science | October 28, 2013

Adam Alter On Why We Have A Hard Time Understanding Value

Why do humans have a hard time assigning the proper monetary value to certain items? Fine art, say—or beer, or even Coca-Cola. In a popular New Yorker blog post, Adam Alter, bestselling author of Drunk Tank Pink, looks into this quirk. In Manhattan recently, the artist Banksy asked an anonymous elderly man to sell original artworks on his behalf. The paintings ended up selling for far less than they would have had buyers known that they were authentic Banksys. (They went for hundreds of  dollars, not the millions that Banksy have been known to fetch). “What makes Banksy’s subversive stunt so compelling,” Alter writes, “is that it forces us to acknowledge how incoherently humans derive value.” Stories and context play a greater role than we imagine. Why does the price of something vary so drastically when one piece of information is added? The way unseen forces change our behavior is something Alter explores in Drunk Tank Pink, which chronicles the power of environmental cues, such as the color of a room, to shape our decision-making process. (Malcolm Gladwell recently cited the book as one of his favorites this year.) Alter explains that pricing art is difficult because it is “inherently inevaluable.” Here’s what he means:

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).

In his keynotes, Alter offers a groundbreaking look into the complex relationship between environmental features and our thoughts, feelings, and actions. To book Adam Alter as a speaker for your next event, contact The Lavin Agency Speakers Bureau.

Watch the video of Banksy's art sale experiment: