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.

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.

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.

1. Are most wine critics impartial judges of quality, or are they really serving as public-relations advocates on behalf of producers? With evidence from my own empirical work, expository journalism, and a survey of the industry, I argue that most wine critics are really in the business of advertising wine, not judging it impartially. Critics are for sale.

2. My exposé of Wine Spectator’s “Award of Excellence” program.

3. My research indicating that wine experts don’t prefer expensive wine to cheap wine by a significant margin in blind tastings: In a year-long series of blind tastings that I conducted with wine experts and non-experts from the US, France, and other countries, my colleagues and I poured more than 6,000 glasses of wine from brown-bagged bottles that cost from $1.50 to $150. On the whole, our tasters actually preferred the cheaper wines to the more expensive wines—by a statistically significant margin. Even among the wine experts alone, there was only a weakly positive correlation between price and preference—one that didn’t rise to the level of statistical significance.

4. Blind tasting and what I call the “wine placebo effect”: No scientific blind-tasting study of wine experts has ever shown expensive wines to do consistently well, or cheap wines to do consistently poorly.

5. “The taste of money”: I believe that the sensory experience itself that changes when you know the wine is expensive. 

6. “The honest wine movement”: the way forward. I advocate for a new approach to quantitative wine evaluation that’s based only on double-blind tasting. So-called “single-blind tasting,” in which tasters know the vintage and/or region (and thus general price range) but not the exact producer, is not enough.