John Stuart Mill on Economic Theory and Method

John Stuart Mill on Economic Theory and Method

John Stuart Mill on Economic Theory and Method

John Stuart Mill on Economic Theory and Method

Synopsis

This volume provides an accessible sourcebook on John Stuart Mill's relationship with David Ricardo and the Classical School, as well as confirming his relevance for modern economics and for the place of economics within the social sciences.

Excerpt

I have said all that I want to say by way of general introduction at the appropriate places in the first two volumes in this series, so there is no need for a further prologue. I shall proceed to the papers included in the present volume.

The two earliest essays still appear in anthologies and are frequently referred to in the journals so I have chosen to include them. Though I believe they remain valid, they do require amendment. As for the first, it is doubtful that I was right to put such emphasis on Mill’s ‘first proposition on capital’ as a deliberate formulation of fixed proportions between labour and capital. Yet the terms ‘cooperation’ (p. 2) and ‘assisted by’ (p. 3) used to describe the relation between real capital and labour do point to a complementary relationship; and the supporting evidence to this effect given in the paper stands, as does the demonstration that the need for technological capital pertains only in productive sectors, so that excess labour can under some circumstances be absorbed into the service sector. I would also emphasise the caution that the complementary character of technological relations could at best only have contributed to an underrating of the significance of aggregate demand in the (Marshallian) short run, since ‘when it is possible to vary all inputs, we have to rely on Say’s Law alone to account for the classical position’ (p. 7). Similarly, my comment that Mill’s fourth proposition on capital entails an implicit assumption of homogeneous capital (Chapter 1, note 12) is otiose, since the proposition applies to the long run when ‘capital’ can change its form.

The second chapter relates Mill’s recantation of the wages fund doctrine to preclusion of (short-run) variation in the intensity of capital usage; a rise (fall) in the wage leaves employment unchanged and simply raises (reduces) the aggregate wage bill. I admit that ‘[t]here is no explicit statement by Mill…to the effect that he was deliberately assuming fixed technical coefficients’, but rely on the doctrine of evidence—shades of Physiocracy!—to make my case: ‘it is evident that if he had been aware of the possibility of input substitution…he could not have avoided recognizing that…a wage-rate reduction would in fact lower costs and make profitable expanded production and employment, even in the short run’ (pp. 26-7). But I had

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.