Academic journal article Proceedings of the American Philosophical Society

Expert Opinion on the Wine Market 1

Academic journal article Proceedings of the American Philosophical Society

Expert Opinion on the Wine Market 1

Article excerpt

INTRODUCTION

Because wine is an experience good (i.e., its quality cannot be ascertained before consumption), experts and their critical reviews may help to fill an information void. Accordingly, the market for expert opinion on wine is large. The seven major U.S. wine magazines have a combined subscribership of nearly 600,000 (Table 1), with more than 350,000 alone subscribing to Wine Spectator; and wine magazine sales amount to well above $25 million. In addition, there are a few foreign magazines (e.g., Decanter) and numerous smaller publications, online services (e.g., JancisRobinson.com), and wine blogs.

Another remarkable fact shown in Table 1 is the sudden and rapidly growing interest in expert opinion. The first U.S. wine magazines all started out of California in the mid-1970s. Even Wine Spectator was originally launched in San Diego and was only moved to New York when Marvin Shanken bought the publication from founder Bob Morrisey in 1981. Given that no national wine magazine existed before the mid-'70s, this sudden and rapidly growing demand for expert opinion is fairly amazing.

Wine consumers and investors rely on experts in many ways. Experts predict the quality of particular vintages (especially Bordeaux) that have not been traded yet to help wine investors and connoisseurs decide whether to buy futures. They describe a wine's taste and smell and rate or award gold medals to wines to facilitate the consumer's choice.

In 1986, the wine world changed again. Princeton economics professor Orley Ashenfelter launched a newsletter called Liquid Assets- The International Guide to Fine Wines. As the first publication of its kind, and in stark contrast to the prevailing glossy wine literature, Liquid Assets was devoted to the quantitative analysis of the fine wine market. Ashenfelter published auction prices and provided numerous economic analyses, such as an updated "new objective ranking of the chateaux of Bordeaux." Like the original classification of 1855, Ashenfelter's ranking was completely empirical and based on wine auction prices and not-as might be thought-on "expert opinion" (1988, 1997).2

However, the central theme of Ashenfelter's research published in Liquid Assets has always been the assessment of vintage quality for wines from various regions (Ashenfelter, 1986, 1987a, 1987b). Essentially, Ashenfelter devised an econometric model that explains auction prices of mature wines by referring to the wine's age and the weather of the year during which the grapes were grown. This model has proven surprisingly effective at assessing the quality of Bordeaux vintages and predicting prices of matured wines.

Given that Ashenfelter was the editor of the prestigious American Economic Review,3 his wine-related works received considerable attention from economists and the general public alike. The New York Times has published numerous articles on Ashenfelter's wine economics research in its Wine and Food Section and the Business Section, as well as on the front page (e.g., Goldberg, 1987; Passell, 1990a, 1990b; Prial, 1990). TV channels, such as ABC, CNN, CNBC, and Bloomberg, have aired special reports on his econometric wine models. The wine trade and wine critics, however, have been less intrigued. The New York wine merchant William Sokolin calls Ashenfelter's equation "somewhere between violent and hysterical" (Ayres, 2007). Robert Parker, the world's most influential wine critic, deems Ashenfelter's empirical approach "really a Neanderthal way of looking at wine. It is so absurd as to be laughable"-in short, "an absolute total sham" (Ayres, 2007).

Why is the wine world up in arms against an empirical approach to wine? Frank Prial of The New York Times writes:

Two reasons. Some elements of the wine trade are angry because the Ashenfelter equation could be helpful in identifying lesser vintages they have promoted. For example, he is down on 1986, a year praised by more conventional commentators. …

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