American Wine Economics:
An Exploration of the U.S. Wine Industry
University of California Press, Berkeley, California, 2013
Reviewer: David A. Jaeger
I read a good chunk of American Wine Economics while sipping a decidedly un- American Spätburgunder produced in the Ahr Valley of Germany. And, despite the title, much of the content is as applicable to wines produced there as it is to wines produced in Walla Walla, Washington, or Vineland, New Jersey.
The stated purpose of American Wine Economics is “to provide a unified and systematic treatment of the wine industry from an economic perspective” with the objectives of “giv[ing] a detailed description of the economic organization of the U.S. wine industry,” to “use economic principles to shed light on the behavior of wine producers and consumers,” and to “summarize findings and present insights from the growing body of studies related to the economics of the wine industry” (p. xiii).
To achieve a “unified and systematic treatment,” the first chapter of American Wine Economics provides a brief introductory microeconomics course with wine production and consumption used as illustrations. The standard theories of the firm and consumer are reviewed, but there is nothing here that is truly specific to wine, and anyone who has taken and passed an intro economics class can skip this chapter.
The subsequent chapters of the book discuss wine as a product and its characteristics and then take us from vine to consumption. While much of the material will be familiar to readers of this Journal and fellow travelers, it is largely concerned with the technology and business of producing wine, not necessarily with wine economics. Although much of the discussion is not specific to American wine, there is quite a bit of useful material here for the wine naïf.
There is more discussion that is specific to the U.S. wine market in Chapter 8 on wine distribution and regulation. While much of the chapter discusses, in general, why governments might want to regulate the market for alcoholic beverages, it also presents the specifics of the three-tier system of distribution in the United States and sketches some of the differences between states in how wine distribution is regulated. I felt, however, that the chapter could have covered the U.S. regulatory environment more completely. For example, as a reference for researchers, a table listing each state’s regime on wine selling and wine “importing” (from other states) would have been very welcome in this chapter.
It is not until chapters 11 (“The Wine Consumer and Demand”) and 12 (“The Wine Consumer, Quality, and Price”) that the books turns to what I would think of as “wine economics.” Here the book seems more focused and grounded in the literature, and it is perhaps no surprise that there is more tabular material here as well. Chapter 11 discusses the various determinants of wine demand (price, income, substitutes), presenting results from the literature. Chapter 12 presents results on the hedonic determinants of prices as well as environmental determinants (location, weather) of prices, again including discussion some of the main papers in the literature. These chapters are a good introduction to research on the determinants of wine prices, and the author, James Thornton, pays thorough attention to the work of his fellow members of the AAWE.
Chapters 12 and 13 discuss the globalization of the wine market and recap the basic economic approach and results.
It is sometimes hard to discern the intended audience for American Wine Economics. There is little technical material in the book, and the discussions of economic principles are clearly aimed at a general, but educated, audience. On the other hand, the little bit of technical material (e.g., two discussions of the meaning of p-values and several discussions of the meaning of elasticity) is likely to leave most popular audiences a little baffled. The dry “professorial” style of the writing might lead some readers to put the book down and reach for another glass of California Chardonnay and the latest issue of Wine Spectator. For the readers of this Journal, the lack, or very limited, discussion of topics like the effect of global warming or wine as investment will surely be seen as lacunae.
For a book that focuses on the “American Wine Industry,” there is also a surprising lack of specifics. For example, why does figure 5 (p. 78) not show actual grape production? Or why does the chapter on grape growing not show the distribution of varietals produced in the United States? Why are the figures on annual U.S. wine sales (p. 211) not shown in a graph rather than a table? There are a host of similar questions that either the author or an attentive editor should have addressed to make the book more specific to the United States.
Overall, there are parts of American Wine Economics that will appeal to an educated wine drinker and parts that will appeal to readers of the Journal of Wine Economics. Neither will find the emphasis to be especially American, however, and the book as a whole will leave both groups wanting more.
David A. Jaeger
City University of New York Graduate Center and University of Cologne