Wine Economics: Origins and Applications in Academia and Trade
Explore the informal and intellectual origins of wine economics, from the demand for scholarly research to the Bordeaux Equation's impact on predicting wine quality. Delve into the American Association of Wine Economists' formation and the reception of econometric models in the wine industry and among economists.
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Wine Economics: Informal & Intellectual Origins, and Areas of Application Robert N. Stavins A. J. Meyer Professor of Energy and Economic Development John F. Kennedy School of Government, Harvard University Cambridge, Massachusetts, USA Business of Food and Applied Economics and Policy, SC Johnson College of Business A.D. White Professor-at-Large Presentation Cornell University Ithaca, New York, USA October 30, 2024
Informal Origins of Wine Economics: Demand for Scholarly Research The Oenonomy Society Fourteen members for annual dinners at ASSA meetings 2001 Griliches RNS; opposite of free riding After dinner in 2004, conceived of an academic journal Journal of Wine Economics Formed the American Association of Wine Economists (2005) Vice Presidency; self-published JWE JWE launched 2006 (Karl Storchmann, Whitman College, Managing Editor, plus Kym Anderson, Orley Ashenfelter, Victor Ginsburgh, and myself as Co-Editors; later added James Fogarty and Bradley Rickard) Cambridge University Press took over publication (2013) Prominence and Success of JWE Submissions , issues/year 2 4, acceptance rate among best (lowest) in econ. Repeated references in New York Times, Wall Street Journal, & Financial Times Launch of Working Paper Series for rejected papers (p t de foie gras competition, result, Steven Colbert (2009), website hits & subscriptions) 2
Intellectual Origins of Wine Economics: The Bordeaux Equation Orley Ashenfelter s Liquid Assets Newsletter New approach in 1991 to ranking fine wines, using auction prices, not tasting (but not completely new official classification of 1855 of five quality categories from first to fifth growths was based on prices) The Bordeaux Equation Econometric model to explain auction prices of mature Bordeaux grand cru wine by weather in crop year Use estimated equation to predict quality of a new vintage (without having to taste the wine!) Debate about success of second step (may do better than experts, but hardly perfect) Reception Received considerable attention from economists, partly because Orley was highly- respected economist, and editor of American Economic Review (1989-1992) Wine trade and wine critics were generally outraged Frank Prial, NYT Wine Talk columnist for 25 years: the sipping, spitting, and note-taking so dear to wine romantics have all been rendered obsolete by mathematics (1990). 3
The Bordeaux Equation and Areas of Application Econometric Specification Dependent variable: natural logarithm of London auction prices for portfolio of mature red Bordeaux wines Independent variables: age of vintage; average temperature over growing season (April-Sept); rain in August; rain in months preceding the vintage (Oct-March) R2 = 0.828 Three Subsequent Major Topics in Wine Economics Value of Wine as a Financial Asset: General result Even grands crus have not out-performed stock market Wine and Expert Opinion: Experts & reviews may help fill information gaps, but mixed evidence on vintages Wine and Climate Change: Known for >2,000 years: weather affects quality of wine grapes (Pliny the Elder, 23-79 A.D.) AAWE Symposium on Wine and Global Warming, Walla Walla, Washington, 2007 Now dozens of conferences each year; thousands of studies (hundreds within economics) Interesting differential impacts of climate change on New World vs Old Word premium wines (example of CA s Screaming Eagleor Australia s Grange vs Burgundy s Roman e-Conti) Raises question: Does terroir have meaning in U.S. context how do vineyard climatic, soil, & other characteristics affect land sale prices? Do AVA designations affect land sale prices? 4
For More Information Harvard Project on Climate Agreements www.belfercenter.org/climate Harvard Environmental Economics Program www.hks.harvard.edu/m-rcbg/heep Website www.stavins.com Blog http://www.robertstavinsblog.org/ Twitter @robertstavins Salata Institute Initiative on Reducing Global Methane Emissions https://salatainstitute.harvard.edu/projects/methane/ 6
