Principles of Political Economy

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John Stuart Mill, Principles of Political Economy withsome of their Applications to Social Philosophy (Ashleyed.) [1848]

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Edition Used:Principles of Political Economy with some of their Applications to Social Philosophy,ed. William James Ashley (London: Longmans, Green and Co., 1909, 7th ed.).

Author: John Stuart MillEditor: Sir William James Ashley

About This Title:John Stuart Mill originally wrote the Principles of Political Economy, with some oftheir Applications to Social Philosophy very quickly, having studied economics underthe rigorous tutelage of his father, James, since his youth. It was published in 1848 inLondon and was republished with changes and updates a total of seven times in Millslifetime. The edition presented here is that prepared by W. J. Ashley in 1909, basedon Mills 7th edition of 1870. Ashley followed the 7th edition with great care, notingchanges in the editions in footnotes and in occasional square brackets within the text.The text provides English translations to several lengthy quotations originally quotedby Mill in French.

Online Library of Liberty: Principles of Political Economy with some of their Applications to SocialPhilosophy (Ashley ed.)

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Table Of ContentsIntroductionPreface [1848][addition to the Preface In the Second Edition, 1849]Preface to the Third Edition [july, 1852][addition to the Preface In the Fourth Edition, 1857][addition to the Preface In the Fifth Edition, 1862][addition to the Preface In the Sixth, Edition, 1865][addition to the Preface In the People's Edition, 1865]Preface to the Seventh Edition [1871]?Principles of Political EconomyPreliminary RemarksBook I: ProductionChapter I: Of the Requisites of ProductionChapter II: Of Labour As an Agent of ProductionChapter III: Of Unproductive LabourChapter IV: Of CapitalChapter V: Fundamental Propositions Respecting CapitalChapter VI: On Circulating and Fixed CapitalChapter VII: On What Depends the Degree of Productiveness of Productive

AgentsChapter VIII: Of Co-operation, Or the Combination of LabourChapter IX: Of Production On a Large, and Production On a Small ScaleChapter X: Of the Law of the Increase of LabourChapter XI: Of the Law of the Increase of CapitalChapter XII: Of the Law of the Increase of Production From LandChapter XIII: Consequences of the Foregoing LawsBook II.: Distribution.Chapter I.: Of PropertyChapter III.: Of the Classes Among Whom the Produce Is DistributedChapter IV.: Of Competition and CustomChapter V.: Of SlaveryChapter VI.: Of Peasant ProprietorsChapter VII.: Continuation of the Same SubjectChapter VIII.: Of MetayersChapter IX.: Of CottiersChapter X.: Means of Abolishing Cottier TenancyChapter XI.: Of WagesChapter XII.: Of Popular Remedies For Low WagesChapter XIII.: The Remedies For Low Wages Further ConsideredChapter XIV.: Of the Differences of Wages In Different EmploymentsChapter XV.: Of ProfitsChapter XVI.: Of RentBook III: ExchangeChapter I: Of Value



Chapter II: Of Demand and Supply In Their Relation to ValueChapter III: Of Cost of Production, In Its Relation to ValueChapter IV: Ultimate Analysis of Cost of ProductionChapter V: Of Rent, In Its Relation to ValueChapter VI: Summary of the Theory of ValueChapter VII: Of MoneyChapter VIII: Of the Value of Money, As Dependent On Demand and SupplyChapter IX: Of the Value of Money, As Dependent On Cost of ProductionChapter X: Of a Double Standard, and Subsidiary CoinsChapter XI: Of Credit, As a Substitute For MoneyChapter XII: Influence of Credit On PricesChapter XIII: Of an Inconvertible Paper CurrencyChapter XIV: Of Excess of SupplyChapter XV: Of a Measure of ValueChapter XVI: Of Some Peculiar Cases of ValueChapter XVII.: On International TradeChapter XVIII: Of International ValuesChapter XIX: Of Money, Considered As an Imported CommodityChapter XX: Of the Foreign ExchangesChapter XXI: Of the Distribution of the Precious Metals Through the

Commercial WorldChapter XXII: Influence of the Currency On the Exchanges and On Foreign

TradeChapter XXIII: Of the Rate of InterestChapter XXIV: Of the Regulation of a Convertible Paper CurrencyChapter XXV: Of the Competition of Different Countries In the Same MarketChapter XXVI: Of Distribution, As Affected By ExchangeBook IV: Influence of the Progress of Society On Production and DistributionChapter I: General Characteristics of a Progressive State of WealthChapter II: Influence of the Progress of Industry and Population On Values and

PricesChapter III: Influence of the Progress of Industry and Population, On Rents,

Profits, and WagesChapter IV: Of the Tendency of Profits to a MinimumChapter V: Consequences of the Tendency of Profits to a MinimumChapter VI: Of the Stationary StateChapter VII: On the Probable Futurity of the Labouring ClassesBook V: On the Influence of GovernmentChapter I: Of the Functions of Government In GeneralChapter II: On the General Principles of TaxationChapter III: Of Direct TaxesChapter IV: Of Taxes On CommoditiesChapter V: Of Some Other TaxesChapter VI: Comparison Between Direct and Indirect TaxationChapter VII: Of a National DebtChapter VIII: Of the Ordinary Functions of Government, Considered As to

Their Economical EffectsChapter IX: The Same Subject Continued



Chapter X: Of Interferences of Government Grounded On Erroneous TheoriesChapter XI: Of the Grounds and Limits of the Laisser-faire Or Non-interference

PrincipleBibliographical Appendix: Prepared By Sir William Ashley In 1909

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[Back to Table of Contents]

IntroductionThe best Introduction to the Principles of Political Economy of John Stuart Mill isMill's own account of his economic studies. They began at the age of thirteen; whenhe was approaching the end of that unique educational process, enforced by the sternwill of his father, which he has described in his Autobiography for the amazement andpity of subsequent generations.

It was in 1819 that he took me through a complete course of political economy. Hisloved and intimate friend, Ricardo, had shortly before published the book whichformed so great an epoch in political economy; a book which would never have beenpublished or written, but for the entreaty and strong encouragement of my father....No didactic treatise embodying its doctrines, in a manner fit for learners, had yetappeared. My father, therefore, commenced instructing me in the science by a sort oflectures, which he delivered to me in our walks. He expounded each day a portion ofthe subject, and I gave him next day a written account of it, which he made me rewriteover and over again until it was clear, precise, and tolerably complete. In this mannerI went through the whole extent of the science; and the written outline of it whichresulted from my daily compte rendu served him afterwards as notes from which towrite his Elements of Political Economy. After this I read Ricardo, giving an accountdaily of what I read, and discussing... the collateral points which offered themselvesin our progress.

On Money, as the most intricate part of the subject, he made me read in the samemanner Ricardo's admirable pamphlets, written during... the Bullion controversy; tothese succeeded Adam Smith; and... it was one of my father's main objects to makeme apply to Smith's more superficial view of political economy the superior lights ofRicardo, and detect what was fallacious in Smith's arguments, or erroneous in any ofhis conclusions. Such a mode of instruction was excellently calculated to form athinker; but it required to be worked by a thinker, as close and vigorous as my father.The path was a thorny one, even to him, and I am sure it was so to me,notwithstanding the strong interest I took in the subject. He was often, and muchbeyond reason, provoked by my failures in cases where success could not have beenexpected; but in the main his method was right, and it succeeded.1

After a year in France, during which he passed some time in the house of M. Say, theeminent political economist, who was a friend and correspondent of the elder Mill,2he went a second time over the same ground under the same guidance.

When I returned (1821), my father was just finishing for the press his Elements ofPolitical Economy, and he made me perform an exercise on the manuscript, whichMr. Bentham practised on all his own writings, making what he called marginalcontents; a short abstract of every paragraph, to enable the writer more easily tojudge of, and improve, the order of the ideas, and the general character of theexposition.3



This was soon after reaching the age of fifteen. Four years later, in 1825, he made asystematic survey of the field for the third time. Though he was still only nineteen, hewas now fully embarked upon his career as an economist, and was contributingarticles on currency and commercial policy to the Westminster Review. Yet when, inthat year, John Mill and a number of his youthful friends entered upon the joint studyof several of the branches of science which they wished to be masters of, it wasonce more the work of the elder Mill which served as the basis.

We assembled to the number of a dozen or more. Mr. Grote lent a room of his housein Threadneedle Street.... We met two mornings in every week, from half-past eighttill ten, at which hour most of us were called off to our daily occupations. Our firstsubject was Political Economy. We chose some systematic treatise as our text-book;my father's Elements being our first choice. One of us read a chapter, or some smallerportion of the book. The discussion was then opened, and anyone who had anobjection, or other remark to make, made it. Our rule was to discuss thoroughly everypoint raised... until all who took part were satisfied with the conclusion they hadindividually arrived at; and to follow up every topic... which the chapter or theconversation suggested, never leaving it until we had untied every knot.1

The figure of James Mill has been singularly obscured by the more attractivepersonality of his son. It may possibly be open to discussion how far James Mill was atrustworthy interpreter of Ricardo. But what cannot be doubted is the extent andpenetrating character of his influence. The evidence of his son may certainly be reliedupon:

My father's writings and conversation drew round him a number of young men whohad already imbibed, or who imbibed from him, a greater or smaller portion of hisvery decided political and philosophical opinions. The notion that Bentham wassurrounded by a band of disciples who received their opinions from his lips, is afable.... The influence which Bentham exercised was by his writings. Through themhe has produced, and is producing, effects on the condition of mankind, wider anddeeper than any which can be attributed to my father. He is a much greater name inhistory. But my father exercised a far greater personal ascendency. He was sought forthe vigour and instructiveness of his conversation, and did use it largely as aninstrument for the diffusion of his opinions....

It was my father's opinions which gave the distinguishing character to the Benthamicor utilitarian propagandism of that time. They fell singly, scattered from him, in manydirections, but they flowed from him in a continued stream principally in threechannels. One was through me, the only mind directly formed by his instructions, andthrough whom considerable influence was exercised over various young men, whobecame, in their turn, propagandists. A second was through some of the Cambridgecontemporaries of Charles Austin... some of the more considerable of whomafterwards sought my father's acquaintance.... The third channel was that of a youngergeneration of Cambridge undergraduates, contemporary... with Eyton Tooke, whowere... introduced by him to my father....



Though none of us, probably, agreed in every respect with my father, his opinions, asI said before, were the principal element which gave its colour and character to thelittle group of young men who were the first propagators of what was afterwardscalled Philosophic Radicalism. Their mode of thinking was characterized by... acombination of Bentham's point of view with that of the modern political economy,and with the Hartleian metaphysics. Malthus's population principle was quite as mucha banner, and point of union among us, as any opinion specially belonging toBentham. This great doctrine... we took up with ardent zeal,... as indicating the solemeans of realizing the improvability of human affairs by securing full employment athigh wages to the whole labouring population through a voluntary restriction of theincrease of their numbers.1

What was true of James Mill's personal influence on the entire circle of youngPhilosophic Radicals and over the whole range of their beliefs, was peculiarly true ofhis influence on the economic opinions of his son. The impress was deep andindelible. For good or for ill,and it is not the purpose of this Introduction tointerpose between the reader and the author and to assign either praise orblameJohn Mill's economics remained those of his father down to the end of hislife. His economics, that is to say, in the sense of what he himself afterwardsdescribed as the theoretic principles,2 or again as the abstract and purelyscientific3 element in his writings: the whole, in fact, of the doctrine of Distributionand Exchange in its application to competitive conditions. After reading through thefirst three Books of the son's Principles of 1848, one has but to turn to the father'sElements of 1821 to realize that, though on outlying portions of the field (like thesubject of Currency) John Mill had benefited by the discussions that had been goingon during the interval, the main conclusions, as well as the methods of reasoning, arethe same in the two treatises. How much of the deposit of doctrine,if we mayborrow a theological term,came originally from Ricardo, how much from Malthus,from Adam Smith, from the French Physiocrats of the eighteenth century, and fromthe general movement of philosophical and political thought, is a subject on whichmuch has been written, but on which we cannot now enter. It is sufficient for ourpurpose to make this one point clear: that it was through James Mill, and, as shapedby James Mill, that it chiefly reached his son.

Yet John Mill certainly thought, when he was writing his book in 1848, and still moreevidently when he wrote his Autobiography in 1861, that there was a wide differencebetween himself and those whom he calls, in language curiously anticipating that ofour own day, the political economists of the old school,1 or the common run ofpolitical economists.2 And accordingly it is essential to observe that this differenceconsisted, not in any abandonment of the abstract science, but in the placing of it ina new setting. In substance he kept it intact; but he sought to surround it, so to speak,with a new environment.

To make this clear, we must return to Mill's mental history. Though eminentlyretentive of early impressions, he was also, in a very real sense, singularly open-minded; and the work of his life cannot be better described than in a happy phrase ofhis own coinage: it was a constant effort to build the bridges and clear the pathswhich should connect new truths with his general system of thought,3i.e. with his



Benthamite and Ricardian starting point. Of the influences, later than that of hisfather, which coloured his thoughts, three must be singled out for notice. They maybriefly be summed upthough each name represents much besidesas those ofColeridge, of Comte, and of his wife.

In Coleridge and in the Coleridgianssuch as Maurice and Sterling, whoseacquaintance he made in 1828he recognised the English exponents of theEuropean reaction against the philosophy of the eighteenth century,4 and itsBenthamite outcome. That reaction, he came to believe, was in large measurejustifiable; and in two celebrated articles in the London and Westminster Review in1838 and 18405 he sought to expound Benthamism and Coleridgism ascomplementary bodies of truth. He did not, indeed, extend this appreciation toColeridge's economic utterances, and compounded for the respect he paid to hispolitical philosophy by the vivacity with which he condemned his incursions into themore sacred field:

In political economy he writes like an arrant driveller, and it would have been wellfor his reputation had he never meddled with the subject. But this department ofknowledge can now take care of itself.1

What Coleridge helped him to realise was, firstly, the historical point of view in itsrelation to politics, and secondly, and as a corollary, the inadequacy of laissez faire.

The Germano-Coleridgian school produced... a philosophy of society in the onlyform in which it is yet possible, that of a philosophy of history.2

And again

That series of great writers and thinkers, from Herder to Michelet, by whomhistory... has been made a science of causes and effects,... by making the events of thepast have a meaning and an intelligible place in the gradual evolution of humanity,have afforded the only means of predicting and guiding the future.3

Similarly, after pointing out that Coleridge was

at issue with the let alone doctrine, or the theory that governments can do no betterthan to do nothing,

he remarks that it was

a doctrine generated by the manifest selfishness and incompetence of modernEuropean governments, but of which, as a general theory, we may now be permittedto say that one-half of it is true and the other half false.4

It is not wonderful that the Bentham and Coleridge articles should make a temporaryalienation between Mill and his old associates and plant in their minds a painfulmisgiving as to his adhering to their principles, as we learn from Professor Bain, whobecame an intimate friend of Mill shortly afterwards.5 As early as 1837 Mrs. Grotehad been quite persuaded that the [London and Westminster] Review would cease to



be an engine of propagating sound and sane doctrines on Ethics and Politics under J.M.6 But it is a little surprising, perhaps, that by 1841 Mill was ready to describehimself in the privacy of correspondence as having definitely withdrawn from theBenthamite school in which I was brought up and in which I might almost say I wasborn.1

The letter was that in which Mill introduced himself to Comte, the first of aremarkable series which has only recently seen the light. By the time he wrote it, theinfluence of Coleridge had been powerfully supplemented by that of the Frenchphilosopher. Indeed, with that tendency to run into extremes which was seldom quiteabsent from him, Mill even declared, in addressing Comte, that it was the impressionproduced as far back as 1828 by the reading of a very early work by Comte which hadmore than any other cause determined his definite withdrawal from the Benthamiteschool. In his eager enthusiasm, he probably ante-dated Comte's influence. It seemsto have been the first two volumes of the Positive Philosophy (of which the secondappeared in 1837) that first interested Mill at all deeply in Comte's views; though, aswe shall notice later, he had long been familiar with ideas akin to them in the writingsof the St. Simonians.

However this may have been, it is abundantly clear that during the years 18413,when he was engaged in completing his great treatise on Logic, Mill was fascinatedby Comte's general system, as set forth in the Positive Philosophy. In October, 1841,he wrote to Bain that he thought Comte's book, in spite of some mistakes, wasvery near the grandest work of this age.2 In November, in the letter to Comtealready quoted, he took the initiative and wrote to the French philosopher to expresshis sympathy and adhesion. I have read and re-read your Cours with a veritableintellectual passion, he told him.

I had indeed already entered into a line of thought somewhat similar to your own;but there were many things of the first importance which I had still to learn from youand I hope to show you, by and by, that I have really learnt them. There are somequestions of a secondary order on which my opinions are not in accord with yours;some day perhaps this difference will disappear; I am not flattering myself when Ibelieve that I have no ill-founded opinion so deeply rooted as to resist a thoroughdiscussion,

such as he hoped to engage Comte in. It was for this reason that he ventured to puthimself into communication with that one of the great minds of our time which Iregard with most esteem and admiration, and believed that their correspondencemight be of immense value for him. And in the first edition of his Logic, whichappeared in 1843, he did not scruple to speak of Comte as the greatest livingauthority on scientific methods in general.1 Into the causes of this enthusiasm it isunnecessary to enter. Mill was tired of Benthamism: a masterly attempt to construct aphilosophy of Science and of Humanity, which paid attention at the same time tohistorical evolution and to the achievements of modern physical and biologicalscience (a side on which the Benthamite school had always been weak), and yetprofessed to be positive, i.e. neither theological nor metaphysicalsuch an attempthad, for the time, an overmastering charm for him. The effect of his reading of Comte



on his conception of the logic of the physical and biological sciences falls outside ourpresent range. What we have now to notice are Comte's views with regard to politicaleconomy. They cannot but have shaken, at any rate for a time, Mill's confidence thatwhat he had learnt from his father could take care of itself.

Comte's ultimate object was, of course, the creation of the Social Science orSociology. To-day there are almost as many different conceptions of the scope ofsociology as there are eminent sociologists; so that it is perhaps worth while to addthat Comte's ideal was a body of doctrine which should cover the life of humansociety in all its aspects. This science could be created, he held, only by the positivemethodby the employment of the Art of Observation, in its three modes, DirectObservation or Observation proper, Experiment, and Comparison.2 Each of thesemodes of Observation would necessarily assume a character appropriate to the field ofenquiry. As to Observation proper: while the metaphysical school of the eighteenthcentury had grossly exaggerated its difficulties, on the other hand there was no utilityin mere collections of disconnected facts. Some sort of provisional hypothesis ortheory or anticipation was necessary, if only to give direction to our enquiries. As toExperiment: direct Experiment, as in the physical sciences, was evidentlyimpracticable, but its place could be taken by a consideration of pathological statesof society such as might fairly be called indirect Experiment. And as toComparison: there was a form of this procedure, viz. the comparison of the differentconsecutive conditions of humanity,the historical method in the true sense of theterm,so fruitful in sociological enquiry as to constitute the distinguishingcharacteristic of this particular branch of science.

To this social science of his vision Comte applied the distinction he had alreadyapplied to the preliminary sciences, between the static and the dynamic.1 Thedifference between the fundamental study of the condition of existence of societyand the study of the laws of its continuous movement was so clear, in his judgment,that he could foresee the ultimate division of Sociology into Social Statics and SocialDynamics. But to attach, in the formative stage of the science, any very greatimportance to this convenient distribution of the subject matter would, he thought, bepositively dangerous, since it would tend to obscure the indispensable and permanentcombination of the two points of view.

Comte's attitude towards political economy, as it was then taught was the naturalresult of his views as to the proper method of creating a science of society.2 As part ofthe general movement of revolutionary thought, it had had a provisional function,and had rendered a transitory service in discrediting the industrial policy of the ancienrgime after that policy had become a mere hindrance to progress. It had prepared theway for a sound historical analysis by calling attention to the importance of theeconomic side of life. Its practical utility, however, was by this time a thing of thepast and it was now an actual obstacle to social advance. Like the rest of therevolutionary philosophy, it now tended to prolong and systematise social anarchy. Itled people to regard the absence of all regulating intervention in economic affairs onthe part of society as a universal dogma; and it met all the difficulties arising out ofmodern industrial changes, such as the famous and immense economic question ofthe effect of machinery, with the sterile aphorism of absolute industrial liberty.



And these practical consequences were but, in Comte's judgment, the consequences ofits underlying scientific defects. From this sweeping condemnation Comte exceptsAdam Smith, from whose example, according to him, the creators of thecontemporary political economy had completely departed. But of the contemporarypolitical economy he declares that it was fundamentally metaphysical: its creators hadno real understanding of the necessity and character of scientific observation. Itsinanity was proved by the absence in economic literature of the real tests of all trulyscientific conceptions, viz. continuity and fecundity. Its sterile disputes on themeaning of terms such as value, and utility, and production were like the worstdebates of medieval schoolmen. And the very isolation of economics from other fieldsof social enquiry which economists had sought to justify was its decisivecondemnation.

By the nature of the subject, in social studies the various general aspects are, quitenecessarily, mutually inter-connected and inseparable in reason, so that the one aspectcan only be adequately explained by the consideration of the others. It is certain thatthe economic and industrial analysis of society cannot be positively accomplished, ifone leaves out all intellectual, moral and political analysis: and therefore thisirrational separation furnishes an evident indication of the essentially metaphysicalnature of the doctrines based upon it.

Now Mill was immensely attracted, and for the time possessed, by Comte's generalconception of the Social Science or Sociology; and in the concluding chapters of hisLogic he took this over bodily, together with Comte's distinction between SocialStatics and Social Dynamics.1 Just as Comte rejected the metaphysical politicalphilosophy of France, so Mill made clear his opinion of the inadequacy of theinterest-philosophy of the Bentham school in its application to the general theory ofgovernment. That philosophy, as he explained, was founded on one comprehensivepremiss: namely, that men's actions are always determined by their interests. But asthis premiss was not true, what were really the mere polemics of the day, and usefulenough in that capacity, were quite erroneously presented as the scientific treatmentof a great question. And quite in the spirit of Comte he added:

These philosophers would have applied and did apply their principles withinnumerable allowances. But it is not allowances that are wanted. There is littlechance of making due amends in the superstructure of a theory for the want ofsufficient breadth in its foundations. It is unphilosophical to construct a science out ofa few of the agencies by which the phenomena are determined, and leave the rest tothe routine of practice or the sagacity of conjecture. We ought either not to pretend toscientific forms or we ought to study all the determining agencies equally, andendeavour, as far as can be done, to include all of them within the pale of the science;else we shall infallibly bestow a disproportionate attention upon those which ourtheory takes into account, while we misestimate the rest and probably underrate theirimportance.1

How, then, about political economy, which Comte had criticised in precisely the samespirit ? Mill was not at all disposed to throw overboard the Ricardian economicsreceived from his father. In the first place, he maintained that a distinction could be



drawn between the general Science of Society or general Sociology and theseparate compartments of the science, each of which asserts its conclusions onlyconditionally, subject to the paramount control of the laws of the general science.The ground for this contention he sets forth thus:

Notwithstanding the universal consensus of the social phenomena, whereby nothingwhich takes place in any part of the operations of society is without its share ofinfluence on every other part; and notwithstanding the paramount ascendency whichthe general state of civilisation and social progress in any given society must henceexercise over the partial and subordinate phenomena; it is not the less true thatdifferent species of social facts are in the main dependent, immediately and in the firstresort, on different kinds of causes; and therefore not only may with advantage, butmust, be studied apart....

There is, for example, one large class of social phenomena of which the immediatelydetermining causes are principally those which act through the desire of wealth; andin which the psychological law mainly concerned is the familiar one that a greatergain is preferred to the smaller... A science may be thus constructed which hasreceived the name of Political Economy.2

In spite of the for example with which political economy is introduced, it is clearthat the generalisation was formulated for the sake of that one subject, subject to aqualification to be shortly mentioned.

I would not here undertake to decide what other hypothetical or abstract sciences,similar to Political Economy, may admit of being carved out of the general body ofthe social science; what other portions of the social phenomena are in a sufficientlyclose and complete dependence, in the first resort, on a particular class of causes, tomake it convenient to create a preliminary science of those causes; postponing theconsideration of the causes which act through them or in concurrence with them to alater period of the enquiry.1

But Mill was not content with this departmental view, taken by itself: he proceededto build two further bridges between his new and his old opinions. In an essay,written for the most part in 1830, and published in the London and WestminsterReview in 1836,2 Mill had laid down with the utmost stringency that the only methodappropriate to political economy, i.e. to the Ricardian economics, was the a priori ordeductive one. Between this and the method of Observation recommended by Comteit might have been thought that there was a sufficiently wide gulf. But Mill nowproceeded to describe the historical method,whereby general Sociology was tobe built up according to Comte and himself alike,in such terms as permitted him todesignate even that a Deductive Method, though indeed an Inverse DeductiveMethod. Thus the evident contrast in method was softened down into the differencesimply between direct and inverse deduction.3

The other bridge was to be a new science, or couple of sciences, still to be created.Mill explained at length in his Logic that there was need of what he denominatedEthology or a Science of Character.4 Built upon this, there ought to be a Political



Ethology, or a theory of the causes which determine the type of character belongingto a people or to an age.5 The bearing of Political Ethology on Political Economy isthus summarily indicated:

The most imperfect part of those branches of social enquiry which have beencultivated as separate sciences is the theory of the manner in which their conclusionsare affected by ethological considerations. The omission is no defect in them asabstract or hypothetical sciences, but it vitiates them in their practical application asbranches of a comprehensive social science. In political economy, for instance,empirical laws of human nature are tacitly assumed by English thinkers, which arecalculated only for Great Britain and the United States. Among other things anintensity of competition is constantly supposed, which, as a general mercantile fact,exists in no country in the world except those two. An English political economist...has seldom learned that it is possible that men, in conducting the business of sellingtheir goods over the counter, should care more about their ease or their vanity thanabout their pecuniary gain.1

In spite once more of the introductory for instance, it is clear that it is only politicaleconomy that Mill has in his mind; and it is primarily to remedy its imperfectionsthat Political Ethology is to be created. Political Ethology, like Ethology itself, Millconceived of as directly deductive in its character.

It is no part of my task to criticise either Mill or Comte: all I am seeking to do is tomake clear the intellectual relations between them. And whether, in particular, aScience of National Character is possible, and, if possible, on what sort of lines it maybe constructed, I would not here undertake to decide. I go on now to the purelybiographical facts,which need the more emphasis because they have droptaltogether out of the Autobiography,that Mill took this project of creating anEthology very seriously; that with parental fondness he cherished this subject for aconsiderable time;2 and that he dropt it because he could not make anything of it.3

It was in this mood of recoil that he began to think of composing a special treatise onpolitical economy, analogous to that of Adam Smith. Writing to Comte in April,1844, he remarked that for him this would only be the work of a few months.4Some particulars as to the actual period of composition are furnished by theAutobiography.5

The Political Economy was far more rapidly executed than the Logic, or indeed thananything of importance which I had previously written. It was commenced in theautumn of 1845, and was ready for the press before the end of 1847. In this period oflittle more than two years there was an interval of six months during which the workwas laid aside, while I was writing articles in the Morning Chronicle... urging theformation of peasant properties on the waste lands of Ireland. This was during theperiod of the Famine, the winter of 184647.

After what we have seen of his mental history, it is easy to anticipate that Mill wouldno longer be satisfied with the kind of treatment that economics had received at thehands of his father, or in subsequent years of McCulloch or Senior. The principles



of abstract political economy, as he had inherited them, he entertained no sort ofdoubt about. As has been well said, within that field Mill speaks as one expoundingan established system.1 As late as 1844 he had reprinted in the thin volume entitledSome Unsettled Questions of Political Economy his old essay on Method, and hadexpressed his complete satisfaction, within its range, with the science as it was to befound in the writings of its best teachers.2 But he was bound to put this science intosome sort of relation with that general Social Science or Philosophy, of which he hadgained, or solidified, his notion from the reading of Comte. Accordingly, he gave tohis book the title Principles of Political Economy, with some of their Applications toSocial Philosophy. And he himself spoke of the work in later years in the followingterms:

It was, from the first, continually cited and referred to as an authority, because it wasnot a book merely of abstract science, but also of application, and treated PoliticalEconomy not as a thing by itself, but as a fragment of a greater whole; a branch ofSocial Philosophy, so interlinked with all the other branches, that its conclusions,even in its own peculiar province, are only true conditionally, subject to interferenceand counteraction from causes not directed within its scope: while to the character ofa practical guide it has no pretension, apart from other classes of considerations.3

It must be left to the reader to judge how far this application was successful,howfar, indeed, the nature of the abstract science lent itself to application. But thecharacter of the undertaking will be rendered clearer by noticing certain of itscharacteristics.

Ethology, as we have seen, had receded from Mill's mind. But the thoughts which hadgiven rise to the project have left their traces in the chapter on Competition andCustom.4 Here Custom is placed side by side with Competition as the other agencydetermining the division of produce under the rule of private property. It is pointedout not only that Competition is a comparatively modern phenomenon, so that, untilrecently, rents, for instance, were ruled by custom, but also that even in the presentstate of intense competition its influence is not so absolute as is often supposed: thereare very often two prices in the same market. He asserts that

political economists generally, and English political economists above others, areaccustomed to lay almost exclusive stress upon the first of these agencies; toexaggerate the effect of competition, and take into little account the other andconflicting principle. They are apt to express themselves as if they thought thatcompetition actually does, in all cases, whatever it can be shown to be the tendency ofcompetition to do.

The language in which he goes on to formulate an explanation and relativejustification of their practice is of the utmost significance.

This is partly intelligible, if we consider that only through the principle ofcompetition has political economy any pretension to the character of a science. So faras rents, profits, wages, prices, are determined by competition, laws may be assignedfor them. Assume competition to be their exclusive regulator, and principles of broad



generality and scientific precision may be laid down, according to which they will beregulated. The political economist justly deems this his proper business: and as anabstract or hypothetical science, political economy cannot be required to do anythingmore.

But, as the ascription to Competition of an unlimited sway is, as a matter of fact, agreat misconception of the actual cause of human affairs.

to escape error, we ought, in applying the conclusions of political economy to theactual affairs of life, to consider not only what will happen supposing the maximumof competition, but how far the result will be affected if competition falls short of themaximum.

After this it might perhaps be expected that Mill would himself embark on aquantitative estimate of the extent of the divergence of the laws of the sciencefrom the facts of life. But certainly no such attempt is made within the covers of histreatiseand he makes it clear that the application of his warning is to be left to thereader:

These observations must be received as a general correction, to be applied wheneverrelevant, whether expressly mentioned or not, to the conclusions contained in thesubsequent portions of this treatise. Our reasonings must, in general, proceed as if theknown and natural effects of competition were actually produced by it.

To discuss the conception of science and its relation to law which underlies suchpassages; to compare it with that implied by Mill elsewhere; or to enter into thequestion whether a systematic ascertainment and grouping of actual facts, guided bythe ordinary rules of evidence, might not deserve to be called scientific, even if itdid not result in lawwould take us too far afield. By confining, as he did, the termscience to the abstract argument, and by leaving the determination of its relation toactual conditions to what he himself in another connexion calls the sagacity ofconjecture, Mill undoubtedly exercised a profound influence on the subsequentcharacter of economic writing in England.

Another result, in the Political Economy, of the preceding phase of Mill's socialspeculation, is to be found in the distinction between Statics and Dynamics which henow introduces into economics itself.1 In the Logic, as we have noticed, thisdistinction was applied, following Comte, only to the general Sociology which was tobe created by the historical method. But the general Sociology being indefinitelypostponed, because the Ethology which in Mill's judgment was its necessaryfoundation was not forthcoming, it seemed proper to employ the distinction in thepreliminary science, and to add in the Political Economy itself a theory of motionto the theory of equilibrium. Thus employed, however, the distinction becomessomething very different from what Comte had intended. Almost the whole of Mill'sBook IV on the Progress of Society consists of a highly theoretical and abstractargument as to the effect on Prices, Rents, Profits, and Wages, within a competitivesociety of the present type, of the progress of population, capital, and the arts ofproduction, in various combinations. Much of the substance of these arguments was



derived from Ricardo or his school; and the whole discussion, even when Mill takesan independent line of his own, moves within the Ricardian atmosphere. Thisstatement of fact does not necessarily imply condemnation. It is made only to clearMill's use of the terms static and dynamic in his Political Economy from theambiguity which his own previous use of the term in relation to general Sociologymight cause to cling to it. And we must except the last chapter of the Book, dealingwith the Probable Futurity of the Working Classes, which is a prophecy of theultimate victory of Co-operation, and has little or no connexion with what goesbefore.

And now we come finally to what Mill himself regarded as the distinguishingcharacteristic of his work; and with it we reach the third of the influences that affectedthe movement of his mind after his early education. I refer, of course, to thedistinction which Mill drew between the laws of the Production and those of theDistribution of wealth.1 With the formal statement in the Principles may be comparedthe passage in the Autobiography,2 where Mill gives an account of the influence ofMrs. Taylor (who became his wife in April, 1851):

The purely scientific part of the Political Economy I did not learn from her; but itwas chiefly her influence that gave to the book that general tone by which it isdistinguished from all previous expositions of political economy that had anypretension to being scientific.... This tone consisted chiefly in making the properdistinction between the laws of the Production of wealthwhich are real laws ofnature, dependent on the properties of objectsand the modes of its Distribution,which, subject to certain conditions, depend on human will. The common run ofpolitical economists confuse these together, under the designation of economic laws,which they deem incapable of being defeated or modified by human effort; ascribingthe same necessity to things dependent on the unchangeable conditions of our earthlyexistence, and to those which, being but the necessary consequences of particularsocial arrangements, are merely co-extensive with these: given certain institutions andcustoms, wages, profits, and rent will be determined by certain causes; but this classof political economists drop the indispensable presupposition, and argue that thesecauses must, by an inherent necessity, against which no human means can avail,determine the shares which fall, in the division of the produce, to labourers,capitalists, and landlords. The Principles of Political Economy yielded to none of itspredecessors in aiming at the scientific appreciation of the action of these causes,under the conditions which they presuppose; but it set the example of not treatingthose conditions as final. The economic generalizations which depend not onnecessities of nature but on those combined with the existing arrangements of society,it deals with only as provisional, and as liable to be much altered by the progress ofsocial improvement. I had indeed partially learnt this view of things from the thoughtsawakened in me by the speculations of the St. Simonians; but it was made a livingprinciple pervading and animating the book by my wife's promptings.

It would be interesting, had I space, to try to distinguish the various currents ofthought which converged at this time upon Mill and his wife. They were both peopleof warm hearts and generous sympathies; and the one most important fact about Mill'sPrinciples, besides its being the work of the son of his father, is that it was published



in the great year 1848. Mill's personal friendship with Carlyle and Maurice inEngland, his keen interest for years in St. Simonism and all the other early phases ofFrench socialism, sufficiently disposed him, if he wore the old political economy atall, to wear it with a difference. I do not propose to add one more to the numerousarguments as to the validity of the distinction between the laws of Production and themodes of Distribution. But I should like to comment on one word which wasconstantly in Mill's mouth in this connexionand that is the word provisional; aword which, according to his own account, he had picked up from Austin.1 He used ittwice in the letter to Comte announcing his intention to write an economic treatise:

I know your opinion of the political economy of the day: I have a better opinion of itthan you have; but, if I write anything on the subject, it will be never losing out ofsight the purely provisional character of all its concrete conclusions; and I shall takespecial pains to separate the general laws of Production; which are necessarilycommon to all industrial societies; from the principles of the Distribution andExchange of wealth, which necessarily presuppose a particular state of society,without implying that this state should, or even can, indefinitely continue.... I believethat such a treatise might have, especially, in England, great provisional utility, andthat it will greatly help the positive spirit to make its way into political discussions.1

Then followed a curious interchange of letters. Comte replied politely that he wasglad to learn of Mill's project, and that he did not doubt that it would be very useful,by contributing to the spread of the positive spirit.

Although an economic analysis, properly so called, ought not, in my opinion, to befinally conceived of or undertaken apart from the general body of sociologicalanalysis, both static and dynamic, yet I have never refused to recognise theprovisional efficacy of this kind of present-day metaphysics.2

Mill wrote in return that he was pleased to get Comte's approbation, since he wasafraid Comte might have thought his project essentially anti-scientific;

and so it would really be if I did not take the greatest possible care to establish thepurely provisional character of any doctrine on industrial phenomena which leavesout of sight the general movement of humanity.3

Comte once more replied that he thought Mill's project a happy one.

When regarded as having the purely preliminary purpose and provisional office thatare assigned to it by a general historical view, political economy loses its principaldangers and may become very useful.4

It is sufficiently apparent that the correspondents are at cross purposes. Byprovisional Comte means until a positive Sociology can be created; Mill means solong as the present system of private property lasts. Until the present social systemshould be fundamentally changed, Mill clearly regarded the Ricardian economics asso far applicable to existing conditions as to call for no substantial revision in methodor conclusions. And by this attitude,by deferring any breach with Ricardian



political economy to a time comparable in the minds of men less ardent than himselfto the Greek Kalends,he certainly strengthened its hold over many of his readers.

Since Mill's time there has been a vast amount of economic writing. The GermanHistorical School has come into existence, and has reached a high point ofachievement in the treatise of Gustav Schmoller. On the other hand, other bodies oftheory have made their appearance, quite as abstract as the Ricardian which theyreject: and here the names of Jevons and Menger stand out above the rest. An equallyabstract Socialist doctrine, the creation largely of Marx, has meantime waxed andwaned. But Mill's Principles will long continue to be read and will deserve to be read.It represents an interesting phase in the intellectual history of the nineteenth century.But its merit is more than historical. It is still one of the most stimulating books thatcan be put into the hands of students, if they are cautioned at the outset againstregarding it as necessarily final in all its parts. On some topics there is still, in myopinion, nothing better in the English language; on others Mill's treatment is still thebest point of departure for further enquiry. Whatever its faults, few or many, it is agreat treatise, conceived and executed on a lofty plane, and breathing a noble spirit.Millespecially when we penetrate beneath the magisterial flow of his final text, aswe are now enabled to do by the record in this edition of his varying moodsis avery human personality. The reader of to-day is not likely to come to him in tooreceptive a spirit; and for a long time there will be much that even those who mostdiffer from him will still be able to learn from his pages.

It remains now to describe the character of the present edition. The text is that of theseventh edition (1871), the last revised by Mill; and it is hoped that the occasional butmisleading misprints which had crept into it have now all been corrected. It has notseemed desirable to add anything in the way of editorial comment. But in the one casewhere Mill himself publicly abandoned an important doctrine of his Principles,thatof the Wages Fundit has seemed proper to give an excerpt from his later writings inthe Appendix. And the same plan has been pursued with regard to Mill's latest viewson Socialism. I have also appended a series of references to the chief writers whohave dealt with the main topics of Mill's treatise, especially those of a controversialnature, since his time. That I have altogether escaped the influence of personal bias inthis selection I can hardly hope. If the references under any head should seem scantyor one-sided, it should be borne in mind that they are intended to include only thoseoutstanding works whose value is generally recognized by all serious economists, andthat the choice is limited in the main to the books that are easily accessible to theEnglish-reading public.

The characteristic feature, however, of this edition is the indication in the notes of allthe significant changes or additions made by Mill in the course of the six editionsrevised by himself. The dates of these editions, after the first in 1848, were 1849,1852, 1857, 1862, 1865, and 1871. In every one of these Mill made noteworthyalterations. Rewriting, or the addition of whole sections or paragraphs, takes placechiefly in the earlier editions;. but even in the last, that of 1871, the few verbalcorrections of which Mill speaks in his Preface were sufficient, in more passagesthan one, to give a different complexion to the argument. My attention was called tothis interesting feature in the history of the Principles by Miss M. A. Ellis' article in



the Economic Journal for June, 1906; and it seemed to me that the interest of studentswould be aroused by a record of the variations. Accordingly I have compared the firstand the seventh edition page by page and paragraph by paragraph; and where anystriking divergence has shown itself, I have looked up the earlier editions andascertained the date of its first appearance. This has proved an unexpectedly toilsomebusiness, even with the assistance of the notes that Miss Ellis has been good enoughto put at my disposal; and I cannot feel quite sure that nothing has escaped my eyethat ought to be noted. Mere changes of language for the sake of improving the style Ihave disregarded, though I have erred rather in the direction of including than ofexcluding every apparent indication of change of opinion or even of mood. Alleditorial notes are placed within square brackets; and I have added, and marked in thesame way, the dates of all Mill's own footnotes subsequent to the first edition. AsMill's revision of the text, though considerable, was rather fragmentary, his time-references are occasionally a little bewildering: a now in his text may mean anytime between 1848 and 1871. In every case where it seemed necessary to ascertainand to remind the reader of the time when a particular sentence was written, I haveinserted the date in the text in square brackets.

Mill's punctuation is not quite so preponderatingly grammatical as punctuation hassince become. As in all the books of the middle of last century, it is also largelyrhetorical. The printers had already, during the course of six editions, occasionallyused their discretion and dropt out a misleading comma. I have ventured to carry theprocess just a little further, and to strike out a few rhetorical commas that seemed tointerfere with the easy understanding of the text. The Index has been prepared byMiss M. A. Ellis.

I must express my thanks to the proprietors of the Fortnightly Review for allowing meto make use of Mill's posthumous articles, and to Mr. Hugh Elliot for permitting me torefer to the Letters of Mill which he is now editing.

W. J. ASHLEY.

EDGBASTON,

September, 1909.




Preface[1848]The appearance of a treatise like the present, on a subject on which so many works ofmerit already exist, may be thought to require some explanation.

It might, perhaps, be sufficient to say, that no existing treatise on Political Economycontains the latest improvements which have been made in the theory of the subject.Many new ideas, and new applications of ideas, have been elicited by the discussionsof the last few years, especially those on Currency, on Foreign Trade, and on theimportant topics connected more or less intimately with Colonization: and thereseems reason that the field of Political Economy should be re-surveyed in its wholeextent, if only for the purpose of incorporating the results of these speculations, andbringing them into harmony with the principles previously laid down by the bestthinkers on the subject.

To supply, however, these deficiencies in former treatises bearing a similar title, is notthe sole, or even the principal object which the author has in view. The design of thebook is different from that of any treatise on Political Economy which has beenproduced in England since the work of Adam Smith.

The most characteristic quality of that work, and the one in which it most differs fromsome others which have equalled or even surpassed it as mere expositions of thegeneral principles of the subject, is that it invariably associates the principles withtheir applications. This of itself implies a much wider range of ideas and of topicsthan are included in Political Economy, considered as a branch of abstractspeculation. For practical purposes, Political Economy is inseparably intertwined withmany other branches of Social Philosophy. Except on matters of mere detail, there areperhaps no practical questions, even among those which approach nearest to thecharacter of purely economical questions, which admit of being decided oneconomical premises alone. And it is because Adam Smith never loses sight of thistruth; because, in his applications of Political Economy, he perpetually appeals toother and often far larger considerations than pure Political Economy affordsthat hegives that well-grounded feeling of command over the principles of the subject forpurposes of practice, owing to which the Wealth of Nations, alone among treatises onPolitical Economy has not only been popular with general readers, but has impresseditself strongly on the minds of men of the world and of legislators.

It appears to the present writer that a work similar in its object and general conceptionto that of Adam Smith, but adapted to the more extended knowledge and improvedideas of the present age, is the kind of contribution which Political Economy atpresent requires. The Wealth of Nations is in many parts obsolete, and in all,imperfect. Political Economy, properly so called, has grown up almost from infancysince the time of Adam Smith; and the philosophy of society, from which practicallythat eminent thinker never separated his more peculiar theme, though still in a veryearly stage of its progress, has advanced many steps beyond the point at which he left



it. No attempt, however, has yet been made to combine his practical mode of treatinghis subject with the increased knowledge since acquired of its theory, or to exhibit theeconomical phenomena of society in the relation in which they stand to the best socialideas of the present time, as he did, with such admirable success, in reference to thephilosophy of his century.

Such is the idea which the writer of the present work has kept before him. To succeedeven partially in realizing it, would be a sufficiently useful achievement, to inducehim to incur willingly all the chances of failure. It is requisite, however, to add, thatalthough his object is practical, and, as far as the nature of the subject admits, popular,he has not attempted to purchase either of those advantages by the sacrifice of strictscientific reasoning. Though he desires that his treatise should be more than a mereexposition of the abstract doctrines of Political Economy, he is also desirous that suchan exposition should be found in it.1




[Addition To The Preface In The Second Edition, 1849]The additions and alterations in the present edition are generally of little moment; butthe increased importance which the Socialist controversy has assumed since this workwas written has made it desirable to enlarge the chapter which treats of it; the moreso, as the objections therein stated to the specific schemes propounded by someSocialists have been erroneously understood as a general condemnation of all that iscommonly included under that name. A full appreciation of Socialism, and of thequestions which it raises, can only be advantageously attempted in a separate work.




Preface To The Third Edition [July, 1852]The present edition has been revised throughout, and several chapters eithermaterially added to or entirely re-cast. Among these may be mentioned that on theMeans of abolishing Cottier Tenantry, the suggestions contained in which hadreference exclusively to Ireland, and to Ireland in a condition which has been muchmodified by subsequent events. An addition has been made to the theory ofInternational Values laid down in the eighteenth chapter of the Third Book.

The chapter on Property has been almost entirely re-written. I was far from intendingthat the statement which it contained of the objections to the best known Socialistschemes should be understood as a condemnation of Socialism, regarded as anultimate result of human progress. The only objection to which any great importancewill be found to be attached in the present edition is the unprepared state of mankindin general, and of the labouring classes in particular; their extreme unfitness at presentfor any order of things, which would make any considerable demand on either theirintellect or their virtue. It appears to me that the great end of social improvementshould be to fit mankind by cultivation for a state of society combining the greatestpersonal freedom with that just distribution of the fruits of labour which the presentlaws of property do not profess to aim at. Whether, when this state of mental andmoral cultivation shall be attained, individual property in some form (though a formvery remote from the present) or community of ownership in the instruments ofproduction and a regulated division of the produce will afford the circumstances mostfavourable to happiness, and best calculated to bring human nature to its greatestperfection, is a question which must be left, as it safely may, to the people of that timeto decide. Those of the present are not competent to decide it.

The chapter on the Futurity of the Labouring Classes has been enriched with theresults of the experience afforded, since this work was first published, by the co-operative associations in France. That important experience shows that the time is ripefor a larger and more rapid extension of association among labourers than could havebeen successfully attempted before the calumniated democratic movements in Europe,which, though for the present put down by the pressure of brute force, have scatteredwidely the seeds of future improvement. I have endeavoured to designate more clearlythe tendency of the social transformation, of which these associations are the initialstep; and at the same time to disconnect the co-operative cause from the exaggeratedor altogether mistaken declamations against competition, so largely indulged in by itssupporters.




[Addition To The Preface In The Fourth Edition, 1857]The present edition (the fourth) has been revised throughout, and some additionalexplanations inserted where they appeared to be necessary. The chapters to whichmost has been added are those on the Influence of Credit on Prices, and on theRegulation of a Convertible Paper Currency.




[Addition To The Preface In The Fifth Edition, 1862]The present fifth edition has been revised throughout, and the facts, on severalsubjects, brought down to a later date than in the former editions. Additionalarguments and illustrations have been inserted where they seemed necessary, but notin general at any considerable length.




[Addition To The Preface In The Sixth, Edition, 1865]The present, like all previous editions, has been revised throughout, and additionalexplanations, or answers to new objections, have been inserted where they seemednecessary; but not, in general, to any considerable length. The chapter in which thegreatest addition has been made is that on the Rate of Interest; and for most of thenew matter there introduced, as well as for many minor improvements, I am indebtedto the suggestions and criticisms of my friend Professor Cairnes, one of the mostscientific of living political economists.




[Addition To The Preface In The People's Edition, 1865]The present edition is an exact transcript from the sixth, except that all extracts andmost phrases in foreign languages have been translated into English, and a very smallnumber of quotations, or parts of quotations, which appeared superfluous, have beenstruck out.1 A reprint of an old controversy with the Quarterly Review on thecondition of landed property in France, which had been subjoined as an Appendix,has been dispensed with.2




Preface To The Seventh Edition [1871]?The present edition, with the exception of a few verbal corrections,3 correspondsexactly with the last Library Edition and with the People's Edition. Since thepublication of these, there has been some instructive discussion on the theory ofDemand and Supply, and on the influence of Strikes and Trades Unions on wages, bywhich additional light has been thrown on these subjects; but the results, in theauthor's opinion, are not yet ripe for incorporation in a general treatise on PoliticalEconomy. For an analogous reason, all notice of the alteration made in the LandLaws of Ireland by the recent Act, is deferred until experience shall have had time topronounce on the operation of that well-meant attempt to deal with the greatestpractical evil in the economic institutions of that country.




PRINCIPLES OF POLITICAL ECONOMYPRELIMINARY REMARKSIn every department of human affairs, Practice long precedes Science: systematicenquiry into the modes of action of the powers of nature, is the tardy product of a longcourse of efforts to use those powers for practical ends. The conception, accordingly,of Political Economy as a branch of science is extremely modern; but the subject withwhich its enquiries are conversant has in all ages necessarily constituted one of thechief practical interests of mankind, and, in some, a most unduly engrossing one.

That subject is Wealth. Writers on Political Economy profess to teach, or toinvestigate, the nature of Wealth, and the laws of its production and distribution:including, directly or remotely, the operation of all the causes by which the conditionof mankind, or of any society of human beings, in respect to this universal object ofhuman desire, is made prosperous or the reverse. Not that any treatise on PoliticalEconomy can discuss or even enumerate all these causes; but it undertakes to set forthas much as is known of the laws and principles according to which they operate.

Every one has a notion, sufficiently correct for common purposes, of what is meant bywealth. The enquiries which relate to it are in no danger of being confounded withthose relating to any other of the great human interests. All know that it is one thing tobe rich, another thing to be enlightened, brave, or humane; that the questions how anation is made wealthy, and how it is made free, or virtuous, or eminent in literature,in the fine arts, in arms, or in polity, are totally distinct enquiries. Those things,indeed, are all indirectly connected, and react upon one another. A people hassometimes become free, because it had first grown wealthy; or wealthy, because ithad first become free. The creed and laws of a people act powerfully upon theireconomical condition; and this again, by its influence on their mental developmentand social relations, reacts upon their creed and laws. But though the subjects are invery close contact, they are essentially different, and have never been supposed to beotherwise.

It is no part of the design of this treatise to aim at metaphysical nicety of definition,where the ideas suggested by a term are already as determinate as practical purposesrequire. But, little as it might be expected that any mischievous confusion of ideascould take place on a subject so simple as the question, what is to be considered aswealth, it is matter of history, that such confusion of ideas has existedthat theoristsand practical politicians have been equally and at one period universally, infected byit, and that for many generations it gave a thoroughly false direction to the policy ofEurope. I refer to the set of doctrines designated, since the time of Adam Smith, bythe appellation of the Mercantile System.

While this system prevailed, it was assumed, either expressly or tacitly, in the wholepolicy of nations, that wealth consisted solely of money; or of the precious metals,which, when not already in the state of money, are capable of being directly converted



into it. According to the doctrines then prevalent, whatever tended to heap up moneyor bullion in a country added to its wealth. Whatever sent the precious metals out of acountry impoverished it. If a country possessed no gold or silver mines, the onlyindustry by which it could be enriched was foreign trade, being the only one whichcould bring in money. Any branch of trade which was supposed to send out moremoney than it brought in, however ample and valuable might be the returns in anothershape, was looked upon as a losing trade. Exportation of goods was favoured andencouraged (even by means extremely onerous to the real resources of the country),because, the exported goods being stipulated to be paid for in money, it was hopedthat the returns would actually be made in gold and silver. Importation of anything,other than the precious metals, was regarded as a loss to the nation of the whole priceof the things imported; unless they were brought in to be re-exported at a profit, orunless, being the materials or instruments of some industry practised in the countryitself, they gave the power of producing exportable articles at smaller cost, andthereby effecting a larger exportation. The commerce of the world was looked upon asa struggle among nations, which could draw to itself the largest share of the gold andsilver in existence; and in this competition no nation could gain anything, except bymaking others lose as much, or, at the least, preventing them from gaining it.

It often happens that the universal belief of one age of Mankinda belief from whichno one was, nor without an extraordinary effort of genius and courage, could at thattime be freebecomes to a subsequent age so palpable an absurdity, that the onlydifficulty then is to imagine how such a thing can ever have appeared credible. It hasso happened with the doctrine that money is synonymous with wealth. The conceitseems too preposterous to be thought of as a serious opinion. It looks like one of thecrude fancies of childhood, instantly corrected by a word from any grown person. Butlet no one feel confident that he would have escaped the delusion if he had lived at thetime when it prevailed. All the associations engendered by common life, and by theordinary course of business, concurred in promoting it. So Long as those associationswere the only medium through which the subject was looked at, what we now think sogross an absurdity seemed a truism. Once questioned, indeed, it was doomed; but noone was likely to think of questioning it whose mind had not become familiar withcertain modes of stating and of contemplating economical phenomena, which haveonly found their way into the general understanding through the influence of AdamSmith and of his expositors.

In common discourse, wealth is always expressed in money. If you ask how rich aperson is, you are answered that he has so many thousand pounds. All income andexpenditure, all gains and losses, everything by which one becomes richer or poorer,are reckoned as the coming in or going out of so much money. It is true that in theinventory of a person's fortune are included, not only the money in his actualpossession, or due to him, but all other articles of value. These, however, enter, not intheir own character, but in virtue of the sums of money which they would sell for; andif they would sell for less, their owner is reputed less rich, though the thingsthemselves are precisely the same. It is true, also, that people do not grow rich bykeeping their money unused, and that they must be willing to spend in order to gain.Those who enrich themselves by commerce, do so by giving money for goods as wellas goods for money; and the first is as necessary a part of the process as the last. But a



person who buys goods for purposes of gain, does so to sell them again for money,and in the expectation of receiving more money than he laid out: to get money,therefore, seems even to the person himself the ultimate end of the whole. It oftenhappens that he is not paid in money, but in something else; having bought goods to avalue equivalent, which are set off against those he sold. But he accepted these at amoney valuation, and in the belief that they would bring in more money eventuallythan the price at which they were made over to him. A dealer doing a large amount ofbusiness, and turning over his capital rapidly, has but a small portion of it in readymoney at any one time. But he only feels it valuable to him as it is convertible intomoney: he considers no transaction closed until the net result is either paid or creditedin money: when he retires from business it is into money that he converts the whole,and not until then does he deem himself to have realized his gains: just as if moneywere the only wealth, and money's worth were only the means of attaining it. If it benow asked for what end money is desirable, unless to supply the wants or pleasures ofoneself or others, the champion of the system would not be at all embarrassed by thequestion. True, he would say, these are the uses of wealth, and very laudable useswhile confined to domestic commodities, because in that case, by exactly the amountwhich you expend, you enrich others of your countrymen. Spend your wealth, if youplease, in whatever indulgences you have a taste for; but your wealth is not theindulgences, it is the sum of money, or the annual money income, with which youpurchase them.

While there were so many things to render the assumption which is the basis of themercantile system plausible, there is also some small foundation in reason, though avery insufficient one, for the distinction which that system so emphatically drawsbetween money and every other kind of valuable possession. We really, and justly,look upon a person as possessing the advantages of wealth, not in proportion to theuseful and agreeable things of which he is in the actual enjoyment, but to hiscommand over the general fund of things useful and agreeable; the power hepossesses of providing for any exigency, or obtaining any object of desire. Now,money is itself that power; while all other things, in a civilized state, seem to confer itonly by their capacity of being exchanged for money. To possess any other article ofwealth, is to possess that particular thing, and nothing else: if you wish for anotherthing instead of it, you have first to sell it, or to submit to the inconvenience and delay(if not the impossibility) of finding some one who has what you want, and is willingto barter it for what you have. But with money you are at once able to buy whateverthings are for sale: and one whose fortune is in money, or in things rapidly convertibleinto it, seems both to himself and others to possess not any one thing, but all thethings which the money places it at his option to purchase. The greatest part of theutility of wealth, beyond a very moderate quantity, is not the indulgences it procures,but the reserved power which its possessor holds in his hands of attaining purposesgenerally; and this power no other kind of wealth confers so immediately or socertainly as money. It is the only form of wealth which is not merely applicable tosome one use, but can be turned at once to any use. And this distinction was the morelikely to make an impression upon governments, as it is one of considerableimportance to them. A civilized government derives comparatively little advantagefrom taxes unless it can collect them in money: and if it has large or sudden paymentsto make, especially payments in foreign countries for wars or subsidies, either for the



sake of conquering or of not being conquered (the two chief objects of national policyuntil a late period), scarcely any medium of payment except money will serve thepurpose. All these causes conspire to make both individuals and governments, inestimating their means, attach almost exclusive importance to money, either in esse orin posse, and look upon all other things (when viewed as part of their resources)scarcely otherwise than as the remote means of obtaining that which alone, whenobtained, affords the indefinite, and at the same time instantaneous, command overobjects of desire, which best answers to the idea of wealth.

An absurdity, however, does not cease to be an absurdity when we have discoveredwhat were the appearances which made it plausible; and the Mercantile Theory couldnot fail to be seen in its true character when men began, even in an imperfect manner,to explore into the foundations of things, and seek their premises from elementaryfacts, and not from the forms and phrases of common discourse. So soon as theyasked themselves what is really meant by moneywhat it is in its essentialcharacters, and the precise nature of the functions it performsthey reflected thatmoney, like other things, is only a desirable possession on account of its uses; and thatthese, instead of being, as they delusively appear, indefinite, are of a strictly definedand limited description, namely, to facilitate the distribution of the produce ofindustry according to the convenience of those among whom it is shared. Furtherconsideration showed that the uses of money are in no respect promoted by increasingthe quantity which exists and circulates in a country; the service which it performsbeing as well rendered by a small as by a large aggregate amount. Two millionquarters of corn will not feed so many persons as four millions; but two millions ofpounds sterling will carry on as much traffic, will buy and sell as many commodities,as four millions, though at lower nominal prices. Money, as money, satisfies no want;its worth to any one, consists in its being a convenient shape in which to receive hisincomings of all sorts, which incomings he afterwards, at the times which suit himbest, converts into the forms in which they can be useful to him. Great as thedifference would be between a country with money, and a country altogether withoutit, it would be only one of convenience; a saving of time and trouble, like grinding bywater power instead of by hand, or (to use Adam Smith's illustration) like the benefitderived from roads; and to mistake money for wealth, is the same sort of error as tomistake the highway which may be the easiest way of getting to your house or lands,for the house and lands themselves.1

Money, being the instrument of an important public and private purpose, is rightlyregarded as wealth; but everything else which serves any human purpose, and whichnature does not afford gratuitously, is wealth also. To be wealthy is to have a largestock of useful articles, or the means of purchasing them. Everything forms thereforea part of wealth, which has a power of purchasing; for which anything useful oragreeable would be given in exchange. Things for which nothing could be obtained inexchange, however useful or necessary they may be, are not wealth in the sense inwhich the term is used in Political Economy. Air, for example, though the mostabsolute of necessaries, bears no price in the market, because it can be obtainedgratuitously: to accumulate a stock of it would yield no profit or advantage to anyone; and the laws of its production and distribution are the subject of a very differentstudy from Political Economy. But though air is not wealth, mankind are much richer



by obtaining it gratis, since the time and labour which would otherwise be requiredfor supplying the most pressing of all wants, can be devoted to other purposes. It ispossible to imagine circumstances in which air would be a part of wealth. If it becamecustomary to sojourn long in places where the air does not naturally penetrate, as indiving-bells sunk in the sea, a supply of air artificially furnished would, like waterconveyed into houses, bear a price: and if from any revolution in nature theatmosphere became too scanty for the consumption, or could be monopolized, airmight acquire a very high marketable value. In such a case, the possession of it,beyond his own wants, would be, to its owner, wealth; and the general wealth ofmankind might at first sight appear to be increased, by what would be so great acalamity to them. The error would lie in not considering, that however rich thepossessor of air might become at the expense of the rest of the community, all personselse would be poorer by all that they were compelled to pay for what they had beforeobtain

Principles of Political Economy

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