How do we calculate the value of a painting?

There’s an intriguing conversation on YouTube between Mark Carney, former governor of the Bank of England, and the artist Damien Hirst. It will be easy to find on Google, since these are not names normally found on the same page.

Ten minutes in, Hirst makes an engaging observation about the value we attach to art. He explains that art collectors will pay anything for a painting, even though the raw materials cost almost nothing. It’s a hundred quid’s worth of canvas, wood and paint, but you can sell it for millions. ‘The problem happens when you make something like a diamond skull. Suddenly people want to know what you paid for the platinum, how much the diamonds are worth…’ Once you have costly ingredients, people start obsessing about raw materials in a way they simply don’t with a painting.

For some inexplicable reason, we are perfectly happy to pay for intangible value in some domains: music, paintings, fashion, wine.