John Stuart Mill’s On the Definition of Political Economy and Method of Investigation Proper to It

By Aiden Singh, May 26, 2020

Introduction

In an 1829 or 1830 essay entitled On the Definition of Political Economy and Method of Investigation Proper to It, John Stuart Mill articulates his views on what political economy is and how research in this burgeoning discipline should be conducted. 1

Writing more than 50 years after Adam Smith published his An Inquiry into the Nature and Causes of the Wealth of Nations in 1776, Mill argued that the discipline needed to adopt a definition that would demarcate the boundaries of what it considers and make clear its methodological approach.

The …. attempt to frame a stricter definition of the science than what are commonly received as such, may be thought to be of little use; or, at best, to be chiefly useful in a general survey and classification of the sciences, rather than as conducing to the more successful pursuit of the particular science in question. We think otherwise, and for this reason; that, with the consideration of the definition of a science, is inseparably connected that of the philosophic method of the science; the nature of the process by which its investigations are to be carried on, its truths to be arrived at. (p. 69)

Mill’s Definition of Political Economy

Mill suggests that political economy should concern itself, not with the whole of human nature, but rather with humans as individuals who are narrowly concerned with acquiring wealth and are rational in the pursuit of this wealth. 

“Political Economy” …. does not treat the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means of obtaining that end. (pg. 67)

He calls for the exclusion from consideration of all other facets of human motivation except those that impede them in their pursuit of wealth. 

[Political Economy] makes entire abstraction of every other human passion or motive; except those which may be regarded as perpetually antagonizing principles to the desire of wealth, namely, aversion to labour, and desire of the present enjoyment of costly indulgences. These it takes, to a certain extent, into its calculations, because these do not merely, like other desires, occasionally conflict with the pursuit of wealth, but accompany it always as a drag, or impediment, and are therefore inseparably mixed up in the consideration of it. (pg. 67)

Political Economy considers mankind as occupied solely in acquiring and consuming wealth; and aims at showing what is the course of action into which mankind, living in a state of society, would be impelled, if that motive, except in the degree in which it is checked by the two perpetual countermoves above adverted to, were the absolute ruler of all their actions. (pg. 67)

The science then proceeds …. under the supposition that man is a being who is determined, by the necessity of his nature, to prefer a greater portion of wealth to a smaller in all cases, without any other exception than that constituted by the two counter-motives already specified. (p. 68)

With respect to those parts of human conduct of which wealth is not even the principal object, to these Political Economy does not pretend that its conclusions are applicable. But there are also certain departments of human affairs, in which the acquisition of wealth is the main and acknowledged end. It is only of these that Political Economy takes notice. (p. 68)

The manner in which [Political Economy] necessarily proceeds is that of treating the main and acknowledged end as if it were the sole end; which, of all hypotheses equally simply, is the nearest to the truth. (p. 68)

The political economist inquires, what are the actions which would be produced by this desire [to accumulate wealth], if, within the departments in question, it were unimpeded by any other. (p. 68)

Mill argues that political economy should treat phenomena such as the establishment of property law and the creation of money and credit as outgrowths of this desire to accumulate wealth. 

Under the influence of this desire, [political economy] shows mankind accumulating wealth, and employing that wealth in the production of other wealth; sanctioning by mutual agreement the institution of property; establishing laws to prevent individuals from encroaching upon the property of others by force or fraud; adopting various contrivances for increasing the productiveness of their labour; settling the division of the produce by agreement, under the influence of competition (competition itself being governed by certain laws, which laws are therefore the ultimate regulators of the division of the produce); and employing certain expedients (as money, credit, &c.) to facilitate the distribution. (pg. 68)

Mill makes clear that he defines political economy in this way, not because he believes humans are actually solely motivated by a desire to accumulate wealth.

Rather, he calls for political economists to focus narrowly on the desire to accumulate wealth (and those motivations which are directly antagonistic to it) because social outcomes are determined by multiple causes and, in order to predict or control these outcomes, we must peel apart and study each of these multiple causes individually. 

Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed. When an effect depends upon a concurrence of causes, those causes must be studied one at a time, and their laws separately investigated, if we wish, through the causes, to obtain the power of either predicting or controlling the effect; since the law of the effect is compounded of the laws of all the causes which determine it. (pg. 68)

The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must analyze the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the law of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of synthesis; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but as they can be performed only with a certain approximation of correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability[.] (pg. 77)

Likewise, he does not actually believe that phenomena like the creation of property law, money, and credit all owe solely to the desire to accumulate wealth.

All these operations, though many of them are really the result of a plurality of motives, are considered by Political Economy as flowing solely from the desire of wealth. (pg. 68) [emphasis added]

Mill likens the approach of considering how man would behave if he were under the influence of a single motivation (i.e. the desire the accumulate wealth) to that of the physical sciences.

The law of the centripetal and that of the tangential force must have been known before the motions of the earth and planets could be explained, or many of them predicted. The same is the case with the conduct of man in society. In order to judge how he will act under the variety of desires and aversions which are concurrently operating upon him, we must know how he would act under the exclusive influence of each one in particular. (pg. 68)

Mill then suggests that, after the political economist has considered humans as motivated solely by the desire to acquire wealth, corrections can be made for other motivations.

The political economist inquires, what are the actions which would be produced by this desire [to accumulate wealth], if, within the departments in question, it were unimpeded by any other. In this way a nearer approximation is obtained than would otherwise be practicable, to the real order of human affairs in those departments. This approximation is then to be corrected by making proper allowance for the effects of any impulses of a different description, which can be shown to interfere with the result in any particular case. (pg. 68)

Mill argues that not correcting for such other factors in cases where they are known to affect human behavior will impede the ability of political economy to produce explanations and make predictions.

So far as it is known, or may be presumed, that the conduct of mankind in the pursuit of wealth is under the collateral influence of any other of the properties of our nature than the desire of obtaining the greatest quantity of wealth with the least labour and self-denial, the conclusions of Political Economy will so far fail of being applicable to the explanation or prediction of real events, until they are modified by a correct allowance for the degree of influence exercised by the other cause. (pg. 68-69)

Mill argues that these factors which need to be corrected for should only be incorporated directly in the study of political economy in rare cases.

Only in a few of the most striking cases (such as the important one of the principle of population) are these corrections interpolated into the expositions of Political Economy itself; the strictness of purely scientific arrangement being thereby somewhat departed from, for the sake of practical utility. (pg. 68)

Mill then proceeds to offer his complete definition of political economy.

Political Economy, then, may be defined as follows; and the definition seems to be complete: “The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.” (pg. 69)

Prediction & Control Are Goals

Note that in articulating his definition of political economy, Mill makes multiple references to prediction and control as a goal of the discipline.

Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed. When an effect depends upon a concurrence of causes, those causes must be studied one at a time, and their laws separately investigated, if we wish, through the causes, to obtain the power of either predicting or controlling the effect; since the law of the effect is compounded of the laws of all the causes which determine it. (pg. 68) [emphasis added]

So far as it is known, or may be presumed, that the conduct of mankind in the pursuit of wealth is under the collateral influence of any other of the properties of our nature than the desire of obtaining the greatest quantity of wealth with the least labour and self-denial, the conclusions of Political Economy will so far fail of being applicable to the explanation or prediction of real events, until they are modified by a correct allowance for the degree of influence exercised by the other cause. (pg. 68-69) [emphasis added]

Probabilistic Prediction Is Possible, Absolute Prediction Is Not

However, Mill argues that absolute prediction is not possible. In his view, only probabilistic prediction is possible. 

The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must analyze the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the law of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of synthesis; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but as they can be performed only with a certain approximation of correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability[.] (pg. 77) [emphasis added]

(Competing view: Friedrich Hayek argued that prediction and control are not possible in economics.)

To Understand Society, We Must Pull It Apart Into Its Constituent Pieces

Note also that, in articulating his definition of political economy, Mill argues that in order to understand society we must pull it apart into its constituent pieces and consider them separately. 

Likewise, to understand the behavior of man we must pull apart his various motivations and consider them individually. 

Once these various elements are understood individually, we can combine these separate pieces of knowledge to produce an understanding of society as a whole. 

Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed. When an effect depends upon a concurrence of causes, those causes must be studied one at a time, and their laws separately investigated, if we wish, through the causes, to obtain the power of either predicting or controlling the effect; since the law of the effect is compounded of the laws of all the causes which determine it. (pg. 68)

In order to judge how [man] will act under the variety of desires and aversions which are concurrently operating upon him, we must know how he would act under the exclusive influence of each one in particular. (pg. 68)

The method of the practical philosopher consists, therefore, of two processes; the one analytical, the other synthetical. He must analyze the existing state of society into its elements, not dropping and losing any of them by the way. After referring to the experience of individual man to learn the law of each of these elements, that is, to learn what are its natural effects, and how much of the effect follows from so much of the cause when not counteracted by any other cause, there remains an operation of synthesis; to put all these effects together, and, from what they are separately, to collect what would be the effect of all the causes acting at once. If these various operations could be correctly performed, the result would be prophecy; but as they can be performed only with a certain approximation of correctness, mankind can never predict with absolute certainty, but only with a less or greater degree of probability[.] (pg. 77)

Reasoning From Assumptions Is The Only Way To Make Progress In Economics

Mill makes a distinction between reasoning from specific experience and reasoning from assumptions. 2

He asks us to consider the question of whether kings are likely to use their powers for public good or for oppression.

If we were to try to answer this question by considering the conduct of specific kings throughout history, this would be an example of reasoning from specific experience: it entails looking to specific experience to try to answer the question.

By looking to historical cases of tyrannical rulers, we could determine that a human placed in the circumstances of a despotic king would misuse his power because we know it has happened before.

An alternative approach to trying to answer this question would involve considering not only the behavior of specific monarchs throughout history, but of men more generally. Under this approach, one would consider human nature and how humans tend to behave when placed in different situations. It would also employ introspection, considering what goes on in our own minds.

Using this method we would also, Mill argues, be able to reach the same conclusion that a human being placed in the position of a despotic king would misuse his power. 

But, unlike the former method, this latter method would allow us to reach this conclusion even if there had never been a king in all of history; because it broadly considers human nature and allows for the use of introspection, it is not limited by a dependence on specific experience.   

Suppose, for example, that the question were, whether absolute kings were likely to employ the powers of government for the welfare or for the oppression of their subjects. The [former method] would endeavour to determine this question by a direct induction from the conduct of particular despotic monarchs, as testified by history. The [latter method] would refer the question to be decided by the test not solely of our experience of kings, but of our experience of men. [It] would contend that an observation of the tendencies which human nature manifested in the variety of situations in which human beings have been placed, and especially observation of what passes in our own minds, warrants us in inferring that a human being in the situation of a despotic king will make a bad use of power; and this conclusion would lose nothing of its certainty even if absolute kings had never existed, or if history furnished us with no information of the manner in which they had conducted themselves. (pg. 70)

Mill refers to the former method as “reasoning from specific experience” and the latter method as “reasoning from assumed hypothesis” (that is, reasoning from assumptions). 

Mill argues that reasoning from assumptions is the essence of science. 

[Reasoning from assumptions] is not a practice confined to mathematics, but is the essence of all science which admits of general reasoning at all. (pg. 70)

On the other hand, reasoning from specific experience is, for Mill, not a part of science but is rather the application of science. 

To verify the hypothesis itself [using reasoning from specific experience], that is, to examine whether the facts of any actual case are in accordance with it, is no part of the business of science at all, but of the application of science. (pg. 70)

For Mill, economics, like geometry, is what he calls an “abstract science.”

That is, it begins not with specific facts (e.g. there have historically been despotic kings; experience shows that humans are motivated by many goals beyond only the accumulation of wealth) but rather with assumptions (e.g. humans placed in certain situations are capable of behaving despotically; humans are motivated only by the desire to accumulate wealth).

In the definition which we have attempted to frame of the science of Political Economy, we have characterized it as essentially an abstract science, and its method as the [reasoning from assumptions]. Such is undoubtedly its character as it has been understood and taught by all its most distinguished teachers. It reasons, and, as we contend, must necessarily reason, from assumptions, not from facts. It is built upon hypotheses, strictly analogous to those which, under the name of definitions, are the foundation of the other abstract sciences. Geometry presupposes an arbitrary definition of a line, “that which has length but not breadth.” Just in the same manner does Political Economy presuppose an arbitrary definition of man, as a being who invariably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained in the existing state of knowledge. (pg. 70)

Now, no one who is conversant with systematic treatises on Political Economy will question, that whenever a political economist has shown that, by acting in a particular manner, a labourer may obviously obtain higher wages, a capitalist larger profits, or a landlord higher rent, he concludes, as a matter of course, that they will certainly act in that manner. Political Economy, therefore, reasons from assumed premises – from premises which might be totally without foundation in fact, and which are not pretended to be universally in accordance with it. The conclusions of Political Economy, consequently, like those of geometry, are only true, as the common phrase is, in the abstract; that is, they are only true under certain suppositions, in which none but general causes – causes common to the whole class of cases under consideration – are taken into the account. This ought not to be denied by the political economist. (pg. 70-71)

But [political economists are] justified in assuming [man is motivated only by a desire to accumulate wealth], for the purposes of their argument: because they had to do only with those parts of human conduct which have pecuniary advantage for their direct and principal object; and because, as no two individual cases are exactly alike, no general maxim could ever be laid down unless some of the circumstances of the particular case were left out of consideration. (pg. 71)

The desires of man, and the nature of the conduct to which they prompt him, are within the reach of our observation. We can also observe what are the objects which excite those desires. The materials of this knowledge every one can principally collect within himself; with reasonable consideration of the differences, of which experience discloses to him the existence, between himself and other people. Knowing therefore accurately the properties of the substances concerned, we may reason with as much certainty as in the most demonstrative parts of physics from any assumed set of circumstances. This will be mere trifling if the assumed circumstances bear no sort of resemblance to any real ones; but if the assumption is correct as far as it goes, and differs from the truth no otherwise than as a part differs from the whole, then the conclusions which are correctly deduced from the assumption constitute abstract truth; and when completed by adding or subtracting the effect of the non-calculated circumstances, they are true in the concrete, and may be applied to practice. (pg. 72-73)

Of this character is the science of Political Economy in the writings of its best teachers. To render it perfect as an abstract science, the combinations of circumstances which it assumes, in order to trace their effects, should embody all the circumstances that are common to all cases whatever, and likewise all the circumstances that are common to any important class of cases. The conclusions correctly deduced from these assumptions, would be as true in the abstract as those of mathematics; and would be as near an approximation as abstract truth can ever be, to truth in the concrete. (pg. 73)

Mill suggests that the conclusions economists reach by reasoning from assumptions are no less valuable than the conclusions of geometry.

The conclusions of geometry are not strictly true of such lines, angles, and figures, as human hands can construct. But no one, therefore, contends that the conclusions of geometry are of no utility, or that it would be better to shut up Euclid’s Elements, and content ourselves with “practice” and “experience.” (pg. 71)

And Mill suggests that economists do not actually believe in their conception of man as concerned only with the accumulation of wealth.

No mathematician ever thought that his definition of a line corresponded to an actual line. As little did any political economist ever imagine that real men had no object of desire but wealth[.] (pg. 71)

Mill argues that reasoning from assumptions is the only way to make progress in economics. 

[Reasoning from assumptions] …. is …. the only method by which truth can possibly be attained in any department of the social science. (pg. 71)

But we go farther than to affirm that [reasoning from assumptions] is a legitimate mode of philosophical investigation in the moral sciences; we contend that it is the only mode. We affirm that the …. [reasoning from] specific experience, is altogether inefficacious in those sciences, as a means of arriving at any considerable body of valuable truth; though it admits of being usefully applied in aid of the [reasoning from assumptions], and even forms an indispensable supplement to it. (pg. 71)

This is because, unlike in the physical sciences, social scientists can rarely run experiments. 

There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; that is, that it is seldom in our power to make experiments in them. (pg. 71)

We cannot try forms of government and systems of national policy on a diminutive scale in our laboratories, shaping our experiments as we think they may most conduce to the advancement of knowledge. We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation. (pg. 71-72)

Even in operating upon an individual mind, which is the case affording greatest room for experimenting, we cannot often obtain a crucial experiment. The effect, for example, of a particular circumstance in education, upon the formation of character, may be tried in a variety of cases, but we can hardly ever be certain that any two of those cases differ in all their circumstances except the solitary one of which we wish to estimate the influence. (pg. 72) 

In how much greater a degree must this difficulty exist in the affairs of states, where even the number of recorded experiments is so scanty in comparison with the variety and multitude of the circumstances concerned in each. How, for example, can we obtain a crucial experiment on the effect of a restrictive commercial policy upon national wealth? We must find two nations alike in every other respect, or at least possessed, in a degree exactly equal, of everything which conduces to national opulence, and adopting exactly the same policy in all their other affairs, but differing in this only, that one of them adopts a system of commercial restrictions, and the other adopts free trade. This would be a decisive experiment, similar to those which we can almost always obtain in experimental physics. Doubtless this would be the most conclusive evidence of all if we could get it. But let any one consider how infinitely numerous and various are the circumstances which either directly or indirectly do or may influence the amount of the national wealth, and then ask himself what are the probabilities that in the longest revolution of ages two nations will be found, which agree, and can be shown to agree, in all those circumstances except one? (pg. 72) 

Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than [reasoning from assumptions], or that of “abstract speculation.” (pg. 72-73) 

However, Mill cautions against the economist, having reasoned from assumption, believing that the imaginary abstract scenario he has considered in his mind is applicable to the real-world without qualification.

All that is requisite is, that [the political economist] be on his guard not to ascribe to conclusions which are grounded upon an hypothesis a different kind of certainty from that which really belongs to them. They would be true without qualification, only in a case which is purely imaginary. In proportion as the actual facts recede from the hypothesis, he must allow a corresponding deviation from the strict letter of his conclusion; otherwise it will be true only of things such as he has arbitrarily supposed, not of such things as really exist. That which is true in the abstract, is always true in the concrete with proper allowances. When a certain cause really exists, and if left to itself would infallibly produce a certain effect, that same effect, modified by all the other concurrent causes, will correctly correspond to the result really produced. (pg. 71)

Disturbing Causes

Mill also warns about what he calls “disturbing causes,” by which he means relevant forces which may be left unaccounted for by an economist’s theory due to the complexity of the world and the economist’s inability to identify them.

When the principles of Political Economy are to be applied to a particular case, then it is necessary to take into account all the individual circumstances of that case; not only examining to which of the sets of circumstances contemplated by the abstract science the circumstances of the case in question correspond, but likewise what other circumstances may exist in that case, which not being common to it with any large and strongly-marked class of cases, have not fallen under the cognizance of the science. These circumstances have been called disturbing causes. (pg. 73)

Mill argues that the possibility of relevant forces being left unaccounted for by social scientific theories is the only element of uncertainty in the process of reasoning from assumptions for which he advocates. 

And here only it is that an element of uncertainty enters into the process – an uncertainty inherent in the nature of these complex phenomena, and arising from the impossibility of being quite sure that all the circumstances of the particular case are known to us sufficiently in detail, and that our attention is not unduly diverted from any of them. (pg. 73)

This constitutes the only uncertainty of Political Economy; and not of it alone, but of the moral sciences in general. (pg. 73)

The Role of Specific Experience

So far, Mill has argued that reasoning from assumptions is the only method by which economics may advance.

But he has also cautioned about disturbing causes, that is, relevant forces which the economist may overlook during the process of reasoning from assumptions. 

It is here, Mill argues, that specific experience becomes useful in economics.

He advocates that economists compare the conclusions they reach by reasoning from assumptions with actual outcomes. Discrepancies between expectations and outcomes could alert the economist to some disturbing factor that has been overlooked. 

Having now shown that the [reasoning from assumptions] in Political Economy, and in all the other branches of moral science, is the only certain or scientific mode of investigation, and that the [reasoning from specific experience] as a means of arriving at truth, is inapplicable to these subjects, we shall be able to show that the latter method is notwithstanding of great value in the moral sciences; namely, not as a means of discovering truth, but of verifying it, and reducing to the lowest point that uncertainty before alluded to as arising from the complexity of every particular case, and from the difficulty (not to say impossibility) of our being assured à priori that we have taken into account all the material circumstances. (pg. 74)

If we could be quite certain that we knew all the facts of the particular case, we could derive little additional advantage from specific experience. …. If the knowledge what are the particular causes operating in any given instance were revealed to us by infallible authority, then, if our abstract science were perfect, we should become prophets. But the causes are not so revealed: they are to be collected by observation; and observation in circumstances of complexity is apt to be imperfect. Some of the causes may lie beyond observation; many are apt to escape it, unless we are on the look-out for them[.] (pg. 74-75)

We cannot, therefore, too carefully endeavour to verify our theory, by comparing …. the results which it would have led us to predict, with most trustworthy accounts we can obtain of those which have been actually realized. The discrepancy between our anticipations and the actual fact is often the only circumstance which would have drawn our attention to some important disturbing cause which we had overlooked. Nay, it often discloses to us errors in thought, still more serious than the omission of what can with any propriety be termed a disturbing cause. (pg. 75)

Failure to compare expectations reached by reasoning from assumptions with observed outcomes relegates the economist to being of no use in practical policy-making: policy-makers must combine practical knowledge with abstract reasoning. 

Although, therefore, a philosopher be convinced that no general truths can be attained in the affairs of nations by the [reasoning from specific experience] road, it does not the less behove him, according to the measure of his opportunities, to shift and scrutinize the details of every specific experiment. Without this, he may be an excellent professor of abstract science; for a person may be of great use who points out correctly what effects will follow from certain combinations of possible circumstances, in whatever tract of the extensive region of hypothetical cases those combinations may be found. He stands in the same relation to the legislator, as the mere geographer to the practical navigator; telling him the latitude and longitude of all sorts of places, but not how to find whereabouts he himself is sailing. If, however, he does no more than this, he must rest contented to take no share in practical politics; to have no opinion, or to hold it with extreme modesty, on the applications which should be made of his doctrines to existing circumstances. (pg. 75)

No one who attempts to lay down propositions for the guidance of mankind, however perfect his scientific acquirements, can dispense with a practical knowledge of the actual modes in which the affairs of the world are carried on, and an extensive personal experience of the actual ideas, feelings, and intellectual and moral tendencies of his own country and of his own age. The true practical statesman is he who combines this experience with a profound knowledge of abstract political philosophy. Either acquirement, without the other, leaves him lame and impotent if he is sensible of the deficiency; renders him obstinate and presumptuous if, as is more probable, he is entirely unconscious of it. (pg. 75)

Such, then, are the respective offices and uses of [reasoning from assumption] and [reasoning from specific experience] – the method of abstract science, and that of specific experiment – as well in Political Economy, as in all the other branches of social philosophy. (pg. 75-76)

Summary

John Stuart Mill argues political economy should be defined as being narrowly concerned with a human motivation to acquire wealth and those motivations which are directly antagonistic to it, namely aversion to labor and a desire for present, costly enjoyment.  

He argues in favor of this definition not because he believes humans are actually so narrowly motivated.

Rather, he argues that social outcomes and human behavior are shaped by a multiplicity of factors and these factors should be studied separately one at a time. 

Once the various elements are understood individually, we can combine these separate pieces of knowledge to produce an understanding of society as a whole.

Mill explicitly lists prediction and control of economic outcomes as a goal of political economy. 

However, he argues that absolute prediction is not possible; the best economists can do is make probabilistic predictions. 

He also states that economists are at a disadvantage relative to the physical sciences in that they can rarely run experiments. 

Therefore, Mill argues, the only way to make progress in economics is by reasoning from assumptions.

That is, economists must begin not with specific facts but rather with assumptions.

From these assumptions, economists must reason toward conclusions about how humans behave and the economy works.

The conclusions economists reach in this manner constitute what Mill calls “abstract truth.”

Once “abstract truths” are reached, they can be adjusted to account for the fact that the underlying assumptions may not correspond perfectly with reality.

After the necessary adjustments are made, the results can be applied to practice. 

Mill likens this approach to how mathematicians studying geometry begin with definitions about abstract concepts such as a perfectly straight line with length but no breadth and reason out toward mathematical conclusions. 

The abstraction of a line with length but no breadth does not correspond to the lines humans actually work with, but that does not make the conclusions of geometry irrelevant. Likewise, Mill argues, for the conclusions economists reach by reasoning from assumptions. 

Mill also warns that, once economists reach conclusions by reasoning from assumptions, they must correct for “disturbing causes.” That is, they must correct for any relevant forces which their theories may have left out because the complexity of the world prevented the economist from initially recognizing their importance.

Economists should seek to identify disturbing causes by noting discrepancies between their conclusions and the facts of the real world; that is, by comparison of the conclusions they reach by reasoning from assumptions with specific experience.

Mill argues that an economist who reasons from assumptions and then fails to compare his conclusions with specific experience should play no role in policy-making.

Footnotes

[1]  The essay was published in 1844 as Essay V in Mill’s Essays On Some Unsettled Questions Of Political Economy.

[2] Mill refers to reasoning from specific experience as the à posteriori method. He defines this method as follows:

The [à posteriori method] is a method of induction, merely[.] …. By the method à posteriori we mean that which requires, as the basis of its conclusions, not experience merely, but specific experience. (pg.70)

Mill refers to reasoning from assumptions as the à priori method. He defines this method as follows:

[The à priori method] is a mixed method of induction and ratiocination. …. By the method à priori we mean …. reasoning from an assumed hypothesis. (pg. 70)

In the interest of simplicity of reading, these latin terms are avoided in this article. 

Sources

John Stuart Mill. On The Definition of Political Economy; And On The Method Of Investigation Proper To It. Essay V. In Essays On Some Unsettled Questions Of Political Economy. Kindle Edition. Originally Published in 1844.