The Feeble and Compromising John Stuart Mill

Mises devoted particular attention to the discussion of time wages. According to a widespread opinion, the economic theory of time wages had refuted the standard charge against the socialists, namely, that their schemes would suffer from incentives problems that were absent under capitalism. On this issue the socialists had found an unexpected ally in John Stuart Mill, long regarded as the patron saint of classical liberalism. In his elegant prose, Mill had stressed that capitalism too suffered from an incentive problem as soon as wages were paid for labor time (time wages), rather than for the work performed (piecework).

John Stuart Mill

Mises noticed that Mill's arguments “have provided for decades one of the main props of the socialist idea, and have contributed more to its popularity than the hate-inspired and frequently contradictory arguments of socialist agitators.”²⁷ Nevertheless, Mises found that it was not difficult to unearth the error in Mill, at least for a reader acquainted with marginal-value theory. The English economist had not taken account of the fact that time wages are different for different kinds of work. Therefore, workers under capitalism still do have an incentive to overcome the irksomeness of labor.

Doubtless the individual working for a time wage has no interest in doing more than will keep his job. But if he can do more, if his knowledge, capability and strength permit, he seeks for a post where more is wanted and where he can thus increase his income. It may be that he fails to do this out of laziness, but this is not the fault of the system. The system does all that it can to incite everyone to the utmost diligence, since it ensures to everyone the fruits of his labour. That Socialism cannot do this is the great difference between Socialism and Capitalism.²⁸

This discussion of Mill's mistake on a question of labor economics was Mises's first blow against the hallowed reputation of Mill. He had come to the conclusion that Mill's reputation had done much damage to the intellectual appeal of the case for political liberalism. Five years after the publication of Socialism, Mises set the record straight:

John Stuart Mill is an epigone of classical liberalism and, especially in his later years, under the influence of his wife, full of feeble compromises. He slips slowly into socialism and is the originator of the thoughtless confounding of liberal and socialist ideas that led to the decline of English liberalism and to the undermining of the living standards of the English people. Nevertheless—or perhaps because of this—one must become acquainted with Mill's principal writings.²⁹