Pink Floyd are one of the most successful acts of all time. They have sold in excess of 250,000,000 albums worldwide and have more than 10,000,000 monthly listeners on Spotify. I’m personally a big fan of them and David Gilmour happens to be my favourite guitarist so I can understand their incredible level of success. Which is why I was surprised to see a picture this week which reveled you could book the band for just £250 in 1969. The image can be seen below and contains some other very well known names like the Small Faces, Joe Cocker, Fleetwood Mac, and Deep Purple.
Now there are a number of reasons that you could book Pink Floyd for just £250 in 1969. Firstly, the band’s best selling albums which lifted them to greater levels of fame weren’t released until a few years after 1969; The Dark Side of the Moon (1973), Wish You Were Here (1975), Animals (1977), The Wall (1979) and The Final Cut (1983). So the band weren’t yet at the height of their success, and as a result garnered a more modest booking fee. The second reason is the economic concept I want to explain today; Purchasing Power.
Purchasing Power is the ability money has to buy goods and services, or in this case, Pink Floyd. This concept of Purchasing Power is very important to remember in economics because the value of money doesn’t stay constant over time, £250 in 1969 is not the same as £250 today. If we use an Inflation calculator (here) we can see that £250 in 1969 would be worth £4,080.87 today.
Even though there is a difference of £3,830.87 between the two figures, they have the same level of Purchasing Power in their respective years so one is not actually greater than the other. So, it isn’t that it was cheap to book Pink Floyd back in 1969, it’s just that £250 back then bought a lot more than it does today. I feel it should be noted that to book Pink Floyd today would cost a lot more than even the Inflation adjusted figure of £4,080.87 due to the level of success they experienced after 1969.
The concept of Purchasing Power has a particular importance in economics with regard to something known as the Money Illusion. This is where people tend to get fixated on the nominal figure of money instead of how valuable the money actually is, for example, if you were to receive a pay increase from £250 to £4,080.87 you may be happy that your wage has increased but if the additional money doesn’t allow you to buy any extra goods or services when you account for money’s value changing over time, like in the Pink Floyd example, then the wage increase really isn’t of any additional benefit to you because it doesn’t increase your Purchasing Power.
By Daragh O’Leary