The Economics of Declining Architecture, Once Again

Last week I asked why contemporary urban architecture has declined in some regards; trace back the link for the full context. My final suggestion concerns the issue of resale value.

I, like many others, have occasionally been tempted to buy a house that looked interesting. I've also been tempted to have huge and beautiful murals painted on the walls of my house. I did neither. Why? I feared for resale value.

The quest for resale value encourages standardized packaging. Just look at the mortgage market or the New York Stock Exchange.

In (many) older settings, people bought homes and buildings and stayed in them for long periods of time. Often they were passed down through the generations. If you do not have to worry about resale, simply buy what you want. But the buyers of modern America often will be moving on to another house within three or maybe five years. They think about selling again at the best price possible, as quickly as possible. So they are led to appeal to mainstream taste.

Andy Warhol understood these dynamics better than many other artists. The most saleable Warhols are those from definite "series." He did flowers, soup cans, Chairman Mao, and so on. These works are easiest to price, market, and brag about in casual conversation. No doubt Warhol, whether you like him or not, was an innovator. But within his ouevre he sought a fair degree of homogenization.

In the music market, in contrast, few people buy CDs for resale value (those that do will focus on the hits). The scope for heterogeneity and innovation is correspondingly greater.

The economics are of course tricky. A world with easy resale is a world with many buyers, which can encourage innovation. But holding the number of buyers constant, a higher demand for resale may well lower innovation.