Thursday, November 03, 2011

Freakonomics on the California Resale Royalty

Over at the Freakonomics blog, Kal Raustiala and Chris Sprigman discuss the California resale royalty scheme.  They point out that "if the California rule applies, buyers of art can expect, on average, to make lower profits when they resell. As a consequence, they are likely to offer less in the initial transaction."  They also note that the scheme "enriches only the fortunate few who actually see their work gain substantial value":

"Let’s call them the '1 percent.' The 99 percent get little to nothing, since their art either drops in price or rises only slightly. The right to 5 percent of a later sale, in short, is like a lottery ticket—and like lottery tickets, the vast majority of ticket holders walk away empty-handed. The most successful artists are the last ones in need of aid, but the net effect of the California resale provision is to transfer wealth from unsuccessful (the lottery losers) to successful artists (the lottery winners). Sound like a familiar theme?"