Written by Dirk Ehnts, Econoblog101
John Stuart Mill (1806-1873) was an English philosopher – one of the most oustanding thinkers in defining liberalsim. This is not liberal in the present-day sense of welfare states but in the formalism that today we call liberatrian.
From Wikipedia:
John Stuart Mill (20 May 1806 – 8 May 1873) was an English philosopher, political economist and civil servant. One of the most influential thinkers in the history of liberalism, he contributed widely to social theory, political theory and political economy. Dubbed “the most influential English-speaking philosopher of the nineteenth century”,[5] Mill’s conception of liberty justified the freedom of the individual in opposition to unlimited state and social control.[6]
Mill was a proponent of utilitarianism, an ethical theory developed by his predecessor Jeremy Bentham, and contributed significantly to the theory of the scientific method.[7]
A member of the Liberal Party, he was also the first Member of Parliament to call for women’s suffrage.[8]
Via Matt Forstater (link), I have found some paragraphs by J. S. Mill on tax-driven money (see below). It is quite amazing that this knowledge from almost 170 years ago got lost in the 21st century, with all the technology available.
Why is it that Mill’s seminal philosophy is so seldom known in detail today? Perhaps information technology must be imagined like a race between weapons and armor. There are more sources available, but the creation of “filter bubbles” has also increased quite a lot. It was probably easier to spread good ideas and theories in the 19th or 20th century than it is now in the 21st. Perhaps it took longer and access to publishing books was more restrictive. Anyway, here is the excerpt from J. S. Mill’s Principles of Political Economy:
Book III, Chapter XIII
Of an Inconvertible Paper Currency
III.13.1
ff1. After experience had shown that pieces of paper, of no intrinsic value, by merely bearing upon them the written profession of being equivalent to a certain number of francs, dollars, or pounds, could be made to circulate as such, and to produce all the benefit to the issuers which could have been produced by the coins which they purported to represent; governments began to think that it would be a happy device if they could appropriate to themselves this benefit, free from the condition to which individuals issuing such paper substitutes for money were subject, of giving, when required, for the sign, the thing signified. They determined to try whether they could not emancipate themselves from this unpleasant obligation, and make a piece of paper issued by them pass for a pound, by merely calling it a pound, and consenting to receive it in payment of the taxes. And such is the influence of almost all established governments, that they have generally succeeded in attaining this object: I believe I might say they have always succeeded for a time, and the power has only been lost to them after they had compromised it by the most flagrant abuse.
III.13.2
In the case supposed, the functions of money are performed by a thing which derives its power for performing them solely from convention; but convention is quite sufficient to confer the power; since nothing more is needful to make a person accept anything as money, and even at any arbitrary value, than the persuasion that it will be taken from him on the same terms by others. The only question is, what determines the value of such a currency; since it cannot be, as in the case of gold and silver (or paper exchangeable for them at pleasure), the cost of production.
III.13.3
We have seen, however, that even in the case of a metallic currency, the immediate agency in determining its value is its quantity. If the quantity, instead of depending on the ordinary mercantile motives of profit and loss, could be arbitrarily fixed by authority, the value would depend on the fiat of that authority, not on cost of production. The quantity of a paper currency not convertible into the metals at the option of the holder, can be arbitrarily fixed; especially if the issuer is the sovereign power of the state. The value, therefore, of such a currency is entirely arbitrary.
