Pricing Genius: The Market Evaluation of Innovation

35 Pages Posted: 29 Jul 2015

See all articles by David W. Galenson

David W. Galenson

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Simone Lenzu

NYU Stern School of Business

Date Written: July 3, 2015

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 age profiles of the two artists 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 most important art, 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.

Keywords: pricing, innovation, auctions, creativity

JEL Classification: D49

Suggested Citation

Galenson, David W. and Lenzu, Simone, Pricing Genius: The Market Evaluation of Innovation (July 3, 2015). Available at SSRN: https://ssrn.com/abstract=2636530 or http://dx.doi.org/10.2139/ssrn.2636530

David W. Galenson (Contact Author)

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Simone Lenzu

NYU Stern School of Business ( email )

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