ABSTRACT
Introduction In his Statement of Some New Principles on the Subject of Political Economy, Exposing the Fallacies of the System of Free Trade, and of Some Other Doctrines Maintained in the “Wealth of Nations,” John Rae (1834) made two fundamental contributions which came to the attention of John Stuart Mill through Nassau Senior: his pioneering formulation of capital theory, and his argument in favor of the promotion of infant industries.2 Mill quoted passages from Rae’s book at some length in chapter 11 (“Of the Law of the Increase of Capital”) of Book 1 of his Principles of Political Economy, and placed Rae’s analysis of the forces leading to the accumulation of capital on a level with Malthus’s principle of population growth (Mill [1871] 1920: 165).3
