Principles of Political Economy by John Stuart Mill

Overview

• First published in 1848, with the seventh edition appearing in 1871.
• Political economy referred to what is today considered macroeconomics.
• Key figures: Adam Smith, David Ricardo, Karl Marx.
• Mill examines fundamental economic processes: production, distribution, exchange, social progress, and government roles.

Book One: Production

• Basic Requisites for Production:

  • Labor and natural objects are essential.
  • Labor is defined as an agent of production.

• Types of Utilities Created by Labor:

  1. Creation of usable objects.
  2. Rendering services (e.g., teachers, doctors).
  3. Providing entertainment.

• Role of Capital:

  • Capital is the accumulated stock of labor's products.
  • Types of capital: fixed vs. circulating.

• Social Forms of Production:

  • Cooperation and combination of labor.
  • Differences in production scale (small vs. large).
  • Production from land is limited compared to labor and capital.

Book Two: Distribution

• Distribution of Property and Produce:
  • Factors affecting distribution: competition, customs, slavery, ownership, wages, profits, and rents.
  • Mill differentiates between workers and capitalists, including landowners.

Book Three: Exchange and Value

• Value:

  • Defined in relation to supply and demand; value is relative.
  • No general rise/fall of value; it is contingent upon the expectations of rise/fall.

• Money and Credit:

  • Discusses their roles in supply, demand, and prices.
  • Includes international trade and interest rates.

Book Four: Society’s Progress

• Definition of Social Progress:

  • Increase of knowledge, improved citizen protection, tax reforms, avoidance of war, and prosperity.

• Limitations of Social Progress:

  • Acknowledges potential stagnation if production does not improve or if capital flow is halted.
  • Predicts emancipation of the laboring class through education.

Book Five: Government's Influence

• Functions of Government:

  • Necessary functions include security, protection, taxation.
  • Optional functions should be questioned.

• Government Interference with Liberty:

  • Should restrict itself to necessary actions, prohibiting harmful behaviors.
  • Advocates for a laissez-faire approach, allowing individual freedom.

Critical Analysis

• Economics as Philosophy:

  • Mill explores what people want and how economics can measure it.
  • Socialism advocated through worker-owned cooperatives.

• Distribution of Wealth:

  • Wealth is a product of labor, distribution governed by human decisions.
  • Human laws can and should determine wealth distribution.

• Population Control:

  • Aligns with Malthusian theory regarding food supply.

• Competition:

  • Benefits of free competition noted; necessary for societal progress.
  • Warning against stagnation from overprotection of citizens.

• Role of Education:

  • Education is essential for enlightened citizenship and social responsibility.

• Advocacy for Women’s Rights:

  • Equal rights for women emphasized; need for women to seek employment in all fields.

• Scientific Method in Economics:

  • Mill's approach grounded in scientific analysis facilitates application to real-world politics and society.