The logic of competition

Greater competition is beneficial for consumers even in a market for arts

“Rent seeking and the decline of the Florentine school,” Ennio E. Piano and Tanner Hardy, April 2022, Public Choice, 192, 59–78 (2022). https://doi.org/10.1007/s11127-022-00971-9

For a long time, economists have written and talked about the benefits that accrue to consumers as a result of free competition among businesses. When any business can easily enter an industry and compete against others to attract the patronage of consumers, it leads to the easier availability of everyday goods and services.

Economists in the past have also noted that competition benefits consumers not just in the market for mundane goods and services but also in the market for arts. William J. Baumol and Hilda Baumol, for instance, have explored how a competitive arts market in 18th century Habsburg empire, which resulted from competition among rival states within the empire to attract talent, helped in the flourishing of the music industry in Vienna during the time of Wolfgang Mozart. While greater competition can lead to a flourishing market that benefits consumers, the lack of competition can have the opposite effect.

“Rent seeking and the decline of the Florentine school” by Ennio E. Piano and Tanner Hardy published in the Public Choice journal looks into how absence of competition can affect the quality of products in the arts market. The authors of the paper study the fall of the Florentine school of painting in Italy during the late Renaissance period to support their argument that in the absence of competition the quality of artistic output drops as artists then have no monetary incentive to impress the buyers of art.

Florence flourished as a hub for the arts during the medieval and the Renaissance period. Even though the region hosted just 1% of Italy’s population, it served as the leading centre for the arts such as painting works. This, however, changed during the late Renaissance period with the region witnessing a drop in artistic talent and output while other regions of Italy did not witness any similar fall from grace. While a significant share of prominent artists lived in Florence from the thirteenth to the fifteenth century, by the middle of the sixteenth century almost no prominent artist lived in Florence.

Why did Florence’s art market witness such a severe decline while other regions of Italy remained unaffected by any such fall? Piano and Hardy argue that at some point artists in Florence got together to form a cartel in the form of a guild that restricted the entry of new artists into the market. And as standard economic theory would predict, this stopped the entry of new artists who could disrupt the market with better art work and gave existing artists very little incentive to compete hard and produce art that could satisfy art enthusiasts. The end result was a drop in the influence and the quality of art produced in Florence. This, the authors state, shows that the influence of competition, or the absence of it, is the same in the art market as it is in the market for other goods and services we use every day.

Piano and Hardy attribute the formation of the Florentine artists’ cartel to the rise of the Medici family as the ruling dynasty of Florence and as the major patron of the arts in the region. This, they argue, turned the art market in Florence into a kind of monopsony with just a single large buyer who could easily dictate the price and other terms at which artists could sell their works. Hence, the authors believe, the artists of Florence trying to protect their personal economic interest got together and formed a cartel to win back some of the bargaining power that they lost to the Medici family. It is, however, possible that such cartelisation was not very beneficial to the cause of the Florentine artists. After all, even as part of a cartel that could restrict supply of art, the Florentine guild artists would have had to sell their art at prices and terms dictated by the only buyer, the Medici family. If that be the case, the absence of attractive remuneration for their art work may have also played a significant role in artists deserting Florence.