Did J S Mill really claim that violations of free trade have nothing to do with liberty?

‘Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interests of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society’ … . The ‘so-called doctrine of Free Trade … rests on grounds different from, though equally solid with, the principle of liberty … . Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraints qua restraint, is an evil: but the restraints in question affect only that part of conduct which society is competent to restrain, and are wrong solely because they do not really produce the results which it is desired to produce by them.’ J S Mill, ‘On Liberty’, 1859, Ch. 5

This passage has puzzled me since I was a young man. It seems to me that individual liberty is obviously violated when governments intervene in trade. If a government imposes a tax on a good for the purposes of assisting the producers of a close substitute, this must be just as much an infringement of the liberty of consumers as when it imposes a sin tax on a good to discourage consumers from purchasing that good.

However, it is now clearer to me what Mill was trying to say. The first key to the puzzle is that Mill refers to ‘the principle of individual liberty’ rather than just ‘individual liberty’. What Mill means by the principle of individual liberty is explained a couple of paragraphs earlier as the maxim ‘that the individual is not accountable to society for his actions, in so far as these concern the interests of no person but himself’. According to that view, the individual should be accountable to society for ‘actions that are prejudicial to the interests of others’.

Friedrich Hayek and others have noted that the distinction that Mill sought to make between actions that affect the acting person and actions that affect others is not very useful because there is hardly any action that may not conceivably affect others in some way. According to Hayek the relevant issue is whether it is reasonable for the affected persons to expect legal protection from the action concerned (‘Constitution of Liberty’, 1960, p 145).

Now, in the paragraph immediately prior to his discussion of international trade, Mill acknowledges that damage to the interests of others does not necessarily justify the interference of society. In this context he discussed the views of society toward various forms of contest in which people who succeed benefit ‘from the loss of others’. He notes: ‘society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering’.

The second key to the puzzle is that in the passage quoted above Mill suggests that all restraints are evil. If Mill is referring to coercion, as seems likely, then it seems to me that at this point he is close to recognizing the merits of the definition of liberty that Hayek later adopted. Hayek defined liberty as ‘a state in which coercion of some by others is reduced as much as possible in society’ (‘Constitution of Liberty’, p 11). This definition meets Mill’s desire to acknowledge that restraints are necessary to protect citizens from force and fraud, and may be appropriate under some other circumstances where individual conduct adversely affects the interests of others.

Mill seems to have been attempting to establish that the attitude of society toward individual conduct should depend on where it lies on a spectrum. At one end of the spectrum, where conduct affects only the individual actor, other people have no right to intervene. At the other end, force and fraud should obviously be illegal. At other points on the spectrum the effects of individual conduct on the welfare of society are ‘open to discussion’. (Mill uses these words are used in the introductory paragraphs of Ch. IV.)

In asserting that the ‘doctrine’ of free trade rests on equally solid ground to ‘the principle of liberty’ Mill is clearly implying that in our discussion of trade there should be a strong presumption that free trade enhances the general welfare of society. It follows that he must believe that government intervention in trade is generally an unwarranted form of coercion. That seems to me to be just another way of saying that such intervention is generally an unwarranted interference with individual liberty.