Chapter I: Front Matter

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