Almost all renowned British economists since Adam Smith have been linked through close friendships. Remember that Smith’s good friend David Hume was a “godfather” to Thomas Malthus, who was an intimate friend of David Ricardo, whose comrade James Mill encouraged his economics. James begot John Stuart Mill. A slight break occurs since Mill did not befriend his successor Alfred Marshall. But Marshall learned from Mill’s works (and from the economist F. Y. Edgeworth, nephew of Ricardo’s friend Maria Edgeworth) and then taught Keynes, whose ideas dominated Western economics until the end of the twentieth century.
The life of John Stuart Mill presents a fascinating personal history shaped by the force of ideas. Through him, we see the philosophical conflicts underlying classical economics. Although economists sometimes debate the originality of his contributions to economic theory, all admit that Mill asks troubling questions about the ethical foundations of economics and capitalism.
One of old-time comedian Jimmy Durante’s most famous lines was “Everybody wants to get into the act.” Nearly every intellectual after Isaac Newton wanted to get into the scientific act and discover precise answers to their questions. Smith, Ricardo, and Malthus wanted to be the Isaac Newtons of economics by discovering laws of nature. The law of comparative advantage, Say’s Law, and the law of population all arose in this period. Around the same time, Jeremy Bentham sought to be the Newton of the moral universe, a moral scientist. James Mill fell under the spell of the potions brewed by moral scientists as well as by economic scientists. In love with the taste of Bentham’s ideas, James Mill forced his son to drink.
Born in London in 1806, John Stuart still had the taste for mother’s milk when his rigorous education began. James taught him Greek at the age of three. By eight, the boy had read Plato, Xenophon, and Diogenes in Greek and begun learning Latin. His mother was not a warm figure to her nine children. With baby John Stuart’s premature knowledge of the classics and her frigidity, he might have mistaken her for the Venus de Milo. Between the ages of eight and twelve, Mill exhausted well-stocked libraries, reading Aristotle and Aristophanes and mastering calculus and geometry. During his spare time he was forced to teach Latin to his brothers and sisters. Any hobbies? He read histories. Any friends? Not a one.
At fourteen, his father began strolling with John Stuart through the woods while delivering lectures on Ricardo’s economics: “He expounded each day a portion of the subject, and I gave him next day a written account of it, which he made me rewrite over and over again until it was clear, precise, and tolerably complete.”1 Imagine the poor boy trying to scribble notes on Ricardo’s complex theories while his father leads him down wooded paths.
Because of such rigors, which turned Mill into an intellectual thoroughbred and an emotional hobbyhorse, he remained humble, denying that he had an unusually quick mind, accurate memory, or energetic character. In “all these natural gifts I am rather below than above par; what I could do, could assuredly be done by any boy or girl of average capacity.” Nor was Mill sure he knew any more than other children until his father took him for a walk through Hyde Park and assured him so. But do not feel proud, James warned: anybody could have done it—given a father like him. John Stuart was both the beneficiary and the victim of such a father, who gave his son “an advantage of a quarter century” over his contemporaries.2
But this advantage robbed from his heart what it had added to his brain. What could be more pathetic than his remark “I was never a boy”?3 He socialized with his father’s friends, none of whom played tag or other children’s games, and appeared as solemn as a loser on election day. James sent his son to France for a year, where he stayed with Bentham’s brother, and briefly with Jean-Baptiste Say (the economist who taught that “supply creates its own demand”). As spring 1822 turned the thoughts of other boys his age to young lasses in meadows, it excited only Mill’s intellect, for it was then that he discovered Jeremy Bentham’s utilitarianism in the three-volume Treatise on Legislation.
When I laid down the last volume . . . I had become a different being. The “principle of utility” understood as Bentham understood it, and applied in the manner in which he applied it . . . fell exactly into place as the keystone which held together the detached and fragmentary component parts of my knowledge and beliefs. It gave unity to my conception of things. I now had opinions; a creed, a doctrine, a philosophy; in one among the best senses of the word, a religion; the inculcation and diffusion of which could be made the principal outward purpose of a life. And I had a grand conception laid before me of changes to be effected in the condition of mankind through that doctrine.4
For the next few years Mill joined his boyhood “friends” James Mill and David Ricardo in preaching the Benthamite gospel through the Westminster Review. The Review
made considerable noise in the world, and gave a recognized status, in the arena of opinion and discussion, to the Benthamite type of Radicalism, out of all proportion to the number of adherents. . . . The air of strong conviction with which they wrote, when scarcely anyone else seemed to have an equally strong faith in as definite a creed . . . made the so-called Bentham school in philosophy and politics fill a greater place in the public mind than it had held before.5
By the time he reached adulthood, Mill had a slight build and a bulge on his forehead over his left eye. His beady, gray eyes overlooked a prominent beak, which itself overshadowed thin lips that emitted an even thinner voice. After losing his hair, he gained the look of the sort of parsimonious chemist who would dispense morphine only one tiny pill at a time. Soon enough this odd visage would shake, shudder, and reveal the turmoil below.
What was this Benthamite gospel that attracted such a persuaded and persuasive flock? Just as nature placed the earth under the force of gravity, he said, nature “has placed mankind under the governance of two masters, pain and pleasure.”6 From these laws Bentham discovered both a descriptive and a prescriptive religion. Since all human beings like pleasure and hate pain (masochists notwithstanding, although they prefer pain only because it gives them pleasure), they choose to do that which gives them pleasure. In its prescriptive chapters, the doctrine implores human beings to choose the path of pleasure. So far this sounds like fun, like the hedonism of the ancient Greek Aristippus. But Bentham adds one ethical caveat: when choices affect others, individuals should choose the alternative that maximizes the total pleasure of all. “Greatest happiness for the greatest number” is the cry of the utilitarian movement. And responsible government should engrave this in legislators’ minds.
In words that made democrats misty-eyed, Bentham argued that all people count equally when determining happiness. If the king stubs one toe, this counts half as much as his serving wench Jane stubbing two. If giving Jane a bandage helps her more than it hurts the king, she gets the bandage. No wonder aristocrats prayed for Bentham to stub his tongue before he could spread this gospel.
Still, this formulation was not mathematically precise enough for the Newton of the moral universe. Bentham devised a method of quantifying the amount of pleasure and pain, called the felicific calculus. As we all know, some experiences are more pleasurable or painful than others. Why? Any single experience can be measured by four factors: (1) intensity, (2) duration, (3) certainty, and (4) propinquity. People prefer long, certain vacations to the mere possibility of a weekend off. Hilarious comedians bring more pleasure than mildly amusing ones.
Bentham apparently gave himself so much pleasure devising this calculus that he prolonged it by adding three more factors: fecundity, impurity, and the effect on others. Some pleasures lead to more pleasures. If by attending a summer frolic, Mark increases the chances of making new friends, the frolic shows the fifth felicific factor, fecundity. If the frolic might bring pain, because Mark befriends the football player’s wife, the frolic shows the sixth factor, impurity (the chance it has of producing opposite sensations). Finally, if many people will laugh when the football player rearranges Mark’s face, we must consider their pleasure.
With these tools Bentham added complex instructions. At first glance they remind one of the assembly directions that accompany certain do-it-yourself Chinese furniture, which might as well be written in the original language, because indecipherable Mandarin is at least prettier than unintelligible English. A closer look, though, reveals that Bentham actually made sense:
Begin with any one person . . . and take an account,
Of the value of each distinguishable pleasure which appears to be produced by it in the first instance.
Of the value of each pain which appears to be produced by it in the first instance.
Of the value of each pleasure which appears to be produced by it after the first. This constitutes the fecundity of the first pleasure and the impurity of the first pain.
Of the value of each pain which appears to be produced by it after the first. This constitutes the fecundity of the first pain and the impurity of the first pleasure.
Sum up all the values of all the pleasures on one side, and those of all the pains on the other. The balance, if it be on the side of pleasure, will give the good tendency of the act upon the whole, with respect to the interests of that individual person; if on the side of pain, the bad tendency of it upon the whole.
Take an account of the number of persons whose interests appear to be concerned; and repeat the above process with respect to each. Sum up the numbers expressive of degrees of good tendency . . . do this again with respect to each individual, in regard to whom the tendency of it is bad. . . . Take the balance; which, if on the side of pleasure, will give the general good tendency of the act . . . if on the side of pain, the general evil tendency with respect to the same community.7
Bentham must have taken step 3, long-term pleasures, quite seriously. He bequeathed his body to the University of London, to be wheeled out for major administrative meetings. His body, post-taxidermy, still resides there. Unfortunately, some sporting, pleasure-seeking students stole his head—which just shows how difficult it is to measure fecundity and purity.
Reading Bentham satisfied John Stuart Mill’s cravings for scientific precision and gave him a new way of looking at social intercourse. He quickly joined the fight for Bentham and his Philosophical Radicals, who included some prominent Parliament members as well as writers. Ironically, these champions of pleasure were about as joyful as Kafka.
In politics, Bentham’s Radicals battled bravely for democracy and free speech. From free speech comes truth, they declared. They fought the Stamp Act, which taxed periodicals, and opposed various restrictions on assembly. Mill was briefly arrested for passing out birth control literature, and later in life he would raise the banner of women’s suffrage. On Ricardian grounds they attacked the Corn Laws. Jeremy Bentham denounced the barbaric English prison system, arguing that punishment should be used only instrumentally, to deter, not to wreak vengeance masquerading as justice. After all, a criminal is just a person who decides that crime pays, Bentham submitted. The real answer is to adjust the costs. Although Bentham once proposed that the motto of the government be “Be quiet,” the Radicals were ready to abandon laissez-faire whenever the benefits outweighed the costs: “I have not, I never had, nor ever shall have, any horror sentimental or anarchical, of the hand of government. I leave it to Adam Smith . . . to talk of invasions of natural liberty.”8 Their god was utility, not an invisible hand, even if their god usually worked through the invisible hand.
Incidentally, their god certainly was not the one associated with churches, synagogues, and mosques. James Mill simply could not reconcile an evil world with a good maker. John Stuart Mill vividly recalled his father’s atheistic rantings.
I have a hundred times heard him say, that all ages and nations have represented their gods as wicked, in a constantly increasing progression, that mankind have gone on adding trait after trait till they reached the most perfect conception of wickedness which the human mind can devise, and have called this God, and prostrated themselves before it.9
During the 1820s and 1830s, the Radicals won many political wars and skirmishes, far beyond anyone’s expectations, including John Stuart Mill’s. To support himself, Mill joined his father as a clerk at the East India Company in 1823. Like Malthus and Keynes, who would later work for the government’s India Office, Mill never made it to India and never learned Hindi or Sanskrit. He did work hard without much distraction, breakfasting at ten o’clock each morning on a single boiled egg, and eating nothing else until the working day was over.10 During the same year he joined the company, Mill founded the Utilitarian Society, where he and other young Benthamites would debate and study regularly for long periods of time with intensity and in propinquity. Their chief opponents were romantics, utopians, and socialists, who all seemed too high in the clouds of Coleridge’s poetry to win earthly debates.
During this period Mill may have taken Benthamite precision too far and completely forgotten the ultimate goal, happiness: “The description so often given of a Benthamite, as a mere reasoning machine, though extremely inapplicable to most . . . was . . . not altogether untrue of me.”11
He had his midlife crisis at the age of twenty. The reasoning machine broke, and springs, gaskets, and wires flew about. For years he had “what might truly be called an object in life; to be a reformer.” Yet one winter day in 1826, he was “in a dull state of nerves . . . one of those moods when what is pleasure at other times, becomes insipid or indifferent.” He asked himself a fateful question and received a devastating answer:
Suppose that all your objects in life were realized; that all the changes in institutions and opinions which you are looking forward to, could be completely effected at this very instant: would this be a great joy and happiness to you? And an irrepressible self-consciousness distinctly answered, “No!” At this my heart sank within me: the whole foundation on which my life was constructed fell down. All my happiness was to have been found in the continual pursuit of this end. The end had ceased to charm, and how could there ever again be any interest in the means? I seemed to have nothing left to live for.12
For six months he despaired, often contemplating suicide. He simply had never developed any human feelings. He saw only the veins in flowers. While romantics wore roseate glasses, his eyes stripped the world of all tints and hues, like turpentine. Years later Nietzsche would announce that “God is dead.” For Mill, robbed of love by a frigid father and left with nothing but reason, man was dead. About his father, Mill wrote: “For passionate emotions of all sorts, and for everything which has been said or written in exaltation of them, he professed the greatest contempt. He regarded them as a form of madness.”13
In an age of reason, Mill longed for passion. Mill was not so much the dupe of rationalist philosophers but the victim of their incompetent, zealous disciples. Hume, for one, insisted that reason always be the “slave of the passions.” Indeed, even Bentham introduced reason only as a method of comparing passions, not replacing them.
Psychoanalysts have quite a case before them. Perhaps Mill was tortured by guilt springing from a repressed death wish directed against his tyrannical, inescapable father. But Mill was worse off than the Greek hero. At least Oedipus had a loving mother. In his three-hundred-page autobiography, Mill does not even mention his mother! An early draft suggests why:
A really warm hearted mother would in the first place have made my father a totally different being and in the second would have made the children growing up loving and being loved. But my mother with the very best intentions only knew how to pass her life in drudging for them. . . . I thus grew up in the absence of love and in the presence of fear.14
His mother did not leave an autobiography. Who knows whether marriage to James Mill depleted her ability to love? Suffice it to say that the Mill home was not a place to drop by for hot chicken soup and warm company.
Just as Mill floundered in the intellectual tide called rationalism, he was saved by an undertow called romanticism. In his Birth of Tragedy, Nietzsche depicted two powerful forces clashing in the human psyche: Apollonian and Dionysian. Apollo is the spirit of reason, order, and Mozart symphonies. Dionysius is the spirit of caprice, emotion, and Puccini operas. When eighteenth-century rationalism drove Mill to despair, he turned to the poetry of Wordsworth and even Coleridge. Wordsworth’s lush portraits of natural beauty finally inspired feelings of joy and the discovery of imagination. The world finally seemed sensuous. By embracing beauty, Mill could battle to drive outward the narrow borders of his mind and the imperial reign of his father.
Like Coleridge’s ancient mariner, Mill embarked on an intellectual odyssey, visiting Carlyle and the French philosopher Auguste Comte, whose empirical emphasis influenced Mill. Sometimes the mariner seemed to go overboard in praising his new godfathers and rejecting the old ones. After befriending Mill, an arrogant Comte demanded financial support. Mill acquiesced and even asked friends to give money to Comte. After about a year, the charity stopped. Instead of thanking his benefactors, Comte mailed a nasty letter to Mill lecturing him on the duty to support penniless pundits. Although Mill was sometimes known as the “Saint of Rationalism,” this episode in his life must be headed “The Saint as Sap.”15
After Mill’s father died in 1836, John Stuart began publishing articles that showed how far he had sailed from the Philosophical Radicals. His 1838 essay “Bentham” savaged Benthamism for impoverishing the spirit. Spiritual perfection should be a personal goal in its own right, regardless of pain and pleasure. Bentham was better when he stuck to legislative questions, rather than personal morality, Mill added condescendingly. Two years later, Mill glorified Coleridge beyond reason.16
His father’s death was probably both liberating and troubling for Mill. Gertrude Himmelfarb reports that on James’s death, John Stuart suffered a “brain fever,” leaving him with a twitching eye. Placing the son on the psychoanalyst’s couch again, could the twitch have resulted from attempts to repress relief at his master’s passing?17
The odyssey was not just intellectual and aesthetic. For the first time, John Stuart Mill fell in love—balding head over tattered heels in love. Unfortunately, Harriet Taylor was married with children. But this did not stop Mill, who was still Benthamite enough to pursue pleasure. Their “affair” took the form of a nonsexual ménage à trois, with secret rendezvous at the London Zoo near the rhino exhibit. Harriet lived with her husband, but Mill visited when John Taylor was out, and Harriet spent many summer weekends with Mill. This odd arrangement lasted from 1830 until 1851, when Mill and Harriet married. John Taylor had died two years before, but Mill thought that a long engagement would sanitize a scandalous liaison. Mill attributed almost all his famous works to Harriet’s wisdom. She was a goddess to him. If Mill himself resembled a squinty-eyed pharmacist, Harriet as a young woman had the large-eyed gaze of a Disney princess. A dinner companion described her body as moving with an “undulating grace,” her lovely head sitting atop a “swan-like throat and complexion like a pearl.” Her low, sweet voice created an “engrossing” presence.18
All the warmth and strength Mill had longed for in his marble mother, he found in a loving wife:
Her mind was the same perfect instrument, piercing to the very heart and marrow of the matter; always seizing the essential idea or principle. The same exactness and rapidity of operation, pervading as it did her sensitive as well as her mental faculties, would, with her gifts of feeling and imagination, have fitted her to be a consummate artist, as her fiery and tender soul and her vigorous eloquence would certainly have made her a great orator, and her profound knowledge of human nature and discernment and sagacity in practical life, would, in the times in which such a carrière was open to women, have made her eminent among the rulers of mankind. Her intellectual gifts did but minister to a moral character at once the noblest and the best balanced which I have ever met with in life.19
Many of Mill’s friends thought he was hallucinating. Historians still argue among themselves in assessing Harriet’s contributions. One thing is certain: Mill felt privileged that such a beauty would choose to love him, and she ended up influencing him immeasurably.
With Harriet in hand and romance spinning in his head, we might expect Mill to have lived out his life composing odes to Grecian urns. But having traveled the world metaphorically and literally, our romantic hero returns home—more of a man than he was before. Home was Benthamism. But Mill would alter and improve it. The rest of his writings and political career reflect an enlightened utilitarianism. Mill insisted that the greatest happiness depends on more than mere pleasure. The joy of sensing a Beethoven symphony or Michelangelo masterpiece is more than just pleasure. Great works and deeds bring joy by lifting the spirit. Bentham had suggested that poker is as good as poetry, if the pleasure given is equal. Mill disagreed. Switching metaphors, Mill countered that he would rather be a discontented Socrates than a well-fed pig. Mill enhances utilitarianism by invoking Platonic virtues of honor, dignity, and self-development. For this reason, Mill became an ardent advocate of public education. To him, statecraft must be soulcraft.
In 1848, Mill published his chief work on economics, Principles of Political Economy. For decades it dominated the book market like the monopolies Mill discussed within its pages. Oxford relied on the Principles until 1919, probably because its successor was written by Marshall, a Cambridge man. Indeed, the works of all the great economists illuminate long paths. From 1776 to 1976 just five books reigned over economics in nearly unbroken succession: Smith’s Wealth of Nations, Ricardo’s Principles, Mill’s Principles, Marshall’s Principles, and Samuelson’s Economics. What they lack in imaginative titles, they make up in endurance.
Mill’s struggle with rationalism and romanticism finds its way into his Principles when he discusses economic methods. James Mill, following Hobbes, thought of social science with the same precision with which one performs geometric proofs. From general premises, James Mill deduced specific conclusions and policies. The general premises usually centered on “laws” of human nature such as self-interest. There could be no doubt about the inferences, any more than one could deny that a triangle has three angles and three sides. From his father, Mill learned economics as syllogistic sequences, or rationalism.
During his crisis and reeducation years, Mill learned a less precise method, induction. In many cases, social scientists can only spy on their subjects and hypothesize patterns or trends, rather than proclaim incontrovertible laws. Induction has two humble goals: discover behavior patterns and make predictions based on those empirical patterns. That induction is less precise does not mean that it is necessarily inferior to deduction. Some subjects do not lend themselves to deduction. Social sciences cannot be deductive and precise, because people do not always behave rigidly and consistently. Deduction may be more appropriate for predicting the behavior of corpses. In a veiled jab at his deceased father, Mill warned that a “wise practitioner” would not “deduce the line of conduct proper to particular cases from supposed universal practical maxims, overlooking the necessity of constantly referring back to the principles of the speculative science.”20
In accepting induction as a proper scientific tool, Mill did not discard deduction. With seemingly Solomonic wisdom, Mill sliced out a role for each. Each method could balance the other. If some economists deduced from flawed a priori principles, empiricists could throw observed counterexamples in their faces. For example, Malthus’s law of population was first presented as a deductive truth. We can disprove Malthus’s law by observing well-stocked supermarket shelves. On the other hand, deductive theoreticians can check the work of empiricists for logical consistency. For instance, a softheaded empiricist could argue that because the migration of storks is highly correlated with the human birthrate in New York, a good policy for controlling the human population would be to shoot down storks. Through logic a rationalist could show that the flawed observations do not make sense. (Naturally, a hard-hearted empiricist would discover the independence of the events for himself once he started shooting storks and counting babies.)
Mill did not always blend the two methods. In fact, Principles proposes a schizoid approach to production and distribution. Fixed, universal laws control production: “There is nothing optional, or arbitrary in them.” Therefore, deduction applies. But “it is not so with the Distribution of Wealth. That is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like.”21
Whereas Ricardo based both his production and his distribution analyses on carefully identified roles played by landlords, workers, and capitalists, Mill rejected such eternal divisions in the distributive process. Yes, the landlord would receive rents under the Ricardian analysis. But society may decide not to let him, Mill insists.
For two reasons Mill’s bifurcated scheme seems mistaken. First, production laws may not be fixed. For example, technological advance cannot be predicted or assured. Mill does hint at this objection. Second, distribution cannot be neatly separated from production.
One does not have to be a tax-slashing fanatic to suspect that confiscatory tax rates might change an individual’s activity. Boris Becker was a wealthy German tennis player. Germany taxed wealthy people heavily. How much tax did Becker pay to Bonn from his million-dollar purses? None. He moved to Monaco. He shifted his production because of distributional measures (and later stumbled into legal trouble). In 2013, actor Gérard Depardieu, a Chevalier of the French Legion of Honor, flipped his French château for a Belgian château and even picked up a Russian passport from Vladimir Putin in order to avoid a planned 75 percent income tax rate. Of course, taxes do not explain everything. Only a fool would conclude from the Becker story that Mikhail Baryshnikov left the Soviet Union because of tax rates. In 2006, the Irish rock star Bono and his U2 bandmates quietly moved their business office from Dublin to the Netherlands to avoid higher Irish taxes. Some of Bono’s fans were disappointed since, at Dublin concerts, Bono had scolded the Irish prime minister for not spending more tax money on Third World poverty relief. While U2’s music may be original, apparently their tax strategy is not. Mick Jagger and the Rolling Stones have been tax exiles in the Netherlands and assorted Caribbean isles for decades.
In subsequent chapters and editions of Principles, Mill relents on his claim of a clear methodological distinction between production and distribution.
To summarize all the important models presented in Principles might take more space than the original work, because Mill attempted a comprehensive review of economic doctrine, adding numerous improvements. He wrote convincingly about the management of the firm; supply and demand as an equation rather than a ratio; Say’s Law; and demand as a major factor in Ricardo’s Law of Comparative Advantage. As Nobel laureate George Stigler observed, Mill’s advancements form a very peculiar list: they are only vaguely related to one another.22 Rather than building a new foundation, Mill replaced many weak stones at many different levels.
Because Alfred Marshall performs similar repairs on Mill’s work, we might better spend this chapter examining Mill and the economics of social policy. Except for Marx, Mill may have been the last of the “political economists,” as famous for his political tracts On Liberty and Utilitarianism as for his economics. By the end of the nineteenth century, economics as a science grew so specialized that few could master both it and philosophy. By the mid-twentieth century, few could master more than a couple of topics in economics alone. We have a choice, states Nobel laureate Robert Solow, between saying more and more about less and less, or less and less about more and more.
In Mill’s earlier book On Logic, he posited a crucial distinction between positive and normative works. Positive economics describes and predicts what actually takes place in the world. Normative economics advocates what should take place based on one’s moral philosophy. Mill as reformer is a normative role. Of the five books of the Principles, the first three tend to be descriptive, while the latter two show Mill in his normative role, fervently devoted to enhancing the human condition through greater wealth equality, women’s rights, and education.
Anyone can carry placards and shout slogans demanding equality, happiness, or the presence of an NFL team in Oakland. But results do not come from banners alone, any more than good weather comes to Siberian towns that rename themselves “Paradise.” The majesty of Mill is that he tied his normative goals to realistic analyses.
Mill delicately balanced the positive and normative in his chapters on taxation. In fact, his position on income tax reflects the spirit of the landmark 1986 U.S. Tax Reform Act, which attempted to “flatten” the progressive income tax. Like Adam Smith, Mill called for a proportional income tax. This takes the same percentage of income from earners regardless of their income level. Contrast this with a progressive income tax, which takes an increasing percentage as income rises. Mill’s analysis here actually mirrors our earlier Mick Jagger example, for Mill fears that a progressive tax might discourage work:
To tax the larger incomes at a higher percentage than the smaller, is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbors.23
Although the proportional tax would apply to most of the population, Mill would exempt the poor from paying taxes.
For most of the twentieth century, the United States rejected Mill’s advice and accepted a progressive income tax. By the mid-1980s, taxpayers could fall into one of fourteen brackets, ranging from 11 to 50 percent. If a person received a raise, she likely moved to a higher bracket. But President Reagan and Congress finally took Mill’s advice and passed the landmark 1986 Tax Reform Act. The act collapsed those fourteen brackets into two: 15 and 28 percent. Although not a “flat” tax system, the act appeared as two plateaus, rather than as an increasingly steep mountain. Also in line with Mill, the act exempted more poor people from paying any income taxes. Though Congress has amended the 1986 act a number of times, and has created more “plateaus,” the basic logic continues: fewer loopholes and lower rates than in the 1960s and 1970s. Today Washington, D.C., is corrosively divided. But the gray-hairs of the nation’s capital say that the extraordinary 1986 tax reform was one of the last examples of Republicans and Democrats coming together to rebuild highly complex and combustible laws.
Why did Congress finally honor Mill, even if partially and inadvertently? A variety of good and bad reasons explains any committee act. As someone once said, chaos in the world proves conclusively that God is a committee. Proportional-tax advocates argue that progressive taxes distort the incentive to augment income. Moreover, a progressive code encourages people to evade taxes as their income rises. They may do this legally, through tax shelters and creative accountancy, or illegally. Even if the published tax code is progressive, if people evade well enough, the results may not be. In fact, prior to the 1986 act, the actual tax returns filed with the Internal Revenue Service illustrated a relatively proportional tax. People used loopholes to thwart and transform the progressive system. The 1986 act, supported by Democrats and Republicans, eliminated many loopholes and made evasion less attractive. Some quirky loopholes did find their way into this tougher bill, however, including one that induced Eskimos to sell their business losses to corporations, which could then deduct the Eskimos’ losses on their corporate tax forms.
Critics who reject these arguments against progressivity insist that proportional taxes are simply not as fair as progressive taxes. Despite this attack, it appears the ghost of Mill is still winning many battles, keeping the number of U.S. tax brackets at half the pre-1986 number, while the U.K. maintains just three basic brackets.
If Mill let the rich off easy on income tax, he tightened the screws on inheritance taxes. In his philosophical and economic works, Mill urged “equal opportunity” rather than “equality of results.” If some children inherit huge sums from their parents, they possess an unfair advantage over others. And those with silver spoons may coast along on their parents’ wealth rather than create more. Why is Mill cautious on income taxes but confiscatory on inheritance taxes? His penetrating insight here is that high inheritance taxes do not discourage work, as progressive income taxes do. “It is not the fortunes which are earned, but those which are unearned, that it is for the public good to place under limitation,” he wrote.24
His analysis is not irrefutable, though. In practice, even inheritance taxes grow messy, for parents can simply transfer wealth before they die. Thus, gift taxes become necessary, along with gift inspectors. Moreover, high inheritance taxes could discourage older people from working or encourage them to spend their wealth on extravagances rather than save or invest in productive ventures. In sum, even inheritance taxes are not foolproof. In the 1980s, Sweden’s inheritance tax reached 70 percent, forcing many spouses and children to sell family homes, holiday cottages, and small businesses to pay the tax collector. Even the founder of IKEA, Ingvar Kamprad, picked up his put-it-together-yourself furniture and decamped to Switzerland. Finally, a coalition government of Social Democrats, the Green Party, and the Left Party totally repealed the tax, beginning at midnight on January 1, 2005. But here’s where the behavior gets interesting. Somehow Swedes were 10 percent more likely to die on January 1, 2005, than on December 31, 2004.25 Either those elderly folks were utterly determined to drink a final midnight toast, or their devoted heirs kept them plugged into life support systems a few seconds longer to avoid the taxman.
President George W. Bush disagreed with Mill on inheritance and estate taxes, which he deemed a “death tax.” In 2001, Bush convinced Congress to chop the estate tax down to zero in 2010. However, the legislation was to expire on December 31 of that year. Thus, on January 1, 2011, the top tax rate would bounce back to its old 55 percent level. If the Swedish example could be called “Keep Pappy Breathing,” the U.S. counterpart could be called the “Throw Momma from the Train Act.” Just in time, however, Congress, under Presidents Bush, Obama, and then Trump, saved solvent mommas by passing more permanent changes, which now exempt the first $11.6 million of an estate from taxation. Nobel laureate Joseph Stiglitz, a strong voice for progressive policies, cautions that high estate taxes present a prickly paradox: they can spur more inequality, not less. His tricky argument posits that high-taxed, wealthy families would put less of their income into savings, which would drive up the returns on capital. Since wealthier families tend to own more capital, they could grow even wealthier in the process.26 Mill’s scrutiny of the rich did not end with inheritance taxes. Despite his love affair and Benthamite breeding, Mill was Victorian enough to oppose sheer sybaritism by the rich. He eagerly proposed taxing riotous parties and luxuries flaunted for status. Long before Thorstein Veblen, Mill declared that an item “on which money is spent . . . from regard to opinion” is “a most desirable subject of taxation.”27 Sometimes Mill sounded as if he would receive as much pleasure from taxing the rich as the rich received from being rich. Given some of the affluent people Mill knew and the poor people he cared for, we cannot blame him. Mill always appreciated how social circumstances helped mold opinions.
Mill also wondered how society could give relief to the poor without dissuading them from getting jobs. No clear answer appeared. Mill distinguished the able-bodied from the disabled, elderly, and very young. Certainly, Mill reasoned, society should not worry about dissuading the disabled and should not cut their relief. Mill accepted the findings of the Royal Commission on Poor Law Reform and opposed the elimination of aid to the handicapped. Yet he felt less lenient toward the physically fit. He proposed that recipients exchange labor for welfare payments. After ignoring Mill’s call for decades, in 1988 the U.S. federal government and several states adopted “workfare” programs in which healthy welfare recipients must accept employment or job training. The father of the federal legislation, Senator Daniel Patrick Moynihan, had labored for many years to redefine welfare as a transition to eventual employment. While the 1988 program had plenty of loopholes, it spurred a heated national debate on the subject. Americans had grown used to conservatives excoriating the welfare state, as President Reagan did by campaigning against “welfare queens” who drove Cadillacs to the bank to cash their government checks. A controversial 1985 book, Losing Ground, earned applause and denunciations for arguing that welfare payments actually tore apart black families. The “conservative” workfare argument got its biggest boost, though, in 1992, when Governor Bill Clinton of Arkansas announced that he would reform welfare “as we know it” if he were elected president. Suddenly, liberal politicians could jump on the anti-welfare bandwagon without embarrassment. After a few years of bickering with Congress, in 1996 President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act, which put a time limit on public assistance and paid bonuses to states that successfully moved welfare recipients into jobs. While Republicans lauded the law they helped write, some White House advisers quit in protest, believing the bill too tough on recipients. Combined with a stunningly healthy job market that brought the jobless rate down to thirty-year lows (hitting 3.9 percent in April 2000), the new workfare system surpassed expectations, cutting the welfare rolls by several million while raising the employment rate of never-married mothers from 63 to 76 percent. A Federal Reserve Bank of San Francisco study concluded that “reform has made even the most vulnerable single mother economically more self-sufficient.”28 Of course, such a strong job market would have induced some people to get off the dole anyway; but there is little doubt that the new law gave them an extra push.
Wisconsin’s heralded model had preceded the federal law by several years. The state counsels former claimants through a transition period, giving them “trial jobs,” child care, and medical services, if necessary. New York City emulated the Wisconsin model, enjoying a dramatic drop in the welfare rolls. From 1960 until 1993, New York City welfare rolls had surged from 250,000 to 1.2 million. By 2019, they had fallen to 330,000. Welfare programs in Arizona, Florida, and eleven other states do not give any additional money to a welfare mother even if she gives birth to another child, a “family cap” concept also applied in South Korea and Singapore. Researchers at Rutgers and Princeton Universities found that this strict rule persuaded more poor women to use birth control, thereby curbing their birthrate. Reforming welfare is as much a cultural revolution as an economic one. The Massachusetts Department of Public Welfare has changed the name on its door plate to the Department of Transitional Assistance. Florida calls its program the Work and Gain Economic Self-Sufficiency Program. To critics, this smacks of George Orwell. To supporters, it puts the jobless in a proper frame of mind to fight back for their self-respect.
Mill’s plan was more severe, however, for he thought that the jobs should necessarily be as arduous as those held by the least fortunate independent workers. Modern versions correctly find no reason to prevent recipients from training for more worthwhile jobs. Nonetheless, Mill shows remarkable prescience again.
Mill feared that if welfare were too easily doled out, generations of poor people would be born into families weaned of a work ethic. Even more pernicious, he thought that higher welfare payments would only promote higher birthrates. Thus, Mill rejected socialist and romantic proposals for raising relief benefits or wages. Such normative efforts ignored positive information about human tendencies. Mill needed to ground his normative policies in mature, reasoned models.
Falling back on his early memories, Mill recalled the power of education. He backed public education for paupers. But education would not consist simply of the three Rs. Mill saw nothing wrong in inculcating a taste for capitalist values. Capitalist societies have a duty to teach all their citizens how to succeed in a commercial community. What Max Weber later called the “Protestant work ethic” is not a biological trait. To assume that it is deprives poor people of their only hope for rising out of poorhouses: “It appears to me impossible but that the increase of intelligence, of education, and of love of independence among the working classes, must be attended with the corresponding growth of the good sense which manifests itself in provident habits of conduct.”29 Mill wanted to combine moral education with economic incentives, proposing, for instance, that the government provide to the poor what we now call home-improvement loans.
Volumes could be written on Mill’s attitude toward laissez-faire policies versus government intervention. In brief, he stayed in the middle of the road and usually did not get run over. Rejecting a doctrinaire laissez-faire position, he embraced only a presumption of laissez-faire. That is, the burden is on the proponent of government to show that the greater happiness requires intervention: “Every departure from [laissez-faire], unless required by some great good, is a certain evil.”30 Obviously the state should tax, coin money, defend against enemies, establish courts, and so forth. But “optional” functions such as consumer protection, education, and business regulation should be approached on a case-by-case method. For example, Mill preferred private charity to state welfare, but he knew that charity might be only partly successful. The poor would happily accept any money, but the rich wouldn’t give (partly because of “free rider” effects—people assume that others will bear the burden). Thus, the state should use its taxing power to maintain the poor.
Mill’s approach again appears very modern. He would have approved, and indeed anticipated, many of today’s governmental institutions. Nonetheless, he made sure that all proposals passed the crucial presumption test, for “impatient reformers, thinking it easier and shorter to get possession of the government than of the intellects and dispositions of the public, are under a constant temptation to stretch the province of the government beyond due bounds.”31 His reading of Alexis de Tocqueville’s classic Democracy in America taught him the virtue of local rather than centralized plans.
In many ways Mill’s positions reflected his government’s at the time. England moved toward free market economics in many significant ways but set up safeguards against exploitation. William Gladstone led Parliament to finally abandon the Corn Laws in 1846 and to reduce income taxes. Even as the alarum of free trade finally shook Europe, Parliament restricted in 1802, 1819, and 1833 the hiring of children through the Factory Acts, providing landmark shields. Mill would approve of both, not out of a knee-jerk ideology but from careful reasoning.
Most economists cannot resist predicting the long-term future. Like Smith, Malthus, Ricardo, Marx, and Keynes, Mill painted an impressionistic vision of the future, blending tones from Ricardo and Saint-Simonian socialism, a utopian movement that glorified industrial workers. From Ricardo, Mill sketched the possibility of a stationary state. From Saint-Simon, Mill brushed on cheerful colors. The stationary state would be happy. Whereas Ricardo constructed a theoretical model to track the results of diminishing returns, closed markets, and falling profits, Mill portrayed a nearly theological model of heaven on earth. In some distant time the scramble for money would stop, and the human race would exalt itself instead of wealth. Keynes would present a similar vision during the Great Depression.
Recall that Mill’s enlightened utilitarianism had a place for Platonic ideals in its calculus. Mill yearned for a time when human beings would care more about dignity, integrity, and justice than overtime and overdrafts:
I cannot . . . regard the stationary state of capital and wealth with the unaffected aversion so generally manifested towards it by political economists of the old school. I am inclined to believe that it would be, on the whole, a very considerable improvement on our present condition. I confess that I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling, crushing, elbowing, and treading on each other’s heels, which form the existing type of social life, are the most desirable lot of human kind, or anything but the disagreeable symptoms of one of the phases of industrial progress.32
Like Marx, Mill thought that humans would eventually surpass the “realm of necessity” and arrive at a time when they could choose not to struggle for subsistence, but to strive to enhance their humanity. Only the “backward countries of the world” truly need more economic growth, Mill thought. The advanced countries need only a better distribution, or at least a better ethos. He decried the United States, where he thought poverty was eliminated but “the life of one sex is devoted to dollar hunting, and of the other to breeding dollar hunters.”33 One wonders whether Mill would prefer our new world, in which all are equally free to hunt.
What are we to make of Mill’s portrait? It is too impressionistic to deduce or even induce any firm conclusions. As new editions of Principles arrived, they sounded somewhat more sympathetic to socialism. Yet Mill never sounded empathetic. He could feel for the utopians, but never sign the petitions or march beside them. As Lord Byron said, “I stood among them, but not of them.” Mill never abandoned his faith in competition and a Tocquevillian fear of centralized power: “I utterly dissent from the most conspicuous and vehement part of [socialist] teaching, their declamations against competition. . . . They forget that wherever competition is not, monopoly is.”34
Few of us ever give up our longings for paradise. The rich can look for it on some tropical isle. Religious men and women can rely on a hereafter. Optimists can rely on tomorrow. John Stuart Mill fought for today and hoped for some idyllic day after tomorrow.
Mill fought for his principles in his Principles and in Parliament during the 1860s. A consistent voice for human rights, Mill championed women’s suffrage, voting rights for the poor, and the North in the American Civil War. According to Lord Balfour, “Mill possessed an authority in the English Universities . . . comparable to that wielded . . . in the Middle Ages by Aristotle.”35
His Autobiography depicts a far-from-conventional politician. When first asked to run for office, he “was convinced” that hardly anyone “really wished to be represented by a person of my opinions.” He openly refused to campaign or spend money. He did make one promise: if elected, he would not devote any time to local interests. One famous writer declared at the time that “the Almighty himself would have no chance of being elected on such a program.” Toward the end of the “campaign,” Mill attended a public meeting of workers. An opponent flashed a placard that quoted Mill bluntly describing the English working class as “liars.” However, they are better than the foreign working classes, the quotation continued, because they feel guilty. Almost any other politician would have been tarred and feathered at this point. Mill recalls, “I was asked whether I had written and published it. I at once answered ‘I did.’” His supporters panicked, fearing for their lives. “Scarcely were these two words out of my mouth, when vehement applause resounded through the whole meeting.” The workers had finally found someone they could trust.36
When his beloved Harriet died, Mill arranged a monument formed of Carrara marble, from the same quarry as Michelangelo’s David and the Marble Arch that had stood in front of Buckingham Palace. After her passing, Mill began to rely more on his stepdaughter, Helen Taylor, for advice and administrative assistance. In spring 1873, while conducting botany experiments near his home in France, Mill contracted erysipelas, a deadly skin infection. His death sparked tributes and special issues of magazines from economics to philosophy to Popular Science. A leading Oxbridge scholar of the day noted that over the prior twenty years, Mill was “the author who has most powerfully influenced nearly all the young men of the greatest promise.”37 Just as today’s students may hang in their dorm rooms posters of the dashing (and murderous) Che Guevara, the brooding Franz Kafka, or the daring Frida Kahlo, Mill was—despite his wan visage—the veritable pinup of his day. His English admirers raised funds to build a memorial statue for him along the Thames, but Mill wanted to be interred next to Harriet in a modest cemetery in a small French village near Avignon. Five people attended the burial. Though he fought in no wars and seldom raised his voice or threw down a gauntlet, he lived a life of struggle. He battled bigots, elitists, rationalists, and socialists. He challenged the ethos etched in his brain at a tender age. Edmund Burke once lamented that “the age of chivalry is gone. That of sophists, economists, and calculators has succeeded, and the glory of Europe is extinguished forever.”38 Chivalry still inspired Mill. And his most gallant duels and conquests were over the windmills of his mind.