The Transformation of the Art Market: Law, Norms, and Institutions

Abstract

Over the last three decades, the art market has undergone a remarkable
transformation. Before the 1990s, artworks were sold with hardly any concern
about whether they had been stolen or looted, whereas now any reputable
gallery or auction house checks the “provenance” of any substantial work
before sale. This transformation reflects interlocking changes in law, norms,
and institutions. New York’s and more broadly the United States’ assertion of
jurisdiction and application of U.S. substantive law has destabilized title to
stolen and looted goods worldwide because American statutes of limitations
generally provide weaker protection for those who possess stolen or looted
goods even in good faith. Application of American law has had a profound
effect, especially for the high end of the market, because European or Asian
investors who purchase art outside of the U.S. may eventually want to sell or
display their works in the U.S. Defective title under American law thus affects
prices worldwide. The tightening and broader application of American law
reflects both longstanding legal principles and changes in social norms towards
the redress of historical wrongs, most notably prominent campaigns relating to
art confiscated or sold under duress in Nazi Germany. New institutions, most
importantly searchable databases recording stolen and looted art such as the
Art Loss Register, are also changing perceptions about minimum standards for
good faith purchase, which in turn affects both social norms and court cases.
These new norms, induced by both legal changes and better information, have
influenced the market even for less valuable art, for which sale or display in
the U.S. is not a relevant consideration and for which the threat of costly legal
action is not credible. The fact that social and institutionalized norms play
an important role in protecting original owners is probably good, because
norms and institutions can be effective even where law is not and often do
so at lower cost.