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AVILA JOINS THE DISCUSSION ON THE ART MARKET AND ITS PLUTOCRATIC POLLUTION:

‘Reich, it is the “rich” pollution… stupid hoarder…

For speculators to move prices up, they have to offer people who have physical stuff an incentive to hold more of it — hence, speculators holding long positions, commercial operators short positions. If speculators are primarily trading with each other (like now in the art world) , bubbles can develop. It does seems like expectations of a higher future price and/or investment in the futures market by institutional investors are pushing up the current prices on art.

Basic economics says that if we want to discourage a negative externality, like pollution (or destroying the possibilities of making art by poor artists due to poverty), we need to put a price on that externality. One way is through an emissions tax (or in our case, increase taxes with art prices); an alternative, with very similar economic results, is a system of tradable permits. All this goes back to Pigou (economist). Now, a key point in all this is that the emissions tax or, equivalently, the rent on emissions permits, does not represent a net loss to society. It’s just a transfer from one set of people to another — from the emitters, and ultimately those who buy their products, to whoever collects the taxes or gets the permits, and ultimately whoever benefits from the revenue or rents thus generated. The only net loss is the deadweight loss created by the reduction in emissions — which has to be set against the benefits of reduced pollution. In economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal (is a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.) Causes of deadweight loss can include monopoly pricing (in the case of artificial scarcity), externalities, taxes or subsidies, and binding price ceilings or floors (including minimum wages). The term deadweight loss may also be referred to as the “excess burden” of monopoly or taxation’