Much of the latest issueÂ of the Economic Journal is devoted to the contribution that economics can make to early assessments of the quality of wine, a field first popularised by Orley Ashenfelter. Here’s a summary.
Quality is the linking theme for the three articles in this Feature on wine: how might one predict wine quality (Ashenfelter); how technology and physical endowments affect the quality (Gergaud and Ginsburgh); and how might expert judgments on wine quality affect prices (Ali, Lecocq and Visser).
Ashenfelter combines an enthusiasm for wine with tools of economics to create a wine rating system using a formula based strictly on two variables: temperature and rainfall. Utilising years of weather data, he concludes that dry, warm weather produces the best wines. According to Ashenfelter â€˜predicting the quality and price of a wine could be like predicting any other market item’.
Gergaud and Ginsburgh study whether quality assessments made by wine experts and by consumers (based on prices obtained at auction between 1980 and 1992), can be explained by variables describing endowments (land characteristics, exposures of vineyards) and technologies (from grape varieties and picking, to bottled wines). They find that, since technological choices typically depend on endowments, the effects can only be identified using an instrumental variables approach. The controversial conclusion from this article is that technological choices affect quality far more than natural endowments, including terroir, the effects of which on wine quality is negligible.
The final article by Ali, Lecocq and Visser, measures the impact of Robert Parker’s oenological grades on en primeur Bordeaux wine prices (i.e. the prices established by the chÃ¢teau owners when the wines are still extremely young). By exploiting an unusual reversal in 2003 in the order of the establishment of en primeur wine prices and the publication of the Parker wine grades, they have estimated an average Parker effect of 2.80 euros per bottle of wine. They also estimate grade-specific effects, and use these estimates to predict what the prices would have been had Parker attended the spring tastings in 2003.