John Stuart Mill [1806-1873] divided economic activities into three categories: production, distribution and exchange. It may be helpful to think of an economic system as a process that begins with a set of inputs (or resources) that are used for production that must be distributed for ultimate consumption. (Mill, Principles of Political Economy, The Colonial Press, 1900) In Figure I.1, the economy is shown as a process of altering a set of inputs to satisfy individual wants. In this example, the steps in the economic process are production, distribution and consumption.
