How is The Value of Art Determined, and Why Are Some Pieces So Expensive?

Art, in all its forms, is the expression of human creativity, values, desires, and emotions. Art tells us about our past,  present and future and we attribute great emotional and historical value to it. But, as do we with most human creations, we also assign financial value to it - Leonardo Da Vinci’s “Salvator Mundi”, for instance, was sold for $450 million at Christie's in 2017. It is not difficult to understand that an artwork made by one of the most renowned artists would be of incredible value to any collector – but how did we come to such an extravagant pricing?

First of all, it is crucial to pin down and understand the criteria used to evaluate a piece of art. Obviously, the primary factor is authenticity, at least to some extent; indeed, some unsigned art pieces, or unconfirmed to be from the artist him/herself, may still be of great value due to the mystery of their nature. Another important question is whether this piece is typical of the artist or not – if the artist has common themes, an outlier to these themes (thus lesser known) would be of lower value. Then, one must look at the importance of the artist in art history – some are now considered eternal like Picasso or Michelangelo, while others are simply “in fashion” at the moment. Lastly,  the artists’ life story and their work’s history is also critical in the determination of value. An artist who died prematurely, had a disability or a tragic accident, one who had a mystery muse, has heightened value because of the myth and glamour surrounding their story. On the other hand, where the art has been (Who previously owned it? Was it ever exposed in a famous gallery?) can either increase or decrease the value.

Other than these criteria, there is an overarching sense of, well, economics. Supply and demand will ultimately control the final price of an artwork. Since the majority of artists on show at auctions today are dead, and most of their work belongs to museums, it is not possible to write this article without one very important word: scarcity. Indeed, the rarity of these artworks is what pushes collectors to empty their wallets. The owner of these pieces can not only appreciate the marvel they now have in their living room, but also obtain the bragging rights to it. Some of us will find the outcome of these sales preposterous, while others will simply say “those are the rules of the game”.

via Hypebeast

As a case study, let us take Banksy’s “Girl With Balloon”. In an unprecedented turn of events, right as the artwork was auctioned off at $1.4 million, one of Banksy’s associates activated a shredder hidden inside the work’s frame, ultimately cutting it to pieces in front of hundreds of unsuspecting people. Now, most of us would expect this piece of art to now be worth the equivalent of nothing; however, this is not the case. Some specialists speculate the destruction may have increased the value of the work. Why is this the case? Let us look back at the criteria: Banksy is “in fashion” at the moment (and on top of that, this spectacle has increased his visibility in media), there is a great deal of mystery surrounding his identity, it is a common theme of his and to top it all off, as Banksy usually produces street art, this one of a kind physical piece is very rare. Its destruction may have a deeper meaning, as Banksy typically denounces consumerism and the ultra-rich.

On a final note, who does the money go to? If the work is sold on the primary market, we are presented with two cases: either the artist sells their work directly to the buyer, in which case they of course receive all monetary benefits, or the work is sold by a gallery hosting the artists’ work, in which case the gallery takes a cut of the selling price and the artist receives the rest. If the work is sold on the secondary market, or resold, then it is done either privately or through auction houses. In this case, the artist does not benefit financially whatsoever from it – however they may benefit in the long-run, as their primary prices will most likely increase due to exposure and increased value associated to their name. This may seem unfair to some, as royalties do not exist in the art market (paintings, sculptures, some photographs) like they do for books or music for example. But this is why some artists may never live to see their success, and others will have to make sacrifices in order to “get their name up there”.