Quiz: Principles of Political Economy

All 50 questions. A perfect score earns the gold medal; 80% earns silver.

1. 1. In Mill’s comparison, money is to commerce what oil is to machinery. What does he mean?

   Money only reduces friction and leaves the laws unchanged Money wears out like lubricant and must be constantly replaced by fresh supplies from the mines Money is the fuel that drives all trade, and without it exchange would stop Without abundant money, trade between nations breaks down entirely
2. 2. What does Mill conclude about an increase of fixed capital that takes place at the expense of circulating capital?

   It has no effect at all on the labouring class It must be, at least temporarily, harmful to the labourers It always raises wages within the same year It is impossible, since fixed capital can only come from new savings
3. 3. Whose testimony on the metayer system does Mill value most, because it comes from a resident proprietor rather than a traveller?

   Arthur Young’s, on France and Italy McCulloch’s, on France Châteauvieux’s, on Lombardy and Piedmont Sismondi’s, on Tuscany
4. 4. What does Mill say justice requires for the actual cultivators of Ireland?

   That landlords be deprived of their rents without any compensation from the state That they become owners of the soil they cultivate, as they would in America That they be turned into hired labourers on large capitalist farms under English tenants That they all be assisted to emigrate at public expense
5. 5. Why, in Mill’s hypothetical example, might workers need a law to obtain a shorter working day that they all want?

   Because each gains by working longer while others keep the limit, so only an enforced agreement holds Because workers cannot judge their own interest and must be protected like children Because employers are forbidden by the Combination Laws to agree to shorter hours Because shorter hours always reduce wages and so must be imposed against the workers’ will
6. 6. What did H. C. Carey claim, against the law of diminishing return?

   That rent is caused by the monopoly of landowners rather than by differences of fertility That population grows only arithmetically while food grows geometrically That settlers till poor uplands first, rich bottoms later That machinery would soon replace all agricultural labour in America
7. 7. How does Mill correct Adam Smith’s view that disagreeable work is paid more to compensate for its hardships?

   He holds that custom and the magistrates fix the wages of disagreeable employments He agrees with Smith that every unpleasant job carries a premium in practice He argues that pay depends only on the skill and training a job requires, never on how unpleasant it may be Where labour is plentiful, the most repulsive work is generally paid worst, falling to those with no choice
8. 8. What does Mill propose as an alternative to keeping a national debt as a safe investment for small savers?

   Compulsory purchase of shares in the railways A guaranteed price for land sold in small lots Life annuities sold by the Church A national bank of deposit and discount
9. 9. According to Mill, what have the mechanical inventions so far achieved?

   They have let more people live the same life of drudgery, and made fortunes for manufacturers They have raised wages in proportion to the increase of production per labourer They have abolished the need for most agricultural labour They have shortened the working day of every labourer in England by several hours a day
10. 10. According to Mill, how does an inconvertible currency issued by a government to pay its expenses affect the rate of interest while the depreciation is going on?

    It raises interest, since depreciation shrinks the real capital lent while demand stays the same It has no effect, because the depreciation alters only prices, not the supply of capital It lowers interest at first, while the new money enters the loan market It lowers interest, because the larger quantity of money makes loans easier to obtain
11. 11. Of the two kinds of security Mill distinguishes in I.7, which does he call the more important?

    Protection by the government against thieves Protection of workers by factory law Protection of trade by the navy Protection against the government
12. 12. What does Mill conclude about speculators in corn?

    They are useful only in trade between countries, not within one country They moderate fluctuations of price, and their interest as a body coincides with the public’s They should be restrained by law in years of dearth They profit chiefly by buying up stocks to create artificial scarcities and so raise prices
13. 13. What advantage of the division of labour does Mill credit to Babbage rather than to Adam Smith?

    The saving of time otherwise lost in passing from one task to another The invention of machines by workers specialised in a single operation Giving each part of the work to people with just the skill or strength it needs The increase of dexterity in each workman through constant repetition of one task
14. 14. Where, according to Mill, is it really true that there cannot be two prices in the same market?

    In the retail shops of country towns and villages In the fees of physicians and barristers In the wholesale trade in the great articles of commerce In the customary rents paid by métayers in Italy
15. 15. In Mill’s simple case of a purely metallic currency without credit, what happens to general prices if the money in circulation increases by one-fourth?

    They rise by exactly one-fourth They do not change, because money is only a medium They rise, but by less than one-fourth, because some of the money is hoarded They fall, because the rate of interest drops
16. 16. In De Quincey’s example, quoted by Mill, why can the musical box be sold for sixty guineas?

    The box is an antique of Swiss make that can no longer be reproduced at any cost Far from any other seller, the buyer pays up to his own estimate of its usefulness A tax on imported luxuries raises its price in the colony Its cost of production on Lake Superior is ten times that in London
17. 17. On what, according to Mill’s chapter “Of Wages,” do wages mainly depend under competition?

    The price of the commodities the labourers produce and the demand for them abroad The total annual produce of the country, divided by custom among the three classes The amount of rent paid to landlords, which fixes the share left for wages and profits The proportion between the labouring population and the funds spent on hiring labour
18. 18. Under the 1844 Act, what does Mill say a drain of three millions of gold for foreign payments amounts to for the Bank of England?

    Virtually a drain of six millions, as deposits and the issue reserve each lose three A drain of only one and a half millions, since half the gold returns at once in payment for exports No drain at all on the Bank, since the gold is taken from the hoards of private bankers A drain of three millions, exactly as under the old system
19. 19. What does Mill call the theory of rent?

    The pons asinorum of political economy A metaphysical fiction of the Ricardians The iron law of political economy The keystone of the whole system of the Corn Laws
20. 20. According to Mill, what set the crisis of 1847 apart from that of 1825?

    It was caused by an over-issue of inconvertible paper money by the country banks No credit boom preceded it; a drain on loanable capital caused it It resulted from a general overproduction of manufactured goods for export It began with the failure of a large bank in the United States and then spread to the London market
21. 21. In Mill’s example of a ten-shilling duty on a million quarters of imported wheat, how does what consumers pay to landowners compare with what they pay to the state?

    It is about the same amount It is about twenty times as much It is about half as much Nothing; foreign growers pay it
22. 22. What general rule does Mill draw from his objections to government agency?

    No general rule can be stated, so each case must be decided on its merits without any presumption Government should confine itself strictly to protecting person and property against force and fraud, and nothing more Laisser-faire should be the general practice; every departure not required by some great good is a certain evil Government should intervene wherever its intervention would be useful
23. 23. What image does Mill use to separate a measure of value from the regulator of value?

    The compass and the magnetic pole The balance-scales and their weights The thermometer and the fire The clock and the sun
24. 24. In this treatise, which labour does Mill agree to call productive?

    Only manual labour performed on the land or in the mines Any labour that produces a benefit or pleasure worth more than its cost Only labour that is paid for in money wages by a capitalist employer Labour producing material wealth, directly or as its ultimate result
25. 25. Which two measures does Mill propose to raise a whole generation of labourers out of poverty?

    A legal minimum wage and allotments of land for every labourer Restoring the allowance system and protective corn duties State-aided colonization and small freeholds made from common land Abolishing the poor law and restricting the trade unions by law
26. 26. Who, according to Mill, recommended primogeniture on the ground that it “makes but one fool in a family”?

    Mr. M’Culloch Jeremy Bentham Sir William Blackstone Dr. Johnson
27. 27. According to Mill’s Equation of International Demand, at what values does a country’s produce exchange with other countries?

    At the ratio of the labour costs of the goods in the exporting country At values that make its exports exactly pay for its imports At whatever values bring the most gold and silver into the country At the average of the costs of production of the goods in all of the countries that trade together
28. 28. What does Mill cite France to show about peasant proprietorship?

    That it has reduced French agriculture to the worst in Europe That it leads inevitably to a ‘pauper warren’ of tiny plots, subdivided again at every death That it raises the birth rate while lowering the death rate among the peasant population That it need not cause rapid growth, since France’s population grows slowest in Europe
29. 29. How did the Rochdale Society of Equitable Pioneers raise its original capital of £28?

    By a loan from a local bank, guaranteed by sympathetic manufacturers of the town By weekly twopences from about forty labourers By a gift from Robert Owen and his followers, who wished to test his co-operative principles By selling shares of a pound each to the mill-owners and shopkeepers of Rochdale
30. 30. What is Mill’s fourth fundamental proposition respecting capital?

    Demand for commodities is not demand for labour Industry is limited by the demand of consumers Money is the principal form of a nation’s capital Capital, once saved, is hoarded and not consumed
31. 31. How does Mill describe associations of labourers such as trade unions in relation to the market for labour?

    As harmless but powerless, since wages are fixed by a self-acting mechanism As a hindrance to a free market that the law ought to forbid as a conspiracy As a necessary means of a free market, letting sellers of labour guard their interests As useful only where the state has already fixed a legal minimum wage for each trade
32. 32. What does Mill say the railway speculation of 1844 and 1845 probably did for Britain?

    Had no economic effect, being a mere transfer of capital from hand to hand Drained the wages fund and caused the distress of the working classes in 1847 Ruined the money market permanently and forced the export of capital Saved it from a depression of profits that would have led to wilder speculation
33. 33. What property did the French revolutionary assignats “represent,” according to Mill?

    The future tax revenues of the Republic Gold and silver deposited in the national treasury in Paris as security Shares in the French East India Company and the other colonial trading companies The lands of the crown, the church, the monasteries and the emigrants
34. 34. What two theories of the social position of manual labourers does Mill contrast?

    The theory of communism, and that of Fourierism or the phalanstery The theory of dependence and protection, and that of self-dependence The theory of free trade, and that of protection to native industry The theory of the wages fund, and that of the reserve army of labour
35. 35. Among luxuries of general consumption, which does Mill say taxation should preferably fall on?

    Books and newspapers, because only the educated classes buy them Domestic servants, because only the rich employ them Stimulants, as more liable than most to be used in excess Clothing, because everyone buys it in proportion to income
36. 36. How do the laws of distribution differ from the laws of production, according to the Preliminary Remarks?

    Distribution is mere accident and so not a subject for scientific enquiry at all Distribution depends only on the quantity of money in circulation Distribution depends partly on human institutions, the laws and usages of each society Distribution is fixed by nature, like production, and no society can alter it
37. 37. Under a double standard, what does Mill say happens if gold rises in value relative to silver?

    Debtors pay in silver, and gold coins are melted down Debtors pay in gold to take advantage of its higher value The Mint automatically adjusts the legal ratio between the coins Both metals keep circulating side by side at a new market ratio
38. 38. In the passage Mill quotes from Richard Jones, two Middlesex mowers are said to mow as much grass in a day as how many Russian serfs?

    Three Twelve Two Six
39. 39. Into which three parts does Mill divide gross profit?

    Surplus-value, ground-rent and taxes Interest, insurance and wages of superintendence Depreciation, interest and dividends Rent, interest and the wages of the manager
40. 40. In what case does Mill allow that protecting duties may be defensible on purely economic grounds?

    When a tariff is framed solely for revenue and protection is merely incidental When foreign producers pay much lower wages than home producers When temporary, as in a young nation naturalising a foreign industry suited to it When needed to keep a favourable balance of trade
41. 41. Which counter-force to the fall of profits does Mill call one of the principal causes that has arrested it in England?

    The perpetual overflow of capital into colonies and foreign countries Government purchase of unsold commodities in times of glut A steady fall of money wages caused by Irish immigration Laws fixing a maximum rate of interest on loans
42. 42. According to Mill in I.13, what would happen in a society holding all instruments of production in common and dividing the produce equally?

    Production would collapse at once for want of the incentive of private gain At first all comfortable; if population doubled, all poorer Poverty would disappear permanently, since the produce would no longer go to idle owners Population would stop growing of its own accord once want was gone
43. 43. According to Mill, what is the effect of a general rise in the cost of labour?

    It has no effect on either profits or values It raises rents but leaves profits unchanged It lowers profits; it cannot raise values generally It raises the prices of all commodities
44. 44. To what does Mill compare the cheapness of American slave-grown cotton before the Civil War?

    The cheapness of goods carried by the Hanse Towns The cheapness of stolen goods The cheapness of goods produced by machinery The cheapness of domestic manufactures made in leisure hours
45. 45. How does Mill contrast the laws of production with the distribution of wealth at the start of Book II?

    Both are fixed by natural laws that no society or government can alter Production follows physical laws; distribution is human institution Distribution follows natural laws, while production depends on the customs and laws of each country Both depend entirely on the will of the ruling class of the time and nothing else
46. 46. In the preface to the third edition (1852), what does Mill call the only objection to socialism to which he now attaches great importance?

    The unprepared state of mankind, especially of the labouring classes That it would destroy the motive of profit on which all saving and accumulation depend That it has been condemned by every political economist since Adam Smith That it contradicts the law of diminishing returns from land
47. 47. Which kind of income does Mill say the state could justly tax in its future increase, because its owners grow richer “in their sleep”?

    The rent of land The salaries of public officials The profits of business The interest on the national debt
48. 48. Which pair is Mill’s main example of commodities with a joint cost of production?

    Coal-gas and coke Wheat and barley Woollen cloth and linen Gold and silver
49. 49. What limit on inheritance does Mill say he would prefer?

    Compulsory equal division among the children, as under the French Civil Code The abolition of all inheritance, with estates passing at death to the state A maximum on what any one person may acquire by bequest or inheritance A maximum on what any testator may leave by will to any one heir
50. 50. What does Mill recommend for services like London’s gas and water supply or railways, where competition among a few firms is “almost illusory”?

    Encouraging as many competing companies as possible to lay rival mains and lines Making them a public function, or granting them entire to one company on terms best for the public Leaving them unregulated, because even a few competitors will keep prices down to the cost level Handing them over to co-operative associations of their own workers