The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Productive and Unproductive Consumption

  • Mark Blaug
Reference work entry


The terms ‘productive’ and ‘unproductive’ consumption were introduced into economics by John Stuart Mill in Book I, chapter 3, of his Principles of Political Economy (1848), although the distinction (without the terminology) first appeared in the closing pages of the new chapter on machinery in the third edition of Ricardo’s Principles (1821), where he argued that workers have a personal interest in the pattern of luxury spending by the rich because spending on ‘menial servants’ increases the demand for labour by more than the equivalent amount of spending on physical goods. Mill’s distinction between the two kinds of consumption is a direct application of Smith’s distinction between ‘productive’ and ‘unproductive’ labour; according to Mill, the only productive consumers are productive labourers, but not all consumption by productive labourers is productive consumption: ‘that alone is productive consumption’, Mill observes, ‘which goes to maintain and increase the productive powers of the community’.

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  1. Marshall, A. 1890. Principles of economics, vol. 1, 9th variorum ed, ed. C.W. Guillebaud. London: Macmillan, 1961.Google Scholar
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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Mark Blaug
    • 1
  1. 1.