In the months since Michael Witmer bought a painting by 19th-century French artist Gustave Courbet, the Greenwich, Connecticut, art adviser has seen prices for Courbet’s work rise dramatically. A Courbet offered at Sotheby’s in the fall went for $2.5 million—seven times its estimate.

The reason: A Courbet retrospective opens this month at New York City’s Metropolitan Museum of Art. It’s an example of what’s known in the art world as the exhibition effect, which dealers leverage by buying art in advance of a major show and selling it into the buzz.

Expect it times ten with the Art Institute of Chicago’s undertaking of a sweeping reorganization of its collection, attempting to define which artists mattered most in 20th-century art. Who makes the cut and gains placement in the museum’s new $300 million Modern Wing, designed by star architect Renzo Piano, will have repercussions far beyond Chicago.

During the past decade, the art market has been exceptionally volatile, with artists becoming top performers at auction one year, turning virtually unsellable a few years later, then coming back in vogue again. Consider Julian Schnabel, an art superstar of the ’80s, who saw one of his black-velvet Maria Callas paintings zoom to $319,000 at Sotheby’s in 1992, only to be priced at a paltry $70,000 12 years later. He came back last month with a successful exhibition in New York, on the heels of an Oscar nod for his direction of The Diving Bell and the Butterfly.

Given how fickle, even ruthless, the market can be, major museum shows are closely watched for the endorsements they bestow on artists—next month’s Whitney Museum of American Art Biennial is a veritable oracle of Delphi as far as some contemporary-art collectors are concerned. Such shows make a case that the “artist has a place in art history,” Michael Witmer says. Sometimes after a successful show of an artist’s work, “everyone wants one.”

But opportunities to canonize artists on the scale of the Art Institute’s Modern Wing don’t come around very often. The Renzo Piano project will reorganize the entire museum by 2010 and increase its display space by more than one-third. The Institute’s curators are currently deciding which artists’ works will be on permanent display, and who will get the most space and the most prominent locations.

The project echoes the Museum of Modern Art’s move into a new building in 2004, which affected the art market almost overnight. A work by Martin Kippenberger, a German conceptual artist, went on the block the week after MOMA showed trustees the new building, where a Kippenberger sculpture sat adjacent to a Warhol and near a Johns. The piece sold for $612,800—nearly triple what was expected.  

The Art Institute’s reinstallation, however, is more ambitious. MOMA’s rehanging of its collection “dodged the issues,” says James Rondeau, curator and chair of the Institute’s department of contemporary art, who is overseeing the installation of 20th-century art next year. (Rondeau’s blockbuster “Jasper Johns: Gray” opened at the Metropolitan yesterday.) MOMA arranged all the art in its collection chronologically, up to 1970, thereby linking van Gogh to Picasso to Pollock, while more recent work was installed in temporary galleries. Chicago, on the other hand, is writing a history of art through this decade. A huge mock-up of the Modern Wing sits in Rondeau’s office, and as the building takes shape, he and other staffers, along with Piano’s associates, are moving tiny pictures around on the walls with increasing fervor.