Wine economics

Tuesday, October 02, 2007

The Ashenfelter vs Parker bout

Yesterday I started reading Ian Ayres' (2007) "Super cruncher". Ayres - he is an econometrician at Yale's law and management schools - starts his book with a 6-page account of the ruckus that Orley Ashenfelter of Princeton University caused in the late 80s with his price prediction formula for Bordeaux wines. For obvious reason, Robert Parker, the king of the "swishing and spitting" approach to wine appreciation, was not amused. I think Ashenfelter won the argument and Parker the money. It is a nice yarn.

The magic formula, as reported by Ayres, is:

Wine quality = 12.145 + 0.00117 winter rainfall
+ 0.0614 average growing season temperature
- 0.00386 harvest rainfall

Most people would probably agree that winter rainfall, growing season temp., and rain at harvest time would affect wine quality and prices. But Ashenfelter estimated the relationship using data from about 30 vintages. Based on this equation, Ashenfelter then estimated the wines' like future price.

A quick check with Google led me to two websites at Princeton that are relevant:
"First crush the grapes, then crunch the numbers".
Princeton economist judges wine by the numbers