In the art world, the value of art is defined by a small number of gatekeepers - the curators, gallery owners, and auctioneers. Therefore, the market is characterized by very subjective prices. This means corruption and collusions are incredibly common, such that art donors can turn a profit on it. Basically, when a person donates a piece to a non-profit museum, they can get a tax-write off. For example, when someone donates a piece that is valued at 10M dollars, they don't have to pay 4M taxes on 10M dollar worth of income, meaning that they save 4M from their pocket. The process of determining the art's worth is difficult and the IRS requires that each art to be professionally-appraised before the write-off. The manipulation of the appraisal process is where rent-seeking behaviors come in. Each year, among all art works donated that had been audited by the IRS, nearly 1/3 of them are overvalued by appraisers by 38%. IRS also only audit a selective amount of art donations each year, which enables donors to take chances with raising the true value of their art. This can happen very easily, where a wealthy art donor could buy off an appraiser to have the assessment price jacked up. Essentially, a rich person could buy a piece of art for 4M, wait for its value to appreciate a little over the years, then look for an ideal appraiser, then donate the art for 10M and receive 4M in net tax benefit; at this time, they have already reached a break-even point.
During this process described above, no additional wealth is created and the government is harmed because they lose tax revenue. This is a good example of rent-seeking that generates no value for the society in a highly exploitative market. The art market is indeed created by the rich and for the rich.
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