The Economics of Lost Art

The economics of lost art is all about provenance. Provenance is the traceable backlog of property rights, the past acquisitions, holdings, and transfer of rarities. Professor at King’s College London, Anja Shortland, specializes in the trade of goods outside of law, and institutions that facilitate such trade. I have written about her first book on the trade of kidnapped humans, and I have written on where and how kidnapping happens. Her new book, Lost Art: The Art Loss Register Casebook Vol 1, is another beautiful insight into the trade of Lost art, where the underworld of thieves and crooks meet the highest of high societies. While reading the book I thought about a five-step strategy to combat the theft, and trade of valuable art.

1. Create Provenance. Shortland’s book is about cases of the Art Loss Register (ALR). The ALR is a database for stolen, lost, and looted valuables. It also actively searches for rarities and in case of a hit, it steps in as a negotiator. It is a private company that earns money by selling data base access to auction houses and other traders of the market to research their good prior to a sale. It also charges success fees for negotiating retrievals of lost or stolen art. In the art world it is has the monopoly on provenance claims. It tries to be an actor that can verify whether a piece of art is in dispute or not. To prevent theft and illicit trade, we first need to identify it as such, thus one needs to create provenance.

2. Research provenance. To create a database of all art in dispute would be a body of work too large for any single private company. Thus, the ARL relies on research and claims from the public, academia, and the industry itself. We are talking about Nazi looted art, stolen watches, never seen before masterpieces, pirate looted antiquities and many other cases. It needs a thriving incentive system for academics, experts, dealers, and connoisseurs, to research provenance and point out foul play. They need to be rewarded with social high standing, and high paying museum employments, as they are. Only though these eyes can research continue in the scope needed to spot shady provenance.

3. Make people care about provenance. Shortland does a great job at showing that shady provenance does not equal legal consequences. Do owners of Nazi looted art, which has been traded x dozen times since 1945, unaware of the provenance need to give back the painting to a family that didn’t even know that this painting was ever in their forefathers’ procession? Would every trade have to be reversed going back to the probably dead Nazi looters? These are hard, moral, but not legal questions. The ARL managed to set a standard where compensation can be paid to previous owners, to establish good provenance. Good provenance is essential to sell art. No high-end dealer or auction house will sell an art piece without ALR’s good provenance. If it is sold, then for only a fraction of the price on the black market. This again supports the theory that people don’t own art for its beauty but for its status.

4. Enforce Provenance. In point 3 we discussed that the legality of bad provenance items is unclear. Thus, law enforcement rarely gets involved, unless there was a recent violent crime or a clear cut case. If I was police I’d also tell my people to fight crime closer to the people than trying to figure out which expensive painting belongs to which rich people. Thus, the ALR must come with hard hitting clear cases to deter dealers from operating in the grey zones, and collectors from owning stolen goods. One clear case can destroy the reputation and business of an auction house. For that reason, the enforcement of a few cases makes people comply out of fear.

5. Incentives for current retrieval. The previous four points can lead to the extinction of art crime. If there is truly a waterproof provenance system, that is well researched, that people trust and enforce, then there is no reason to forge, or steal paintings. Put what do we do with the current pieces of art that are in the hands of criminals waiting to be sold. The fear is that there might be a small group of people that can find social status in stolen pieces of art. It is thus possible that a submarket will emerge for people who like to buy, hold and sell stolen art, creating their own provenance system with the current loot. To avoid that one has to create small incentive for these items to re-emerge in the ALR’s provenance system. These incentives should be around 5% of the art pieces’ value paid by the rightful owner for retrieval. This makes it too costly to steal that piece in the first place, but high enough for it to be given back.

The case that fascinated me the most was the 1980 break in into the Museo Nacional de Artes in Buenos Aires. The break in itself was very strange. It seemed too easy for the thieves to get in and nick the most valuable 16 impressionist paintings. Time passed, and in 2001, sixteen beautiful impressionist paintings were on display at Sotheby’s, including Cezanne’s and Renoir’s, valued at 350 million USD. The ALR immediately spotted that they were the previously mentioned loot. When the ALR wanted to retrieve the 16 paintings on behalf of the Argentinian museum from its current Taiwanese owners it ran into some difficulties. The Argentinian Museum wasn’t very keen on retrieving these paintings. Why? Were they involved in the crime? Did the government at the time need money and staged a loot, to sell off its masterpieces for cash? If so, who is the rightful owner? Surely the government stole from the people to sell it to crooks. But on whose behalf should the ALR now retrieve these masterpieces? To reinforce the previous points: what is the provenance here? who should research it? Should Sotheby’s care? Which court can enforce it (probably not the Argentinian one)? And lastly, if the Argentinians don’t want to claim their pandoras box, then how can these 16 masterpieces ever see the day of light? To find out what happens read Shortland’s fantastic book, and research!