Principles of Political Economy (1848) by John Stuart Mill was one of the most important economics or political economy textbooks of the mid-nineteenth century. It was revised until its seventh edition in 1871, shortly before Mill's death in 1873, and republished in numerous other editions. Beside discussing descriptive issues such as which nations tended to benefit more in a system of trade based on comparative advantage (Mill's answer: those with more elastic demands for other countries' goods), the work also discussed normative issues such as ideal systems of political economy, critiquing proposed systems such as communism and socialism. Along with A System of Logic, Principles of Political Economy established Mill's reputation as a leading public intellectual. Mill's sympathetic attitude in this work and in other essays toward contemporary socialism, particularly Fourierism, earned him esteem from some of the working class as one of their intellectual champions.
Contents
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.
Preliminary remarks
Book I Production
I 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 to 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 Of Labour as an Agent of Production
Book II Distribution
I Of Property
II The same subject continued
III Of the Classes among whom the Produce is distributed
IV Of Competition and Custom
V Of Slavery
VI Of Peasant Proprietors
VII Continuation of the same subject
VIII Of Metayers
IX Of Cottiers
X Means of abolishing Cottier Tenancy
XI Of Wages
XII Of Popular Remedies for Low Wages
XIII The Remedies for Low Wages further considered
XIV Of the Differences of Wages in different Employments
XV Of Profits
XVI 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. It is also in this third book, primarily in Chapter I, that Mill considers communism and socialism as alternatives to capitalism.
I Of Value
II Of Demand and Supply, in their relation to Value
III Of Cost of Production, in its relation to Value
IV Ultimate Analysis of Cost of Production
V Of Rent, in its relation to Value
VI Summary of the Theory of Value
VII Of Money
VIII Of the Value of Money, as dependent on Demand and Supply
IX Of the Value of Money, as dependent on Cost of Production
X Of a Double Standard, and Subsidiary Coins
XI Of Credit, as a Substitute for Money
XII Influence of Credit on Prices
XIII Of an Inconvertible Paper Currency
XIV Of Excess of Supply
XV Of a Measure of Value
XVI Of some Peculiar Cases of Value
XVII Of International Trade
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. But on the prospect of ever intensifying economic activity, 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.
I General characteristics of a Progressive State of Wealth
II Influence of the Progress of Industry and Population on Values and Prices
III Influence of the Progress of Industry and Population on Rents, Profits, and Wages
IV Of the Tendency of Profits to a Minimum
V Consequences of the Tendency of Profits to a Minimum
VI Of the Stationary State
Book V on the Influence of Government
In his fifth book, Mill outlined the government’s role in upholding liberty within society through necessary tasks, those that are fundamental to the government’s existence, and optional tasks, those that would arguably benefit the public if implemented. The necessary tasks mentioned include the protection of citizens from invasion, the safety of domestic life, and regulations on private property and the resources it produces. He states that the government must be cautious when intervening in economic issues to avoid disrupting the natural demand for freedom between consumers and producers to trade, he mentions this again when referring to the long-run negative impact of protectionism. However, he also notes the potential benefits of government intervention, including the expansion and maintenance of markets through subsidized exploration and the construction of lighthouses. These are examples of public goods and externalities in modern economics. Mill states that while the market fails to solve certain societal issues, the government must uphold both progress and liberty in its intervention within the market. Like his other work, specifically On Liberty (1859), Mill claims that government activity is justified so long as it is beneficial to society and does not infringe upon any individual’s freedom, other than limits on conduct to prevent harm to others, or on conduct which would affect prejudicially the interests of others.
Mill discusses his ideal system of taxation, promoting a tweaked version of proportional taxation that at a lower limit gives exemption to those earning less than the limit. Book V touches on the outdated idea of “double taxation,” which has turned into a debate on the usefulness of the expenditure tax in contemporary tax reform debates.
I Of the Functions of Government in General
II On the General Principles of Taxation
III Of Direct Taxes
IV Of Taxes on Commodities
V Of some other Taxes
VI Comparison between Direct and Indirect Taxation
Reception
In 1856, this book was included in the Index Librorum Prohibitorum, thus being banned by the Catholic Church.