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Pricing genius: The market evaluation of innovation

Author

Listed:
  • David W. Galenson

    (University of Chicago and Universidad del CEMA)

  • Simone Lenzu

    (University of Chicago)

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, Universidad del CEMA, vol. 19, pages 219-248, November.
  • Handle: RePEc:cem:jaecon:v:19:y:2016:n:2:p:219-248
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    File URL: https://ucema.edu.ar/publicaciones/download/volume19/galenson.pdf
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    1. repec:eee:reecon:v:72:y:2018:i:1:p:86-100 is not listed on IDEAS

    More about this item

    Keywords

    creativity; technological change; hedonic regression analysis; life cycles;

    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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