Investing in art: a blend of financial reward and psychic income

This essay discusses the return on art and the various views on this subject that can be found in the literature. It describes the market for painting in its many guises, highlighting price determination. The essay focuses on the construction of an appropriate price index and reviews the available alternatives. The principal conclusion is that art apparently generates psychic income, but also breaks through the social inefficiency of the capital market. Any policy to be pursued in this area could seek to eliminate these adverse externalities.