How did Richard Prince produce the most expensive photograph ever?

As you'd expect of a compulsive collector, Richard Prince's study is full of stuff: you know the kind of thing – a Warhol Car Crash, a custom-bound first edition of Bret Easton Ellis's American Psycho, an original copy of Sylvia Plath's verse with handwritten notes by Ted Hughes. Prince isn't gesturing at these, though, but at an issue of French Vogue with a cheesy-looking model on the cover – a pseudo Bad Girl, faux-sneering from the seat of a Harley. "It's a 'Girlfriend'!" Prince yelps, his voice breaking with indignation. "They stole this from me! Well, I'm going to steal it right back."

"Steal" is not a word that comes easily to the lips of artists, but in Prince's case there's no hesitation. There is also no question that he's right: that Vogue cover has been ripped off from his "Girlfriend" pictures, a series he began in the 1990s. But before you fire off outraged letters to Condé Nast, you might like to consider the backstory. Prince's "Girlfriend" pictures are all "rephotographs" of photos of biker chicks, some of them scarily frank, sent in by their boyfriends to the personal pages of US motorbike magazines. Put simply, the artist snipped out pictures other people had taken, shot them with his own camera and then sold them as art. For Prince to complain that what he did unto others is now being done unto him seems a bit rich.

So, too, does Richard Prince. In the early 1980s, Prince began a series that still recurs in his work, of cowboys filched from those pre-Brokeback Mountain ads for Marlboro cigarettes. In November 2005, one early "Cowboy" became the first photograph to sell for more than $1m. That figure was laughably outclassed this January when a second Marlboro Man went for $3.4m. No other photograph – Doisneau or Stieglitz, Cartier-Bresson or Diane Arbus – has sold for anything like as much. And the second "Cowboy" wasn't just a rephotograph of somebody else's photograph; it was a reprise, made in 2001, of a kind of work Prince had been making for 20 years. It was the unoriginal of an unoriginal of an unoriginal.

Indignant? Well, how about this. In 1983, Prince took a shot of a full-frontal shot, taken in 1976 by the unhappily named Garry Gross, of a 10-year-old Brooke Shields wearing nothing but baby oil, her hair coiffed and face made up like a woman of 20. That Gross had paid Shields's mother $450 to shoot her naked daughter was bad enough. That Prince rephotographed that photograph and turned it into art – his version was recently shown at New York's Whitney Museum – makes it very bad indeed.

Or does it? That question is at the heart of Richard Prince's work, the subject of a major exhibition at London's Serpentine Gallery this summer. To get what is going on in the show, you need to consider various things.

First, there is Prince's own past in the cuttings department of the magazine publisher Time, Inc. It was while working here in the 1970s that the artist known as Prince began taking other people's images and showing them as his own. It may also be useful to ponder the word "appropriation", the art-school term for this process. In 1936, the critic Walter Benjamin published an essay called "The Work of Art in the Age of Mechanical Reproduction", arguing that, in the day of the camera, ideas of originality no longer held good. Artists, thrilled, have spent the ensuing decades pinching work from popular culture and each other. (The most famous of these was Andy Warhol, with whom Prince says he shares a birthday.)

Another useful word to take along to the Serpentine is "scopophilia". Freud's term for voyeurism, scopophilia has come to mean a greed for images, a bulimia of the eye. We consume so much because we see so much to consume – the millions of images thrown at us by posters and TV and newspapers. The more we have, the more we want; the more images we see, the more there'll be. Love and cigarettes, cars and little girls, all are equally food for the eye. And so you might read Prince's subtext as this: if images are property and property is theft, why not take them? Even the title of the shot he took from Gross was lifted, this time from a 1923 photograph by Alfred Stieglitz. Stieglitz's picture, of the gelded genitals of a horse, was called Spiritual America.

Which makes you wonder whether Richard Prince isn't some kind of American moralist. Figure Prince out from his work and you'd be unlikely to come up with this amiable, 59-year-old guy in jeans and a T-shirt. Nor would you picture Prince living where he does, on 88 acres of woodland in the foothills of New York's Catskill ' Mountains. His studio, next to one of those upstate farmhouses that seems to smell of pie, looks like a cabin. We're walking out of its door when I wonder aloud about his moralism and Prince stops in his tracks. "What does that mean?" he grimaces. "That I'm a political artist? You know what politics is defined as? 'The infinite number of relations between men and women.' Look it up in a dictionary and that's what it says. Well, if that's your definition, then, yeah, I'm a political artist. That's what my work is about. Do I have any responsibility to the public? No, I have none. My function is not to tell people about right and wrong. And I certainly don't want to be political in any conventional sense. I mean, does anyone remember who was president of France when Gauguin was painting?"

(It's worth noting here that Prince's career is not limited to appropriating other people's work. His study is dotted with photographs of celebrities, all dedicated to him – "Richard, all the best, Phyllis Diller. Just kidding!" – but all signed in an oddly familiar hand. The magazine ZG once published an interview with the 17-year-old Prince, supposedly by JG Ballard, which turned out to be a hoax perpetrated by its subject. Then there is Prince's supposed birth in Panama's Canal Zone to alleged CIA-operative parents. Oh, and the handbags he recently designed for Marc Jacobs and Louis Vuitton, which Prince then ripped off in the privacy of his own studio. Just because he looks you in the eye and denies his work has a moral agenda doesn't mean it hasn't.)

If Prince isn't judging America, then is he at least an American artist? By now, we've strolled up to the Body Shop, the big metal hangar where his large-scale works are made. "This is why I don't care about museums!" he says, waving at the hangar behind him. "I've got my own. Museums really want some kind of dialogue with the public, and that's not my thing." Then, getting to my question, he says, "Yeah, absolutely I'm an American artist. It's my subject. I collect Damien [Hirst]'s work – he's a good friend of mine – and Martin Kippenberger was another good friend. But America is what my art is about."

The question is, which America? The one we're standing in looks like a story by Washington Irving. (Irving's best-known character, Rip Van Winkle, lived just down the road.) There are clapboard houses, deer, woodpeckers tapping at birch-bark. But there is another America visible through the door to the Body Shop, and it is very much less homespun. It is Underbelly USA, a world of soft porn, tattoos and muscle cars – super-charged dicks-on-wheels, air scoops bulging from their bonnets. Several of these, waiting to be turned into art, are parked outside the Body Shop – cars with names such as El Camino and Grand National, all painted red or black. Inside, Prince's team of good ol' boys is buffing cannibalised auto-parts into sculpture. The artist stops in front of a newly finished piece, a black-and-silver Hood, and says, "That is so fuckin' great – one of the best things you've ever made." The boys shuffle their feet and look bashful.

(It is a surreal scene, something so urban being done in somewhere so rural. Yet earlier, when the IoS photographer locked the keys to our car in its boot, Prince's team had tumbled out of the Body Shop like the Keystone Cops, each wielding a lock-picking device known as a Slim Jim. They took two minutes to get the boot open. So much for bucolic innocence.)

I'm struck with the feeling that this hyper-masculinity of cowboys and muscle cars is a kind of game for Prince. Just as bodybuilders end up with the wasp-waisted silhouette of an Edwardian hostess, so the super-butchness of his car-art passes through manliness and comes out the other side. Deduce Prince from his work and you'd arrive at a beer-bellied ball-scratcher who beats his wife. By contrast, the artist is trim and mild-mannered and when his wife pulls up in an Audi – they live in the farmhouse with a stepson and daughter – he calls her "hon".

Prince's cars are not straightforward love. There is something deeply unpleasant about works such as 25 Hours, one of a series of autos-on-plinths where the plinth seems to be being eaten by the auto. Like an ageing lion-tamer, you wonder if Prince is really in control of his beasts. As we stroll through this museum to himself, he stops at a new piece, a bonnet held upright by a basketball hoop. Cars and sport: very butch. Yet the work came about by chance and feels unstable. "It just happened," Prince says. "The sculpture just wanted to be that way." Which is to say, it is a car accident.

On the way back to his studio, Prince opens the door to another building on the compound and reveals the 1970 Dodge Challenger he showed at last year's Frieze Art Fair – a perfect, driveable simulacrum of the original car, but for the fact that it has a new paint job and engine and, of course, that it is an artwork. Prince climbs into the driver's seat, turns the ignition and revs; the noise is ear-splitting, incredible. Also frightening – I panic for a second that the car is too big for its driver, that it may get away with him. It's astonishing all right, but is it art? Prince ponders the question for a moment, then says, "I'm not really sure any more."

And that, maybe, is the point. I admire and like Prince's work, I admire and like him; but after an afternoon spent in their company, I have no clearer idea about either. And the same, I guess, may be true of Prince himself.

Back in his study, we're talking about the "Nurse" paintings, schlocky-looking images of women from the covers of cheap paperbacks to which Prince has added fetishistic face-masks. ("My work is about the contribution I make to it," he says. "Those masks are my contribution.") Critics have cursed the "Nurse" pictures, damning Prince as a misogynist. Aren't the "Nurses" rather, well, nasty? Prince looks at me and weighs his words; then, without a blink, he says, "The 'Nurses' came about because I looked at the world we live in – tsunamis, Iraq, earthquakes in China – and I thought: everybody needs a nurse. So I made a nurse for everybody." Yes, well.

So here's my reading of Richard Prince. Like Gilbert and George – the only link between the three I can think of – Prince's life is his art. His subject is an obsessively acquisitive society, and he himself has become – has made himself – obsessively acquisitive. The fruits of this obsession will be shown at the Serpentine. Crap paperbacks and $150,000 first editions, photographs signed by Playboy bunnies and by Lee Miller, images from advertising and Willem de Kooning: all are grist to his mill. To treat his subject, Prince has to be his subject. The greatness (and the horror) of America lies in its capacity to consume: he is the Michelangelo of the Personal Debt Generation. You want something? Don't save for it, charge it! You want to make art? Click, it's art! But does Prince know any more where life begins and performance ends?

I'm about to put this to him and then – thinking he'll deny it, especially if it's true – I stop. Back in the Body Shop, we'd looked at a wall piece, Canal Zone, which incorporated a Panamanian number plate from 1952. "I've had that plate forever, so I thought finally I'd better use it," Prince said. So he really was born in Panama? He looked me in the eye and smiled. "Sure."

Richard Prince: Continuation, media partnered by 'The Independent', is at the Serpentine Gallery in collaboration with Louis Vuitton, London W2 (020 7402 6075) from Thursday until 7 September