Mill on Contextual Analysis
Mill's views about the role of theory—not accepting theoretical outcomes uncritically because in practice, in the context of a given society, other factors such as custom may modify theoretical predictions—distinguish him from Ricardo and are closer to the Smithian view. In our examination of Adam Smith, we found that Smith's economic policy pronouncements were not abstract theoretical tools applied to a mechanical society but were a contextual analysis that reflected his views of how pure theoretical propositions work out in a given social context.
The eclecticism that we found in Mill's examination of the merits of capitalism and private property as.compared with communism is also a reflection of this Smithian-type contextual analysis. Mill suggested that he would choose pure theoretical communism as contrasted with existing capitalism, but he immediately exclaimed that this is not a proper basis for choice. Existing capitalism (and, indeed, socially reformed capitalism) compared with communism as it is likely to unfold throws the balance in favor of a system of private property capitalism.
Smith's and Mill's contextual analysis is fundamentally grounded in their broader approach to economics—the view that economic activity is only a part of all activities. This contrasts sharply with the more narrow focus of Ricardo and the legions of mainstream economists who followed his lead.