The opportunity cost of wine, and why consumers don’t want to pay it
That’s one of the key points in an intriguing new book by an Eastern Michigan economist, James Thornton, called “American Wine Economics: An Exploration of the U.S. Wine Industry.” The book looks at the economic side of the wine business — something that’s rarely seen given the Winestream Media’s emphasis on toasty and oaky.
“I didn’t really see any systematic examination of wine the way an economist would do it,” says Thornton, who started his academic career studying the economics of medical care. “So, as I was becoming interested in wine, it became a fascinating field of study.”
Hence opportunity cost. Everyone understands the money cost of a good or service, but economists argue that’s not the only cost that determines whether we buy something. There is also opportunity cost — how much it costs us in time, aggravation, and the like, to make a purchase.
In wine, that means not just what we pay for a bottle, but also how much time we want to invest so we can learn more and make better decisions about what we buy. It’s something that happens all the time in other areas, like buying a car. Almost everyone does some research, whether it’s clicking an Internet link or asking a friend about a certain model or a local dealership. And everyone test drives cars, which is about as aggravating and time consuming an experience as possible.
In this, it’s part of what Thornton describes as the theory of rational consumer behavior, which says we want to make the best possible decision. Except when it comes to wine.
“I’d have to speculate here, because I don’t know that there are any studies on this,” says Thornton, a beer drinker who married a wine drinker and came over from the dark side. “But it’s sort of intimidating. You hear all that garbage growing up, that it’s a mortal sin to drink sweet wine, or that you can only have certain wines with friends. And you don’t want to learn, because it is so intimidating. So everyone believes you have to be either an idiot or Robert Parker.”
In other words, academic support for something the Wine Curmudgeon has argued for as long as I have been arguing: The wine business, given the constitutionally protected three-tier distribution system and aided by its allies in the Winestream Media, has no incentive to lower the opportunity cost for wine. The money comes in anyway. Hence wine labels that don’t inform, wine education that is almost non-existent, winespeak, and even scores. And it’s why people buy crappy cheap wine and don’t care, because the opportunity cost is probably higher than the money cost.
The good news, says Thornton, is that the Internet is reducing the opportunity cost of wine. It’s easier than ever to find reviews, ratings, and information about wine, and especially from a crowd-sourced site like CellarTracker. Over time, that should make it easier for consumers to pay opportunity costs, and should help all of us drink better wine.