Why John Stuart Mill should not be enlisted among neoclassical economists

Abstract

While John Stuart Mill was not unwilling to identify with the philosophical approach of utilitarianism, he nonetheless distanced himself from utilitarianism as conceived by Bentham. He rejected all the assumptions that led the latter to advocate a felicific calculus. He thus constructed his economic system on the basis of a different empirical economic anthropology to that found in the analyses of Jevons, Marshall, Walras and Menger, all of which derive from Bentham's reasoning. This, essentially, is why it is not justifiable to include J. S. Mill in the pantheon of neoclassicism.

Keywords:

• Utilitarianism
• neoclassical or marginal revolution
• J. S. Mill
• Bentham
• classical political economy

Acknowledgements

The author would like to thank the two anonymous referees for their comments on this essay, which have helped to improve it significantly.

Notes

1 de Marchi (1974) provides useful insights on the subject of Mill's Principles, the impression it created and the extent to which it was successful. The data he gives suggest that Mill's Principles was more widely read than the relevant works of Ricardo and Marshall. Also see Robbins (1998: 231).

2 Many writers follow this line of interpretation, more or less. Ricardo's intervention is the aspect most debated.

3 This is a matter that has been very thoroughly investigated in the relevant literature. The arguments presented in this paragraph are to be found in Robinson (1970), Harcourt (1972), Garegnani (1978, 1979), Kurz (1985), Eatwell and Milgate (1999).

4 Note that this symmetry between ‘pains’– as labour or saving – also implies symmetry between factors of production, the key pre-requisite for establishment of what became the well-known theory of marginal productivity.

5 In a very interesting analysis, Stark (1946: 601–8) relates how Bentham's work became the basis for the neoclassical views of Jevons, Edgeworth and Marshall, and also Menger.

6 This argument is presented in Mitchell (1918), Stark (1946), Hutchison (1956), Black (1972), Stigler (1965), Henry (1990) and Roncaglia (1999).

7 I agree with Mitchell (1918: 162) that although Bentham's theoretical interests extended over many disciplines, his central preoccupation was application of the principle of utility to the study of socio-historical phenomena.

8 See, for example, Schumpeter (1994: 302–3 and 1054), Stigler (1965: 70–5), Stark (1946: 600–1), Viner (1991: 162), Mitchell (1918), Hutchison (1956: 289–90), and Henry (1990: 90–5).

9 See Schumpeter (1994: 130–2). Mitchell (1918: 162) writes that Bentham was aware of the influence that the analyses of Hume, Hartley and Priestley in the UK, Helvetius in France and Beccaria in Italy had exercised on his work.

10 The analytical preconditions for utilitarianism are succinctly recorded by Rubin (1989: 234–7) and by Henry (1990: 92–5).

11 It is a thesis that we encounter in Smith as well, as an adjunct to his thesis of the invisible hand.

12 As Bentham (1988: 3) characteristically notes: ‘the community is a fictitious body, composed of the individual persons who are considered as constituting as it were its members. The interest of the community, then, is what? – the sum of the interests of the several members who compose it.’

13 For further details see Viner (1991: 155). Outlining his positive evaluation of Bentham's political activity, Viner notes that Bentham ‘was a successful social reformer, more successful perhaps than anyone else in history except Karl Marx – I have in mind here only the realization and not the merits of programs of change – if he is given credit for those changes which came after his death as the result largely of the efforts of his disciples.’

14 For this listing, see Viner (1991: 160–1), Roncaglia (1999: 108–9).

15 As mentioned above, it is usually accepted in the literature that Bentham did in fact arrive at formulation of the principle of diminishing marginal utility. In his essay of 1801 entitled The True Alarm (see Hutchison 1956: 290–1) – having first emphasized that ‘all value is founded on utility’– Bentham criticizes Smith for having failed to connect use value with exchange value.

In keeping with his own specific problematic, Smith notes that ‘the things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use’ (1981: I.iv.13). To illustrate this point he put forward the well-known ‘water-diamond paradox’ (see Schumpeter 1994: 300–11). A diamond possesses great exchange value but little use value. Exactly the opposite is true of water. For nineteenth-century British political economy, the water and diamonds paragraph in the Wealth of Nation was of course ‘a contested illustrative device that provided a focal point for arguments about the nature of price formation and the meaning and role of utility’ (White 2002: 677). It is thus a somewhat ‘mythical construction, as there never was a paradox for Smith and his successors’ (White 2002: 660).

Bentham returned to this ‘paradox’ in his essay of 1801, in which he ventured a different approach. The answer he gave foreshadows (in some way) the neoclassical theory of marginal utility. He remarks in particular that ‘the reason why water is found not to have any value with a view to exchange is that it is equally devoid of value with a view to use. If the whole quantity required is available, the surplus has no kind of value. It would be the same in the case of wine, grain, and everything else. Water, furnished as it is by nature without any human exertions, is more likely to be found in that abundance which renders it superfluous: but there are many circumstances in which it has a value in exchange superior to that of wine’ (cited in Hutchison 1956: 291).

16 Bentham says of money that: ‘we have already to be shown to be the most accurate measure of the quantity of pain or pleasure a man can be made to receive’ (Bentham 1954: vol. 3, 437–8). See also Stark (1946: 606–7) and Stigler (1965: 74). The same position on money is to be found in Marshall's (1956: 32) analysis.

17 It is worth noticing likewise that although the idea of moral calculus is linked primarily to his name, Bentham was not in fact the originator of the notion. He was influenced by Benjamin Franklin (see Viner 1991: 161).

18 For further detail see Stigler (1965: 74).

19 As noted by Hutchison (1956: 290), although Bentham may be considered an authentic predecessor of Jevons and Edgeworth, ‘as an economist, as to-day defined, Bentham made no attempt to develop an economic calculus or a theory of relative values and prices.’ On the other hand, the first clear formulation of the abovementioned ‘neoclassical theorem’ is to be found in Gossen's remarkable book, published in Germany in 1854, which went completely unnoticed at the time (Schumpeter 1994: 910–11).

20 Hutchinson (1956), in his interesting analysis, draws out attention to the fact that Bentham had at this time left open another window into the later Keynesian problematic this time. His views on forced saving and state intervention are mercantilist in spirit. If one aspect of Bentham links us to neoclassical authors and the other to Keynes, we may well agree with Hutchinson (1956: 306) that ‘if Bentham is still to be described as a “classical” economist, along with Smith and Ricardo, then this much-controverted adjective is virtually emptied of any doctrinal significance.’

21 For further details see Viner (1991: 166).

22 In particular ‘if the sources of pleasures were precisely the same to human beings and to swine, the rule of life which is good enough for the one would be good enough for the other’ (Mill 2000a: ii.§4).

23 To cite a characteristic passage in Mill's argument: ‘Many indifferent things, which men originally did from a motive of some sort, they continue to do from habit. Sometimes this is done unconsciously, the consciousness coming only after the action: at other times with conscious volition, but volition which has became habitual, and is put into operation by the force of habit, in opposition perhaps to the deliberate preference, as often happens with those who have contracted habits of vicious or hurtful indulgence. […] The distinction between will and desire thus understood, is an authentic and highly important psychological fact; but the fact consists solely in this – that will, like all other parts of our constitution, is amenable to habit, and that we may will from habit what we no longer desire for itself, or desire only because we will it. It is not less true that will, in the beginning, is entirely produced by desire; including in that term the repelling influence of pain as well as the attractive one of pleasure’ (Mill 2000a: iv.§11).

24 This fact, for Hutchison (1956: 289) too, is one of the great ironies in the history of economic thought, ‘where good original ideas, fundamentally acceptable to most economists of a subsequent period, were left buried and suppressed while the stage was dominated by doctrines now mainly and fundamentally rejected.’

25 See Viner (1991: 171–2) and Black (1972: 126). Analogous arguments have been developed by Jevons (1871: 30–2) and Marshall (1956: 79 and 107). I do not propose to elaborate on this matter here.

26 The fact that he defends methodological individualism is obvious in the ideas that Mill develops in August Comte and Positivism (see Mill 1993). For more on the conflict between Mill and Comte, see Lewisohn (1972).

27 In a sense Mill did develop a supply-and-demand analysis. This has been the object of much discussion (see, for example, Hollander 1987: 162; Schumpeter 1994: 603–15). In both Principles (Mill 1976) and the earlier Essays on Some Unsettled Questions of Political Economy (Mill 2000b), to supplement in some modest way Ricardo's comparative-cost analysis (see Mill 2000b: essay I; 1976: III, ch. 18), he introduced an equation of reciprocal demand. But in Mill's work the supply-and-demand mechanism was never conceded a generalized foundation for determination of the value of all commodities (Mill 1976: III, ch. 6). In other words the mechanism never provided a general basis for his value theory. The reason for this has already been outlined in this paper: it is because of his distancing from the utilitarian problematic of Bentham.

28 Hollander's analysis (1987: 210–17) is especially elusive at this point. Through the device of classifying as exogenous the changes in the techniques employed, Mill develops his argument on the basis of constant ratios between fixed capital and labor in each separate branch (see Mill 1976: Book I, ch. 5 and 6).

29 It is for this reason that Bladen (1941: 18) concluded that ‘for ten or twenty years, indeed, after the publication of Mill's Principles English political economy was stagnant.’

30 I owe this apt formulation to Meikle (1995: 20).