Hard to say what's overpriced.
Expensive 1911s are, for all intents and purposes, objets d'art. And lovely ones at that. I view a $2000 1911 no differently from a $2000 guitar - most people buying them are hobbyists with a little extra money to spend. That vintage Les Paul (really, we're not even talking 'vintage' money) probably isn't going to be used to craft a rock'n'roll masterpiece, nor is that 1911 going to be at the front lines in the war on terra'. In both cases, a select few will be used to record or save lives, but most won't.
You're paying for craftsmanship and prestige and aesthetics as much as anything. The time of a single master smith will set you back twice as much as a custom from a gunsmith shop (Nighthawk Talon, Yost-Bonitz) which will set you back, in turn, some money from a high-end production shop (Les Baer Thunder Ranch, Ed Brown Special Forces).
Nothing wrong with paying for craftsmanship and design.
For a defensive pistol (cop or civilian - military/SPECIAL FORCES BLACK OPS CIA OPERATORS OMG may be a different story), once you get past functional, safe and combat accurate (Glock, M&P, Sig, H&K, CZ from $400-800), how much more security does a $2500 1911 offer you?