Economists with a sense of humour might sound like a contradiction in terms but Olivier Gergaud and Victor Ginsburgh qualify. Along with a mass of statistical analysis their paper to the 2005 conference of the UK Royal Economic Society included some delightful put downs of pretensious wine buffs. To give a couple of examples.

They quote Robert Tinlot, a former Director General of the Organisation Internationale de la Vigne et du Vin (OIV):

"There is no wine region in our world that does not try to value its vineyards and their output without reference to the character that they inherit from the place where the wine is produced. Consumers who visit producers are particularly sensitive to the beauty of the landscape, to the architecture of the villages and to any other element that belongs to the region of production."

And their comment?

Thus terroir includes even the landscape, as if it affected the quality and the taste of the wine. Tinlot becomes a bit more reasonable in the next pages, suggesting that an objective definition of terroir should be restricted to "natural endowments of a region, such as soil, subsoil, slopes and exposure of the vineyards, climate." But he adds that more recently, there is a "tendency to extend the notion to human factors, such as know-how and local traditions of the local population, that are influenced by the natural, social, political and, why not, religious conditions that prevail in the region…which leads quite naturally to the French notion of appellation d'origine contrôlée."

Then from James Wilson's book Terroir: The Role of Geology, Climate and Culture in the Making of French Wines:

"Terroir has become a buzz word in English wine literature. The lighthearted use disregards reverence for the land which is a critical, invisible element of the term. The true concept is not easily grasped but includes physical elements of the vineyard habitat—the vine, subsoil, siting, drainage, and microclimate. Beyond the measurable ecosystem, there is an additional dimension—the spiritual aspect that recognizes the joys, the heartbreaks, the pride, the sweat, and the frustrations of its history."

For their part, Gergaud and Ginsburgh "restrict the notion of terroir to natural endowments which are non-transferable, and which are likely to really influence in a measurable way both the quality and the taste of a wine: soil, subsoil, slopes and exposure of vineyards. All the other elements are either not quantifiable (the influence of social relations, for example) or can be reproduced elsewhere, taking into account adjustments due to local conditions. Clearly, not all grapes grow in every region because of soil, slopes and climate, but enough experimentation exists and winemakers know how this should be handled. All the remainder, including the choice of grapes, is technological."

The conclusion of their study is that technological choices affect quality much more than natural endowments, the effect of which is negligible.

"It may be tempting to conclude," they write, "that the wine-making technology has become so sophisticated that it can completely shade the effect of terroir, and that vines can be grown in almost any place, as long as the weather permits, and the right combination of vines is made. The French "terroir" legend does obviously not hold, at least in the Haut-Médoc region, which is probably one of the most famous in the world. Nowadays, high quality wines are produced in many different environments, including Languedoc in the South of France, a region which was supposed to be able to grow table wines only.

"Old-world producers--Italy, Spain and more specifically France--use intensively a terroir-based strategy to convince consumers that they produce top-quality wines (good wines, best terroir and old-world are synonymous). Conversely, new-world producers have favoured a brand-based strategy (sun, good oenologists and sophisticated wineries are key ingredients to make top-of-the-range wines; terroir is not considered a crucial factor). Nevertheless, none of the two strategies seems satisfactory in the very competitive world market that prevails nowadays. Indeed, in order to improve market shares, some new-world producers are intending to develop a certification system, that is a terroir-based strategy. The Napa Valley example is interesting and illustrative. In this region, several producers like Dominus Estate are currently applying to get an official appellation from the Bureau of Alcohol, Tobacco and Firearms. On the other hand, old-world producers (Bordeaux and Burgundy essentially) have decided to advertise more to develop their generic brand. In doing so, French producers try to mitigate the numerous drawbacks of their "Appellation d'Origine Contrôlée" (AOC) system in order to recover their lost market shares. AOC laws are now much too strict. Many exceptional wines such as Daumas-Gassac, for example, are unable to obtain an AOC label essentially because they use vines that are not in conformity with the AOC rule. Daumas-Gassac sells at prices comparable to Second-Growth Pauillacs or Margaux. As a result, producers are forced to sell under the appellation "vin de pays," a low grade for a wine. On the contrary, discovering the holy grail is apparently not very difficult: Didier Daguenau, who is known to produce outstanding Pouilly-Fumé wines, obtained an AOC label for his worst production, a lemon he calls "quintessence of my balls" (sic), produced with bad quality grapes that are however in conformity with the AOC tradition. In its current version, the complex and costly French AOC system seems unable to produce more than just horizontal differentiation (typicity). As a matter of fact, it cannot guarantee a high level of quality (vertical differentiation). "This does not mean that a wine with a Saint Estephe taste can be grown in Napa Valley or in Chile, but that wines of comparable quality can be. Since the taste of a wine is a horizontal quality, some consumers will prefer the Saint Esthephe, others will prefer a wine from Chile, but they will agree that both are good wines."