How We Create Value Out of Nothing
By: Temitope Ajileye
Tags: Art, Values, Philosophy, Economics

A s human society grew in complexity, so did our value systems. New frameworks emerged that made it possible for values to be quantified and exchanged without going through an effort-reward conversion. The invention of currencies boosted the development of human societies, increasing the reach of the economy by connecting in values of time and space that which otherwise could not be exchanged. The value of cucumbers changed when they became available in winter, and the value of houses changed when they could travel across oceans. In reality, neither cucumbers can survive the winter, nor can houses be moved, so it is inevitable that whenever value is stored into currency, its very nature changes. We can effectively say that the value of a house is not the same as the value of the value of a house; the latter, for example, can change much more rapidly than the former can.

The advent of the modern age and the widening of the distance between currencies and material values brought with them the realization that if value can be exchanged, it can also be fabricated. Fabrication does not need to be malicious, rather it can be understood as the creation of artifacts and services whose value cannot be traced back to material efforts. There are two routes to fabricate values, one formal and the other informal.

The system is engineered so that there is a constant, slow, and predictable flow of artists from anonymity to fame.

The formal route is exemplified by cryptocurrencies, of which there are now dozens circulating in the digital sphere. The awareness that currencies do not need material backing values is decades old. Cryptocurrencies fully embrace freedom from material backing and take it a step further: Currencies do not need material backing authorities either. All they require is an exchange system that guarantees the certainty of the transaction, and the order in which it was made. By creating a channel through which value can flow, value itself becomes fabricated, similar to the way in which water is extracted from thin air using fog fences.

While the aforementioned formal route aims to rid itself of authorities and compliance, the informal route relies entirely on these. This is typical of the fine arts world (but also of international organizations like the petroleum OPEC, and of industries like the diamond one). The origins of authorities are intertwined with historical phenomena too complex and case-specific to be explained here, but at every point in time it is undeniable that there are those who have authority, and those who do not. This is not the same as saying that a long time is needed for authorities to come about — new ones are born and die every year.

The authority in the fine art world is the complex of art galleries, critics and evaluators. To further simplify the discussion and eliminate ambiguities, we should distinguish the exchange value of a work of art from its aesthetic value, if such a thing can be defined. It will therefore not come as a surprise if the value of art works seem arbitrary, or if the art itself becomes a currency for the storage and transfer of value.

The first step towards the fabrication of value is rarity. This effect is accomplished by the galleries who decide how much art is available by choosing which artists are given a platform, and which are not. The qualities which galleries look for in an artist do include the aesthetic value of the art itself, but only after factors including reputation in the art community, experience, and critical reviews of past works. Above all, the system is engineered so that there is a constant, slow, and predictable flow of artists from anonymity to fame. This process of controlled extraction, much like the extraction of diamonds, gives stability to the value of different works of art, helping to keep that value high.

The second step is agreement: Good criticism can give second life to an artwork and bad criticism can destroy it. However, there has to be agreement between critics, for their judgements to carry a maximal weight. Individual art critics might be afraid to break away when they are aware that the value of the group is higher if they present a united front. This effect has been recently observed in film criticism, driven by online review aggregators.

The value of artworks may be arbitrary, but the process by which they are valued is real.

There is a second agreement at play here: The value of art galleries is reinforced by good criticism of their expositions, and the value of critics and evaluators is validated by the presence of artworks they judge positively in high-rank galleries. This feedback loop causes agreement between galleries and critics.

While we can accept the arbitrary nature of the value of artworks as an effective summary, we should not mistake the arbitrariness for randomness or fiction. There is nothing random in the agreements described above, and the mechanisms that exist uphold such systems and build reputation inside them are considered legitimate. The value of artworks may be arbitrary, but the process by which they are valued is real.