Talk of an art market bubble is almost as old as the run-up in art prices that began three to four years ago. For many armchair critics, the art world has become a segment of the larger glamour industry, a place where celebrity and wealth mingle and merge. In our new gilded age, the public expenditure of large sums of money at auction is a glitzy spectator sport, yet a lingering spirit of egalitarianism makes us simultaneously long to see the rich and famous struck down for their excesses. So it seems some observers are eagerly waiting for the bubble to burst.
 
Defenders of the current art boom, on the other hand, contend that there is no bubble. Today’s art market, they say, is fundamentally different from all prior markets, because the huge concentrations of wealth that have been amassed throughout the global economy are essentially invulnerable to localized financial shocks. The global rich are unfazed by the economic blips—rising gas prices, downsizing, offshoring, mortgage foreclosures—that affect the rest of us. These are the people who have (so far) kept the Manhattan real estate market perking along, even as housing prices across the U.S. falter and fall. Many art-world cognoscenti remain confident that the elite’s appetite for art can only grow, pushing prices ever upward as the supply of trophy-quality objects is depleted.

It may well be that the art-market bulls and bears are both right. There have been fundamental shifts in the distribution of wealth over the past two decades, and this situation is not likely to change soon. But the competition to serve the superwealthy has created a dichotomy of haves and have-nots nearly as stark as that which exists on the larger economic scene. In the art world game of musical chairs, there are fewer and fewer seats, and many may find themselves out in the cold if the music stops.

Systemic flaws in the current art market belie its apparent growth. Despite the media attention focused on seven-, eight- and even nine-figure prices, the market for these trophy artworks is inherently limited. Dealers and auctioneers who want to be seen as major players must obtain such inventory and then sell it. At the upper reaches of the market, however, even a slight miscalculation can be disastrous. A dealer has perhaps half a dozen chances to sell a high-ticket work before it becomes stale and overexposed—“shopped around,” in art world parlance. He or she can show it at the fairs in Basel, Miami, London and perhaps a few other places. For an auction house, the sales opportunities are even more narrowly limited by that split-second when the auctioneer’s gavel comes down. If the handful of collectors who have the potential interest as well as the financial ability to buy the work in question decide to pass, the game is effectively over. The passage of time may make it possible to sell the piece, probably at a reduced price. But meanwhile, everyone—auctioneers, dealers and clients—will want to move on to something else. Anyone who has a financial stake in the work, be it the original owner, the auction house, the dealer or the dealer’s backers, will be stuck holding the bag.