John Stuart Mill and Classical Economists

British Economist John Stuart Mill didn’t propose any new principles of economics but he expands the thoughts of Adam Smith, David Ricardo, and Robert Malthus. Mills' idea about the theory of value is similar to classical economists like Adam Smith, David Ricardo, Robert Malthus but he explained this concept in slightly modified ways. Mill considered the labor and natural objects are the prerequisites of production. Mill outlined that land, labor, and capital are the function of economic development. He said labor could be bodily or mental, and appropriate natural objects are those, which are naturally given or grow up spontaneously. Mill and other classical economists promoted the principle of law self-interest. Mill, Malthus, and most of the classical economists argued that education could raise the wage of labor, which would decrease the size of labor families and standard of living. He also contributes to the quantity theory, he explained the difference between money and price, and made a clear relation between money quantities and prices. Mills discussed elaborately the tax system, considering the tax principles of Adam Smith, Mill’s proposed idea using the tax structure is how to reduce the income inequality from the society. Mill showed the relationship between population and food production.

Malthus's theory about population was supported by the Mill and he said population control was essential for improving the condition of working-class in order to enjoy the fruit of technological progress and capital accumulation. Mill and other classical economists supported the free trade and they said free trade could induce economic welfare for the countries. Adam Smith proposed a natural rate of interest; Mill said there should be an interest rate even though the fluctuation of the market rate of interest, which is called the natural rate of interest. Mill also said interest rate could be determined by the demand and supply of the debt.

Mill was greatly influenced by the Utilitarianism of Jeremy Bentham. Mill published a book in 1863 named Utilitarianism. In that book his thought about utility is slightly different from the other classical Economists. Mill argued the method of determining the best utility is that of the moral agents when given the choice between two or more actions, ought to choose the action contributions most to (maximizes) the total happiness in the world (Wikipedia). Mill improved the idea of Adam Smith and Ricardo about the international trade, he said terms of the international exchange rate of the product determined by the supply and demand of the countries. He argued that trade advantage should be considered based on comparative cost advantage rather than the absolute cost advantage.

Mill promoted economic democracy instead of the idea of capitalism of classical economists like Adam Smith, Ricardo, and Malthus. Malthus encourages late marriage but Mills added birth control as the important factor to reduce population growth. He believed that educated workers could use various methods of birth control, which would reduce the size of their families and improve their standard of living. Mills' thoughts about Wage fund are different from the other classical economist's concepts; Ricardo said producer pays the wage to workers from current capital not from fixed capital. Mill said the portion of current capital that is given to workers as a wage is called Wage Fund but Adam Smith said wage fund is the accumulations of all capital.