John Stuart Mill Summary Chapter Essay

J. S. Mill and the Decline of Classical Economics

John Stuart Mill Summary, John Stuart Mill Chapter

J. S. Mill (1806-1873) was a most unusual and gifted thinker who contributed significantly not only to economics but also to political science and philosophy. His tremendous intellectual powers were complemented by an education of unique breadth and intensity. His father, James Mill, assumed the role of instructor to his young son, restraining him from the life of a normal child. At three years of age he was studying Greek, and by age eight he began Latin. After mastering mathematics, chemistry, physics, and logic, he started to study political economy at age thirteen. By his fifteenth year his formal education was finished, and he spent the next four years editing a five-volume work of Bentham, whose influence on Mill we will examine later in this chapter. The psychological costs of this unusually intense education were finally manifested in a mental break­down at the age of twenty, but following a period of depression Mill rallied and became one of the leading intellectuals of his and all time. His Autobiography contains an unusually honest and open examination of his early education and subsequent psychological difficulties.

Although J. S. Mill was an extremely capable economic theoretician, his intellectual background directed him toward much broader social issues than economists typically address. Mill was essentially a social philosopher intent upon improving the role of the individual in society. In place of the pessimism of his father and Ricardo, he advanced a guarded optimism that contemplated the development of a good society. Although he read widely, the major influences on his economic ideas were his early training in the classical economics of Smith, Ricardo, his own father, and Bentham; the socialist writings of Fourier and Saint-Simon; the writings of Comte, sometimes called the father of sociology, who led Mill to view economics as only one aspect of human social activity; and, finally, his friend Harriet Taylor, who later became his wife and who taught Mill to be more receptive to the humanistic socialist ideas of his times. Mill was both a classical liberal and a social reformer.

J. S. Mill's position in the development of economic ideas is difficult to specify. He wrote at the end of the classical period, but his open-mindedness, one of his greatest assets, enabled him to modify classical doctrine in several ways. His economics is simultaneously the most mature statement of the classical position and the start of a new period in the development of economic thinking. His Principles of Political Economy, written in less than two years, was first published in 1848 and remained, in its subsequent seven editions, the standard in the field until the end of the century. The short period it took Mill to write the book reflected his view that the discipline was so well developed that few major problems remained to be solved. He believed that his major tasks were to write a lucid exposition of Ricardian doctrine and to incorporate into it the new ideas that had appeared during the second quarter of the nineteenth century. However, he was an original thinker who made important contributions, which he charac­teristically did not emphasize, in international trade theory as well as in supply-and-demand analysis.

In Principles of Political Economy (1848), John Stuart Mill attempted to rescue the essential tenets of Ricardo's Principles from the avalanche of criticism that had begun shortly after its publication in 1817 and continued unabated through­out three decades. Mill's work represented a significant revision of classical economic theory as well as its culmination because saving Ricardian theory was contingent upon repairing its major flaws. Before examining Mill's contribu­tions, therefore, it is necessary to survey some of the many criticisms of Ricardian doctrine to which Mill was responding. These stemmed from three main sources. First, there was increasing evidence of a disparity between Ricardian doctrine and the empirical evidence gathered from the operation of the English economy. Contrary to the Malthusian population theory, which was an essential premise of Ricardo's system, there was growing evidence that real per capita income was increasing, not decreasing, as population increased; and with rapidly developing technology, agriculture was experiencing increasing, not diminishing, returns. Second, the discipline of economics was becoming increasingly professionalized and consequently more critical of received doctrine. Academicians began to work through Ricardo's theoretical structure, particularly his labor theory of value, and found his treatment of demand and of the role of profits in the determination of prices to be wanting. Third, a number of humanist and socialist writers, ignoring the technical content of economic thinking, delivered broadsides at­tacking the foundations of the emerging capitalistic economy that Ricardo's theoretical structure represented.

A number of subsequent developments in economic thought emerged from these criticisms of Ricardian thought. Say's Law—the theory advanced by Ricardo, Say, and James Mill, which states that the economy will automatically produce full employment—came to be rejected by certain heterodox economists, notably Marx. In addition, a growing body of socialist literature by French, Swiss, German, and English writers questioned the classical notion that economic harmony was best achieved by means of the unimpeded workings of a capitalist economy. The nineteenth-century culmination of this heterodox thought was Marx's Kapital.

A more technical body of criticism was advanced by men who were studying economics more as a profession than as an avocation. These writers tried to spell out more explicitly the proper scope and method of economics and to identify the chief building blocks of the classical system. Their major thrust was to reject, in part, the Malthusian population doctrine, historically diminishing returns in agriculture, and the wages fund doctrine, and to replace the labor theory of value with a value theory in which profits were a determinant of price and in which the role of demand and utility in determining relative prices was enlarged. This line of analysis finally bore fruit in the marginal utility school, which began in the 1870s, as well as in the economics of Alfred Marshall.