The answer cannot be found in the physical product alone. Across modern economies, consumers purchase products for their functional qualities, but also for what those products represent. A car can represent engineering, design or status; a watch can represent heritage and craftsmanship; clothing can communicate identity; and a handbag can signify membership of a particular social world. A brand can therefore acquire a value that extends beyond the cost of producing the physical object. This raises a broader question: how did price become associated with prestige, and why does that association continue to work?

Before Branding, There Was Status

The relationship between possessions and social status is considerably older than modern advertising. Long before today's commercial brands, societies used clothing, jewellery, architecture, food and other possessions to distinguish social groups. Particular materials, colours, forms of dress and objects could be associated with rank, wealth or privilege. Scarcity could contribute to this process because goods that were difficult to obtain could also become markers of distinction.

If something was difficult for others to obtain, possessing it could become a visible sign of social position. An elaborate garment could demonstrate access to resources; a large residence could demonstrate wealth and status; rare materials could communicate privilege precisely because relatively few people could obtain them. The object therefore performed two functions simultaneously: it had a practical function, but it could also communicate something about the person who possessed it.

The important point is that the association between possessions and social recognition predates the modern concept of the brand. Contemporary branding did not invent the desire for distinction. It inherited and systematised an older social phenomenon.

Industrialisation and the Birth of the Modern Brand

Industrialisation transformed this relationship. As production became increasingly standardised and goods became available to larger numbers of people, manufacturers faced a new challenge: how could one product be distinguished from another when both could perform essentially the same function?

The answer increasingly involved the development of the modern brand. Names, symbols, packaging, design, reputation and eventually advertising allowed manufacturers to attach an identity to a product. The physical object remained important, but consumers could also respond to the associations surrounding it.

This introduced a distinction between functional value and symbolic value. A product could perform a practical task while simultaneously carrying social and cultural meaning. Once those meanings became established, the value attributed to the product could extend beyond its material and functional characteristics.

When Price Becomes a Signal

At the end of the nineteenth century, the American economist and sociologist Thorstein Veblen offered one of the most influential explanations of this phenomenon. In The Theory of the Leisure Class, published in 1899, Veblen analysed what became known as “conspicuous consumption”: consumption that serves, among other purposes, to display wealth and social position. His analysis helped establish the idea that the social meaning of a product can influence the way it is valued.

This creates an important paradox in conventional economic thinking. Normally, higher prices are expected to reduce demand. Yet in some luxury markets, higher prices can increase the appeal of a product for consumers who place particular importance on rarity, exclusivity or conspicuousness. The relationship is therefore not universal, but under particular conditions price itself can become part of the signal.

A high price can suggest that a product is difficult to obtain, associated with a particular social group or positioned at the upper end of its market. The economic price can therefore acquire a social meaning.

From Product to Symbol

Modern luxury branding has developed this principle into a sophisticated system. A conventional product may compete by promising greater quality or better value for money. A luxury brand often communicates something additional: that the product represents a distinctive identity, heritage, experience or social position.

Luxury companies therefore invest heavily in heritage, craftsmanship, design, storytelling, distribution and the management of availability. Research into luxury consumption has found that perceived rarity and exclusivity can contribute significantly to perceptions of luxury and desirability.

A watch does more than tell time. A fashion item does more than provide clothing. A car does more than transport its passengers. The product becomes a carrier of meaning. It can communicate taste, achievement, identity, belonging or distinction. The consumer may therefore be purchasing two things simultaneously: the physical product and the cultural meaning attached to it.

From Function to Perception

The automobile provides a useful example of this distinction. Consumers may encounter products from different countries that offer comparable levels of comfort, design, technology and engineering, yet carry very different prices and reputations. The difference cannot always be explained by measurable functional characteristics alone.

A particular national or corporate tradition may have become associated with precision, another with design, another with craftsmanship, another with innovation. These associations influence how consumers interpret products before they have experienced them. Research into country-of-origin effects has repeatedly demonstrated that perceptions of a product's country of origin can influence evaluations of product quality and attitudes towards products.

This does not mean that these perceptions are necessarily accurate, nor that one national tradition is inherently superior to another. It means that consumers interpret products through cultural frameworks. Country of origin can function as one informational cue among many, alongside price, brand reputation, design and observable product characteristics.

The consumer is therefore not necessarily comparing products alone. They may also be comparing meanings. And meanings can acquire economic value.

The Country Behind the Brand

This is where the country behind the brand becomes particularly important. Countries develop reputations that can influence how products associated with them are perceived. Certain national industries have acquired strong international associations with particular qualities: German manufacturing is often associated with engineering and precision; France with fashion, cuisine and luxury; Italy with design and craftsmanship; Switzerland with watchmaking and precision; and Japan with technological innovation and reliability.

These should be understood as cultural associations rather than objective national characteristics. They are the result of historical experience, industrial development, cultural production, corporate reputation and repeated exposure. Research confirms that country-of-origin perceptions can have a measurable influence on consumer evaluations, although their importance varies by product, consumer and context.

In this sense, a successful international brand can become an informal ambassador for aspects of the culture with which it is associated. Branding therefore has relevance beyond economics. The reputation of a country's industries can contribute to its broader international image, while a country's cultural image can in turn influence perceptions of its products.

Scarcity and the Desire for What Others Cannot Have

Scarcity is another important element. In ordinary markets, companies generally seek to increase accessibility because more customers usually mean more sales. Luxury markets can operate differently.

A company may restrict distribution, produce limited quantities or carefully manage availability because widespread accessibility can weaken the perception of exclusivity. Research on luxury brands has found evidence that rarity and perceived exclusivity can contribute to luxury perceptions and desirability, although the effects are not identical across products and consumers.

This creates a relationship in which scarcity can contribute to desire, while desire can support higher prices. The consumer may therefore value not merely the object itself, but also the fact that relatively few people possess it.

Yet scarcity is not automatically successful. Some forms of limited availability can have negative effects, particularly when consumers experience the scarcity strategy as frustrating or when the product's characteristics do not support the desired positioning.

The lesson is therefore more subtle: scarcity can create value when it reinforces an already credible brand meaning.

When Perception Becomes Economic Reality

The question then becomes whether such prestige is artificial. In one sense, cultural value is constructed. But constructed does not mean unreal.

Much of what gives value to modern societies depends upon collective recognition. Reputation, institutional authority, professional status and even currencies operate within systems of shared recognition and trust. Brands function in a similar way.

If enough consumers associate a particular name with quality, heritage, status or craftsmanship, those associations can produce measurable economic consequences. Consumers may become willing to pay more. Companies can maintain higher prices. The brand can become more valuable. Its reputation can strengthen demand, and demand can reinforce the reputation.

What begins as perception can therefore become an economic reality.

The Psychology of “Expensive Means Better”

There is also a psychological dimension to the relationship between price and perceived quality. Consumers cannot always evaluate the quality of a product before purchasing it, particularly when quality is subjective or difficult to measure.

How does someone determine whether one perfume is worth several times the price of another? How much more valuable is an expensive watch than a much less expensive one when both perform their essential function? How can the precise difference in craftsmanship between two luxury handbags be measured by a consumer who is encountering them for the first time?

In such situations, consumers use signals. Price can be one of them. Research on luxury consumption has found that some consumers associate high prices with luxury, and experimental research has demonstrated circumstances in which high prices can increase luxury-brand choice, particularly when rarity and conspicuousness are also important to the consumer.

The paradox is therefore that price can influence perception, while perception can help justify the price. The two can reinforce each other.

Branding and the Search for Social Recognition

The relationship between branding and social recognition becomes particularly interesting during adolescence. Young people are developing personal and social identities while becoming increasingly aware of how they are perceived by their peers. Research involving adolescents has found links between personal and social identity and the importance they attach to clothing products and brands, with peers, family, media and celebrities among the social influences considered.

Clothing and other visible consumer goods can therefore become forms of social communication. A brand may communicate belonging to a particular group, a particular style or an aspiration about how one wishes to be perceived. In a school or peer environment, visible possessions can become signals of taste, familiarity with current trends or social position.

This can extend to the desire for social and romantic recognition. A young person may believe that wearing a particular brand makes them appear more attractive, confident or socially established, and may hope that this affects how others perceive them. Research supports the broader connection between adolescent identity, peer influence and brand or clothing consumption, although the strength and nature of these effects vary considerably between individuals.

The significance of this observation extends beyond fashion. It demonstrates how branding can become involved in identity formation at a relatively early stage of life. The brand is no longer simply a label attached to a product. It can become part of the language through which individuals communicate with one another.

Beyond Luxury

This phenomenon extends far beyond traditional luxury goods. It can be found in restaurants, hotels, universities, real estate, technology, wine, art, cosmetics and professional services.

A restaurant can acquire prestige through reputation and scarcity of access. A hotel can become desirable through its history, location and exclusivity. A university can derive part of its reputation from selectivity and institutional history. A neighbourhood can become more expensive as its reputation changes and demand increases.

In each case, social perception can become part of economic value.

The Digital Age and the Visibility of Status

The digital age has accelerated the circulation of symbolic value. Social media allows products, lifestyles and brands to be displayed to audiences far beyond the immediate social environment. A product can acquire international visibility through images, videos, influencers, celebrities and online communities.

This has changed the relationship between consumption and communication. People do not simply purchase objects; they can display them. The handbag, car, watch, hotel or restaurant can become part of a publicly visible personal image.

The process also creates a rapid feedback mechanism. A product becomes visible, visibility creates recognition, recognition can create desire, and increased demand can reinforce the brand's cultural position.

Yet the digital environment can also weaken established brands. Greater visibility does not automatically create prestige. If a brand becomes perceived as too common, too commercial or insufficiently distinctive, its symbolic value can diminish. Luxury branding therefore involves a continuing balance between recognition and exclusivity.

The Paradox of the Luxury Brand

The luxury brand therefore faces a fundamental paradox. It must be sufficiently recognised to be desirable while retaining enough exclusivity to remain distinctive. It needs visibility without becoming ordinary.

Research on luxury brands supports the importance of this tension. Studies have found that increased brand penetration can, under some circumstances, reduce luxury desirability, while awareness can remain beneficial.

This helps explain why luxury branding differs from simply producing a high-quality product. The objective is to create a world around the product and persuade consumers that entering that world has value.

When Brands Become Cultural Ambassadors

A successful international brand can carry more than a commercial identity. It can also carry associations about the society with which it is connected: its traditions, aesthetics, craftsmanship, technological capabilities and ways of working.

Consumers may encounter a country's image through its products long before they visit the country itself. A fashion house, automobile manufacturer, technology company, watchmaker or food producer can therefore contribute, intentionally or otherwise, to the international image of its country of origin.

This does not make every successful company an instrument of national policy, nor does it mean that a country's reputation is determined by its brands. The relationship is more subtle. Commercial reputation and cultural reputation can reinforce one another.

For this reason, branding can also be viewed through the lens of cultural diplomacy. A country that is associated internationally with creativity, craftsmanship, innovation, reliability or design possesses a form of cultural capital that can influence how its products, institutions and people are perceived.

Where Is Branding Heading?

The future of branding may make the distinction between functional value and symbolic value even more important. As technology makes products easier to compare, consumers are gaining access to increasingly detailed information about performance, materials, durability and price. Artificial intelligence is also making it easier to compare products and identify functional differences. As objective comparison becomes easier, brands may have to compete increasingly through less measurable dimensions of value: identity, experience, trust, community, heritage and cultural meaning.

At the same time, digital technologies are making status more visible and more personalised. Social media already allows consumers to communicate their choices to large audiences, while digital communities can create powerful forms of identification around particular brands and lifestyles. The next generation of branding may therefore be less about simply owning a recognisable object and more about participating in a recognisable cultural identity.

This could produce an interesting paradox. As technology makes products more transparent, the symbolic dimensions of brands may become more important rather than less. If consumers can easily establish that two products perform similarly, the question may increasingly become: What does one of these products mean to me, and what does owning it communicate to others?

The future of branding may therefore depend less on convincing consumers that a product is objectively better and more on giving them a reason to believe that the product is meaningfully different. In an increasingly transparent marketplace, cultural perception could become one of the most valuable forms of competitive advantage.

What Are We Actually Buying?

This brings us back to the original question. Why does expensive sometimes become desirable?

Because people rarely purchase products for functional reasons alone. They can also purchase experiences, identities, stories, associations and meanings.

A car is transportation, but it can also represent achievement. A watch measures time, but it can also represent heritage. Clothing provides protection and expression, but it can also communicate identity. A handbag carries possessions, but it can also signal membership in a particular cultural world.

The product has therefore acquired a second layer of value. Functional value can become symbolic value, and symbolic value can become economic value.

From Cultural Meaning to Economic Value

The story of branding is ultimately a story about the relationship between culture and economics. A company can manufacture a product, but prestige emerges through a wider process involving history, reputation, cultural associations, social recognition and consumer perception.

The strongest brands succeed when these elements converge and become sufficiently established that consumers are willing to pay for the meaning surrounding the object as well as for the object itself.

Perhaps the most interesting conclusion is that the economic value of a product is not always contained within the product. Part of its value exists in the cultural world surrounding it.

We do not simply buy objects; we buy what objects have come to mean. When that meaning becomes sufficiently powerful, the price itself can become part of the attraction.

This is the paradox at the heart of prestige: economic value can be shaped by cultural meaning. Once a society attaches recognition, identity and distinction to a product, those perceptions can become part of what consumers are willing to pay for.

Culture, in this sense, is not simply something that exists alongside the economy. Culture can help create economic value.

• Independent