“That’s only a want, not a need”, a student dismissively said this week of an item he didn’t consider important. But the wants/needs approach is problematic. Unless you define a need as something which you can’t survive without (air), the definition becomes subjective. And if you do define a need objectively (according to absolute survival), then everyone alive today is obviously having all of their “needs” met. Not very helpful.
Let’s take a look at the margins. Would you agree that water is a need? Me too. But what about CLEAN water? Really, you can survive drinking murky-looking stuff. So is clean water a want or a need?? Is a house a need? Let’s say it is, but does that mean an air-conditioned house with a fridge is a need? Clearly not. In the West we are so far past the “needs” level that it doesn’t make sense to talk about it; we’re totally in the wants arena.
The subjective theory of value tells us that stuff is valued according to the subjective desires of consumers. These are not objective NEEDS, but rather subjective WANTS. And these wants are ranked in importance by each individual, inside each’s head. That is, no one except that individual can rank their wants. And, of course, each person will rank their “needs” very highly.
The bottom line is that we only need to talk about wants. We can be sure that needs are highly ranked among those wants, but we cannot say which things are needs, nor which things are the most urgent needs of a given individual. Thus, the wants/needs approach is just a distraction when it comes to thinking about market activity. Worse, it gives us the false impression that we’re able to objectively rank some goods above others and tempts us to impose our ranking on others.
You may object that it’s cold and cruel to ignore “needs” and only focus on serving “wants”. But the truth is that the needs of millions, even billions, of people have been best served by markets which are left alone to satisfy “wants” (among which are all the “needs”).