John Stuart Mill's Theories of Wealth and Income Distribution

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Abstract Although he was much influenced by David Ricardo when he wrote the classical part of his Principles, John Stuart Mill was not a Ricardian when he penned his theories of wealth and distribution. They are based on a triple foundation. First, a belief that economics is a moral discipline. Second a theory of custom-driven human behavior. Third, an empirically formed conviction that the institutions of state, education and business cooperate to structure the distribution of income. On the basis of these presuppositions, Mill formulated 1) an institutional theory of the formation of human and non-human wealth and 2) an even more institutional theory of distribution demonstrating how the aforementioned institutions malignantly skew the distribution of income to the advantage of the propertied classes and to the extreme disadvantage of the working class. As a social economist, Mill recommended institutional reforms designed to eradicate the poverty of the working class.

Keywords: capitalism, classes, distribution, education, institutions, poverty, reforms, utility, wealth

INTRODUCTION

John Stuart Mill claimed that he wrote his Principles of Political Economy of 1848 (Mill 1965a and 1965b) in order to replace Adam Smith's Wealth of Nations (Smith 1981). Mill felt that a new work was needed because the "'Wealth of Nations' is in many parts obsolete, and in all, imperfect." He endeavored, therefore, to combine Smith's "practical mode of treating his subject with the increased knowledge since acquired of its theory." Mill was confident that he had succeeded in producing a book that is "embodying all the abstract science in the completest form yet attained" (Mill 1965a: xciii; and 1963: 708).

This form has its origins in the economics of David Ricardo, which was one of those intellectual diets that Mill was forced-fed by his father, James Mill, when he took the teenaged John Stuart "through a complete course of (Ricardian) political economy." The approach of economists had changed since the days of Ricardo, however. Thus Mill censured the "English political economists" of his time for failing to heed Ricardo's implicit admonition to improve on Smith's work (Mill 1981: 31; and 1967a: 225). Improvements by his successors were all the more urgent, said Ricardo, because such repair would require "abilities...of a far superior cast to any possessed" by Ricardo himself (Ricardo 1951: 6).

Hence Mill decided to complete Ricardo's unfinished work; an effort that is embodied in Mill's Principles. This involved a disentanglement and analysis of two economic phenomena which the "common run of political economists confuse...together," namely the "laws of the production of Wealth...and the modes of its Distribution" (Mill 1981: 255). By the former, Mill understood those "laws and conditions of the production of wealth" that "partake of the character of physical truths." We "cannot alter the ultimate properties either of matter or mind," said Mill, we "can only employ those properties more or less successfully, to bring about events in which we are interested." It is "not so with the Distribution of Wealth," he asserted. That is a "matter of human institutions solely. The things once there, mankind, individually and collectively, can do with them as they like." Given this orientation of Mill, the "laws of Production and Distribution...are the subjects of...[his] treatise" on political economy (Mill 19 65a: 199, 21). In view of this Millian approach, I proceed as follows. In the next section, I discuss Mill's theory of wealth. This is followed by a precis of his theory of distribution. (1) I close with a conclusion.

WEALTH

In this section, I endeavor 1) to inquire into Mill's theory of behavior as it relates to the production, acquisition, and use of wealth, 2) to narrate his account of the origins and nature of wealth, and 3) to provide an abstract of his description of the pursuit of wealth in capitalist society. …