The world of fine art presents a curious economic paradox: pieces that might seem to hold little intrinsic value often fetch astronomical sums, confounding the traditional relationship between cost and value. This disparity reflects the influence of social and cultural forces that determine the price of art in ways that deviate from standard economic principles. This article will investigate the factors that affect the art market, why some pieces are valued as high as they are, and why these pieces are bought for these prices. 

From prehistoric cave paintings to contemporary installations – art is a way to create a story, to express emotion, to worship, or to make a social commentary. However, the modern art market now represents a multi-billion-dollar industry that is not necessarily focused on the pieces themselves.  And in 2024, the global art market was valued at around $65 billion. But what exactly drives the vast differences in the pricing of art, even between pieces of seemingly equal quality? 

Unlike manufactured goods, where production costs often correlate with price, the art market defies such straightforward logic. For example, in the automotive industry, both a Ferrari and a Toyota serve the same basic function, however the Ferrari commands a much higher price due to its superior engineering, materials, and brand prestige. The art market, however, amplifies this phenomenon to a much greater degree. Artwork is often positioned and promoted by dealers, galleries and auction houses meaning that the intrinsic value of a piece of art rarely aligns with its market price. This makes is hard for buyers to assess an objective value, making them susceptible to pricing based purely on perception and prestige. 

One example of the disconnect between market price and intrinsic value is Maurizio Cattelan’s Comedian (2019). The piece consists of a banana taped to a wall. The material costs would have been virtually non-existent, however the piece sold for $120,000. One reason the piece fetched so much at the auction was because of how it was presented. It was shown at Art Basel Miami Beach which is one of the most prestigious art fairs in the world, and by being placed beside other high value pieces Comedian benefitted from “perceptual contrast”. This is when something of lesser value is elevated because of its association with other more valuable items. 

Another reason art can be valued so highly is because of the critics. Praise from respected galleries and critics can drive the prices upwards, regardless of the piece itself. Social scientist Steven Plattner argued that critics are often wary of dismissing potentially groundbreaking work, causing them to err on the side of praise. This has become even more prevalent after critics heavily critiqued the 19^th century Impressionists, whose works are now considered extraordinarily groundbreaking and are now worth millions. 

Even when these works seem to be overpriced and lack inherent quality and value buyers still remain eager to purchase it. Thorstein Veblen’s theory of conspicuous consumption offers an explanation for this phenomenon. Veblen argues that people buy luxury goods, including art, to signify their wealth and status. This is known as the Veblen effect where consumers are willing to pay more for a good due to its high price. In this way art becomes a vehicle for individuals to signify/flaunt their wealth to others. This theory extends beyond individual pieces, and in some cases an artist or their brand become so successful and powerful that they transcend the artwork itself. For example, Damien Hirst’s studio produced pieces have become iconic and his name alone guarantees a high price regardless of what the piece is. 

Art also has no immediately recognizable value making it seemingly worthless to many people. However aside from aesthetics and wealth flaunting, Pierre Bourdieu explains its value. His concept of cultural capital states that owning high priced art signals to others intelligence, education, and a refined taste. Therefore, wealthy collectors can showcase their cultural sophistication making it incredibly valuable to the people who can purchase these pieces.