J.S. Mill's Contribution to the History of Economic Thought
John Stuart Mill (1806-1873)has a very important place in the sphere of economics. He has presented his thought on political economy in his work ‘Principles of the Political economy’. The important economic ideas and theories as stated by J.S. Mill can be outlined as follows:
1. Economic Method: J.S. Mill developed inductive logic to be used in scientific research. Mill observed that laws of natural sciences are not exact but the statement of tendencies.
2. Liberalization: Mill is of the view that restriction on the liberties of the individual is to be justified for the protection of individual liberties. So, he was in favour of individual liberties subject to the protection of social welfare.
3. The principles of Lasses Faire: Though Mill favoured Laisses fair principle, but he recommended government intervention in some specific fields like education, factory, legislation, public work, etc.
4. Socialism: Mill favoured socialism. His socialistic schemes consist of (a) replacement of wage system by a system of association and (b) Reform of the institutions of inheritance.
5. Theory of profit: Mill viewed that the rates of profit depend on wages, rising as wages fall and falling as wages rise. To him, profit means “ the remuneration of abstinence.”
6. Theory of wages: Mill has propounded the wage-fund theory. In his words, wages are settled by the demand and supply of labour or by the proportion between population and capital.
7. Value: Mill opines that under perfect completion, relative prices are determined by the equality between demand and supply. Mill also discussed the concept of elasticity and joint product.
8. The doctrine of the population: Mill has followed the Malthusian theory of population. He also felt that the poor workers are responsible for the rapid growth of population and suggested that the state should take measure to control the population.
9. International trade: Mill stated that in the international state equilibrium terms of trade not determined by the cost of production but by the equation of reciprocal demand.
10. Say’s Law: Mill maintained that Say’s Law is applicable in the barter system and not in the money economy. Mill argues that in money economy there is a possibility of overproduction and thus nullified Say’s law in the money economy.
Thus, one can conclude that Mill has restated the principles of the classical school in their modified and systematic manner and so also it bears some of the shortcomings of the classical system.
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