Wednesday, 26 September 2012

Economist of The Week - John Stuart Mill

Periods come and periods go – and it isn't any different with the economic sciences. Today's economist in many ways represents the end of the era of classical economics, and the beginning of a new age of economic thought. Not only his work concludes and finalises the ideas of his legendary predecessors, but he also was a famous philosopher, a child prodigy and an outstanding intellect. His name is John Stuart Mill.

Source:Wikipedia Commons

Early life


John Stuart Mill was born in 1806, as the eldest son of a well-off London family – and most importantly, as the son of James Mill, a philosopher and economist. His father, while he published works himself, was most notably the personal secretary and lifelong devotee of the philosopher Jeremy Bentham.
Bentham – and hence, James Mill – were utilitarianists. Utilitarianism states that the only measure of right and wrong should be what causes the biggest amount of happiness to the biggest amount of people. Why the casual reader might think of this as a New Age-like mentality, it was nowhere near of the sort. On the other hand, Stuart's father, James Mill – supported in this by Bentham – aimed to make his son a genius intellect, and in the process he educated him in a scrupulous environment, completely shielded from other his children of his age.

Education


By the age of 13, Mill could speak fluent Greek and to a lesser extent Latin, and it was at his age that he began to study political economy, based on the ideas of Adam Smith and David Ricardo. In fact, Ricardo, who was a close friend of his father, used to invite young Mill to his house to have economic discussions – it must have been a truly fascinating experience.
He also had the opportunity to meet Jean-Babtiste Say – at the age of fourteen, he stayed in Montpelier, France for a year at the house of Bentham's brother Samuel. When he was arriving and departing from France respectively, he stayed at the by-then-famous economist's home.
When he came of age, Mill refused to study at the University of Cambridge or Oxford – because he disagreed with the two universities contemporary practices of only admitting wealthy students who were willing to become clergy members. Instead, he choose to attend the newly founded University College London – the spiritual father of which was no other than Jeremy Bentham, his father's mentor.

Career and personal life


After finishing university, Mill followed his father to work at the East India Company – just like Thomas Malthus did back in 1805. He became an early proponent of women's rights – and in doing so, he met with a woman who in many ways was just as much an outstanding intellect as he was. Her name was Harriet Taylor – they met in 1830, and while they were both attracted to each other, Harriet was a married woman, and had three children with his estranged husband.
The two started to live in a common household before the death of Harriet's husband – which, combined with their proposals for women suffrage, made many people furious. Nonetheless, Harriet had a paramount influence on Mill – and when her husband died, they managed to marry in 1851.

Works


Mill's heritage is very extensive – not only was he a philosopher, he was an MP in the British Parliament as well. His economically most relevant books are however the 1848 economics textbook Principles of Political Economy and his 1859 On Liberty, which he finished shortly after Harriet's untimely death in tuberculosis.


The second 'Wealth of Nations'


Mill's ideas were derived from both his utilitarianism and his support for the ideas of other classical economists, such as Adam Smith, Ricardo, and notably, Thomas Malthus. His most notable contribution to the field is his mentioned Political Economy textbook, which was revered as a sort of new Wealth of Nations in academic circles, and replaced it as a main textbook until the end of the 19th century. His book was aimed to be a textbook – contrary to Wealth of Nations – but was written in a style different from today's books; the mathematical methods of economics were not developed back then, so Mill stick with lengthy, quality prose.

Economics ideas


His other ideas include the 'equality of sacrifice', which meant that he believed in flat taxation, based on the utilitarianist ideals. He was an early proponent of economic democracy, where shareholders are not corporate in nature, but are elected from the circle of workers. His wage theory states that wages generally exceed minimum subsistence level, and are paid out of capital, evenly divided among workers of the same position. This means that a capital rise will mean wage rises, and wage rises will in turn lead to higher competition among workers – which on the other hand has the effect of lowering wages, and keeping some workers forcibly out of employment. In this sense, he was the first proponent of forced unemployment.
He supported Malthus's population theory, and Ricardo's law of diminishing returns as well – meaning he believed that profit rates for businesses decrease over time.

Later life and death


Harriet's death affected Mill deeply – nonetheless, he remained active until his death, co-working with Harriet's daughter Helen until Mill's death. Between 1865 and 1868, he was a Rector of St. Andrews, as well as an MP for Westminster. He died in 1873 – the date signals the end of classical economics, and coincides with the earlier emergence of 19th century economics schools of thought.

Congratulations – you have finished the first part of Economist of the Week posts, the ones concerning classical economists. A further, concluding post will summarize their views, backgrounds and what did they have in common – but until then, do keep on reading and subscribe.


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