NEWSFLASH! In September I will join The Conversation as its Business and Economy Editor. I have been honoured to work at The Age for the past ten years, originally alongside the legendry Tim Colebatch, and for the past four years as economics editor in my own right.

At The Conversation, my job will be to make the best thinking from Australia's 40 univerisites accessible to the widest possible audience. That means you. From the new year I will also write a weekly column.

On this site are most of the important things I have written for Fairfax and the ABC over the past few decades. I recommend the Search function. The site is a record for you, as well as me.

I'll continue to post great things from The Conversation and other places here, and also on Twitter and Facebook. Enjoy.

Sunday, December 04, 2016

Cheap wine is better, but hide the bottle

I get anxious going into bottle shops. That's partly because I was brought up Methodist, and partly because I never pick the right thing. If I spend too much, I'll be wasting my money; if I spend too little, my guests will think I'm serving rubbish. And to me, it's all the same.

The reassuring if depressing news from the American Association of Wine Economists is that I'm not alone. (Yes, there is such a group.) One of the most widely cited papers in its Journal of Wine Economics is "Nothing Good Ever Came from New Jersey: Expectations and the Sensory Perception of Wines".

In the first test they gave "experienced wine professionals" reds from New Jersey and California and asked them to tell the difference. They had been told nothing about where the reds came from and couldn't. But in the second they told the tasters that some (but not which) of the wines came from New Jersey. The professionals became dogmatic, saying that the wine they thought was from New Jersey was plainly inferior, even if it was really from California. They still couldn't pick which was which.

In Predictably Irrational, economist Dan Ariely describes how he gave students two small samples of beer and asked which they would like in a larger glass. One of the samples had vinegar added. The students rated each pretty well. Then he ran the experiment again, this time telling the students one of the samples contained vinegar. They picked the one they thought it was, and hated it.

Back to price. Ariely gave students electrical shocks, asked them how much they hurt, then handed out tablets to "relieve the pain" (which actually were vitamin C tablets). They worked, but what really worked was the price. If the students were told they were expensive, they worked extremely well. If they were told they were cheap, they were less effective.

Which is where wine comes in. Study after study finds that more expensive wines taste better, when people know they are more expensive. When they don't, the shocking finding from an analysis of 6000 tastings entitled "Do More Expensive Wines Taste Better?" is that, "on average, individuals who are unaware of the price do not derive more enjoyment from more expensive wine. In fact, they enjoy more expensive wines slightly less".

It bears repeating: on average, people unaware of the price enjoy expensive wines slightly less. If price is a guide, it's a guide for what not to buy.

Curiously, there was one small group which enjoyed what turned out to be the most expensive wines slightly more. They were wine experts; which is only half reassuring. They are experts at something, but it's not predicting what you and I will like.

My best advice (and I'm the worst person to give this sort of advice) is to race in, get something cheap, get out, and pour it into better looking bottles. Your guests will be doubly grateful.

In The Age and Sydney Morning Herald