Principles of Political Economy

"Principles of Political Economy" was the most important economics or political economy textbook of the mid nineteenth century, and was written by John Stuart Mill. The first edition was published in 1848, and was revised until its seventh edition in 1871, shortly before Mill's death in 1873.

Preface and Preliminary Remarks

Mill's "Principles" were written in a style of prose far flung from the introductory texts of today. Devoid of the mathematical graphs and formulae that were only developed after his death, principally by Alfred Marshall, Mill wrote with the rich tone of grandeur that is found in all his books. His book continued to be used well into the twentieth century as the foundational textbook, for instance in Oxford University until 1919.

* [http://www.efm.bris.ac.uk/het/mill/book1/prel.txt Preliminary remarks]

Book I Production

;I [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch01 Of the Requisites of Production] Mill explores the nature of production, beginning with labour and its relationship to nature. He starts by stating, that the "requisites of production are two: labour, and appropriate natural objects." A discussion follows of man's connection to the natural world, and how man must labour to utilise almost anything found in the natural world. He uses a rich array of imagery, from the sewing of cloth, to the turning of wheels and the creation of steam. Man has found a way to harness nature, so that "the muscular action necessary for this is not constantly renewed, but performed once for all, and there is on the whole a great economy of labour." He then turns on the view of who "takes the credit" for industry. "Some writers," he says,

"have raised the question, whether nature gives more assistance to labour in one kind of industry or in another; and have said that in some occupations labour does most, in others nature most. In this, however, there seems much confusion of ideas. The part which nature has in any work of man, is indefinite and incommensurable. It is impossible to decide that in any one thing nature does more than in any other. One cannot even say that labour does less. Less labour may be required; but if that which is required is absolutely indispensable, the result is just as much the product of labour, as of nature. When two conditions are equally necessary for producing the effect at all, it is unmeaning to say that so much of it is produced by one and so much by the other; it is like attempting to decide which half of a pair of scissors has most to do in the act of cutting; or which of the factors, five and six, contributes most to the production of thirty."

He refers former French Economists and Adam Smith, who thought land rents were higher because there was more nature being provided. In fact, says Mill, the simple answer is that land is scarce, which is what enables greater rent exaction. He mentions that many things are limited in abundance, for instance, Arctic whale fishing, which could not keep supplied the demand. This alludes to an introductory principle of value, that "as soon as there is not so much of the thing to be had, as would be appropriated and used if it could be obtained for asking; the ownership or use of the natural agent acquires an exchangeable value."

;II [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch02 Of Labour as an Agent of Production]

;III [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch03 Of Unproductive Labour]

;IV [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch04 Of Capital] Capital, says Mill, is "the accumulated stock of the produce of labour". Though its nature is misunderstood. He gives an example of the consumption of food, as opposed to assets allocated for production.

"The distinction, then, between Capital and Not-capital, does not lie in the kind of commodities, but in the mind of the capitalist -- in his will to employ them for one purpose rather than another; and all property, however ill adapted in itself for the use of labourers, is a part of capital, so soon as it, or the value to be received from it, is set apart for productive reinvestment."

Capital, like labour, can be unemployed, and Mill gives an example of inefficient taxation of productive capital. Then he observes the surplus to living standards created by industrialism.

"Finally, that large portion of the productive capital of a country which is employed in paying the wages and salaries of labourers, evidently is not, all of it, strictly and indispensably necessary for production. As much of it as exceeds the actual necessaries of life and health (an excess which in the case of skilled labourers is usually considerable) is not expended in supporting labour, but in remunerating it, and the labourers could wait for this part of their remuneration until the production is completed; it needs not necessarily pre-exist as capital: and if they unfortunately had to forego it altogether, the same amount of production might take place. In order that the whole remuneration of the labourers should be advanced to them in daily or weekly payments, there must exist in advance, and be appropriated to productive use, a greater stock, or capital, than would suffice to carry on the existing extent of production: greater, by whatever amount of remuneration the labourers receive, beyond what the self-interest of a prudent slave-master would assign to his slaves. In truth, it is only after an abundant capital had already been accumulated, that the practice of paying in advance any remuneration of labour beyond a bare subsistence, could possibly have arisen: since whatever is so paid, is not really applied to production, but to the unproductive consumption of productive labourers, indicating a fund for production sufficiently ample to admit of habitually diverting a part of it to a mere convenience."

;V [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch05 Fundamental Propositions respecting Capital] ;VI [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch06 Of Circulating and Fixed Capital] ;VII [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch07 On what depends the degree of Productiveness of Productive Agents] ;VIII [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch08 Of Co-operation, or the Combination of Labour] ;IX [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch09 Of Production on a Large, and Production on a Small Scale] ;X [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch10 Of the Law of the Increase of Labour] ;XI [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch11 Of the Law of the Increase of Capital] ;XII [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch12 Of the Law of the Increase of Production from Land] ;XIII [http://www.efm.bris.ac.uk/het/mill/book1/bk1ch13 Consequences of the Foregoing Laws]

Book II Distribution

*I [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch01 Of Property]
*II [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch02 The same subject continued]
*III [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch03 Of the Classes among whom the Produce is distributed]
*IV [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch04 Of Competition and Custom]
*V [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch05 Of Slavery]
*VI [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch06 Of Peasant Proprietors]
*VII [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch07 Continuation of the same subject]
*VIII [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch08 Of Metayers]
*IX [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch09 Of Cottiers]
*X [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch10 Means of abolishing Cottier Tenancy]
*XI [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch11 Of Wages]
*XII [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch12 Of Popular Remedies for Low Wages]
*XIII [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch13 The Remedies for Low Wages further considered]
*XIV [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch14 Of the Differences of Wages in different Employments]
*XV [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch15 Of Profits]
*XVI [http://www.efm.bris.ac.uk/het/mill/book2/bk2ch16 Of Rent]

Book III Exchange

In his third book, Mill addressed one of the issues left unresolved by David Ricardo's theory of comparative advantage, namely to whom the gains of trade were distributed. Mill's answer was that international trade benefited most the country whose demand for goods is most elastic.

*I [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch01 Of Value]
*II [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch02 Of Demand and Supply, in their relation to Value]
*III [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch03 Of Cost of Production, in its relation to Value]
*IV [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch04 Ultimate Analysis of Cost of Production]
*V [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch05 Of Rent, in its relation to Value]
*VI [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch06 Summary of the Theory of Value]
*VII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch07 Of Money]
*VIII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch08 Of the Value of Money, as dependent on Demand and Supply]
*IX [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch09 Of the Value of Money, as dependent on Cost of Production]
*X [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch10 Of a Double Standard, and Subsidiary Coins]
*XI [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch11 Of Credit, as a Substitute for Money]
*XII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch12 Influence of Credit on Prices]
*XIII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch13 Of an Inconvertible Paper Currency]
*XIV [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch14 Of Excess of Supply]
*XV [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch15 Of a Measure of Value]
*XVI [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch16 Of some Peculiar Cases of Value]
*XVII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch17 Of International Trade]
*XVIII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch18 Of International Values]
*XIX [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch19 Of Money, considered as an Imported Commodity]
*XX [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch20 Of the Foreign Exchanges]
*XXI [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch21 Of the Distribution of the Precious Metals through the Commercial World]
*XXII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch22 Influence of the Currency on the Exchanges and on Foreign Trade]
*XXIII [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch23 Of the Rate of Interest]
*XXIV [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch24 Of the Regulation of a Convertible Paper Currency]
*XXV [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch25 Of the Competition of Different Countries in the same Market]
*XXVI [http://www.efm.bris.ac.uk/het/mill/book3/bk3ch26 Of Distribution, as affected by Exchange]

Book IV Influence of the Progress of Society on Production and Distribution

In his fourth book Mill set out a number of possible future outcomes, rather than predicting one in particular. The first followed the Malthusian line that population grew quicker than supplies, leading to falling wages and rising profits. The second, per Smith, said if capital accumulated faster than population grew then real wages would rise. Third, echoing David Ricardo, should capital accumulate and population increase at the same rate, yet technology stay stable, there would be no change in real wages because supply and demand for labour would be the same. However growing populations would require more land use, increasing food production costs and therefore decreasing profits. The fourth alternative was that technology advanced faster than population and capital stock increased. The result would be a prospering economy. Mill felt the third scenario most likely, and he assumed technology advanced would have to end at some point. [Pressman (2006) 45] But on the prospect of continuing economic growth, Mill was more ambivalent.

"I confess I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling, crushing, elbowing, and treading on each other's heels, which form the existing type of social life, are the most desirable lot of human kind, or anything but the disagreeable symptoms of one of the phases of industrial progress. [Mill (1871) Book 4, Chapter 6]

*I [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch01 General characteristics of a Progressive State of Wealth]
*II [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch02 Influence of the Progress of Industry and Population on Values and Prices]
*III [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch03 Influence of the Progress of Industry and Population on Rents, Profits, and Wages]
*IV [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch04 Of the Tendency of Profits to a Minimum]
*V [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch05 Consequences of the Tendency of Profits to a Minimum]
*VI [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch06 Of the Stationary State]
*VII [http://www.efm.bris.ac.uk/het/mill/book4/bk4ch07 On the Probable Futurity of the Labouring Classes]

Book V On the Influence of Government

*I [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch01 Of the Functions of Government in General]
*II [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch02 On the General Principles of Taxation]
*III [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch03 Of Direct Taxes]
*IV [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch04 Of Taxes on Commodities]
*V [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch05 Of some other Taxes]
*VI [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch06 Comparison between Direct and Indirect Taxation]
*VII [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch07 Of a National Debt]
*VIII [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch08 Of the Ordinary Functions of Government, considered as to their Economical Effects]
*IX [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch09 The same subject continued]
*X [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch10 Of Interferences of Government grounded on Erroneous Theories]
*XI [http://www.efm.bris.ac.uk/het/mill/book5/bk5ch11 Of the Grounds and Limits of the Laisser-faire or Non-Interference Principle]

ee also

*"Essays on Some Unsettled Questions of Political Economy" (1844) John Stuart Mill

Notes

References

* Hollander, Samuel (1985) "The Economics of John Stuart Mill, University of Toronto Press
* Pressman, Steven (2006) "Fifty Major Economists", Routledge, ISBN-10 0415366496
* Schwartz, Pedro (1972) "The New Political Economy of J.S. Mill", Duke University Press

External links

* [http://www.efm.bris.ac.uk/het/mill/prin.htm "Principles of Political Economy"] , by John Stuart Mill from the Economics, Finance and Management Department of the University of Bristol.
* [http://www.econlib.org/library/Mill/mlP.html "Principles of Political Economy"] , by John Stuart Mill on Econlib, with American spelling.