Perceiving luxury and necessity

Perceiving luxury and necessity

Simon Kemp *

Department of Psychology, University of Canterbury, Christchurch, New Zealand

Received 29 May 1997; received in revised form 4 February 1998; accepted 17 February 1998

Abstract

Three studies were carried out where di�erent goods were rated on a necessity-luxury scale.

In Study 1 these ratings correlated well with respondents' estimated price elasticities of de-

mand of the goods. Study 2 showed that a good was regarded as more luxurious if it was the

object of desire rather than relieved a state of discomfort. Study 3 found a strong correlation

between a good's luxury rating and preference for distributing the good via the market rather

than regulation when the good suddenly became scarce. Studies 2 and 3 supported Berry's

conceptual analysis of luxury (Berry, C.J., 1994. The Idea of Luxury: A Conceptual and

Historical Investigation. Cambridge University Press; Cambridge.) Ó 1998 Elsevier Science

B.V. All rights reserved.

PsycINFO classi®cation: 2229; 3040; 3920

JEL classi®cation: D30; H41

Keywords: Distribution; Economic beliefs; Economic attitudes; Luxury; Necessity

Journal of Economic Psychology 19 (1998) 591±606

* Fax: +64 3 364 2181; e-mail: [email protected].

0167-4870/98/$ ± see front matter Ó 1998 Elsevier Science B.V. All rights reserved.

PII: S 0 1 6 7 - 4 8 7 0 ( 9 8 ) 0 0 0 2 6 - 9

1. Introduction

A persistent element in lay economic thinking is that society should beorganised so that people's needs rather than their wants are satis®ed. Forexample, Gandhi wrote that ``a certain degree of physical harmony andcomfort is necessary. . . but above a certain level it becomes a hindrancerather than a help'' (Tendulkar, 1961, p. 88). The purpose of the presentarticle is the empirical exploration of people's ideas about luxury and ne-cessity.

Although there seems to have been little previous empirical research onluxury and necessity, theories that deal with the distinction are relatively easyto come by. The most in¯uential psychological theory in the area probablycomes from Maslow (1970), who proposed a hierarchy of needs, rangingfrom basic physiological needs such as hunger and thirst up to needs of self-actualisation. According to Maslow, lower-level needs must be satis®ed be-fore those on the next level become important sources of motivation. So, forexample, the hungry person will not be much interested in ful®lling thehigher order social or cognitive needs such as the urge to understand andexplore.

Maslow's theory points to a possible way in which di�erent activities, ordi�erent goods that are used in di�erent activities, could be ordered on anecessity-luxury continuum. The theory also suggests a rationale for theexistence of such a continuum. In contrast, economists have usually followedKing Lear's (Act 2, Scene 4) advice to ``reason not the need'' and havepreferred to concentrate on the concept of demand elasticity, which is be-haviourally de®ned. The basic principle of elasticity is that demand for some(elastic) goods may be quite heavily a�ected by price or income changes,while that for other (inelastic) goods is relatively little a�ected.

A distinction between a luxury and a necessity can be de®ned in terms ofthese elasticities. One such de®nition describes luxury goods as those whoseincome elasticity of demand is greater than one (e.g. Deaton and Muellbauer,1980; Lancaster, 1971, p. 68). That is, for a luxury good, the proportion ofthe household budget spent on that luxury good (or class of goods) rises asthe household income rises. Alternatively, a distinction might be made interms of price elasticity of demand (e.g., Lipsey, 1989, pp. 93±94). When theprices of necessities rise, the quantity purchased declines relatively little; butpurchases of the more dispensable luxuries decline more sharply with pricerises. (Although note that not all goods with high price elasticity need beluxuries. Consider, for example, bread supplied by two di�erent companies

592 S. Kemp / Journal of Economic Psychology 19 (1998) 591±606

under di�erent brands.) The co-existence of these two somewhat di�erentapproaches to luxury and necessity in economics underlines the fact that theluxury-necessity distinction, as envisioned by Gandhi for example, is not acentral theoretical concept in contemporary economics.

Berry (1994), in his book The idea of luxury has recently attempted both aconceptual analysis of luxury and a historical survey of attitudes to it. Berrystarts from the premise that luxuries are re®nements of basic human needssuch as those for food, shelter and health care. Although caviar is a luxuryfood, it is still a food and will satisfy hunger if eaten in su�cient quantity.Thus, the status of a good as luxury is partially determined by its naturaldesirability, and not simply by whether it is an object for conspicuous con-sumption. In this way, Berry hopes to explain why goods may often, likesugar in western Europe, begin as luxuries, but then lose their luxury statusand become goods for mass consumption. It is, he claims, a characteristic ofluxuries that they please people rather than simply alleviate a state of dis-comfort.

This basic premise is complicated by other considerations. Needs not beabsolute but can also be instrumental. ``Hence a Rolls-Royce can be an in-strumental necessity; it is a means of demonstrating municipal dignity orcompany prosperity or personal status'' (Berry, 1994, p. 40). The perceptionof what is necessity and what is luxury does vary from society to societydespite the apparently constant nature of basic human needs. Moreover,although the status of goods as luxuries is partly determined by social per-ception, it is possible for di�erent people to disagree as to whether particularcommodities are luxuries or necessities.

Berry considers the concept of luxury as an important one for society, andthat societies often adhere to a principle of precedence such that ``whenAdam needs something that Brenda wants but does not need, then meetingAdam's need is prima facie morally preferable to satisfying Brenda's desire''(Berry, 1994, pp. 199±200). The supply of luxury, he points out, is oftenconsidered of dubious political morality, and he hypothesises that ``di�erentevaluations of desire and di�erent evaluations of need result in di�erentconceptions of political order'' (Berry, 1994, p. 63). Much of his book isdevoted to the historical investigation of this hypothesis.

The di�erent theoretical accounts of luxury, in particular those suggestedby Lipsey and Berry, provided hypotheses which were directly tested in thethree studies presented below. Study 1 investigated how luxury ratings relatedto price elasticity of demand; Study 2 focussed on Berry's hypothesis thatluxuries please rather than alleviate states of discomfort; Study 3 considered

S. Kemp / Journal of Economic Psychology 19 (1998) 591±606 593

how people's preferences for the distribution of goods in short supply variedwith their perception as luxuries or necessities.

All three studies made use of the same basic method, in which people rateddi�erent types of goods on a nine-point luxury scale ranging from completenecessity (1) to complete luxury (9). Category rating scales of this type havebeen widely used in psychological research, and the methodological issuesarising from their use have been extensively investigated (e.g. Gescheider,1988; Kemp and Willetts, 1995; Parducci, 1982, 1995; Poulton, 1989; Thur-stone and Chave, 1929). In brief they seem to o�er a simple, e�ective meansof investigating people's perceptions, attitudes and beliefs.

2. Study 1

In Study 1 respondents were asked to rate a range of goods on a necessity-luxury scale, and also to estimate how their consumption would be a�ected ifthe price of the goods were to double. Thus the study focussed on price ratherthan income elasticity. The focus on price elasticity was suggested by theexpectation that respondents were likely to have had more experience ofrelatively sharp changes in the prices of goods than in their own incomes, andhence that their ratings of the e�ects of the former would be more likely torelate to actual behaviour changes.

2.1. Method

2.1.1. QuestionnaireThe questionnaire consisted of two main parts. One (luxury rating) part

listed 21 di�erent goods (see Table 1). Respondents were informed that thispart concerned what goods you consider to be luxuries and what necessities,and they were requested to rate each good on a scale from 1 (you consider it acomplete necessity) to 9 (you consider it a complete luxury). They respondedby circling one of the nine numbers provided alongside each item.

The other (elasticity) part listed the same goods in the same order andasked respondents whether they ever bought the item. If ``Yes'', they werefurther asked how much they paid each time they bought it, and if the priceof the item was doubled how much or how often they would continue tobuy the item compared to what they did at present. Responding to thisquestion was by circling a percentage on a scale from 0% to 100% with 10%intervals.


Respondents were instructed: ``0% means you would never buy the item ifthe price doubled, 100% that you would continue to buy it just as often asyou do now. When deciding how much you would buy after the price dou-bles, imagine that the price for this whole line of goods has doubled, forexample all wine prices double, not just the wine supplied by one ®rm. Howmuch wine would you continue to buy? (Similarly for all the other goods.)Assume that your income and all other prices stay the same when the price ofone item doubles''.

In half the questionnaires, luxury rating preceded elasticity rating; in theother half, this order was reversed. Additionally, two di�erent orders of thegoods were used for each questionnaire order.

Questionnaires concluded with a request for age group and gender infor-mation.

Table 1

Mean luxury rating (SD in brackets) for those who ever (yes) and never (no) buy the good, and mean

percentage of the present amount that people would continue to buy if the price doubled, for those

respondents who buy the good. The percentage of these is given in the ®nal column

Good Luxury 1ratings Av. % bought

after doubling

Av. %

buyingAv. yes Av. no (SD)

Going to a concert 7.3 8.6 (2.1) 44 85

Compact Disk 6.5 7.2 (2.3) 29 65

Wine 6.1 7.8 (2.5) 46 88

Going to the movies 6.0 6.0 (1.8) 46 90

Bar of chocolate 5.8 8.0 (2.6) 63 90

Lunch with friend 5.7 8.3 � (2.2) 45 94

Holiday accommodation 5.5 6.7 (3.0) 42 67

Taxis 5.4 7.9 � (2.5) 42 87

Watching live rugby 5.4 6.3 (2.9) 53 40

Books 4.8 6.9 � (2.5) 39 87

Fruit juice 4.6 5.3 (2.0) 46 88

Fish 4.5 5.7 � (2.0) 37 62

Main local newspaper 4.1 4.1 (1.9) 64 85

Toll call 4.1 ) (2.8) 58 100

Sports shoes 3.5 7.2 � (2.3) 50 78

City bus-trips 3.4 4.7 (2.2) 40 35

Doctor 2.0 8.0 � (1.8) 74 98

Petrol 1.9 6.0 � (1.5) 73 92

Milk 1.8 4.0 � (1.3) 44 85

Bread 1.7 2.3 (1.1) 78 94

Electricity 1.3 1.0 (0.7) 74 90

Notes. Luxury ratings are on a scale from 1 (complete necessity) to 9 (complete luxury).� Indicates a signi®cant (p < 0.05, 2-tailed t-test) di�erence between Av. Yes and Av. No.


2.1.2. Subjects and procedureFifty-two Christchurch residents completed questionnaires, normally at

home. They were recruited by asking paid student interviewers to each ®ndup to eight people of their acquaintance who were not students to completethe questionnaires. The interviewers were asked to try to ®nd a range ofrespondents. The eventual sample contained 21 men and 29 women. Twenty-four were aged between 15 and 24 years, 19 were between 25 and 34, twobetween 35 and 44, two between 45 and 54, and three between 55 and 64.

2.2. Results and discussion

Table 1 shows some of the key results of the study. Overall, the resultsindicate that the ratings of luxury versus necessity are social perceptionsmodi®ed by the di�ering values and tastes of the individual. Indications ofthe importance of individual di�erences are given by the size of the standarddeviations, and by non-purchasers of di�erent goods often rating them asmore luxurious than users. Other features of the data, however, suggest theratings were strongly in¯uenced by social values and the preferences of theindividual. For example, the average ratings of purchasers and non-pur-chasers are often quite similar. (The Pearson correlation between the two setsof average ratings is 0.69.) There is also substantial consensus between in-dividuals as to which goods are luxuries and necessities. For example, norespondent rated electricity as more luxurious than going to a concert, orbread as more luxurious than a compact disk, and only ®ve rated milk asmore luxurious than wine. In general these results are consistent with Berry'scontention that the idea of luxury is not simply a matter of personal taste.

Goods perceived as luxuries were also those most likely to be less fre-quently purchased if the price doubled, a suggestion con®rmed by a Pearsoncorrelation of )0.80 between mean luxury ratings, taken only over the usersof individual items, and mean percentage of present consumption that wouldbe maintained after price doubling. The corresponding correlation where themean luxury ratings included non-users was )0.83. There was also a negativecorrelation of )0.26 between the mean luxury ratings, taken over all therespondents, and the percentage of respondents buying the good at present.Thus, for the sample as a whole, the luxuriousness of a good was correlatedwith a willingness to dispense with it when the price doubled.

The high correlation between a good's luxury rating and the quantitypeople would continue to buy after price doubling might be thought an ar-tefact of respondents providing both estimates in the same questionnaire.


Hence, average luxury ratings and mean percentages of present consumptionwere calculated for those respondents who provided these estimates ®rst: 27respondents estimated luxury ratings ®rst, 25 estimated percentages ®rst. Thecorrelation between the two sets of average measures was )0.67. Thus, whenpossible carry-over e�ects were taken into account the correlation remainedsubstantial.

The variation between individuals suggested that the correlation betweenluxury ratings and tendency to maintain the quantity purchased after pricedoubling should be examined for individual respondents as well as in theaggregate. Accordingly, correlations were calculated for each respondent(omitting those items which the respondent never used). The correlationsobtained ranged from 0.17 to )0.82 with an average of )0.52. For only threerespondents was the correlation positive. Clearly then, the aggregate result,that a high luxury rating is associated with a low tendency to maintainpresent purchasing after price doubling, also usually held for individual re-spondents.

For ®ve of the items, for example wine, there is considerable range in thequality and price of the goods available commercially. For each of theseitems, a multiple regression was carried out in which luxury ratings wereregressed on both the average amount reportedly paid by the respondentsat present and the percentage they claimed they would continue to pur-chase after price doubling. The critical results (shown in Table 2) are thebeta-weights for the e�ect of the amount paid by the respondents on theirluxury ratings. All but one of these beta-weights is negative, indicating thatthose who spent more on this class of item were less likely to consider it aluxury.

Table 2

Results, for items with considerably varying unit costs, of regressing luxury ratings on the average amount

reportedly paid by the respondents ($) and the percentage they would continue to spend after price

doubling (%)

Item b$ b% R2

Holiday accom. )0.39 � )0.59 � 0.52 �

Lunch with a friend )0.34 � )0.37 � 0.19 �

Sports shoes )0.23 )0.22 0.13

Concerts 0.03 )0.32 0.11

Wine )0.08 )0.18 0.04

Note.� p < 0.05.


Although the issue was not formally investigated, it might be remarkedthat the ordering of goods from necessity to luxury in Table 1 is in ap-proximate agreement with Maslow's hierarchy of needs. Milk, bread andelectricity (widely used for heating in Christchurch), which received thelowest luxury ratings, satisfy physiological needs. Goods meeting highersocial and cognitive needs (the local newspaper, lunch with a friend, compactdisks) tend to receive higher luxury ratings.

Study 1 used respondents' estimates of how they might react to pricechanges rather than behavioural measures of price elasticity which are neitheravailable nor readily calculable for New Zealand. Some points of comparisonare available from work carried out in other countries, although the con-siderable variation in elasticities calculated from actual consumption pat-terns, the di�culty of causally ascribing change in the patterns to pricechange, and the variety of calculation methods suggest that the behaviouralmeasures should not necessarily be regarded as more accurate (e.g. Pelaez,1981; Whittaker and Barr, 1989). Nervlove (1995) calculated a price elasticityof around )1.65 for wine in Sweden; Bittlingmayer (1992) a value between)1.5 and )3 for books in Germany; Pelaez (1981) values of )0.55 (over 11years) and )0.25 (over 1 year) for petrol in the USA; Branch (1993) a value of)0.30 for residential use of electricity in the USA; Reekie (1976) a valuearound )0.10 for purchase of evening regional newspapers in the UK. Largernegative values indicate greater price elasticity of demand, and should cor-respond with lower estimated respondent demand after price doubling.Comparison with the results in Table 1 provides rough support for this ex-pectation.

3. Study 2

Study 2 investigated a proposition derived from Berry's account of luxury.Berry (1994, pp. 12,13), holds that luxury goods are pleasing and desired,while necessities relieve an unpleasant state. In the idiom of operant psy-chology, luxuries are positive and necessities are negative reinforcements. Animplication of this proposition is that the same good might be di�erentlyconsidered as a luxury or a necessity depending on the state of mind of theperson wanting the good. For example, I might think George's favorite fooda luxury in ordinary circumstances, but a necessity if he was extremelyhungry and no other food was at hand.


3.1. Method

3.1.1. QuestionnaireSix goods were used to test the positive±negative hypothesis. Each good

was presented twice, once described positively when the good was likely toplease the consumer, once negatively when the good was likely to relieve anegative state of the consumer. Each page listed all six goods. Three goods onthe ®rst page were described positively, three negatively. On a later page, thesame goods were listed in the same order, but those previously describedpositively were now described negatively and vice versa. (The items areshown in Table 3.) E�ectively this produced a simple repeated-measuresdesign. Page order was counterbalanced across subjects. Subjects performedall ratings with the same scale used in Study 1.

3.1.2. Subjects and procedureTwo samples were questioned. Forty Christchurch residents, 28 of them

male, were recruited in the same way as in Study 1 and completed thequestionnaires, normally at home. All subjects were told not to turn back topages previously answered. The second sample comprised 42 undergraduatepsychology students, 11 of them male, who completed the questionnaire atthe start of a lecture.

3.2. Results

There were no signi®cant (p < 0.05) di�erences in rating any item betweenthe two samples and no interesting patterns were suggested by the data. Norwere there any important di�erences between the two samples with respect tothe hypotheses investigated. Consequently, pooled results are presented be-low.

Results relating to the hypothesis are shown in Table 3. Clearly, the hy-pothesis was upheld. All six pairs of items showed signi®cant di�erences inthe expected direction, and some of these di�erences ± particularly thoseinvolving water, dental work and food ± clearly have substantive as well asstatistical signi®cance, as shown by the size of the di�erence between themeans. For example, dental work was perceived by the sample as either aluxury (the rating is greater than 5) or a necessity (the rating is under 5 andonly just over 1) depending on the personal context. Overall, similar itemswere more likely to be perceived as a luxury if they produced a positive e�ectfor the recipient than if they relieved a state of discomfort.


4. Study 3

A major theme of Berry's account of luxury (Berry, 1994) is the history ofthe relationship between the perception of luxury and political decisionmaking, and he demonstrates that societies have often felt it their duty toprovide necessities for many rather than luxuries for few.

Moreover, although his work is mostly devoted to considering the socialconceptions of past and present Europeans, it is worth remarking that manynon-European societies appear to make a similar distinction. Sahlins (1972)points out that in a number of societies, for example in Melanesia and inAlaska, ``staples are insulated against pecuniary transactions'' (p. 218). Food

Table 3

Positive (+) and negative ()) descriptions of six items and their average luxury ratings (SDs in brackets)

from Study 2

1 (+) Paul's hip reduces his mobility considerably. An operation is available that will make him much more

mobile. In your opinion, the operation is: Av.� 1.9 (1.1)

()) George's hip causes him a great deal of pain whenever he moves. An operation is available that will

largely free him from this pain. In your opinion, the operation is: Av.� 1.6 � (1.0)

2 (+) Sally is out walking and comes across a stream of clear water. She thinks how delicious it would taste.

In your opinion, a drink of this water would be: Av.� 4.5 (2.0)

()) It is a hot day. Delia's throat is parched, and she is extremely thirsty. In your opinion, a drink of water

would be: Av. � 1.6 �� (1.1)

3 (+) Alice gets a great deal of pleasure from reading. She sees a book in a store which she thinks she would

enjoy. In your opinion, this book is: Av.� 5.2 (2.0)

()) Anne is feeling quite depressed, and sees a book in a store which she thinks will take her out of herself.

In your opinion, this book is: Av.� 3.6 �� (1.9)

4 (+) Paul thinks he would be more socially successful if he had some work done on his teeth. In your

opinion, the dental work is: Av. � 5.6 (2.5)

()) Geo�rey is contemplating having some dental work done because his teeth cause him considerable pain

whenever he eats. In your opinion, the dental work is: Av.� 1.7 �� (1.3)

5 (+) Cynthia likes food. One day she comes home and sees a slice of her favourite pie in the fridge. In your

opinion, the pie is: Av.� 6.0 (1.8)

()) Julia has been working hard all day, and is extremely hungry. She comes home and sees a slice of her

favourite pie in the fridge. In your opinion, the pie is: Av.� 3.6 �� (2.2)

6 (+) George is on his way to watch a rugby game, when he notices he is running low on petrol. He stops to

®ll up. In your opinion, the petrol is: Av.� 3.2 (1.9)

()) Andrew is on his way to an important business deal when he notices he is running low on petrol. He

stops to ®ll up. In your opinion, the petrol is: Av.� 2.3 �� (1.6)

Note. Signi®cant results of two-tailed t-tests between positive and negative items are shown after negative

means. � p < 0.05; �� p < 0.01.


may be shared, often according to complex regulations, but it cannot bebought and sold, at least within the narrow society.

Some recent research (Kemp, 1996; Kemp and Bolle, in press) has inves-tigated people's preferences for whether scarcities of a good should be dealtwith by regulation or left to the market system. This research has found thesepreferences to be strongly a�ected by the type of the scarce good. Peoplegenerally prefer, for example, that scarcities of goods which are necessary forpeople's health should be dealt with by regulation while scarcities of cham-pagne should be left to market forces (Kemp, 1996).

Berry's theorising, as well as some of the results just described, suggeststhat there should be a relationship between people's perceptions of whether agood is believed to be a luxury or a necessity and the means people wouldprefer to employ when confronted with a scarcity of the good. Scarce luxuriescan be left to the market to allocate, while the distribution of scarce neces-sities should be regulated.

4.1. Method

4.1.1. QuestionnaireThe questionnaire began by de®ning two possible responses to dealing

with goods in short supply, a regulation and a market response. The actualde®nitions used, based on those used by Kemp (1996) and Kemp and Bolle(in press), were:

``In the regulation response, the government (or local body) makes upregulations to try to distribute the commodity to those people it thinks mightmost bene®t from it. Assume that the regulators are honest and well mean-ing''.

``In the market response, there is no intervention. In this circumstance theprice of the commodity will go up until the number of people willing or ableto pay for it just equals how much is available. Alternatively, a commoditywhich was free will now start to cost money''.

The questionnaire presented eight scenarios of goods suddenly becomingin short supply. The ®ctitious shortages developed in a drug to treat a newillness, champagne, car radiator hoses, land for gardens, housing, sports fa-cilities, newsprint paper, and electricity. The ®rst six of these scenarios weresimilar to those presented in Kemp and Bolle (in press) Expt 4. None of thescenarios suggested that the producer or supplier was to blame for theshortage. As examples, the full wording of the electricity and hoses scenarioswere:


``An electricity shortage develops in the city as a result of low rainfall inthe catchment areas for the dams. The situation will probably improvein a few months, but meanwhile electricity supply will not be able tomatch demand''.

``A new microbe emerges that selectively attacks car radiator hoses. Vir-tually all cars are quickly a�ected by the microbe. The problem can besolved by ®tting hoses made of a special, scarce polymer''

Following each scenario subjects made two rating judgements. First, theyindicated their distribution preference on a nine point scale ranging from 1(completely favour regulation) to 9 (completely favour market). Second, theyrated the scarce good on a scale from 1 (complete necessity) to 9 (completeluxury).

Two di�erent orders of the scenarios were employed.

4.1.2. Subjects and procedureTwo samples were employed. Thirty-four Christchurch residents, 14 of

them male, were recruited in the same way as in Study 1 and completed thequestionnaires, usually at home. Forty-one undergraduate students, 13 ofthem male, completed the questionnaire at the start of a lecture. No subject ineither sample served in Studies 1 or 2.

4.2. Results

Table 4 shows the average ratings obtained on the two scales. There wereno signi®cant di�erences between the samples on any rating, and no evidentpattern in the di�erences between the samples. In consequence the pooledresults are presented. Correlations between the two di�erent scales, the chieffocus of the analysis, were obtained by correlating over both the di�erentscenarios and the di�erent subjects.

The correlation between the two sets of mean ratings shown in Table 4 was0.98 (p < 0.05). Correlations between the ratings were also calculated overthe eight scenarios for each subject separately. The 74 Pearson correlations soobtained (one subject gave a market preference rating of 9 for all the sce-narios) ranged from )0.53 to 1.00 with a median of 0.79. All but three of thecorrelations were positive. Thus, overwhelmingly, subjects regarded themarket system as more appropriate for distributing the goods they thoughtmore luxurious. There was no signi®cant di�erence in the correlations


(General public median r� 0.85; Student median r� 0.79) between the twosamples.

Correlations between the two ratings were also calculated for each scenarioseparately. These correlations, shown in Table 4, were all positive. This set ofcorrelations is a little more di�cult to interpret than those taken over thescenarios since one component of them may be subjects' individual tenden-cies to rate anything high or low. This component of the correlation can beextracted by regressing each preference rating on both the correspondingluxury rating and the average of all the 16 ratings given by the subject. Theaverage of the beta-weights obtained for the luxury ratings for electricity,though positive (b� 0.13), was not signi®cant. However, signi®cant averageweights were obtained for champagne (b� 0.27), housing (b� 0.43), sports(b� 0.64), paper (b� 0.41), gardens (b� 0.41), hoses (b� 0.47) and drug(b� 0.67). Thus, for all but one of the scenarios, the subjects who inclinedmore towards market distribution for a good were also more inclined toconsider the scarce good a luxury.

5. Discussion

The studies reported here produced a number of ®ndings. People's per-ceptions of luxury are strongly related to the economic concept of priceelasticity; luxury goods di�er from necessities in being positive rather thannegative reinforcements; and the perceived necessity of a good is stronglyrelated to the desire to regulate its distribution if the good is in short supply.The results of Studies 2 and 3 supported Berry's theorising.

Table 4

Average market distribution preference (SDs in brackets), average luxury rating (SDs in brackets) of

commodities in short supply and Pearson correlations between the two ratings

Commodity Av. preference rating Av. luxury rating r

Champagne 7.8 (1.9) 8.3 (1.5) 0.31 ��

Sports 5.5 (2.5) 5.0 (2.2) 0.64 ��

Gardens 5.4 (2.8) 6.0 (1.9) 0.51 ��

Housing 5.1 (2.8) 4.4 (2.4) 0.61 ��

Paper 4.3 (2.7) 4.3 (2.0) 0.53 ��

Hoses 4.2 (2.1) 3.7 (2.0) 0.40 ��

Drug 2.4 (1.8) 2.6 (1.8) 0.65 ��

Electricity 2.3 (1.7) 2.1 (1.4) 0.23 �

Note. Signi®cance levels (two-tail): � p < 0.05; �� p < 0.01.


Overall, the results are in line with Berry's broad hypothesis that thedistinction between luxury and necessity is an important one for society andthus an important component of lay economic thinking. Of course, this is notto say that the luxury-necessity dimension is the only important one. It is easyto think of goods that are neither luxuries nor necessities: cigarettes for non-smokers, for example. More radically, Belk et al. (1989) suggest that a usefuldistinction might be drawn between sacred and profane consumer goods.

The formally tested results are supplemented by other conclusions that canbe drawn from the three studies. Firstly, the average perceptions of luxuryare consistent across the studies. Compare, for example, the low luxuryratings given electricity in Studies 1 and 3, the low luxury ratings given petrolin Studies 2 and 3, the relatively high ratings given wine and champagne in allthree studies. The perceptions, then, were not much in¯uenced by the slightlydi�erent research contexts of the particular studies ± as we should hope.

Secondly, all three studies demonstrate individual di�erences in people'sperceptions. Di�erent people do not always agree as to which goods areluxuries and which are not. Moreover, while none of the studies addressedthe issue of how people's perceptions of luxury slowly change over time, it ishard to imagine that a nineteenth century respondent could have ratedelectricity or petrol as a necessity. Nor, of course, should one suppose thatthe ratings given particular goods and services by the New Zealand samplesreported here will necessarily hold for other countries or cultures.

None of the results reported here is really surprising, yet in combinationthey suggest conclusions that are perhaps not quite so obvious. The re-spondents of Study 3 preferred, as Berry (1994) suggested, that the distri-bution of necessities in short supply should be regulated, while thedistribution of scarce luxuries should be left to the market. However, theapparent consensus on this issue is disturbed by ®nding that individuals di�erbetween themselves as to which goods are necessities and which luxuries.Even more disturbing is that at least some goods can be viewed by the sameobserver as either a luxury or as a necessity depending on who wants thegood and why. Indeed, a good (water, for example) can be either a luxury ora necessity for the same potential consumer in di�erent situations. Theseconsiderations make the would-be regulator's decisions very di�cult ones.

Consider, for example, the provision of health care, in New Zealand aselsewhere a currently contentious issue. In general, New Zealanders have astrong preference that the supply of health care should be regulated ratherthan left to the market (Kemp, 1996; Kemp and Bolle, in press), and, indeed,some of the present results indicate that health-care is often regarded as a


necessity. But the preferences are not always clear cut. In the present results,for example, dental work done to relieve pain was rated as a necessity, butdental work done for social reasons was rated, on average, towards theluxury end of the scale, with marked variability between individuals.

A wider question concerns whether distributing scarce necessities viaregulation is actually a good thing to do at all. While regulations may bemore likely to distribute necessities evenly among rich and poor, they may beless likely than the market system to encourage producers either to producemore or to develop new products that might satisfy the same need. Many ofthe scenarios presented in Study 3 featured goods whose supply was relativelyinelastic or only subject to short-term scarcity, such as water in dams orundeveloped land. In these cases, the market system is not likely to be ef-fective at increasing the supply. However, the hoses scenario, for example,produced similar results, although presumably other hose materials could bedeveloped or marketed. Kemp (1996) found that respondents' preference forregulation increased if the scarcity were long-term, suggesting that peoplemay not perceive the market system as o�ering long-term advantages forincreasing supply. Certainly, the issue appears to warrant further investiga-tion.

Previous research has found apparent paradoxes in lay economic thinking:for example, people consistently desire lower taxes and increased publicspending, particularly on social services (e.g. Furnham and Lewis, 1986). Inthis context it is not surprising that people's ideas about luxury and necessityalso appear to contain elements which sit uneasily with each other.

Acknowledgements

I am grateful for the helpful comments from the two anonymous review-ers, and for useful suggestions from Brian Easton.

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Perceiving luxury and necessity

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