Classical Economics, Lecture 4

John Stuart Mill

Rothbard on Mill

• Rothbard has a very low opinion of Mill. This is not only because he held the wrong views. Rothbard doesn’t like his personality.

• He regards Mill as a woolly thinker who had trouble making up his mind.

• Instead of coming down on one side or the other of an issue, he would try to incorporate both sides.

• Notice that these are two separate complaints.

Rothbard on Mill Continued

• “John Stuart was the quintessence of soft rather than hardcore, a woolly minded man of mush in striking contrast to his steel-edged father. John Stuart Mill was the sort of man who, hearing or reading some view seemingly at utter variance with his own, would say, 'Yes, there is something in that', and proceed to incorporate this new inconsistent strand into his capacious and muddled world-view. Hence Mill's ever expanding intellectual 'synthesis' was rather a vast kitchen midden of diverse and contradictory positions.”

Marx on Mill

• Marx held a similar view of Mill.• He attacked Mill for combining contradictory

elements in his economic system.• Mill defended both Ricardo’s view that profit or

interest is a residual and Nassau Senior’s position that profit is a reward for abstinence from consumption. Marx made fun of Senior’s view, but his criticism is based on misunderstanding.

James Mill

• Rothbard contrasts John Stuart Mill unfavorably with his father, James Mill. James Mill was a tough, consistent cadre type.

• He points out that although J.S. Mill sometimes deviated from his father, he eventually came around to something close to his views.

J.S. Mill and His Father

• Here are some examples of Rothbard’s point.• James Mill was a strict utilitarian. His son

modified utilitarianism, e.g., by distinguishing lower and higher pleasures, and probably in other ways as well, but he remained a utilitarian.

James Mill was a Ricardian. So was his son, but in modified form.

James Mill believed in democracy; Mill was a critic of unlimited democracy, but still a democrat.

A Problem for Rothbard’s Interpretation

• If Mill was the inept bumbler that Rothbard presents him to be, how did he get to be so influential?

• Mill had acquired a great reputation through his System of Logic (1843). He was regarded as a great philosopher. ( I’d add that he really was a great philosopher.)

• He had an impressive style.

What Did Mill Do?

• Before Mill’s Principles of Political Economy (1848), Ricardo’s system had come under attack.

• Perronet Thompson and Torrens criticized Ricardo’s theory of rent. Rent isn’t a differential. Also, productive land is valuable because people value what can be produced with it. Causation doesn’t go from the land to what it produces, but the other way around.

Criticisms of Ricardo

• Samuel Bailey criticized Ricardo’s theory of value. Value depends on subjective utility, not labor cost of production. Value is relative, not absolute.

• As already mentioned, Senior attacked Ricardo’s theory of profit.

• Richard Whateley criticized the Malthusian views implicit in Ricardo’s theory of wages. People don’t respond mechanically to increased wages by reproducing.

Reversal of Trend

• Despite these criticisms, Mill was able to revive the basics of the Ricardian system.

• Mill accepted Ricardo’s theory of rent.• He accepted Ricardo’s account of wages.• He accepted Ricardo’s theory of profit, combined

with the inconsistent view of Nassau Senior.• He accepted Malthusianism in modified form. He

didn’t insist on the geometric versus arithmetic ratios of increase that Malthus emphasized.

Reversal Continued

• Rothbard especially stresses Mill’s rejection of Bailey’s advances toward a subjective utility theory of value.

• Mill returned to a cost of production position.

Mill on Population

• Restricting population was one of Mill’s biggest causes.

• As a young man, he was in jail for a short time for distributing birth control pamphlets.

• He was willing to accept restrictions on liberty, e.g., parental licenses, to achieve his goals.

Mill and Progress in Economics

• Mill’s success in reviving the Ricardian system is for Rothbard an example that shows what’s wrong with the Whig Interpretation of science.

• Progress wasn’t continuous, because people went back to erroneous views.

Mill’s Difference From Ricardo

• Although Mill was a Ricardian, he had one crucial difference from Ricardo.

• Mill thought that there were no laws of distribution. This opened the door to labor unions and redistribution of wealth and income. It’s up to people to decide how income is to be distributed.

• It’s not at all clear that this is consistent with the parts of Ricardo’s system he accepted.

Did Mill Get Anything Right?

• So far, Rothbard has been very critical of Mill. Did he get anything right?

• Rothbard agrees with Mill that “the demand for commodities is not the demand for labor.” What does this mean?

• When people pay for goods and services, this is not the direct source of wages or other costs of production. Why not?

Payment of Workers

• Workers and the other factors of production are paid out of the funds the capitalist has previously accumulated. They aren’t paid out of current sales. The capitalist has to wait for his profits until what he produces is sold.

• This is a fundamental point against Keynes. He recommended that in case of depression, consumer spending should be increased. If Mill is right, this won’t generate more jobs. Employers need investment funds to pay workers.

Method In Economics

• Mill also had ideas about method in economics. Rothbard thinks, as usual, that these were all wrong.

• The correct method was defended by Nassau Senior. Economics starts with certain truths that are given to us directly, because of our knowledge of human action.

Method Continued

• E.g., everyone aims to increase wealth, where “wealth” need not mean money but rather means a higher position on the person’s scale of preferences.

• From these truths, other propositions are deduced.• Ricardo also followed a deductive method, but his

axioms weren’t causal statements about the world.• They were mathematical identities.

Mill on Method

• Mill thought that economics begins from hypotheses about the world. An important example is that people want to maximize their monetary income.

• This is the famous assumption of “economic man.”

• If you deduce what happens on the assumption of economic man, you will arrive at truth only to the extent that the hypothesis is true. Mill didn’t think it was fully true.

Mill on Method Continued

• Economics gives you just partial truth. Its results must be combined with other investigations to give a fuller picture of the world.

• Mill had unusual philosophical views about deduction. He thought that the syllogism really doesn’t tell you anything new. You wouldn’t know the major premise unless you already knew the conclusion.

Mill on Imperialism

• Like his father and other utilitarians, Mill had definite policy goals.

• He was a strong supporter of the British Empire. The British were at a higher stage of civilization than the people of India and were entitled to rule them in order to bring them in line with enlightened thought.

• Both Mills were high officials of the British East India Company.

Mill on Socialism

• Mill was much less sympathetic to laissez-faire than most of the earlier Ricardians.

• He thought socialism might be a good idea but opposed centralization. He favored a system of workers’ cooperatives.

• He opposed continual technological progress and liked the idea of a stationary state in which people concentrated on non-economic pursuits,

Mill and Liberty

• Despite the rhetoric of On Liberty, some scholars think that Mill really wanted a class of intellectuals like himself to control public opinion.

• According to this view, Mill’s ostensibly libertarian arguments were designed to safeguard the views of intellectuals like himself from public criticism.

Mill and Liberty Continued.

• Mill wasn’t really concerned with the freedom of the masses. He thought they should be directed by their intellectual betters.

• Mill was influenced by Auguste Comte, who favored control of public opinion in an “organic” society. However, Mill sometimes criticized Comte.

• Maurice Cowling and Joseph Hamburger support this view. To accept, one has to read On Liberty in a fairly speculative way.