Governing the Trade in High Value Fine Art

Abstract: Global art sales now exceed $60bn a year. In 2015, just over a quarter of this volume came from objects sold for more than $1mn at auction sales. With rising prices, art and cultural property crime has become a major criminal market. What underpins the trust of buyers in this market which is potentially riddled with “lemons”– i.e. fakes, forgeries and items with defective legal titles? Public funding to tackle art theft and fraud is very limited. We study the complex private governance system ordering this market. A multiplicity of experts screens high value objects for ownership and authenticity before each sale. Afterwards, there is a further layer of inspection. Generally, mistakes are resolved informally and confidentially. We show that the system is a polycentric governance system in which different actors govern distinct but overlapping issue areas, each of them working for individual profit (and prestige). The system is constantly challenged by changes in regulation or societal norms, litigation and criminal innovations. If private governance fails, entire sub-markets disappear until agents develop credible new solutions. We thus observe an evolving private governance regime rather than one in “steady state”.