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Mill’s Principles of Political Economy was first published in 1848, and it went through various editions; the final edition was the seventh, which appeared in 1871. Political Economy is the term nineteenth-century writers use to refer to the study of what we today call macroeconomics, though its practitioners, such as Adam Smith, Mill, David Ricardo, and Karl Marx, were more philosophical and less empirical in their methods than modern economists. In this book, Mill examines the fundamental economic processes on which society is based: production, the distribution of goods, exchange, the effect of social progress on production and distribution, and the role of government in economic affairs.
Book I deals with production and begins by identifying the basic requisites that enable production to exist: labor and natural objects. Labor may be defined as an agent of production, though not all labor leads to the production of a material object. Labor produces three types of utilities. The first is the creation of objects for human use, wherein labor invests external material things with properties that make these things usable. Second, some labor renders human beings serviceable to society and to themselves, such as the labor of teachers and doctors. The third utility is the labor of giving pleasure or entertainment, which does not make other people more productive or result in a tangible product. In addition to labor and natural objects, production requires capital, without which it would cease. In essence, capital is the accumulated stock of the products of labor. After discussing such aspects and manifestation of capital, such as fixed versus circulating capital, Mill examines the social forms of production, such as cooperation, combination of labor, production on a small and large scale, and the increase of labor, which results in the increase of capital as well as production. Last, Mill examines production from land and recognizes that such production is markedly different from the one achieved through labor and capital, since production from land is limited and not likely to greatly increase.
Book II examines distribution as it is manifested in the allocation of property and produce. Mill discusses the effect on distribution of such factors as competition; customs; slavery; ownership by peasants; and the various types of laborers, wages, profits, and rents. Mill acknowledges the difference between workers and capitalists (he includes landowners in this category), both of whom share the products of labor. In book III, Mill addresses the topics of exchange and value, defining the latter in terms of supply and demand. Mill sees value as relative, since it depends on the quantity of another thing or things. There is no general rise and fall of value, for it rises only when a fall is supposed and it falls when a rise is supposed. Mill considers money and its relationship to supply and demand, cost of production, and credit (which is a substitute for money). Further, he looks at the influence of credit on prices, the function of currency, international trade and values, and rates of interest.
Book IV deals with the relationship between a society’s progress and its economic affairs. Mill defines social progress in terms of the increase of knowledge, the improved protection of citizens and property, the transformation of taxes so they are less oppressive, the avoidance of war, and the increase in the prosperity of the people brought about by improvements in business capacities, including the more effective employment of the citizens through education. Mill notes that social progress is not infinite and that a given state of affairs may become stationary if production does not improve and if the overflow of capital from the affluent to the less affluent countries becomes suspended. This recognition of a state of stagnation leads Mill to speculate on the future of the laboring classes, which he foresees rising beyond the patriarchal values of society and becoming emancipated through education. The newly empowered working class will generate massive change in society.
Book V analyzes the influence of government on society, arguing that the functions of government can be divided into the necessary and the optional. The necessary is that which is inseparable from the very of idea of government, such as security, protection, and taxation. Everything else that government does is optional and subject to question. Mill concludes by considering the question of a government’s interference with individual liberty. Mill asserts that government should always restrict itself to doing only what is necessary. First, a government should prohibit and punish individual behavior that harms other people, such as force, fraud, or negligence. Second, a government should work to limit or even eliminate the great amount of energy being spent on the harming of one nation by another. Third, a government should turn such destructive behavior into bettering human faculties, namely, transforming the powers of nature so they serve the greatest physical and moral good. Finally, Mill proposes that governments should adopt a laissez-faire policy, in that they would abstain from interfering with individual choice and grant unconstrained freedom to people, who should be able to pursue their happiness without restrictions.
In Principles, Mill turns economics into a viable philosophical area of inquiry by exploring what people really want and what economics can measure and assess. Mill’s approach to economics is based on his belief in the superiority of socialism, in which economic production would be driven by cooperatives owned by the workers. To this end, Mill argues that the laws of production may be natural laws, but the laws of distribution are created and enacted by human beings. In other words, wealth is the natural end product of labor, but the distribution of wealth is determined by the decisions and the will of actual people (the elite) and is not simply part of the order of nature. Mill carries this view quite far, maintaining that human laws and institutions can and should determine how wealth is distributed. Thus, for Mill, economics is closely tied to social philosophy and politics.
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