Some art owners cannot bear to part with their pieces, only consigning one to auction if they are in financial distress. Others sell all the time; they are simply looking to turn a profit.

These attitudes have implications far beyond individual art owners, find authors Stefano Lovo and Christophe Spaenjers. In a paper in the March issue of the American Economic Review, they show how the combination of two factors — emotional attachment to art and reactions to the business cycle — explain the co-movement of the art market and macroeconomy.

The authors create a model of art owner behavior. “Collectors” have a high attachment to art, and they only sell when they need liquidity. “Flippers” always sell, regardless of their attachment to the art or state of the economy. “Investors,” when not in distress, strategically sell during good economic times. They do this to capitalize on the high value of art ownership during economic expansions.

The model predicts that the prices and volume of consigned art follow economic cycles. Data from Christie’s and Sotheby’s confirms this, as the figure below shows. As GDP rises, so do art prices and the number of pieces at auction.

Figure 5 from Lovo and Spaenjers (2018)

The art market, which relies on “emotional dividends,” may seem fundamentally different than markets for unsentimental goods. Yet, these emotions help to drive strategic selling decisions — and the art world’s own business cycle — that economists are well placed to study.