Last Saturday, an elderly man set up a stall near Central Park and sold eight spray-painted canvases for less than one five-hundredth of their true value. The art works were worth more than two hundred and twenty-five thousand dollars, but the man walked away with just four hundred and twenty dollars. Each canvas was an original by the enigmatic British artist Banksy, who was approaching the midpoint of a monthlong residency in New York City. Banksy had asked the man to sell the works on his behalf. For several hours, hundreds of oblivious locals and tourists ignored the quiet salesman, along with the treasure he was hiding in plain sight. The day ended with thirty paintings left unsold. One Banksy aficionado, certain she could distinguish a fake from the real thing, quietly scolded the man for knocking off the artist’s work.
Normally, Banksy has no trouble attracting customers. Five years ago, two of his pieces were sold for more than three million dollars combined. It would take the elderly man in Central Park almost twenty years to amass the same lofty sum. What makes Banksy’s subversive stunt so compelling is that it forces us to acknowledge how incoherently humans derive value. How can a person be willing to pay five hundred times more than another for the same art work born in the same artist’s studio?
It’s tempting to argue that there’s something special about art—that the story of how an art work came to be is far more important than the origin story of a Snickers bar or a Samsung television or a Porsche roadster. In his book “How Pleasure Works: The New Science of Why We Like What We Like,” the psychologist Paul Bloom explains the idea eloquently:
Beer is a long way from fine art, but we see the same quirks in valuation there. In a famous experiment published in 1985, the behavioral economist Richard Thaler asked self-described “regular beer drinkers” to imagine a scenario in which they’re lying on the beach on a hot day, daydreaming about a cold beer, when a companion gets up and offers to bring back a bottle from the only nearby vender. Some of the respondents were told that this place was a “fancy resort hotel”; others were told that it was a “small, run-down grocery store.” In either case, the participants would be getting a chilled, unopened bottle of their favorite brew. Since the beer might be expensive, the companion asks how much they would be willing to pay: if the beer cost as much as or less, he would buy a bottle; if it cost more, he would return empty-handed.
The people who were told that the beer was sold at a run-down grocery store were willing to pay a median price of $1.50, whereas those who were told it was sold at a fancy resort were willing to pay a median price of $2.65—a seventy-seven per cent premium for the privilege of enjoying the same outcome. The fancy-resort beer, Thaler explained, may not have been seventy-seven per cent more valuable, but people were willing to accept the additional hit because paying more is an “expected annoyance” at overpriced hotels. Paying $2.65 at a fancy resort makes you expansive; paying $2.65 at a run-down grocery store makes you a chump.
Beer and art share an awkwardly named property: they’re “inherently inevaluable.” Some concepts are easy to evaluate without a reference standard. You don’t need a yardstick, for example, when deciding whether you’re well-rested or exhausted, or hot or cold, because those states are “inherently evaluable”—they’re easy to measure in absolute terms because we have sensitive biological mechanisms that respond when our bodies demand rest, or when the temperature rises far above or falls far below seventy-two degrees. Everyone agrees that three days is too long a period without sleep, but art works satisfy far too abstract a need to attract a universal valuation. When you learn that your favorite abstract art work was actually painted by a child, its value declines precipitously (unless the child happens to be your prodigious four-year-old).
A bottle of beer is easier to value because it fulfills some basic needs, but many of the factors that determine its price are just as slippery. In one experiment, bar patrons in Boston sampled and rated whether they preferred a “regular” beer (Sam Adams or Budweiser) or an “M.I.T. brew” (the same beer with several drops of balsamic vinegar). Only thirty per cent of those who knew that the M.I.T. brew contained balsamic vinegar preferred it to the regular beer, but that number rose to fifty-nine per cent when the vinegar remained a mystery.
In another experiment, the ventral putamen, a region of the brain that processes reward, was more active when people drank Pepsi than when they drank Coke—except when they were told that they were drinking Pepsi. Coke’s brand appeal is so powerful, and our ability to determine the value of cola so fickle, that our brains respond differently as soon as we learn that what we’re drinking isn’t Coke. The physical experience doesn’t change at all, but we’re unable to peg the value of a brown, caffeinated soda until we know where its life began.
Perhaps these quirks seem frivolous. The world doesn’t change much because people struggle to derive the value of beer and art works. Unfortunately, we’re no better at calculating the value of life itself. In one classic study, people were asked how much they would be willing to donate to save a group of endangered waterfowl. Some of them were led to believe that the fund was designed to save two thousand birds, others that it was designed to save twenty thousand birds, and a third group two hundred thousand birds. Assuming each life is valuable, donations should rise alongside the number of birds saved. In fact, people are insensitive to these numbers, pledging almost identical amounts (ranging from seventy-eight to eighty-eight dollars) regardless of whether they believed the campaign would save two thousand or even two hundred thousand birds. The same is true of charities: people are often willing to donate more to save one clearly identified victim than they are to save an entire village of faceless people. We’re swayed by all the wrong cues, and our valuation estimates are correspondingly incoherent. Banksy knew this when he asked an elderly man to sell his works in Central Park. It’s comforting to believe that we get what we pay for, but discerning true value is as difficult as spotting a genuine Banksy canvas in a city brimming with imitations.
Adam Alter is the author of “Drunk Tank Pink: And Other Unexpected Forces That Shape How We Think, Feel, and Behave,” and an assistant professor of marketing at New York University’s Stern School of Business, with an affiliated appointment in the N.Y.U. psychology department.
Credit: Banksy NY.
