Anja Shortland on Lost Art
Jun 21 2021

Lost-Art-200x300.jpg Economist and author Anja Shortland of King's College London talks about her new book, Lost Art, with EconTalk host Russ Roberts. When a famous painting disappears into the underworld of stolen art, how does it make its way back into the legitimate world of auction houses and museums? Drawing on the archives of a private database of stolen objects--the Art Loss Register--Shortland discusses the economics of the art world when objects up for sale may be the result of theft.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Doug Iliff
Jun 22 2021 at 2:03pm

Fascinating conversation.  Makes me think that they’ll never track down the art lost in that famous theft of Boston’s Gardner Museum.  Even if my great-grandchildren find them in my attic, the ALR will keep them from profiting.  Darn.

Russ brought up a great point about the value of art when he asked about a hypothetical Beethoven Tenth.  Would we still love it even if composed by a brilliant poseur?  Probably– but the score itself would only be worth the paper it was printed on, even as the public, starved for classical music worth the listen, would subscribe to live performance.

Paintings and sculptures don’t have that issue, of course, but as a boy I got as much pleasure from seeing a replica of Rodin’s Thinker ensconced outside the Nelson in Kansas City as I did from the original in Paris as an adult.  Maybe more; as a boy I perhaps experienced a greater sense of wonder.  Perhaps that’s why I shamelessly populate my office with high-quality Chinese knock-offs of the paintings I love.  They have not yet been drained of delight.

This afternoon I’m scheduled to have a conversation with a fellow who has become notorious for withdrawing his daughter from a toney girls’ school on the Upper East Side, due to a sellout to Critical Race Theory.  He is considering starting his own school, and is calling me because I did that 40 years ago.  If I could found an academically and artistically excellent school with a tuition of $5,000 per year, could not a replica be translated to NYC for somewhere south of $55,000, which was his cost?

If that turns out to be impossible, I suspect the problem would be exactly what Ms. Shortland said about painting replicas: they do not confer status on the owner.  In other words, they lack snob appeal.


Aidan T
Jun 23 2021 at 7:19am

I really loved this episode, as I did Professor Shortland’s previous appearance talking about kidnapping. Incentives and behaviours in murky areas, and how people of dubious character iterate towards resolution when nobody is watching are completely fascinating.

And to my US friends, is there really such a word as “burglarized” in American? We would just say “burgled” in England.

Jul 22 2021 at 7:34pm

Strangely, the UK has “pressurized” where the US has simply “pressured”.

Jose Loyola
Jun 23 2021 at 11:34am

Loved the podcast. A great conversation on a topic I had never really thought about.

Mark Webb
Jul 6 2021 at 12:41pm

Great episode. Would love to see a follow-up conversation about the implications for how to create trust-based institutions in a non-government way. As discussed in the episode, the value of a piece of artwork from a market perspective has very little to do with the strict experience of looking at the piece, and a lot to do with intrinsic factors. Although individual actors could continue to trade art after discovering it is lost or stolen, the value of the artwork absent a clean history from the ALR drops to almost nothing.

This has direct parallels with (and huge implications for) people who try to set up other trust-based networks – most intriguingly cryptocurrencies. Cryptocurrencies are all trust-based units of exchange, as are other blockchain-based technologies like NFTs. There’s some tipping point between an ad hoc institution providing a service based on a tenuous trust, and an institution becoming a de facto governance structure where trust is high enough not to be questioned anymore by most actors. The ALR seems to have made this leap, probably in part because it provided a valuable service to most interested parties along the way.

I’d be interested in whether similar private institutions have been used in other successful trust-based networks, such as when online secure payments were first implemented back in the late 1990’s. What common elements do we see in the development successful trust networks? What elements are missing from unsuccessful attempts to set up trust networks? How do these criteria compare with current implementations of blockchain technology?

Obviously all this was beyond the scope of this fascinating conversation, but would be interesting to dive deeper into.

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TimePodcast Episode Highlights

Intro. [Recording date: May 20th century, 2021.]

Russ Roberts: Today is May 20th, 2021, and my guest is economist Anja Shortland of King's College, London. She previously appeared on EconTalk in June 2019 to talk about her book Kidnap, which was a fantastic book and conversation. That conversation was about stolen people. Today's conversation is about stolen art, and a few other things as well. Her new book is Lost Art. Anja, welcome back to EconTalk.

Anja Shortland: Thank you for having me back.


Russ Roberts: So, let's start with a basic problem. Let's say you know I'm an art lover, maybe I'm an art dealer or a collector, and you contact me to tell me you have a copy of a Rembrandt. So, I'm so excited, but my excitement is going to be tempered by the fact that what you're selling may not actually be a Rembrandt. If it is a Rembrandt, you might have stolen it, and after I buy it I may not be able to keep it. You write,

Top prices are only paid when buyers are confident the offered works are genuine and unencumbered. What underpins buyers' trust that artworks are as described and that any problems will be rectified with a minimum of fuss and financial loss?

So, what we have here is a fundamental problem in trust and in property rights. How does that get resolved in a world with very little government regulation, except for if you steal something and you're caught they will put you in jail?

Anja Shortland: Even if the police would like to put a thief in jail, they probably wouldn't find the time or the resources to do it. So, what I find so fascinating about the art market is that it has developed really elegant and interesting private governance solution to the problems that you describe. They're mostly reputational solution, where people gain status from correctly identifying genuine objects and finding reliable provenance information, or at least reassuring you that nobody's actively looking for a particular artwork. And, because art has become so expensive at the top level since the 1980s, this is a sustainable system where people who are interested in collecting art will pay for these services.

Russ Roberts: Explain what provenance is. It's a word that's going to come up a lot. It's a somewhat obscure word in English. To me, it's best described as chain of ownership. Is that a good way to describe it?

Anja Shortland: That is a really brilliant question. If you'd gone to the Oxford English Dictionary in the 1970s it would just have said, 'Place of origin.' And, the idea would have been that you can trace an object back to its master, or to its archeological context. But, over the last 30 years the meaning has changed almost entirely, and now it means, 'Root of title.'

Russ Roberts: It means what?

Anja Shortland: So, originally the root of title--

Russ Roberts: root of title--

Anja Shortland: will go all the way back to the original master, but now people are interested in every little step of the ownership. And, they're looking for gaps that are red flags, like you don't know where it was between 1936 and 1942.

Russ Roberts: The worry there is that it may have, say, been confiscated by the Nazis; it may have been stolen and then resold without compensation to the owner who lost it. And therefore, your ownership of it may be either in legal doubt or have moral issues around it.

Anja Shortland: Absolutely right. Yes. And, if you're trying to sell a very expensive artwork in New York, then these two things coincide as morally problematic; but in New York your title would be very much in doubt if an artwork has some impairment in its chain of title.

With antiquities, you'd be worried about them being looted or illegally exported from their country of origin after the adoption of the UNESCO [United Nations Educational, Scientific and Cultural Organization] treaties on protecting cultural heritage.

Russ Roberts: Another issue that's going to arise in our conversation is statute of limitations. There's a legal statute of limitation, which is basically after a certain period of time some prior owners may have lost a claim to an object. But, there's also a moral statute of limitations: that a court, even though it's passed a legal limit, may choose to help someone enforce, right?

Anja Shortland: I found so fascinating about this market is that I'd always thought about law as law, but this is a global market, and we're talking about laws. And, what might give me a legally valid title in Switzerland or France might well be challenged somewhere else.

So, yes: The statute of limitation is a period in which somebody has to posses an object that they've bought in good faith before true title is transferred to them. So, this could be immediately upon purchase, as it is in Italy. It could be after three years--Switzerland. It could be maybe five years. It could even be 10 years. But then, the other question is: When does that run from? From the point of purchase, which would be in Europe? Or, from the point in which you discover or which a former owner discovers where the object is? And that is the American approach, in particular the New York approach.

So, yes: where you are determines the quality of your title. And, interestingly, it's New York where all the highest-value art is being traded--because people who have got good title want to show it by presenting that particular artwork in New York.


Russ Roberts: So, your book is a set of--vignettes is not the right word, but they are examples of different kinds of objects that come onto the market, and how these problems of ownership, and trust, and provenance are either resolved or not resolved. We're going to talk, I hope, about three of them. They're all extraordinarily interesting. The book reads a little bit like a detective novel, a set of detective stories, because there's all these twists and turns, and there's usually a lot of hidden stuff that comes to light through digging and detective work.

But, behind all of them is an organization called the Art Loss Register--the ALR, the Art Loss Register--whose archives you are drawing on. And, I'd like you to give us the background on that institution, that organization.

Anja Shortland: So, my background with that institution comes from my previous book Kidnap: Inside the Ransom Business, where I look at a company called Control Risks that created an institutional framework for resolving hostage crises. One of the founders of Control Risks approached me after I'd written Kidnap and said, 'You might want to write a book about my other company, the Art Loss Register.' And, obviously I was very excited by this idea. And, I realized what the Art Loss Register did was, it was creating a hostage situation for stolen art, which the founder, Julian Radcliffe, was extremely well-placed to resolve because he had all these skills of negotiating with the underworld.

So, how do you create a hostage situation for stolen art? What the Art Loss Register has done, painstakingly over the last 30 years, is to create a database of lost, and stolen, and looted art. They did this with the backing in 1990 of the major auction houses, art dealers associations, antiquities dealers associations, and interestingly, the art insurance companies and syndicates in Lloyd's. They provided the backing to experiment in governance, effectively--blue chip backing, which was good. And, over the last 30 years, Julian Radcliffe has changed the norms around due diligence and the art market so that now it's almost impossible to claim that you've bought or sold something in good faith unless you have searched the Art Loss Register and they have given you a clean certificate of health--so that they like the provenance, and also that it's not registered as missing. If they make a match, then they will alert the former owners.

Russ Roberts: So, a couple thoughts on that, which your description reminds me of. At one point you make a reference to the Wild West--meaning a sort of lawless free-for-all that used to exist in the art market. And, what has happened is, is that there's this private sheriff for now, this Art Loss Register, where Julian Radcliffe is the head of it; and they have--and I don't know what the right word is--regularized, or set, as you say, a set of both norms and formal institutions to let buyers and sellers have a set of rules that they're going to play by. Not enforced by the government: enforced by an expectation on the part of the players.

But, I have to say, when you describe it that way, there's got to be some people who feel like the Art Loss Register took the fun out of the art market. Because, it used to be that someone could show up with a rolled up canvas under their arm and say, 'This is an obscure Rembrandt that I found in my cousin's attic.' And, the Art Loss Register is going to find out either it was stolen in 1958 from somebody, or that they're going to say it's a forgery.

But, of course, there are a lot of people who like buying forgeries and believing that they're real. Not art museum directors--they try to avoid that. But I assume some private collectors aren't so thrilled. It just strikes me--there's a line, I forget what movie it's from, that con artists are successful because people enjoy being conned. It takes two to have a hoax, or a con job. And, I just wonder if there's some loss of excitement here. What do you think about that?

Anja Shortland: I think there is a loss of excitement indeed, but we're also talking about huge amounts of money here. And, if you're playing with a lot of money it's not fun to have huge amounts of risks associated with it.

So, here we're talking, initially at least, about the very top-end of the art market. And, what collectors are looking for is a sound financial investment, but also something that confers status to them. And, there is no status in something that's ethically or morally questionable, so people want ethically acceptable titles.

They also want portable titles. If you're super rich and you've got properties dotted all over the world, the last things you want to happen is for customs to seize your property. And, you'd also be hugely embarrassed if you come out as the big philanthropist and then the Metropolitan Museum of Art says, 'Well, thanks, but no thanks, Mr. Rockefeller. We couldn't possibly exhibit this.'

So, it's the collectors that said, 'We need something that we're sure about.'

Then, you get all of these investigative journalists starting to crawl all over the auction houses in the late 1980s and early 1990s saying, 'You're basically glorified fences.' So, the auction houses, they realized that there's going to be this avalanche of very bad publicity coming their way. They know where they've cut the corners. So, they want to be proactive and say, 'Yes, that was so 1980s.' So, in the 1990s they're desperate for a solution.

And, then, there's insurance companies who've got art prices going through the roof. We all know that thieves, criminals are rational individuals: as prices go up so do the incentives for committing art theft. So, there are three big, powerful interest groups that are all looking for a solution.

Interesting they're all looking for slightly different solutions. The idea of the insurers that you go out there and salvage what has been lost doesn't sit easily with the cozy relationships that auction houses have with their consignors, whose identity they wish to protect. So, there are subtle differences in what they actually want, but they all know that they need to move to create a product that the highly financially-powered art investor want to buy, and that requires good title and authenticity.

Russ Roberts: So, just to clarify a couple of words. A 'fence' is someone who is a reseller of a stolen object. So, a thief doesn't often resell the object--well, the thief sells it once to someone who then represents it, perhaps, as something else. Maybe, 'My grandfather found it the attic, I don't remember when.' Or, 'Someone dropped this off at my house.' Obviously, being a fence is morally and legally problematic. So, an auction house that accepts a piece of stolen art is acting like a fence, and it's not good for their reputation and lead to legal issues.

Anja Shortland: Absolutely right. The problem was that Sotheby's, in particular, was caught basically laundering stolen antiquities, and if they didn't know it completely then they should have known. They knew that the story was waiting to break, so they wanted to make a decisive break with that past and say, 'Now, moving forward, we have a solution.'

Russ Roberts: The other term you used in co-signer [?consignor? --Econlib Ed.], it's not the usual term in English. It's c-o-s-i-g-n-o-r, [?c-o-n-s-i-g-n-o-r? --Econlib Ed.], consignor. The person who consigns the object to the merchant who is going to then sell it to a wider audience.

So, a thief--to take the worst possible case--a thief approaches an auction house and misrepresents the origin of an item, which of course they have an incentive to do, and of course so does the auction house if they're not caught, in theory. Because, they'll get a bigger price if it's thought to be authentic and real. The consignor will get a higher price for the object, and the auction house will get a higher fee if it goes for a large amount of money [?] or is believed to be authentic. So, they have a mutual interest--if they're not caught; but they also have a different interest if it turns out it is actually inauthentic and it's discovered.


Russ Roberts: The other thing I want to point out--which is just fantastic--is that you can't just search the database of the Art Loss Register. So, if you steal something and you wait 10 years and keep it underground, under wraps, and then you say, 'I wonder if anyone noticed,' you can't just log in to the Art Loss Register and find out. Explain how the Art Loss Register is actually used as a database, and who actually looks at it. And, then, what happens when requests are made that maybe aren't so kosher?

Anja Shortland: Yeah, it's an interesting one. So, anybody can check the INTERPOL [International Criminal Police Organization] database of stolen art, and anyone can look at the register of looted art for Nazi and holocaust era looted artifacts. So, if you think there might be a problem with your piece, you can check whether it has been reported to those registers. If you try and make a similar request to the Art Loss Register, they want to know who you are and why you're interested in this particular object. So, if it comes from a reputable dealer or auction house, then there is clearly no problem. However, if it's a private individual who wants to know what's going on, the Art Loss Register will want to know a huge amount of details about who you are and which door the police should be knocking at to start interrogating and looking for this.

So, in my book there is an example of a Francis Bacon painting that was stolen from Madrid, and the thieves started to investigate with the Art Loss Register whether there might be a problem reselling it. And, very quickly the Spanish police were able to arrest them. It's that public/private partnership that the Art Loss Register has built with police forces around the world that makes them an extremely powerful force for deterring theft, which was what the insurers were looking for in the first place when they helped to create the Art Loss Register.

Russ Roberts: One more thing about the insurance companies I don't want to miss. If I own an extremely valuable art object, say a Cézanne, and I insure it--and we're going to talk about a Cézanne in a minute, French impressionist--if I insure it and it gets stolen, they compensate me for my loss. And, let's say 25 years later the painting shows up in an auction and is discovered to be my stolen painting, the insurance company owns that painting because they paid out the payment to me in my insurance.

However, is it a custom or a contractual thing that they will give me back my painting as long as I give back the money with interest, but not the real value? So, if the painting is worth $10 million when it's stolen, and in between it appreciates to $30, I can get my painting back for $10 million plus interest. I don't have to give them the $30 million it's now worth to them as the actual owners. Is that custom? Where does that come from?

Anja Shortland: So, ery few people are actually able to insure their paintings to their full value, anyway. So, probably a $1your0 million painting was only insured for a million because you weren't really able to afford the premium on a $10 million painting. The insurers will only seek to regain what they paid out in compensation, because for insurers there's also reputational gain, when insurers are getting quite a lot of negative publicity already and they don't want to be seen to be benefiting from crimes.

So, the Art Loss Register was made so powerful because of the insurance companies basically giving them their back-catalog of everything that had ever been stolen, was still sitting on their books.

So, they started off with the IFAR Lost Art Alerts, which from the 1970s--International Foundation for Art Research, in New York--they started off with that. But, getting the back-issues of all things that had ever been reported stolen to Lloyd and that had been paid out by insurers gave them a big starting catalog of things. It gave them real credibility.

Russ Roberts: Do you know how many items are in the Art Loss Register?

Anja Shortland: Over 700,000, as of the end of last year.

Russ Roberts: So, those are all unresolved theft?

Anja Shortland: Yes. Theft and incidents of looting, and expropriations--things that got lost from Jewish collections--it's not entirely clear exactly how they made their way out of the families' hands and where they are now. But yeah, over 700,000 uniquely identifiable objects--watches, paintings, sculptures, family silver--anything that is uniquely identifiable. That's the thing. So, you've got to match a picture of the object with its current state. And, that's also sometimes interesting and difficult because the not-so-subtle hand of the restorer might have obliterated a lot of the characteristics.

Russ Roberts: Like the serial number of a watch, say, hypothetically?

Anja Shortland: Yes, possibly. Though, why somebody would want to buy a watch with the serial number scratched out, that rather suggests the thing is very wrong.

Russ Roberts: Yeah, oops.


Russ Roberts: So, let's talk about some of the actual cases. Let's start with the Bakwin, if that's how you pronounce it.

Anja Shortland: Yes.

Russ Roberts: Bakwin Family. They come home one day to discover that their house has been burglarized. Seven paintings are gone, and there's no sign of forced entry. Is that correct?

Anja Shortland: That's right. It was 1978, in Massachusetts. This is a family that has an art collection from their parents, who used to just travel to Paris in the 1920s and 1930s, and were friends with the artists, and they just brought back lots of Impressionist art directly from the studio just for enjoyment. And the family just always enjoyed them; sitting in the dining room, everyone loved looking at them. But, they didn't really have a massive security presence. And, the wife just said, 'Everyone knew the house key, the backdoor key was under the ceramic frog by the steps.'

Russ Roberts: Note to self: Don't use the ceramic frog. Use something else.

Anja Shortland: Keys under the doormat.

But, yeah. So, their seven paintings were stolen, and one of them a painting by Cézanne worth a million probably at the time, but much, much more nowadays. They just disappeared. They didn't turn up on the art market at all for more than 20 years.

It was only in 1999 that the Cézanne appeared in a strange context where somebody was looking for transport insurance to move it from Russia to Switzerland. And, again, transport insurance for art is something that really only gets insured at Lloyd's of London, and it was the Lloyd's of London art insurers that had helped to create the Art Loss Register. So, they ask the Art Loss Register, 'Can we insure this for transport?' And, the Art Loss Register says, 'No, that's the Bakwin Cézanne. Put us in touch with the people who asked you that question.'

Russ Roberts: And, then what happened?

Anja Shortland: The person who had asked for the transport insurance was this middleman who said he wasn't really sure who his principals were, but believed them to be a Russian institution. And, 'anonymous Russian institution' doesn't sound so good: that sounds like possibly a Russian mafia. They didn't seem that surprised when they were told that there was a problem. They said they got it in a settlement of a debt.

But, it just got worse and worse, because it turned out it wasn't just the Cézanne, but they said, 'We've got another two paintings that we've also got.' And, they turned out to be from the Bakwin hoard. And, another two. And, finally, all seven paintings were discovered to still be in the same people's hands.

And, this is not a set of paintings. So. if there had been a number of good faith purchases over time, you would have thought that would be split up. So, it really sounded that whoever was in--holding these paintings, in possession of these paintings--was very close to the original thief, because otherwise they would have been split up.

It wasn't really possible to get anywhere close to making a deal with an anonymous Russian institution, because there's so many red lines in this business; and paying criminals is obviously a no-no. But, even worse than paying criminals is giving money to organized crime or a possible terrorist group. And, an anonymous Russian institution was just a no-go.

Russ Roberts: So, the issue was that once the Bakwins found someone, and once the Art Loss Register discovered someone who had access to these paintings, they wanted them back. Right? And, the person who has them is anonymous at this point. They have a representative who has been this person inquiring on their behalf about transport insurance and other things. But, at this point, a negotiation begins, correct? Or, is it a legal issue? Or both?

Anja Shortland: It isn't a legal issue at this point because nobody knows where the paintings are or who is in possession of them. So, everything is completely in the air. So, what they're saying is, basically, 'We recognize that we've got something on our hands that will be difficult to sell. What are we going to do about it? Is there going to be some sort of finder's fee? Is there some way of coming to a commercial arrangement where this $15-, $20-, $25-, $30-painting somehow goes back to the original owner, but whoever has got it now also gets something out of it?' So, the Art Loss Register in general looks towards some sort of amicable settlement. But, clearly, you can't do an amicable settlement if your counter-partner is criminal.

Russ Roberts: So, the person representing the Russian institution is claiming it's not a crime--they got these paintings in good faith through a deal of some kind of, as you say, a debt settlement--but now they'd be happy to sell them for the right price.

The problem, of course, is that--this is what's so fascinating about this product and this market--you don't know whether they're really the seven paintings that were stolen from the Bakwins. They could be just forgeries that a clever person has now recreated to make a lot of money. You can say, 'I've got the Cézanne. Of course, it's appreciated, but I don't need all the full value. My clients will accept $2 million.' And, then person, this middle person, would get a finder's fee.

So, one of the challenges was figuring out whether these were the actual paintings themselves or forgeries. And, how was that achieved?

Anja Shortland: Splitting an artwork into a perfect provenance which can sell a forgery, an artwork that will stand on its quality alone is a very well known way of art fraud. So, yes: the Art Loss Register and the Bakwin's were very worried that they might be palmed off with a copy.

So, while they couldn't really talk about ransoms with this Russian institution, what they did talk about is, 'How are we going to authenticate this particular painting in the first place?' And, you can imagine that this was quite a problem because the Russian institution people said, 'Well, you just send an art expert to us, and we'll show them the picture.' And, Julian said, 'We can't do that. We can't send the impressionist specialist from Sotheby's or Christie's into the lair of the Russian mafia. Why don't you bring it to London instead?' Obviously, they were not going to take them to London where they could be seized at customs, or most likely be seized at Sotheby's.

So, there were all these trust issues that seemed to be completely impossible to solve, until everyone realized, 'There are some jurisdictions that are supremely relaxed in these matters. And, if we're talking about consensual trades between adults, it doesn't matter whether the things are stolen.'

So, they said, 'Where are we going to go?' They thought about Monaco first, and then they decided that Switzerland was actually the perfect place for authenticating all of the paintings. Because, you'd have access to all the Swiss banks, so all the finance would be absolutely nicely tied up; and it will be very safe for everyone to go to a bank vault in Geneva, and customs would not get involved in this at all.

So, that was what was decided. And, when they asked the intermediary to put the Swiss lawyer of the holders in touch with them, the lawyer came in and said, 'Oh actually, the paintings have been in Switzerland all along. This Russian story was just a story to--it was just a subterfuge. So, don't worry about the Russian mafia: everything is completely above board, and everything is in Geneva already, so don't worry about it anymore.'

Russ Roberts: So, they meet in Geneva, but you can see there's still some problems. The painting gets passed out through a car window for a brief--how did that happen? What happened?

Anja Shortland: Yeah. So, again, there was still a lot of trust issues to be resolved. They decide that they still need some statement of good faith--they still have to make sure that the holder is not the thief or connected to the thief. They look at the evidence that is provided and it's just so weak that they said, 'We can only give you a very small percentage, maybe 5%, of the value of the Cézanne as your finder's fee', as everyone was calling it at the time.

And, then, the question is, 'But, 5% of what?' And they said, 'Sotheby's says it's worth $15 million.' Unfortunately, around the same time, the Whitney family is selling a very similar Cézanne, and that sells for $40 million or something like that. So, they said, 'Why is the Whitney family's Cézanne so much more expensive than the Bakwin's Cézanne?' And, if you're talking about 5% or 10% of $15 million, or $30 million, or $40 million, it really begins to matter.

So, they just really couldn't find a solution to all of these problems. So, ultimately what they decided was to transfer the ownership of the six minor paintings from the Bakwins to this anonymous holder in exchange for the Cézanne.

And, indeed, yeah--they converge on this lawyer's office and wait for hours, and hours, and hours, drumming their fingers on the table, until eventually somebody appears with the contracts. They sign the contracts. They go downstairs. And then this limousine with the dark windows pulls up, and somebody hands out this wrapped package. They go back to the lawyer's office, and the Sotheby's experts are, 'Yeah, this is it. This is the real thing.' And, the deal is done.

Russ Roberts: How that turns out we're not going to spoil. I encourage you to read the book. But, the denouement, the ending of that story and what it turns--out who that middleman was and how he became the owner of that painting--is quite extraordinary. It involves a murder and a lot of betrayal of the lawyer's ethical code. But, then eventually the Bakwins get the Cézanne back. But, they decide not to keep it, correct?

Anja Shortland: That's correct.

Russ Roberts: Because, they don't want to pay the insurance. They think it's probably worth $30 million, and the insurance is going to be $30,000 a year. They're not wealthy art collectors per se. They've already spent an enormous amount of legal fees to prosecute this attempt to get it back, once 1999 came along and they became aware that someone knew where they were, the paintings. So, they decided to sell it. It sells for $30 million, correct?

Anja Shortland: That's correct, yes.

Russ Roberts: Who buys it, and where is it now?

Anja Shortland: It's been sold twice since. So, the last time it sold it was much closer to $60 million, I don't know who's got it at the moment. But, yes: this is an extremely valuable painting that the family just felt that it would change their lives from that laidback, 'We're just enjoying our art, we're living with it, and people come and go in our house.' They just didn't want that. They just wanted to enjoy art, and presumably they bought something else. So, it went up for auction.


Russ Roberts: So, this question of enjoying art, I want to talk about that, but I want to do it in the context of another story in your book, which is the Turner painting. A person shows up with what purports to be an original Turner, a British artist--a seascape. And, what happens? What's his plan and what actually happens?

Anja Shortland: There are lots of stories of sleepers. It's a dream of a lot of people that the find in the attic turns out to be a genuine Rembrandt or a genuine Turner.

Authentication is a big business, and art is basically a credence good, and some people say it's a meta-credence good in the sense that nobody might ever be able to prove definitively whether something is or isn't a Turner.

So, this man goes around, spends a huge amount of money soliciting expert opinions on this Turner, and he gets a really mixed bag of endorsements. And, people just basically give him the runaround and say, 'Yeah, it's a very good copy', or, 'It looks like a student's work', or, 'Yes, it's pretty convincing, but it's on a coach door panel. That's not what Turner would have done at the time.' But, he gets a scientific analysis. He gets the fingerprint analysis. He gets every connoisseur--

Russ Roberts: Explain that. Explain it: there's a fingerprint on the painting that could be Turner's?

Anja Shortland: Indeed. It has 10 areas that look very similar to Turner's left thumbprint. However, for it to stand up in court there'd have to be 16. So, it's suggestive but nothing quite matches up.

The only reason that the Art Loss Register gets involved is when this man decides that he's very close to making big bucks on this. And, rather than rushing in to a sale he goes to what's effectively an upmarket pawnbroker to borrow several million pounds [£, British currency unit--Econlib Ed.] with this painting as collateral. And, very wisely, the pawnbroker decides to check out the provenance with the Art Loss Register. It's not registered as stolen, but the ALR's staff don't like the provenance at all. It's only hearsay, and the documents that are submitted look just so fake. They go back to the pawnbroker and say, 'This person says he's bought it from somebody and we have no reason to suspect that this person even exists.' And, that person was supposed to have had it from a country house sale, but it's not in the catalog of that country house sale. And, the country house sale wasn't actually with a family that he says it was from, anyway. So there was just nothing that matched up in that trail of provenance.

So, they said to the pawnbroker, 'We wouldn't touch this.' And, they said, 'Well, it's worth four million. Surely this can't go wrong if we just give them a million.' But, of course, if it's not a Turner it's worth £800. So, yes--it went rather badly for the pawnbroker in the end. Because, once Sotheby's found out how ropey[?] the provenance was they decided they rather not put their name on the line. Because, again, it's a reputational issue. If they're going to sell it as a Turner, yes it would fetch four million. But, if they sell it as a Turner-question-mark, then probably nobody would be interested. For them, the risk is just too big.

Russ Roberts: And, if they sell it as a Turner-exclamation-point and it turns out that almost everyone agrees it's not a Turner, it's really awkward.

You mentioned the three tests. For those at home who are thinking of forging a painting, or passing off a painting as legitimate that isn't, the three tests are provenance--the chain of ownership; what you call autograph; and materials. So, explain those other two, the autograph and materials, and how that played into the Turner discussion.

Anja Shortland: There is a lot of art historical research; and, basically, if it's a genuine masterpiece it should leave some sort of trace in the historical record. If it's a genuine Turner, somebody would have bought it from Turner or out of the Turner estate; it would have been traded several times over its history. So, it should just keep popping up.

And, the people who are working with the owner of this not-quite-Turner, they were trying very hard to try and find times when it might have been sold. And, just every time they came up, 'It was in such and such a sale.' The Art Loss Register turned round and said, 'Yes, but the picture that was sold at that sale is actually at the Metropolitan Museum of Art. That provenance is not available for this particular seascape. And, anyway, it's a portrait and not a landscape.'

Then you've got the connoisseurship. These are people who studied Turner, or a particular artist, in great detail, and they're looking for brush strokes, they're looking for techniques, they're looking for particular color combinations, etc. They used to be the people whose word and reputation underpinned the art market, but they lost a lot of credibility when the [third pillar? inaudible 00:43:56] came into play, and that's a materials scientist coming in and saying, 'Would the material that was being used to create this artwork have been available to the artist at the time?' So, if you have a Turner that uses Titanium White that's only been available since the 1920s, then clearly there is a problem. So, if you want to pass something off as a Turner, you would have to source materials that were available to Turner at the time, and ideally, some of the paints that he's known to have used and particularly have liked.

But, that of course means that contemporary paintings--paintings by his students, paintings by art students at the time this painting was exhibited--they could have also produced it. So, the materials scientist can tell you it's wrong, but they can't give you a definitive attribution, unless you really have the right thumbprint in the painting and a perfect match can be made.

Russ Roberts: So, this turned out to be almost certainly a forgery, right?

Anja Shortland: Well, without a provenance it doesn't have a hope. The connoisseurs are divided. There were enough of the connoisseurs who give it a clean bill of health, and there was nothing that the materials scientists found that was of the wrong period. So, it does have a chance. But--

Russ Roberts: And, in theory--but, go ahead--

Anja Shortland: not without a provenance that will get past the Art Loss Register. So, far none has been offered.

Russ Roberts: So, it's unsolved, as far as we know?

Anja Shortland: It's unsold, and it's unsolved. And we don't really know where it is, either.

Russ Roberts: The puzzle I have about it is that: If you had a thumbprint, that would be a deal killer if it wasn't anything like Turner's. Is the implication here that somebody studied Turner's thumbprint from other sources and found someone with a similar thumbprint and put it on there to make it seem more authentic? What's going on there?

Anja Shortland: So, the idea--it's a left thumbprint, and that's not a fingerprint that is very often--the only other left thumbprint is on Turner's paintbox. So, he didn't paint with his left thumb. So, the most likely source of this painting is Francis Sherrell, who was Turner's student. So, it could have been something that Turner could have picked up in the studio while the paint was still wet and said, 'Francis, it's looking quite good,' or, 'Francis, try again,' and then it was put down again.

Russ Roberts: But, how cool is that? Wouldn't you want to have a--I've told the story a long time ago, the time I sat in a chair that Adam Smith probably sat in and how relatively exciting that was. Wouldn't you want to own a Turner--not a Turner, a Sherrell--is it Sherrell? The student?

Anja Shortland: Yeah.

Russ Roberts: Wouldn't you want to own Turner's student's imitation of Turner, that has Turner's actual thumbprint? That would be pretty cool. That's not worth $4 million, but it's worth more than $40, isn't it?

Anja Shortland: That is correct. Unfortunately it wouldn't quite cover the debts or the amount of money that has been spent on trying to get the sleeper accepted; and that's really the main problem. It's only going to end well for the person who possesses it if it is actually accepted as a multimillion dollar Turner. It's these high stakes.

It's also a sad story, because clearly people's hopes and ideas are really bound up in this painting.


Russ Roberts: The part that I find interesting--this is what I was alluding to earlier, and this really comes from my wife's insight: we were talking about your book last night--it's interesting that if it's not Turner and it just looks like a Turner, it's not worth anything. I mean, if somebody found a score for Beethoven's Tenth, an alleged score for Beethoven's Tenth Symphony, and let's say it's a forgery--they wrote it, it's not really by Beethoven but they're pretending they found it in their attic, in wherever.

Anja Shortland: Like the Hitler Diaries.

Russ Roberts: Correct. And, they said, 'This is the real thing.' And, it turns out, it's a terrible fraud: It's the wrong ink, Beethoven didn't use that kind of paper, he didn't make his quarter note rests that shape. You know, everything goes wrong. But, it's a magnificent piece of music. Right? It's not a Beethoven, but it's a great piece of music, you'd say, 'I'm happy to have it. I'd love to have a Beethoven's 10th symphony, even if it weren't written by Beethoven, if it were "in his style."' Which, of course, be part of the autograph part of your test. Right? It couldn't sound like a Mussorgsky. It would have to sound like a Beethoven. But, wouldn't you like to have Beethoven's Tenth? And, yet, somehow an extra Turner or an extra Picasso is not worth anything unless it's actually by the Master. It's a strange thing about art, I think. Am I wrong?

Anja Shortland: But, that's deliberate. That's very deliberate. You're trying to keep the supply absolutely rock steady on, whatever, 57 paintings, only three of which ever make it onto the market once in a blue moon. That's what creates value. Once you start diluting that and start admitting more and more paintings into the oeuvre of these artists, every single one of these other paintings will become less valuable.

Russ Roberts: But, if the 58th one is not by Turner, but is instead by Joe Schmoe, but it's beautiful--I happen to like Turner--wouldn't I be happy to have a fake Turner? Why is a fake Turner--

Anja Shortland: Lots of people are. And, the thing is, lots of people used to love having copies of famous paintings. So, there is lots of contemporary copies, and the last Leonardo discussion was all about, 'Is this the original Leonardo, or is one of 15 workshop copies that Leonardo's students made?' But, it's only worth $450.3 million if we believe it to be the only Leonardo on the market.

Russ Roberts: My point is that there's something a little bit weird about that. I think everyone recognizes that there's a subjectivity to art, but the particular aspect of subjectivity of, 'This is not really drawn by the hand of the Master, but I can still enjoy it in theory just as much'--

Anja Shortland: Yes, but art is not about being pretty. It's about status. And, the status is bound up in owning something that nobody else has got. And, that is the last Leonardo, not just 1 of 15, or 1 of 500 copies of the last Leonardo.

And, yes, if you start diluting markets, like Cycladic sculptures, which used to be really exciting and a big collector's dream, but they're also easy to fake because you can sculpt marble and the marble is whatever age the marble is, you can't tell when it has been sculpted. And, the market just collapses.

So, authenticity is a big thing, for auction houses which are commission-based, to protect the market for the really rare objects by making it super-difficult for other people to come in. And, then, you also have academics and museum curators who also don't have any reason to dilute the oeuvre of a master and change our idea of history.

Russ Roberts: Maybe you know, I saw Michelangelo's David in Florence, which was a great thrill. I'm not a serious student of art, but it's 17 feet tall, and it's sculpted out of one piece of marble, and it's utterly magnificent. There's a copy of it in a museum in England, what's the name of it?

Anja Shortland: The Victoria and Albert.

Russ Roberts: Yeah, the Victoria and Albert. They've got a room of famous things they've copied so you can see them: You don't have to go to Florence; you don't have to go to Greece, or wherever. And, it's pretty cool, but--

Anja Shortland: Yes. The [inaudible 00:53:18] is full of plaster casts: that's what students use to train their eyes.

Russ Roberts: I don't remember if the David is actually--I think there's a David there, and I think it's--maybe it's not 17 feet tall. It's still pretty cool, the idea of it. I wouldn't mind having one.

Anja Shortland: But you don't get the status from a plaster cast that you get from the original, and that's what the market is all about. It's about creating institutions that protect that. And, it's a very dynamic game, because the better you get at protecting it, the better the fakers and forgers get at trying to circumvent your tests.


Russ Roberts: So, with the advent of the Art Loss Register roughly 30 years ago, how has that changed the art world? Do we have any measures of how it's changed, in term of--in theory, it should increase the value of paintings because they're authenticated, and are known to be of certain provenance, autograph, materials, and so on. But, it's had other impacts as well. So, talk about how this private institution has affected this formerly Wild West market in art.

Anja Shortland: What the Art Loss Register has done is it has held out a hope to the victims of theft and looting, and governments whose antiquities have been stolen and looted from public museums and major archeological sites, that they might be reunited at some stage in the future with their possessions.

But, it's also made it a lot less attractive to steal art in the first place. So, knowing that you find it very difficult to sell art on the open market--and you do have to sell it at a boot sale, a car boot sale, or--

Russ Roberts: That's a trunk--

Anja Shortland: on the Internet, or somewhere where you're not going to get the full value of it--makes it less interesting to target art in the first place.

So, it has made art more insurable. And, it's made art more enjoyed, because knowing that it's not worth stealing, we can tour[?] it round the world. There not enough Bond villains to create a market for stolen art. So, there is a big gap what we try and get on the open market and on the gray and underground markets for stolen art.

And so, that differential between something that has a good provenance and something that has an impaired provenance, creates the possibility for what are called amicable resolutions, negotiations.

It's actually relatively rare that they find art--that the Art Loss Register finds art that's still in the hands of the criminal or somebody closely related to the criminal. What mostly happens is that they find something that's been put up for sale by a good-faith buyer who's had it for 10, 20 years in their collection, or they bought it five years ago from somebody else who's had it for 10 years in their collection.

So, it really is about recognizing the current possessor's moral rights--and they might also be the legal owner of the artwork, at least in their jurisdiction. And, recognizing the moral claim of the previous owners. And, somehow creating a level playing field for a negotiation.

And, very often, that works extremely well, particularly at the top end of the market where people say, 'This would be worth so much more if I could sell it in New York, rather than in the Freeport in Geneva.' So, they volunteer to come to a negotiated resolution.

And, also, the bottom end of the market: because social norms have shifted, and people do recognize and support the idea that certain historic wrongs can and should be righted through restitution. But, not outright restitution and saying, 'We'll share in this, in 30-70, 50-50', whatever you do. A private/government solution actually has a much--it just seems fairer to both sides. And, it's also hugely cheaper than trying to go to court. And, courts will eventually come up with what will look like an unfair judgment: 'It doesn't belong to A or B, it does actually belong to both.' So, I think that's a really interesting and elegant solution to a very tricky property-rights problem.


Russ Roberts: That's a really nice point. Again, emphasizing you're not talking about the actual thief trying to fence the article themselves, but a good-faith buyer who innocently bought something that wasn't owned by the seller, unknown to the buyer, now tries to resell it. There's a moral ambiguity there.

And, the private solution is--what's the right word?--nuanced, negotiated, shared, as you say.

Whereas the public solution is often going to be a one-size-fits-all, an all-or-nothing. It's awkward. You could have arbitration, I think, for, in a public setting. But, typically ownership is either A or B's: it's not split. It could be in a divorce. Right? In a divorce, property gets resold and then divided up: it's not like necessarily one person gets all this item and the other person gets zero. It's often one person gets part of the monetary value, even though the other person might the item itself.

A similar thing is happening here. And, I guess divorce court is a better model for this than, say, a normal court of justice where ownership is then a one or a zero.

Anja Shortland: That's correct. And, the beauty of the Art Loss Register is that they come in at a point of sale.

So, the current holder has already somehow severed their emotional link with the artwork and they're thinking of it in monetary terms. It's not like the Art Loss Register comes into your sitting room and says, 'Russ, that painting above your mantelpiece that you love dearly and that gives you joy every day of the week, we want that back.'

You've already put it on the market: you're thinking of it as money. And, they say, 'Well, we can get you more money. We can add value by resolving its history. We make it more attractive for a conscientious buyer, and certainly for an art investor. Are you willing to share some of these gains with the original owner?'

And, the chances are, if it's put like that to you, you probably will. If somebody sues you you're going to get super-defensive about it. So, it's a difference of approach that works really well.


Russ Roberts: So, the Art Loss Register gave you access to all this information. You do raise issues at times in the book about times that they may have overstepped and damaged their own reputation through a decision, a strategic decision they had to make. A lot of the book involves Julian Radcliffe's--the Founder and Director--his sense of what will be effective in a very ambiguous legal situation. How did that feel to you when you were writing the book? And, is the Art Loss Register going to go forward without someone like a Julian Radcliffe at the helm of it?

Anja Shortland: Yeah: It's a hugely controversial company. It's constantly being held to account by the media, as well. The idea of this Julian Radcliffe figure is very often likened to a James Bond-type character, because he operates on the margins--yeah--of where people feel comfortable. And, he built that company in a period of norm change--so, in the 1990s you had all these debates about Nazi-looted art, and a little later blood antiquities, blood antiquities, terrorist funding, etc. So, social norms are changing, and he says--he creates this due diligence product for the market, and pushes it onto an opaque market that's really quite comfortable with all these cozy relations.

And, you can't--I can't think of any successful norm entrepreneurs that are not controversial. They all are. Challenging norms is the definition of being controversial.

And, yes--I mean, he does occasionally do things that with hindsight he probably wouldn't do again. I find that interesting. He's a rational actor, I think, with making decisions sometimes just from gut feelings. But, he doesn't [?persist to? inaudible 01:03:50?]. He's got skin in the game, as you would say. If he feels and realize that something is harming his reputation, he won't try it again. And, yeah: it is a world where you fiercely have to guard your reputation, and if you do take a risk you do stick your neck out, then you better be right--you better be proved right in court eventually. Yeah.

It was very interesting. I was critical, as well as intrigued, as well as admiring, and I think that comes across in the book as well.


Russ Roberts: One thing we didn't make clear is that they are not doing this out of the goodness--it's not a public service. So, how do they make their money? What pays Julian Radcliffe's airplane budget? He does a lot of flying around the world--often fruitlessly, as you'll read in the book if you look at it. How do they make their money? How big is their staff, roughly?

Anja Shortland: About 25, maybe about 30 people. Fluctuates, as well. I'm not sure how much has got through the pandemic. But yes: it's a private governance[?] for private profit. So, people pay to register, and the insurers initially bankrolled the Art Loss Register so that they could register their art losses from the previous decades.

Now, the main income is from search income. So, everyone who wants to search either has to pay a one-off fee, or they can subscribe for however many dozens, 100s, or 1000s of artworks they want checking every year.

They do this for art fairs as well, because art fairs don't want to be seen to be selling stolen goods, either.

And, then thirdly, they get some money from recovery fees, and from location fees. So, you can either pay a location fee, if you just let the Art Loss Register tell you where your artwork is. Or, you pay a recovery fee if you want to use their services to get the picture or the artwork back, and that will be a percentage of its value.

Over time, the main income stream shifts. So, they start off with insurance money, effectively. Then they go through a period time where they go rather aggressively for the recoveries. And, that doesn't always go well, some of them end in tears. But there are also a few windfalls that then keep the company afloat. And, I'd say only in the last 5, 10 years or so has it become a stable company that just works on the search incomes. So, yes: I do think it is now sustainable.

But, as I was writing the book, and as I could see money going down the drain in an alarming way in several of the stories, I was--I kept thinking, 'Is this a toy, or is this an institution?' But, it's the norm change, and these adventure stories are very much a part of changing the dynamics and changing the norms and due diligence that's absolutely necessary to get to the point where they're now.


Russ Roberts: One of the incredible things about it is, of course, that what keeps the Art Loss Register honest is their reputation and their concern to maintain that reputation.

In the movie version, there would come a temptation so large that they might consider jeopardizing that reputation. So, it's an interesting example, and there's so little competition. Right? So, it's a private entity. It comes into existence to allow a set of transactions to take place with more confidence than they had taken place before, and their trust in them relies on what they would forfeit if they were to sacrifice that trust. And, yet, it's possible that that gets tested. As I said, if I were to make a movie about it, you know, I'd call it, 'The Art Loss Database', instead of 'The Art Loss Register,' where the founder would face some dilemma. So that--if you want to comment on that. I don't know if you have a conflict of interest on this or not. I think the Art Loss Register is publishing your book, is that correct?

Anja Shortland: That is correct, yes. So they gave me access to their archive. It wasn't clear whether that was going to be an economics book. I think it is, now.

Russ Roberts: For sure.

Anja Shortland: At first, it was just a collection of adventure stories that I wanted to analyze in detail. We didn't go for a university publisher.

And yes: there are always these temptations in the art market. And, you could say, when Christie's sold the last Leonardo, that was one of those points where you thought, 'Well, did they stake their reputation here on something that they ought not to have done?' But, then, you look at the sales brochure in detail and you find that they've basically put all the information out there. So they went for total disclosure. They just didn't hold anything back. And, you think, 'Okay, this was a calculated risk.'

I can't really see at the moment that there would be anything big enough for them to jeopardize their reputation. But, yeah--it is always possible. It's a monopoly, but it's a contestable monopoly. There are people always on their tail.

So, an alternative to the Art Loss Register, of course, is blockchain. And, then, you've got really good provenances, rather than--it's really a shortcut. The Art Loss Register is not a complete provenance. It just says, 'At the moment, nobody's looking for it.' But, somebody might register it within the next three months, and then you've got a problem. But, at the moment nobody's looking for it, and therefore you are buying it in good faith.

But, year: there have been other art loss databases. And, at the moment, the way they're doing it, they're using real people to match paintings, artworks, with the photograph that they're given by the owner. So, you can see that somebody's going to come in and say, 'I'm going to use artificial intelligence. I'm going to revolutionize this.' So, it's a contestable monopoly, and I do think that has kept them on their toes. They've had to see off a bit of opposition in the past. It's a survivor.

Russ Roberts: My guest today has been Anja Shortland. Her book is Lost Art. Anja, thanks for being part of EconTalk.

Anja Shortland: You are very welcome. Great to talk to you again.