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”: (more…)