Have you ever wondered about who decides how much our morning coffee costs? Or why diesel prices are suddenly skyrocketing? In 1776 a Scottish thinker indeed living up to his name, Adam Smith published his work The Wealth of Nations, bringing into life the first ever collection of discussions about how wealth is created.

Now, because we’re artists, the points that Smith has on the division of labour are obviously irrelevant for most, except for those 2 or 3 souls that plan on getting a job in HR at Jeff Koons’ atelier. The main point for us to look at would be how prices of various products are created.

If we consider Smith’s views on commodity products, there are three things that make up the price of every product: the labour it took to make the product, the expenses we have in paintbrushes, paint tubes, rent, food and other materials to be able to make the product and the profit that we want to make. 

In usual commodity products like car tires and laptop hinges, the rent and labour (wages) make up a lot of the price, but anything beyond that is the company’s profit. 

But it seems art doesn’t behave exactly like rubber tires or metal hinges, because some art like works from the Spatial Concept: Expectations series by Lucio Fontana for example couldn’t rack up the expense cheque by more than a few tenners and a bowl of homemade pasta. And yet, the works sell for millions of Pounds and more.

Unlike our average commodities, art’s value isn’t judged by the materials used, neither by the labour it took to create it, because a quickly made blotchy cheap-paint-on-rubbish-canvas Rothko painting (he even used an assistant to make the process of painting faster) will be much more expensive to buy than a Koons Balloon Dog, that actually took months and thousands of man hours (obviously not the artist’s own time) to create and is made out of premium, long lasting materials.

The majority of an artwork’s price is therefore not bound to the physical features of any particular piece of art, but its perceived value, that certain je ne sais quoi. 

And exactly like these four French words that sound pretentious when a non-French speaker uses them in a sentence, but sound completely normal when uttered by a real French person, art’s perceived significance and consequently its value can differ drastically when circumstances change. And more on that in tomorrow’s blog.