What a $105 Million Price Tag Means

Tuesday, at a Christie’s auction, René Magritte’s L’empire des lumières (1954) sold for $105 million ($121.2 million with fees). Showing a dark street under a daytime sky, the painting has us wondering whether it is night or day:

L’empire des lumières:

As Magritte explained, “After I had painted L’empire des lumières, I got the idea that night and day exist together, that they are one. This is reasonable, or at the very least it’s in keeping with our knowledge: in the world night always exists at the same time as day. (Just as sadness always exists in some people at the same time as happiness in others.) But such ideas are not poetic. What is poetic is the visible image of the picture.”

The sale came down to a tense 10 minutes when two telephone bidders fought it out. Finally one was on top with $105 million and the other withdrew.

Auction Prices

The supply side of pricey contemporary art markets includes artists, private collectors, museums, and dealers. To elevate price, they hope to convey a reputation that gives bidders signals about value. The markets that determine price have been called “opaque” because a painting is a non-standard good whose value can be based on a socially created reality.

Meanwhile, on the demand side,  buyers can be aware of a slew of variables that range from prior sales to prevailing taste. In addition, the “masterpiece effect” increases the price of a painting if the artist is famous as might the “death effect” after an artist dies. And, beyond the art world, the financial health of the economy can propel prices up or down.

Below, you can see the massive dollars paid at auction for leading artists. The newest Magritte sale would have nudged him closer to the top:

Our Bottom Line: Price

In a market economy, price provides information. We know, for example, that a $10 t-shirt is not well made. However, in art markets prices can be less dependable. They come and go with trends and shifting supply and demand variables. For the Magritte sale, the original Christie’s estimate was $95 million, a whopping $10 million below the final bid.

Still, our bottom line is a $121.2 million price tag and the message it indisputably sends.

My sources and more: Each slightly different, Smithsonian Magazine, NY Times and CNN all had the auction facts. But The Art Newspaper was best. Most crucially though, through my former student Alanna Butera’s paper for Sotheby’s, I learned how paintings are priced. Please note that today’s post was an update of and quotes from a 2022 post from econlife.