The Return on Art

Should you invest in art? Only if you’re willing to sacrifice profits for artistic pleasure. On average, art appreciates less than stocks. To see this, imagine living in a world where on average a piece of artwork goes up as much as stocks do. If this were the case, most everyone would rather have a nice painting than a stock certificate. Consequently, if on average stocks and art performed equally well, no one would buy stocks. Since capitalism requires that people invest in stocks, the market automatically adjusts the return on stocks so that they do financially better on average than art does. Stocks’ superior performance doesn’t mean you should never invest in art; rather, you should accept that on average your artistic investments will earn a lower return than your stock market investments.