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WorkJohn Stuart Mill

Principles of Political Economy

The economics textbook of Victorian Britain, which argues that the way wealth is shared out is a human arrangement and can be changed.

by John Stuart Mill1,493 passages held

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First published
(aged 42)
Original language
English

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Overview

Oxford was still setting this book for its students in 1919, seventy-one years after it first appeared. Mill had written it quickly. He began in the autumn of 1845 and had it ready for the press before the end of 1847, although he gave six months of that time to newspaper articles on Ireland during the famine. Principles of Political Economy came out early in 1848, and the first thousand copies sold in less than a year. It set out the economics of Adam Smith and David Ricardo as a complete system, and then made a distinction neither of them had made. The laws of production, Mill says, are fixed like laws of nature; the distribution of what is produced is a matter of human institution, settled by rules that a society has made and can remake. The distinction carries the book's claim that property, inheritance and wages are open to reform. It let Mill argue for peasant ownership of land, for workers' co-operatives such as the one at Rochdale, and for a future in which growth comes to a stop, the stationary state that earlier economists had dreaded and that he thought might be an improvement. The chapter on the future of the labouring classes was written at the urging of Harriet Taylor, later his wife, and Mill said that its general argument was hers. The book changed as he did. Its first edition treated socialism mainly as an opponent. After 1848 he studied the socialist writers, and the third edition of 1852 replaced most of what he had said about them with a more favourable account. In 1869, after reading On Labour by the economist William Thornton, he gave up the wages-fund doctrine, which holds that the sum available to pay wages is fixed, so that trade unions cannot raise them for workers as a whole. He had taught that doctrine in this book, and the seventh edition of 1871, the last he revised, still left it standing in the text. Principles of Economics by Alfred Marshall, the Cambridge economist, appeared in 1890 and in time displaced it as the standard British textbook.

Key concepts

What is the wages-fund?

The wages-fund is the part of a country's capital that employers set aside to pay labour. On the doctrine taught in this book, the general level of wages is that fund divided by the number of labourers. Wages can therefore rise only if capital grows faster than population, or if population is restrained, and a rise won by one group of workers comes out of what is left for the others.

What is the stationary state?

The stationary state is the condition in which capital and population have stopped growing, because profits have fallen to the lowest rate at which people will still save. Economists before Mill treated it as the dreaded end of progress. Mill argues that a stationary economy need not mean a stationary human life: there would be as much room as ever for mental culture, moral and social progress and improving the art of living.

What is a peasant proprietor?

A peasant proprietor is a cultivator who owns the land he farms, as in parts of France, Switzerland, Norway and Flanders in Mill's day. Mill sets him against two other figures: the English labourer hired by a tenant farmer, and the Irish cottier who rents a patch at a rent bid up by competition. Because the owner keeps the whole fruit of his effort, Mill credits the system with tireless industry, foresight and prudence about the size of families.

How does the Principles distinguish Communism from Socialism?

Communism, in Mill's usage, is the entire abolition of private property with an equal division of the produce. Socialism is the wider word: any system in which land and the instruments of production belong to communities, associations or the government, while unequal shares may remain. The followers of Robert Owen fall under the first, and those of Saint-Simon and Fourier under the second.

What role does custom play beside competition in Mill's economics?

Custom is the settled usage that fixes rents, prices and shares where nobody bargains for the last penny. Economists, Mill says, reason as though competition decided everything. Yet through most of history, and still in much of Europe, the tenant has paid a customary rent and the professional man a customary fee. Competition is a recent force, and conclusions drawn from it have to be corrected wherever custom rules.

What does equality of sacrifice mean in taxation?

Equality of sacrifice means that each person should feel neither more nor less inconvenience from his share of the taxes than every other person feels from his. Mill takes this to be what fairness in taxation requires. He concludes that an income covering bare necessaries should be exempt and everything above it taxed at one rate, since a rate that rises with income would in his view penalise those who work and save more.

Themes of the book

What this book returns to, gathered into themes and ordered by how much of the text each one occupies.

Production has laws; distribution is ours to arrange

Is the way wealth is shared out as fixed as the way it is produced? Mill says no, and on that answer rests every proposal for reform in the book.

The laws of production, Mill writes, partake of the character of physical truths, while distribution is a matter of human institution: once things exist, society can place them at the disposal of whomever it pleases. Custom, he adds, has settled shares far more often than competition has. Private property is therefore one arrangement among others, to be judged by its results. If the choice lay between Communism and the present state, he says, the difficulties of Communism would be as dust in the balance. He would limit what anyone may inherit, and he praises peasant ownership in Arthur Young's words: the magic of property turns sand to gold.

  • production
  • property
  • property rights
  • land ownership
  • peasant proprietorship
  • land tenure
  • agriculture
  • rent
  • political economy
  • division of labor
  • productivity

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Wages, numbers and the future of labour

Can working people ever be more than hired hands paid what the market allows? Mill starts from the bleak arithmetic of wages and population and ends with workers owning the workshop.

Wages, in this book, depend on the proportion between the labouring population and the capital set aside to pay it, the wages-fund, so no lasting gain is possible unless numbers are restrained. Mill looks for that restraint to education and to the opening of occupations to women. In the chapter on the future of the labouring classes he rejects the theory of dependence and protection, under which the rich look after the poor. The poor have come out of leading-strings. He expects the wage relation to give way to partnership, and finally to associations of labourers who own their capital and elect their managers, like the Rochdale Pioneers.

  • wages
  • labor
  • population
  • poverty
  • employment
  • education
  • competition
  • profits
  • capital

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Value, money and trade

What fixes the price of a thing, and does money change anything real? Mill thought the theory of value complete and money a mere convenience, two of the boldest sentences in the book.

The third book deals with exchange. Things that can be multiplied at will sell for their cost of production, and things that cannot, for what demand will bear. Mill declares that nothing in the laws of value remains to be cleared up. Money he calls the most insignificant thing in the economy of society, a contrivance for sparing time and labour, noticed only when it goes out of order, as in a crisis of credit. On trade between nations he repeats his account of how demand divides the gain, and allows one exception to free trade: a temporary duty to naturalise an industry in a young country.

  • value
  • prices
  • cost of production
  • money
  • credit
  • international trade

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The stationary state and the limits of government

Must an economy keep growing for people to live well? Mill welcomes the end of growth that earlier economists feared, and asks in his last book what a government should and should not do.

Profits tend to fall as capital accumulates, and earlier economists dreaded the stationary state at the end of that road. Mill is not charmed by a life of trampling, crushing and elbowing to get on. He doubts whether all the mechanical inventions yet made have lightened the day's toil of any human being, and thinks a society with stable numbers and wealth could turn to the art of living. The fifth book concerns government. Taxes should demand an equal sacrifice from each. Laisser-faire is the general practice, with large exceptions: schooling, the care of children, colonies, the hours of labour, and whatever individuals cannot judge or do for themselves.

  • economic growth
  • capital accumulation
  • taxation

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Within this work

passages held
1,493
distinct concepts
1,318
by passages held, corpus-wide
#41

What this book thinks together

The wheel takes this book’s leading concepts and shows how often they come up together. The wider the band between two, the more of its passages speak of both. Among them, most often together: “population” and “wages”.
Concept co-occurrence, strongest first 8 concepts, joined by 24 pairings. 89 pairings reach beyond these concepts and are not drawn.
ConceptPaired conceptShared passages
populationwages40
capitallabor38
profitswages33
capitalproduction31
laborproduction31
capitalwages22
capitalprofits21
laborwages18
laborpopulation10
laborprofits8
populationprofits8
capitalcredit6
creditproduction6
international tradewages6
productionwages6
capitalpopulation5
international tradeprofits5
productionprofits4
creditprofits3
international tradelabor3
capitalinternational trade2
creditinternational trade2
creditlabor1
populationproduction1

Works held

The author's work in order, this book marked in place. Your-language title first, the original beneath it where the two differ; side chips show which full texts are held.

  1. 1843 A System of Logic, Ratiocinative and Inductive

    It was the first book of his own, and it made his name in 1843. Its claim that every belief must answer to experience is the ground on which the later books on morals and politics stand.

     EN
  2. 1844 Essays on Some Unsettled Questions of Political Economy (Essays on some unsettled Questions of Political Economy)

    Written at twenty-three and twenty-four, these five essays waited until the System of Logic had found him readers. Their argument on trade returns, four years later, in the Principles of Political Economy.

     EN
  3. 1848 Principles of Political Economy you are here EN
  4. 1859 On Liberty

    One of the two books Mill expected to outlast the rest, the other being the System of Logic. Its defence of individuality against majority opinion runs on into Considerations on Representative Government and The Subjection of Women.

     EN
  5. 1861 Considerations on Representative Government

    Written two years after On Liberty, it faces the same danger, a majority that overrides everyone else, and meets it with electoral machinery. It is his fullest statement on how a free people should be governed.

     EN
  6. 1861 Utilitarianism

    A defence of the ethics he inherited from Bentham and from his father, assembled from papers of the 1850s. Short as it is, it supplies the standard of right and wrong that his political books take for granted.

     EN
  7. 1862 The Contest in America

    Occasional journalism from Fraser's Magazine, written in haste before a journey to Greece. It shows Mill as a polemicist, arguing against the prevailing opinion of his own class.

     EN
  8. 1865 Auguste Comte and Positivism

    Two essays from the Westminster Review of 1865, written eight years after Comte's death. They close a relationship that began with admiring letters in 1841 and left its mark on the System of Logic.

     EN
  9. 1869 The Subjection of Women

    The most contested of his books in its day, published in 1869 after his one term in Parliament. It carries the reasoning of On Liberty into marriage and the household.

     EN
  10. 1879 Socialism

    Left unfinished at his death, these are the posthumous "Chapters on Socialism", first drafts for a book planned in 1869. They return to a question that the Principles of Political Economy had reopened from one edition to the next.

     EN
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