Last weekend I had the opportunity to visit an arcade, but not one of those modern fancy arcades with virtual reality, laser tag, etc. This arcade specializes in having old-school games, primarily pinball, but also early video arcade games. You pay a cover charge ($5 for kids, $10 for adults), and then you use quarters to play the games. But here’s the cool part: the price of the games is the same as it was when the games were first released.
As an economist, of course, I was very interested in the prices.
They had pinball machines that dated back the 1960s, and video games from the late 1970s. Most video arcade games were around 50 cents for the early games (late 1970s and early 1980s). But the pinball machines started out at 25 cents, with the earliest game they had being a Bally Blue Ribbon machine, manufactured in 1965 (interestingly, some of the earlier machines had slots for both dimes and quarters — I assume the price was adjustable mechanically). Notably, you also got to play 5 balls for this price (3 balls seems to be standard later on).
How should we think about that 25 cents? A standard reaction is to adjust the number for inflation. Using the CPI-U as the inflation index, that means the 25 cents from 1965 is “worth” about $2.40 now. That’s interesting, but I don’t think it really provides the relevance that we want today.
An alternative is to calculate the “time price” of playing the game. Using the average hourly wage of $2.67 in December 1965, we can calculate that it would take about 5.5 minutes of work to pay for that game — a game which probably only lasts about 5.5 minutes, unless you are really good at it!
Another comparison we could do is with the cost of video games today compared with wages today. But that’s not really a fair comparison — video games are much more advanced today. We would need to do some sort of quality adjustment, which is overly complicated.
But, at least in my case, there is no need to do the quality adjustment — I can play the exact same game as 1965. In fact, I did (several times). There was also that $10 cover charge that I mentioned, and if I spread that fixed cost over 40 games, it cost me about 50 cents per play (including the 25 cents to start the machine) to play the 1965 Bally’s Blue Ribbon Pinball machine. At the average wage today of $29 per hour, it takes about 1 minute to afford a play of that same game. In other words, my Blue-Ribbon-Pinball standard of living is about 5.5 times greater than in 1965.
Now this isn’t to say we are 5.5 times better off overall than 1965. Prices don’t stay constant for most goods! But hopefully it is a useful way to think about that 25 cent price tag from the past, and how to compare it to today.
Economist Writing Every Day 