Adam Smith and basic needs

Mark Twain is reputed to have said “A classic is something everybody wants to have read, but no one wants to read.” This is certainly true for the writings of dead economists. I recently saw an example in criticism of Adam Smith, the author of Wealth of Nations, first published in 1776. The economist, whom I will not cite, correctly wrote that the now-dead Adam Smith broke with the tradition of his day by explaining that it is consumption, not production or saving, that satisfies the wants of men and women.

But the contemporary economist went on to criticize Smith for not distinguishing between needs and wants, known also as necessities and luxuries. This distinction between types of consumption, he asserted, was done more than a century later, with the 1890 publication of Cambridge University economist Alfred Marshall’s Principles of Economics. This assertion is wrong. Alfred Marshall founded neo-classical economics, so is justly famous, but he was not the first to distinguish between necessary and luxury consumption. In the Wealth of Nations, Smith devotes considerable attention to this in a section titled “Consumable commodities are either necessaries or luxuries”:

By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France they are necessaries neither to men nor to women, the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people. All other things I call luxuries, without meaning by this appellation to throw the smallest degree of reproach upon the temperate use of them. Beer and ale, for example, in Great Britain, and wine, even in the wine countries, I call luxuries. A man of any rank may, without any reproach, abstain totally from tasting such liquors. Nature does not render them necessary for the support of life, and custom no-where renders it indecent to live without them.

Adam Smith, The Wealth of Nations (1776), Book V, Chapter 2, part 2, from Edwin Cannan’s complilation of the fifth (1789) edition, published by (Methuen and Co. in 1904.

Adam Smith was ahead of his time in emphasizing relative rather than absolute poverty. I wish that all economists would read classical literature before making claims that cannot be substantiated.

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