At the most basic level, the art world exists to answer the question Is it art? When Cubist paintings were first produced, around 1907, they did not look like art to many people, even people who were interested in and appreciated fine-art painting. The same thing was true of Jackson Pollock’s drip paintings (around 1950) and Andy Warhol’s soup cans (1962).
But you don’t know it’s art by looking at it. You know it’s art because galleries want to show it, dealers want to sell it, collectors want to buy it, museums want to exhibit it, and critics can explain it. When the parts are in synch, you have a market. The artist produces, and the various audiences—from billionaire collectors to casual museumgoers and college students buying van Gogh posters—consume. The art world is what gets the image from the studio to the dorm room.
From an interesting review of Hugh Eakin’s new book, Picasso’s War: How Modern Art Came to America, about the creation of a market (in terms of both sales to rich people and attention from museum goers) for modern art in the US.