Why Is Art Expensive?

Brands are king in fine art. Names like Rothko and Pollock distinguish them from unknown artists the same way the Coke and Pepsi brands distinguish them from other sugar water.
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The answer is that the market for fine art is heavily “curated.” It is controlled by galleries and dealers who commit with astonishing discipline to keeping artwork prices predictable and pegged to signals of quality like the prestigiousness of the gallery selling the artist’s work. You could say the market for art is “rigged”; a more charitable explanation is that galleries and dealers act as tastemakers, deciding which art is good and therefore expensive. The end result is to turn artists into brands, which introduces enough certainty for the market to function.
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The consensus on fine art’s value is also a data-driven conclusion. Binstock notes that between art databases of auction sale results, which date back to the eighties, and published volumes that go back even further, there is “a lot of history to justify the price one might have to pay” for an expensive artwork. Any number of favorable analyses chart the prices of pieces by renowned artists like Andy Warhol. Despite a rapid rise and fall in price during exuberant periods like the 2008 fine art bubble, they outperform the stock market over several decades.
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So how do professionals evaluate an artwork’s worth? According to Sara Friedlander, who organizes art auctions at Christie’s, the world’s largest auction house, “There is not one art market. Every artist has his or her own market.” Christie’s predicts auction prices by looking at “comparables in the market,” which except in the case of real outliers or a rare masterpiece, means the selling price of a similar work by the same artist. 
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Other circumstances external to an artwork also impact its status in the art world. One reason we celebrate certain works and artists is their contribution to artistic movements. “The Fountain” is just a urinal placed upside down and signed, but it defined the Dada movement’s challenge to artistic sensibilities, which is why an authorized copy of the artwork (the original was lost) sold for $1.8 million in 1999. 
http://priceonomics.com/why-is-art-expensive/