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1. Classical Economics, Lecture 4
John Stuart Mill

2. 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.

3. 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.”

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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?

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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,

23. 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.

24. 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.