Principles Of Political Economy

By

John Stuart Mill

Abridged, with Critical, Bibliographical,

and Explanatory Notes, and a Sketch

of the History of Political Economy,

By

J.Laurence Laughlin, Ph.D.

Assistant Professor of Political Economy in Harvard University

A Text-Book For Colleges.

New York:

D.Appleton And Company,

1, 3, and 5 Bond Street.

1885

Contents

• Preface.
• Introductory.
• A Sketch Of The History Of Political Economy.
• Books For Consultation (From English, French, And German Authors).
• Preliminary Remarks.
• Book I.Production.
• Chapter I.Of The Requisites Of Production.
• § 1.The requisites of production.
• § 2.The Second Requisite of Production, Labor.
• § 3.Of Capital as a Requisite of Production.
• Chapter II.Of Unproductive Labor.
• § 1.Definition of Productive and Unproductive Labor.
• § 2.Productive and Unproductive Consumption.
• § 3.Distinction Between Labor for the Supply of Productive Consumption and Labor for the Supply of Unproductive Consumption.
• Chapter III.Of Capital.
• § 1.Capital is Wealth Appropriated to Reproductive Employment.
• § 2.More Capital Devoted to Production than Actually Employed in it.
• § 3.Examination of Cases Illustrative of the Idea of Capital.
• Chapter IV.Fundamental Propositions Respecting Capital.
• § 1.Industry is Limited by Capital.
• § 2.Increase of Capital gives Increased Employment to Labor, Without Assignable Bounds.
• § 3.Capital is the result of Saving, and all Capital is Consumed.
• § 4.Capital is kept up by Perpetual Reproduction, as shown by the Recovery of Countries from Devastation.
• § 5.Effects of Defraying Government Expenditure by Loans.
• § 6.Demand for Commodities is not Demand for Labor.
• Chapter V.On Circulating And Fixed Capital.
• § 1.Fixed and Circulating Capital.
• § 2.Increase of Fixed Capital, when, at the Expense of Circulating, might be Detrimental to the Laborers.
• § 3.—This seldom, if ever, occurs.
• Chapter VI.Of Causes Affecting The Efficiency Of Production.
• § 1.General Causes of Superior Productiveness.
• § 2.Combination and Division of Labor Increase Productiveness.
• § 3.Advantages of Division of Labor.
• § 4.Production on a Large and Production on a Small Scale.
• Chapter VII.Of The Law Of The Increase Of Labor.
• § 1.The Law of the Increase of Production Depends on those of Three Elements—Labor.Capital, and Land.
• § 2.The Law of Population.
• § 3.By what Checks the Increase of Population is Practically Limited.
• Chapter VIII.Of The Law Of The Increase Of Capital.
• § 1.Means for Saving in the Surplus above Necessaries.
• § 2.Motive for Saving in the Surplus above Necessaries.
• § 3.Examples of Deficiency in the Strength of this Desire.
• § 4.Examples of Excess of this Desire.
• Chapter IX.Of The Law Of The Increase Of Production From Land.
• § 1.The Law of Production from the Soil, a Law of Diminishing Return in Proportion to the Increased Application of Labor and Capital.
• § 2.Antagonist Principle to the Law of Diminishing Return; the Progress of Improvements in Production.
• § 3.—In Railways.
• § 4.—In Manufactures.
• § 5.Law Holds True of Mining.
• Chapter X.Consequences Of The Foregoing Laws.
• § 1.Remedies for Weakness of the Principle of Accumulation.
• § 2.Even where the Desire to Accumulate is Strong, Population must be Kept within the Limits of Population from Land.
• § 3.Necessity of Restraining Population not superseded by Free Trade in Food.
• § 4.—Nor by Emigration.
• Book II.Distribution.
• Chapter I.Of Property.
• § 1.Individual Property and its opponents.
• § 2.The case for Communism against private property presented.
• § 3.The Socialists who appeal to state-help.
• § 4.Of various minor schemes, Communistic and Socialistic.
• § 5.The Socialist objections to the present order of Society examined.
• § 6.Property in land different from property in Movables.
• Chapter II.Of Wages.
• § 1.Of Competition and Custom.
• § 2.The Wages-fund, and the Objections to it Considered.
• § 3.Examination of some popular Opinions respecting Wages.
• § 4.Certain rare Circumstances excepted, High Wages imply Restraints on Population.
• § 5.Due Restriction of Population the only Safeguard of a Laboring-Class.
• Chapter III.Of Remedies For Low Wages.
• § 1.A Legal or Customary Minimum of Wages, with a Guarantee of Employment.
• § 2.—Would Require as a Condition Legal Measures for Repression of Population.
• § 3.Allowances in Aid of Wages and the Standard of Living.
• § 4.Grounds for Expecting Improvement in Public Opinion on the Subject of Population.
• § 5.Twofold means of Elevating the Habits of the Laboring-People; by Education, and by Foreign and Home Colonization.
• Chapter IV.Of The Differences Of Wages In Different Employments.
• § 1.Differences of Wages Arising from Different Degrees of Attractiveness in Different Employments.
• § 2.Differences arising from Natural Monopolies.
• § 3.Effect on Wages of the Competition of Persons having other Means of Support.
• § 4.Wages of Women, why Lower than those of Men.
• § 5.Differences of Wages Arising from Laws, Combinations, or Customs.
• Chapter V.Of Profits.
• § 1.Profits include Interest and Risk; but, correctly speaking, do not include Wages of Superintendence.
• § 2.The Minimum of Profits; what produces Variations in the Amount of Profits.
• § 3.General Tendency of Profits to an Equality.
• § 4.The Cause of the Existence of any Profit; the Advances of Capitalists consist of Wages of Labor.
• § 5.The Rate of Profit depends on the Cost of Labor.
• Chapter VI.Of Rent.
• § 1.Rent the Effect of a Natural Monopoly.
• § 2.No Land can pay Rent except Land of such Quality or Situation as exists in less Quantity than the Demand.
• § 3.The Rent of Land is the Excess of its Return above the Return to the worst Land in Cultivation.
• § 4.—Or to the Capital employed in the least advantageous Circumstances.
• § 5.Opposing Views of the Law of Rent.
• § 6.Rent does not enter into the Cost of Production of Agricultural Produce.
• Book III.Exchange.
• Chapter I.Of Value.
• § 1.Definitions of Value in Use, Exchange Value, and Price.
• § 2.Conditions of Value: Utility, Difficulty of Attainment, and Transferableness.
• § 3.Commodities limited in Quantity by the law of Demand and Supply: General working of this Law.
• § 4.Miscellaneous Cases falling under this Law.
• § 5.Commodities which are Susceptible of Indefinite Multiplication without Increase of Cost.Law of their Value Cost of Production.
• § 6.The Value of these Commodities confirm, in the long run, to their Cost of Production through the operation of Demand and Supply.
• Chapter II.Ultimate Analysis Of Cost Of Production.
• § 1.Of Labor, the principal Element in Cost of Production.
• § 2.Wages affect Values, only if different in different employments; “non-competing groups.”
• § 3.Profits an element in Cost of Production.
• § 4.Cost of Production properly represented by sacrifice, or cost, to the Laborer as well as to the Capitalist; the relation of this conception to the Cost of Labor.
• § 5.When profits vary from Employment to Employment, or are spread over unequal lengths of Time, they affect Values accordingly.
• § 6.Occasional Elements in Cost of Production; taxes and ground-rent.
• Chapter III.Of Rent, In Its Relation To Value.
• § 1.Commodities which are susceptible of indefinite Multiplication, but not without increase of Cost.Law of their Value, Cost of Production in the most unfavorable existing circumstances.
• § 2.Such commodities, when Produced in circumstances more favorable, yield a Rent equal to the difference of Cost.
• § 3.Rent of Mines and Fisheries and ground-rent of Buildings, and cases of gain analogous to Rent.
• § 4. Résumé of the laws of value of each of the three classes of commodities.
• Chapter IV.Of Money.
• § 1.The three functions of Money—a Common Denominator of Value, a Medium of Exchange, a “Standard of Value”.
• § 2.Gold and Silver, why fitted for those purposes.
• § 3.Money a mere contrivance for facilitating exchanges, which does not affect the laws of value.
• Chapter V.Of The Value Of Money, As Dependent On Demand And Supply.
• § 1.Value of Money, an ambiguous expression.
• § 2.The Value of Money depends on its quantity.
• § 3.—Together with the Rapidity of Circulation.
• § 4.Explanations and Limitations of this Principle.
• Chapter VI.Of The Value Of Money, As Dependent On Cost Of Production.
• § 1.The value of Money, in a state of Freedom, conforms to the value of the Bullion contained in it.
• § 2.—Which is determined by the cost of production.
• § 3.This law, how related to the principle laid down in the preceding chapter.
• Chapter VII.Of A Double Standard And Subsidiary Coins.
• § 1.Objections to a Double Standard.
• § 2.The use of the two metals as money, and the management of Subsidiary Coins.
• § 3.The experience of the United States with a double standard from 1792 to 1883.
• Chapter VIII.Of Credit, As A Substitute For Money.
• § 1.Credit not a creation but a Transfer of the means of Production.
• § 2.In what manner it assists Production.
• § 3.Function of Credit in economizing the use of Money.
• § 4.Bills of Exchange.
• § 5.Promissory Notes.
• § 6.Deposits and Checks.
• Chapter IX.Influence Of Credit On Prices.
• § 1.What acts on prices is Credit, in whatever shape given.
• § 2.Credit a purchasing Power, similar to Money.
• § 3.Great extensions and contractions of Credit.Phenomena of a commercial crisis analyzed.
• § 4.Influence of the different forms of Credit on Prices.
• § 5.On what the use of Credit depends.
• § 6.What is essential to the idea of Money?
• Chapter X.Of An Inconvertible Paper Currency.
• § 1.What determines the value of an inconvertible paper money?
• § 2.If regulated by the price of Bullion, as inconvertible Currency might be safe, but not Expedient.
• § 3.Examination of the doctrine that an inconvertible Current is safe, if representing actual Property.
• § 4.Experiments with paper Money in the United States.
• § 5.Examination of the gain arising from the increase and issue of paper Currency.
• § 6. Résumé of the subject of money.
• Chapter XI.Of Excess Of Supply.
• § 1.The theory of a general Over-Supply of Commodities stated.
• § 2.The supply of commodities in general can not exceed the power of Purchase.
• § 3.There can never be a lack of Demand arising from lack of Desire to Consume.
• § 4.Origin and Explanation of the notion of general Over-Supply.
• Chapter XII.Of Some Peculiar Cases Of Value.
• § 1.Values of commodities which have a joint cost of production.
• § 2.Values of the different kinds of agricultural produce.
• Chapter XIII.Of International Trade.
• § 1.Cost of Production not a regulator of international values.Extension of the word “international.”
• § 2.Interchange of commodities between distance places determined by differences not in their absolute, but in the comparative, costs of production.
• § 3.The direct benefits of commerce consist in increased Efficiency of the productive powers of the World.
• § 4.—Not in a Vent for exports, nor in the gains of Merchants.
• § 5.Indirect benefits of Commerce, Economical and Moral; still greater than the Direct.
• Chapter XIV.Of International Values.
• § 1.The values of imported commodities depend on the Terms of international interchange.
• § 2.The values of foreign commodities depend, not upon Cost of Production, but upon Reciprocal Demand and Supply.
• § 3.—As illustrated by trade in cloth and linen between England and Germany.
• § 4.The conclusion states in the Equation of International Demand.
• § 5.The cost to a country of its imports depends not only on the ratio of exchange, but on the efficiency of its labor.
• Chapter XV.Of Money Considered As An Imported Commodity.
• § 1.Money imported on two modes; as a Commodity, and as a medium of Exchange.
• § 2.As a commodity, it obeys the same laws of Value as other imported Commodities.
• Chapter XVI.Of The Foreign Exchanges.
• § 1.Money passes from country to country as a Medium of Exchange, through the Exchanges.
• § 2.Distinction between Variations in the Exchanges which are self-adjusting and those which can only be rectified through Prices.
• Chapter XVII.Of The Distribution Of The Precious Metals Through The Commercial World.
• § 1.The substitution of money for barter makes no difference in exports and imports, nor in the Law of international Values.
• § 2.The preceding Theorem further illustrated.
• § 3.The precious metals, as money, are of the same Value, and distribute themselves according to the same Law, with the precious metals as a Commodity.
• § 4.International payments entering into the “financial account.”
• Chapter XVIII.Influence Of The Currency On The Exchanges And On Foreign Trade.
• § 1.Variations in the exchange, which originate in the Currency.
• § 2.Effect of a sudden increase of a metallic Currency, or of the sudden creation of Bank-Notes or other substitutes for Money.
• § 3.Effect of the increase of an inconvertible paper Currency.Real and nominal exchange.
• Chapter XIX.Of The Rate Of Interest.
• § 1.The Rate of Interest depends on the Demand and Supply of Loans.
• § 2.Circumstances which Determine the Permanent Demand and Supply of Loans.
• § 3.Circumstances which Determine the Fluctuations.
• § 4.The Rate of Interest not really Connected with the value of Money, but often confounded with it.
• § 5.The Rate of Interest determines the price of land and of Securities.
• Chapter XX.Of The Competition Of Different Countries In The Same Market.
• § 1.Causes which enable one Country to undersell another.
• § 2.High wages do not prevent one Country from underselling another.
• § 3.Low wages enable a Country to undersell another, when Peculiar to certain branches of Industry.
• § 4.—But not when common to All.
• § 5.Low profits as affecting the carrying Trade.
• Chapter XXI.Of Distribution, As Affected By Exchange.
• § 1.Exchange and money make no Difference in the law of Wages.
• § 2.In the law of Rent.
• § 3.—Nor in the law of Profits.
• Book IV.Influence Of The Progress Of Society On Production And Distribution.
• Chapter I.Influence Of The Progress Of Industry And Population On Values And Prices.
• § 1.Tendency of the progress of society toward increased Command over the powers of Nature; increased Security, and increased Capacity of Co-Operation.
• § 2.Tendency to a Decline of the Value and Cost of Production of all Commodities.
• § 3.—except the products of Agriculture and Mining, which have a tendency to Rise.
• § 4.—that tendency from time to time Counteracted by Improvements in Production.
• § 5.Effect of the Progress of Society in moderating fluctuations of Value.
• Chapter II.Influence Of The Progress Of Industry And Population On Rents, Profits, And Wages.
• § 1.Characteristic features of industrial Progress.
• § 2.First two cases, Population and Capital increasing, the arts of production stationary.
• § 3.The arts of production advancing, capital and population stationary.
• § 4.Theoretical results, if all three Elements progressive.
• § 5.Practical Results.
• Chapter III.Of The Tendency Of Profits To A Minimum.
• § 1.Different Theories as to the fall of Profits.
• § 2.What determines the minimum rate of Profit?
• § 3.In old and opulent countries, profits habitually near to the minimum.
• § 4.—prevented from reaching it by commercial revulsions.
• § 5.—by improvements in Production.
• § 6.—by the importation of cheap Necessaries and Implements.
• § 7.—by the emigration of Capital.
• Chapter IV.Consequences Of The Tendency Of Profits To A Minimum, And The Stationary State.
• § 1.Abstraction of Capital not necessarily a national loss.
• § 2.In opulent countries, the extension of machinery not detrimental but beneficial to Laborers.
• § 3.Stationary state of wealth and population dreaded by some writers, but not in itself undesirable.
• Chapter V.On The Possible Futurity Of The Laboring-Classes.
• § 1.The possibility of improvement while Laborers remain merely receivers of Wages.
• § 2.—through small holdings, by which the landlord's gain is shared.
• § 3.—through co-operation, by which the manager's wages are shared.
• § 4.Distributive Co-operation.
• § 5.Productive Co-Operation.
• § 6.Industrial Partnership.
• § 7.People's Banks.
• Book V.On The Influence Of Government.
• Chapter I.On The General Principles Of Taxation.
• § 1.Four fundamental rules of Taxation.
• § 2.Grounds of the principle of Equality of Taxation.
• § 3.Should the same percentage be levied on all amounts of Income?
• § 4.Should the same percentage be levied on Perpetual and on Terminable Incomes?
• § 5.The increase of the rent of land from natural causes a fit subject of peculiar Taxation.
• § 6.Taxes falling on Capital not necessarily objectionable.
• Chapter II.Of Direct Taxes.
• § 1.Direct taxes either on income or expenditure.
• § 2.Taxes on rent.
• § 3.—on profits.
• § 4.—on Wages.
• § 5.—on Income.
• § 6.A House-Tax.
• Chapter III.Of Taxes On Commodities, Or Indirect Taxes.
• § 1.A Tax on all commodities would fall on Profits.
• § 2.Taxes on particular commodities fall on the consumer.
• § 3.Peculiar effects of taxes on Necessaries.
• § 4.—how modified by the tendency of profits to a minimum.
• § 5.Effects of discriminating Duties.
• § 6.Effects produced on international Exchange by Duties on Exports and on Imports.
• Chapter IV.Comparison Between Direct And Indirect Taxation.
• § 1.Arguments for and against direct Taxation.
• § 2.What forms of indirect taxation are most eligible?
• § 3.Practical rules for indirect taxation.
• § 4.Taxation systems of the United States and other Countries.
• § 5. A Résumé of the general principles of taxation.
• Chapter V.Of A National Debt.
• § 1.Is it desirable to defray extraordinary public expenses by loans?
• § 2.Not desirable to redeem a national Debt by a general Contribution.
• § 3.In what cases desirable to maintain a surplus revenue for the redemption of Debt.
• Chapter VI.Of An Interference Of Government Grounded On Erroneous Theories.
• § 1.The doctrine of Protection to Native Industry.
• § 2.—had its origin in the Mercantile System.
• § 3.—supported by pleas of national subsistence and national defense.
• § 4.—on the ground of encouraging young industries; colonial policy.
• § 5.—on the ground of high wages.
• § 6.—on the ground of creating a diversity of industries.
• § 7.—on the ground that it lowers prices.
• Appendix I.Bibliographies.
• Appendix II.Examination Questions.
• Footnotes