Some thoughts on this interesting subject: * There's a parallel between these high prices and high valuations for some tech startups. The first example in the

Some thoughts on this interesting subject: * There's a parallel between these high prices and high valuations for some tech startups. The first example in the article (the paintings didn't change even though now we know a Chinese guy paints them in his garage, so why the exponential decrease in price) could be asked in that domain, e.g. what changed in Webvan (to use the most known example) so that it went from ~$6B evaluation to epsilon in less than two years (http://www.forbes.com/sites/greatspeculations/2010/12/13/the-biggest-ipo-flops/ http://www.forbes.com/sites/greatspeculations/2010/12/13/the...). The answer in this case is that it didn't have that value to start with (forged painting, startup with no clear biz plan). * However, one cannot say the above for all paintings. Does Monet's six paintings really are worth ~$100M (http://www.wsj.com/articles/sothebys-to-auction-6-more-monet-paintings-1428014193 http://www.wsj.com/articles/sothebys-to-auction-6-more-monet...)? Now, one wants to say they have a lot of value, because Monet is beautiful but how much is that? What is its intrinsic value? * One can try to define intrinsic value for an object of art thus: It is the value you place on it even if it's found that it was created by an unknown. This works for in other domains (i.e. you don't place more value on git because Torvalds worked on it or less value on a Go library because the guy who wrote it is unknown). How much value would you put on Mona Lisa if today it was found that a certain Cosma di Pietro Mellini had painted it instead of Leonardo? Probably a lot but not as much perhaps as, say, Raphael's ceiling frescos from the Stanza della Segnatura https://en.wikipedia.org/wiki/Raphael_Rooms https://en.wikipedia.org/wiki/Raphael_Rooms. * Now to me it seems like the huge discrepancies in prices in objects are inherent to art (painting and sculpture mostly) and much less of an issue in literature. As an example: How much would Hamlet depreciate if it was found today that it was written by Thomas Middleton? If you think the drop would be huge than try to explain why a similar situation does not hold, say, for Homer's works. * The highly inflated prices are unique to art because the buyers, although we may view them as idiotic nouveau riche, do get a lot of value through prestige, which is hard to quantify. This, I think, would be the main difference between the art market and inflated stock prices: If you had shares for Webvan, etc. you were duped, you get no extra gain, prestige or otherwise, from holding the share other than its value. * A similar situation exists in wines and high-end restaurants, where the prestige element also applies.