Principles of Political Economy (Mill), vol. 2
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PRINCIPLES
OF
POLITICAL ECONOMY.
VOL. II.
PRINCIPLES
OF
POLITICAL ECONOMY
WITH
SOME OF THEIR APPLICATIONS TO SOCIAL PHILOSOPHY.
BY
JOHN STUART MILL.
IN TWO VOLUMES.
VOL. II.
SEVENTH EDITION.
LONDON:
LONGMANS, GREEN, READER AND DYER.
1871.
LONDON:
SAVILL, EDWARDS AND CO., PRINTERS, CHANDOS STREET.
COVENT GARDEN.
CONTENTS
OF
THE SECOND VOLUME.
BOOK III. EXCHANGE.—(Continued.) Chapter VII. Of Money. Page § 1. Purposes of a Circulating Medium3 2. Gold and Silver, why fitted for those purposes5 3. Money a mere contrivance for facilitating exchanges, which does not affect the laws of Value8 Chapter VIII. Of the Value of Money, as dependent on Demand and Supply. § 1. Value of Money, an ambiguous expression11 2. The value of money depends, cæteris paribus, on its quantity12 3. —together with the rapidity of circulation17 4. Explanations and limitations of this principle19 Chapter IX. 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 it23 2. —which is determined by the cost of production26 3. This law, how related to the principle laid down in the preceding chapter28 Chapter X. Of a Double Standard, and Subsidiary Coins. § 1. Objections to a double standard32 2. The use of the two metals as money, how obtained without making both of them legal tender34 Chapter XI. Of Credit as a Substitute for Money. § 1. Credit not a creation but a transfer of the means of production36 2. In what manner it assists production37 3. Function of credit in economizing the use of money40 4. Bills of exchange41 5. Promissory notes47 6. Deposits and cheques48 Chapter XII. Influence of Credit on Prices. § 1. The influence of bank notes, bills, and cheques, on price, a part of the influence of Credit51 2. Credit a purchasing power similar to money52 3. Effects of great extensions and contractions of credit. Phenomena of a commercial crisis analyzed54 4. Bills a more powerful instrument for acting on prices than book credits, and bank notes than bills59 5. — the distinction of little practical importance62 6. Cheques an instrument for acting on prices, equally powerful with bank notes68 7. Are bank notes money?70 8. No generic distinction between bank notes and other forms of credit72 Chapter XIII. Of an Inconvertible Paper Currency. § 1. The value of an inconvertible paper, depending on its quantity, is a matter of arbitrary regulation75 2. If regulated by the price of bullion, an inconvertible currency might be safe, but not expedient78 3. Examination of the doctrine that an inconvertible currency is safe if representing actual property80 § 4. Examination of the doctrine that an increase of the currency promotes industry83 5. Depreciation of currency a tax on the community, and a fraud on creditors86 6. Examination of some pleas for committing this fraud87 Chapter XIV. Of Excess of Supply. § 1. Can there be an oversupply of commodities generally?92 2. The supply of commodities in general cannot exceed the power of purchase94 3. —never does exceed the inclination to consume95 4. Origin and explanation of the notion of general oversupply97 Chapter XV. Of a Measure of Value. § 1. A Measure of Exchange Value, in what sense possible101 2. A Measure of Cost of Production103 Chapter XVI. Of some Peculiar Cases of Value. § 1. Values of Commodities which have a joint cost of production107 2. Values of the different kinds of agricultural produce110 Chapter XVII. Of International Trade. § 1. Cost of production not the regulator of international values113 2. Interchange of commodities between distant places, determined by differences not in their absolute, but in their comparative, cost of production115 3. The direct benefits of commerce consist in increased efficiency of the productive powers of the world118 4. —not in a vent for exports, nor in the gains of merchants119 5. Indirect benefits of commerce, economical and moral; still greater than the direct121 Chapter XVIII. Of International Values. § 1. The values of imported commodities depend on the terms of international interchange124 2. —which depend on the Equation of International Demand126 3. Influence of cost of carriage on international values131 § 4. The law of values which holds between two countries and two commodities, holds of any greater number132 5. Effect of improvements in production on international values136 6. The preceding theory not complete140 7. International values depend not solely on the quantities demanded, but also on the means of production available in each country for the supply of foreign markets142 8. The practical result little affected by this additional element147 9. The cost to a country of its imports, on what circumstances dependent150 Chapter XIX. Of Money, considered as an Imported Commodity. § 1. Money imported in two modes; as a commodity, and as a medium of exchange154 2. As a commodity, it obeys the same laws of value as other imported commodities155 3. Its value does not depend exclusively on its cost of production at the mines158 Chapter XX. Of the Foreign Exchanges. § 1. Purposes for which money passes from country to country as a medium of exchange160 2. Mode of adjusting international payments through the exchanges160 3. Distinction between variations in the exchanges which are self-adjusting, and those which can only be rectified through prices166 Chapter XXI. 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 values169 2. The preceding theorem further illustrated173 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 commodity177 4. International payments of a non-commercial character179 Chapter XXII. Influence of the Currency on the Exchanges and on Foreign Trade. § 1. Variations in the exchange which originate in the currency181 2. Effect of a sudden increase of a metallic currency, or of the sudden creation of bank notes or other substitutes for money182 3. Effect of the increase of an inconvertible paper currency. Real and nominal exchange187 Chapter XXIII. Of the Rate of Interest. § 1. The rate of interest depends on the demand and supply of loans191 2. Circumstances which determine the permanent demand and supply of loans192 3. Circumstances which determine the fluctuations196 4. The rate of interest, how far, and in what sense connected with the value of money199 5. The rate of interest determines the price of land and of securities205 Chapter XXIV. Of the Regulation of a Convertible Paper Currency. § 1. Two contrary theories respecting the influence of bank issues207 2. Examination of each210 3. Reasons for thinking that the Currency Act of 1844 produces a part of the beneficial effect intended by it214 4. — but produces mischiefs more than equivalent220 5. Should the issue of bank notes be confined to a single establishment?235 6. Should the holders of notes be protected in any peculiar manner against failure of payment?238 Chapter XXV. Of the Competition of different Countries in the same Market. § 1. Causes which enable one country to undersell another240 2. Low wages one of those causes248 § 3. —when peculiar to certain branches of industry245 4. —but not when common to all247 5. Some anomalous cases of trading communities examined249 Chapter XXVI. Of Distribution, as affected by Exchange. § 1. Exchange and Money make no difference in the law of wages252 2. —in the law of rent255 3. —nor in the law of profits256 BOOK IV. INFLUENCE OF THE PROGRESS OF SOCIETY ON PRODUCTION AND DISTRIBUTION. Chapter I. General Characteristics of a Progressive State of Wealth. § 1. Introductory Remarks263 2. Tendency of the progress of society towards increased command over the powers of nature; increased security; and increased capacity of co-operation264 Chapter II. Influence of the Progress of Industry and Population on Values and Prices. § 1. Tendency to a decline of the value and cost of production of all commodities270 2. —except the products of agriculture and mining, which have a tendency to rise272 3. —that tendency from time to time counteracted by improvements in production274 4. Effect of the progress of society in moderating fluctuations of value275 5. Examination of the influence of speculators, and in particular of corn dealers277 Chapter III. Influence of the Progress of Industry and Population on Rents, Profits, and Wages. § 1. First case; population increasing, capital stationary282 2. Second case; capital increasing, population stationary286 3. Third case; population and capital increasing equally, the arts of production stationary287 4. Fourth case; the arts of production progressive, capital and population stationary288 5. Fifth case; all the three elements progressive295 Chapter IV. Of the Tendency of Profits to a Minimum. § 1. Doctrine of Adam Smith on the competition of capital300 2. Doctrine of Mr. Wakefield respecting the field of employment302 3. What determines the minimum rate of profit304 4. In opulent countries, profits habitually near to the minimum307 5. — prevented from reaching it by commercial revulsions310 6. — by improvements in production312 7. — by the importation of cheap necessaries and instruments314 8. — by the emigration of capital316 Chapter V. Consequences of the Tendency of Profits to a Minimum. § 1. Abstraction of capital not necessarily a national loss319 2. In opulent countries, the extension of machinery not detrimental but beneficial to labourers322 Chapter VI. Of the Stationary State. § 1. Stationary state of wealth and population, dreaded and deprecated by writers326 2. — but not in itself undesirable328 Chapter VII. On the Probable Futurity of the Labouring Classes. § 1. The theory of dependence and protection no longer applicable to the condition of modern society333 2. The future well-being of the labouring classes principally dependent on their own mental cultivation338 3. Probable effects of improved intelligence in causing a better adjustment of population — Would be promoted by the social independence of women340 4. Tendency of society towards the disuse of the relation of hiring and service341 5. Examples of the association of labourers with capitalists345 6. — of the association of labourers among themselves352 7. Competition not pernicious, but useful and indispensable376 BOOK V. ON THE INFLUENCE OF GOVERNMENT. Chapter I. Of the Functions of Government in general. § 1. Necessary and optional functions of government distinguished381 2. Multifarious character of the necessary functions of government382 3. Division of the subject388 Chapter II. Of the General Principles of Taxation. § 1. Four fundamental rules of taxation390 2. Grounds of the principle of Equality of Taxation392 3. Should the same percentage be levied on all amounts of income?395 4. Should the same percentage be levied on perpetual and on terminable incomes?400 5. The increase of the rent of land from natural causes a fit subject of peculiar taxation407 6. A land tax, in some cases, not taxation, but a rent-charge in favour of the public410 7. Taxes falling on capital, not necessarily objectionable412 Chapter III. Of Direct Taxes. § 1. Direct taxes either on income or on expenditure415 2. Taxes on rent415 3. —on profits417 4. —on wages420 5. An Income Tax422 6. A House Tax426 Chapter IV. Of Taxes on Commodities. § 1. A Tax on all Commodities would fall on profits432 2. Taxes on particular commodities fall on the consumer433 3. Peculiar effects of taxes on necessaries435 4. —how modified by the tendency of profits to a minimum439 5. Effects of discriminating duties444 6. Effects produced on international exchange by duties on exports and on imports448 Chapter V. Of some other Taxes. § 1. Taxes on contracts458 2. Taxes on communication461 3. Law Taxes463 4. Modes of taxation for local purposes464 Chapter VI. Comparison between Direct and Indirect Taxation. § 1. Arguments for and against direct taxation466 2. What forms of indirect taxation most eligible471 3. Practical rules for indirect taxation473 Chapter VII. Of a National Debt. § 1. Is it desirable to defray extraordinary public expenses by loans?477 2. Not desirable to redeem a national debt by a general contribution481 3. In what cases desirable to maintain a surplus revenue for the redemption of debt483 Chapter VIII. Of the Ordinary Functions of Government considered as to their Economical Effects. § 1. Effects of imperfect security of person and property487 2. Effects of over-taxation489 3. Effects of imperfection in the system of the laws, and in the administration of justice491 Chapter IX. The same subject continued. § 1. Laws of Inheritance497 2. Law and Custom of Primogeniture499 3. Entails504 4. Law of compulsory equal division of inheritances506 5. Laws of Partnership508 6. Partnerships with limited liability. Chartered Companies510 7. Partnerships in commandite515 8. Laws relating to Insolvency521 Chapter X. Of Interferences of Government grounded on Erroneous Theories. § 1. Doctrine of Protection to Native Industry530 2. Usury Laws542 3. Attempts to regulate the prices of commodities548 4. Monopolies550 5. Laws against Combination of Workmen552 6. Restraints on opinion or on its publication558 Chapter XI. Of the Grounds and Limits of the Laisser-faire or Non-interference Principle. § 1. Governmental intervention distinguished into authoritative and unauthoritative561 2. Objections to government intervention the compulsory character of the intervention itself, or of the levy of funds to support it563 3. increase of the power and influence of government565 § 4. — increase of the occupations and responsibilities of government566 5. — superior efficiency of private agency, owing to stronger interest in the work568 6. — importance of cultivating habits of collective action in the people570 7. Laisser-faire the general rule572 8. — but liable to large exceptions. Cases in which the consumer is an incompetent judge of the commodity. Education576 9. Case of persons exercising power over others. Protection of children and young persons; of the lower animals. Case of women not analogous580 10. Case of contracts in perpetuity584 11. Cases of delegated management585 12. Cases in which public intervention may be necessary to give effect to the wishes of the persons interested. Examples: hours of labour; disposal of colonial lands588 13. Case of acts done for the benefit of others than the persons concerned. Poor Laws593 14. — Colonization596 15. — other miscellaneous examples603 16. Government intervention may be necessary in default of private agency, in cases where private agency would be more suitable606