists by about 65%.

• brandeis.edu/global Death, Bereavement, and Creativity

§ Art History provided us with dates that cultural items were created § Business provided us with prices with which to analyze these cultural items § Economics provided us with the methodologies to do the analysis Combining art history, business, and economics, we know when items are created, we can value these items, and we have the methodology to analyze the results § We can now say empirically that suffering does not produce more creative output, at least in this study

• brandeis.edu/global Roger DePiles

§ Interesting that a 17th century art historian came up with a numerical rating system § His system was not fully appreciated by art history researchers § By combining his rating system with prices and econometric methodology, we can fully appreciate his contribution

• brandeis.edu/global Immigration of Artists

§ By using data on artists, we are able to say something about the creative industries and immigration.

• brandeis.edu/global Engagement

§ We provide ideas and methodologies to other academic disciplines § Other academic disciplines provide ideas, methodology and data for us to use in our research. § Working on interdisciplinary subjects with our academic colleagues helps economics and business research to be more relevant to the world outside

• brandeis.edu/global