The cynic, as Oscar Wilde put it, knows the price of everything and the value of nothing. For critics, that switches into reverse: indifferent to price, we are expected to deliberate about value. So I reacted as you might expect to the news that Damien Hirst hopes to cream off a commission-free £60m from an auction of 223 works that begins tomorrow. I sneered at him as a greedy show-off and pitied the customers who would be paying exorbitant prices for his vitrines of grubby fag butts and tanks of sectioned animals. If I admired Hirst at all, it was for his cynical expertise at parting fools from their money - and, in this case, for depriving dealers of their customary share in his profits by selling directly to his gullible public.
That's what I thought until I saw the exhibition of his wares, 'Beautiful Inside My Head Forever', which occupies the sedate Sotheby's galleries that are usually full of old-maidish Old Masters and weathered Georgian furniture. Within minutes, I recanted; I realised that I was the cynic, so distracted by Hirst's hucksterism that I had undervalued the art itself - its witty inventiveness, the ingenuity of its manufacture and its sheer beauty. I don't expect I'll ever undergo the same conversion to Tracey Emin, who offers only the sloppy mess of her life. But Hirst is both a thinker and a maker, an inquisitor of appearances and, surprisingly, a morbid moralist.
Inside Hirst's head, as the show's title points out, is where the work originates, as he dreams up objects so extravagant that they are almost inconceivable: a skull encrusted with gemstones, a display case of skeletal fish, a simpering angel half-flayed to expose internal organs that supernatural beings are not supposed to possess. Concepts such as these are his way of giving visible form to ideas and they force us to think about aspects of existence we prefer to ignore.
Detractors often say that Hirst's titles, inflated by pretension, are more interesting than the works they're attached to. But when he calls his devilish tiger shark The Physical Impossibility of Death in the Mind of Someone Living, he means exactly that. Like Captain Ahab's white whale in Moby-Dick, death and eternity are beyond our imagining because they lie outside our bodies. Hirst's murderous shark - a killer which is dead and yet, thanks to the preservative solution in which it is becalmed, somehow still alive, immortalised by his artistry - obliges us to look the notion in the eye. No wonder people shriek or shudder or dismissively sniff: the object is a memento mori and it ensures that the inside of the viewer's head will never again be as blandly, forgetfully, beautiful as it once was.
Hirst is nothing if not self-conscious, and he has a conscience about what he does. Hence the impish critique of his priorities in a drawing that scribbles down a list of the things he likes best. At first the line-up is 'Love, Mexico, Money'. Underneath, he changes his mind and suggests that the proper order should be 'Mexico, Money, Love'. He tempts you to transfer money to first place, but pre-empts the accusation by joking, in another series of sketches, that he possesses the Midas touch, which was both a blessing and a curse. The king in the fable turned everything he touched to gold. All the same, his gift killed him because his food changed to gleaming, inedible metal in his hands.
The most spectacular object in Hirst's sale is an icon of gilded greed - a calf in formaldehyde with a mirror between its horns as a memento of vanity, hooves that look like diamanté stiletto heels and a penis stiffened by rigor mortis, not by desire. Its estimated price tag is between £8m and £12m. This is the tacky, phoney god worshipped by the Israelites during Moses's absence on the mountain; in the Bible the prophet smashes it when he interrupts their besotted revels. On a marble plinth, in a glass case rimmed with gold-plated steel, Hirst's calf is safe from the iconoclastic rage that puritans have always vented on things of beauty. Nevertheless, prospective purchasers can't complain that Hirst hasn't warned them about the folly of investing in his work. 'Don't go worshipping False Idols!' he chides, in a drawing that accompanies a design for the beast.
How, you might wonder, can he tell buyers to beware while still encouraging an orgy of expenditure? But there is no contradiction here, only a paradox; Hirst's mixed motives show up the bewildering nature of all art, a game that is both precious and pointless. Art simultaneously delights and cheats us, turning facts into fiction or truth into decorative lies. Hirst is a homespun aesthetic philosopher, which is why he headlined the contents of his brain when he gave the Sotheby's exhibition its title. He is an artist who asks why art exists, what it's good for, what it's worth. Price is easily determined, fixed by the clatter of the auctioneer's hammer; the value of the obsessive but gloriously futile activity is harder to ascertain. Long ago human creativity was a grateful offering to our presumed creator. Now that we live without the hope of mortality, why do we bother? Like Francis Bacon transforming Golgotha into an abattoir, Hirst is a religious artist for a godless age.
Does art merely prettify the ugliness of our actual world? One of Hirst's most unsettling works is Black Ritual: from afar a square of glistening ebony, up close a graveyard of houseflies sealed in resin. Is art's purpose simply to programme sensations, to make us feel good? If so, Hirst proposes eliminating the creative process and going straight to the end product, a self-deceptive bliss that could just as easily be obtained from a bottle. Hence his candy-coloured pills labelled Sodium Chlorate and Neomycin Sulfate, or his psychedelic sunbursts in household gloss, whose titles - Beautiful Airmid Dysmorphia Intense Painting (With Extra Inner Beauty), for instance - tell you exactly what mood they are supposed to provoke.
As in his defunct Notting Hill restaurant with its pharmaceutical decor, Hirst enjoys pretending to be a chemist writing therapeutic prescriptions for the addicts who are his clients. He knows that he is dispensing placebos or sedatives, Prozac for the eyes. But he takes his professional duty seriously. Drug dealers dispense calm (or frenzy, if that's your preference) and artists too, like lay priests, trade in reassurance.
In a sketch that ponders The 5 Stages of Dying, Hirst demarcates the journey the moribund and the bereaved have to go on: denial, anger, bargaining, depression, acceptance. Art, however, disrupts that submissive progress; for Hirst, it is an indignant and triumphant denial of death and it never reaches the resigned acceptance that therapists recommend. An art that represents things can make the past present again, revivifying it. This is what Hirst demonstrates in Memories Of/Moments With You, a showcase of manufactured diamonds that could have migrated up Bond Street from the Cartier showroom. Love, testifying to its eternality, puts its trust in money; the rings on our fingers are tokens of a happiness that is revived, in principle, whenever we look at them.
But artists kill the objects of their love to preserve them, and Hirst often plays at being a taxidermist or a mortician. No Life contains a litter of grounded butterflies and a smattering of diamonds, together with some scalpel blades: jewels are the products of surgery, cut from living rock. Hirst's surest way of denying death is to create a catacomb of good-looking, unputrefied corpses, like his speckled calf that balances on its two hind legs as if clumsily clambering towards heaven. Although people are less easy to pickle, Hirst had a scheme to cram his dead grandmother's chattels in a steel box and weld it permanently shut - the next best thing to keeping the absent woman alive.
Chastened, I now see that there's more to Hirst than the money-grubbing Artful Dodger who acts up for the tabloids. He is a tragic clown who jests about extinction because the imminence of death turns life itself into a joke. Nothing lasts, neither flesh and bones nor even bricks and mortar. Perhaps I should mortgage my house to buy an impaled butterfly, an anatomical dummy or an ashtray of extinct Marlboros? Though Hirst, come to think of it, lives between a West Country farm, a Gothic Revival mansion and a summer home in Mexico, so the joke after all might just be on me.
· The direct sale of Hirst's work, Beautiful In My Head Forever, starts tomorrow at Sotheby's in Bond Street, London