I. J. S. Mill: the multiple syntheses.

Of all books on economics, Mill's Principles of Political Economy (1848)

was one of the most widely read and widely employed. Used as a text for almost
sixty years (until replaced by Marshall's), it was and it is a complete treatise on
classical economic theory, economic policy, and social philosophy. In his
Principles of Political Economy Mill has traced out:
V.1 A balance between the inductive-deductive extremes in economic method;
V.2 A synthesis of the classical pessimist and optimist ideas;
V.3 A bridge between the classical and neoclassical economics;
V.4 A compromise between the classical ideas and the socialist ones.
V.1 A balance between the inductive-deductive extremes in economic
method.
Mill lived in a period when the scientific inquiry of Political Economy began
to be criticised. For instance, French philosopher Auguste Comte, charged that
Political Economy as a deductive science lacked empirical an historical relevance.
Therefore, Comte called for a new method as well as a new ordering of the social
sciences. The new method was called positivism, by which Comte meant
empiricism, or induction.
Mill was sympathetic to Comte's attempts to construct a general science of
man, but he nevertheless defended economics as a separate science. He also moved
closer to Comte's position on scientific method, but he consistently defended the
Ricardian approach as useful to a social science.
According to Mill, in the social arena the empirical or inductive method
could not be applied alone, since causes of social phenomena are often complex
and interwoven and effects are not easily distinguishable from one another. Mill
viewed deduction as a desirable check on the errors of empiricism. But deduction
need not lead to dogmatic acceptance of ideas and theories that cannot be
supported by fact. Thus facts are a desirable check to pure deduction.
V.2 A synthesis of the classical pessimist and optimist ideas.
 Mill as Ricardo and all the classical economists assigned a crucial role to
capital and to capital accumulation. He argued that employment and output are
dependent on the accumulation and investment of capital. But, he considered that
unemployment of resources - other than a temporary state of affairs – was not
possible because of Say's law.
V.3 A bridge between the classical and neoclassical economics.
Mill developed the first clear British contribution to static equilibrium price
formation in the modern sense and correctly formulated the demand and supply
as schedules.
But Mill's purely theoretical achievement goes even beyond Marshallian
economics. His verbal model of reciprocal demand in the theory of international
trade was a unique theoretical achievement. The role of price adjustments in
establishing conditions of reciprocal equilibrium in several markets
simultaneously – this advance places Mill one step ahead of Leon Walras.
Therefore, in conception, if not in formalization and development, general
equilibrium theory could be termed "Millian" as well as "Walrasian" .

V.4 A compromise between the classical ideas and the socialist ones.
Mill asserted the famous dichotomy between economic laws of production
and the social laws of distribution. The former, according to Mill, are
unchangeable; they are governed by natural laws. These laws, which had been so
well described by Ricardo and his followers, are the proper province of economics
in the narrow sense - as a separate science. But the laws of distribution, Mill
insisted, are not determined by economic forces alone. They are, instead, almost
entirely a matter of human will and institutions, which themselves are the product
of changing values, mores, social philosophies, and tastes. The laws of distribution
are therefore malleable, and their explanation and understanding lie not merely in
economic inquiry but in the historical laws that underlie economic progress.
Like Ricardo before him, Mill believed that the economy, owing to
diminishing returns and falling incentives to invest, was being propelled from a
progressive state to a stationary state. But alone among the classical economists,
Mill did not believe that the stationary state was undesirable, since it provided
the necessary condition for his program of social reform. Mill believed that
once “the stationary state was reached, problems of equity in distribution could be
evaluated and social reforms could proceed apace.”
A major part of Mill's normative economics concerns the proper role o f
government. In the classical tradition, Mill reasserted that laissez faire should be
the rule and that any departure from it, "unless required by some great good, is a
certain evil." But Mill was able to list several exceptions to the doctrine of laissez
faire without compromising on the basic principle. His exceptions would allow
government intervention in the areas of consumer protection, general
education, preservation of the environment, selective enforcement of
"'permanent" contracts based on future experience (e.g. marriage), public-
utility regulation, and public charity.
In short, Mill recognized, and in some cases enunciated for the first time, the
majority of popular exceptions to laissez faire that have become an integral part of
modern capitalism, for instance, in the United States.