More proof that your banker friends are full of shit

Pax Arcana

I’ve said it before and I’ll say it again — almost all wine snobbery is based on marketing and price tags.

That’s not to say that all wines are equal. Some are swill and others are blissful. Most fall in between. The point is that price is a poor indicator of quality.

The worst aspect of this entire charade is that an entire body of knowledge has been constructed solely to support the skewed price/quality hierarchy. At every street corner on every block of Yuppietown USA, you will find an investment banker and his party planner girlfriend willing to school you on the difference between Cabernet grapes grown on the north slope and the south slope.

Head Freakonomics weirdo Steven Levitt relates a story that confirms his suspicions about wine pricing and its effect on snobs breathing the most rarefied of air — the Harvard Society of Fellows. After reluctantly paying big money for wine that he knew he couldn’t appreciate at the society’s meetings, Levitt proposed a challenge. He bought two expensive wines and one cheap wine and conducted a blind tasting. He even split the fancy wine into two separate glasses — the fellows thought they were tasting four wines when they were really tasting three.

If you can’t guess the results, you really need to work on your context clues:

The results could not have been better for me. There was no significant difference in the rating across the four wines; the cheap wine did just as well as the expensive ones. Even more remarkable, for a given drinker, there was more variation in the rankings they gave to the two samples drawn from the same bottle than there was between any other two samples. Not only did they like the cheap wine as much as the expensive one, they were not even internally consistent in their assessments.

Levitt cites a recent paper in the Journal of Wine Economics as further proof of this truth, though he does admit that people with real training can tell the difference between “better” wines and “worse” ones. It’s just that the rest of us — regardless of that time we went to Napa — cannot.

Cheap Wine [Freakonomics]

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2 Comments

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2 responses to “More proof that your banker friends are full of shit

  1. Chris

    Yeah, I don’t buy it. I think that price is actually a decent signal of average quality: there are always going to be sub-par expensive bottles of wine, and there’s plenty of cheap stuff (say, <=$12) that can match poorer quality expensive wine – but on average, I’ve always found pricier stuff to be better (and last a bit longer, when open) than the cheap stuff. Though mostly I buy cheaper wine anyhow.

    Also, Levitt should know that the standard errors from a test with essentially 4 observations would be huge – you can’t make inference from that!

  2. I was thinking after I wrote this that my non-economist argument against Levitt would be that while many less expensive wines are pretty good, the odds of getting a bad one increase as the price drops. I’d draw a graphic of this, but I have no idea how.

    Still I think it’s fascinating — and probably quite true — that many people who claim to know a lot about wines would probably fail miserably at distinguishing fancy-pants ones from decent ones in a blind test. Jeffrey Steingarten, in one of his books that I lost on a beach somewhere, wrote a gathering of serious wine experts (in Italy, I think) who — when the wine was controlled for temperature and put in glasses that masked the color — couldn’t even tell the difference between white wine and red wine.

    I don’t know what this all says except that if there are three Shirazes on the menu at varying price points — I’m going cheap.

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