Economic Thought of J B Say and J S Mill Episode 10

Economic Thought of J B Say and J S Mill Episode 10 Module - 1 Economic Thought of J B Say and J S Mill J.B. Say and J.S.Mill. both were also part of the socialists who had given there economic thoughts at that time. His full name Jean Baptiste Say was born in Lyons on January 5, 1767 and died in Paris on November 15, 1832. Say was French by birth. Say was the leading French political economist in the first third of the 19th century. Say earlier had worked at a broad range of occupations including an apprenticeship in a commercial office, following in the family tradition, working for a life insurance company, journalist, soldier, politician, cotton manufacturer and writer. The major reasons for his constantly changing career were the political and economic upheavals his generation had to endure. First the French revolution, the revolutionary wars, the rise of Napoleon Bonaparte, economic warfare with Britain, and eventually the fall of the empire and the restoration of the bourbon monarchy. These are the Beasons why say kept on changing his job because the French revolution was taking place then the revolutionary wars came in Europe then Napoleon Bonaparte who was very strong and powerful soldier he started in the first world war he was very well known and then he started a war with Britain now when wars come the whole economy becomes there is up well in the economy because the economy cannot taken the up wells of the war if war is there the entire money is spent on war fare. Spent on fighting the war and a very little is left for actually domestic production and consumption. That is why during war time the whole economy becomes slow and there is total upherial in the

economic of that country. When we come to the works of J.B.Say in1793 say married Mile Deloche daughter of a former lawyer. From 1794 to 1800 Say edited a periodical entitled la decade philisophique literary, et politique, in which he expounded the doctrines of Adam Smith. Adam Smith the classical economists his doctrines were taken by Say and these are the French names for the works for the doctrines that he wrote, the books that he wrote and from 1794 to 1800 Say was editing a periodical so a journal was been edited by Say were his economic ideas were put. Say made his name a leading French political economists of his time. with the publication of the trait d'economie politique. So again in 1803 Say started the publication and known economists of that time so political economy, they were not divided and whole politics and economics went to gather and Traite to means the treatise the whole classification of what is economics and what is politics what are the ideas in economics and politics that was written by Say in 1803. The economic ideas which are most closely associated with his name are Say's law of market, even today economists refer to Say's law of market which is often quoted as supply creates its own demand the vital role played by the entrepreneur in economic activity, the contribution of nonmaterial goods that is services. Say's law of markets means that emphasizing the supply side if you remember the classical economists had also emphasized supply side demand will always be there but it the supply which is more important and this supply will creates its demand what they argued was that if i have a demand for a commodity but if that commodity is not in the market, then what can i do with the demand i will keep demanding it doesn t exist so what Say said that supply has to be there if that is commodities are there automatically i will demand particular commodity because it is available in the market and he emphasized the role of the entrepreneur that is the person who starts

business the person who innovates and comes up with new commodities he is the entrepreneur and in economic activity the role is very important because he takes the risks and when he takes the risk he starts in new business he starts new commodities and because of the risk he earns lots of profits. Then contribution of none material goods was also emphasized by Say so far when we have studied earlier Adam Smith, Ricardo, Malthus they were all material related economists who said it is because money is there material is there that is why economic development takes place, but Say was first to say it is not only monetary activities as such not only material goods which give profits even services, a doctor for example a lawyer who are providing services they will also contribute to economic growth and development. Module 2 War Economic and Treatise on Political Economy Say was convinced that French economic policy was going to result in economic collapse. The continental system which excluded British goods from the continent, the issuing of government licenses for business, the increasing tariffs on imported cotton, and the difficulties of trading in wartime, were all stifling French industry. Now let us first look at these points which are very important because they are war economics it is at the economics at a time when war was taking place so the continental system means the system which is existed in Europe. Europe as a continent so that is the economic system which excluded British goods from the continent that means with Britain trading was not taking place because France was at war with Britain now when two countries are war students they will be no trading and people will not like to take goods from a country with whom i am fighting so British goods were not being brought to France now if British goods are not coming in the form of raw

materials in the form of inputs then French manufacturers were losing because they couldn t produce because British commodities were not being imported to France. Issuing government licensees for business the licenses were done by the government and with out a license no body could start a business now that is a long time taking process and licenses are often corrupt system in which people corruption enters and long procedures are there and people cannot start business. Tariffs on imported cotton when cotton was imported from Britain then tariffs were put which meant that imports prices were very high if your importing raw materials which are very high costly naturally your own domestic product the prices will also increase and trading in war became difficult all these lead to stifling of the French industry, stifling means througtling, suffering, suffocating of the French industry. The publication of the second edition of the treatise on political economy brought Say again to the attention of the government which employed him to travel to England to discover the secret of English economic growth and to report on the impact of the revolutionary wars on the British economy. So when Say published his second edition of treatise on political economy his famous book in 1814 that is just when wars revolutionary wars has just ended this Say was asked to go to England to study travel to England and to study their economic system how they were managing how Britain was still earning profits development was taking place so that the French could adopt those ideas and improve their own development. Say also used the trip to make contact with British philosophical radicals and political economists such as James Mill, Jeremy Bantam and Ricardo. Part of his report was published in the pamphlet De I' Angleterre et des Anglia s, these are all French words because he was French he wrote in French only he dint know much English at that time but it contains the devastating critique of the economic impact of war on ordinary British working population and the

use of the bank of England to pay the costs of war by depreciating the money and creating public debt which would take decades to pay back. So what he learnt in England when he went there in Britain he contacted all the British economists Mill was one Jams Mill then we have Jeremy Benthom an another British economists Ricardo also at that time he met these economists and then discussed economic problems with them and he found that war had always a bad impact on the population of that country what Britain and other government were doing was that they were creating money or money use of bank, England was paying the costs of war and they depreciated the money by depreciating the money you reduce the value of money which means that when people are going to import then they can import much more because now the commodity will cost less, say for example if you can understand better if India depreciates rupee which means that the value of rupee comes down say for example with US and if the exchanged rate of Indian one dollar is equal to 50 rupees then by depreciating our own rupee or value that means that one dollar will now be equal to 60 rupees so more we can export and the US economy they can buy more products with one dollar because now worth of 60 rupees can be sold to them. So what Britain was doing was reducing the value of currency so that they could sell more to other countries export more to other countries and with this they had enough foreign exchange to fight the war as well as pay all the dues and debts that the economy had. Module 3 Say s law of Market Say's law of market which is very very important, he is well known for Say's law of markets which means 1. Aggregate supply creates its own aggregate demand, this is first

principle of the law that the aggregates supply total supply aggregate means the total supply it will create its own the own aggregate demand in the economy. Supply creates its own demand. So supply will creates its own demand there is no need for demand to come and then supply be adjusted you create the supply demand will get adjusted accordingly. Supply constitutes its own demand. Now these are different variations to what the Says law of market states. And inherent in supply is the demand for its own consumption. so supply if every commodity has its demand and this demand is created because of consumption of that particular commodity for example if there are shoes in the market or purses in the market then supply is there the demand for purse will automatically be created because i will requiring the purse i will need the purse to take to school or to college or else where or shoes to wear so demand its self the supply it has inherent demand and this demand is there because consumption is there because he want to consume. We do not buy shoes and keep at home we buy it because we want to consume it we want to wear it so what ever commodity is demanded all that is consumed by the people. It is always supply that we consume and that you cannot consume what does not exist by just demanding it, this is crux of the whole law that supply is there that is why i demand comes even if you keep on demanding say for an aeroplane but there are no aeroplanes in the market what will happen the demand goes waste so only when supply is there the demand gets created. Say s law says the supply sale of X commodity creates or demand purchases of Y commodity. This law can be shown by business cycle statistics you also gave a business cycle statistics, and i think if you remember, every economy faces a business cycle so that there is ups and then there is downs and then there is recovery again so whole economy first grows then it becomes stagnant for some time then it comes down which is the slope period the

depression period and then it goes up boom period so this cyclical trend for every economy it is a must otherwise economy cannot grow. And it should be very small cyclical growth only when the big depression takes place then it is very difficult for economy to be lifted up as it is taking place today in the recession times. He was also among the first to argue that money was neutral in its effect on the economy. Money is not desired for its own sake, but for what it can purchase. It is true that why do i want money why does any body want money it is because money is there for transactions, money is there for purchase i do not keep money, i want money for money sake because i like 5 rupees coin or a 10 rupee note or a 100 rupee note i don t buy i don t just keep money for keeping it, i use it so that i can purchase commodities. The book of J.B.Say which he had rewritten in his times. Now this was the ideas of Say which we have discussed so far and how it is importance was only with regards to the law of the markets. Module -4 Mill s Social Liberty and Freedom of Speech J.S.Mill, John Stuart Mill 1806 to 1873 was a British philosopher, a political economists, civil servant and Member of Parliament, was an influential classical liberal thinker of the 19th century. He was an exponent of utilitarianism that meant that utility was very important in his theories and ethical theory developed by Jeremy Bentham though his conception of it was very different from Bentham's. J.S.Mill was born in London, the eldest son of the Scottish philosopher and historian James Mill. Say went to Britain and contacted James Mill that is the father of John Stuart Mill because he was his contemporary at that time and then from him the ideas had come. His father's history of India was published in 1818; immediately there after, about the

age of twelve, Mill began a thorough study of the scholastic logic. James Mill was interested east India companies had been formed people were coming to India they were finding Indian economy a vast economy which was very primitive which was not developed and here the British could come and exploit their commodities their goods they had a market in India. Which needed to be exploited so his father had rewritten history of India which was published in 1818 and then J.S.Mill started his theory of logic. In 1851 Mill married Harriet Taylor after 20 years of an intimate friendship. He cites her influence in his final revision on liberty that is the book rewritten by J.S.Mill on liberty where his wife had influenced the ideas and she had wanted him to write this book published shortly after her death, and she appears to be referenced in the subjection of women. Another book written by Mill the subjection of women where he fought for women's rights and his wife had influenced him. Taylor died in 1858 after developing congestion only seven years after the marriage. During 1865-68 he was a member of parliament and was associated with the liberal party of Britain in that time. Mill advocated easing the burdens on Ireland and became the first person in parliament to call for women to be given the right to vote. Now today in India we have the women s to sit in the panchayat to be represented in the panchayat right to vote for women was not there in Britain and then mill was the first person first economist when he became a member of parliament he wanted to pass the bill by giving the women to right to vote in the elections. Coming to the works of economic works of Mill we find on liberty it addresses the nature and limits of the power that can be legitimately exercised by society over the individual. So how much liberty should a person have, how much pressure should society or power should the society have on the individual that is all given in his book on liberty. One argument that Mill develops further than any previous

philosopher is the harm principle the harm principle holds that each individual has the right to act as he wants, so long as these actions do not harm others. So on liberty he wrote the book he said that society there is a limit to how much power it has on the individual so individuals are free but how much freedom can an individual have an individual can have freedom till the point so that he doesn t harm others he as the right to act as he wants there will be no restriction but in his act if he is harming any body then he doesn t have that right. Mill excuses those who are incapable of self government from this principle, such as young children or those living in backward states of society. So he was always saying individual freedom is there but self government should be there that means in your homes also you should try and meet your ends with the money that you have you should be self restrained you should know how to govern your self hence he dint like those people who were in the back ward states of society who were poor people in the society and he felt that these poor had to be helped and once they are helped they should learn how to behave and how to economise in the society. On liberty involves an impassioned defense of free speech. So he advocated freedom of speech and he said every one has a right to speak to say there mind to express their views and ideas and no body should stop them. This is the book of J.S.Mill which he wrote on liberty which can see in the slide now. So Helen Taylor was the daughter of Harriet Taylor and collaborated with Mill for fifteen years after her mother's death, she stayed with her father and she helped him in his writings of the books and influencing even after her mother's death. Mill demonstrated a deep appreciation for a noting in his essay " The contest in America": so when human beings are injustice is there, tyrannical injustice is there and war is carried out which is

not correct for its own sake it is not correct then that it is not good for the economy. He was in favor of military and war to give victory to the own ideas and right and good but then which is their own war it is carried on for an honest purpose then it is their free choice but if it is then not a free choice but on completion that he dint agree. Mill's views on social liberty and tyranny of majority was liberty and authority is the most concern of feature in portions of history. So the struggle is there between liberty and authority liberty my freedom my choice and authority imposed on me by somebody else or the society. Mill defined social liberty as protection from the tyranny of political rulers. So the political kings and political zars and political rulers they were they had tyranny in their mind they were exploiting the people and they were trying to subjugate the people, Mill opposed that and said social liberty should be there and it as to be they have to survive they have to protect the society they have to protect the people from the tyranny of political rulers. So Mill puts limits on the ruler's power that he would not be able to use his power for his own wishes so he said liberty is good for individual, liberty is good for the people but if you remember, how your own act should not harm others so if the rulers act is wishes are being harmed to the society or it is harming individuals then mill said that a stop must be put to rulers and they should not be allowed to act independenlty. the human rights and slavery, mill said that The Negro Question that means should their be slavery in the country, coming to

Module 5 Economic Philosophy Economic philosophy and free markets, Mill's principles of political economy said that a market should be free and equality of taxation should be there, that means equality of sacrifice and progressive taxation should be penalized should not be there because those who worked harder will save more and then they should not taxed away, so he said equality in taxation should be there. He was also very emphatic about environment and he said that environment destruction should not take place and this reduces the quality of life, so you should be protective about environment you should be protective about the trees about the plants nature because that gives you the life, that is the quality of life.