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5: The Theory of Policy in Mill - William Dyer Grampp, Economic Liberalism, vol. 2 The Classical View 
Economic Liberalism (New York: Random House, 1965). vol. 2 The Classical View.
Part of: Economic Liberalism, 2 vols.
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The Theory of Policy in Mill
We come at last to John Stuart Mill. To include still other economists would not alter the point of this chapter or make it any more plain. The point is this: Liberal economic policy authorizes the state to do whatever the people want it to do and it is able to do. For additional evidence that liberalism is not synonymous with laisser faire the reader can consult the informative book of D. H. Mac-Gregor, Economic Thought and Policy. However, that book so emphasizes the opposition to free markets and makes so little of the support for them that the reader is liable to conclude the economists of the nineteenth-century were in favor of the state’s directing the economy. Such a conclusion is quite mistaken. The economists favored neither extreme. How far they wished the state to go toward either was the leading question in their theory of policy.
Mill tried to answer that question. Other writers, he said, had considered only a few measures of policy, such as the Poor Laws or the Factory Acts, and had pretty much neglected the others. Nevertheless they had stated their opinions in the form of very general arguments that were meant to apply to other measures as well. Those arguments revealed a strong bias for either laisser faire or for its opposite. But the writers did not say how far either principle was to be carried nor did they seem to be clear in their own minds on the point. Mill hoped, in the Principles, to provide some help in deciding the limits of laisser faire.
THE OBJECTIONS TO INTERFERENCE
He distinguished two kinds of interference by the government in the economy: authoritative and nonauthoritative. The former is prescriptive or coercive while the latter is suggestive or optional. The government may form a bank and give it a monopoly of all banking transactions. That interference would be authoritative. Or it may operate a bank in competition with banks that are privately owned. That would be nonauthoritative. Of the two forms, authoritative interference presents the greater danger to liberty. Interference of this kind should be more limited in its application and needs a greater necessity to justify it. From some areas, it should be excluded altogether. In a sentence that suggests the great passages in the essay On Liberty that he was to write ten years later, Mill said, “there is a circle around every individual human being, which no government, be it that of one, of a few, or of the many, ought to be permitted to overstep.”18 The question is just what the circle encompasses. It includes, Mill answered, the thoughts and feelings of the individual, the part of his behavior that affects only him, the part that does no injury to others, and the part that affects others only by example. That interference could invade these areas was the first objection to it.
What Mill here insisted on was similar to what the liberals of the seventeenth and eighteenth century meant by the inviolability of natural rights. It was the meaning also of his second objection to authoritative interference. The objection was that each additional responsibility assigned to government added to the total of its powers and hence to the danger of their being used to deprive the individual of his liberty. He warned against thinking that a democratic government (as he defined it) could be trusted with powers that would be dangerous in a dictatorial government. Indeed there was, he said, even more need to limit the powers of democratic government, because it is ruled by public opinion, and from public opinion there is no appeal. Another objection to authoritative interference is that it adds to the total work of government and reduces the efficiency with which any one part is done. The objection was utilitarian, and he meant that most business is done best by the people whose business it is. His final objection—and “one of the strongest”—is that authoritative interference does for the people what they, for the sake of cultivating their “active faculties,” should do for themselves. The greater is the authority of the government, Mill said, the greater is the number of able people who are a part of it. The smaller then is the number outside government who are able to protect the people from it. All of these objections created a strong case against authoritative interference. They led to the conclusion that: “Laisser-faire, in short, should be the general practise: every departure from it, unless required by some great good, is a certain evil.”19
What counted most with Mill were the utilitarian objections. His case for laisser faire is summarized in his statement that the government does not know so well as the people what they want and cannot provide it so well as they can provide it for themselves. Yet when the case is put this way—with the assumptions clearly implied—it invites some questions: Is it a fact that the people always know better than the government what is good for them? Supposing it is a fact, can one say they always can do more for themselves than the government can do for them? And supposing all this to be true, can we be sure that an individual acting freely, in his own interest, will not injure other individuals? Mill met these questions explicitly, and answered—No, these are not always facts. He acknowledged there was a case for intervention, and most of his explanation of the principles of policy is about that case. What he had to say against laisser faire is more interesting and longer than what he said for it.
Individuals do not always know their own interest as consumers, Mill stated, and they are particularly unknowing about those objects of expenditure that “raise the character of human beings.” They are the objects that are the most important in the doctrine of utilitarianism. Mill made education an example. Individuals will not all of them spend enough on it if they may themselves decide what the amount shall be. Some will, but those who need education most will spend the least. “The uncultivated cannot be competent judges of cultivation,” he said. He said also that government without being presumptuous could assume that it was more cultivated than the mass of people. It therefore should provide schools, although it should not prohibit people from providing schools for themselves. Also, it should compel parents to send their children to an elementary school of some kind. The interference would be nonauthoritative in providing schools and authoritative in compelling attendance. Mill justified both kinds of interference by stating that the failure of parents to educate their children was an injury to the children and, because of the effects of ignorance, to everyone else in society as well. That circle drawn around every person within which his rights were private and supreme did not include parental authority in all of its forms. When Mill excepted education from the rule of laisser faire, he was therefore consistent with the premises of his policy.
Something more should be said about his views on education and other forms of consumption. He did not believe that every one of the wants of the individual was beyond the judgment of the economist. Those which were beyond it were placed there by an ethical decision of the economist. He ignored them because he wished to, not because he felt incompetent and hence had to. Mill did not believe it impossible to compare the wants of different individuals or to draw a conclusion about how much a given quantity of consumption satisfied each person. He would have been puzzled and then saddened by the Olympian attitude that today’s economists take toward consumer wants. (But he would have tried very hard to understand it, believing as he did that he could learn something from everyone.) Ruskin said that Mill’s great mistake was that he passed too little judgment on the quality of consumption and production. An economist today would say that Mill made far too many judgments.
Mill’s disposition to make such judgments is an aspect of his ideas and behavior that is not much commented on. It does not square well with his insisting upon tolerance. But it can hardly be missed. It was, it seems to me, a mixture of several things. First, there was his utilitarianism, within which the judging of ends was perfectly in order. One cannot decide what is the greatest good of the greatest number without having first decided what the good is. It could be simply what the greatest number want it to be. But more often it is what men of discernment, like Mill himself, believe it ought to be. There was also in his thinking an element of the Whig conception of freedom. In that view, not all persons were equally capable of freedom, and those who were had an obligation to improve those who were not. When Mill was a young man, some prominent people, mostly Whigs, formed the Edinburgh Society for the Diffusion of Useful Knowledge among the lower classes. James Mill was a member, and the chairman was Lord Brougham, a leading Whig and a contributor of economic articles to The Edinburgh Review. Peacock called it “The Steam Intellect Society” and scored off Brougham in the same novel in which he made fun of M’Culloch. There was still another element in the mixture and the one that is the least pleasing to an admirer of Mill. He was given not only to forming opinions about the behavior of others but of being censorious, to want not only to improve their characters but to meddle and fuss with them, to be at times the maiden aunt or bluenose, or (more charitably) Cato the Censor. This element will surprise those who know Mill only as the champion of individual liberty. But a fair reading of his Principles cannot fail to disclose this element. It may be thought not to count for much, especially when set against his declarations for tolerance and privacy. Indeed in his chapter on the future of the working class, Mill rebuked those who would treat the poor as if they were children, who would think for them instead of encouraging them to think for themselves. Yet in telling the poor some of the things that were good for them, Mill was doing just what he advised others not to do. He may have been helpful in doing this but that is not necessarily a justification for it. Mill was inconsistent to assert both that men are their own masters and that some of them should not follow their inclinations.
He probably would have resolved the dilemma by saying that if the poor are helped now, they in time will become capable of making the proper choices. But the very idea of “proper” is inconsistent with liberalism of the classical and nonutilitarian kind. What counts is whether or not everyone is free to make choices in as rational a manner as he is capable of, together with the corollary that if a choice made by one person will affect another it must have the other’s consent. The act of choice is important, not the thing chosen. Mill did not entirely accept this idea, but he was even farther from rejecting it. His equivocation allowed the officious element to enter his doctrine. To overlook that element is to ignore something that helps to explain a major inconsistency in his economic policy. The inconsistency was to state that what is most important to the individual—as his character undoubtedly is—should be farthest from the power of the state, and then to propose ways in which the state could improve his character. To be sure, Mill tried to remove the inconsistency by saying that the failure of a man to develop his character can be injurious to others. Yet if that is so, even character loses its position as an end and becomes a means to something else (the improvement of the character of others?). Moreover, what meaning is left in the declaration that there should be “some space in human existence . . . sacred from authoritative intrusion”? As Ernest Barker said, the liberal view is that the improvement of a man’s character is the business of no one but himself.
THE EXCEPTIONS TO LAISSER FAIRE
Mill believed the government should restrict more than consumption. He also believed it should place some restrictions on what individuals could do in labor markets, in the conduct of business, and in the making of contracts. His reason was that individuals do not always know what their interest is; that when they do know it, they may not be able to promote it; and that even when they do know their interest and are able to promote it, the interest of some may not be in harmony with the interest of others. On these considerations he based five exceptions to laisser faire, and they were considerably more important than the exception he took to complete freedom of consumption. They were of more practical consequence, more interesting from the viewpoint of the theory of policy, and more instructive about the duties of the government and the governed. They also show the difference between Mill’s method and that of other economists. Where they examined a few outstanding issues of policy and made some swift generalizations, he began with the principle of laisser faire, considered whether or not it should govern all economic conduct, found numerous instances in which it should not, and then generalized about the exceptions. What he said is most clear if we know the point from which he began. It was that “most persons take a juster and more intelligent view of their own interest, and of the means of promoting it” than the government can take. However, there are “some large and very conspicuous exceptions.”20
First, people do not always know their interest. Incapacity and immaturity prevent some from knowing it, and others act for them. The question, then, is how much power the others should be permitted to have. An example is the interest of a child. Mill’s view was that the interest of children could be cared for much better by government than by their parents. He expressed the view forcefully and in language much different from the well-tempered prose for which he is celebrated. He wrote of the “constant abuse” of parental power, of “domestic tyrants,” of children being “brutally ill-treated” and even murdered by their parents, of “the metaphysical scruples” that prevented government from interfering directly with the family, and of other matters that disclose the censorious element in his thinking. (When Mill wrote about the family in any of its aspects, from the authority of husbands and fathers to the number of children, he often was intemperate.) The point of this exception to laisser faire is that it justified child labor laws, which the Factory Acts originally were. In Mill’s day they had begun to control the work of women. Such control was a mistaken application of the exception, he said. Women would be able to take care of themselves very well if the laws were repealed that gave husbands a monopoly of family property, granted them coercive power, permitted moral and physical tyranny, etc.
Second, an individual cannot know just what his interest will be in the distant future. The reason is not incapacity or immaturity but simply the impossibility of perfectly accurate prediction. The point has an important bearing on the freedom of individuals to make contracts. That freedom always is presumed to be an essential feature of liberalism. But in exercising it an individual may impose obligations on himself that in the future will abridge his freedom. This can happen because he cannot know at the time a contract is made whether or not the terms later will become burdensome. Mill did not go so far as to repudiate the principle of leaving contracts free. But he did say the principle should be applied sparingly to contracts in perpetuity. The law, he said, should refuse to enforce them if they impose conditions about which a contracting party cannot have formed a reasonable judgment at the time the contract was made. In other words, an individual should be allowed to break the contract. If however he is not allowed to break it on his own choosing, he should be allowed to do so upon making out a sufficient case before an impartial body.
Third, the interest of one individual may conflict with that of others. If it does, the state should limit the freedom of the few for the sake of the many. From this point Mill developed some quite large economic powers of government, such as the control of corporation directors, the public ownership of enterprise, the fixing of monopoly prices, and the confiscating of monopoly profits. His reasoning is curious. Starting with the idea that individuals know their interest better than government can, he concluded the government should not interfere with the management of private affairs except when it should. It should, he said, when otherwise the affairs of one group would be managed for it by another. The point is similar, perhaps identical, with his first exception to laisser faire. But here he gave the example of the directors of a joint-stock company using their position to the detriment of shareholders other than themselves. Whatever can be said about the inefficiency or dishonesty of government, Mill wrote, can be said with equal force about the behavior of corporate directors. He did not, however, want their work to be taken over by government officials. All of the practical and most of the ethical arguments for laisser faire made him oppose such a solution. It is an odd solution in any event: It was that the government should operate, not merely regulate, a private enterprise, but should not own it.
He mentioned the solution in his remarks about the responsibility of government for the proper conduct of private enterprise. He believed government had that responsibility and he applied the idea to many more things than the supervision of corporate directors. He believed government was responsible for the conduct of monopolies; otherwise they could use their price power to tax the public. Local governments should own some, he said, like gas and waterworks. Others, like canals and railroads, should be regulated. One method of regulation that he proposed was the familiar one of the government’s setting their rates. He also proposed the novel method of permitting the monopolies to use their price power for a limited period after which the government would confiscate and operate them. The implied theory was that the monopoly profits over the allotted time would equal the capital value of the enterprise if its prices were competitive. At the end of the period, the public would acquire ownership of the enterprise it had bought by paying higher than competitive prices for the service. All of this is substantial intervention. But Mill had one more proposal about the monopoly problem. It was that the government in certain circumstances should establish an enterprise and while retaining ownership, give it over to a private company to operate. The proposal was just the opposite of that noted above—and almost as odd. That above was government operation of private enterprise; this was private operation of government enterprise.
In explaining the third exception, Mill continually shifted the argument and made it encompass more and more intervention. He seemed to be asking the reader a series of questions to which the answer always was supposed to be Yes. Is it not true that, if as a shareholder you name a director to manage the business you both own, he may be in a position to increase his income at your expense? If this is granted, does it not follow that we have an instance of self-interest producing disharmony instead of the harmony that laisser faire presupposes? Is it not true that the disharmony would be as great as that produced by government, even a government that is inefficient and corrupt? Does it not follow that government management of a corporation’s affairs would be no worse than private management? Have we not then established a justification for government intervention in order to remove disharmony? (The reader’s “Yes” would be fairly weak at this point.) If the government may intervene in corporate affairs, may it not also intervene in other instances in which there is disharmony? Is not monopoly such an instance? And are there not a number of ways to solve the monopoly problem? Is not government ownership one way, as well as government operation, government regulation, government confiscation of profits? . . . What began as a modest observation about corporate affairs ended in a stunning collection of proposals for intervention.
Fourth, an individual acting alone may be unable to promote his own interest, even though he knows it very well, even though he is acting for himself, and even though what he wants is in harmony with what others want. The reason is that he can get it only if all of the others also act to get it. Mill gave two examples. One was the reduction of working hours without a reduction of daily wages. If all workers wanted this reduction but tried individually to get it, all would fail. If one tried to work ten hours when the working day was twelve, he would lose his job or be paid less than the others. If all agreed to work ten hours but had no way to enforce the agreement, it would break down. Anyone who wanted higher wages could earn them by working twelve hours while the others were working ten. If higher wages rather than shorter hours were what most of the workers really wanted, in time everyone again would be working twelve hours—but at the old hourly wage. To be effective, the agreement would have to be enacted into law.
The other example was the Wakefield system of colonization. It was a piece of ingenuity of the kind that always has fascinated economists. Usually the device contrives to redirect self-interest in an artful way in order to promote a public good. An earlier instance was the mercantilist plan to increase the population by subsidizing marriages and taxing bachelors, the tax to finance the subsidy. (Reversing the plan is a possible remedy for overpopulation.) Another was Ricardo’s optimum tariff on grain: an amount equal to the additional tax burden on agriculture, the result being a proper allocation of capital between it and industry. Still another is the proposal made in this century to fix exchange rates, auction off import licenses, and subsidize exports. Wakefield proposed that the colonial government put a high price on land and use the proceeds to pay the transportation costs of immigrants. The effects would be: (a) to keep the immigrants employed at nonagricultural work until they had enough to buy land, thereby providing a supply of labor for the building of roads, canals, and urban industry; (b) preventing the immigrants from acquiring more land than they could cultivate efficiently; (c) populating the colony while relieving the old countries of crowding. Today, in the economics of development, the plan would be described as a method of securing in an underpopulated country the optimum rates of growth in agriculture, in urban industries, and of investment yielding external economics.
There are significant implications in the examples that Mill used to illustrate his fourth exception. The first example showed the inability of an individual worker to change wages in a competitive market. What it proved was that competition can be restricted only by concerted action that has the support of law. To use the same example to illustrate the inadequacy of self-interest is to imply that competition among producers does not always serve their interest. That is not a novel idea. What is novel is to find it in the last great work of classical economics. One reasonably can ask why the interest of the workers should be placed before that of the rest of the population. One can argue that the workers’ interest should come first, but Mill did not argue this way (except if one wishes to infer the argument from his very general proposition, made near the beginning of the Principles, that while the forces regulating production cannot be changed, those regulating distribution can be; I believe the inference is not justifiable). He simply implied that if something is to the advantage of the workers, they should be assisted in obtaining it—and a predisposition toward the working class is not something usually ascribed to classical economics. All that Mill was careful to say was that the restricting of hours and the raising of hourly wages might cause unemployment and hence not be to the workers’ advantage. Whether or not any particular instance of regulation would be to the worker’s advantage was, Mill said, always “a question of fact.” Here one ought to recall the similarity of Mill’s position to that of Senior.
The example of colonization also illustrated another failing of a competitive market and one of a much different kind. It showed that the total returns from a particular economic act, such as an investment in roads, do not all of them go to the person who makes the investment and that what he does not receive other people do. The marginal private return is less than the marginal social return, it would be said in welfare economics. In a free market, if the (marginal) private cost of investment is greater than the private return, even though less than the social return, the investment will not be made. The economy nevertheless would benefit if it were made, because total output would increase. Government, in Mill’s scheme of things, would contrive to have the investment made.
Fifth, some persons are not permitted to act for themselves, and others must act for them. The reason here is not immaturity, as it is with children, nor that the person voluntarily authorizes someone else to act for him, as a shareholder does. It is that custom or necessity—or both—does not allow a person to act for himself. For example, a person who seeks charity is not allowed to specify the amount or anything else about it. These decisions are made by those who dispense it. The question then is whether the givers alone should determine how charity is to be granted or whether government should specify the procedure. Mill answered in favor of government. It can, he said, make the provision of relief what it should be: absolutely certain to persons in need and the granting of it impersonal, fair, predictable, and respectful of the privacy of the recipient. “The dispensers of public relief have no business to be inquisitors.” That is the tolerant Mill, not the censorious.
In explaining this exception to laisser faire, he stated his view of the Poor Laws. It was that the recipient never should be made as well off as those who supported themselves. The reason was not justice. He did not, for example, argue that those who worked for their living deserved more than those who did not. Nor did he in any other way relate his view to the ethical aspect of the labor theory of value, which was that income earned by labor was ethically superior to that which was not. Mill’s reason was a practical one and exemplified his utilitarianism. It was that relief should be given in such a way as to prompt those who received it to greater exertion and independence so that as soon as possible they could do without it. The idea was derived from a psychological conjecture that runs through the history of economics (and was especially important to the mercantilists)—namely, that in adversity begins industry. Mill carried it a little further and said that adversity must not be so great as to leave people hopeless nor so slight as to make them indolent. There is, it seems, an optimum amount. What he believed were the causes of poverty, hence of the need for relief, also is interesting. They were, he said, the excessively unequal distribution of wealth in his day and the fact that the habits of the people were neither “temperate” nor “prudent” (Cato again). He did not attribute poverty to the structural and cyclical unemployment of his time.
The fifth exception to laisser faire meant the government should control the conduct of people who act for others. Mill applied it to colonies, as well as to poor relief, and the clear implication was that government should direct colonial development instead of allowing it to be determined by individuals acting in their interest as they understand it. A colonist should not be allowed to make an investment that is profitable to him if it retards the development of the colony. In making a long-term investment, he is acting in the interest of others, not only of himself, even though he may be indifferent to the fact. Future generations will be affected by what he does now. Mill said that acts which have consequences extending indefinitely beyond the persons making them, “to the interests of the nation or of posterity,” are acts “for which society in its collective capacity is alone able, and alone bound, to provide.” He could also have argued—as he did in making his second exception to laisser faire—that such acts have the consequences of a long-term contract, because future generations are bound by investment decisions over which they can have no control. After laying down the very broad principle of collective responsibility for the welfare of posterity, the specific application Mill made of it was so modest as to be anticlimactic. The application was the Wakefield system again. Nevertheless, Mill was aware that the principle could be used in many other ways. Indeed it could be used in ways he did not acknowledge. I can think of no reason why it should apply only to investment in colonies. If it is wrong for a colonist to ignore the interests of the future, it also is wrong for an individual in the mother country to do so. If a colonial government may control investment, so may a home government; and that requires control of consumption also. Mill’s idea is a variation on an idea in the theory of growth, namely that a market economy underestimates the value of long-term investment and hence grows less rapidly than an economy in which government controls investment; the government is more effective because it takes a longer view than individuals take. If true, this means that long-term investment made by the market adds less to the income of the near future than it takes from the income of the far future, and it is analogous to the proposition in welfare economics than in some market transactions at any moment of time the gains to those making it are less than the costs imposed on those outside it. Mill could have applied his fifth exception to such instances. He did in fact apply the fourth to them.
THE ARGUMENT FOR UNLIMITED INTERFERENCE
The use to which he did put the fifth exception was something different. Inasmuch as individuals should not be allowed to act in a way that damages the future, they should be encouraged to act in a way that assists it. If they will not do so voluntarily, the government is justified in acting in their place. He therefore came to the conclusion that government was justified (if not obliged) to do anything which was desirable for the future but was not profitable for individuals to undertake in the present. From that Mill went on to say that government also should do anything which was desirable for the present but which individuals in the present did not find it profitable to undertake. The extension of the idea brought him around to Smith’s proposition that government should engage in works of great usefulness that private enterprise would neglect if they were unprofitable. The conclusion is that government may do anything which is to the interest of the present and the future to have done. Lest that be thought an overstatement, the reader shall have it in Mill’s words:
It may be said generally, that anything which it is desirable should be done for the general interest of mankind or of future generations, or for the present interests of those members of the community who require external aid, but which is not of a nature to remunerate individuals or associations for undertaking it, is in itself a suitable thing to be undertaken by government: though, before making the work their own, governments ought always to consider if there be any rational probability of its being done on what is called the voluntary principle, and if so, whether it is likely to be done in a better or more effectual manner by government agency than by the zeal and liberality of individuals.21
The qualification about voluntary action, it should be noted, is itself qualified: government should allow philanthropies to undertake unprofitable but useful work only if they can do it more effectively than government can. That is not consistent with Mill’s view that by acting for themselves individuals become more effective.
At this point a disciple of laisser faire must be troubled over what was made of it by one who is renowned as its great expositor. But there is still more. After concluding his statement of the five exceptions to laisser faire, Mill warned against using them in a way that would prevent government intervention when it otherwise seemed necessary. He wished it known that if intervention seemed to be called for and could not be justified by one of the five exceptions, government should intervene nevertheless. He said: “In the particular circumstances of a given age or nation, there is scarcely anything, really important to the general interest, which it may not be desirable, or even necessary, that the government should take upon itself, not because private individuals cannot effectually perform it, but because they will not.”22 They most likely will not in those places where the rulers are superior in ability and purpose to the ruled, as in a country conquered by a people who are more energetic and cultivated than the natives are. Mill’s remarks at this point would be coldly received by the underdeveloped countries today, but most of them would welcome his rejection of the market as the guide to development. Mill, to be sure, did say that what government does it should do in a way that prepares people to do in time the same thing for themselves. But that time can be very far into the future, and meanwhile government direction may do more to make people dependent on it than to teach them how to do without it. Not unfairly, one may recall Mill to himself. The last sentence quoted above is on the last page of the Principles. On the last page of On Liberty, he said that a state which tried to do everything for the people would find it really could not do very much, because the people in time would not be worth doing much for.
THE AMBIGUITY IN MILL
The ambiguity in Mill is formidable. Among the things that are not clear is what he meant by freedom. As a utilitarian he believed in freedom as a means and not as something that was always worthwhile in itself. He believed men should be free because only by being so could they reach their goals. But if one supposes they may reach their goals without being free, does that mean freedom has no value? One cannot be sure. At other times he wrote that freedom was an end in itself, and then he was not a utilitarian. Another uncertain point is whether freedom, as either a means or an end, meant the absence of restraint or the possession of power. When he made it a means, one is not clear in what order he ranked the purposes it was meant to serve. The ambiguity on these points becomes most noticeable when one brings together all of the arguments for and against laisser faire and examines their relations to each other. Of the four in favor of laisser faire, the first two imply that freedom is an end; but the last two imply it is a means. All of the arguments against laisser faire imply either that freedom is not an effective means to the ends to which it is directed or that the ends are not desirable. Some imply that freedom means the possession of power (the first, second, and fourth exceptions), while the others imply it can be either that or the absence of restraint. When Mill stated the ends that either freedom or intervention was meant to serve, he sometimes made them, abstractly, the moral or mental energies of the individual; sometimes, specifically, qualities like diligence, enterprise, or self-reliance; sometimes, impersonal and abstract, like the efficiency of government or of the economy, or impersonal and specific like the production of particular commodities and services. It is plausible to think he placed the qualities of individuals above the other ends, but that is not prescriptive enough to tell legislators how to make policy or the public how to judge it.
These detailed comments may seem to the reader to be of questionable value. My reason for making them comes from believing that most of what has been written about Mill is too brief or too particular. Some of the histories of economic thought contain a very fair summary of Mill’s arguments for and against laisser faire. But by omitting the details, they give his theory of policy an appearance of completeness and consistency that it really does not have. Particular studies of the theory emphasize one or another aspect to the exclusion of the rest. Robbins shows that Mill was not doctrinaire about laisser faire and that he was sympathetic to socialism. But Mill’s theory of policy was much more than that. MacGregor emphasizes Mill’s opposition to laisser faire, citing among other things his denunciation of the idea in a letter to Carlyle in 1833 (a letter which in my opinion has been rather overworked) and in a speech in the House of Commons in 1868. One would suppose that Mill meant nothing at all when he wrote that “laisser faire, in short, should be the general practise.” The statement is certainly difficult to interpret but not so difficult as to justify its being discarded as meaningless.
There are those who have supposed Mill was in favor of nothing but laisser faire. Most have been of an earlier age, when denouncing laisser faire was not so easy as it has become in the twentieth century. Among them have been the leading American lawyers of the nineteenth century. Benjamin R. Twiss writes about them in his book on the Constitution and laisser faire. He reports that in 1909 Roscoe Pound said that every liberally educated lawyer in America from 1850 onward was required to read in Mill’s Principles the chapter entitled “Of the Grounds and Limits of the Laisser-Faire or Non-Interference Principle.” This is the chapter on which most of my comments are based. Pound said that American lawyers got their extreme view of liberty of contract from Mill. It was a view that carried free exchange as far as possible and then a little farther. Twiss cites the argument, made by railroad lawyers in a rate-fixing case, that to fix prices is to deprive the seller of his property.23 We may recall that in his third exception to laisser faire, Mill proposed that the government set prices in a market where they otherwise would be set by a monopoly. One wonders just what it was that the law students read—an expurgated edition of the Principles or those passages they expected to be quizzed on by teachers predisposed to laisser faire.
THE GENERAL CONSCIENCE AS THE GUIDE TO POLICY
The ambiguity in Mill’s theory of policy is not the point at which one cares to end a commentary on him. One would like to find some idea that helps to bring together the parts of the theory, that dispels at least some of their ambiguity, and that relates the premise of his theory to that of the other liberal economists of the century. I do not know of any idea that does all of this, although it may be somewhere in his writings. However, some help is provided by a remark Mill made about “the general conscience,” by which he seems to have meant the ethical values which all “persons of ordinary good intentions either believe already, or can be induced to believe.”24 The general conscience, he said, was the justification for prohibitory regulations—those forms of authoritative interference that restrict the behavior of individuals. He did not say it justified prescriptive measures—those forms that require individuals to do certain things. But most measures of policy can be stated in either way. Certainly all that Mill proposed can be. What all of them had in common was, I suggest, that they recommended themselves to a man of ordinary good intentions. Or they could be made to do so. Such a man would or should believe that individuals can look after themselves better than government can look after them. Hence, laisser faire would recommend itself to him as a general rule. But he would take exception to it when it produced results not to his liking: poor education, child labor, monopoly prices, long hours of work, and any other of the problems that Mill’s proposals were meant to solve.
The general conscience helps us to understand the principle by which Mill marked off the areas of the economy he believed should be controlled by government and those he believed should not be. It relates the different forms of control to each other by showing what all of them have in common. It also shows why Mill refused to be bound by the principles of economic policy that he himself laid down—why, that is, after carefully explaining the circumstances in which exceptions could be taken to laisser faire he appended an omnibus exception by which control of almost any kind could be justified. That last exception had only one limit—the general conscience. Finally, the idea of the general conscience implies there is no inconsistency in a policy that calls for both intervention and nonintervention or both controlled and uncontrolled markets. The idea does that by implying intervention can increase the freedom of some individuals by adding to their power and can protect others against a loss of freedom by removing conflicts of interest.
The ultimate principle on which Mill based his economic policy, was, I submit, that government may do anything which men of good intentions believe it should do or can be made to believe it should do. His principle was similar to but not identical with that of the liberal economists of the century who were not utilitarians. It was similar in that Mill and the others believed government may do whatever the people want it to do and it is able to do. Mill differed from them in believing that the wants of the people should not be taken as given. He did not believe, as the others did, that government must be limited by what clearly could be established as the opinion of the people. Mill believed the formation of opinion was itself one of the responsibilities of government. It must be so, because in his view government was responsible for improving the people, for strengthening their character, elevating their desires, and enlarging their views. This is the difference that separated the liberals who were utilitarian from those who were not. It is suggested by Mill’s distinction between what people “either already believe” and what they “can be induced to believe.”
The distinction, made so casually and quickly, is enormously important. The utilitarian view allows for much more government intervention than the nonutilitarian (or traditional) view of liberalism. That is so because what people can be induced to believe is almost always more than what they do believe. It also is so because government itself is to the utilitarians an agency that forms beliefs. There are ways (like the market and the polls) of knowing what people do believe and what the general conscience is, even though the ways often are rough and ready. The traditional liberal therefore can specify in a practical way just what is the limit to government power. There is no way of knowing what the general conscience ought to be, because in a liberal society there are no absolutes by which conscience is formed. Those governments that do claim to know what the general conscience ought to be are none of them liberal in either the traditional or utilitarian sense. They are in fact based on some form of political idealism, such as communism or fascism. The utilitarians, to be sure, do propose the rule that government may do only those things that improve the people, but the rule merely restates the problem, because it does not explain what those things are and what improvement is.
Both the traditional and the utilitarian views of liberalism help to explain the measures of economic policy enacted by government in the nineteenth century. In time the utilitarian view enlarged its influence, not to displace traditional liberalism but to compete with and to challenge it. In the twentieth century, governments have been guided more by what they believe the people ought to want and less by what the people clearly do want. My evidence for this is the increase in those measures of economic policy that are controversial, difficult to enforce, divisive, and subject to continual change. In the transition—in both its factual and doctrinal aspects—is the answer to one of the great questions of our day: How did liberalism change from an economic policy of limitation to one of comprehensive control? The answer, put very simply, is that traditional liberalism was replaced by utilitarian liberalism. Those who today propose comprehensive planning in the name of liberalism are utilizing the opportunities that utilitarianism supplies. Those who adhere to the traditional view of liberalism are often pained that the advocates of planning also call themselves liberals. To do so is, in the traditional view, a travesty on the word liberal. But it really is not, because in the nineteenth century liberalism by admitting utilitarian ideas became ambiguous. And the ambiguity explains something more important than the confusion of names. It explains why traditional liberals believe that what the planning liberals propose to do will in the end produce a dictatorial state, and it explains why the latter dismiss the belief. Ironically, about the only figure of the past whom both admire is Mill.
Mill did not begin the transition from traditional liberalism. Utilitarianism is much older. Bentham was a force, and he in turn was influenced by Hume and others. But Mill made the first comprehensive effort to state the utilitarian theory of liberalism. Those who followed enlarged either on his principles of economic policy or on those of the traditional liberals. It is with Mill, therefore, that these studies are concluded.
THE CLASSICAL PSYCHOLOGY OF LIBERALISM
THE POLITICS OF THE CLASSICAL ECONOMISTS
LIBERALISM IN THE GREAT CENTURY
 John Stuart Mill, Principles of Political Economy, etc. (London, 1891), p. 604.
Ibid., p. 609.
Ibid., p. 614.
Ibid., p. 627.
 Benjamin R. Twiss, Lawyers and the Constitution. How Laissez Faire Came to the Supreme Court (Princeton, 1942), pp. 141, 75-76n.
 Mill, op. cit., p. 604.