Yale University professor of psychology Paul Bloom, and author of How Pleasure Works, explores why the knowledge of a treasured object’s pedigree profoundly affects our enjoyment of it – and colours our judgement of its value as an investment.

Why is a Cezanne painting, a premier Cru Bordeaux or a dress once worn by Marilyn Monroe so highly valued? The simple answer is that each of these items is a source of great pleasure, often in conjunction with other characteristics such as beauty, scarcity or antiquity. But the way that pleasure functions, and its relationship with financial value, is often laden with paradox. Paul Bloom, professor of psychology and cognitive science at Yale University, and author of How Pleasure Works: The new science of why we like what we like, offers some intriguing insights into why we value some assets so highly.

International Wealth: It might be argued that the true value of any treasured object – such as an important painting or a diamond necklace – is nothing more than its base cost or its utility as an appreciating asset. So why do the owners of such objects often endow them with much greater value?

Paul Bloom: When economists think about why we buy and possess objects, they think in terms of utility – what it can do for you or its investment value, what you can get back for it. But human psychology is a lot richer than that. With many objects, we want to possess them for reasons that go well beyond their utility. Sometimes it’s just because of what they signal to others: some brands have appeal because they show you are affluent. But what I focus on is different from that and more fundamental. When we value an object, we value its history, where it came from. This is the key to a lot of the pleasure we get from art, for example, and it explains why the difference between an original and a forgery matters so much to us. We want the real Picasso, not because we can see a difference from a copy (which is certainly not always the case), but because part of the pleasure we get from it comes from knowing how it was created.

There’s a lot of evidence for the endowment effect, whereby once you own something it becomes more valuable to you.

IW: Do the owners of such objects uncouple the pleasure they get from the financial value, and if an object is financially valuable, does that reinforce the pleasure you get from it?

PB: We know that, for the most part, if you think something is expensive you get more pleasure from it. My favourite experiment shows that if you drink wine you think is expensive, it tastes better, you rank it better, and neuro-imaging shows that parts of your brain devoted to pleasure are more responsive. You really do enjoy the expensive stuff more! But people are generally unaware that this is happening to them: we think we don’t care about price but we’re wrong. The flip side is that there are occasional instances where the excitement is created by getting something cheap. I have one wealthy friend who will delight in buying things as inexpensively as possible.

IW: What motivates people to possess treasure assets in the first place? Is it an innate sense – something that is hard-wired – or something that we learn?

PB: I wouldn’t be confident enough to say that the impetus to acquire treasure objects is universal or hard-wired. But there is a lot of evidence for what psychologists call the endowment effect, whereby once you do own something it becomes more valuable to you. Danny Kahneman, who won the Nobel Prize [for Economic Sciences in 2002] showed that if you ask someone how much they would pay for a coffee mug, they suggest a sum of money. You give them the mug and then ask how much they would want to sell it back to you. And they want more – it’s perverse.

IW: Why are we tempted to attribute our reaction to a precious thing to the properties of the thing itself?

PB: I think the focus on the history of an object is universal and is something we are born with. All humans, when they value something, are affected by what they believe to be the object’s history. What culture adds is that it tells you what sort of history to focus on. Art is a good example. Every society has art and in every society part of the value of art is in its history, but in some societies such as in the United States or European countries, creativity – the genius moment – is a highly valued part of history. Only in those kinds of societies could modern art come into being. In other societies, for example in Asia, skill and virtuosity are the aspects of history that matter. Calligraphy, for example, may lack originality in the American sense, but it requires immense skill. Essentialism is universal – we respond to what we perceive to be the essence of things. But our belief about what matters about that essence varies from culture to culture.

IW: What part does provenance play in pleasure? Why does our appreciation of something like a dress owned by Marilyn Monroe transcend purely monetary considerations?

PB: I call this ‘contagious magic’ and it’s another sort of history that in this case is about contact. We did a study [at Yale] where we asked people: who do you like and respect most in the world? If the answer was someone like George Clooney or Barack Obama we would ask them: how much would you pay for a sweater that had been owned by that person? And then we asked them how much they would pay if they had to keep it a secret and weren’t allowed to sell it, and the price dropped slightly. But what really made the money go down is if you tell them it would be thoroughly washed before the purchase. People want something with a physical embodiment attached in some way. I did another study with a colleague where we looked at auction data for objects that had been owned by John F. Kennedy, Marilyn Monroe and the fraudster Bernie Madoff. For Kennedy and Monroe, the closer an object was to their body, the more value it had. So people would pay more for Monroe’s watch than for her radio. For Bernie Madoff it was the reverse. Because he’s a despised character, that physical contact counted against an object.

IW: To what extent do individuals use the demonstration of their capacity to appreciate an object to build their status and gain respect?

PB: Part of what goes on, certainly in art, is a linking of both status and knowledge. This can explain the appeal of certain modern works of art, like a white canvas [by a painter such as Robert Rauschenberg]. Regardless of what pleasure you get from its history, owning the work is a demonstration to other people of your powerful sense of discernment. It’s similar to the case with bottled water, where you are saying: look, I can spend money to get what other people get for free. With modern art you might be saying: I can spend $1m to get what you might get for nothing.

IW: Why is context important in how we attribute value and derive pleasure?

PB: Context is often informative of a history. If you see a picture in a gallery, it means it was created by artists, it was vetted by experts, but if you saw the same picture lying against a dumpster, you just don’t know that. If you see concert violinist Joshua Bell playing in the Boston Symphony Orchestra, you know this guy is good, he’s passed through various experts, but if you see him busking at a subway station, you’ve no idea who he is [as Bell once did in 2007 as an experiment, only to find his earnings, at around $32, were little more than those of other buskers]. It affects how you hear the music, how you see the art. So context tells you invisible facts about its essence.

IW: So, without that human context, why do people get pleasure from owning precious metals and stones?

PB: Most things where the essence of the thing is involved are human creations. For precious metals, gold and diamonds, it is more of a convention and an appreciation of scarcity. Diamonds are hard and shiny, and at a low level they’re beautiful, but much of the pleasure we get from them is their scarcity. If diamonds fell from the sky, nobody would get their loved one a diamond as a gift. And, again, authenticity really matters – if someone gets a diamond ring, it matters to them that it contains a real diamond, even if it there is no visible or functional difference between it and a synthetic diamond.

Professor Paul Bloom’s new book, Just Babies: The Origins of Good and Evil is due out this year.