John Stuart Mill Research Paper
The Works of John Stuart Mills: Utilitarianism
John Stuart Mill's philosophy followed the doctrines of his father James Mill and his father's mentor and compatriate, Jeremy Bentham. John was raised from birth by his father for the primary purpose of progressing the utilitarian theories which both he and Bentham ascribed. Utilitarianism is an ethical theory holding that the right course of action is the one that maximises the overall "good". Bentham’s work on utilitarianism was foundational for the work which was done by Mills.
The utilitarianism philosophy argued that the right act or policy was that which would cause the greatest good for the greatest number of people also known as the greatest happiness principle, or the principle of utility.
Premise: Equity vs. Equality
Equity is the state, quality, or ideal of being just, impartial, and fair.
Equality is the state, quality or ideal of being equal.
Fair Price and Taxation …show more content…
Based on the concept of “Equality of Sacrifice”, Mills believed that people will perceive taxes to be fair, so long as they were being applied equally to all members of society.
He saw progressive taxation as a “mild form of robbery” as it penalized those who worked harder in accruing more wealth. As marketers, we view taxation as being an intense, emotional issue, which should be treated delicately, as it affects all segments of the population. Hence, in situations where public interest is threatened, the price must be determined on the basis of equity, not equality. A progressive taxation rate refers to the manner in which taxation progresses with higher incomes. Income earners are indebted to pay a proportionately higher taxation “price” on the amount they earn as incomes increases. A progressive taxation rate therefore reduces the tax burden on poorer members of society, as the burden is shifted to those with a higher ability to pay. Progressive taxation hence has a distribution effect on
income.
Developing nations, like our own, spend a considerable fraction of the national budget on roads, schools, infrastructure, poverty alleviation and other areas that promote progress. It is evident then, that there would be no possible way to raise the annual budget if economies operate on an equal taxation base. In order to prevent a budget deficit from occurring, fewer revenues would have to be channelled toward developmental initiatives and welfare benefits (URP, CEPEP, and Social Welfare). This would further place deprived members of society in an even more vulnerable state. As such, the absence of the distribution effect of income causes greater disparities in income allocation. This situation may potentially lead to the erosion of the middle class, with the creation of a very large upper and lower class. Hence, we deduce that an equal price may not always be a fair price, particularly in matters of social reform.
Mills further postulates the concept of individualism. The main contention of individualism is that each man should enjoy the benefits of his own production. What Mills fails include however, is that people are born and bred under particular situations which render them unequal in their ability to progress. A person born under unfavourable circumstances such as poverty, may not be as able to acquire the level of education and advancement as a person with the financial means to do so. As such, he ignores that individuals are a victim of circumstance. Owing to detrimental circumstances, not every member of society can adequately seek his own interest. Furthermore, those ravished with poverty are unable to progress, particularly because the revenue generating assets are in the hands of the rich. We are therefore of the belief that an equal taxation “price” leads to an uneven distribution of income which renders the poor helpless, and fuels the vicious cycle of poverty.
For developing nations like our own, the focus of price setting and policy makers should be cantered on equity rather than equality. Owing to our history of slavery and dependence, distribution of income has always been uneven in Trinidad and Tobago. There is a very large middle class, but there also exists extremes of wealth and poverty. According to the CIA world fact book, 6.4% of Trinidad and Tobago’s population are unemployed, while 17% of the population lies under the poverty line. This places a large segment of the population dependent on government benefits for survival. An equal taxation basis then, does not seek the greatest good for the greatest number. It ensures that more wealth is maintained in the hands of the rich, while restricting the poor from acquiring greater levels of income and advancement.
Furthermore, because a flat tax offers a tax break to higher income earners, Mills goes on to propose that inheritance should be taxed. His utilitarian society suggests that everyone should be equal. Hence receiving an inheritance would place one ahead of society unless the inheritance is taxed. He contends that inheritance allows people to acquire wealth which they had no produced. This practice is, in our eyes in unjust. We agree that persons who have accrued wealth also have the right to dispose of their assets in any manner they deem fit. In addition, we believe that society needs a way of transferring wealth from one generation to another, especially since younger generations now have difficulties in gaining a foot in the property ladder. Hence, we support that no inheritance or gift taxes are currently being levied in Trinidad and Tobago.
The Pricing Mechanism within the Domestic and International Economy
Mills indicates that as a society progresses and the working class becomes more educated they will have more influence on the political economy of a country, and inevitably be responsible for affecting the price and distribution of the goods and services that they consume. Therefore in conjunction to this it can be argued that an educated workforce will be able to make more informed decisions that would influence a fair price. If the price is outstanding as compared to the utility derived, the educated consumer will refrain from purchasing the good unless it is a necessity. Because prices are determined by the interaction of demand and supply, the educated consumer will have an influence on the price by restricting demand.
With consideration to fair prices, Mills proposed that within a domestic economy, the existence of competition equalized costs and thus domestic prices were equal to the cost of production. In theory, this relates that the price of an object will be equal to the cost of the factors of production that went into making it. We believe that for the supply side, under the cost of production theory prices will be fair if two conditions are fulfilled. Firstly, the price must cover all payments to the factors of production, including interest. Secondly, these payments must equate the level of employment, or effort expended by each factor.
On the demand side, we see that the price generated stems from a person’s willingness to pay. It can be argued then, that the price in a domestic economy should be determined by demand and supply, and not the cost of production. However, we are of the view that in order to protect the consumer, a fair price should be equal to the cost that went into the creation of the good. A higher willingness to pay would result in extremely high and unfair prices which would only benefit producers. This leads to a transfer of income from those operating on fixed incomes to profit earners.
In matters of international trade however, Mills recognized that the factors of production were not mobile across international borders. Furthermore, he acknowledged that international price ratios including wages and profits would not equalize through competition. As such, Mills held that international prices would strictly depend on supply and demand, and not costs of production. He concluded that the terms of trade would depend on the demands for the imported products by the two countries.
Given that a country (Country A) has a comparative advantage in wine, it wishes to trade with another nation (Country B). Assuming that Country A exports wine and Country B exports cloth, the terms of trade would then be determined by the relative strengths of import demands for each country. If Country A’s demand for imported cloth is much greater than Country B’s demand for imported wine, then the terms and gains from trade will favour Country B.
We maintain that the demand for goods is a symbolism of a person’s (or country’s) willingness to pay. In essence, a person’s willingness to pay is influenced by his intrinsic need for the good, combined with other external or situational factors. The laws of demand and supply hence interact to determine an equilibrium price that is favourable to both producer and consumer, where the said price mirrors the consumer’s willingness to pay. It is expected then, that having acquired the product, the consumer experiences utility. The price mechanism hence creates a price which is fair, so long as it ensures the greatest utility for the aggregate society. As such, we believe that in matters of free trade, prices may be subject to government monitoring, and in extreme cases, intervention if specific groups are being advantageous.
Government Intervention In the Pricing System
Mills favoured a "laissez-faire" approach to governance, but encouraged government intervention in the price mechanism where private monopolies were concerned. In particular, he did not support the common monopolist practice of price discrimination. We believe that in order to ensure that the society at large is protected from unfair prices; the government’s role in stabilizing prices should extend to matters beyond monopolistic control. The used car industry in Trinidad and Tobago for instance is not controlled by any single monopoly, however, car dealers have been collectively engaging in unfair tactics which do not promote consumer welfare. The government has initiated a new draft policy to regulate the said industry which seeks to ensure a positive impact from the importation of used motor vehicles, while at the same time mitigating the potential risks. These risks include consumer protection issues, environmental issues and legality of imported vehicles.
Hence, our premise concludes that though utilitarianism is positioned on the basis of equality, an equal price is not always synonymous with a fair price. Domestically, the price of a good should be determined by the cost of production involved in materializing the product, and international prices are fair if determined by the interaction of supply and demand. Government intervention in the price mechanism is necessary in regulating prices to be fair to both producers and consumers.
Conclusion
Following our research conducted on the works of John Stuart Mills, and his view of fair pricing, we derive that where social justice is concerned, and in matters of underprivileged sectors, an equal price is not always a fair price. The taxation “price” in our view should be progressive in relation to a person’s income to ensure that incomes are distributed more evenly. Furthermore, we disagree that a tax should be lobbied on inheritance, to create a free transfer of wealth throughout generations. We believe that an inheritance tax has a distortionary effect on creation of wealth and economic growth, as it discourages saving and investments.
We maintain that with respect to customer protection in a domestic economy, fair prices are determined under the cost of production theory. In the intentional economy however, fair prices are determined not by the cost of production, but by the interaction of demand and supply. To this, we add that strength of a country’s demand for a good reflects its willingness to pay. Hence, the equilibrium price generated would be one that is fair in the eyes of the importing country.
Mills favoured a lassies faire approach to governance, and saw government’s intervention as necessary only where monopolies were concerned. In promoting individualism, the actions of several individuals can lead to unfavourable aggregate macroeconomic outcomes. Though each person is responsible for their individual interest, not all members of society are in a position to do so. Hence, we advocate that government intervention in the price mechanism is necessary to regulate prices across industries, even where monopoly power is not dominant.
John Stuart Mill's philosophy followed the doctrines of his father James Mill and his father's mentor and compatriate, Jeremy Bentham. John was raised from birth by his father for the primary purpose of progressing the utilitarian theories which both he and Bentham ascribed. Utilitarianism is an ethical theory holding that the right course of action is the one that maximises the overall "good". Bentham’s work on utilitarianism was foundational for the work which was done by Mills.
The utilitarianism philosophy argued that the right act or policy was that which would cause the greatest good for the greatest number of people also known as the greatest happiness principle, or the principle of utility.
Premise: Equity vs. Equality
Equity is the state, quality, or ideal of being just, impartial, and fair.
Equality is the state, quality or ideal of being equal.
Fair Price and Taxation …show more content…
Based on the concept of “Equality of Sacrifice”, Mills believed that people will perceive taxes to be fair, so long as they were being applied equally to all members of society.
He saw progressive taxation as a “mild form of robbery” as it penalized those who worked harder in accruing more wealth. As marketers, we view taxation as being an intense, emotional issue, which should be treated delicately, as it affects all segments of the population. Hence, in situations where public interest is threatened, the price must be determined on the basis of equity, not equality. A progressive taxation rate refers to the manner in which taxation progresses with higher incomes. Income earners are indebted to pay a proportionately higher taxation “price” on the amount they earn as incomes increases. A progressive taxation rate therefore reduces the tax burden on poorer members of society, as the burden is shifted to those with a higher ability to pay. Progressive taxation hence has a distribution effect on
income.
Developing nations, like our own, spend a considerable fraction of the national budget on roads, schools, infrastructure, poverty alleviation and other areas that promote progress. It is evident then, that there would be no possible way to raise the annual budget if economies operate on an equal taxation base. In order to prevent a budget deficit from occurring, fewer revenues would have to be channelled toward developmental initiatives and welfare benefits (URP, CEPEP, and Social Welfare). This would further place deprived members of society in an even more vulnerable state. As such, the absence of the distribution effect of income causes greater disparities in income allocation. This situation may potentially lead to the erosion of the middle class, with the creation of a very large upper and lower class. Hence, we deduce that an equal price may not always be a fair price, particularly in matters of social reform.
Mills further postulates the concept of individualism. The main contention of individualism is that each man should enjoy the benefits of his own production. What Mills fails include however, is that people are born and bred under particular situations which render them unequal in their ability to progress. A person born under unfavourable circumstances such as poverty, may not be as able to acquire the level of education and advancement as a person with the financial means to do so. As such, he ignores that individuals are a victim of circumstance. Owing to detrimental circumstances, not every member of society can adequately seek his own interest. Furthermore, those ravished with poverty are unable to progress, particularly because the revenue generating assets are in the hands of the rich. We are therefore of the belief that an equal taxation “price” leads to an uneven distribution of income which renders the poor helpless, and fuels the vicious cycle of poverty.
For developing nations like our own, the focus of price setting and policy makers should be cantered on equity rather than equality. Owing to our history of slavery and dependence, distribution of income has always been uneven in Trinidad and Tobago. There is a very large middle class, but there also exists extremes of wealth and poverty. According to the CIA world fact book, 6.4% of Trinidad and Tobago’s population are unemployed, while 17% of the population lies under the poverty line. This places a large segment of the population dependent on government benefits for survival. An equal taxation basis then, does not seek the greatest good for the greatest number. It ensures that more wealth is maintained in the hands of the rich, while restricting the poor from acquiring greater levels of income and advancement.
Furthermore, because a flat tax offers a tax break to higher income earners, Mills goes on to propose that inheritance should be taxed. His utilitarian society suggests that everyone should be equal. Hence receiving an inheritance would place one ahead of society unless the inheritance is taxed. He contends that inheritance allows people to acquire wealth which they had no produced. This practice is, in our eyes in unjust. We agree that persons who have accrued wealth also have the right to dispose of their assets in any manner they deem fit. In addition, we believe that society needs a way of transferring wealth from one generation to another, especially since younger generations now have difficulties in gaining a foot in the property ladder. Hence, we support that no inheritance or gift taxes are currently being levied in Trinidad and Tobago.
The Pricing Mechanism within the Domestic and International Economy
Mills indicates that as a society progresses and the working class becomes more educated they will have more influence on the political economy of a country, and inevitably be responsible for affecting the price and distribution of the goods and services that they consume. Therefore in conjunction to this it can be argued that an educated workforce will be able to make more informed decisions that would influence a fair price. If the price is outstanding as compared to the utility derived, the educated consumer will refrain from purchasing the good unless it is a necessity. Because prices are determined by the interaction of demand and supply, the educated consumer will have an influence on the price by restricting demand.
With consideration to fair prices, Mills proposed that within a domestic economy, the existence of competition equalized costs and thus domestic prices were equal to the cost of production. In theory, this relates that the price of an object will be equal to the cost of the factors of production that went into making it. We believe that for the supply side, under the cost of production theory prices will be fair if two conditions are fulfilled. Firstly, the price must cover all payments to the factors of production, including interest. Secondly, these payments must equate the level of employment, or effort expended by each factor.
On the demand side, we see that the price generated stems from a person’s willingness to pay. It can be argued then, that the price in a domestic economy should be determined by demand and supply, and not the cost of production. However, we are of the view that in order to protect the consumer, a fair price should be equal to the cost that went into the creation of the good. A higher willingness to pay would result in extremely high and unfair prices which would only benefit producers. This leads to a transfer of income from those operating on fixed incomes to profit earners.
In matters of international trade however, Mills recognized that the factors of production were not mobile across international borders. Furthermore, he acknowledged that international price ratios including wages and profits would not equalize through competition. As such, Mills held that international prices would strictly depend on supply and demand, and not costs of production. He concluded that the terms of trade would depend on the demands for the imported products by the two countries.
Given that a country (Country A) has a comparative advantage in wine, it wishes to trade with another nation (Country B). Assuming that Country A exports wine and Country B exports cloth, the terms of trade would then be determined by the relative strengths of import demands for each country. If Country A’s demand for imported cloth is much greater than Country B’s demand for imported wine, then the terms and gains from trade will favour Country B.
We maintain that the demand for goods is a symbolism of a person’s (or country’s) willingness to pay. In essence, a person’s willingness to pay is influenced by his intrinsic need for the good, combined with other external or situational factors. The laws of demand and supply hence interact to determine an equilibrium price that is favourable to both producer and consumer, where the said price mirrors the consumer’s willingness to pay. It is expected then, that having acquired the product, the consumer experiences utility. The price mechanism hence creates a price which is fair, so long as it ensures the greatest utility for the aggregate society. As such, we believe that in matters of free trade, prices may be subject to government monitoring, and in extreme cases, intervention if specific groups are being advantageous.
Government Intervention In the Pricing System
Mills favoured a "laissez-faire" approach to governance, but encouraged government intervention in the price mechanism where private monopolies were concerned. In particular, he did not support the common monopolist practice of price discrimination. We believe that in order to ensure that the society at large is protected from unfair prices; the government’s role in stabilizing prices should extend to matters beyond monopolistic control. The used car industry in Trinidad and Tobago for instance is not controlled by any single monopoly, however, car dealers have been collectively engaging in unfair tactics which do not promote consumer welfare. The government has initiated a new draft policy to regulate the said industry which seeks to ensure a positive impact from the importation of used motor vehicles, while at the same time mitigating the potential risks. These risks include consumer protection issues, environmental issues and legality of imported vehicles.
Hence, our premise concludes that though utilitarianism is positioned on the basis of equality, an equal price is not always synonymous with a fair price. Domestically, the price of a good should be determined by the cost of production involved in materializing the product, and international prices are fair if determined by the interaction of supply and demand. Government intervention in the price mechanism is necessary in regulating prices to be fair to both producers and consumers.
Conclusion
Following our research conducted on the works of John Stuart Mills, and his view of fair pricing, we derive that where social justice is concerned, and in matters of underprivileged sectors, an equal price is not always a fair price. The taxation “price” in our view should be progressive in relation to a person’s income to ensure that incomes are distributed more evenly. Furthermore, we disagree that a tax should be lobbied on inheritance, to create a free transfer of wealth throughout generations. We believe that an inheritance tax has a distortionary effect on creation of wealth and economic growth, as it discourages saving and investments.
We maintain that with respect to customer protection in a domestic economy, fair prices are determined under the cost of production theory. In the intentional economy however, fair prices are determined not by the cost of production, but by the interaction of demand and supply. To this, we add that strength of a country’s demand for a good reflects its willingness to pay. Hence, the equilibrium price generated would be one that is fair in the eyes of the importing country.
Mills favoured a lassies faire approach to governance, and saw government’s intervention as necessary only where monopolies were concerned. In promoting individualism, the actions of several individuals can lead to unfavourable aggregate macroeconomic outcomes. Though each person is responsible for their individual interest, not all members of society are in a position to do so. Hence, we advocate that government intervention in the price mechanism is necessary to regulate prices across industries, even where monopoly power is not dominant.