John Stuart Mill Utilitarianism Theory

John Stuart Mill (1806-1873) — the Last Great Classical Economist

John Stuart Mill Utilitarianism and Summary, Mill theory

John Stuart Mill was considered the last great economist of the classical school because he systematized and popularized the whole body of economic thought of those who preceded him by publishing a famous textbook known as Principles of Political Economy (1848). His publication was the most widely accepted textbook until the end of the century.

According to his Autobiography, Mill got interested in the field of economics largely as a result of promptings from his father, James Mill, who encouraged him to write, publish, and pursue a seat in Parliament. His father closely monitored and supported John's education. At a young age of three, John began to learn Greek followed by Latin at age eight. He mastered algebra, elementary geometry, and began studying differential calculus at age twelve. By then John had also written a history of the Roman government. At age thirteen, John Stuart Mill began his study of political economy and by age eighteen edited and published five volumes of Bentham's manuscripts. Unfortunately, at age twenty John had a nervous breakdown. At age twenty-four and after much needed rest, he married Mrs. Harriet Taylor (1807-58) who greatly influenced his perspective and understanding of the importance of humanitarianism and a love for liberty, human progress, and a defense of women rights (Mill, 1873).

Mill was the last scholar to retain a mix of both utility and labor theory of value perspectives within the same body of economic doctrine. As a disciple of both Ricardo and Bentham, Mill was considered somewhat inconsistent and eclectic in his philosophical approach. He was also an advocate of reform and government intervention, yet at the same time he claimed to be a utilitarian.

One of Mill's most original contributions to economic theory was his theory of international prices. While looking at the domestic picture, Mill explained that since competition equalized costs and therefore rates of profits within a country, prices within a country were equal to costs of production. In contrast, while assuming that factors of production were not mobile between countries, international price ratios including wages and profits would not equalize through competition. Any benefit from specialization would come from producing that which was relatively cheaper. Hence, Mill held that international prices would strictly depend on supply and demand and not costs of production.

Mill also came up with something called an "offer curve." Because each country attempted to balance international payments, at each possible price, a country would offer a certain quantity of their export in exchange for a certain quantity of another country's export. A graph of this exchange schedule of prices versus quantities was what Mill labeled an "offer curve." The prices pertinent to each country's offer curve would also be equilibrium prices because they would equate value of imports of one country to the value of exports of another country.

Throughout Mill's writings, there were several interesting contradictions. First, throughout Mill's writings, it is fairly evident that he couldn't quite decide between the two theories of value (i.e. the labor theory of value and the utility theory of value) and seemingly attempted to combine the two. While Mill rejected the utilitarian notion that the heart of political economy is exchange and even supported Ricardo's insistence that value was based on labor, Mill did not believe that labor was the only determinant of value. Mill suggested that the labor theory of value held only when the ratios of capital to labor were the same in all industries.

Second, although Mill had utilitarian tendencies, he did not believe in Bentham's notion that self-interest toward pleasure was the basis for all motives. Mill believed that self-interest was essentially a product of competition and strongly believed that people could have altruistic and noble motives.

Third, Mill sided with utilitarian dogma which encouraged "laissez-faire" economics, while at the same time advocated social reform through government action. According to one of Jeremy Bentham's axioms, individual utility or changes of pleasure cannot be measured nor compared. The problem, then for utilitarians with regard to government reform was the fact that governments would not be able to maximize societal utility without being able to determine individual utility. Hence, to believe in utilitarianism and at the same time favor government reform and intervention was quite a contradiction for Mills. To compound the problem even further, government had self-interests as well. One could not be a true utilitarian and advocate government reform at the same time.

As an advocate of reform, Mill felt that the institution of private property of means of production was the source of all inequality. Unlike Bastiat, Say, and Senior, he did not believe that God instituted private property. For him, the law of private property, which affected the distribution of wealth, was strictly a human institution. Therefore, this institution could be changed in the future just as it had been changed in the past. Mill believed that private property acquisition came from violent conquest.

Mill vehemently rejected the capitalist class structure especially because of the extremes of wealth and poverty. Mill was aware that free market capitalism stimulated unequal income and wealth distribution among social classes. He also observed that large corporations had a tendency to monopolize economic and political power. To reduce tensions among the classes, Mill suggested avoidance of the monopolistic structure in the economy and to increase protection of the rights of working classes.

To carry out these suggestions, Mill recommended certain reforms for certain laws, for education, and insisted on government intervention. Mill suggested that government intervention or reform be sought for to modify the socially adverse effects of the free market.

In spite of his sympathy toward socialist ideas, Mill felt that a socialist system could only be established when, and only when people's characters had been elevated. A socialist society, he insisted, was "at present workable only by the elite of mankind" (Mill, 1879, pp. 123-24). In the meantime, the competitive "struggle for riches" (Mill, Principles, p. 749) was all that was possible for the majority of society. Hence, "the object to be principally aimed at, in the present stage of human improvement, is not the subversion of the system of individual property, but the improvement of it, and the full participation of every member of the community in its benefits"). Similar to Owen, Mill encouraged establishment of small cooperatives.