In Defence of Bordeaux

There is a particular sort of flower which is extremely popular and all civilised people find them most attractive.  Flowers can be grown from a seed and the growing process takes around ten years.  The developing plant has little appeal until it blossoms into a flower; it keeps its looks for a number of years then withers away.
 

There is an active market for flowers in their prime.  What people will pay for a flower in full bloom has fluctuated over the years but prices have over the long term risen steadily.  Flowers are a high end consumer item and have therefore unsurprisingly kept pace with inflation.

As a flower enthusiast you always make sure you have several examples in your home, replacing them as they wither.  You have been purchasing flowers for many years and expect to continue to do so in future.  It does not surprise you that the cost of flowers has generally risen over the years since the cost of everything else from a pint of milk to your hand-made shoes has generally risen.  You certainly expect to be paying more for flowers in ten years’ time than you are today.

One day, you are offered some seeds.  These seeds are expected to grow into very nice flowers, perhaps not the very best examples but certainly above average.  They are apparently quite easy to grow: you simply put them in a dark room for ten years and keep them cool.

You consider what you should pay for these seeds.  Flowers of good quality and in full bloom are currently changing hands for around £1,000 each.  If the price of flowers just keeps pace with inflation then in ten years’ time a decent flower in its prime will be changing hands at a minimum of £1,300.

So what would you pay today for something you reckon will be worth £1,300 in ten years’ time?  Ten year interest rates are not so different to the expected level of inflation so when you discount back you just arrive at £1,000.

You reflect that it seems peculiar that you are happy to pay the same price for a seed as you are for a flower in full bloom when the seed can give you no immediate pleasure.  But then something occurs to you:  to insist on paying any less for the seed would be to expect the pleasure and value of a flower in the future to be less in real terms than it is today.  You happily proceed and buy the seeds.

Just then your wine merchant calls offering you an en primeur allocation of one of your favourite clarets.  He tells you it is a very promising vintage and should turn out to be extremely good though perhaps not amongst the very top vintages.  However when he tells the price you are shocked for it is exactly the same as the rather good mature vintage you bought just recently. 

 
You are just about to tell him it is simply ridiculous to ask the same price for a primeur as a mature wine with many years in bottle when you notice the rather lovely flower sitting beside the telephone.  You then look at the seeds you have just bought and after a few moments of reflection you say “Yes, I think I’ll take a few cases of that please”.