Beyond the distinction between necessaries and luxuries

The distinction made by the classical economists between necessaries and luxuries is weakened by two problems: how to draw the line between necessaries and luxuries in advanced modern economies; how to evaluate luxuries, whether positively for individual’s freedom and for the economy, or negatively because they appear unethical. This paper examines a possible way out of these problems that emerges both from Scitovsky’s approach to “human welfare” and from some overlooked insights of Marshall, Hawtrey, and Keynes, the Cambridge economists who inspired Scitovsky. The proposal is to split luxuries into two components, and to redefine them, together with necessaries, on the basis of people’s motivations and goals, as well as of the effects on well-being and on the economy.