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Pricing Genius: The Market Evaluation of Innovation

Author

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  • David W. Galenson
  • Simone Lenzu

Abstract

Economists have neglected a key issue for understanding and increasing technological change, in failing to study how talented individuals produce innovations. This paper takes a quantitative approach to this problem. Regression analysis of auction data from 1965–2015 reveals that the age-price profiles of Jackson Pollock and Andy Warhol—the two greatest painters born in the 20th century—closely resemble the profiles of the two artists' careers derived both from textbooks of art history and from retrospective exhibitions. The agreement of these sources confirms that the auction market assigns the highest prices to the art that scholars judge to be the most important, and examination of the artists' careers reveals that this art is the most important because it is the most innovative. These results lend strong support to our understanding of creativity at the individual level, with a sharp contrast between the extended experimental innovation of Pollock and the sudden conceptual innovation of Warhol.

Suggested Citation

  • David W. Galenson & Simone Lenzu, 2016. "Pricing Genius: The Market Evaluation of Innovation," Journal of Applied Economics, Taylor & Francis Journals, vol. 19(2), pages 219-248, November.
    • Handle: RePEc:taf:recsxx:v:19:y:2016:i:2:p:219-248
    DOI: 10.1016/S1514-0326(16)30009-5
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    Cited by:

    1. Kathryn Graddy & Carl Lieberman, 2018. "Death, Bereavement, and Creativity," Management Science, INFORMS, vol. 64(10), pages 4505-4514, October.
    2. Galenson, David W., 2018. "Pricing revolution: From abstract expressionism to pop art," Research in Economics, Elsevier, vol. 72(1), pages 86-100.
    3. Alexander Cuntz & Matthias Sahli, 2023. "Ars longa, vita brevis: The death of the creator and the impact on exhibitions and auction markets," WIPO Economic Research Working Papers 76, World Intellectual Property Organization - Economics and Statistics Division.

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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