In both economics and the art world, the process of determining value isn’t based on objective, constant, universal units of measurement, which renders the analogy between the two fields surprisingly instructive.

Unlike other fields of human endeavor, where the units of measurement used are grounded in natural laws (weight, length, pressure, temperature etc), the value of art is inherently subjective and fluid. Quality and value in these other fields, are tied to measurement units which are objective, constant and therefore produce objectively  measurable and predictable results. In both art and economics, value is determined through complex, human-driven interactions and processes, but in both fields, the ideal of a truly “free market”—where value, is discovered through unregulated interactions—is often disrupted by intermediaries and authorities whose decisions shape and sometimes distort organic dynamics.

The growing confusion in the art world regarding the notions of quality and value, has grown so big, it seems almost as if that is the natural state of things.

This essay uses two key economic concepts: ‘price discovery’ and ‘stock-to-flow ratio’, to try and understand how we have arrived at a place where poor art can be considered to have value, and vice-versa. Exploring these parallels might offer an insight into how external forces, which have distorted the otherwise organic, self-correcting and self-regulating mechanisms of value emergence, have resulted in an oversaturated and confused art world.

In economics, price discovery refers to the process by which the market determines the price of a good or service through the interaction of buyers and sellers. Prices reflect a mixture of tangible factors like scarcity and demand, as well as intangible ones such as perceived utility, originality or prestige. This process is often seen as the product of a free market where value is revealed through organic competition, interaction and negotiation.

In art, a parallel process exists for determining artistic value, through a complex web of interactions between artists, critics, curators, and the public. However, much like with governments and central banks’ role as regulators, the art world is often subject to the tastes, agendas and judgments of curators, critics, bureaucrats and art institutions, who act as gatekeepers or regulators of sorts, significantly influencing what is considered valuable. Over time, this value, which is anything but static and is continuously renegotiated and reinterpreted by the actors involved, gets increasingly distorted, becoming a reflection of institutional and political priorities.

In both art and economics, gatekeepers and intermediaries play a crucial role in value determination. In economics, central banks, regulators, and governments’ interventions disrupt natural price discovery by manipulating interest rates, setting prices control, introducing subsidies or inflating currency’s supply through quantitative easing. These actions impact assets’ values artificially, leading to bubbles, market inefficiencies and even economic crises. Similarly, in the art world, curators, critics, and government cultural agencies, disrupt the organic emergence of artistic value. By deciding which artists receive funding, which works are exhibited, or which genres are promoted, these actors influence the perception of what is deemed “important” or “worthy of attention,” while crafting narratives around its cultural, social, or political significance and more often than not, dictating the terms by which an artwork is judged.

The rise of cultural bureaucracies that provide subsidies to certain types of art and certain groups of artists, further distorts this landscape, creating a system where value is often imposed from the top down rather than emerging from public demand or organic market and social dynamics.

Rather than allowing value to emerge organically, these gatekeepers impose their own esthetic or intellectual preferences, elevating certain artists while marginalizing others. A feedback loop is created where the value of a work is no longer tied to its intrinsic qualities or popular appeal but is instead determined by its alignment with institutional trends or theories, promoted by the art establishment.

Both in the art world and in economics, the interventions of gatekeepers often lead to the creation of artificial markets. In the art world, government agencies and cultural bureaucrats play a crucial role in deciding which artistic endeavors can thrive and which remain underfunded or ignored. Bureaucrats often prioritise certain artistic genres or political messages, skewing the artistic landscape, creating a disconnect between the broader public and the art that is being promoted or exhibited. Art that resonates with certain communities may be overlooked or underfunded because it doesn’t align with the narratives or criteria of gatekeepers, while artists who adapt to these criteria may thrive as a result of blatant favoritism even if their work is of low quality, or lacks widespread cultural relevance. Artists, in turn, tailor their work to fit the criteria of funding institutions, resulting in the loss of originality as a fundamental artistic component, the overrepresentation of specific types of art and the marginalisation of others.

This process is analogous to the economic world, where regulators and governments create distortions by intervening in the free market. For instance, subsidies to specific industries or fiscal policies designed to protect particular sectors can result in market inefficiencies and the artificial inflation of certain sectors. Just as an inflated value for an artwork might not reflect its cultural significance, artificially propped-up industries may not reflect true market value. Both in art and economics, top-down intervention leads to misallocation of resources and a disconnection from organic value creation.

The parallel between price discovery in economics and value emergence in the art world reveals a shared vulnerability to distortion by intermediaries. Whether it’s regulators and central banks shaping the economy, or  bureaucrats, curators and critics defining the art world’s taste, external interventions frequently skew the free flow of artistic capital and the organic processes of value creation. In both spheres, value is not merely a product of market demand or public appreciation but is subject to the decisions of those in power. While it is tempting to assume that value should emerge organically, the reality is that gatekeepers—whether in the form of curators or economic regulators—play a powerful role in shaping how value is perceived and distributed.

This process is described and examined in detail, in the Austrian School of economics’ critique of centralized intervention in markets. Thinkers like Ludwig von Mises and Murray Rothbard argue that government manipulation of markets disrupts the natural order of supply and demand, diverting the process of value discovery away from what is truly meritorious or desired by the public.

To deepen this analogy, another concept from the world of economics worth looking at is the stock-to-flow ratio, which is an economic metric used to measure the scarcity of a commodity. Stock refers to the existing supply, while flow refers to the new supply entering the market. Commodities with a high stock-to-flow ratio (like gold) are seen as more valuable because their existing supply is stable and difficult to inflate. In contrast, commodities with low ratios (like wheat or oil) are more subject to fluctuations in value because they are more easily produced.

In the art world, one can draw a similar comparison. Historically, art was created by a relatively small number of highly skilled individuals, and the demand for their work was relatively high, giving art a high stock-to-flow ratio. The number of artists producing work (the “flow”) was relatively low, so the “stock” of great art remained scarce. This scarcity conferred value upon individual artists and their works, allowing them to hold significant cultural, political, economic, and social importance. However, with the advent of the Industrial Revolution and the rise of the modern state, mainly through the industrialization of art schools and academies, the number of artists and artworks has grown exponentially. Art education became more accessible, and art production exploded, lowering the stock-to-flow ratio of art. While this democratization of artistic creation might seem like a positive development, it has also led to an oversaturation of the art market. As more and more artists emerge and more works (the majority of which is bound to be mediocre) flood the market, the intrinsic quality and value of art, as a unique cultural product, have both diminished.

This parallels the argument in Austrian economics, that artificially expanding the supply of a commodity—whether through government printing of money or overproduction—devalues it. In the same way that expanding the money supply through central banking leads to inflation, expanding the number of artists and artworks has diluted the significance of individual contributions, creating a cultural inflation of sorts, followed by an inevitable decline in artistic quality.

As both Ludwig von Mises and F.A. Hayek observed, markets are driven by human action and subjective values, meaning that both economics and the arts are fundamentally tied to the human element. The dynamics of value in both spheres are determined not by inherent worth alone, but by perception, scarcity, and the interaction of social forces. When external entities—be they central banks or cultural institutions—intervene, the organic discovery of value becomes distorted.

The parallels between the overproduction of art and the overproduction of money help explain why we find ourselves in an era where it is increasingly difficult to distinguish between “good” and “bad” art. Just as monetary inflation erodes the purchasing power of money, the cultural inflation of art and artists, has eroded our ability to recognise artistic excellence. Where once great artists were able to command attention and resources due to their unique contributions to society, today’s artists operate in an oversaturated market where value is increasingly dictated by trends, funding priorities, and institutional gatekeeping. The more art that is produced, the harder it becomes for any individual work to stand out, diluting the overall cultural value of art in society.

The economic concepts of price discovery and the stock-to-flow ratio provide a powerful analogy for understanding the decline of artistic value in modern societies. Similarly to how centralised intervention disrupts price discovery; the regulators and gate keepers of the art world, tamper with the organic process of artistic value emergence, and just as government’s intervention and manipulation of money and the markets in economics can lead to inflation and devaluation; the explosion of art production in the modern era has diluted the intrinsic worth of both art and artists, and as a result, we live in a time where artistic value tends to be artificially imposed rather than emerging organically.

Rather than allowing for a free, decentralized market of artistic ideas and propositions, to naturally offer individual artists the reward for their work as valued by the others they serve, the current system determines value, and therefore reward, in a manner which is highly dependent on political obedience and connections. In a reality where the majority of art and artists are unable to generate real artistic value, the reward cannot be based on art itself, and so it is bound to be based on obedience and politics.

Looking at the art world through the lens of economics, its different schools of thought and its real world manifestations, provides some valuable insights and might help understand certain dynamics that otherwise, might seem as if they’re simply how things are, where as in reality, they are a direct consequence of a specific system and its operating code.  One can argue that what has happened to art in the past hundred years or so, is the same thing that happened to every other aspect of human societies in that time period, as a result of the emergence of the Fiat standard as a monetary technology, and how it has changed every aspect of modern life. What we find ourselves with today, is Fiat art, just like we have Fiat education systems, Fiat Health systems, Fiat Food, Fiat politics, Fiat science, Fiat wars and so on.

The challenge then, is to recognize these distortions and seek a shift to a more authentic system for governing the art world, where scarcity, excellence, merit, and public appreciation play a larger role in balancing these influences, in order to allow for a more authentic representation of value.

Trying to imagine what type of art and artists would emerge in a less regulated and centrally controlled environment, is as exciting as it is depressing in view of the current state of things. But it is essential, even as a thought experiment, to try and envision a future where art and artists are evolving outside the gridlock created by the bureaucratic and political apparatus of the art world.