Monetary matters

Markovitz Dissertation Fellowships help students link economics and social life.

Social sciences graduate students Erica Coslor, AM’05, and Marc Teignier-Baque, AM’05, are working to illuminate the links between social and economic behavior—and they are both 2009-–10 recipients of the Michael C. Markovitz Dissertation Fellowship. Established by Michael Markovitz, AM’73, PhD’75, in 1997, the fellowship provides one or two annual dissertation-year awards to social sciences graduate students exploring “the connection between the social/cultural and commercial spheres of life.” 

Coslor arrived in the sociology department in 2002 planning to study nightlife and entertainment, but switched tracks. “I wanted to focus on the intersection of money and values, something that was a problematic market,” she says. “And then I realized that the art market is complicated because of the relationship between aesthetic values and market values. I started going to auctions in Chicago and fell in love with the topic.” 

Through ethnographic research in New York and London, Coslor’s dissertation traces the interest in art investment over the past 40 years. What started over 300 years ago as speculative interest—purchasing a piece of artwork and positing that it might be worth more down the road—has evolved, she says, into rational, calculated investment that is even acceptable to hedge-fund managers. Supporting that shift, financial professionals and economists have developed technical evaluation measures and ways to legitimize financial investment in art. Examples include art price indices that compare against the Standard & Poor’s 500 and private equity funds that purchase a portfolio of artwork and sell shares to potential investors.

But while such resources now exist, Coslor notes that the art market is more complex than it appears on the surface. Potential investors run into trouble, she explains, when they assume that auction sales adequately represent the market’s overall direction “I interpreted the criteria for receiving a Markovitz Fellowship as conducting research that helps inform how the social sciences contribute to economic understandings,” Coslor says. “Using ethnographic research to uncover the disconnect between auctions and galleries is where sociology can contribute to economic understanding of the art market. One example is the price protection measures used by galleries. If art collectors or funds want to sell their works, the gallerists representing those artists will often step in. If the owner really wants to sell and the gallery doesn’t think it’s a good time—if, for instance, the market is not doing well—the gallery might try to arrange a private sale rather than have the work go to auction where it gets a publicly visible price. If the owners don’t follow the gallerist’s advice, they could be subject to sanctions, such as that particular gallery never selling to them again.” This is because gallerists must manage price levels at the same time that they manage artistic careers: a low price at auction can sometimes create a permanent black mark on a young artist’s perceived career.

While Coslor developed a new research focus as a graduate student, Marc Teignier-Baque returned to a field he studied as a Barcelona undergraduate: international trade and economic growth. His dissertation explores international trade’s effects on structural transformation and economic development in the United Kingdom and South Korea. A country that is self-sufficient yet unproductive in terms of agriculture, he noted, is forced to allocate a large fraction of its labor resources to the agricultural sector. As a result, that nation’s aggregate productivity is low, even if its productivity outside the agricultural arena is high. Teignier-Baque theorized that agricultural imports would enable such countries to reduce labor in agriculture and reallocate it to more productive areas, thereby increasing capital accumulation and accelerating the rate of economic growth.

Creating a model to test his hypothesis, Teignier-Baque quantified the importance of international trade for the UK during the 19th century. His results showed that importing food was critical to industrialization because it spurred a reduction in agricultural employment—and thus moved human resources into nonagricultural sectors with more potential for productivity. He then ran the data for South Korea since 1963. He chose South Korea because the country has had “a fast industrialization process, and has been an agricultural importer for the past 47 years. I thought that perhaps one of the reasons they were able to industrialize so fast is that they imported food from abroad.” In an interesting twist, he found that South Korea had actually enacted legislation to protect the agricultural sector—agricultural import tariffs existed throughout his entire sample period, and in the early 1970s, the country introduced subsidies for agricultural producers. 

Thus, social behavior directly affected economic growth. “My model shows that South Korea benefited less from agricultural imports than the UK did, but only because the South Korean government protected the agricultural sector so strongly,” he explains. Without those restrictions, he argues, its industrialization process would have been even faster. “I predict that my model can be applied to other countries, those that still have the majority of their resources in an unproductive agricultural sector. In poor countries, the leadership seems to be concerned about dependency on foreign agricultural imports, so agricultural trade is not all that important. But if a country that has bad land is attempting to independently provide food, then it’s going to get into trouble.”

Teignier-Baque and Coslor agree that having a Markovitz Fellowship has focused and invigorated their dissertation research. “I used to do land-planning consulting on top of teaching,” remembers Coslor. “The Markovitz Fellowship has allowed me time to write, and that has made an enormous difference.” Seconds Teignier-Baque: “I had been working as a teaching assistant and a lecturer. Very interesting experiences, but experiences that absorbed a lot of time. I’m not sure I would be able to graduate this spring without the support.”

The benefactor behind that support, Michael Markovitz, earned a doctorate from the Department of Psychology and then became a licensed clinical psychologist. He practiced for several years before starting the Illinois School of Professional Psychology. The first private, independent school to award the Doctor of Psychology (PsyD) degree, it grew into a university of 27 campuses with almost 15,000 students before Markovitz sold the business in 2001. 

That success enabled him to endow a divisional fellowship. “I couldn’t have had the career I’ve had without the benefit of the fine education I got at Chicago,” Markovitz says. “When I asked the dean at the time, Richard Saller, how I could help, he told me that the Division needed dissertation-year fellowships. I designated the gift for research looking at the connection between social and economic behavior because I realized that psychology, where I started out, and business, where I ended up, are closely related to one another. Money doesn’t behave by itself—it acts through the medium of people doing things with it. I predicted that providing targeted scholarship funding would encourage people to pursue this area of research. And I think it’s worked out that way.”