¹ Bonar, James, Disturbing Elements in the Study and Teaching of Political Economy (Baltimore, 1911), 75.Google Scholar

² “Economic Theory and Wages,” in Wright, David McCord, ed., The Impact of the Union (New York, 1951), 320.Google Scholar

³ Ibid., 316.

⁴ A Review of Economic Doctrines, 1870–1929 (Oxford, 1953), 13.Google Scholar

⁵ Pigou, A. C., “Mill and the Wages Fund,” Economic Journal, LIX (06 1949), 177.Google Scholar

⁶ Cairnes, J. E., Some Leading Principles of Political Economy Newly Expounded (New York, 1874).Google Scholar

⁷ Taussig, F. W., Wages and Capital (New York, 1896).Google Scholar

⁸ Thus John Stuart Mill assiduously warned his reader against confusing money with the wages fund: “Money cannot in itself perform any part of the office of capital, since it can afford no assistance to production. … What capital does for production is to afford the shelter, protection, tools, and materials which the work requires, and to feed and otherwise maintain the labourers during this process. These are the services which present labour requires from past, and the produce of past, labour.” See Mill, John Stuart, Principles of Political Economy (5th ed. New York, 1858), I, 84.Google Scholar See also, in this connection, Fellner, William, Emergence and Content of Modern Economic Analysis (New York, 1960), 56–9.Google Scholar

⁹ Trade Unions and Strikes, Their Philosophy and Intentions (London: published privately by the author, 1860), 5.Google Scholar Dunning argued that the only worthwhile object of trade unions, given the wages fund theory, would be to provide a fund for the support of the members when unemployed. What is more, “the true state of employer and employed is that of amenity, and they are the truest friends, each of the other, for each derives his revenue from the other.” (p. 52).

¹⁰ Stirling, James, Trade Unionism, with Remarks on the Report of the Commissioners on Trade Unions (Glasgow, 1869), 26–7.Google Scholar In this extremely interesting book, the free market was closely identified with divine ordinance: “The humble labourer finds his best protection, and his richest reward, in that very struggle among the powerful, which shallow thinkers denounce as oppressive to the poor; while, at the same time, the competition among labourers for employment secures the capitalist against the tyranny of the many. Free competition ensures justice to all. When nature is left free to work, a divinely regulated mechanism of antagonist interest secures to each man that which is fairly due to him: to the master, faithul service at a fair price; to the labourer, the hire whereof he is worth.” (pp. 6–7).

¹¹ Some Leading Principles, 338.

¹² Sidney, and Webb, Beatrice, Industrial Democracy, II (London, 1897), 615–16.Google Scholar It is well known that the major working-class movements up to the 1880s had as their object not raising wages but getting labourers out of the labouring class.

¹³ Thus it was that the reformers of the mid-nineteenth century placed their faith in producers' co-operatives as a means of solving the labour problem. In the United States, for example, the National Labor Union and the Knights of Labor advocated the formation of producers' and consumers' co-operatives as part of their official program. The Knights of Labor was by far the largest organization of labour the United States ever had. They looked towards land reform, producers co-operatives, and education to create a society of small property owners. Such a system was to supplant the wage system. The Knights of Labor officially had little interest in the possibility of improving the economic conditions of the worker qua worker. They frowned upon strikes and on efforts of the government to raise income. Their program was to help workers in establishing co-operatives. The membership would be the market for the product of the producing units. The idea was to destroy capitalism by making everyone a capitalist. See Millis, Harry A. and Montgomery, Royal E., Organized Labor (New York, 1945), 50–5, 59–75.Google Scholar

¹⁴ A Refutation of the Wage Fund Theory of Modern Political Economy as Enunciated by Mr. Mill and Mr. Fawcett (London, 1866)Google Scholar, reprinted in Hollander, Jacob H., ed., A Reprint of Economic Tracts (Baltimore, 1903).Google Scholar Longe himself was not an economist but a lawyer. At Oxford he studied philosophy and a few years after his graduation, in 1854, became assistant commissioner of the Children's Employment Commission. His duties brought him in contact with employers of large numbers of workers, giving him the opportunity to become acquainted with the opinion of businessmen on the wages problem. During this time he also became familiar with John Stuart Mill's theories of the relation between capital and labour. In the process, Longe became convinced that the wages fund theory was a fallacy and he eventually presented his argument to that effect in his treatise published in 1866.

¹⁵ Ibid., 16.

¹⁶ Ibid., 27.

¹⁷ Ibid., 37.

¹⁸ Ibid.

¹⁹ Ibid. 44.

²⁰ I, 114.

²¹ Still another way of interpreting Mill's theorem is to say that the employment multiplier is greater if the expenditure is for relatively labour-using items. Furthermore, if it is the case that the marginal propensity to consume from labour income is greater than from capital income, the conclusion is even stronger. See Johnson, Harry G., “Demand for Commodities Is Not Demand for Labour,” Economic Journal, LIX (12 1949), 531–6.CrossRefGoogle Scholar

²² Longe, , Refutation, 53.Google Scholar

²³ Principles, I, 549.Google Scholar

²⁴ Refutation, 34–5.

²⁵ This point has been made by Schumpeter: “… the long-run analysis … might be couched in terms of [supply and demand] schedules. I shall only indicate how this could be done: labor supply, by virtue of the Malthusian law, could be represented as a function of real (in our sense) wage rates; the problem is to represent the quantities that ‘capitalists’ demand, also as a function of real wage rates. Since, at any moment, these wage rates depend on the size of the wage fund, since this wage fund's variations are governed by the rate of saving, since, given everybody's propensity to save … savings depend (mainly) on ‘capitalists’ incomes, hence on ‘profits’; and since according to Ricardo profits depend upon wages … and so on.” History of Economic Analysis (New York, 1954), 667n.Google Scholar See Appendix infra.

²⁸ Thornton, W. T., On Labour: Its Wrongful Claim and Rightful Dues, Its Actual Present and Possible Future (London, 1869), ii.Google Scholar

²⁹ Ibid., 45.

³⁰ Ibid., 52.

³¹ Ibid., 50.

³² Ibid., 47–8.

³¹ Ironically, this criticism of Thornton, and the ones following, are substantially the same as those made by John Stuart Mill in his “recantation” in 1869.

³² On Labour, 49.

³³ Ibid., 52.

³⁴ Ibid., 53.

³⁵ Ibid., 61.

³⁶ This point was made by Professor Chamberlin: “The instance of monopoly has been chosen as a simple and familiar case in order to free the notion of equilibrium from its associations with the intersection of the demand and supply curves. It will be the purpose of this book to show that most prices involve elements … mingled in various ways with competition, and the result is very generally equilibrium prices which do not equilibrate supply and demand.” See Chamberlin, Edward H., The Theory of Monopolistic Competition (7th ed., Cambridge, Mass., 1956), 15.Google Scholar

³⁷ On Labour, 65.

³⁸ Ibid., 85.

³⁹ Mill, John Stuart, “Thornton on Labour and Its Claims,” Fortnightly Review, nos. XXIX and XXX (05 and June 1869), 505–18, and 680–700.Google Scholar Reprinted in Mill, John Stuart, Dissertations and Discussions (2nd ed. London, 1873), 25–85.Google Scholar The above quotation is on page 48.

⁴⁰ It should be pointed out that Mill earlier had an opportunity to recant when Longe sent him a copy of his essay in 1866, an opportunity that Mill neglected to use. In a letter to Professor Hollander, Longe commented on this slight with a thinly veiled insinuation of plagiarism: “I had never heard of Mr. Thornton until I saw Mill's review of his book On Labour and its Claims in the Fortnightly for May, 1869. I had sent a copy of my pamphlet to Mill and Fawcett (among many others) in 1866, and it was certainly known to political economists in 1867 and 1868. I never received any acknowledgement of its receipt from either Mill or Fawcett. I had been told that Thornton was an intimate friend of Mill, and that they were in the same office in London–the India House–and that both were writers on economic subjects. I never doubted that Thornton as well as Mill was aware of my pamphlet, and was pleased to find these known writers adopting my views.” Cited by Hollander, in A Reprint of Economic Tracts, 4–5.Google Scholar

⁴¹ 124.

⁴² “Thornton on Labour and Its Claims,” 43.

⁴³ Taussig, , Wages and Capital, 248.Google Scholar

⁴⁴ Mill's recantation enabled him to discuss the issue of trade unionism. To Mill, the question of the justification of trade unions cannot be decided by economic law, but must fall under the jurisdiction of the moral law. The question is an ethical one: are there any rights of labour or capital that are violated if one party pushed its demands to the extreme limit of economic possibility? Mill handles the question in terms of utilitarian philosophy: the terms of the contract are the only rules of justice between employer and employee. No one is under any obligation to employ labour at all; nor is anyone bound to pay any given wage. If wages are so high as to leave no profit to capital then the workers would simply “be killing the goose to get at the eggs.” “Thornton on Labour and Its Claims,” 66.

⁴⁵ Principles of Political Economy, (7th ed., London, 1871), xxxi.Google Scholar This aspect of Mill's recantation apparently escaped the notice of two recent writers on the subject. Their statement that the wages fund theory “was repudiated by J. S. Mill in a revised edition of his Principles” is simply incorrect. Young, A. F. and Ashton, E. T., British Social Work in the Nineteenth Century (London, 1956), 19.Google Scholar But see Miller, J. Don, “The Wages Theory and the Popular Influence of Economists,” American Economic Review (03 1940), 108–12.Google Scholar And especially the “Reply” by E. M. Winton in ibid. (June 1941), 343–4.

⁴⁶ Hunter, Lawrence C., “Mill and Cairnes on the Rate of Interest,” Oxford Economic Papers, II (02 1959) p. 85.Google Scholar