John Stuart Mill on growth and distribution

“It is only in the backward countries of the world that increased production is still an important object; in those most advanced, what is economically needed is a better distribution.”

J. S. Mill, Principles of Political Economy (1848).


LW: The new AEA 2010-2011 Economists Calendar, which just arrived, highlights a dead economist each month, with selected quotations from his published works. (Only one of the featured economists - Joan Robinson - is a woman.) The above quote from John Stuart Mill, for May 2011, caught my attention.

Is it not remarkable that more than a century and half ago, Mill saw no reason for economic growth - increased production - to be a priority in economically advanced countries? The compilers of this calendar have done a splendid job, and remind us that Mill's “Principles of Political Economy (1848) was the standard text in economics at Oxford until 1919, when it was replaced by Marshall's Principles". All the selected quotes, due to space constraints, are necessarily brief. It helps to place this one in context, so I provide a longer, more complete quote below.

“It is only in the backward countries of the world that increased production is still an important object: in those most advanced, what is economically needed is a better distribution, of which one indispensable means is a stricter restraint on population. Levelling institutions, either of a just or of an unjust kind, cannot alone accomplish it; they may lower the heights of society, but they cannot, of themselves, permanently raise the depths.

On the other hand, we may suppose this better distribution of property attained, by the joint effect of the prudence and frugality of individuals, and of a system of legislation favouring equality of fortunes, so far as is consistent with the just claim of the individual to the fruits, whether great or small, of his or her own industry. We may suppose, for instance (according to the suggestion thrown out in a former chapter), a limitation of the sum which any one person may acquire by gift or inheritance, to the amount sufficient to constitute a moderate independence.”

John Stuart Mill, Principles of Political Economy (1848), book 4, chapter 6.

http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/mill/prin/book4/bk4ch06

Mill was an outstanding political economist, and his prose does not seem dated even today. Note the influence of Malthus, however, in his call for restraint on population growth.

DOW: For a quick comparison, according to Angus Maddison, a well-respected economic historian, measured in approximate purchasing power parity the average real GDP per capita of the United Kingdom in 1850 was about 8 to 10 per cent of that of the U.S. today.

I don’t think too many people today would be content to live on a small fraction of their present real income and would want to promote economic growth to raise it.

Having said that, Mill is right that to emphasize the need for a better distribution of income, a problem that remains with us to this day. And in my view he is right to see huge intergenerational transfers of unearned income and wealth as something to limit to improve that distribution.

Thanks to Larry Willmore for this Tdj.