Cost, quality and conspicuous consumption

There’s a rather confusing aspect to fine wine.

It has to do with the relationship of price to perception. Let me explain.

Now top quality wine costs a reasonable amount to produce. It can also only be made from certain vineyard sites, and so its supply is limited. This pushes up the price.

Once something becomes expensive, it becomes the object of conspicuous consumption. Well resourced individuals, driven by their biology, purchase and consume it to demonstrate their wealth, and by extension their reproductive fitness.

This doesn’t mean the wine they use in this primordial display isn’t of great quality. The problem is that for wine geeks, intrinsic wine quality – its desirable sensory properties – are what matters. But for most people who buy very expensive wines, this is not the primary concern. They want it to taste nice, and as long as it does, that will do fine, as long as the criterion that it is truly expensive is met.

Things become confusing when wine becomes a Veblen good. [Google it if this term is unfamiliar.] Then, the more expensive it is, the more desirable it becomes. Sometimes wines can become famous, and costly, even if they are not great wines (according to the definition of the wine expert or geek). It is a sort of virtuous circle.

This then creates another level of complexity. These expensive wines can end up defining ‘quality’ in fine wines. People benchmark with the most expensive wines, and these end up defining ‘quality’. Wines become highly esteemed because they are expensive, and other wines become desirable because they resemble these highly esteemed wines.

There is therefore a tension in the world of fine wine. Some people are wine nuts, and for them, the wine’s sensory properties are all that matters. For others, this is a secondary consideration. It is a complicated situation.

9 comments to Cost, quality and conspicuous consumption

  • Fair points here. But there’s a flipside within the wine geek/expert world also: scarcity. Allocations or lack of importers drive up the premiums commanded by small Burgundy, Jura, Beaujolais &c producers. Maybe we’re more informed or discerning, but the cache of something new, interesting or hard to find is a similar concept.

  • Not sure these points are at all fair; for one the “reproductive fitness” angle would seem to be sexist and aimed at fat-cat men. I’m sure there are plenty of wealthy women who enjoy “fine wine” too. Not to mention that I think there is a distinct difference between “experts” and “geeks”, as there is in any sphere, and that what is spelt out here is replicated in many other areas of consumption too; cars, clothes, jewellery… I think we need to remember that wine is a business much like any other and thus resembles those too.

  • Cesar, good point – scarcity does put up prices, and this can apply to wines sought after for their intrinsic qualities.
    Damien, I am not suggesting that all fine wine or expensive wine is consumed as part of conspicuous consumption. There are many wealthy people who buy very expensive wines who really appreciate and enjoy them. There are those who consume conspicuously and also enjoy the intrinsic qualities of the wines they use in such displays. I don’t think the concept of conspicuous consumption is sexist at all.
    I think wine is a particularly interesting example because it concerns sensation and taste. It’s fairly obvious why a really expensive car is really expensive – also, very expensive jewellery. Wine’s qualities are more ethereal and hidden.

  • Sorry Jamie, surely the very definition of a Veblen good is inseparable from conspicuous consumption? Whilst I’m sure there are many who do appreciate them for there ethereal (although as an author on wine science, how “ethereal” that might be is disputable I’m sure) reasons. Ditto the last sentence; what’s so “hidden” about wines’ qualities?
    The sexist part was you conjoining “extension” with “reproductive fitness”; fast cars, jokes about Porsches and hedgehogs and all that, no?!

  • Martin Jones

    I must join Damien in raising an eyebrow at the weird ‘reproductive fitness’ angle. What about gay men who from my experience certainly do not think about reproducing and yet many enjoy their wine too. So maybe heterosexist rather than sexist, Jamie? Whatever, a strange angle.

  • I think you’re reading my post wrong. I’m not suggesting that all who enjoy expensive wine do so as a form of conspicuous consumption. But CC is sometimes a driver of sales of expensive wines.

    And I am talking about biology generally in this regard. Gay men, or even men who have had vasectomies, still engage in behaviours shaped by evolution to maximize reproductive fitness. Demonstrating you are well resourced individual by being able to ‘waste’ resources is the essence of conspicuous consumption. There’s not any ‘-ist’ of any kind about it.

  • I don’t have any issue with the “sexist” commentary because I have actually seen it in action as a Sommelier & Retailer. Women do not spend nearly as much on wine as men.
    Value of a wine is not linear. Someone with plenty of disposable income can simply make their purchasing decisions using either price or brand as their guide. Price being if its expensive it must be decent, brand being Lafite. Not much wine knowledge or thought is needed to order a bottle of Lafite from a good vintage or a bottle of the most expensive wine on the list.

    Those of us without the big bank account meed to be a bit smarter about the tools we use to make wine purchasing decisions. In some cases people use a critics score, in others they take some wine classes or go to tastings and learn what they like.

  • Steve

    Jamie, you’re a somewhat inarticulate if informed soul that struggles with anything deeper with ‘rich people like to show off a bit’. Why don’t you just take a day or two off when you can’t think of anything to fill your clumsily written albeit sincere blog. This is idiotic, offensive to women (make that humans), and frankly embarrassing. Even from the man that thinks The Feeling are the Led Zep de nos jours, this is a low point.

  • Philip

    Actually I think high end wine is frequently a positional good – which is a type of Veblen good. In certain circles its function, or taste, is completely irrelevant – why else do you see people drinking Chateau Lafite and coca cola. High end cars are not a good comparison, because all cars can actually get you around. All wine can do is get you drunk.
    And conspicuous consumption isn’t only about reproductive fitness. It’s also about power. You don’t think our current queen rides around in a golden carriage wearing a crown full of valuable jewels because she’s trying to persuade someone to mate with her do you?

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