The Sun article, which was sent my way by the illustrious wine-counterfeiting scholar/economist Günter Schamel (whose work I’ve previously discussed here), has the amusing title “You Plonkers” and an equally amusing photo of a nonplussed McGowan.

The most unusual thing about this story is that while has been much discussion of counterfeit wine in the high-end rare and fine wine market—Jefferson bottles and first-growth Bordeaux and such—there hasn’t been nearly as much talk about counterfeiting in the low-to-midrange wine market.

In that market, the trick might be a lot easier to get away with, for at least three reasons: first of all, evidence from psychology and neuroscience indicates that the end consumers of inexpensive or midpriced wines aren’t probably paying as much attention to the wine’s sensory qualities as they would if it were expensive. Second of all, consumers’ quality expectations are clearly lower when they pay less, so they’re less likely to complain even if the wine doesn’t meet those expectations. Third, and perhaps most importantly, there’s little incentive for any individual to sue for fraud. Unlike, say, wine collector Bill Koch, who alleges millions of dollars in counterfeit damages related to his collection alone—and thus has incentive to sue on his own behalf—even the theoretical smattering of consumers that are more or less certain the wine is counterfeit probably can’t be bothered to raise a big stink over a potential refund (barring punitive damages) of £5 per bottle.

This last phenomenon is the same sort of collective action dilemma that mobile phone companies, credit-card companies, and the like have been trading on for years: they upcharge customers a few cents here and there—rounding the length of a dropped call up to the nearest minute, for instance, or playing with the spread on exchange rates on foreign transactions—but it’s below the radar screen of anyone but the most obsessively litigious or penny-pinching customer. It adds up to a lot of money for the company, but not enough is taken from any individual to incite a lawsuit. It’s thus a highly effective form of fraud.

When there are enough instances of such a scam, plaintiff firms sometimes come after the perpetrators with class-action suits, because contingency fees allow the firms to collect a percentage of the entire settlement even when the payout to any individual member of the class is small. The amalgamated damages then function as incentives for the plaintiff firms that look more like Koch’s and less like McGowan’s, even as many of the plaintiffs themselves probably don’t even go to the trouble to deposit their miniscule winnings (have you ever received one of those 40-cent settlement checks in the mail?).

It might seem, then, that the optimal opportunity for fraud is where (1) the damages to each individual are relatively low; (2) the number of instances is fewer than would make the case worth a plaintiff firm’s time; and yet (3) the business is large enough to make good money for the counterfeiter.

If low-end wine counterfeiting fits into this magical middle ground, then it’s here, perhaps, that sensationalist tabloids like the Sun can serve serve a critical role in the information marketplace and substitute for the plaintiff firm in solving this collective action problem. The tabloid punishes the supermarket chain with a public shaming while also rewarding the whistleblower with fifteen minutes of fame, which may not be worth millions, but whose cocktail-party value, plus perhaps a few pounds for the story, creates enough incentive for a consumer somewhere to tell all. If the story catches on, the extra ad impressions justify the tabloid’s effort. And all of this happens at little cost compared with that of preparing a fraud suit.

Unless, that is, you figure in the Sun’s liability risk if the facts turn out not to be true. This can be a serious matter in Britain, whose libel laws are so friendly to plaintiffs that the jurisdiction is said to attract so-called “libel tourists” from other countries. At least in Britain, then, this sort of middle-ground fraud might have to be particularly brazen and verifiable to be reported in a tabloid. (This one was probably reviewed by the Sun’s legal staff before publication and certified as such, in keeping with the age-old adage that the lawyers get paid no matter what.)

On its face, the Jadot fraud does look unusually brazen, from the apparently not-very-believable label to the fact that, according to McGowan, the wine tasted like Liebfraumilch—an off-dry German wine—when it was supposed to be white Burgundy. Even wine novices are pretty good at differentiating sugar levels, and passing off a sweet wine as dry—if that is indeed what happened here—would be an unusually challenging feat to attempt. But in the world of wine counterfeiting these days, maybe brazenness is no drawback, and the challenge is the game.

Other soccer discussion boards, like the Washington Post’s Soccer Insider, were flooded with debate and discussion about the questionable call, which began almost immediately after it happened at about 16:40 GMT (the time zone used by FIFA.com). So were Twitter feeds (although at some point Twitter crashed, as it frequently has during the World Cup). The discussion over the controversy really exploded around the internet after the game ended at 16:51, and before long, USA’s tie with Slovenia already had more Google News blog hits (850) than Serbia’s upset of Germany (701).

But on FIFA.com, the silence about USA-Slovenia has been deafening. The latest comment to appear on the discussion board has a timestamp of 20:04. In the 193-minute span between the game’s end and the latest comment’s time stamp, only 24 squeaky-clean comments have been approved. For instance: “great fightback by the USA”; “this is the right result on the balance of play”; “way to go USA”; “the match was really exciting!”; “slovenia is the best team”; “USA are becoming a real nice team!”; and “Slovenia had a great chance to qualify in the next round!! But in the second half we were too defensive.”

By comparison, in that same span of time—193 minutes—after the end of Germany-Serbia (which ended today at 14:20), there were already 175 comments posted. That’s more than seven times as many.

At one point, a user named Rossus, from South Africa, posted one comment that did, in the most polite possible way, at least hint at the idea that there might have been some controversy. Rather than suggesting any human fault, Rossus’s comment merely used the word “luck”: “I am not a USA supporter but the USA was very unlucky not to win.” But even that comment, after briefly appearing on the match overview page (which streams the latest comments), was later censored, and never made it to the discussion board page itself. The comment is no longer on the site, but I took a screen shot of it during the brief time that it appeared on the overview page, which appears here to the left.

Just to test my theory personally, I also tried posting the following comment: “I disagree with referee Koman Coulibaly’s decision to nullify the third US goal.” Sure enough, as other posts materialized on the board, mine never did. It goes without saying that FIFA.com refused to comment on or post my followup questions about what the standards were for censorship on their site.

It’s interesting to see how often, and how deeply, large organizations seem to misunderstand the purpose of discussion boards, blogs, and other internet debate and discussion fora. They seem to imagine that most users and readers won’t notice the censorship, or that they will find cleansed discussion boards to be valid platforms for authentic debate and discussion.

I suspect, though, that these organizations tend to underestimate both the curiosity of their readers and the power of the internet as a commons, and that this sort of board cleansing just leads people simply to speak with their fingers by ditching FIFA.com—in spite of its undoubtedly large software budget—and seek their information elsewhere. This goes not just for the would-be commenters that have suffered through the sting of a rejected comment, on which they might have spent a good deal of time; it also goes for the would-be readers, many of whom immediately notice that something seems fishy.

This doesn’t just undermine fans’ trust in FIFA; it also squanders an easy opportunity for the body that administers the world’s favorite sporting event to become a place where fans can share, discuss, and debate the things that they care most deeply about—thus engendering goodwill and helping to spread the good word about soccer.

Instead, the fans are turning elsewhere. A homemade-looking website called bigsoccer.com, for instance, already has 728 posts on its SerbiaSlovenia-USA discussion thread.

Its motto? “Share the passion.”

The book, due out on April 15 from Fearless Critic Media (distributed by Workman Publishing), rates and reviews 250 of the world’s most prominent beers (craft brews, macro-lagers, and everything in between), based on blind tastings by a panel of brewers and experts in the beer mecca of Portland, Oregon—Seamus’ hometown. We also include a broad and (hopefully) accessible reference guide to the world’s major beer styles, flavors, and regions.

The collaboration was, I must admit, a bit lopsided: Seamus (who is a brewer and one of the world’s 96 Certified Cicerones) did the lion’s share of the work. I contributed the “Trials” concept (building on the ideas set forth in The Wine Trials) and co-wrote the first few chapters, which discuss the effects of behavioral marketing, perceptual bias, and the placebo effect on the beer industry.

In Portland, Seamus and I also conducted a beer experiment together in which we tested people’s ability (or, um, lack thereof) to discriminate between major European brands of mass-market lager beer. Johan Almenberg and Anna Dreber, the Swedish economists with whom we collaborated on much of the experimental research behind The Wine Trials, helped us analyze the data.

Seamus, along with his partner (and my old high school friend) Laurel Hoyt, assembled an excellent blind-tasting panel of brewers and beer experts in Portland. Seamus and Laurel tirelessly ran the blind tastings, procuring beer samples from all over the world, storing them in climate-controlled conditions, and running up to five tastings per week for months on end—all the while keeping the tasting panel happy and well-fed.

Seamus also crafted the reference guide to styles, flavors, and region, which more or less boils his brain’s enormous body of esoteric beer knowledge down to what’s most useful to readers and beer drinkers. The project was a blast, and I hope the book turns out to be helpful both to beer enthusiasts and to everyday beer drinkers.

This sneak preview PDF includes a press release about The Beer Trials; the book’s full preface; the book’s full beer ratings list; and 11 sample beer reviews.

The Beer Trials hits stores nationwide in the third week of April. It can be ordered online from Amazon.com.

For media requests, please contact Fearless Critic Media.

People have sometimes (often, maybe) misinterpreted The Wine Trials (and The Wine Trials 2010) as making the claim that no expensive wines are worth the money, or that cheap wine is generally “better” than expensive wine. In fact, I make neither one of those claims in the book.

Rather, my basic points are these:

(1) Evidence has shown that most everyday wine drinkers (not wine professionals) don’t prefer more expensive wines to cheaper wines in blind tastings. This is separate from the question of whether the properties of expensive wines are aesthetically superior in the minds of experts.

(2) Many (but certainly not all) expensive wines, such as the luxury brands from LVMH—which are advertised much like the group’s TAG Heuer watches, De Beers diamonds, Guerlain perfume, or Louis Vuitton handbags—are overpriced because such a large portion of their cost base is spent on marketing. This doesn’t just go for superpremium wines like LVMH’s Château d’Yquem, Krug, and Dom Pérignon; it also goes for brands like Cloudy Bay, a straightforward New Zealand Sauvignon Blanc whose price—without any apparent change in the production method—rose from about $15 per bottle to about $30 per bottle after LVMH acquired the brand in 2003 and began marketing Cloudy Bay as a luxury product.  To me, when the consumer dollar is going more toward advertising than toward materials or production, it’s a paradigm case of overpricing. It bothers me that the mainstream wine media doesn’t take brands to task for this.

(3) There are also wines that are overpriced for reasons other than marketing—reasons like an irrational premium Bordeaux bubble that’s being inflated by indiscriminate demand from rich, unsophisticated consumers in emerging markets like China and Russia. Even if Pétrus spends no money on marketing, $5,000 is an irrational price for a bottle, and this is a demand-side phenomenon.

(4) Then there are the producers who model themselves after Pétrus in an effort to capitalize on that same demand-side phenomenon. These producers make “high-end” wine (with the characteristics typically associated with the 95-and-higher-point wines in wine magazines, e.g. aging in new French oak, high alcohol, extreme concentration) and price it as such. Here, there aren’t necessarily the extreme marketing expenditures of LVMH; rather, there’s simply a price-signalling play: the hope that positioning the product at the top end of the market will speak for itself, and that consumers in search of a luxury good will buy into that notion. In this case, the consumer dollar isn’t paying for lots of advertising and marketing—it’s just sustaining unconscionably high profit margins for the producer.

What situations (2), (3), and (4) have in common is that the cost of production of each of these premium wines is virtually unrelated to the street price.

One might divide wine pricing theory into two rough schools of thought. There is the camp that believes wine should be priced from a supply-side/cost-plus perspective–you take the cost of production of the wine, you add reasonable costs and a modest profit for the producer, you factor in markups for distribution and retail, and you arrive at more or less what the wine should cost. The other camp believes that wine should be priced from a demand-side perspective–that a wine is worth whatever the market is willing to pay for it.

The reason I’m in the first camp, and not the second, is that I don’t subscribe to the neoclassical model of consumer rationality upon which the demand-side pricing theory is built, a counterfactual universe of stingily hypersensitive, quality-sniffing consumers. My sense is that, especially when it comes to hazy markets like wine, real human beings—within certain constraints—generally anchor themselves to market prices that are imposed upon them, and generally pay for things what they’re told those things are worth.

One attempt to justify superpremium wines with modest costs of production is an opportunity-cost-of-land argument—that wine in the Champagne appellation is so expensive that the opportunity cost of that land can justify higher prices. I’m unsympathetic to that argument, because real estate prices track market wine prices, so the price of land is not an independent factor.

So when are premium prices justified in my camp?

When the cost of production is high. The fact that Matthews and Briand mention 1er Cru Burgundy and German whites as examples of expensive wines worth the money suggests that they might be in my camp too, because these are particular examples of wine regions in which grapes are often harvested from small plots with very low yields. In the case of German TBA, for instance, the harvesting is often done on steeply terraced slopes that are extremely difficult to work. Ice wines and botrytized wines—the priciest of German whites—are indisputably more difficult and expensive to produce than almost any other type of wine.

In short, while spending $50 or $75 or even $100 on a good Sauternes, TBA, or top red Burgundy might not always make economic sense for the buyer—particularly if it’s a buyer without much experience in wine—it’s at least justifiable from a supply-side pricing perspective. The $150 you’ll pay for a bottle of Opus One or Krug, meanwhile—never mind the $5,000 you’ll pay for a bottle of 2005 Pétrus—has little to do with the cost of production.

This from the abstract:

“In markets for experience goods, publications exist to help consumers decide which products to purchase. However, in most cases these publications accept advertising from the very firms whose products they review, raising the possibility that they bias product reviews to favor advertisers…Although the average Wine Spectator ratings earned by advertisers and non-advertisers are similar, I find that advertisers earn just less than one point higher Wine Spectator ratings than non-advertisers when I use Wine Advocate ratings to adjust for differences in quality.”

These are wine ratings, not the restaurant Awards of Excellence, which I’ve written about in the past; the applicants for those awards are advertisers by definition (having submitted a $250 fee to be considered).

Karl Storchmann has also posted an interesting blog entry about Reuter’s paper on the AAWE website.

Reuter later retreats to a statement that he “finds little consistent evidence of bias…at worst, the tests for biased ratings suggest that Wine Spectator rates wines from advertisers almost one point higher than wines from non-advertisers. However, selective retastings can explain at most half of this bias and then only within the set of U.S. wines rated by both Wine Spectator and Wine Advocate. Given Wine Spectator’s claim that it rates wines blind, the remaining difference in ratings may simply reflect consistent differences in how the two publications rate quality, which leads to predictable differences in advertising. This interpretation is consistent with the fact that tests for biased awards provide no additional evidence of bias. Therefore, despite the fact that Wine Spectator is dependent on advertising revenue, the long-run value of producing credible reviews appears to minimize bias.”

I think this conclusion is softer than it need be. Even if selective retastings explain only half of the one-point bias, that’s still pretty damning; it means that if you advertise in Wine Spectator, you might well get the benefit of a selective retasting that gets you, on average, an additional half-point. Translation: advertising influences ratings.

With respect to the other half-point, if there are indeed “consistent differences in how the two publications rate quality, which leads to predictable differences in advertising,” then you should try leafing through a copy of Wine Spectator and seeing if you’d trust critics who favor the types of wines that tend to advertise in the magazine. I think the roster of advertisers speaks for itself.

The more important issue, perhaps—especially if you’re a small wine producer—is how difficult it is to get magazines like Wine Spectator to even review your wines at all. And this is where, anecdotally, bias might play an even larger role. “Unsolicited samples,” states the Wine Spectator website, “may not be tasted.” Advertise in the magazine, and that problem seems to go away.

And then there’s the matter of the selection of a wine (Columbia Crest Cabernet Sauvignon Reserve) from a Wine Spectator advertiser (Chateau Ste. Michelle) as this year’s Wine Spectator wine of the year.

Although proving bias in every such case is a complicated, difficult point, the obvious conclusion of all such research is the simplest:

We should be skeptical of criticism whose publication is financially supported by the producers of the products being criticized.

Wine critics should not accept advertisements from wineries.

Period.

When I arrived in Portland last month, the first thing I wanted to do was buy a bike and get around the way the locals do. Since I wouldn’t be in town for too long, and it wasn’t clear that I’d be able to take the bike with me when I left, I wanted something extremely cheap.

There were bike shops on every other corner in Southeast Portland, the sort of Brooklyn-ish neighborhood where I was staying. I walked into what looked like the grungiest of them—a store that sold mostly used bikes. There was one employee, and he was heavily tattooed and seemed pretty cool. I completely leveled with him: I didn’t know anything about bikes, really; I could barely change a tire; I was only going to be in town for a little while, and I wondered if he had something cheap that I could use for puttering around town.

I know this is sort of quaint, but the last time I bought a bike, I think I spent $35, and it wasn’t hot. It was a road bike; it had 18 speeds, I think; it squeaked; and it served my needs (biking from my house to school every day) perfectly well. (The bike later died a peaceful death at Burning Man, but that was due to maltreatment, not poor quality.) I was looking for something like that.

The guy in the store asked me how much I wanted to spend.

I sort of stuttered my way and ultimately refused to answer the question because I was embarrassed to say something like “less than a hundred dollars,” for fear of coming off like Borat inspecting the Hummer before buying the ice-cream truck.

Yeah, the bike guy answered, he had something super-cheap for me, an old road bike that they’d fixed up. It wasn’t exactly my size, but it would do. It was a 1991 model, a Trek, I think; it was in good working condition, it had some newer components, and it came with a warranty. I could have it, he said, for $475.

So I went to another store. Same deal, more or less. There was one bike for $275, but it was a girl’s Raleigh from the 1960s with a wicker basket.

I started looking around the Web. At the down-to-earth-sounding Recyclery, another Portland used bike shop—and probably a great one—there are currently 59 used bikes on offer. But 34 of them cost more than $1,000, only eight are priced under $500, and there are none under $300. Even to rent a bike for one week from the Recyclery costs $175—more than I paid for my weekly rental car the previous time I was in Portland.

At Portland’s Costco, meanwhile—on the outskirts of the city—you can buy a brand-new Schwinn Midtown city bike with Shimano shifters for two hundred something dollars. But, according to the clerk there, those Schwinns aren’t moving.

I don’t doubt that the Schwinn Midtown is a far inferior bike, from the point of view of a bike connoisseur, to whatever’s being sold used in Portland. But you’ve got to love a city whose citizens put a set of moral/aesthetic principles—whether it’s riding a bike with proper disc brakes or refusing to support the Big Box stores—this far above their own financial well-being. And although every city has its bike aficionados, I think that in Portland, most people just buy rebuilt bikes locally because it feels right to do so, not because all these everyday bike riders can really tell the difference between Shimano TX-30 derailleurs and M-970 XTRs.

Still, what’s up with this bike micro-inflation? Why does there seem to be no market in Portland for used bikes that are actually cheap? Portland is otherwise a pretty cheap city. Beer is cheap. Used clothing is cheap. By major urban standards, housing is cheap, too, unless you compare it to the strip-mall-type cities. And certainly there are plenty of people in town who can’t afford to spend $475—never mind $1,000—on a bike.

I asked a few people in town about this, and got some general sense of agreement and common frustration: cheap bikes were impossible to find around here. The word on the street was that so many people were selling their cars (or taking their cars off the road) and using bikes to commute to work that there just weren’t enough bikes to go around. I also heard about a guy who was actually in the business of bicycle arbitrage—he would immediately snap up the few cheap bikes that would come up on Craigslist, fix them up a bit, put them back up on Craigslist, and make a good profit.

So I started looking at Craigslist—not just in Portland, but in other cities too, and not just at bike prices, but also at car and truck prices. I looked at a wide range of midsized-to-large cities that I thought represented a diversity of urban layouts, bike prevalence, wealth, and so on: Austin, Miami, New York City, Phoenix, Portland, San Francisco, and Seattle.

From each of these cities I collected an extremely basic data set: the asking prices for the 50 most recent cars/trucks and bikes advertised. I excluded children’s bikes, frame-only bikes, and non-working bikes; I excluded non-working cars and cars that were being sold for parts. I also excluded obvious dealer spam from each. Then, I looked at the medians. Here’s what happened:

Median price, first 50 items for sale on Craigslist, 8pm PDT, 8/13/09

I didn’t run any serious statistical tests on the data set. This is because there are a few fundamental problems—the largest being that we’re not comparing apples to apples in terms of what’s being sold. That is, we don’t know if the same types of bikes are being sold for more in Seattle than in Phoenix, or if there are different types of bikes being sold in the two markets. The ads also change so frequently that replicating these results might be difficult; and 50 data points might be too small a sample.

Still, whether it’s over/underpricing or just selective selling, what struck me about this informal little analysis was that not one city fell out of line in the inverse order. Where cars were selling for the most, bikes were selling for the least; where cars were selling for the least, bikes were selling for the most; and so on, inversely, in between.

So, it looks like even though there are tons of bikes and bike shops in Portland, there still aren’t enough sellers in town to satisfy the strong demand in this biker’s paradise. Perhaps, in the long run, when enough arbitrageurs start shuffling bikes around the country (and enough arbitrageurs start underpricing each other to drive down their margins), more cheap used bikes will become available in the bike-friendly cities.

In the meantime, if you’re a Portland or Seattle resident thinking of selling your car and going green, maybe you should drive down to Phoenix and ride a bike back. You’d leverage both sides of the inverse relationship—plus there’d be some beautiful scenery along the way.

Worth a thousand words?

With taste and smell—the so-called “chemical” senses, which are more complex (humans have about 400 different types of olfactory receptors) and less well understood than the others, we don’t have the luxury of those points of reference. That’s why we so often resort to loose analogies—“tastes like chicken”—and it’s also why reproducing tastes and smells is so difficult (grape soda doesn’t taste much like grapes, and nobody’s yet synthesized a bottle of 1945 Pétrus—an activity that would surely yield tremendous profit).

To challenge this barrier, we resort to analogy. Coffee tastes like nuts and chocolate; Sauvignon Blanc smells like grapefruit and cat pee. In a Sauternes, you might sense the brine of the first green olive you tasted in Italy; in a Pedro Ximénez sherry, the viscous maple syrup that your grandmother once drizzled on your pancakes.

But how carefully are we really choosing these adjectives and analogies? How often do they correspond to real chemical commonalities? Does that matter? Do the analogies more frequently serve a more poetic (or at least suggestive) purpose, forging new neural assemblies that connect relatively arbitrary taste and smell memories with each other—connections that, reinforced over time, turn into sensory reality?

Two papers at last month’s meeting of the American Association of Wine Economists in Reims (this is my second of two articles about the conference) investigated this question with respect to the wine industry, which is, if not a microcosm of all consumer-products industries, at least an increasingly apt caricature of them. While creative adjectivism has long characterized in the wine world, the practice in other taste industries—chocolaty coffee, metallic fish, grassy honey, peaty whiskey—is now ascendant.

The canonical work in the wine-adjective field is Princeton economist Richard Quandt’s “On Wine Bullshit” (a riff on his fellow Princetonian Harry Frankfurt’s “On Bullshit”). Writes Quandt:

Two things have to be true before wine ratings can become useful for the average wine drinker. Since there are many wine writers, and there is a substantial overlap in the wines they write about (particularly Bordeaux wines), it is important that there be substantial agreement among them. And secondly, what they write must actually convey information; that is to say, it must be free of bullshit. Regrettably, wine evaluations fail on both counts.

At the AAWE meeting, Coco Krumme of M.I.T., who is also a Fearless Critic food writer, studied data from critical descriptions of more than 3,500 wines from recent vintage years, ranging from $4.99 to $137.99 in retail price, and employed a Bayesian filter to “find those words that best predict the price category of a bottle” (abstract here). She found that “about 65% of commonly occurring words are non-overlapping.” Words like “old,” “elegant,” “intense,” “supple,” “velvety,” “smoky,” “tobacco,” and “chocolate” predict expensive wines; “pleasing,” “refreshing,” “value,” “enjoy,” “bright,” “light,” “fresh, “tropical,” “pink,” “fruity,” “good,” “clean,” “tasty,” and “juicy” predict cheap wines. As for suggested pairings, “steak” and “shellfish” predict expensive wines; “chicken” predicts cheap wines.

Perhaps most amusingly, Krumme reports that “words with the same meaning are preferentially used for expensive over cheap wines: for example, ‘vintage’ is six times more likely to describe an expensive wine; ‘harvest’ is used for cheap wines.”

Economist Carlos Ramirez of George Mason University, meanwhile, ran a regression (abstract here) on a data set of 800 Wine Spectator descriptions of Napa Valley Cabernet Sauvignon wines from for wines from the 2004, 2005, and 2006 vintages, and found a length-of-review effect—that is, “longer wine descriptions are associated with higher prices—a 10 percent increase in the length of a wine description (adding about 23 characters) is associated with a statistically significant increase of 4 to 13 percent to the price of the bottle.” Like Krumme, Ramirez also found some particular wine descriptors (about 20 of the 208 he looked at) that, controlling for other variables, signal higher wine prices.

If you’re familiar with wine ratings and reviews, neither of these results might surprise you. But the interesting, unanswered question is: which way does the causality go?

Here are three potential theories:

(1) Expensive wines are generally fairly similar to each other, and their particular properties lead critics to refer more frequently to certain flavors (e.g. chocolate) and to write longer reviews of these wines. That is, there’s just a specific expensiveness to expensive wines that explains these differences. (Quandt would likely doubt this, and the empirical evidence, as described in The Wine Trials, would be against it, too.)

(2) Tasting is not done blind, and thus critics are influenced to write more and refer to certain flavors when they taste expensive wines.

(3) Tasting is done blind, but the sensory reviews of expensive wines are edited after the fact by editors who know what the wines are.

Regardless of which of these theories is correct, what’s highly likely is that the descriptors are self-fulfilling—reading an expensive wine description primes the drinker to have a more typically expensive wine experience. That is, the adjectives and analogies we read in wine reviews fuse with our experience of drinking the wine in such a complete way that the liquid’s intrinsic and extrinsic properties become inseperable.

Is this why it’s so difficult to undermine the conventional wisdom that very expensive wine is worth the money?

Maybe we just synthesize whatever we seek, creating value as we go: search for chocolate, and it will magically appear.

Not empty for long?

Schamel’s study, which is still in progress, has thus far looked at a data set of 260 eBay auctions of empty wine bottles. In his model, the most powerful predictive variable—explaining both the incidence of sale and the final auction price of an empty bottle—is “the price a full and presumably authentic bottle could potentially fetch in the marketplace.”

Schamel argues that this is “powerful evidence that the empty bottles might go on to be refilled. Why otherwise would someone want to pay more than 100 euros for an empty bottle of 1982 Chateau Lafite-Rothschild rated with 100 Parker points? Presumably, because it is worth a lot more once it is filled up again.”

Certainly, notwithstanding a recent incident in which a customer at a London restaurant sent back a £18,000 magnum of 1961 Château Pétrus claiming that it was counterfeit, our wine experiments and others’ predict that few consumers—even wine experts—would be able to identify a plausible fake of ’82 Lafite.

In my mind, the strongest piece of evidence in favor of Schamel’s theory is that his model shows no price effect for the most intuitively collectible of all wine bottles—Château Mouton-Rothschild bottles with artist labels. These are designed by a different prominent artist for each vintage. One might assume that these bottles, when empty—since they’re limited-edition works of art—would have higher value than others if they were being collected for legitimate purposes.

On the other hand, if collecting empty wine bottles is less like art collecting and more like straightforward conspicuous-consumption plumage—that is, if, say, a collector’s display of a row of empty bottles in his or her dining room or wine cellar is functioning as a mere social display of the total value of all the expensive wines that he or she has consumed—then he or she would have an interest in buying the most expensive possible bottles, which would explain the model’s results without the need for counterfeiting. It would be interesting to survey empty-bottle collectors to see, at least anecdotally, what qualities they claim to value most.

It was also brought up in the Q&A session that, to complete his or her work, a counterfeiter would also need an appropriate cork. As few corks are available on eBay, Schamel has not yet investigated a potential cork effect. However—and this is speculation—I would imagine there to still be a robust market amongst counterfeiters for empty bottles without corks, primarily because I’d assume that there is also a separate black market for counterfeit corks (or real corks without bottles) that could complete the sets, so to speak.

I’d also assume that one of the main categories of counterfeit-wine buyers would be conniving restaurateurs in regions where there’s a lot of demand for prestige bottles but relatively little wine tradition or wine education—China and Russia come to mind. I’ve seen a table full of businessmen in Hong Kong order a bottle of 1970 Haut-Brion and mix it with Coca-Cola. Restaurant customers in such situations would be easily duped—and they also might be less vigilant about looking at the cork. Such restaurateurs might take steps, for instance, to avoid presentation of the cork when the bottle is opened.

I’ll leave it at this: if I were going to go into the wine counterfeiting business, eBay would certainly be one place I’d start…

Is this a good thing or a bad thing? My intuition (and that of the economists I’ve been speaking with here in Stockholm) is the latter—first and foremost, as in Quebec, it’s a major headache for wine producers, whose distribution chances hang on the (often arbitrary) whims of just one decisionmaker. Opening hours of stores are criminally short. Pricing is screwy, in part because per-unit (rather than per-krona) taxation results in cheap wine being overpriced and expensive wine underpriced. As ever, monopolies throw everybody’s incentives out of whack.

But here’s one definite consumer-oriented boon that results: in an of-the-people move, Systembolaget wine stores—that is, all wine stores in Sweden—are organized first by color, second by price. There’s the 69-kronor-(US$8.71)-and-under red wine section; there’s the 70-kronor-(US$8.84)-to-99-kronor (US$12.50) red wine section; and then there’s the 100-kronor (US$12.63)-and-up red wine section.

Although I’ve seen US wine stores with special $10-and-under sections and such, I’ve never seen an entire store organized this way. Intuitively, at least, it seems to be more aligned with consumers’ game plans as organization by region, grape, and so forth.

Why don’t non-monopoly stores organize this way?

My guess would be that profit-minded stores, for understandable reasons, don’t want to lose the chance to upsell—they want people to walk away with a wine more expensive than the one they came looking for.