Wenger prefers kids over big-money codgers
"What we need to focus on is continually developing and not live in dreamland where we are linked with players of 30 million ($43.30 million) to 40 million pounds because that is not realistic," Wenger told the club's website.
"I can cite you players in the last 10 or 15 years who have cost 30 million and have been a flop."
Arsenal are fifth in the Premier League, 10 points behind leaders Liverpool, and fans have urged Wenger to add new faces to his squad in the January transfer window.
However the Frenchman, who built his reputation on developing youngsters like Nicolas Anelka, Cesc Fabregas and Patrick Vieira, has faced a tighter financial regime since the club's expensive Emirates Stadium was built in 2006.
"We have gone for a policy that is to develop our young players ... and not listen to everybody (in the media) who comes out every day with a new name," said Wenger.
"It is not necessarily linked that you spend 30 million (pounds) and get a massive player."
Wenger's latest crop of youngsters could get another opportunity to show their worth in Saturday's FA Cup third round match at home to Championship side Plymouth Argyle.