Sunday, May 12, 2024

Getting Sloshed With Burton Malkiel

That's Burt "A Random Walk Down Wall Street" Malkiel.

From The Milken Institute Review, February 14, 2024:

The Review mostly publishes articles on economic policy. Why, then, this chronicle of the doings of a bunch of aging ivory tower types who get sloshed together once a month in New Jersey? First, these aren’t just any academics. The author, Burt Malkiel, emeritus professor of economics at Princeton and former dean of the Yale School of Management, wrote the best book ever about personal finance. And two of his fellow quaffers, Orley Ashenfelter and Richard Quandt, are among America’s most distinguished economists, specializing in labor and econometrics, respectively. Second, while they were enjoying tea time with Bacchus, they were also challenging long unquestioned assumptions about who, how and where great wine is made — in the process, changing the wine industry forever. I, for one, am jealous.  —Peter Passell

Tastings at Tea Time
Getting Sloshed with Redeeming Social Consequence
by Burton Malkiel

It is said that drinking good wine with good food and good friends is one of life’s most civilized pleasures. This perfectly describes the beginning of one of the longest-running wine tasting groups in the country. Three friends with different backgrounds and professions decided during the 1980s to spend at least one late afternoon each month socializing over glasses of wine and a variety of meats and cheeses.

Today the group has expanded to eight, the majority in their 80s and 90s, who agree that wine improves with age: the older they get, the better they like it. This group of dedicated individuals has spent well over 30 years drinking some of the world’s great wines, debunking myths with an intellectual and hedonistic curiosity. This is their story.

Two of the original members were Princeton University professors. Orley Ashenfelter, a noted labor economist, was an early champion of experimental research in economics, both in the lab and in large-scale social experiments. And Orley — I’ll refer to my fellow wine tasters by their familiar names throughout — extended his reach to, of all things, wine, using statistical methods to show how rainfall and summer heat influence the quality and price of wine. In general, high-quality vintages correspond to the years in which the harvest seasons are dry, the summers are warm and subsurface moisture is abundant from wet conditions during the previous winter and spring.

Startlingly straightforward? Yes, but hardly popular with the professional wine establishment. Robert Parker, one of the most influential wine critics, called Orley’s method “Neanderthal,” “ludicrous and absurd.” Today, Orley’s work is widely accepted. In 2023 he was given an honorary doctorate from the Université de Bordeaux. The university cited his empirical work on the wine market and noted that he has “made wine economics … emerge as a complete discipline at the international level.”

Orley is also an owner of vineyards in California and New Jersey. He has treated the group to delicious tastings of cabernet sauvignon and cabernet franc from his New Jersey vineyards. It is easy to see why the establishment of a wine tasting group would have considerable appeal to him. It is also clear why the Princeton wine tasting group was so unique. How many tasting groups include a real-life grower and vineyard owner? And while there are wine tasting groups all over the world, there are no others to our knowledge that have existed for almost 40 years with reasonably stable membership and who publish their results on a website named

Richard Quandt, the second founding member of the group, is a noted econometrician. Many elements of the economist’s standard statistical analytic toolkit have their origins in his work. Dick, the senior member of the group, now in his early 90s, strikes a dramatic presence with his impressive head of wavy white hair, his Hungarian accent and his very large Labrador retriever, Stormy.

Dick developed the methods by which the wine tasting group could judge the quality of the wine tasted as well as the software to do the analysis of the statistical results. Perhaps the most significant was his analysis of the wine group’s retesting of a famous 1976 Paris wine tasting, the Judgment of Paris. In the original iconic tasting, wines that were produced in France (including first-growth Bordeaux such as Château Mouton Rothschild and Château Haut-Brion) were compared with arguably similar red wines from California. The judges were French oenophiles. The unthinkable happened: wines from the Napa Valley bested those from France, and thereafter California was catapulted to the top of the fine wine conversation.

The Judgment of Paris was the brainchild of Steven Spurrier, the English owner of a wine shop in Paris who set up the tasting with his American associate Patricia Gallagher. Not only did unheralded wines from California’s David best the Goliath of Bordeaux, but the French judges were unable to identify the provenance of the wines. One wine expert declared that one of the storied French wines was “definitely California. It has no nose.” Judge Odette Kahn, editor for La Revue du Vin de France, was so incensed about the results (and her ranking of the American wines as best in their categories) that she unsuccessfully demanded that she could have her rating sheet returned so she could alter her preferences. As Jim Barnett, the owner of the vineyard that produced one of the winning California wines, put it, “Not bad for a kid from the sticks.” ....


Completely unrelated, 2016's:
Randomness: "A Drunkard’s Walk in Manhattan"

Also at the Milken Institute Review:
Central Banks Mission Creep