James Mill on Comparative Advantage and the Gains from Trade:

Excerpts from the Elements

James Mill (1773-1836) was a major figure in classical political economy; for biographical data and internet resources see Gonçalo L. Fonseca and Leanne J. Ussher’s New School website. Mill’s Elements of Political Economy was the first textbook of Ricardian economics. John Stuart Mill recalled in his Autobiography how the book got started: “My father … commenced instructing me in the science by a sort of lectures, which he delivered to me in our walks.” The thirteen-year old wrote up the lectures and from his notes grew the book. In the preface James Mill wrote “My object has been to compose a school-book of Political Economy … I profess to have made no discovery.”

The Elements has a double place in the history of classical international trade theory. The first edition (1821) presented with “model clearness” the principle of comparative advantage from chapter 7 of David Ricardo’s Principles of Political Economy and Taxation. (Morgan Rose gives a brief Teacher’s Corner history of comparative advantage.) Some years later John Stuart Mill was in a reading group studying the Elements. He recalled in his Autobiography, “The theory of International Values which I afterwards published, emanated from these conversations.” The theory which he published in the first of the Essays on Some Unsettled Questions of Political Economy seems to have been a response to a mistake in the Elements regarding the evaluation of the gain from trade. In the third and final edition of the Elements James went some way to accommodate his son’s corrections: “I have corrected an error of the former editions.”

Rod Hay’s Documents for the History of Economics website at McMaster makes available the entire 3rd edition of the Elements of Political Economy as well as the other documents mentioned above; the 3rd edition is also available from the Library of Economics and Liberty. However the interest in Mill’s account of comparative advantage justifies reproducing all three (1821, -24 and –26) versions of the comparative advantage section.

What’s here

James Mill treats specialisation and comparative advantage in Section IV of chapter III. The chapter is entitled “Interchange” and the section, “Occasions on which it is the Interest of Nations to Exchange Commodities with one another”.

The “Occasions …” section is presented here in two forms

· pdf files of the 3 versions of Section IV more or less as they appear on the original printed page: 1^st edition 2^nd edition 3^rd edition

· 2 framed paired comparisons—1^st and 2^nd 2^nd and 3^rd with the major changes highlighted.

Editions of the Elements

1821. Elements of Political Economy. London: Baldwin, Cradock and Joy. 

1824. Elements of Political Economy second edition revised and corrected. London: Baldwin, Cradock and Joy.

1826. Elements of Political Economy, third edition revised and corrected. London: Baldwin, Cradock and Joy. (This was reprinted with the same pagination by H.G. Bohn (London) in 1844, by Augustus Kelley (New York) in 1965 and by Georg Holms (Hildesheim.) in 1971.

1967. In Winch’s selection of Mill’s writing listed below.

Literature 
 

Just a few items from a considerable literature:

Jacob Viner, 1937. Studies in the Theory of International Trade, London: George Allen & Unwin. (The classic account of the development of comparative advantage.)

Donald Winch, 1966 James Mill: Selected Economic Writings, Edinburgh: Oliver & Boyd. (This valuable survey of Mill’s economic writings reprints the third edition of the Elements noting important changes from earlier editions.)

William O. Thweatt, 1976. “James Mill and the Early Development of Comparative Advantage.” History of Political Economy 8 (Summer): 207-234.

William O. Thweatt, 1986. “James and John Mill on Comparative Advantage: Sraffa’s Account Corrected.” In H. Visser & E. Schoorl, eds., Trade in Transit. Dordrecht, Nijhoff. (In Thweatt’s history of the discovery of comparative advantage James Mill is more important than Ricardo or Torrens, the two authors most often associated with the discovery.)

Andrea Maneschi, 1998. Comparative Advantage in International Trade: A Historical Perspective. Cheltenham: Edward Elgar. (A recent review of the history of comparative advantage.)

John Aldrich, 2004. “The Discovery of Comparative Advantage.” Journal of the History of Economic Thought, 26, (3): 379-399. (A recent re-examination) pdf

John Aldrich, University of Southampton, Southampton, UK. (home) 6^th September 2002. Revised 30^th August 2010.