In 1974 the British Rail Pension Fund decided to invest in art, eventually devoting some £40 million ($70 million), or about 3 percent of its holdings at the time, to the venture. British Rail engaged with Sotheby’s, which offered “free” advice on the condition that any sales from British Rail’s portfolio would pass through Sotheby’s. The significance of the British Rail experiment, the success of which remains debatable, was that it was the first very large-scale and systematic attempt to treat art as an investment vehicle.

During the 1980s and early ’90s, there was an extraordinary boom in the art market, particularly in Impressionist and Post-Impressionist pictures. A crucial role was played by Japanese buyers, who were attracted to the market following the revaluation of the yen at the 1985 International Plaza Agreement. The next year, changes to U.S. tax law removed incentives that had encouraged the wealthy to donate fine art to museums, instigating a spate of sales. The greatest escalation of prices occurred between 1987 and 1990, after the 1987 stock market crash. During this period Vincent van Gogh, who had sold only one painting in his own lifetime, became the most sought-after artist in the world. Three of his pieces became, in turn, the most expensive paintings ever sold; the 1987 sale of Sunflowers to the Japanese fire-insurance company Yasuda brought $39.9 million, a price eclipsed later in the same year by the sale of Irises to Australian entrepreneur Alan Bond for $53.9 million and again in 1990, when Japanese businessman Ryoei Saito purchased Portrait of Dr. Gachet for $82.5 million.

For a time it seemed as though the art market was immune to the fluctuations of the money markets. In reality, prices were being forced up artificially by a huge influx of money from institutions, individual speculators, and, it later emerged, an elaborate Japanese money-laundering operation. While the sale rooms boomed, many dealers operating in the more traditional fields of the secondary market were unable to keep up with spiraling prices or compete with the incursions of the auction houses into the retail market. This led to profound changes for some of London’s most venerable galleries. In 1992 Arthur Ackermann (established 1783) merged with Oscar and Peter Johnson. Christie’s purchased Spink and Son (established 1666) in 1993, merged it with Leger Gallery in 1996, and, after having spun off the assets, closed Spink-Leger Pictures in 2002.

Another major trend of the 1990s was the ascendance of contemporary art, which became the art market’s biggest growth area. This was particularly the case in England, where artists such as Damien Hirst and Tracey Emin enjoyed the patronage of British collector Charles Saatchi. These so-called Young British Artists also benefited from the popularity of Tate Modern, which opened in 2000.

As the century turned, art and antiques fairs became increasingly important. Among the most important were the Biennale des Antiquaires in Paris, the Frieze Art Fair and the Grosvenor House Art and Antiques Fair in London, the Armory Show in New York, and Europe’s biggest art fair, the European Fine Art Fair in Maastricht (Netherlands). These venues offered dealers publicity and a high volume of visitors and offered buyers the reassurance that everything had been rigorously vetted. Buyers also had the opportunity to compare prices in a much less inhibited way than in a traditional gallery setting.

The growing popularity of fairs can also be attributed to a scandal that rocked the art market beginning in January 2000, when Christie’s chief executive officer (CEO), Christopher Davidge, provided the U.S. Justice Department with damning evidence of past collusion between Sotheby’s and Christie’s over the fixing of commission rates. Sotheby’s primary shareholder and CEO, A. Alfred Taubman, was tried and sentenced in the U.S. criminal court system, but Christie’s previous CEO, Sir Anthony Tennant, refused extradition to the United States. In addition, the two most powerful auction houses in the world were faced with fines and levies totaling almost $590 million (£390 million). The following year Sotheby’s profits were approximately halved, and there were those who predicted that Sotheby’s and Christie’s domination of the world art market would end. This did not come to pass, though the setbacks did allow rivals to challenge their position.

Also in 2000, France implemented a European Union rule that abolished the French auctioneers’ monopoly on holding sales in France, which had been implemented by Henry II in 1556. This allowed Sotheby’s and Christie’s to hold their first sales in France and spurred an increasing volume of business to Paris. Improved access to the international market has been good for the business of stronger firms such as Tajan and Artcurial: Briest, Poulain & F. Tajan.

The 2003 launch of the £214 million ($350 million) Fine Art Fund was the first investment vehicle to experiment with the art market on a scale comparable to that undertaken by the British Rail Trust nearly 30 years before. Its inception was soon followed by the creation of several other funds with portfolios centred on art. The 2000s also saw significant growth in the number of financial institutions offering art advisory services, in particular Citibank and the Union Bank of Switzerland/Warburg (UBS). A linked phenomenon has been the huge growth in corporate collecting, wherein institutions such as UBS and Deutsche Bank have played a leading role.

A very readable survey of the art market from the mid-18th century to the 1990s is Peter Watson, From Manet to Manhattan: The Rise of the Modern Art Market (1992). The best overall history of collecting continues to be Niels von Holst, Creators, Collectors, and Connoisseurs: The Anatomy of Artistic Taste from Antiquity to the Present Day (1967; originally published in German, 1960).

Surveys of the history of the auction include Brian Learmount, A History of the Auction (1985). Sotheby’s and Christie’s are the subjects of Robert Lacey, Sotheby’s: Bidding for Class (1998); and John Herbert, Inside Christie’s (1990), both of which provide useful background on the major developments in the postwar art market.

An invaluable source for information on the early development of auctions in 18th-century England is Iain Pears, The Discovery of Painting: The Growth of Interest in the Arts in England, 1680–1768 (1988). A useful sourcebook for collecting in England, particularly in the 18th and 19th centuries, is Frank Herrmann (compiler), The English as Collectors, 2nd rev., expanded ed. (1999).

An extremely well-researched analysis of dealing in 18th-century France, focusing mainly on the decorative arts, is Carolyn Sargentson, Merchants and Luxury Markets: The Marchands Merciers of Eighteenth-Century Paris (1996). A seminal work that is invaluable as a source of data on prices, albeit one in which some of the conclusions now seem very dated and betray the prejudices of a partisan observer writing in the 1960s, is Gerald Reitlinger, The Economics of Taste: The Rise and Fall of Picture Prices, 1760–1960, 3 vol. (1961–70, reprinted 1982).