Let’s talk about the pricing of top Bordeaux wines.
It’s the subject of intense current discussion, but I think there’s some misunderstanding here. We’re not just talking about the price of wine. At the high end, it’s rather more than this: it’s a discussion about sex.
High-end fine wines are an example of a Veblen good. Named after Thorstein Veblen, who coined the term ‘conspicuous consumption’ in 1899, Veblen goods are unusual in that their appeal lessens as their price drops.
Putting this the other way round, they are the sorts of goods for which high price is part of their appeal, and as they get more expensive, so they become more desirable.
Latour, Lafite, Margaux, Petrus, Haut Brion and Cheval Blanc are celebrity wines. Their market price doesn’t depend on high critic ratings, or even their intrinsic quality as wines. For sure, they need to be very good wines, but as long as they don’t let it slip too much, they will have a steady stream of well-heeled buyers waiting to lap them up. This is because they are an accepted part of the luxury category: famous wines bought, in part, as a display of wealth and status.
Luxury is big business, and doing well at the moment. Luxury is conspicuous consumption. And conspicuous consumption is actually all about sex. It’s a fundamental human behaviour: a sexual display. It is about being able to demonstrate reproductive potential by showing off that you have resources to waste.
Take the example of an expensive watch. Just today I saw a shop window full of Rolex and Breitling watches in the £5000–£7000 range. What drives people to buy one of these watches? I’m sure they are very good, but you can get a perfectly good, beautiful-looking watch for £100 or less—one that tells the time just as well as a watch costing 50 times as much. Why do people feel the need to spend £5000 on a watch? Isn’t this a misallocation of resources?
Or take the example of a Ferrari or Aston Martin. Fine pieces of engineering, for sure. But actually quite impractical for urban roads, and expensive to run. When people buy cars like these, it matters that they are expensive. People aren’t looking for value for money, or practicality.
Both wearing a Rolex and driving a Ferrari are examples of conspicuous consumption. They are resources spent for no logical reason other than to display status. Clearly only someone with lots of money will be able to buy them. They can’t be faked in any plausible way—the only people who could get away with a fake Rolex are the ones who could actually afford one in the first place.
In nature we see the process of sexual selection, whereby some species develop traits that are reliable indicators of reproductive success. The peacock’s tail is a brilliant indicator of what is known as ‘runaway’ sexual selection. A large tail is a significant handicap in terms of escaping from predators, so only the fittest males can get away with the added burden of a big tail. The bigger the tail the fitter the individual. Suddenly there is an evolutionary pressure for the size of the tail to increase. The males display their tails to females. They are costly; a waste of resources. But any male fit enough to waste resources this way will make a good mate. And for a trait to be a focus of sexual selection, it is important that it cannot be faked.
Veblen goods—those that are involved in conspicuous consumption—are basically all about sex. By owning of consuming them, people are displaying the extent of their resources. Rather than a physical trait subject to sexual selection, humans have used this behavioural form of sexual selection. The display of resources represented by the luxury category is basically all about sex.
Latour, Lafite and their peers are not like normal wines, and we have to remember this in discussion about their pricing.