chapter  7
Keynes’s ‘Economic possibilities for our grandchildren’: Scitovsky’s suggested new interpretation
Pages 14

In order to identify the economic problem, the issue of whether the subsistence level of the standard of life is absolute or relative should be discussed. In fact, commentators on Keynes’s essay are divided on this issue, but most of them end up by encountering some interpretative problems. Some commentators interpret Keynes’s concept of subsistence level in terms of ‘relative needs’, that is, people’s desires depend on the economic and social context. According to this interpretation, since economic growth also improves the social context, people constantly push their desires ahead of what they have, and the economic problem is never solved because the subsistence level is never achieved. Therefore, it is not interesting what will happen after the economic problem is resolved. The main argument in support of this interpretation is that it is impossible clearly to define an absolute level of subsistence. Individuals’ desire to feel themselves included in the social community, and the desire to live longer and healthy imply shifting the necessary standard of life ahead as the economic conditions improve thanks to technical progress (Fitoussi 2008; Friedman 2008).4 This interpretation finds support in Keynes’s text because he mentioned ‘relative needs’, although he then focused on ‘absolute needs’. He thus took the wrong route – according to these commentators. However, this interpretation does not capture the spirit of the essay, which started from the subsistence of the human race in biological terms in order to identify the entry into the world of human choice. In this spirit, ‘subsistence’ is not to be interpreted in subjective terms as ‘perceived subsistence’, but in objective terms by considering humans as all the other animals, and in particular without having human consciousness. The theoretical approach underlying this interpretation is that of rational choice theory and revealed preferences, which does not draw distinctions among the purposes of human actions, whether they are for subsistence or any other purpose. This approach then encounters limits in its capacity to explain, for example, the ‘fundamental [. . .] issue [. . . of] how society responds to the opportunities that improvements of technology have afforded’ (Stiglitz 2008: 43). The alternative interpretation claims that the subsistence level in Keynes’s essay should be regarded as absolute, because it is based on ‘needs’. These ‘needs’ ‘are the objective requirements of a good and comfortable life’, and they can refer to a desirable list of things like personality, friendship, respect, and leisure. Economic growth can thus resolve the economic problem, but at the same time it creates a new problem: the rise of ‘wants’, which are ‘purely psychic, infinitely expandable’, and which can be manipulated by the freemarket economy (Skidelsky and Skidelsky 2013). Keynes should be criticised – according to this interpretation – because he failed to distinguish between ‘needs’, which are desirable, and ‘wants’, which are undesirable. The fact that working hours have not declined as expected thus

appears to be undesirable because work becomes necessary to finance people’s wants, which have been artificially increased. This alternative interpretation attempts to amend Keynes’s essay and to provide a more convincing account of economic and welfare problems. But spelling out the list of desirable goods so that Keynes’s subsistence level of standard of life becomes typically human, introduces a new weakness. In fact, it leaves unspecified the quality of these goods, such as personality, friendship, and leisure, which may also assume undesirable intents and purposes, so that the distinction between ‘needs’ and ‘wants’ becomes unclear.