Tuesday, October 23, 2007

Adam Smith on Necessities and Luxuries (the latter may be taxed)

The Bayesian Heresy ('economics, global agenda, current affairs, globalisation, culture and more rants on the dismal science') here:

Quote of the Day- Adam Smith in 21st Century” by Marshall Jevons.

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.” (Punctuation corrected: from Glasgow Edition, WN V.ii.k: p 870-1]

This is an accurate and useful quotation in which Adam Smith is discussing ‘Taxes upon consumable Commodities’. Incidentally, it was not his case against drinking, beer, ale, or wine! [I speak as an abstainer from alcohol].

His more serious point on what constitute the ‘necessaries, conveniences, and amusements of life’ in respect of the ‘necessaries’ would have relevance when assessing the ‘subsistence’ wage that employers would be deemed to pay in Smith’s ‘model’ of how a commercial economy worked in the 18th century.

It might also be relevant when assessing the distribution of income in the 21st century to determine absolute poverty in a rich economy compared to a developing or non-developing (poor) economy. The contents of the necessaries basket of consumable goods at different levels of development would be different.

Defining a low income family in a rich country as living in intolerable poverty is a controversial subject among policy makers and those who influence them. It would be an interesting exercise for modern economists to estimate along the lines that Adam Smith suggested exactly what would be regarded as the minimum creditable requirement for different income groups in today’s world.

I understand that in certain poorer groups, the quality, and presumably the expense, of styled footwear of young adults is a key indicator of what is considered to be respectable among them and not merely whether they have footwear at all.

All ‘likenesses’ of Adam Smith show him to be wearing stylish shoes, he also like drinking French claret and Scottish beer, was stylishly dressed (he had his ‘contraband’ shirts burned when he became a Scottish Customs Commissioner), and lived frugally. His two indulgences were his library collection and entertaining friends for tea.


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