Plunder and Provenance: Using Restitution to Correct a Market Defect

Abstract

The secondary art market is experiencing a market failure caused by Nazi-looted art without legal title. Legal and market responses are inadequate and create illiquidity. The prevailing methodology entrenches existing inefficiencies by not utilizing the potential to rehabilitate Nazi-looted art. Economic research does not address Nazi-looted art, and the legal, ethical, and moral discussions are not considering the economic effect of Nazi-looted art on the market. Existing proposals lack a distributive aspect and are inefficient as they remain anchored in the bilateral structure of current possessor versus original owner and a zero-sum framework. This Article closes the existing gap in the literature and recommends compensated restitution as a market solution to the toxic asset of Nazi-looted art. The Article’s central contribution to the restitution debate is the proposed creation of the Holocaust Expropriated Art Restitution Fund (HEAR Fund), which removes Nazi-looted art from the market and increases liquidity through restitution. The HEAR Fund captures and utilizes currently ignored private information, allowing it to contribute to social utility. Uncertainty is eliminated, and the artwork reenters the market with legal title. The Fund has two functions: a database and efficient information infrastructure for provenance research and acquiring works for restitution. It creates an efficient solution to the Nazi-looted art problem by increasing the utility of all art market actors and implements the long-standing executive policy of the United States government on Nazi-looted art bringing justice to the victims of Nazi dispossession. Restitution is structuralized by treating comparable situations equally, adding fairness and justice to the process, and compensation ensures the participation of current possessors.