Emotion, memory and history: The economics of nostalgia
In the world of gaming, there’s a very popular topic at the moment: the newest Pokémon releases, Omega Ruby and Alpha Sapphire. As a child who grew up on a steady diet of video games, I am very excited by these new games. So much so, that I went and bought a second hand Pokémon Emerald to prepare myself for these new remakes. I thoroughly enjoyed Emerald, as I was able to raise my Pokémon properly, beat the Elite Four and become Pokémon Champion for the nth time.
However, I was surprised by my own actions. While replaying the game gave me great satisfaction, I couldn’t help but wonder why I wasted money on an old game, even though I knew that I would buy the newer remakes anyway. And then I realised—it’s not just me. For example, plenty of people buy vintage clothes, even though they’re largely considered out of style by today’s standards. Now, why do we buy these outdated items? It seems that the economics of nostalgia has a lot to answer for our seemingly strange decisions.
In economics, we expect people to be rational in their decisions when they buy a good or service. In theory as well as real life, people determine the choice of goods or services that are on offer and, by a logical process, they buy the preferred option in order to maximise their utility or satisfaction. Now, buying an out of date item seems inconsistent with this rational choice theory. In general, newer items come with more benefits and extras which should give more value and satisfaction to people. Why is it that some people still buy an older item when newer options are available? I believe that the specific qualities that older items possess influence some of us to buy these items.
If we come back to the Pokémon Emerald game that I bought, it dawned on me that my decision was fully influenced by nostalgia. My brain decided that I should buy the game because the emotions and memories that can be rediscovered by playing it are of immense value. It seems that the memories and emotions that can be relived in old items are able to generate value to some people, enough so that they will purchase them. These qualities can also indirectly influence people to buy new items. Have you ever wondered why sequels or remakes of items, such as Harry Potter movies and Pokémon games sell extremely well? It is because some people associate these things with fond memories, which provide value to them. They are motivated to buy these items because they believe that these new items will give the same feel-good factor as the old items, if not more. It’s no wonder why there are still adults who play Pokémon, even though teenagers are the target market of the Pokémon Company.
The principles of nostalgia economics can also be found in the collectibles market, which includes stamps, coins, vintage cars and rare wines. At a glance, the rational person would accept the high values that these items command because of one important factor: scarcity. However, this does not make sense if we think about it more closely. What is the value of old stamps, or vintage cars to most people? A huge, big fat zero! Old stamps don’t have any functional value in today’s world, and the performance of vintage cars is inferior to the cars of today. Now, why do some people still buy these out of date items, often at extraordinary prices? This phenomenon can be explained by the subjective theory of value.
This ideology explains that the value of a good is determined not by its intrinsic properties, nor by the amount of labor required to produce it, but by the importance that an individual places on the item. This theory would explain the actions of many buyers in the collectibles market. These people are compelled to buy old items, in which they see enormous value, even though there are better performing alternatives, often at lower prices. However, we must also note that there are also investors in the collectibles market who purely chase profits. For example, many wine collectors purchase rare, vintage wines not for personal consumption. Instead, they sell them later for higher prices, often to collectors who follow the subjective theory of value. Furthermore, nostalgia economics is not only confined to goods or services: it can also be applied to certain experiences.
A great way to explain the charm of old and outdated pieces of history is to study the market for heritage and nostalgic tourism. In this market, people travel to places that they have been before, or go on a holiday to countries where they can discover ancient cultures. For example, an international student who studied in Australia may come back for a holiday to relive his youth, or a couple might visit Italy to see ancient buildings such as the Colosseum or St. Peter’s Basilica. While nostalgic tourism is fuelled by the desire to relive past experiences, the demand for heritage tourism is fuelled by the desire to experience cultures and tradition that have survived to the present day.
In a study by Gareth Shaw, the author notes that tradition, local events and specific cuisines are some of the factors that motivate tourists to visit certain countries. The author notes that heritage and nostalgic tourism, if done right, will provide a huge contribution to a country’s GDP. Currently, the biggest and most well-known destinations for tourists are countries steeped in history and culture, such as Japan, Italy, England and America. The economic benefits that these countries receive through heritage tourism, in form of revenues, are huge. I, for one, am hopeful that the heritage sites in Australia, such as Sovereign Hill, will provide similar future economic benefits for this country in the years to come.
In the world that we live in today, you and I buy things to satisfy our needs and wants. It doesn’t always matter whether the items that we buy are new and shiny, or old and outdated. As long as an item is able to provide the value that we need to sate our desires, it is good enough. It’s clear that the value that we personally attach to old items can explain our fascination with the relics of bygone eras.