The thousand dollar consoles you forgot

Here's a great chart to compare the cost of video game consoles at launch over time:






 The source is here.

The Neo Geo and 3D0 are barely remembered today. Interestingly enough, they are more expensive then the upcoming generation in nominal figures as well as inflation-adjusted figures.

As I said last time, console games have gotten cheaper, and the world is filled with even cheaper substitute goods like smartphone and tablet games. Some of those $1 console-free games are future classics. We even have a developing trend of a console game being ported to the touchscreen devices people already own.

From the consumer perspective, this is the golden age of video games.

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I missed Earth Hour this year

And by missed, I mean did not participate.

The idea was tonight at 8:30 p.m. everyone was supposed to shut off all non-essential lights for one hour to draw attention to global warming and allow participants to ponder the issue while sitting uselessly in the dark.

What an awful way to promote environmentalism.

As my environmental-policy major girlfriend taught me, this sends the message that being good to the environment requires living without basic necessities like artificial light. The future of environmentally-friendly electricity will never take root by lowering the standard of living.

Instead, the future will require technological breakthroughs that will produce cheaper electricity that's good for the environment. Anything less is a doomed for failure. Let's turn on the lights and look for a real solution.
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Taxes are progressive enough

There is a lie being repeated that America has a regressive tax system, that the rich pay a lower percentage of their wealth than the middle class. Instead, we have a progressive tax system that has done a great job of keeping inequality in check.

As I've said before, there's nothing wrong with inequality. What we should focus on is the well-being of the poor, and the poor in America enjoy a high standard of living.

The recent Bruce Meyer episode of Econtalk made a compelling point that inequality is much lower than the pundits claim because they are merely looking at pre-tax income. Once you factor in taxes, consumer spending and government assistance programs like the earned income tax credit you see a much different picture observe.

Both the left and the right make the mistake of focusing on the top tax bracket in the past, which was higher than it is today, but affected few people. A much larger percentage of our federal taxes paid by the wealthy, and it's not just because they have more of the wealth. We are seeing lower taxes for the poor and middle class.

Enter Warren Buffet and the claim that he pays a lower tax rate than his secretary, whose income was never identified. He claimed he paid 17.4 percent while everyone else in his office pays 31 to 44 percent. Greg Mankiw said that isn't even true, but let's play along and say it is.

Is it fair for members of the left to use him as an example to "prove" that the rich pay a lower tax rate, like "Bob" did in an exchange we had in a comment section at For The Sake of Science last month? People rightly claim that taxpayers are able to use loopholes and write-offs to reduce their tax bill, and the rich have access to smart accountants who can exploit them, so could this stymie the progressiveness of the official tax rates?

The good news is that the hard data says otherwise. Using Warren Buffett as an anecdotal example is misleading, as we can see by looking at the effective federal tax rate that compares what people actually pay in taxes to their incomes. Here's what the Congressional Budget Office projected for this year:



It's plain to see that in reality, the five different quintiles fall neatly in line, with the top 1 percent that gets so much focus today paying the highest at 33.8 percent. It is a lie to say the rich pay less of a percentage of taxes than anyone else.

All is not lost for the left. They could simply abandon this bogus claim of a regressive tax system and instead focus on the gains that have come through lowering taxes for the poor and middle class and various "redistribution" programs like the earned income tax credit. That would allow them to sleep better at night instead of, in the words of Michael Munger, elevating the sin of envy to a virtue.
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More standard of living and video games

In my last post I made the point that video games have gotten super cheap and vividly more complex, but I don't think I hit home just how that factors into the cost of living. I showed that prices on console games had fallen by 40 percent in some cases, comparing the cost of a modern Xbox 360 game to a technically-inferior original Nintendo game.

A Nintendo Entertainment System game from 1987 - prices around $100 in 2010 dollars - is somewhat comparable in quality to a $1 mobile phone game. The graphics will be better today, and instead of buying a console, a lot of consumers will already have the phone. In effect, the smart phone could be considered a $0 console for some consumers.

Now here's a little J. Bradford Delong to get the mental gears turning:

But what if we took some other set of prices? Instead of taking a representative sample of everything produced in 1890, stuffing it into a time machine, bringing it forward to today, selling it; suppose we took a representative sample of everything produced today, stuffed it into a time machine, took it back to 1890, and sold it then at the prices that then prevailed?

Then we would have a very different answer, for a large chunk of what is produced now was unavailable back in 1890. It has a very high - in many cases an infinite - price.

When I was in high school, I remember seeing The Toy starring Richard Pryor on television and realizing that the spoiled rich kid in 1982 with his room full of arcade cabinets could never compete with my Super Nintendo Entertainment System.

Channeling my own J. Bradford Delong, imagine a 10-year-old game like Halo set up in a LAN, with 16 player matches. What would that be worth to the Pac-Man and Donkey Kong crowd of the early 1980's? How about next month's Gears of War 3 and five on five deathmatches? Aristotle Onassis was able to finance the Olympic Tower in the 1970's, but the cost of one game of Horde 2.0 would have been too much for him - the price would have been infinite.

The improvements to the standard of living for video game is not tenfold, or even a thousandfold. It is so absurdly high it is impossible to quantify.
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Standard of living and video games

I had been planning on writing a piece to prove how cheap video games have gotten over the years by factoring in inflation, but it turned out a number of other people have already done that, some with pretty graphs and video segments.

So I'm going to dig a little deeper to show that the inflation comparison only scratches the surface.

Both the consoles and the games themselves have fallen in price. The two Nintendo titles from 1989 went for $95.44 and $121.46 each in 2010 dollars, although those catalog prices were a little above average at the time. It's true, video games have never been cheaper.

It's also important to remember that the $50 to $60 modern Xbox games are much more advanced that the Nintendo games I grew up with. Russ Roberts has gone into more detail with his comparison of expanding iPod features and memory coupled with falling prices. The lesson is the same: repetitive levels, 8-bit graphics and sound effects have been replaced with rich environments, HD graphics and voice actors.

Compare the basic left-right-forward-back movements of Doom from 1993 with the 3-D environments and cover to dive behind in Gears of War from 2006. The original Legend of Zelda manual had drawings to let the player know what the items and monsters in the game were supposed to look like. Some old-school RPGs had a few choices for the player to make, but they doesn't come close to the complicated plots and moral dilemas in games like Mass Effect and Fallout 3.

And even with those price drops and quality increases, there are now substitute goods to console traditional games that give consumers even cheaper alternatives, like downloadable titles, which fall in the $5 to $20 range, and now mobile games on smart phones, which fall in the $1 to $5 range. These alternatives tend to be shorter than the console games, but some like Section 8: Prejudice or Angry Birds are known for their replay value coupled with a low price.

In fact, mobile games have been so popular as a cheap alternative that the new portable Nintendo 3DS system flopped on release this year, its $40 price for new games couldn't compete with phone games cheaper than a sandwich.

If Brad Delong ever writes an updated version of his brilliant Cornucopia: Increasing Wealth in the Twentieth Century paper showing the complications in standard of living comparisons, than he'll have need find no better example than Pac-Man versus Castle Crashers.

Edit: I have more to say on this matter.
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