The article begins from a precise thesis: the literature on the History of Economic Thought has paid little attention to the importance of James Mill for modern economic science. Gómez Julián argues that Mill was the first economist to propose that every supply creates its own demand, one of the finest exponents of the Quantity Theory of Money of his time, an author in whose work the germs of Modern Monetary Policy can be found, and a pioneer on issues such as productive and unproductive labour and capital accumulation. The article’s stated objective is to demonstrate how fundamental James Mill was to modern Political Economy.

I. The Least-Known Plagiarism of the Classical Economists

Gómez Julián opens the discussion by describing as “the least-known plagiarism” of the age of the classical economists the attribution to Jean-Baptiste Say of the formulation of the so-called Say’s Law, popularly known through the statement that “every supply creates its own demand.”

The article’s historical reconstruction begins with William Spence, author of Britain Independent of Commerce, published in 1807. The article adds that the idea had previously been developed by William Cobbett in his Political Register, under the title “Down with Commerce.” In response to Spence’s work, James Mill published Commerce Defended in 1808.

In that work, Mill argued that a country’s annual produce is employed in making purchases and, because that same produce is what is offered for sale, one part of the produce purchases the other. From this follows the idea that annual produce creates a market for itself. Mill also clarifies that there may be an excess of a particular commodity, but not of commodities in general: a sectoral excess implies that other commodities have been produced in insufficient proportion and that the means of production must be redistributed until equilibrium is restored.

The article continues with Elements of Political Economy (1821). There Mill argues that the proportion in which commodities exchange depends, in the first instance, on the relation between supply and demand. He nevertheless maintains that their relative value ultimately depends on the cost of production: changes in supply or demand may temporarily move values away from that point, while competition, when unobstructed, tends to return them to it.

II. Monetary Theory and the Quantity Theory of Money

On monetary matters, the article takes up an observation by Marx: James Mill sought to present Ricardo’s theory of money on the basis of simple metallic circulation, without resorting to the international complications with which, according to the article’s own formulation, Ricardo attempted to conceal the inconsistency of his conception, and without entering into controversy over the functions of the Central Bank. Gómez Julián also recalls that Ricardo questioned those functions on more than one occasion.

Gómez Julián presents Mill as one of the finest exponents of the Quantity Theory of Money of his time. According to the article’s exposition, Mill attempts to demonstrate in a relatively solid manner that the quantity of money in circulation determines the total sum of commodity prices in an economy and likewise determines the value or price of money.

Mill then explains two circumstances under which the Government creates money: 1) when it wishes to let it flow freely through the channels of circulation and 2) when it wishes to control at its discretion the quantity in circulation. In the first case, the Government leaves the Mint open to the public to convert bullion into coin, so that people coin their bullion when its monetary form is more valuable.

It is precisely here that Gómez Julián identifies germs of Modern Monetary Policy in James Mill, in contrast with predecessors such as Ricardo, who questioned Government monetary intervention. The article adds that, for Mill, the value of money depends on its quantity: it rises with scarcity and, through the mechanism that the text itself links to the “metaphysical necessity” attributed to the later Say’s Law, the money market tends once again toward equilibrium.

Mill also argues that, if the Government wishes the quantity of money in circulation to be smaller than it would be without intervention, it must raise the value of the metal contained in the coinage; if it wishes a larger quantity, it must reduce it. Gómez Julián presents this mechanism as another germ of Modern Monetary Policy.

III. Trade, Comparative Advantages, and Exchange-Rate Competitiveness

In the field of international trade, the article maintains that James Mill conceived the relationship between nations in the same way as the relationship between merchants: buy in the cheapest market and sell in the dearest. Gómez Julián explicitly contrasts this formulation with what he calls the “Ricardian illusion of Comparative Advantages,” which he describes as highly widespread at the time.

The text adds that Mill was one of the first economists to propose using the value of the currency to gain or lose competitiveness in the world market; that is, it identifies in his work an early formulation of competitiveness through exchange rates.

IV. Consumption, Egoism, and the Organization of Political Economy

Gómez Julián points out that original notions of productive consumption and unproductive consumption can be found in Mill’s thought, later taken up by Marx in his theoretical system. In commenting on Mill’s exposition of these notions, Marx highlighted his “customary cynical acumen and clarity.”

The article also gives special attention to the principles of egoism linked to private property and production. According to Gómez Julián, these issues appear in Mill with greater clarity and depth than in Adam Smith’s The Theory of Moral Sentiments. The article itself summarizes this conception through a phrase by Marx:

Mill’s clarity would also be reflected in the organization of his major work, divided into four main parts:

1. Production
2. Distribution
3. Exchange
4. Consumption

Gómez Julián highlights the depth, simplicity, and concreteness with which Mill approaches this structure. The article does not claim that this scheme later became the general template for economics textbooks; that extrapolation is therefore excluded from this version.

The text likewise cites Marx regarding the monetary theories of John Stuart Mill. In order to emphasize James Mill’s theoretical capacity, Marx observes that the son maintained an “eclectic logic” that allowed him to embrace his father’s positions and, at the same time, their opposites.

V. Social Classes, Capital, and Population

The question of social classes also receives attention in the article. Although Gómez Julián characterizes James Mill as the “bourgeois apologist par excellence” of his time, he highlights the clarity with which Mill refers to the great mass of the people as the class that can offer, in exchange for its means of subsistence, only ordinary labour.

The article also attributes to Mill an early understanding of the distinction between the medium of circulation as capital and the medium of circulation as a simple medium of exchange. To illustrate this, it reproduces a passage from Elements of Political Economy in which Mill rejects as circular the claim that the value of commodities depends on capital, since capital itself is composed of commodities. Gómez Julián summarizes the Marxian interpretation by indicating that the medium of circulation employed for productive purposes constitutes capital.

On population, Mill maintains that there is a certain density that is convenient both for social intercourse and for the combination of forces that increases the product of labour. From this, Gómez Julián states that Mill clearly understood that the needs of capital essentially determine population density, in contrast with the well-known arguments of Malthus.

VI. Capital Accumulation and Intellectual Influence

Gómez Julián argues that James Mill was, together with S. Bailey, one of the first economists to discuss in depth the question of Capital Accumulation: in particular, the extent of the effects of industrial capital with respect to its accumulation when the magnitude of the total capital advanced remains constant.

The article also notes the error made by both Mill and Bailey in presenting as a fixed magnitude the portion of capital invested in labour-power — variable capital — separating it from the mass of profit obtained by the capitalist.

Finally, the text turns to John Maynard Keynes, who explains that the designation “classical economists,” invented by Marx, referred to Ricardo, James Mill, and their predecessors, that is, to the founders of the theory that culminated with Ricardo. Gómez Julián uses this passage to present Mill as one of the founders of Political Economy.

The Article’s Thesis

The conclusion that emerges from the exposition as a whole coincides with the objective announced in the abstract: to show that James Mill played a fundamental role in the formation of modern economic science. The argument rests on his contributions to the relation between supply and demand, the theory of value and production costs, the Quantity Theory of Money, the antecedents of monetary policy, trade and exchange rates, consumption, egoism and private property, social classes, the distinction between money and capital, population, capital accumulation, and his direct influence on John Stuart Mill and David Ricardo.

Bibliography Cited in the Article

• Keynes, J. (2003). Teoría General de la Ocupación, el Interés y el Dinero. Fondo de Cultura Económica, México D. F.
• Marx, K. (1844). Comments on James Mill, Éléments D’économie Politique.
• Marx, K. (1989). Contribución a la Crítica de la Economía Política. Editorial Progreso, Moscú.
• Marx, K. (2010). El Capital. Fondo de Cultura Económica, México D. F.
• Mill, J. (1808). Commerce Defended.
• Mill, J. (1821). Elements of Political Economy.
• Mill, J. (1825). Colony.
• Sraffa, P. (1795). The Works and Correspondence of David Ricardo, Vol. 10, Biographical Miscellany.
• Winch, D. (1966). Selected Economic Writings.

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