I have previously quoted an interesting line from Gibbons' Decline in Fall, using it to demonstrate that, unlike the supposed sages of the present day, men two centuries ago understood that inherited wealth, even when used in simple consumption, still benefits all mankind. It is an interesting enough quote that I will reproduce it once again here:
Such refinements, under the odious name of luxury, have been severely arraigned by the moralists of every age; and it might perhaps be more conducive to the virtue, as well as happiness, of mankind, if all possess the necessities, and none of the superfluities, of life. But in the present imperfect condition of society, luxury, though it may proceed from vice or folly, seems to be the only means that can correct the unequal distribution of property. The diligent mechanic, and the skillful artist, who have obtained no share in the division of the earth, receive a voluntary tax from the possessors of land; and the latter are prompted, by a sense of interest, to improve their estates, with whose produce they may purchase additional pleasures.However, this time, unlike its original use in my essay "A Great Quote", I want to make use of it to illustrate another concept, one I touched upon in my earlier essay "The Most Misleading Word", the difficulty of defining the term "need". Or, to be more precise, the take Gibbons' opening sentence as a starting point, and look at the twin concepts of "necessities" and "luxuries", as these two concepts have often been used to justify a host of government actions, as well as to impugn the concept of economic freedom, and classical liberalism itself. And since the dichotomous pair are so useful to such a range of arguments, providing justification for a host of interventions, it seems that such an inquiry may provide insight into some arguments for or against such intervention. (A similar argument, about "needs" versus "wants" can be found mentioned in "Liberalism, Its Origins and Consequences - Introduction".)
I suppose the best place to begin is at the very beginning, with the term "necessity". Some would suggest we should define both "necessity" and "luxury", but since "luxury" is effectively defined as anything one wants which is not a "necessity" defining one should be enough. As they form a true dichotomy, covering the entire spectrum of possibilities, we can define one and, by that definition alone, know the other as well.
So, what is a necessity? Most people seem to think they know the meaning of this word intuitively, but, when pressed, have a very hard time defining it, or even specifying if a given good or service falls under it. And should you try to ask more than one person for a definition, it gets even worse, as the "self-evident" meaning of one, if he is even able to give it, very rarely matches with that of another. Despite the fact that the term is one that "everyone knows", which everyone thinks he can define with ease, like its root "need", it is a term without a clear meaning.
It may be slightly bad form, but let me begin by quoting myself, from my essay "The Most Misleading Word":
The problem is simple, it is inherent in the very word itself, the word "need". You see, to use "need" properly, you really need an explicit or implicit clause following it, to explain for what purpose it is needed. For example, "You need an oven to bake a cake." Or, as an example of an implicit clause, if you were discussing driving to the store, "you need to put gas in your car [to drive to the store]." It is only with this modifier that "need" is meaningful, as "need" has meaning only in context.That argument applies just as well to our current question. A "necessity" is a necessity" only in terms of a specific goal. One can try to give it a more general definition, say "necessary for preserving life", but then "necessities" are pretty low, as a bare minimum of food and water is all that can be considered "necessary", and I have yet to see a definition of "necessity" which contemplates anything beyond bread and water as being a luxury.
In "Absolute Values" I discussed the way using absolute terms can make a mess of thought, well "need" is not exception. When we deprive "need" of a context, there is only one way to read it, that is an absolute need, a need one will feel regardless of circumstance. But such needs do not exist. Even the bare minimum I used above, "need to survive" assumes one wishes to survive, and so is wrong in a few aberrant contexts. But, outside of that single case, "need" is only meaningful when we use it as a means to an end. Without the end, "need" is meaningless, and quite misleading.
No, when people speak of "necessities" in economic terms, they are not talking about anything definable, instead they are smuggling in a value judgment, saying "everyone should have X", and "no one should have more than X". In other words, they are applying some sort of floor to allowable poverty. But, they are in no way defining "necessity", they are simply telling us what they wish everyone had. (See "The Inherent Disappointment of Authoritarianism", for a similar process in the thinking of those promoting socialism. Also see "Can We Ban the Word "Scarce"?", "Bad Economics Part 17" and "Protean Terminology", for discussions of such ill-defined terms.)
And you can see this in the shifting definition of necessity, even among reformers. What wa sonce a luxury, a car, a television, a single family home, often becomes a necessity in a generation or two. A decade ago we heard about the plight of children without internet access, now we hear sob stories about those without high speed connections. Necessity is not a meaningful phrase, it simply represents the current assumption among a given group of reformers about what everyone should have. It is, in all senses, a meaningless phrase.
But even if it somehow had meaning, even if there were some sort of necessities that everyone really should have to have a fulfilling life, that does not argue against luxuries. It is the mistake of the left (and some on the right) to imagine that luxuries impoverish the poor, that the economy is a zero sum game. We see this every day, but it is always wrong.
Let me give an example. Often, to "soak the rich", the government will enact "luxury taxes", arguing they only hurt the rich, and so they should be popular with the poor. But the truth is they hurt the poor much more than the rich, who they often fail to touch. For example, let us suppose there is a massive new tax on boat sales. The truly rich, if they want to, can buy their new boats overseas, thus avoiding the tax entirely. Instead, the tax hits the upper middle class, who cannot go overseas, and so either must pay more for their one luxury expenditure or do without. As a result of these lost sales, those who sell boats, often middle class men, and those who make them, middle and lower class, lose work and either find themselves unemployed or at least less well paid. Similarly, those provide services, at berths, at marinas, at restaurants and gas stations and other businesses catering to boaters, all see a decline in business as well. And so, as a consequence, a few rich people, and many upper middle class, do without boats, while the middle and lower class workers who depend on boats for their livelihood all suffer in a "soak the rich" scheme. (And this doesn't even consider businesses which rely on boats, such as tours and fishing charters, whose middle and lower class workers will suffer as well.)
And that is the problem with criticizing luxuries. Luxuries do not impoverish the poor, they make jobs for the poor. The rich do not make their toys, or sell or service them, the poor and middle class do. And in that way, the rich, even the "idle rich" make the middle class and poor wealthier. In addition, those bright fellows in the lower and middle classes who come up with goods and services but lack the funds to create them also can appeal to the rich for funds, and with their new "luxuries" create new jobs and lift even more out of poverty.
And finally, one day's luxury often becomes the commonplace of the next generation. Plumbing was once a rich man's toy, as was electric light. Medicine was once a luxury of the rich. So were cars. And radios and televisions and computers. Air travel was, actually a two week vacation every year was a swell. But what starts out as a luxury, through progress spurred by the wealth to be made, eventually becomes within the grasp of all. And so "luxuries" make us all richer with time.
And that is the true harm of this false split between luxuries and necessities, it makes us malign luxuries which are actually quite beneficial, driving progress and improving the lot of future generations, while at the same time providing employment and opportunities for the poor of today. I know many will not believe it, but the "greed' of those peddling luxuries have done more to better mankind than all the philanthropists who ever lived. Henry Ford brought more material wealth, progress and real freedom to individual Americans than every soup kitchen, job training center, welfare check, social worker, community center and shelter ever opened.
An interesting parallel to my argument for luxuries can be found in "Government Efficiency" when discussing how medical advances go from being available only to the rich to being common. It is also interesting to see how government "help" has short circuited that process and made advances more costly rather than less. I also discussed these issues in "Greed Versus Evil", but as that is such a lengthy, discursive essay, I discussed most topics in it.
Update (05/19/2010): I wrote something very similar in my post "The Benefits of Inequalities of Wealth" as well.
Originally posted in Random Notes on 2010/05/18.