Meela,
I don't think Elves (or hobbits) were set up by Tolkien as a pure ideal that we should aspire to. But I also think that an important piece of man was encapsulated in the Elven mode, and another piece in the hobbit mode. I'm not sure where it appears in the Letters but Tolkien clearly stated that both hobbits and Elves reflect a little piece of man's whole essence.
Hobbits, for example, show the power of the everyday small person, someone who's wrapped up in the mundane things of life. Good things to be sure.....family, children, tilling the soil, living in harmony with nature. Yet, in a pinch, and when presented with an urgent need, that same individual has the abiliy to take on an extraordinary task which requires him to show unusual courage. In that sense, man is asked to emulate that aspect of being a hobbit, while staying away from a hobbit's "little" shortcomings such as pettiness, small greed, looking inward, etc.
The same goes for Elves. They certainly represent man's creative side par excellence---art, music, dance. But they too had shortcomings: focusing on the past, becoming embalmers of their world, being hoodwinked by their own creations (as with the Silmarils), perhaps being too isolated, or occasionally turning to the shadow. A reading of the Silmarillion will certainly reinforce the fact that Elves weren't perfect!
In one sense a "perfect" Man can't exist, at least in terms of Tolkien's own philosophy as a Christian. The fall makes that impossible. This is an event which Tolkien even alluded to in his writings on Arda towards the end of his life. See Adanel in Morgoth's Ring.
I've often thought that the ideal to which we should aspire (perhaps not indivudually but as a race)is to take the best of each of Tolkien's people and somehow bring it into a harmonious whole: hobbits, men, Elves, and dwarves. Then discard that which is not right or "true". Not an easy task!
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