AN INQUIRY INTO THE NATURE AND CAUSES OF

THE WEALTH OF NATIONS.

by Adam Smith

INTRODUCTION AND PLAN OF THE WORK.

The annual labour of every nation is the fund which originally supplies it

with all the necessaries and conveniencies of life which it annually

consumes, and which consist always either in the immediate produce of that

labour, or in what is purchased with that produce from other nations.

According, therefore, as this produce, or what is purchased with it, bears a

greater or smaller proportion to the number of those who are to consume it,

the nation will be better or worse supplied with all the necessaries and

conveniencies for which it has occasion.

But this proportion must in every nation be regulated by two different

circumstances: first, by the skill, dexterity, and judgment with which its

labour is generally applied; and, secondly, by the proportion between the

number of those who are employed in useful labour, and that of those who are

not so employed. Whatever be the soil, climate, or extent of territory of

any particular nation, the abundance or scantiness of its annual supply

must, in that particular situation, depend upon those two circumstances.

The abundance or scantiness of this supply, too, seems to depend more upon

the former of those two circumstances than upon the latter. Among the savage

nations of hunters and fishers, every individual who is able to work is more

or less employed in useful labour, and endeavours to provide, as well as he

can, the necessaries and conveniencies of life, for himself, and such of his

family or tribe as are either too old, or too young, or too infirm, to go

a-hunting and fishing. Such nations, however, are so miserably poor, that,

from mere want, they are frequently reduced, or at least think themselves

reduced, to the necessity sometimes of directly destroying, and sometimes of

abandoning their infants, their old people, and those afflicted with

lingering diseases, to perish with hunger, or to be devoured by wild beasts.

Among civilized and thriving nations, on the. contrary, though a great

number of people do not labour at all, many of whom consume the produce of

ten times, frequently of a hundred times, more labour than the greater part

of those who work ; yet the produce of the whole labour of the society is so

great, that all are often abundantly supplied ; and a workman, even of the

lowest and poorest order, if he is frugal and industrious, may enjoy a

greater share of the necessaries and conveniencies of life than it is

possible for any savage to acquire.

The causes of this improvement in the productive powers of labour, and the

order according to which its produce is naturally distributed among the

different ranks and conditions of men in the society, make the subject of

the first book of this Inquiry.

Whatever be the actual state of the skill, dexterity, and judgment, with

which labour is applied in any nation, the abundance or scantiness of its

annual supply must depend, during the continuance of that state, upon the

proportion between the number of those who are annually employed in useful

labour, and that of those who are not so employed. The number of useful and

productive labourers, it will hereafter appear, is everywhere in proportion

to the quantity of capital stock which is employed in setting them to work,

and to the particular way in which it is so employed. The second book,

therefore, treats of the nature of capital stock, of the manner in which it

is gradually accumulated, and of the different quantities of labour which it

puts into motion, according to the different ways in which it is employed.

Nations tolerably well advanced as to skill, dexterity, and judgment, in the

application of labour, have followed very different plans in the general

conduct or direction of it; and those plans have not all been equally

favourable to the greatness of its produce. The policy of some nations has

given extraordinary encouragement to the industry of the country ; that of

others to the industry of towns. Scarce any nation has dealt equally and

impartially with every sort of industry. Since the down-fall of the Roman

empire, the policy of Europe has been more favourable to arts, manufactures,

and commerce, the industry of towns, than to agriculture, the Industry of

the country. The circumstances which seem to have introduced and

established this policy are explained in the third book.

Though those different plans were, perhaps, first introduced by the private

interests and prejudices of particular orders of men, without any regard to,

or foresight of, their consequences upon the general welfare of the society;

yet they have given occasion to very different theories of political

economy; of which some magnify the importance of that industry which is

carried on in towns, others of that which is carried on in the country.

Those theories have had a considerable influence, not only upon the opinions

of men of learning, but upon the public conduct of princes and sovereign

states. I have endeavoured, in the fourth book, to explain as fully and

distinctly as I can those different theories, and the principal effects

which they have produced in different ages and nations.

To explain in what has consisted the revenue of the great body of the

people, or what has been the nature of those funds, which, in different ages

and nations, have supplied their annual consumption, is the object of these

four first books. The fifth and last book treats of the revenue of the

sovereign, or commonwealth. In this book I have endeavoured to shew, first,

what are the necessary expenses of the sovereign, or commonwealth ; which of

those expenses ought to be defrayed by the general contribution of the whole

society, and which of them, by that of some particular part only, or of some

particular members of it: secondly, what are the different methods in which

the whole society may be made to contribute towards defraying the expenses

incumbent on the whole society, and what are the principal advantages and

inconveniencies of each of those methods ; and, thirdly and lastly, what are

the reasons and causes which have induced almost all modern governments to

mortgage some part of this revenue, or to contract debts; and what have been

the effects of those debts upon the real wealth, the annual produce of the

land and labour of the society.

BOOK I.

OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRlBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.

CHAPTER I.

OF THE DIVISlON OF LABOUR.

The greatest improvements in the productive powers of labour, and the

greater part of the skill, dexterity, and judgment, with which it is

anywhere directed, or applied, seem to have been the effects of the division

of labour. The effects of the division of labour, in the general business of

society, will be more easily understood, by considering in what manner it

operates in some particular manufactures. It is commonly supposed to be

carried furthest in some very trifling ones ; not perhaps that it really is

carried further in them than in others of more importance: but in those

trifling manufactures which are destined to supply the small wants of but a

small number of people, the whole number of workmen must necessarily be

small ; and those employed in every different branch of the work can often

be collected into the same workhouse, and placed at once under the view of

the spectator.

In those great manufactures, on the contrary. which are destined to supply

the great wants of the great body of the people, every different branch

of the work employs so great a number of workmen, that it is impossible to

collect them all into the same workhouse. We can seldom see more, at one

time, than those employed in one single branch. Though in such

manufactures, therefore, the work may really be divided into a much greater

number of parts, than in those of a more trifling nature, the division is

not near so obvious, and has accordingly been much less observed.

To take an example, therefore, from a very trifling manufacture, but one in

which the division of labour has been very often taken notice of, the

trade of a pin-maker: a workman not educated to this business (which the

division of labour has rendered a distinct trade, nor acquainted with the

use of the machinery employed in it (to the invention of which the same

division of labour has probably given occasion), could scarce, perhaps, with

his utmost industry, make one pin in a day, and certainly could not make

twenty. But in the way in which this business is now carried on, not only

the whole work is a peculiar trade, but it is divided into a number of

branches, of which the greater part are likewise peculiar trades. One man

draws out the wire; another straights it; a third cuts it; a fourth points

it; a fifth grinds it at the top for receiving the head; to make the head

requires two or three distinct operations ; to put it on is a peculiar

business; to whiten the pins is another ; it is even a trade by itself to

put them into the paper ; and the important business of making a pin is, in

this manner, divided into about eighteen distinct operations, which, in some

manufactories, are all performed by distinct hands, though in others the

same man will sometimes perform two or three of them. I have seen a small

manufactory of this kind, where ten men only were employed, and where some

of them consequently performed two or three distinct operations. But though

they were very poor, and therefore but indifferently accommodated with the

necessary machinery, they could, when they exerted themselves, make among

them about twelve pounds of pins in a day. There are in a pound upwards of

four thousand pins of a middling size. Those ten persons, therefore, could

make among them upwards of forty-eight thousand pins in a day. Each

person, therefore, making a tenth part of forty-eight thousand pins, might

be considered as making four thousand eight hundred pins in a day. But if

they had all wrought separately and independently, and without any of them

having been educated to this peculiar business, they certainly could not

each of them have made twenty, perhaps not one pin in a day; that is,

certainly, not the two hundred and fortieth, perhaps not the four thousand

eight hundredth, part of what they are at present capable of performing, in

consequence of a proper division and combination of their different

operations.

In every other art and manufacture, the effects of the division of labour

are similar to what they are in this very trifling one, though, in many of

them, the labour can neither be so much subdivided, nor reduced to so great

a simplicity of operation. The division of labour, however, so far as it

can be introduced, occasions, in every art, a proportionable increase of

the productive powers of labour. The separation of different trades and

employments from one another, seems to have taken place in consequence of

this advantage. This separation, too, is generally carried furthest in those

countries which enjoy the highest degree of industry and improvement; what

is the work of one man, in a rude state of society, being generally that of

several in an improved one. In every improved society, the farmer is

generally nothing but a farmer ; the manufacturer, nothing but a

manufacturer. The labour, too, which is necessary to produce any one

complete manufacture, is almost always divided among a great number of

hands. How many different trades are employed in each branch of the linen

and woollen manufactures, from the growers of the flax and the wool, to the

bleachers and smoothers of the linen, or to the dyers and dressers of the

cloth ! The nature of agriculture, indeed, does not admit of so many

subdivisions of labour, nor of so complete a separation of one business

from another, as manufactures. It is impossible to separate so entirely

the business of the grazier from that of the corn-farmer, as the trade of

the carpenter is commonly separated from that of the smith. The spinner is

almost always a distinct person from the, weaver; but the ploughman, the

harrower, the sower of the seed, and the reaper of the corn, are often the

same. The occasions for those different sorts of labour returning with the

different seasons of the year, it is impossible that one man should be

constantly employed in any one of them. This impossibility of making so

complete and entire a separation of all the different branches of labour

employed in agriculture, is perhaps the reason why the improvement of the

productive powers of labour, in this art, does not always keep pace with

their improvement in manufactures. The most opulent nations, indeed,

generally excel all their neighbours in agriculture as well as in

manufactures ; but they are commonly more distinguished by their superiority

in the latter than in the former. Their lands are in general better

cultivated, and having more labour and expense bestowed upon them, produce

more in proportion to the extent and natural fertility of the ground. But

this superiority of produce is seldom much more than in proportion to the

superiority of labour and expense. In agriculture, the labour of the rich

country is not always much more productive than that of the poor ; or, at

least, it is never so much more productive, as it commonly is in

manufactures. The corn of the rich country, therefore, will not always, in

the same degree of goodness, come cheaper to market than that of the poor.

The corn of Poland, in the same degree of goodness, is as cheap as that of

France, notwithstanding the superior opulence and improvement of the latter

country. The corn of France is, in the corn-provinces, fully as good, and in

most years nearly about the same price with the corn of England, though, in

opulence and improvement, France is perhaps inferior to England. The

corn-lands of England, however, are better cultivated than those of France,

and the corn-lands of France are said to be much better cultivated than

those of Poland. But though the poor country, notwithstanding the

inferiority of its cultivation, can, in some measure. rival the rich in the

cheapness and goodness of its corn, it can pretend to no such competition in

its manufactures, at least if those manufactures suit the soil, climate, and

situation, of the rich country. The silks of France are better and cheaper

than those of England, because the silk manufacture, at least under the

present high duties upon the importation of raw silk, does not so well suit

the climate of England as that of France. But the hardware and the coarse

woollens of England are beyond all comparison superior to those of France,

and much cheaper, too, in the same degree of goodness. In Poland there are

said to be scarce any manufactures of any kind, a few of those coarser

household manufactures excepted, without which no country can well subsist.

This great increase in the quantity of work, which, in consequence of the

division of labour, the same number of people are capable of performing, is

owing to three different circumstances ; first, to the increase of dexterity

in every particular workman ; secondly, to the saving of the time which is

commonly lost in passing from one species of work to another ; and, lastly,

to the invention of a great number of machines which facilitate and abridge

labour, and enable one man to do the work of many.

First, the improvement of the dexterity of the workmen, necessarily

increases the quantity of the work he can perform; and the division of

labour, by reducing every man's business to some one simple operation, and

by making this operation the sole employment of his life, necessarily

increases very much the dexterity of the workman. A common smith, who,

though accustomed to handle the hammer, has never been used to make nails,

if, upon some particular occasion, he is obliged to attempt it, will scarce,

I am assured, be able to make above two or three hundred nails in a day, and

those, too, very bad ones. A smith who has been accustomed to make nails,

but whose sole or principal business has not been that of a nailer, can

seldom, with his utmost diligence, make more than eight hundred or a

thousand nails in a day. I have seen several boys, under twenty years of

age, who had never exercised any other trade but that of making nails, and

who, when they exerted themselves, could make, each of them, upwards of two

thousand three hundred nails in a day. The making of a nail, however, is by

no means one of the simplest operations. The same person blows the bellows,

stirs or mends the fire as there is occasion, heats the iron, and forges

every part of the nail: in forging the head, too, he is obliged to change

his tools. The different operations into which the making of a pin, or of a

metal button, is subdivided, are all of them much more simple, and the

dexterity of the person, of whose life it has been the sole business to

perform them, is usually much greater. The rapidity with which some of the

operations of those manufactures are performed, exceeds what the human hand

could, by those who had never seen them, he supposed capable of acquiring.

Secondly, The advantage which is gained by saving the time commonly lost in

passing from one sort of work to another, is much greater than we should at

first view be apt to imagine it. It is impossible to pass very quickly from

one kind of work to another, that is carried on in a different place, and

with quite different tools. A country weaver, who cultivates a small farm,

must loose a good deal of time in passing from his loom to the field, and

from the field to his loom. When the two trades can be carried on in the same

workhouse, the loss of time is, no doubt, much less. It is, even in this

case, however, very considerable. A man commonly saunters a little in

turning his hand from one sort of employment to another. When he first

begins the new work, he is seldom very keen and hearty; his mind, as they

say, does not go to it, and for some time he rather trifles than applies to

good purpose. The habit of sauntering, and of indolent careless application,

which is naturally, or rather necessarily, acquired by every country workman

who is obliged to change his work and his tools every half hour, and to

apply his hand in twenty different ways almost every day of his life,

renders him almost always slothful and lazy, and incapable of any vigorous

application, even on the most pressing occasions. Independent, therefore, of

his deficiency in point of dexterity, this cause alone must always reduce

considerably the quantity of work which he is capable of performing.

Thirdly, and lastly, everybody must be sensible how much labour is

facilitated and abridged by the application of proper machinery. It is

unnecessary to give any example. I shall only observe, therefore, that the

invention of all those machines by which labour is to much facilitated and

abridged, seems to have been originally owing to the division of labour. Men

are much more likely to discover easier and readier methods of attaining any

object. when the whole attention of their minds is directed towards that

single object, than when it is dissipated among a great variety of things.

But, in consequence of the division of labour, the whole of every man's

attention comes naturally to be directed towards some one very simple

object. It is naturally to be expected, therefore, that some one or other of

those who are employed in each particular branch of labour should soon find

out easier and readier methods of performing their own particular work,

whenever the nature of it admits of such improvement. A great part of the

machines made use of in those manufactures in which labour is most

subdivided, were originally the invention of common workmen, who, being each

of them employed in some very simple operation, naturally turned their

thoughts towards finding out easier and readier methods of performing it.

Whoever has been much accustomed to visit such manufactures, must frequently

have been shewn very pretty machines, which were the inventions of such

workmen, in order to facilitate and quicken their own particular part of the

work. In the first fire engines {this was the current designation for steam

engines}, a boy was constantly employed to open and shut alternately the

communication between the boiler and the cylinder, according as the piston

either ascended or descended. One of those boys, who loved to play with his

companions, observed that, by tying a string from the handle of the valve

which opened this communication to another part of the machine, the valve

would open and shut without his assistance, and leave him at liberty to

divert himself with his play-fellows. One of the greatest improvements that

has been made upon this machine, since it was first invented, was in this

manner the discovery of a boy who wanted to save his own labour.

All the improvements in machinery, however, have by no means been the

inventions of those who had occasion to use the machines. Many improvements

have been made by the ingenuity of the makers of the machines, when to make

them became the business of a peculiar trade; and some by that of those who

are called philosophers, or men of speculation, whose trade it is not to do

any thing, but to observe every thing, and who, upon that account, are often

capable of combining together the powers of the most distant and dissimilar

objects. in the progress of society, philosophy or speculation becomes, like

every other employment, the principal or sole trade and occupation of a

particular class of citizens. Like every other employment, too, it is

subdivided into a great number of different branches, each of which affords

occupation to a peculiar tribe or class of philosophers ; and this

subdivision of employment in philosophy, as well as in every other business,

improve dexterity, and saves time. Each individual becomes more expert in

his own peculiar branch, more work is done upon the whole, and the quantity

of science is considerably increased by it.

It is the great multiplication of the productions of all the different arts,

in consequence of the division of labour, which occasions, in a

well-governed society, that universal opulence which extends itself to the

lowest ranks of the people. Every workman has a great quantity of his own

work to dispose of beyond what he himself has occasion for; and every other

workman being exactly in the same situation, he is enabled to exchange a

great quantity of his own goods for a great quantity or, what comes to the

same thing, for the price of a great quantity of theirs. He supplies them

abundantly with what they have occasion for, and they accommodate him as

amply with what he has occasion for, and a general plenty diffuses itself

through all the different ranks of the society.

Observe the accommodation of the most common artificer or daylabourer in a

civilized and thriving country, and you will perceive that the number of

people, of whose industry a part, though but a small part, has been employed

in procuring him this accommodation, exceeds all computation. The woollen

coat, for example, which covers the day-labourer, as coarse and rough as it

may appear, is the produce of the joint labour of a great multitude of

workmen. The shepherd, the sorter of the wool, the wool-comber or carder,

the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser,

with many others, must all join their different arts in order to complete

even this homely production. How many merchants and carriers, besides, must

have been employed in transporting the materials from some of those workmen

to others who often live in a very distant part of the country ? How much

commerce and navigation in particular, how many ship-builders, sailors,

sail-makers, rope-makers, must have been employed in order to bring together

the different drugs made use of by the dyer, which often come from the

remotest corners of the world ? What a variety of labour, too, is necessary

in order to produce the tools of the meanest of those workmen ! To say

nothing of such complicated machines as the ship of the sailor, the mill of

the fuller, or even the loom of the weaver, let us consider only what a

variety of labour is requisite in order to form that very simple machine,

the shears with which the shepherd clips the wool. The miner, the builder of

the furnace for smelting the ore the feller of the timber, the burner of

the charcoal to be made use of in the smelting-house, the brickmaker, the

bricklayer, the workmen who attend the furnace, the millwright, the forger,

the smith, must all of them join their different arts in order to produce

them. Were we to examine, in the same manner, all the different parts of his

dress and household furniture, the coarse linen shirt which he wears next

his skin, the shoes which cover his feet, the bed which he lies on, and all

the different parts which compose it, the kitchen-grate at which he prepares

his victuals, the coals which he makes use of for that purpose, dug from the

bowels of the earth, and brought to him, perhaps, by a long sea and a long

land-carriage, all the other utensils of his kitchen, all the furniture of

his table, the knives and forks, the earthen or pewter plates upon which he

serves up and divides his victuals, the different hands employed in

preparing his bread and his beer, the glass window which lets in the heat

and the light, and keeps out the wind and the rain, with all the knowledge

and art requisite for preparing that beautiful and happy invention, without

which these northern parts of the world could scarce have afforded a very

comfortable habitation, together with the tools of all the different workmen

employed in producing those different conveniencies ; if we examine, I say,

all these things, and consider what a variety of labour is employed about

each of them, we shall be sensible that, without the assistance and

co-operation of many thousands, the very meanest person in a civilized

country could not be provided, even according to, what we very falsely

imagine, the easy and simple manner in which he is commonly accommodated.

Compared, indeed, with the more extravagant luxury of the great, his

accommodation must no doubt appear extremely simple and easy ; and yet it

may be true, perhaps, that the accommodation of an European prince does not

always so much exceed that of an industrious and frugal peasant, as the

accommodation of the latter exceeds that of many an African king, the

absolute masters of the lives and liberties of ten thousand naked savages.

CHAPTER II.

OF THE PRINCIPLE WHICH GIVES OCCASION TO

THE DIVISION OF LABOUR.

This division of labour, from which so many advantages are derived, is not

originally the effect of any human wisdom, which foresees and intends that

general opulence to which it gives occasion. It is the necessary, though

very slow and gradual, consequence of a certain propensity in human nature,

which has in view no such extensive utility ; the propensity to truck,

barter, and exchange one thing for another.

Whether this propensity be one of those original principles in human nature,

of which no further account can be given, or whether, as seems more

probable, it be the necessary consequence of the faculties of reason and

speech, it belongs not to our present subject to inquire. It is common to

all men, and to be found in no other race of animals, which seem to know

neither this nor any other species of contracts. Two greyhounds, in running

down the same hare, have sometimes the appearance of acting in some sort of

concert. Each turns her towards his companion, or endeavours to intercept

her when his companion turns her towards himself. This, however, is not the

effect of any contract, but of the accidental concurrence of their passions

in the same object at that particular time. Nobody ever saw a dog make a

fair and deliberate exchange of one bone for another with another dog.

Nobody ever saw one animal, by its gestures and natural cries signify to

another, this is mine, that yours ; I am willing to give this for that. When

an animal wants to obtain something either of a man, or of another animal,

it has no other means of persuasion, but to gain the favour of those whose

service it requires. A puppy fawns upon its dam, and a spaniel endeavours,

by a thousand attractions, to engage the attention of its master who is at

dinner, when it wants to be fed by him. Man sometimes uses the same arts

with his brethren, and when he has no other means of engaging them to act

according to his inclinations, endeavours by every servile and fawning

attention to obtain their good will. He has not time, however, to do this

upon every occasion. In civilized society he stands at all times in need of

the co-operation and assistance of great multitudes, while his whole life is

scarce sufficient to gain the friendship of a few persons. In almost every

other race of animals, each individual, when it is grown up to maturity, is

entirely independent, and in its natural state has occasion for the

assistance of no other living creature. But man has almost constant

occasion for the help of his brethren, and it is in vain for him to expect

it from their benevolence only. He will be more likely to prevail if he can

interest their self-love in his favour, and shew them that it is for their

own advantage to do for him what he requires of them. Whoever offers to

another a bargain of any kind, proposes to do this. Give me that which I

want, and you shall have this which you want, is the meaning of every such

offer; and it is in this manner that we obtain from one another the far

greater part of those good offices which we stand in need of. It is not from

the benevolence of the butcher the brewer, or the baker that we expect our

dinner, but from their regard to their own interest. We address ourselves,

not to their humanity, but to their self-love, and never talk to them of our

own necessities, but of their advantages. Nobody but a beggar chooses to

depend chiefly upon the benevolence of his fellow-citizens. Even a beggar

does not depend upon it entirely. The charity of well-disposed people,

indeed, supplies him with the whole fund of his subsistence. But though

this principle ultimately provides him with all the necessaries of life

which he has occasion for, it neither does nor can provide him with them as

he has occasion for them. The greater part of his occasional wants are

supplied in the same manner as those of other people, by treaty, by barter,

and by purchase. With the money which one man gives him he purchases food.

The old clothes which another bestows upon him he exchanges for other

clothes which suit him better, or for lodging, or for food, or for money,

with which he can buy either food, clothes, or lodging, as he has occasion.

As it is by treaty, by barter, and by purchase, that we obtain from one

another the greater part of those mutual good offices which we stand in need

of, so it is this same trucking disposition which originally gives occasion

to the division of labour. In a tribe of hunters or shepherds, a particular

person makes bows and arrows, for example, with more readiness and dexterity

than any other. He frequently exchanges them for cattle or for venison, with

his companions; and he finds at last that he can, in this manner, get more

cattle and venison, than if he himself went to the field to catch them. From

a regard to his own interest, therefore, the making of bows and arrows grows

to be his chief business, and he becomes a sort of armourer. Another excels

in making the frames and covers of their little huts or moveable houses. He

is accustomed to be of use in this way to his neighbours, who reward him in

the same manner with cattle and with venison, till at last he finds it his

interest to dedicate himself entirely to this employment, and to become a

sort of house-carpenter. In the same manner a third becomes a smith or a

brazier; a fourth, a tanner or dresser of hides or skins, the principal part

of the clothing of savages. And thus the certainty of being able to exchange

all that surplus part of the produce of his own labour, which is over and

above his own consumption, for such parts of the produce of other men's

labour as he may have occasion for, encourages every man to apply himself to

a particular occupation, and to cultivate and bring to perfection whatever

talent of genius he may possess for that particular species of business.

The difference of natural talents in different men, is, in reality, much less

than we are aware of ; and the very different genius which appears to

distinguish men of different professions, when grown up to maturity, is not

upon many occasions so much the cause, as the effect of the division of

labour. The difference between the most dissimilar characters, between a

philosopher and a common street porter, for example, seems to arise not so

much from nature, as from habit, custom, and education. When they came in to

the world, and for the first six or eight years of their existence, they

were, perhaps, very much alike, and neither their parents nor play-fellows

could perceive any remarkable difference. About that age, or soon after,

they come to be employed in very different occupations. The difference of

talents comes then to be taken notice of, and widens by degrees, till at

last the vanity of the philosopher is willing to acknowledge scarce any

resemblance. But without the disposition to truck, barter, and exchange,

every man must have procured to himself every necessary and conveniency of

life which he wanted. All must have had the same duties to perform, and the

same work to do, and there could have been no such difference of employment

as could alone give occasion to any great difference of talents.

As it is this disposition which forms that difference of talents, so

remarkable among men of different professions, so it is this same

disposition which renders that difference useful. Many tribes of animals,

acknowledged to be all of the same species, derive from nature a much more

remarkable distinction of genius, than what, antecedent to custom and

education, appears to take place among men. By nature a philosopher is not

in genius and disposition half so different from a street porter, as a

mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last

from a shepherd's dog. Those different tribes of animals, however, though

all of the same species are of scarce any use to one another. The strength

of the mastiff is not in the least supported either by the swiftness of the

greyhound, or by the sagacity of the spaniel, or by the docility of the

shepherd's dog. The effects of those different geniuses and talents, for

want of the power or disposition to barter and exchange, cannot be brought

into a common stock, and do not in the least contribute to the better

accommodation and conveniency of the species. Each animal is still obliged

to support and defend itself, separately and independently, and derives no

sort of advantage from that variety of talents with which nature has

distinguished its fellows. Among men, on the contrary, the most dissimilar

geniuses are of use to one another ; the different produces of their

respective talents, by the general disposition to truck, barter, and

exchange, being brought, as it were, into a common stock, where every man

may purchase whatever part of the produce of other men's talents he has

occasion for,

CHAPTER III.

THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET.

As it is the power of exchanging that gives occasion to the division of labour, so the extent of

this division must always be limited by the extent of that power, or, in other words, by the

extent of the market. When the market is very small, no person can have any encouragement

to dedicate himself entirely to one employment, for want of the power to exchange all that

surplus part of the produce of his own labour, which is over and above his own consumption,

for such parts of the produce of other men's labour as he has occasion for.

There are some sorts of industry, even of the lowest kind, which can be carried on nowhere

but in a great town. A porter, for example, can find employment and subsistence in no other

place. A village is by much too narrow a sphere for him; even an ordinary market-town is

scarce large enough to afford him constant occupation. In the lone houses and very small

villages which are scattered about in so desert a country as the highlands of Scotland, every

farmer must be butcher, baker, and brewer, for his own family. In such situations we can

scarce expect to find even a smith, a carpenter, or a mason, within less than twenty miles of

another of the same trade. The scattered families that live at eight or ten miles distance from

the nearest of them, must learn to perform themselves a great number of little pieces of work,

for which, in more populous countries, they would call in the assistance of those workmen.

Country workmen are almost everywhere obliged to apply themselves to all the different

branches of industry that have so much affinity to one another as to be employed about the

same sort of materials. A country carpenter deals in every sort of work that is made of wood ;

a country smith in every sort of work that is made of iron. The former is not only a carpenter,

but a joiner, a cabinet-maker, and even a carver in wood, as well as a wheel-wright, a

plough-wright, a cart and waggon-maker. The employments of the latter are still more

various. It is impossible there should be such a trade as even that of a nailer in the remote and

inland parts of the highlands of Scotland. Such a workman at the rate of a thousand nails

a-day, and three hundred working days in the year, will make three hundred thousand nails in

the year. But in such a situation it would be impossible to dispose of one thousand, that is, of

one day's work in the year. As by means of water-carriage, a more extensive market is opened

to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast,

and along the banks of navigable rivers, that industry of every kind naturally begins to

subdivide and improve itself, and it is frequently not till a long time after that those

improvements extend themselves to the inland parts of the country. A broad-wheeled waggon,

attended by two men, and drawn by eight horses, in about six weeks time, carries and brings

back between London and Edinburgh near four ton weight of goods. In about the same time a

ship navigated by six or eight men, and sailing between the ports of London and Leith,

frequently carries and brings back two hundred ton weight of goods. Six or eight men,

therefore, by the help of water-carriage, can carry and bring back, in the same time, the same

quantity of goods between London and Edinburgh as fifty broad-wheeled waggons, attended

by a hundred men, and drawn by four hundred horses. Upon two hundred tons of goods,

therefore, carried by the cheapest land-carriage from London to Edinburgh, there must be

charged the maintenance of a hundred men for three weeks, and both the maintenance and

what is nearly equal to maintenance the wear and tear of four hundred horses, as well as of

fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be

charged only the maintenance of six or eight men, and the wear and tear of a ship of two

hundred tons burthen, together with the value of the superior risk, or the difference of the

insurance between land and water-carriage. Were there no other communication between

those two places, therefore, but by land-carriage, as no goods could be transported from the

one to the other, except such whose price was very considerable in proportion to their weight,

they could carry on but a small part of that commerce which at present subsists between them,

and consequently could give but a small part of that encouragement which they at present

mutually afford to each other's industry. There could be little or no commerce of any kind

between the distant parts of the world. What goods could bear the expense of land-carriage

between London and Calcutta ? Or if there were any so precious as to be able to support this

expense, with what safety could they be transported through the territories of so many

barbarous nations? Those two cities, however, at present carry on a very considerable

commerce with each other, and by mutually affording a market, give a good deal of

encouragement to each other's industry.

Since such, therefore, are the advantages of water-carriage, it is natural that the first

improvements of art and industry should be made where this conveniency opens the whole

world for a market to the produce of every sort of labour, and that they should always be

much later in extending themselves into the inland parts of the country. The inland parts of the

country can for a long time have no other market for the greater part of their goods, but the

country which lies round about them, and separates them from the sea-coast, and the great

navigable rivers. The extent of the market, therefore, must for a long time be in proportion to

the riches and populousness of that country, and consequently their improvement must always

be posterior to the improvement of that country. In our North American colonies, the

plantations have constantly followed either the sea-coast or the banks of the navigable rivers,

and have scarce anywhere extended themselves to any considerable distance from both.

The nations that, according to the best authenticated history, appear to have been first

civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the

greatest inlet that is known in the world, having no tides, nor consequently any waves, except

such as are caused by the wind only, was, by the smoothness of its surface, as well as by the

multitude of its islands, and the proximity of its neighbouring shores, extremely favourable to

the infant navigation of the world; when, from their ignorance of the compass, men were

afraid to quit the view of the coast, and from the imperfection of the art of ship-building, to

abandon themselves to the boisterous waves of the ocean. To pass beyond the pillars of

Hercules, that is, to sail out of the straits of Gibraltar, was, in the ancient world, long

considered as a most wonderful and dangerous exploit of navigation. It was late before even

the Phoenicians and Carthaginians, the most skilful navigators and ship-builders of those old

times, attempted it; and they were, for a long time, the only nations that did attempt it.

Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first

in which either agriculture or manufactures were cultivated and improved to any considerable

degree. Upper Egypt extends itself nowhere above a few miles from the Nile; and in Lower

Egypt, that great river breaks itself into many different canals, which, with the assistance of a

little art, seem to have afforded a communication by water-carriage, not only between all the

great towns, but between all the considerable villages, and even to many farm-houses in the

country, nearly in the same manner as the Rhine and the Maese do in Holland at present. The

extent and easiness of this inland navigation was probably one of the principal causes of the

early improvement of Egypt.

The improvements in agriculture and manufactures seem likewise to have been of very great

antiquity in the provinces of Bengal, in the East Indies, and in some of the eastern provinces

of China, though the great extent of this antiquity is not authenticated by any histories of

whose authority we, in this part of the world, are well assured. In Bengal, the Ganges, and

several other great rivers, form a great number of navigable canals, in the same manner as the

Nile does in Egypt. In the eastern provinces of China, too, several great rivers form, by their

different branches, a multitude of canals, and, by communicating with one another, afford an

inland navigation much more extensive than that either of the Nile or the Ganges, or, perhaps,

than both of them put together. It is remarkable, that neither the ancient Egyptians, nor the

Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their

great opulence from this inland navigation.

All the inland parts of Africa, and all that part of Asia which lies any considerable way north

of the Euxine and Caspian seas, the ancient Scythia, the modern Tartary and Siberia, seem, in

all ages of the world, to have been in the same barbarous and uncivilized state in which we

find them at present. The sea of Tartary is the frozen ocean, which admits of no navigation ;

and though some of the greatest rivers in the world run through that country, they are at too

great a distance from one another to carry commerce and communication through the greater

part of it. There are in Africa none of those great inlets, such as the Baltic and Adriatic seas in

Europe, the Mediterranean and Euxine seas in both Europe and Asia, and the gulfs of Arabia,

Persia, India, Bengal, and Siam, in Asia, to carry maritime commerce into the interior parts of

that great continent; and the great rivers of Africa are at too great a distance from one another

to give occasion to any considerable inland navigation. The commerce, besides, which any

nation can carry on by means of a river which does not break itself into any great number of

branches or canals, and which runs into another territory before it reaches the sea, can never

be very considerable, because it is always in the power of the nations who possess that other

territory to obstruct the communication between the upper country and the sea. The navigation

of the Danube is of very little use to the different states of Bavaria, Austria. and Hungary, in

comparison of what it would be, if any of them possessed the whole of its course, till it falls

into the Black sea.

CHAPTER IV.

OF THE ORIGIN AND USE OF MONEY.

When the division of labour has been once thoroughly established, it is but

a very small part of a man's wants which the produce of his own labour can

supply. He supplies the far greater part of them by exchanging that surplus

part of the produce of his own labour, which is over and above his own

consumption, for such parts of the produce of other men's labour as he has

occasion for. Every man thus lives by exchanging, or becomes, in some

measure, a merchant, and the society itself grows to be what is properly a

commercial society.

But when the division of labour first began to take place, this power of

exchanging must frequently have been very much clogged and embarrassed in

its operations. One man, we shall suppose, has more of a certain commodity

than he himself has occasion for, while another has less. The former,

consequently, would be glad to dispose of; and the latter to purchase, a

part of this superfluity. But if this latter should chance to have nothing

that the former stands in need of, no exchange can be made between them. The

butcher has more meat in his shop than he himself can consume, and the

brewer and the baker would each of them be willing to purchase a part of it.

But they have nothing to offer in exchange, except the different productions

of their respective trades, and the butcher is already provided with all the

bread and beer which he has immediate occasion for. No exchange can, in this

case, be made between them. He cannot be their merchant, nor they his

customers ; and they are all of them thus mutually less serviceable to one

another. In order to avoid the inconveniency of such situations, every

prudent man in every period of society, after the first establishment of the

division of labour, must naturally have endeavoured to manage his affairs in

such a manner, as to have at all times by him, besides the peculiar produce

of his own industry, a certain quantity of some one commodity or other, such

as he imagined few people would be likely to refuse in exchange for the

produce of their industry. Many different commodities, it is probable, were

successively both thought of and employed for this purpose. In the rude ages

of society, cattle are said to have been the common instrument of commerce ;

and, though they must have been a most inconvenient one, yet, in old times,

we find things were frequently valued according to the number of cattle

which had been given in exchange for them. The armour of Diomede, says

Homer, cost only nine oxen; but that of Glaucus cost a hundred oxen. Salt is

said to be the common instrument of commerce and exchanges in Abyssinia ; a

species of shells in some parts of the coast of India ; dried cod at

Newfoundland; tobacco in Virginia; sugar in some of our West India colonies;

hides or dressed leather in some other countries; and there is at this day a

village In Scotland, where it is not uncommon, I am told, for a workman to

carry nails instead of money to the baker's shop or the ale-house.

In all countries, however, men seem at last to have been determined by

irresistible reasons to give the preference, for this employment, to metals

above every other commodity. Metals can not only be kept with as little loss

as any other commodity, scarce any thing being less perishable than they

are, but they can likewise, without any loss, be divided into any number of

parts, as by fusion those parts can easily be re-united again; a quality

which no other equally durable commodities possess, and which, more than any

other quality, renders them fit to be the instruments of commerce and

circulation. The man who wanted to buy salt, for example, and had nothing

but cattle to give in exchange for it, must have been obliged to buy salt to

the value of a whole ox, or a whole sheep, at a time. He could seldom buy

less than this, because what he was to give for it could seldom be divided

without loss; and if he had a mind to buy more, he must, for the same

reasons, have been obliged to buy double or triple the quantity, the value,

to wit, of two or three oxen, or of two or three sheep. If, on the contrary,

instead of sheep or oxen, he had metals to give in exchange for it, he could

easily proportion the quantity of the metal to the precise quantity of the

commodity which he had immediate occasion for.

Different metals have been made use of by different nations for this

purpose. Iron was the common instrument of commerce among the ancient

Spartans, copper among the ancient Romans, and gold and silver among all

rich and commercial nations.

Those metals seem originally to have been made use of for this purpose in

rude bars, without any stamp or coinage. Thus we are told by Pliny (Plin.

Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an ancient

historian, that, till the time of Servius Tullius, the Romans had no coined

money, but made use of unstamped bars of copper, to purchase whatever they

had occasion for. These rude bars, therefore, performed at this time the

function of rnoney.

The use of metals in this rude state was attended with two very considerable

inconveniences ; first, with the trouble of weighing, and secondly, with

that of assaying them. In the precious metals, where a small difference in

the quantity makes a great difference in the value, even the business of

weighing, with proper exactness, requires at least very accurate weights and

scales. The weighing of gold, in particular, is an operation of some nicety

In the coarser metals, indeed, where a small error would be of little

consequence, less accuracy would, no doubt, be necessary. Yet we should find

it excessively troublesome if every time a poor man had occasion either to

buy or sell a farthing's worth of goods, he was obliged to weigh the

farthing. The operation of assaying is still more difficult, still more

tedious ; and, unless a part of the metal is fairly melted in the crucible,

with proper dissolvents, any conclusion that can be drawn from it is

extremely uncertain. Before the institution of coined money, however, unless

they went through this tedious and difficult operation, people must always

have been liable to the grossest frauds and impositions; and instead of a

pound weight of pure silver, or pure copper, might receive, in exchange for

their goods, an adulterated composition of the coarsest and cheapest

materials, which had, however, in their outward appearance, been made to

resemble those metals. To prevent such abuses, to facilitate exchanges, and

thereby to encourage all sorts of industry and commerce, it has been found

necessary, in all countries that have made any considerable advances towards

improvement, to affix a public stamp upon certain quantities of such

particular metals, as were in those countries commonly made use of to

purchase goods. Hence the origin of coined money, and of those public

offices called mints; institutions exactly of the same nature with those of

the aulnagers and stamp-masters of woollen and linen cloth. All of them are

equally meant to ascertain, by means of a public stamp, the quantity and

uniform goodness of those different commodities when brought to market.

The first public stamps of this kind that were affixed to the current

metals, seem in many cases to have been intended to ascertain, what it was

both most difficult and most important to ascertain, the goodness or

fineness of the metal, and to have resembled the sterling mark which is at

present affixed to plate and bars of silver, or the Spanish mark which is

sometimes affixed to ingots of gold, and which, being struck only upon one

side of the piece, and not covering the whole surface, ascertains the

fineness, but not the weight of the metal. Abraham weighs to Ephron the four

hundred shekels of silver which he had agreed to pay for the field of

Machpelah. They are said, however, to be the current money of the merchant,

and yet are received by weight, and not by tale, in the same manner as

ingots of gold and bars of silver are at present. The revenues of the

ancient Saxon kings of England are said to have been paid, not in money, but

in kind, that is, in victuals and provisions of all sorts. William the

Conqueror introduced the custom of paying them in money. This money,

however, was for a long time, received at the exchequer, by weight, and not

by tale,

The inconveniency and difficulty of weighing those metals with exactness,

gave occasion to the institution of coins, of which the stamp, covering

entirely both sides of the piece, and sometimes the edges too, was supposed

to ascertain not only the fineness, but the weight of the metal. Such

coins, therefore, were received by tale, as at present, without the trouble

of weighing.

The denominations of those coins seem originally to have expressed the

weight or quantity of metal contained in them. In the time of Servius

Tullius, who first coined money at Rome, the Roman as or pondo contained a

Roman pound of good copper. It was divided, in the same manner as our Troyes

pound, into twelve ounces, each of which contained a real ounce of good

copper. The English pound sterling, in the time of Edward I. contained a

pound, Tower weight, of silver of a known fineness. The Tower pound seems to

have been something more than the Roman pound, and something less than the

Troyes pound. This last was not introduced into the mint of England till the

18th of Henry the VIII. The French livre contained, in the time of

Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair

of Troyes in Champaign was at that time frequented by all the nations of

Europe, and the weights and measures of so famous a market were generally

known and esteemed. The Scots money pound contained, from the time of

Alexander the First to that of Robert Bruce, a pound of silver of the same

weight and fineness with the English pound sterling. English, French, and

Scots pennies, too, contained all of them originally a real penny-weight of

silver, the twentieth part of an ounce, and the two hundred-and-fortieth

part of a pound. The shilling, too, seems originally to have been

the denomination of a weight. "When wheat is at twelve shillings the quarter,"

says an ancient statute of Henry III." then wastel bread of a farthing shall

weigh eleven shillings and fourpence". The proportion, however, between the

shilling, and either the penny on the one hand, or the pound on the other,

seems not to have been so constant and uniform as that between the penny and

the pound. During the first race of the kings of France, the French sou or

shilling appears upon different occasions to have contained five, twelve,

twenty, and forty pennies. Among the ancient Saxons, a shilling appears at

one time to have contained only five pennies, and it is not improbable that

it may have been as variable among them as among their neighbours, the

ancient Franks. From the time of Charlemagne among the French, and from that

of William the Conqueror among the English, the proportion between the

pound, the shilling, and the penny, seems to have been uniformly the same as

at present, though the value of each has been very different ; for in every

country of the world, I believe, the avarice and injustice of princes and

sovereign states, abusing the confidence of their subjects, have by degrees

diminished the real quantity of metal, which had been originally contained

in their coins. The Roman as, in the latter ages of the republic, was

reduced to the twenty-fourth part of its original value, and, instead of

weighing a pound, came to weigh only half an ounce. The English pound and

penny contain at present about a third only ; the Scots pound and penny

about a thirty-sixth ; and the French pound and penny about a sixty-sixth

part of their original value. By means of those operations, the princes and

sovereign states which performed them were enabled, in appearance, to pay

their debts and fulfil their engagements with a smaller quantity of silver

than would otherwise have been requisite. It was indeed in appearance only ;

for their creditors were really defrauded of a part of what was due to them.

All other debtors in the state were allowed the same privilege, and might

pay with the same nominal sum of the new and debased coin whatever they had

borrowed in the old. Such operations, therefore, have always proved

favourable to the debtor, and ruinous to the creditor, and have sometimes

produced a greater and more universal revolution in the fortunes of private

persons, than could have been occasioned by a very great public calamity.

It is in this manner that money has become, in all civilized nations, the

universal instrument of commerce, by the intervention of which goods of all

kinds are bought and sold, or exchanged for one another.

What are the rules which men naturally observe, in exchanging them either

for money, or for one another, I shall now proceed to examine. These rules

determine what may be called the relative or exchangeable value of goods.

The word VALUE, it is to be observed, has two different meanings, and

sometimes expresses the utility of some particular object, and sometimes the

power of purchasing other goods which the possession of that object conveys.

The one may be called ' value in use ;' the other, 'value in exchange.' The

things which have the greatest value in use have frequently little or no

value in exchange ; and, on the contrary, those which have the greatest

value in exchange have frequently little or no value in use. Nothing is more

useful than water ; but it will purchase scarce any thing; scarce any thing

can be had in exchange for it. A diamond, on the contrary, has scarce any

value in use; but a very great quantity of other goods may frequently be had

in exchange for it.

In order to investigate the principles which regulate the exchangeable value

of commodities, I shall endeavour to shew,

First, what is the real measure of this exchangeable value; or wherein

consists the real price of all commodities.

Secondly, what are the different parts of which this real price is composed

or made up.

And, lastly, what are the different circumstances which sometimes raise some

or all of these different parts of price above, and sometimes sink them

below, their natural or ordinary rate; or, what are the causes which

sometimes hinder the market price, that is, the actual price of commodities,

from coinciding exactly with what may be called their natural price.

I shall endeavour to explain, as fully and distinctly as I can, those three

subjects in the three following chapters, for which I must very earnestly

entreat both the patience and attention of the reader : his patience, in

order to examine a detail which may, perhaps, in some places, appear

unnecessarily tedious; and his attention, in order to understand what may

perhaps, after the fullest explication which I am capable of giving it,

appear still in some degree obscure. I am always willing to run some hazard

of being tedious, in order to be sure that I am perspicuous; and, after

taking the utmost pains that I can to be perspicuous, some obscurity may

still appear to remain upon a subject, in its own nature extremely

abstracted.

CHAPTER V.

OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN

LABOUR, AND THEIR PRICE IN MONEY.

Every man is rich or poor according to the degree in which he can afford to

enjoy the necessaries, conveniencies, and amusements of human life. But

after the division of labour has once thoroughly taken place, it is but a

very small part of these with which a man's own labour can supply him. The

far greater part of them he must derive from the labour of other people, and

he must be rich or poor according to the quantity of that labour which he

can command, or which he can afford to purchase. The value of any commodity,

therefore, to the person who possesses it, and who means not to use or

consume it himself, but to exchange it for other commodities, is equal to

the quantity of labour which it enables him to purchase or command. Labour

therefore, is the real measure of the exchangeable value of all commodities.

The real price of every thing, what every thing really costs to the man who

wants to acquire it, is the toil and trouble of acquiring it. What every

thing is really worth to the man who has acquired it and who wants to

dispose of it, or exchange it for something else, is the toil and trouble

which it can save to himself, and which it can impose upon other people.

What is bought with money, or with goods, is purchased by labour, as much as

what we acquire by the toil of our own body. That money, or those goods,

indeed, save us this toil. They contain the value of a certain quantity of

labour, which we exchange for what is supposed at the time to contain the

value of an equal quantity. Labour was the first price, the original

purchase money that was paid for all things. It was not by gold or by silver,

but by labour, that all the wealth of the world was originally purchased;

and its value, to those who possess it, and who want to exchange it for some

new productions, is precisely equal to the quantity of' labour which it can

enable them to purchase or command.

Wealth, as Mr Hobbes says, is power. But the person who either acquires, or

succeeds to a great fortune, does not necessarily acquire or succeed to any

political power, either civil or military. His fortune may, perhaps, afford

him the means of acquiring both; but the mere possession of that fortune

does not necessarily convey to him either. The power which that possession

immediately and directly conveys to him, is the power of purchasing a

certain command over all the labour, or over all the produce of labour which

is then in the market. His fortune is greater or less, precisely in

proportion to the extent of this power, or to the quantity either of other

men's labour, or, what is the same thing, of the produce of other men's

labour, which it enables him to purchase or command. The exchangeable value

of every thing must always be precisely equal to the extent of this power

which it conveys to its owner.

But though labour be the real measure of the exchangeable value of all

commodities, it is not that by which their value is commonly estimated. It

is often difficult to ascertain the proportion between two different

quantities of labour. The time spent in two different sorts of work will not

always alone determine this proportion. The different degrees of hardship

endured, and of ingenuity exercised, must likewise be taken into account.

There may be more labour in an hour's hard work, than in two hours easy

business ; or in an hour's application to a trade which it cost ten years

labour to learn, than in a month's industry, at an ordinary and obvious

employment. But it is not easy to find any accurate measure either of

hardship or ingenuity. In exchanging, indeed, the different productions of

different sorts of labour for one another, some allowance is commonly made

for both. It is adjusted, however, not by any accurate measure, but by the

higgling and bargaining of the market, according to that sort of rough

equality which, though not exact, is sufficient for carrying on the business

of common life.

Every commodity, besides, Is more frequently exchanged for, and thereby

compared with, other commodities, than with labour. It is more natural,

therefore, to estimate its exchangeable value by the quantity of some other

commodity, than by that of the labour which it can produce. The greater part

of people, too, understand better what is meant by a quantity of a

particular commodity, than by a quantity of labour. The one is a plain

palpable object ; the other an abstract notion, which though it can be made

sufficiently intelligible, is not altogether so natural and obvious.

But when barter ceases, and money has become the common instrument of

commerce, every particular commodity is more frequently exchanged for money

than for any other commodity. The butcher seldom carries his beef or his

mutton to the baker or the brewer, in order to exchange them for bread or

for beer ; but he carries them to the market, where he exchanges them for

money, and afterwards exchanges that money for bread and for beer. The

quantity of money which he gets for them regulates, too, the quantity of

bread and beer which he can afterwards purchase. It is more natural and

obvious to him, therefore, to estimate their value by the quantity of money,

the commodity for which he immediately exchanges them, than by that of

bread and beer, the commodities for which he can exchange them only by the

intervention of another commodity ; and rather to say that his butcher's

meat is worth three-pence or fourpence a-pound, than that it is worth three

or four pounds of bread, or three or four quarts of small beer. Hence it

comes to pass, that the exchangeable value of every commodity is more

frequently estimated by the quantity of money, than by the quantity either

of labour or of any other commodity which can be had in exchange for it.

Gold and silver, however, like every other commodity, vary in their value;

are sometimes cheaper and sometimes dearer, sometimes of easier and

sometimes of more difficult purchase. The quantity of labour which any

particular quantity of them can purchase or command, or the quantity of

other goods which it will exchange for, depends always upon the fertility or

barrenness of the mines which happen to be known about the time when such

exchanges are made. The discovery of the abundant mines of America, reduced,

in the sixteenth century, the value of gold and silver in Europe to about a

third of what it had been before. As it cost less labour to bring those

metals from the mine to the market, so, when they were brought thither, they

could purchase or command less labour; and this revolution in their value,

though perhaps the greatest, is by no means the only one of which history

gives some account. But as a measure of quantity, such as the natural foot,

fathom, or handful, which is continually varying in its own quantity, can

never be an accurate measure of the quantity of other things ; so a

commodity which is itself continually varying in its own value, can never be

an accurate measure of the value of other commodities. Equal quantities of

labour, at all times and places, may be said to be of equal value to the

labourer. In his ordinary state of health, strength, and spirits ; in the

ordinary degree of his skill and dexterity, he must always lay down the same

portion of his ease, his liberty, and his happiness. The price which he pays

must always be the same, whatever may be the quantity of goods which he

receives in return for it. Of these, indeed, it may sometimes purchase a

greater and sometimes a smaller quantity ; but it is their value which

varies, not that of the labour which purchases them. At all times and

places, that is dear which it is difficult to come at, or which it costs

much labour to acquire; and that cheap which is to be had easily, or with

very little labour. Labour alone, therefore, never varying in its own value,

is alone the ultimate and real standard by which the value of all

commodities can at all times and places be estimated and compared. It is

their real price; money is their nominal price only.

But though equal quantities of labour are always of equal value to the

labourer, yet to the person who employs him they appear sometimes to be of

greater, and sometimes of smaller value. He purchases them sometimes with a

greater, and sometimes with a smaller quantity of goods, and to him the

price of labour seems to vary like that of all other things. It appears to

him dear in the one case, and cheap in the other. In reality, however, it is

the goods which are cheap in the one case, and dear in the other.

In this popular sense, therefore, labour, like commodities, may be said to

have a real and a nominal price. Its real price may be said to consist in

the quantity of the necessaries and conveniencies of life which are given

for it ; its nominal price, in the quantity of money. The labourer is rich

or poor, is well or ill rewarded, in proportion to the real, not to the

nominal price of his labour.

The distinction between the real and the nominal price of commodities and

labour is not a matter of mere speculation, but may sometimes be of

considerable use in practice. The same real price is always of the same

value; but on account of the variations in the value of gold and silver, the

same nominal price is sometimes of very different values. When a landed

estate, therefore, is sold with a reservation of a perpetual rent, if it is

intended that this rent should always be of the same value, it is of

importance to the family in whose favour it is reserved, that it should not

consist in a particular sum of money. Its value would in this case be liable

to variations of two different kinds: first, to those which arise from the

different quantities of gold and silver which are contained at different

times in coin of the same denomination; and, secondly, to those which arise

from the different values of equal quantities of gold and silver at

different times.

Princes and sovereign states have frequently fancied that they had a

temporary interest to diminish the quantity of pure metal contained in their

coins; but they seldom have fancied that they had any to augment it. The

quantity of metal contained in the coins, I believe of all nations, has

accordingly been almost continually diminishing, and hardly ever augmenting.

Such variations, therefore, tend almost always to diminish the value of a

money rent.

The discovery of the mines of America diminished the value of gold and

silver in Europe. This diminution, it is commonly supposed, though I

apprehend without any certain proof, is still going on gradually, and is

likely to continue to do so for a long time. Upon this supposition,

therefore, such variations are more likely to diminish than to augment the

value of a money rent, even though it should be stipulated to be paid, not

in such a quantity of coined money of such a denomination (in so many pounds

sterling, for example), but in so many ounces, either of pure silver, or of

silver of a certain standard.

The rents which have been reserved in corn, have preserved their value much

better than those which have been reserved in money, even where the

denomination of the coin has not been altered. By the 18th of Elizabeth, it

was enacted, that a third of the rent of all college leases should be

reserved in corn, to be paid either in kind, or according to the current

prices at the nearest public market. The money arising from this corn rent,

though originally but a third of the whole, is, in the present times,

according to Dr. Blackstone, commonly near double of what arises from the

other two-thirds. The old money rents of colleges must, according to this

account, have sunk almost to a fourth part of their ancient value, or are

worth little more than a fourth part of the corn which they were formerly

worth. But since the reign of Philip and Mary, the denomination of the

English coin has undergone little or no alteration, and the same number of

pounds, shillings, and pence, have contained very nearly the same quantity

of pure silver. This degradation, therefore, in the value of the money rents

of colleges, has arisen altogether from the degradation in the price of

silver.

When the degradation in the value of silver is combined with the diminution

of the quantity of it contained in the coin of the same denomination, the

loss is frequently still greater. In Scotland, where the denomination of the

coin has undergone much greater alterations than it ever did in England, and

in France, where it has undergone still greater than it ever did in

Scotland, some ancient rents, originally of considerable value, have, in

this manner, been reduced almost to nothing.

Equal quantities of labour will, at distant times, be purchased more nearly

with equal quantities of corn, the subsistence of the labourer, than with

equal quantities of gold and silver, or, perhaps, of any other commodity.

Equal quantities of corn, therefore, will, at distant times, be more nearly

of the same real value, or enable the possessor to purchase or command more

nearly the same quantity of the labour of other people. They will do this, I

say, more nearly than equal quantities of almost any other commodity; for

even equal quantities of corn will not do it exactly. The subsistence of the

labourer, or the real price of labour, as I shall endeavour to shew

hereafter, is very different upon different occasions ; more liberal in a

society advancing to opulence, than in one that is standing still, and in

one that is standing still, than in one that is going backwards. Every

other commodity, however, will, at any particular time, purchase a greater

or smaller quantity of labour, in proportion to the quantity of subsistence

which it can purchase at that time. A rent, therefore, reserved in corn, is

liable only to the variations in the quantity of labour which a certain

quantity of corn can purchase. But a rent reserved in any other commodity is

liable, not only to the variations in the quantity of labour which any

particular quantity of corn can purchase, but to the variations in the

quantity of corn which can be purchased by any particular quantity of that

commodity.

Though the real value of a corn rent, it is to be observed, however, varies

much less from century to century than that of a money rent, it varies much

more from year to year. The money price of labour, as I shall endeavour to

shew hereafter, does not fluctuate from year to year with the money price of

corn, but seems to be everywhere accommodated, not to the temporary or

occasional, but to the average or ordinary price of that necessary of life.

The average or ordinary price of corn, again is regulated, as I shall

likewise endeavour to shew hereafter, by the value of silver, by the

richness or barrenness of the mines which supply the market with that metal,

or by the quantity of labour which must be employed, and consequently of

corn which must be consumed, in order to bring any particular quantity of

silver from the mine to the market. But the value of silver, though it

sometimes varies greatly from century to century, seldom varies much from

year to year, but frequently continues the same, or very nearly the same,

for half a century or a century together. The ordinary or average money

price of corn, therefore, may, during so long a period, continue the same,

or very nearly the same, too, and along with it the money price of labour,

provided, at least, the society continues, in other respects, in the same,

or nearly in the same, condition. In the mean time, the temporary and

occasional price of corn may frequently be double one year of what it had

been the year before, or fluctuate, for example, from five-and-twenty to

fifty shillings the quarter. But when corn is at the latter price, not only

the nominal, but the real value of a corn rent, will be double of what it is

when at the former, or will command double the quantity either of labour, or

of the greater part of other commodities; the money price of labour, and

along with it that of most other things, continuing the same during all

these fluctuations.

Labour, therefore, it appears evidently, is the only universal, as well as

the only accurate, measure of value, or the only standard by which we can

compare the values of different commodities, at all times, and at all

places. We cannot estimate, it is allowed, the real value of different

commodities from century to century by the quantities of silver which were

given for them. We cannot estimate it from year to year by the quantities of

corn. By the quantities of labour, we can, with the greatest accuracy,

estimate it, both from century to century, and from year to year. From

century to century, corn is a better measure than silver, because, from

century to century, equal quantities of corn will command the same quantity

of labour more nearly than equal quantities of silver. From year to year, on

the contrary, silver is a better measure than corn, because equal quantities

of it will more nearly command the same quantity of labour.

But though, in establishing perpetual rents, or even in letting very long

leases, it may be of use to distinguish between real and nominal price; it

is of none in buying and selling, the more common and ordinary transactions.

of human life.

At the same time and place, the real and the nominal price of all

commodities are exactly in proportion to one another. The more or less money

you get for any commodity, in the London market, for example, the more or

less labour it will at that time and place enable you to purchase or

command. At the same time and place, therefore, money is the exact measure

of the real exchangeable value of all commodities. It is so, however, at the

same time and place only.

Though at distant places there is no regular proportion between the real and

the money price of commodities, yet the merchant who carries goods from the

one to the other, has nothing to consider but the money price, or the

difference between the quantity of silver for which he buys them, and that

for which he is likely to sell them. Half an ounce of silver at Canton in

China may command a greater quantity both of labour and of the necessaries

and conveniencies of life, than an ounce at London. A commodity, therefore,

which sells for half an ounce of silver at Canton, may there be really

dearer, of more real importance to the man who possesses it there, than a

commodity which sells for an ounce at London is to the man who possesses it

at London. If a London merchant, however, can buy at Canton, for half an

ounce of silver, a commodity which he can afterwards sell at London for an

ounce, he gains a hundred per cent. by the bargain, just as much as if an

ounce of silver was at London exactly of the same value as at Canton. It is

of no importance to him that half an ounce of silver at Canton would have

given him the command of more labour, and of a greater quantity of the

necessaries and conveniencies of life than an ounce can do at London. An

ounce at London will always give him the command of double the quantity of

all these, which half an ounce could have done there, and this is precisely

what he wants.

As it is the nominal or money price of goods, therefore, which finally

determines the prudence or imprudence of all purchases and sales, and

thereby regulates almost the whole business of common life in which price is

concerned, we cannot wonder that it should have been so much more attended

to than the real price.

In such a work as this, however, it may sometimes be of use to compare the

different real values of a particular commodity at different times and

places, or the different degrees of power over the labour of other people

which it may, upon different occasions, have given to those who possessed

it. We must in this case compare, not so much the different quantities of

silver for which it was commonly sold, as the different quantities or labour

which those different quantities of silver could have purchased. But the

current prices of labour, at distant times and places, can scarce ever be

known with any degree of exactness. Those of corn, though they have in few

places been regularly recorded, are in general better known, and have been

more frequently taken notice of by historians and other writers. We must

generally, therefore, content ourselves with them, not as being always

exactly in the same proportion as the current prices of labour, but as being

the nearest approximation which can commonly be had to that proportion. I

shall hereafter have occasion to make several comparisons of this kind.

In the progress of industry, commercial nations have found it convenient to

coin several different metals into money; gold for larger payments, silver

for purchases of moderate value, and copper, or some other coarse metal, for

those of still smaller consideration, They have always, however, considered

one of those metals as more peculiarly the measure of value than any of the

other two; and this preference seems generally to have been given to the

metal which they happen first to make use of as the instrument of commerce.

Having once begun to use it as their standard, which they must have done

when they had no other money, they have generally continued to do so even

when the necessity was not the same.

The Romans are said to have had nothing but copper money till within five

years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they

first began to coin silver. Copper, therefore, appears to have continued

always the measure of value in that republic. At Rome all accounts appear to

have been kept, and the value of all estates to have been computed, either

in asses or in sestertii. The as was always the denomination of a copper

coin. The word sestertius signifies two asses and a half. Though the

sestertius, therefore, was originally a silver coin, its value was estimated

in copper. At Rome, one who owed a great deal of money was said to have a

great deal of other people's copper.

The northern nations who established themselves upon the ruins of the

Roman empire, seem to have had silver money from the first beginning of

their settlements, and not to have known either gold or copper coins for

several ages thereafter. There were silver coins in England in the time of

the Saxons ; but there was little gold coined till the time of Edward III

nor any copper till that of James I. of Great Britain. In England,

therefore, and for the same reason, I believe, in all other modern nations

of Europe, all accounts are kept, and the value of all goods and of all

estates is generally computed, in silver: and when we mean to express the

amount of a person's fortune, we seldom mention the number of guineas, but

the number of pounds sterling which we suppose would be given for it.

Originally, in all countries, I believe, a legal tender of payment could be

made only in the coin of that metal which was peculiarly considered as the

standard or measure of value. In England, gold was not considered as a legal

tender for a long time after it was coined into money. The proportion

between the values of gold and silver money was not fixed by any public law

or proclamation, but was left to be settled by the market. If a debtor

offered payment in gold, the creditor might either reject such payment

altogether, or accept of it at such a valuation of the gold as he and his

debtor could agree upon. Copper is not at present a legal tender, except in

the change of the smaller silver coins.

In this state of things, the distinction between the metal which was the

standard, and that which was not the standard, was something more than a

nominal distinction.

In process of time, and as people became gradually more familiar with the

use of the different metals in coin, and consequently better acquainted with

the proportion between their respective values, it has, in most countries, I

believe, been found convenient to ascertain this proportion, and to declare

by a public law, that a guinea, for example, of such a weight and fineness,

should exchange for one-and-twenty shillings, or be a legal tender for a debt

of that amount. In this state of things, and during the continuance of any

one regulated proportion of this kind, the distinction between the metal,

which is the standard, and that which is not the standard, becomes little

more than a nominal distinction.

In consequence of any change, however, in this regulated proportion, this

distinction becomes, or at least seems to become, something more than

nominal again. If the regulated value of a guinea, for example, was either

reduced to twenty, or raised to two-and-twenty shillings, all accounts being

kept, and almost all obligations for debt being expressed, in silver money,

the greater part of payments could in either case be made with the same

quantity of silver money as before; but would require very different

quantities of gold money ; a greater in the one case, and a smaller in the

other. Silver would appear to be more invariable in its value than gold.

Silver would appear to measure the value of gold, and gold would not appear

to measure the value of silver. The value of gold would seem to depend upon

the quantity of silver which it would exchange for, and the value of silver

would not seem to depend upon the quantity of gold which it would exchange

for. This difference, however, would be altogether owing to the custom of

keeping accounts, and of expressing the amount of all great and small sums

rather in silver than in gold money. One of Mr Drummond's notes for

five-and-twenty or fifty guineas would, after an alteration of this kind, be

still payable with five-and-twenty or fifty guineas, in the same manner as

before. It would, after such an alteration, be payable with the same

quantity of gold as before, but with very different quantities of silver. In

the payment of such a note, gold would appear to be more invariable in its

value than silver. Gold would appear to measure the value of silver, and

silver would not appear to measure the value of gold. If the custom of

keeping accounts, and of expressing promissory-notes and other obligations

for money, in this manner should ever become general, gold, and not silver,

would be considered as the metal which was peculiarly the standard or

measure of value.

In reality, during the continuance of any one regulated proportion between the respective

values of the different metals in coin, the value of the most precious metal regulates the value

of the whole coin. Twelve copper pence contain half a pound avoirdupois of copper, of not the

best quality, which, before it is coined, is seldom worth seven-pence in silver. But as, by the

regulation, twelve such pence are ordered to exchange for a shilling, they are in the market

considered as worth a shilling, and a shilling can at any time be had for them. Even before the

late reformation of the gold coin of Great Britain, the gold, that part of it at least which

circulated in London and its neighbourhood, was in general less degraded below its standard

weight than the greater part of the silver. One-and-twenty worn and defaced shillings,

however, were considered as equivalent to a guinea, which, perhaps, indeed, was worn and

defaced too, but seldom so much so. The late regulations have brought the gold coin as near,

perhaps, to its standard weight as it is possible to bring the current coin of any nation; and the

order to receive no gold at the public offices but by weight, is likely to preserve it so, as long

as that order is enforced. The silver coin still continues in the same worn and degraded state as

before the reformation of the cold coin. In the market, however, one-and-twenty shillings of

this degraded silver coin are still considered as worth a guinea of this excellent gold coin.

The reformation of the gold coin has evidently raised the value of the silver coin which can be

exchanged for it.

In the English mint, a pound weight of gold is coined into forty-four guineas and a half, which

at one-and-twenty shillings the guinea, is equal to forty-six pounds fourteen shillings and

sixpence. An ounce of such gold coin, therefore, is worth £ 3:17:10½ in silver. In England, no

duty or seignorage is paid upon the coinage, and he who carries a pound weight or an ounce

weight of standard gold bullion to the mint, gets back a pound weight or an ounce weight of

gold in coin, without any deduction. Three pounds seventeen shillings and tenpence halfpenny

an ounce, therefore, is said to be the mint price of gold in England, or the quantity of gold

coin which the mint gives in return for standard gold bullion.

Before the reformation of the gold coin, the price of standard gold bullion in the market had,

for many years, been upwards of £3:18s. sometimes £ 3:19s. and very frequently £4 an ounce;

that sum, it is probable, in the worn and degraded gold coin, seldom containing more than an

ounce of standard gold. Since the reformation of the gold coin, the market price of standard

gold bullion seldom exceeds £ 3:17:7 an ounce. Before the reformation of the gold coin, the

market price was always more or less above the mint price. Since that reformation, the market

price has been constantly below the mint price. But that market price is the same whether it is

paid in gold or in silver coin. The late reformation of the gold coin, therefore, has raised not

only the value of the gold coin, but likewise that of the silver coin in proportion to gold

bullion, and probably, too, in proportion to all other commodities ; though the price of the

greater part of other commodities being influenced by so many other causes, the rise in the

value of either gold or silver coin in proportion to them may not be so distinct and sensible.

In the English mint, a pound weight of standard silver bullion is coined into sixty-two

shillings, containing, in the same manner, a pound weight of standard silver. Five shillings

and twopence an ounce, therefore, is said to be the mint price of silver in England, or the

quantity of silver coin which the mint gives in return for standard silver bullion. Before the

reformation of the gold coin, the market price of standard silver bullion was, upon different

occasions, five shillings and fourpence, five shillings and fivepence, five shillings and

sixpence, five shillings and sevenpence, and very often five shillings and eightpence an ounce.

Five shillings and sevenpence, however, seems to have been the most common price. Since

the reformation of the gold coin, the market price of standard silver bullion has fallen

occasionally to five shillings and threepence, five shillings and fourpence, and five shillings

and fivepence an ounce, which last price it has scarce ever exceeded. Though the market price

of silver bullion has fallen considerably since the reformation of the gold coin, it has not fallen

so low as the mint price.

In the proportion between the different metals in the English coin, as copper is rated very

much above its real value, so silver is rated somewhat below it. In the market of Europe, in the

French coin and in the Dutch coin, an ounce of fine gold exchanges for about fourteen ounces

of fine silver. In the English coin, it exchanges for about fifteen ounces, that is, for more silver

than it is worth, according to the common estimation of Europe. But as the price of copper in

bars is not, even in England, raised by the high price of copper in English coin, so the price of

silver in bullion is not sunk by the low rate of silver in English coin. Silver in bullion still

preserves its proper proportion to gold, for the same reason that copper in bars preserves its

proper proportion to silver.

Upon the reformation of the silver coin, in the reign of William III., the price of silver bullion

still continued to be somewhat above the mint price. Mr Locke imputed this high price to the

permission of exporting silver bullion, and to the prohibition of exporting silver coin. This

permission of exporting, he said, rendered the demand for silver bullion greater than the

demand for silver coin. But the number of people who want silver coin for the common

uses of buying and selling at home, is surely much greater than that of those who want silver

bullion either for the use of exportation or for any other use. There subsists at present a like

permission of exporting gold bullion, and a like prohibition of exporting gold coin; and yet the

price of gold bullion has fallen below the mint price. But in the English coin, silver was then,

in the same manner as now, under-rated in proportion to gold; and the gold coin (which at that

time, too, was not supposed to require any reformation) regulated then, as well as now, the

real value of the whole coin. As the reformation of the silver coin did not then reduce the price

of silver bullion to the mint price, it is not very probable that a like reformation will do so

now.

Were the silver coin brought back as near to its standard weight as the gold, a guinea, it is

probable, would, according to the present proportion, exchange for more silver in coin than it

would purchase in bullion. The silver coin containing its full standard weight, there would in

this case, be a profit in melting it down, in order, first to sell the bullion for gold coin, and

afterwards to exchange this gold coin for silver coin, to be melted down in the same manner.

Some alteration in the present proportion seems to be the only method of preventing this

inconveniency.

The inconveniency, perhaps, would be less, if silver was rated in the coin as much above its

proper proportion to gold as it is at present rated below it, provided it was at the same time

enacted, that silver should not be a legal tender for more than the change of a guinea, in the

same manner as copper is not a legal tender for more than the change of a shilling. No creditor

could, in this case, be cheated in consequence of the high valuation of silver in coin ; as no

creditor can at present be cheated in consequence of the high valuation of copper. The bankers

only would suffer by this regulation. When a run comes upon them, they sometimes

endeavour to gain time, by paying in sixpences, and they would be precluded by this

regulation from this discreditable method of evading immediate payment.They would be

obliged, in consequence, to keep at all times in their coffers a greater quantity of cash than at

present ; and though this might, no doubt, be a considerable inconveniency to them, it would,

at the same time, be a considerable security to their creditors.

Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly

does not contain, even in our present excellent gold coin, more than an ounce of standard

gold, and it may be thought, therefore, should not purchase more standard bullion. But gold in

coin is more convenient than gold in bullion ; and though, in England, the coinage is free, yet

the gold which is carried in bullion to the mint, can seldom be returned in coin to the owner

till after a delay of several weeks. In the present hurry of the mint, it could not be returned till

after a delay of several months. This delay is equivalent to a small duty, and renders gold in

coin somewhat more valuable than an equal quantity of gold in bullion. If, in the English coin,

silver was rated according to its proper proportion to gold, the price of silver bullion would

probably fall below the mint price, even without any reformation of the silver coin ; the value

even of the present worn and defaced silver coin being regulated by the value of the excellent

gold coin for which it can be changed.

A small seignorage or duty upon the coinage of both gold and silver, would probably increase

still more the superiority of those metals in coin above an equal quantity of either of them in

bullion. The coinage would, in this case, increase the value of the metal coined in

proportion to the extent of this small duty, for the same reason that the fashion increases the

value of plate in proportion to the price of that fashion. The superiority of coin above bullion

would prevent the melting down of the coin, and would discourage its exportation. If, upon

any public exigency, it should become necessary to export the coin, the greater part of it

would soon return again, of its own accord. Abroad, it could sell only for its weight in bullion.

At home, it would buy more than that weight. There would be a profit, therefore, in bringing it

home again. In France, a seignorage of about eight per cent. is imposed upon the coinage, and

the French coin, when exported, is said to return home again, of its own accord.

The occasional fluctuations in the market price of gold and silver bullion arise from the same

causes as the like fluctuations in that of all other commodities. The frequent loss of those

metals from various accidents by sea and by land, the continual waste of them in gilding and

plating, in lace and embroidery, in the wear and tear of coin, and in that of plate, require, in all

countries which possess no mines of their own, a continual importation, in order to repair this

loss and this waste. The merchant importers, like all other merchants, we may believe,

endeavour, as well as they can, to suit their occasional importations to what they judge is

likely to be the immediate demand. With all their attention, however, they sometimes overdo

the business, and sometimes underdo it. When they import more bullion than is wanted, rather

than incur the risk and trouble of exporting it again, they are sometimes willing to sell a part

of it for something less than the ordinary or average price. When, on the other hand, they

import less than is wanted, they get something more than this price. But when, under all those

occasional fluctuations, the market price either of gold or silver bullion continues for several

years together steadily and constantly, either more or less above, or more or less below the

mint price, we may be assured that this steady and constant, either superiority or inferiority of

price, is the effect of something in the state of the coin, which, at that time, renders a certain

quantity of coin either of more value or of less value than the precise quantity of bullion

which it ought to contain. The constancy and steadiness of the effect supposes a

proportionable constancy and steadiness in the cause.

The money of any particular country is, at any particular time and place, more or less an

accurate measure or value, according as the current coin is more or less exactly agreeable to

its standard, or contains more or less exactly the precise quantity of pure gold or pure silver

which it ought to contain. If in England, for example, forty-four guineas and a half contained

exactly a pound weight of standard gold, or eleven ounces of fine gold, and one ounce of

alloy, the gold coin of England would be as accurate a measure of the actual value of goods at

any particular time and place as the nature of the thing would admit. But if, by rubbing and

wearing, forty-four guineas and a half generally contain less than a pound weight of standard

gold, the diminution, however, being greater in some pieces than in others, the measure of

value comes to be liable to the same sort of uncertainty to which all other weights and

measures are commonly exposed. As it rarely happens that these are exactly agreeable to their

standard, the merchant adjusts the price of his goods as well as he can, not to what those

weights and measures ought to be, but to what, upon an average, he finds, by experience, they

actually are. In consequence of a like disorder in the coin, the price of goods comes, in the

same manner, to be adjusted, not to the quantity of pure gold or silver which the coin ought to

contain, but to that which, upon an average, it is found, by experience, it actually does

contain.

By the money price of goods, it is to be observed, I understand always the quantity of pure

gold or silver for which they are sold, without any regard to the denomination of the coin. Six

shillings and eight pence, for example, in the time of Edward I., I consider as the same money

price with a pound sterling in the present times, because it contained, as nearly as we can

judge, the same quantity of pure silver.

CHAPTER VI.

OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.

In that early and rude state of society which precedes both the accumulation

of stock and the appropriation of land, the proportion between the

quantities of labour necessary for acquiring different objects, seems to be

the only circumstance which can afford any rule for exchanging them for one

another. If among a nation of hunters, for example, it usually costs twice

the labour to kill a beaver which it does to kill a deer, one beaver should

naturally exchange for or be worth two deer. It is natural that what is

usually the produce of two days or two hours labour, should be worth double

of what is usually the produce of one day's or one hour's labour.

If the one species of labour should be more severe than the other, some

allowance will naturally be made for this superior hardship; and the produce

of one hour's labour in the one way may frequently exchange for that of two

hour's labour in the other.

Or if the one species of labour requires an uncommon degree of dexterity

and ingenuity, the esteem which men have for such talents, will naturally

give a value to their produce, superior to what would be due to the time

employed about it. Such talents can seldom be acquired but in consequence of

long application, and the superior value of their produce may frequently be

no more than a reasonable compensation for the time and labour which must be

spent in acquiring them. In the advanced state of society, allowances of

this kind, for superior hardship and superior skill, are commonly made in

the wages of labour ; and something of the same kind must probably have

taken place in its earliest and rudest period.

In this state of things, the whole produce of labour belongs to the

labourer; and the quantity of labour commonly employed in acquiring or

producing any commodity, is the only circumstance which can regulate the

quantity of labour which it ought commonly to purchase, command, or exchange

for.

As soon as stock has accumulated in the hands of particular persons, some of

them will naturally employ it in setting to work industrious people, whom

they will supply with materials and subsistence, in order to make a profit

by the sale of their work, or by what their labour adds to the value of the

materials. In exchanging the complete manufacture either for money, for

labour, or for other goods, over and above what may be sufficient to pay the

price of the materials, and the wages of the workmen, something must be given

for the profits of the undertaker of the work, who hazards his stock in this

adventure. The value which the workmen add to the materials, therefore,

resolves itself in this case into two parts, of which the one pays their

wages, the other the profits of their employer upon the whole stock of

materials and wages which he advanced. He could have no interest to employ

them, unless he expected from the sale of their work something more than

what was sufficient to replace his stock to him ; and he could have no

interest to employ a great stock rather than a small one, unless his profits

were to bear some proportion to the extent of his stock.

The profits of stock, it may perhaps be thought, are only a different name

for the wages of a particular sort of labour, the labour of inspection and

direction. They are, however, altogether different, are regulated by quite

different principles, and bear no proportion to the quantity, the hardship,

or the ingenuity of this supposed labour of inspection and direction. They

are regulated altogether by the value of the stock employed, and are greater

or smaller in proportion to the extent of this stock. Let us suppose, for

example, that in some particular place, where the common annual profits of

manufacturing stock are ten per cent. there are two different manufactures,

in each of which twenty workmen are employed, at the rate of fifteen pounds

a year each, or at the expense of three hundred a-year in each manufactory.

Let us suppose, too, that the coarse materials annually wrought up in the

one cost only seven hundred pounds, while the finer materials in the other

cost seven thousand. The capital annually employed in the one will, in this

case, amount only to one thousand pounds; whereas that employed in the other

will amount to seven thousand three hundred pounds. At the rate of ten per

cent. therefore, the undertaker of the one will expect a yearly profit of

about one hundred pounds only; while that of the other will expect about

seven hundred and thirty pounds. But though their profits are so very

different, their labour of inspection and direction may be either altogether

or very nearly the same. In many great works, almost the whole labour of

this kind is committed to some principal clerk. His wages properly express

the value of this labour of inspection and direction. Though in settling

them some regard is had commonly, not only to his labour and skill, but to

the trust which is reposed in him, yet they never bear any regular

proportion to the capital of which he oversees the management ; and the

owner of this capital, though he is thus discharged of almost all labour,

still expects that his profit should bear a regular proportion to his

capital. In the price of commodities, therefore, the profits of stock

constitute a component part altogether different from the wages of labour, and

regulated by quite different principles.

In this state of things, the whole produce of labour does not always belong

to the labourer. He must in most cases share it with the owner of the stock

which employs him. Neither is the quantity of labour commonly employed in

acquiring or producing any commodity, the only circumstance which can

regulate the quantity which it ought commonly to purchase, command or

exchange for. An additional quantity, it is evident, must be due for the

profits of the stock which advanced the wages and furnished the materials of

that labour.

As soon as the land of any country has all become private property, the

landlords, like all other men, love to reap where they never sowed, and

demand a rent even for its natural produce. The wood of the forest, the

grass of the field, and all the natural fruits of the earth, which, when

land was in common, cost the labourer only the trouble of gathering them,

come, even to him, to have an additional price fixed upon them. He must then

pay for the licence to gather them, and must give up to the landlord a

portion of what his labour either collects or produces. This portion, or,

what comes to the same thing, the price of this portion, constitutes the

rent of land, and in the price of the greater part of commodities, makes a

third component part.

The real value of all the different component parts of price, it must be

observed, is measured by the quantity of labour which they can, each of

them, purchase or command. Labour measures the value, not only of that part

of price which resolves itself into labour, but of that which resolves

itself into rent, and of that which resolves itself into profit.

In every society, the price of every commodity finally resolves itself into

some one or other, or all of those three parts ; and in every improved

society, all the three enter, more or less, as component parts, into the

price of the far greater part of commodities.

In the price of corn, for example, one part pays the rent of the landlord,

another pays the wages or maintenance of the labourers and labouring cattle

employed in producing it, and the third pays the profit of the farmer. These

three parts seem either immediately or ultimately to make up the whole price

of corn. A fourth part, it may perhaps be thought is necessary for replacing

the stock of the farmer, or for compensating the wear and tear of his

labouring cattle, and other instruments of husbandry. But it must be

considered, that the price of any instrument of husbandry, such as a

labouring horse, is itself made up of the same time parts ; the rent of the

land upon which he is reared, the labour of tending and rearing him, and the

profits of the farmer, who advances both the rent of this land, and the

wages of this labour. Though the price of the corn, therefore, may pay the

price as well as the maintenance of the horse, the whole price still

resolves itself, either immediately or ultimately, into the same three parts

of rent, labour, and profit.

In the price of flour or meal, we must add to the price of the corn, the

profits of the miller, and the wages of his servants ; in the price of

bread, the profits of the baker, and the wages of his servants; and in the

price of both, the labour of transporting the corn from the house of the

farmer to that of the miller, and from that of the miller to that of the

baker, together with the profits of those who advance the wages of that

labour.

The price of flax resolves itself into the same three parts as that of corn.

In the price of linen we must add to this price the wages of the

flax-dresser, of the spinner, of the weaver, of the bleacher, etc. together

with the profits of their respective employers.

As any particular commodity comes to be more manufactured, that part of the

price which resolves itself into wages and profit, comes to be greater in

proportion to that which resolves itself into rent. In the progress of the

manufacture, not only the number of profits increase, but every subsequent

profit is greater than the foregoing ; because the capital from which it is

derived must always be greater. The capital which employs the weavers, for

example, must be greater than that which employs the spinners; because it

not only replaces that capital with its profits, but pays, besides, the

wages of the weavers : and the profits must always bear some proportion to

the capital.

In the most improved societies, however, there are always a few commodities

of which the price resolves itself into two parts only the wages of labour,

and the profits of stock ; and a still smaller number, in which it consists

altogether in the wages of labour. In the price of sea-fish, for example,

one part pays the labour of the fisherman, and the other the profits of the

capital employed in the fishery. Rent very seldom makes any part of it,

though it does sometimes, as I shall shew hereafter. It is otherwise, at

least through the greater part of Europe, in river fisheries. A salmon

fishery pays a rent ; and rent, though it cannot well be called the rent of

land, makes a part of the price of a salmon, as well as wares and profit. In

some parts of Scotland, a few poor people make a trade of gathering, along

the sea-shore, those little variegated stones commonly known by the name of

Scotch pebbles. The price which is paid to them by the stone-cutter, is

altogether the wages of their labour ; neither rent nor profit makes an part

of it.

But the whole price of any commodity must still finally resolve itself into some one or other

or all of those three parts; as whatever part of it remains after paying the rent of the land, and

the price of the whole labour employed in raising, manufacturing, and bringing it to market,

must necessarily be profit to somebody.

As the price or exchangeable value of every particular commodity, taken

separately, resolves itself into some one or other, or all of those three

parts ; so that of all the commodities which compose the whole annual

produce of the labour of every country, taken complexly, must resolve itself

into the same three parts, and be parcelled out among different inhabitants

of the country, either as the wages of their labour, the profits of their

stock, or the rent of their land. The whole of what is annually either

collected or produced by the labour of every society, or, what comes to the

same thing, the whole price of it, is in this manner originally distributed

among some of its different members. Wages, profit, and rent, are the three

original sources of all revenue, as well as of all exchangeable value. All

other revenue is ultimately derived from some one or other of these.

Whoever derives his revenue from a fund which is his own, must draw it

either from his labour, from his stock, or from his land. The revenue

derived from labour is called wages; that derived from stock, by the person

who manages or employs it, is called profit; that derived from it by the

person who does not employ it himself, but lends it to another, is called

the interest or the use of money. It is the compensation which the borrower

pays to the lender, for the profit which he has an opportunity of making by

the use of the money. Part of that profit naturally belongs to the borrower,

who runs the risk and takes the trouble of employing it, and part to the

lender, who affords him the opportunity of making this profit. The interest

of money is always a derivative revenue, which, if it is not paid from the

profit which is made by the use of the money, must be paid from some other

source of revenue, unless perhaps the borrower is a spendthrift, who

contracts a second debt in order to pay the interest of the first. The

revenue which proceeds altogether from land, is called rent, and belongs to

the landlord. The revenue of the farmer is derived partly from his labour,

and partly from his stock. To him, land is only the instrument which enables

him to earn the wages of this labour, and to make the profits of this stock.

All taxes, and all the revenue which is founded upon them, all salaries,

pensions, and annuities of every kind, are ultimately derived from some one

or other of those three original sources of revenue, and are paid either

immediately or mediately from the wages of labour, the profits of stock, or

the rent of land.

When those three different sorts of revenue belong to different persons,

they are readily distinguished; but when they belong to the same, they are

sometimes confounded with one another, at least in common language.

A gentleman who farms a part of his own estate, after paying the expense of

cultivation, should gain both the rent of the landlord and the profit of the

farmer. He is apt to denominate, however, his whole gain, profit, and thus

confounds rent with profit, at least in common language. The greater part of

our North American and West Indian planters are in this situation. They

farm, the greater part of them, their own estates : and accordingly we

seldom hear of the rent of a plantation, but frequently of its profit.

Common farmers seldom employ any overseer to direct the general operations

of the farm. They generally, too, work a good deal with their own hands, as

ploughmen, harrowers, etc. What remains of the crop, after paying the rent,

therefore, should not only replace to them their stock employed in

cultivation, together with its ordinary profits, but pay them the wages

which are due to them, both as labourers and overseers. Whatever remains,

however, after paying the rent and keeping up the stock, is called profit.

But wages evidently make a part of it. The farmer, by saving these wages,

must necessarily gain them. Wages, therefore, are in this case confounded

with profit.

An independent manufacturer, who has stock enough both to purchase

materials, and to maintain himself till he can carry his work to market,

should gain both the wages of a journeyman who works under a master, and the

profit which that master makes by the sale of that journeyman's work. His

whole gains, however, are commonly called profit, and wages are, in this

case, too, confounded with profit.

A gardener who cultivates his own garden with his own hands, unites in his

own person the three different characters, of landlord, farmer, and

labourer. His produce, therefore, should pay him the rent of the first, the

profit of the second, and the wages of the third. The whole, however, is

commonly considered as the earnings of his labour. Both rent and profit are,

in this case, confounded with wages.

As in a civilized country there are but few commodities of which the

exchangeable value arises from labour only, rent and profit contributing

largely to that of the far greater part of them, so the annual produce of

its labour will always be sufficient to purchase or command a much greater

quantity of labour than what was employed in raising, preparing, and

bringing that produce to market. If the society were annually to employ all

the labour which it can annually purchase, as the quantity of labour would

increase greatly every year, so the produce of every succeeding year would

be of vastly greater value than that of the foregoing. But there is no

country in which the whole annual produce is employed in maintaining the

industrious. The idle everywhere consume a great part of it; and, according

to the different proportions in which it is annually divided between those

two different orders of people, its ordinary or average value must either

annually increase or diminish, or continue the same from one year to

another.

CHAPTER VII.

OF THE NATURAL AND MARKET PRICE OF COMMODITIES.

There is in every society or neighbourhood an ordinary or average rate, both

of wages and profit, in every different employment of labour and stock. This

rate is naturally regulated, as I shall shew hereafter, partly by the

general circumstances of the society, their riches or poverty, their

advancing, stationary, or declining condition, and partly by the particular

nature of each employment.

There is likewise in every society or neighbourhood an ordinary or average

rate of rent, which is regulated, too, as I shall shew hereafter, partly by

the general circumstances of the society or neighbourhood in which the land

is situated, and partly by the natural or improved fertility of the land.

These ordinary or average rates may be called the natural rates of wages,

profit and rent, at the time and place in which they commonly prevail.

When the price of any commodity is neither more nor less than what is

sufficient to pay the rent of the land, the wages of the labour, and the

profits of the stock employed in raising, preparing, and bringing it to

market, according to their natural rates, the commodity is then sold for

what may be called its natural price.

The commodity is then sold precisely for what it is worth, or for what it

really costs the person who brings it to market; for though, in common

language, what is called the prime cost of any commodity does not comprehend

the profit of the person who is to sell it again, yet, if he sells it at a

price which does not allow him the ordinary rate of profit in his

neighbourhood, he is evidently a loser by the trade; since, by employing his

stock in some other way, he might have made that profit. His profit,

besides, is his revenue, the proper fund of his subsistence. As, while he is

preparing and bringing the goods to market, he advances to his workmen their

wages, or their subsistence ; so he advances to himself, in the same manner,

his own subsistence, which is generally suitable to the profit which he may

reasonably expect from the sale of his goods. Unless they yield him this

profit, therefore, they do not repay him what they may very properly be said

to have really cost him.

Though the price, therefore, which leaves him this profit, is not always the

lowest at which a dealer may sometimes sell his goods, it is the lowest at

which he is likely to sell them for any considerable time; at least where

there is perfect liberty, or where he may change his trade as often as he

pleases.

The actual price at which any commodity is commonly sold, is called its

market price. It may either be above, or below, or exactly the same with its

natural price.

The market price of every particular commodity is regulated by the

proportion between the quantity which is actually brought to market, and the

demand of those who are willing to pay the natural price of the commodity,

or the whole value of the rent, labour, and profit, which must be paid in

order to bring it thither. Such people may be called the effectual

demanders, and their demand the effectual demand; since it maybe sufficient

to effectuate the bringing of the commodity to market. It is different from

the absolute demand. A very poor man may be said, in some sense, to have a

demand for a coach and six; he might like to have it; but his demand is not

an effectual demand, as the commodity can never be brought to market in

order to satisfy it.

When the quantity of any commodity which is brought to market falls short of

the effectual demand, all those who are willing to pay the whole value of

the rent, wages, and profit, which must be paid in order to bring it

thither, cannot be supplied with the quantity which they want. Rather than

want it altogether, some of them will be willing to give more. A competition

will immediately begin among them, and the market price will rise more or

less above the natural price, according as either the greatness of the

deficiency, or the wealth and wanton luxury of the competitors, happen to

animate more or less the eagerness of the competition. Among competitors of

equal wealth and luxury, the same deficiency will generally occasion a more

or less eager competition, according as the acquisition of the commodity

happens to be of more or less importance to them. Hence the exorbitant price

of the necessaries of life during the blockade of a town, or in a famine.

When the quantity brought to market exceeds the effectual demand, it cannot

be all sold to those who are willing to pay the whole value of the rent,

wages, and profit, which must be paid in order to bring it thither. Some

part must be sold to those who are willing to pay less, and the low price

which they give for it must reduce the price of the whole. The market price

will sink more or less below the natural price, according as the greatness

of the excess increases more or less the competition of the sellers, or

according as it happens to be more or less important to them to get

immediately rid of the commodity. The same excess in the importation of

perishable, will occasion a much greater competition than in that of durable

commodities; in the importation of oranges, for example, than in that of old

iron.

When the quantity brought to market is just sufficient to supply the

effectual demand, and no more, the market price naturally comes to be either

exactly, or as nearly as can be judged of, the same with the natural price.

The whole quantity upon hand can be disposed of for this price, and can not

be disposed of for more. The competition of the different dealers obliges

them all to accept of this price, but does not oblige them to accept of

less.

The quantity of every commodity brought to market naturally suits itself to

the effectual demand. It is the interest of all those who employ their land,

labour, or stock, in bringing any commodity to market, that the quantity

never should exceed the effectual demand ; and it is the interest of all

other people that it never should fall short of that demand.

If at any time it exceeds the effectual demand, some of the component parts

of its price must be paid below their natural rate. If it is rent, the

interest of the landlords will immediately prompt them to withdraw a part of

their land; and if it is wages or profit, the interest of the labourers in

the one case, and of their employers in the other, will prompt them to

withdraw a part of their labour or stock, from this employment. The quantity

brought to market will soon be no more than sufficient to supply the

effectual demand. All the different parts of its price will rise to their

natural rate, and the whole price to its natural price.

If, on the contrary, the quantity brought to market should at any time fall

short of the effectual demand, some of the component parts of its price must

rise above their natural rate. If it is rent, the interest of all other

landlords will naturally prompt them to prepare more land for the raising of

this commodity ; if it is wages or profit, the interest of all other

labourers and dealers will soon prompt them to employ more labour and stock

in preparing and bringing it to market. The quantity brought thither will

soon be sufficient to supply the effectual demand. All the different parts

of its price will soon sink to their natural rate, and the whole price to

its natural price.

The natural price, therefore, is, as it were, the central price, to which

the prices of all commodities are continually gravitating. Different

accidents may sometimes keep them suspended a good deal above it, and

sometimes force them down even somewhat below it. But whatever may be the

obstacles which hinder them from settling in this centre of repose and

continuance, they are constantly tending towards it.

The whole quantity of industry annually employed in order to bring any

commodity to market, naturally suits itself in this manner to the effectual

demand. It naturally aims at bringing always that precise quantity thither

which may be sufficient to supply, and no more than supply, that demand.

But, in some employments, the same quantity of industry will, in different

years, produce very different quantities of commodities ; while, in others,

it will produce always the same, or very nearly the same. The same number of

labourers in husbandry will, in different years, produce very different

quantities of corn, wine, oil, hops, etc. But the same number of spinners or

weavers will every year produce the same, or very nearly the same, quantity

of linen and woollen cloth. It is only the average produce of the one

species of industry which can be suited, in any respect, to the effectual

demand ; and as its actual produce is frequently much greater, and

frequently much less, than its average produce, the quantity of the

commodities brought to market will sometimes exceed a good deal, and

sometimes fall short a good deal, of the effectual demand. Even though that

demand, therefore, should continue always the same, their market price will

be liable to great fluctuations, will sometimes fall a good deal below, and

sometimes rise a good deal above, their natural price. In the other species

of industry, the produce of equal quantities of labour being always the

same, or very nearly the same, it can be more exactly suited to the

effectual demand. While that demand continues the same, therefore, the

market price of the commodities is likely to do so too, and to be either

altogether, or as nearly as can be judged of, the same with the natural

price. That the price of linen and woollen cloth is liable neither to such

frequent, nor to such great variations, as the price of corn, every man's

experience will inform him. The price of the one species of commodities

varies only with the variations in the demand; that of the other varies not

only with the variations in the demand, but with the much greater, and more

frequent, variations in the quantity of what is brought to market, in order

to supply that demand.

The occasional and temporary fluctuations in the market price of any

commodity fall chiefly upon those parts of its price which resolve

themselves into wages and profit. That part which resolves itself into rent

is less affected by them. A rent certain in money is not in the least

affected by them, either in its rate or in its value. A rent which consists

either in a certain proportion, or in a certain quantity, of the rude

produce, is no doubt affected in its yearly value by all the occasional and

temporary fluctuations in the market price of that rude produce; but it is

seldom affected by them in its yearly rate. In settling the terms of the

lease, the landlord and farmer endeavour, according to their best judgment,

to adjust that rate, not to the temporary and occasional, but to the average

and ordinary price of the produce.

Such fluctuations affect both the value and the rate, either of wages or of

profit, according as the market happens to be either overstocked or

understocked with commodities or with labour, with work done, or with work

to be done. A public mourning raises the price of black cloth ( with which

the market is almost always understocked upon such occasions), and augments

the profits of the merchants who possess any considerable quantity of it. It

has no effect upon the wages of the weavers. The market is understocked with

commodities, not with labour, with work done, not with work to be done. It

raises the wages of journeymen tailors. The market is here understocked with

labour. There is an effectual demand for more labour, for more work to be

done, than can be had. It sinks the price of coloured silks and cloths, and

thereby reduces the profits of the merchants who have any considerable

quantity of them upon hand. It sinks, too, the wages of the workmen employed

in preparing such commodities, for which all demand is stopped for six

months, perhaps for a twelvemonth. The market is here overstocked both with

commodities and with labour.

But though the market price of every particular commodity is in this manner

continually gravitating, if one may say so, towards the natural price; yet

sometimes particular accidents, sometimes natural causes, and sometimes

particular regulations of policy, may, in many commodities, keep up the

market price, for a long time together, a good deal above the natural price.

When, by an increase in the effectual demand, the market price of some

particular commodity happens to rise a good deal above the natural price,

those who employ their stocks in supplying that market, are generally

careful to conceal this change. If it was commonly known, their great profit

would tempt so many new rivals to employ their stocks in the same way, that,

the effectual demand being fully supplied, the market price would soon be

reduced to the natural price, and, perhaps, for some time even below it. If

the market is at a great distance from the residence of those who supply it,

they may sometimes be able to keep the secret for several years together,

and may so long enjoy their extraordinary profits without any new rivals.

Secrets of this kind, however, it must be acknowledged, can seldom be long

kept; and the extraordinary profit can last very little longer than they are

kept.

Secrets in manufactures are capable of being longer kept than secrets in

trade. A dyer who has found the means of producing a particular colour with

materials which cost only half the price of those commonly made use of, may,

with good management, enjoy the advantage of his discovery as long as he

lives, and even leave it as a legacy to his posterity. His extraordinary

gains arise from the high price which is paid for his private labour. They

properly consist in the high wages of that labour. But as they are repeated

upon every part of his stock, and as their whole amount bears, upon that

account, a regular proportion to it, they are commonly considered as

extraordinary profits of stock.

Such enhancements of the market price are evidently the effects of

particular accidents, of which, however, the operation may sometimes last

for many years together.

Some natural productions require such a singularity of soil and situation,

that all the land in a great country, which is fit for producing them, may

not be sufficient to supply the effectual demand. The whole quantity brought

to market, therefore, may be disposed of to those who are willing to give

more than what is sufficient to pay the rent of the land which produced

them, together with the wages of the labour and the profits of the stock

which were employed in preparing and bringing them to market, according to

their natural rates. Such commodities may continue for whole centuries

together to be sold at this high price ; and that part of it which resolves

itself into the rent of land, is in this case the part which is generally

paid above its natural rate. The rent of the land which affords such

singular and esteemed productions, like the rent of some vineyards in France

of a peculiarly happy soil and situation, bears no regular proportion to the

rent of other equally fertile and equally well cultivated land in its

neighbourhood. The wages of the labour, and the profits of the stock

employed in bringing such commodities to market, on the contrary, are seldom

out of their natural proportion to those of the other employments of labour

and stock in their neighbourhood.

Such enhancements of the market price are evidently the effect of natural

causes, which may hinder the effectual demand from ever being fully

supplied, and which may continue, therefore, to operate for ever.

A monopoly granted either to an individual or to a trading company, has the

same effect as a secret in trade or manufactures. The monopolists, by

keeping the market constantly understocked by never fully supplying the

effectual demand, sell their commodities much above the natural price, and

raise their emoluments. whether they consist in wages or profit, greatly

above their natural rate.

The price of monopoly is upon every occasion the highest which can be got.

The natural price, or the price of free competition, on the contrary, is the

lowest which can be taken, not upon every occasion indeed, but for any

considerable time together. The one is upon every occasion the highest which

can be squeezed out of the buyers, or which it is supposed they will

consent to give; the other is the lowest which the sellers can commonly

afford to take, and at the same time continue their business.

The exclusive privileges of corporations, statutes of apprenticeship, and

all those laws which restrain in particular employments, the competition to

a smaller number than might otherwise go into them, have the same tendency,

though in a less degree. They are a sort of enlarged monopolies, and may

frequently, for ages together, and in whole classes of employments, keep up

the market price of particular commodities above the natural price, and

maintain both the wages of the labour and the profits of the stock employed

about them somewhat above their natural rate.

Such enhancements of the market price may last as long as the regulations of

policy which give occasion to them.

The market price of any particular commodity, though it may continue long

above, can seldom continue long below, its natural price. Whatever part of

it was paid below the natural rate, the persons whose interest it affected

would immediately feel the loss, and would immediately withdraw either so

much land or no much labour, or so much stock, from being employed about it,

that the quantity brought to market would soon be no more than sufficient to

supply the effectual demand. Its market price, therefore, would soon rise to

the natural price; this at least would be the case where there was perfect

liberty.

The same statutes of apprenticeship and other corporation laws, indeed,

which, when a manufacture is in prosperity, enable the workman to raise his

wages a good deal above their natural rate, sometimes oblige him, when it

decays, to let them down a good deal below it. As in the one case they

exclude many people from his employment, so in the other they exclude him

from many employments. The effect of such regulations, however, is not near

so durable in sinking the workman's wages below, as in raising them above

their natural rate. Their operation in the one way may endure for many

centuries, but in the other it can last no longer than the lives of some of

the workmen who were bred to the business in the time of its prosperity.

When they are gone, the number of those who are afterwards educated to the

trade will naturally suit itself to the effectual demand. The policy must be

as violent as that of Indostan or ancient Egypt (where every man was bound

by a principle of religion to follow the occupation of his father, and was

supposed to commit the most horrid sacrilege if he changed it for another),

which can in any particular employment, and for several generations

together, sink either the wages of labour or the profits of stock below

their natural rate.

This is all that I think necessary to be observed at present concerning the

deviations, whether occasional or permanent, of the market price of

commodities from the natural price.

The natural price itself varies with the natural rate of each of its

component parts, of wages, profit, and rent; and in every society this rate

varies according to their circumstances, according to their riches or

poverty, their advancing, stationary, or declining condition. I shall, in

the four following chapters, endeavour to explain, as fully and distinctly

as I can, the causes of those different variations.

First, I shall endeavour to explain what are the circumstances which

naturally determine the rate of wages, and in what manner those

circumstances are affected by the riches or poverty, by the advancing,

stationary, or declining state of the society.

Secondly, I shall endeavour to shew what are the circumstances which

naturally determine the rate of profit ; and in what manner, too, those

circumstances are affected by the like variations in the state of the

society.

Though pecuniary wages and profit are very different in the different

employments of labour and stock ; yet a certain proportion seems commonly to

take place between both the pecuniary wages in all the different employments

of labour, and the pecuniary profits in all the different employments of

stock. This proportion, it will appear hereafter, depends partly upon the

nature of the different employments, and partly upon the different laws and

policy of the society in which they are carried on. But though in many

respects dependent upon the laws and policy, this proportion seems to be

little affected by the riches or poverty of that society, by its advancing,

stationary, or declining condition, but to remain the same, or very nearly

the same, in all those different states. I shall, in the third place,

endeavour to explain all the different circumstances which regulate this

proportion.

In the fourth and last place, I shall endeavour to shew what are the

circumstances which regulate the rent of land, and which either raise or

lower the real price of all the different substances which it produces.

CHAPTER VIII.

OF THE WAGES OF LABOUR.

The produce of labour constitutes the natural recompence or wages of labour.

In that original state of things which precedes both the appropriation of

land and the accumulation of stock, the whole produce of labour belongs to

the labourer. He has neither landlord nor master to share with him.

Had this state continued, the wages of labour would have augmented with all

those improvements in its productive powers, to which the division of labour

gives occasion. All things would gradually have become cheaper. They would

have been produced by a smaller quantity of labour ; and as the commodities

produced by equal quantities of labour would naturally in this state of

things be exchanged for one another, they would have been purchased likewise

with the produce of a smaller quantity.

But though all things would have become cheaper in reality, in appearance

many things might have become dearer, than before, or have been exchanged

for a greater quantity of other goods. Let us suppose, for example, that in

the greater part of employments the productive powers of labour had been

improved to tenfold, or that a day's labour could produce ten times the

quantity of work which it had done originally ; but that in a particular

employment they had been improved only to double, or that a day's labour

could produce only twice the quantity of work which it had done before. In

exchanging the produce of a day's labour in the greater part of employments

for that of a day's labour in this particular one, ten times the original

quantity of work in them would purchase only twice the original quantity in

it. Any particular quantity in it, therefore, a pound weight, for example,

would appear to be five times dearer than before. In reality, however, it

would be twice as cheap. Though it required five times the quantity of other

goods to purchase it, it would require only half the quantity of labour

either to purchase or to produce it. The acquisition, therefore, would be

twice as easy as before.

But this original state of things, in which the labourer enjoyed the whole

produce of his own labour, could not last beyond the first introduction of

the appropriation of land and the accumulation of stock. It was at an end,

therefore, long before the most considerable improvements were made in the

productive powers of labour ; and it would be to no purpose to trace further

what might have been its effects upon the recompence or wages of labour.

As soon as land becomes private property, the landlord demands a share of

almost all the produce which the labourer can either raise or collect from

it. His rent makes the first deduction from the produce of the labour which

is employed upon land.

It seldom happens that the person who tills the ground has wherewithal to

maintain himself till he reaps the harvest. His maintenance is generally

advanced to him from the stock of a master, the farmer who employs him, and

who would have no interest to employ him, unless he was to share in the

produce of his labour, or unless his stock was to be replaced to him with a

profit. This profit makes a second deduction from the produce of the labour

which is employed upon land.

The produce of almost all other labour is liable to the like deduction of

profit. In all arts and manufactures, the greater part of the workmen stand

in need of a master, to advance them the materials of their work, and their

wages and maintenance, till it be completed. He shares in the produce of

their labour, or in the value which it adds to the materials upon which it

is bestowed; and in this share consists his profit.

It sometimes happens, indeed, that a single independent workman has stock

sufficient both to purchase the materials of his work, and to maintain

himself till it be completed. He is both master and workman, and enjoys the

whole produce of his own labour, or the whole value which it adds to the

materials upon which it is bestowed. It includes what are usually two

distinct revenues, belonging to two distinct persons, the profits of stock,

and the wages of labour.

Such cases, however, are not very frequent; and in every part of Europe

twenty workmen serve under a master for one that is independent, and the

wages of labour are everywhere understood to be, what they usually are, when

the labourer is one person, and the owner of the stock which employs him

another.

What are the common wages of labour, depends everywhere upon the contract

usually made between those two parties, whose interests are by no means the

same. The workmen desire to get as much, the masters to give as little, as

possible. The former are disposed to combine in order to raise, the latter

in order to lower, the wages of labour.

It is not, however, difficult to foresee which of the two parties must, upon

all ordinary occasions, have the advantage in the dispute, and force the

other into a compliance with their terms. The masters, being fewer in

number, can combine much more easily: and the law, besides, authorises, or

at least does not prohibit, their combinations, while it prohibits those of

the workmen. We have no acts of parliament against combining to lower the

price of work, but many against combining to raise it. In all such disputes,

the masters can hold out much longer. A landlord, a farmer, a master

manufacturer, or merchant, though they did not employ a single workman,

could generally live a year or two upon the stocks, which they have already

acquired. Many workmen could not subsist a week, few could subsist a month,

and scarce any a year, without employment. In the long run, the workman may

be as necessary to his master as his master is to him ; but the necessity is

not so immediate.

We rarely hear, it has been said, of the combinations of masters, though

frequently of those of workmen. But whoever imagines, upon this account,

that masters rarely combine, is as ignorant of the world as of the subject.

Masters are always and everywhere in a sort of tacit, but constant and

uniform, combination, not to raise the wages of labour above their actual

rate. To violate this combination is everywhere a most unpopular action, and

a sort of reproach to a master among his neighbours and equals. We seldom,

indeed, hear of this combination, because it is the usual, and, one may say,

the natural state of things, which nobody ever hears of. Masters, too,

sometimes enter into particular combinations to sink the wages of labour

even below this rate. These are always conducted with the utmost silence and

secrecy till the moment of execution; and when the workmen yield, as they

sometimes do without resistance, though severely felt by them, they are

never heard of by other people. Such combinations, however, are frequently

resisted by a contrary defensive combination of the workmen, who sometimes,

too, without any provocation of this kind, combine, of their own accord, to

raise tile price of their labour. Their usual pretences are, sometimes the

high price of provisions, sometimes the great profit which their masters

make by their work. But whether their combinations be offensive or

defensive, they are always abundantly heard of. In order to bring the point

to a speedy decision, they have always recourse to the loudest clamour, and

sometimes to the most shocking violence and outrage. They are desperate, and

act with the folly and extravagance of desperate men, who must either

starve, or frighten their masters into an immediate compliance with their

demands. The masters, upon these occasions, are just as clamorous upon the

other side, and never cease to call aloud for the assistance of the civil

magistrate, and the rigorous execution of those laws which have been enacted

with so much severity against the combination of servants, labourers, and

journeymen. The workmen, accordingly, very seldom derive any advantage from

the violence of those tumultuous combinations, which, partly from the

interposition of the civil magistrate, partly from the superior steadiness

of the masters, partly from the necessity which the greater part of the

workmen are under of submitting for the sake of present subsistence,

generally end in nothing but the punishment or ruin of the ringleaders.

But though, in disputes with their workmen, masters must generally have

the advantage, there is, however, a certain rate, below which it seems

impossible to reduce, for any considerable time, the ordinary wages even of

the lowest species of labour.

A man must always live by his work, and his wages must at least be

sufficient to maintain him. They must even upon most occasions be somewhat

more, otherwise it would be impossible for him to bring up a family. and the

race of such workmen could not last beyond the first generation. Mr

Cantillon seems, upon this account, to suppose that the lowest species of

common labourers must everywhere earn at least double their own maintenance,

in order that, one with another, they may be enabled to bring up two

children; the labour of the wife, on account of her necessary attendance on

the children, being supposed no more than sufficient to provide for herself:

But one half the children born, it is computed, die before the age of

manhood. The poorest labourers, therefore, according to this account, must,

one with another, attempt to rear at least four children, in order; that two

may have an equal chance of living to that age. But the necessary

maintenance of four children, it is supposed, may be nearly equal to that of

one man. The labour of an able-bodied slave, the same author adds, is

computed to be worth double his maintenance ; and that of the meanest

labourer, he thinks, cannot be worth less than that of an able-bodied slave.

Thus far at least seems certain, that, in order to bring up a family, the

labour of the husband and wife together must, even in the lowest species of

common labour, be able to earn something more than what is precisely

necessary for their own maintenance; but in what proportion, whether in that

above-mentioned, or many other, I shall not take upon me to determine.

There are certain circumstances, however, which sometimes give the labourers

an advantage, and enable them to raise their wages considerably above this

rate, evidently the lowest which is consistent with common humanity.

When in any country the demand for those who live by wages, labourers,

journeymen, servants of every kind, is continually increasing; when every

year furnishes employment for a greater number than had been employed the

year before, the workmen have no occasion to combine in order to raise their

wages. The scarcity of hands occasions a competition among masters, who bid

against one another in order to get workmen, and thus voluntarily break

through the natural combination of masters not to raise wages. The demand

for those who live by wages, it is evident, cannot increase but in proportion

to the increase of the funds which are destined to the payment of

wages. These funds are of two kinds, first, the revenue which is over and

above what is necessary for the maintenance; and, secondly, the stock which

is over and above what is necessary for the employment of their masters.

When the landlord, annuitant, or monied man, has a greater revenue than what

he judges sufficient to maintain his own family, he employs either the whole

or a part of the surplus in maintaining one or more menial servants.

Increase this surplus, and he will naturally increase the number of those

servants.

When an independent workman, such as a weaver or shoemaker, has got more

stock than what is sufficient to purchase the materials of his own work, and

to maintain himself till he can dispose of it, he naturally employs one or

more journeymen with the surplus, in order to make a profit by their work.

Increase this surplus, and he will naturally increase the number of his

journeymen.

The demand for those who live by wages, therefore, necessarily increases

with the increase of the revenue and stock of every country, and cannot

possibly increase without it. The increase of revenue and stock is the

increase of national wealth. The demand for those who live by wages,

therefore, naturally increases with the increase of national wealth, and

cannot possibly increase without it.

It is not the actual greatness of national wealth, but its continual

increase, which occasions a rise in the wages of labour. It is not,

accordingly, in the richest countries, but in the most thriving, or in those

which are growing rich the fastest, that the wages of labour are highest.

England is certainly, in the present times, a much richer country than any

part of North America. The wages of labour, however, are much higher in

North America than in any part of England. In the province of New York,

common labourers earned in 1773, before the commencement

of the late disturbances, three shillings and sixpence currency, equal to

two shillings sterling, a-day ; ship-carpenters, ten shillings and sixpence

currency, with a pint of rum, worth sixpence sterling, equal in all to six

shillings and sixpence sterling; house-carpenters and bricklayers, eight

shillings currency, equal to four shillings and sixpence sterling ;

journeymen tailors, five shillings currency, equal to about two shillings

and tenpence sterling. These prices are all above the London price ; and

wages are said to be as high in the other colonies as in New York. The price

of provisions is everywhere in North America much lower than in England. A

dearth has never been known there. In the worst seasons they have always had

a sufficiency for themselves, though less for exportation. If the money

price of labour, therefore, be higher than it is anywhere in the

mother-country, its real price, the real command of the necessaries and

conveniencies of life which it conveys to the labourer, must be higher in a

still greater proportion.

But though North America is not yet so rich as England, it is much more

thriving, and advancing with much greater rapidity to the further

acquisition of riches. The most decisive mark of the prosperity of any

country is the increase of the number of its inhabitants. In Great

Britain, and most other European countries, they are not supposed to double

in less than five hundred years. In the British colonies in North

America, it has been found that they double in twenty or five-and-twenty

years. Nor in the present times is this increase principally owing to the

continual importation of new inhabitants, but to the great multiplication of

the species. Those who live to old age, it is said, frequently see there

from fifty to a hundred, and sometimes many more, descendants from their own

body. Labour is there so well rewarded, that a numerous family of children,

instead of being a burden, is a source of opulence and prosperity to the

parents. The labour of each child, before it can leave their house, is

computed to be worth a hundred pounds clear gain to them. A young widow with

four or five young children, who, among the middling or inferior ranks of

people in Europe, would have so little chance for a second husband, is there

frequently courted as a sort of fortune. The value of children is the

greatest of all encouragements to marriage. We cannot, therefore, wonder

that the people in North America should generally marry very young.

Notwithstanding the great increase occasioned by such early marriages, there

is a continual complaint of the scarcity of hands in North America. The

demand for labourers, the funds destined for maintaining them increase, it

seems, still faster than they can find labourers to employ.

Though the wealth of a country should be very great, yet if it has been long

stationary, we must not expect to find the wages of labour very high in it.

The funds destined for the payment of wages, the revenue and stock of its

inhabitants, may be of the greatest extent; but if they have continued for

several centuries of the same, or very nearly of the same extent, the number

of labourers employed every year could easily supply, and even more than

supply, the number wanted the following year. There could seldom be any

scarcity of hands, nor could the masters be obliged to bid against one

another in order to get them. The hands, on the contrary, would, in this

case, naturally multiply beyond their employment. There would be a constant

scarcity of employment, and the labourers would be obliged to bid against

one another in order to get it. If in such a country the wages off labour had

ever been more than sufficient to maintain the labourer, and to enable him

to bring up a family, the competition of the labourers and the interest of

the masters would soon reduce them to the lowest rate which is consistent

with common humanity. China has been long one of the richest, that is, one

of the most fertile, best cultivated, most industrious, and most populous,

countries in the world. It seems, however, to have been long stationary.

Marco Polo, who visited it more than five hundred years ago, describes its

cultivation, industry, and populousness, almost in the same terms in which

they are described by travellers in the present times. It had, perhaps, even

long before his time, acquired that full complement of riches which the

nature of its laws and institutions permits it to acquire. The accounts of

all travellers, inconsistent in many other respects, agree in the low wages

of labour, and in the difficulty which a labourer finds in bringing up a

family in China. If by digging the ground a whole day he can get what will

purchase a small quantity of rice in the evening, he is contented. The

condition of artificers is, if possible, still worse. Instead of waiting

indolently in their work-houses for the calls of their customers, as in

Europe, they are continually running about the streets with the tools of

their respective trades, offering their services, and, as it were, begging

employment. The poverty of the lower ranks of people in China far surpasses

that of the most beggarly nations in Europe. In the neighbourhood of Canton,

many hundred, it is commonly said, many thousand families have no habitation

on the land, but live constantly in little fishing-boats upon the rivers and

canals. The subsistence which they find there is so scanty, that they are

eager to fish up the nastiest garbage thrown overboard from any European

ship. Any carrion, the carcase of a dead dog or cat, for example, though

half putrid and stinking, is as welcome to them as the most wholesome food

to the people of other countries. Marriage is encouraged in China, not by

the profitableness of children, but by the liberty of destroying them. In

all great towns, several are every night exposed in the street, or drowned

like puppies in the water. The performance of this horrid office is even

said to be the avowed business by which some people earn their subsistence.

China, however, though it may, perhaps, stand still, does not seem to go

backwards. Its towns are nowhere deserted by their inhabitants. The lands

which had once been cultivated, are nowhere neglected. The same, or very

nearly the same, annual labour, must, therefore, continue to be performed,

and the funds destined for maintaining it must not, consequently, be

sensibly diminished. The lowest class of labourers, therefore,

notwithstanding their scanty subsistence, must some way or another make

shift to continue their race so far as to keep up their usual numbers.

But it would be otherwise in a country where the funds destined for the

maintenance of labour were sensibly decaying. Every year the demand for

servants and labourers would, in all the different classes of employments,

be less than it had been the year before. Many who had been bred in the

superior classes, not being able to find employment in their own business,

would be glad to seek it in the lowest. The lowest class being not only

overstocked with its own workmen, but with the overflowings of all the other

classes, the competition for employment would be so great in it, as to

reduce the wages of labour to the most miserable and scanty subsistence of

the labourer. Many would not he able to find employment even upon these hard

terms, but would either starve, or be driven to seek a subsistence, either

by begging, or by the perpetration perhaps, of the greatest enormities.

Want, famine, and mortality, would immediately prevail in that class, and

from thence extend themselves to all the superior classes, till the number

of inhabitants in the country was reduced to what could easily be maintained

by the revenue and stock which remained in it, and which had escaped either

the tyranny or calamity which had destroyed the rest. This, perhaps, is

nearly the present state of Bengal, and of some other of the English

settlements in the East Indies. In a fertile country, which had before been

much depopulated, where subsistence, consequently, should not be very

difficult, and where, notwithstanding, three or four hundred thousand people

die of hunger in one year, we maybe assured that the funds destined for the

maintenance of the labouring poor are fast decaying. The difference between

the genius of the British constitution, which protects and governs North

America, and that of the mercantile company which oppresses and domineers in

the East Indies, cannot, perhaps, be better illustrated than by the

different state of those countries.

The liberal reward of labour, therefore, as it is the necessary effect, so

it is the natural symptom of increasing national wealth. The scanty

maintenance of the labouring poor, on the other hand, is the natural symptom

that things are at a stand, and their starving condition, that they are

going fast backwards.

In Great Britain, the wages of labour seem, in the present times, to be

evidently more than what is precisely necessary to enable the labourer to

bring up a family. In order to satisfy ourselves upon this point, it will

not be necessary to enter into any tedious or doubtful calculation of what

may be the lowest sum upon winch it is possible to do this. There are many

plain symptoms, that the wages of labour are nowhere in this country

regulated by this lowest rate, which is consistent with common humanity.

First, in almost every part of Great Britain there is a distinction, even in

the lowest species of labour, between summer and winter wages. Summer wages

are always highest. But, on account of the extraordinary expense of fuel,

the maintenance of a family is most expensive in winter. Wages, therefore,

being highest when this expense is lowest, it seems evident that they are

not regulated by what is necessary for this expense, but by the quantity and

supposed value of the work. A labourer, it may be said, indeed, ought to

save part of his summer wages, in order to defray his winter expense; and

that, through the whole year, they do not exceed what is necessary to

maintain his family through the whole year. A slave, however, or one

absolutely dependent on us for immediate subsistence, would not be treated

in this manner. His daily subsistence would be proportioned to his daily

necessities.

Secondly, the wages of labour do not, in Great Britain, fluctuate with

the price of provisions. These vary everywhere from year to year, frequently

from month to month. But in many places, the money price of labour remains

uniformly the same, sometimes for half a century together. If, in these

places, therefore, the labouring poor can maintain their families in dear

years, they must be at their ease in times of moderate plenty, and in

affluence in those of extraordinary cheapness. The high price of provisions

during these ten years past, has not, in many parts of the kingdom, been

accompanied with any sensible rise in the money price of labour. It has,

indeed, in some ; owing, probably, more to the increase of the demand for

labour, than to that of the price of provisions.

Thirdly, as the price of provisions varies more from year to year than the

wages of labour, so, on the other hand, the wages of labour vary more from

place to place than the price of provisions. The prices of bread and

butchers' meat are generally the same, or very nearly the same, through the

greater part of the united kingdom. These, and most other things which are

sold by retail, the way in which the labouring poor buy all things, are

generally fully as cheap, or cheaper, in great towns than in the remoter

parts of the country, for reasons which I shall have occasion to explain

hereafter. But the wages of labour in a great town and its neighbourhood,

are frequently a fourth or a fifth part, twenty or five-and--twenty per

cent. higher than at a few miles distance. Eighteen pence a day may be

reckoned the common price of labour in London and its neighbourhood. At a

few miles distance. it falls to fourteen and fifteen pence. Tenpence may be

reckoned its price in Edinburgh and its neighbourhood. At a few miles

distance, it falls to eightpence, the usual price of common labour through

the greater part of the low country of Scotland, where it varies a good deal

less than in England. Such a difference of prices, which, it seems, is not

always sufficient to transport a man from one parish to another, would

necessarily occasion so great a transportation of the most bulky

commodities, not only from one parish to another, but from one end of the

kingdom, almost from one end of the world to the other, as would soon reduce

them more nearly to a level. After all that has been said of the levity and

inconstancy of human nature, it appears evidently from experience, that man

is, of all sorts of luggage, the most difficult to be transported. If the

labouring poor, therefore, can maintain their families in those parts of the

kingdom where the price of labour is lowest, they must be in affluence where

it is highest.

Fourthly, the variations in the price of labour not only do not correspond,

either in place or time, with those in the price of provisions, but they are

frequently quite opposite.

Grain, the food of the common people, is dearer in Scotland than in England,

whence Scotland receives almost every year very large supplies. But English

corn must be sold dearer in Scotland, the country to which it is brought,

than in England, the country from which it comes; and in proportion to its

quality it cannot be sold dearer in Scotland than the Scotch corn that comes

to the same market in competition with it. The quality of grain depends

chiefly upon the quantity of flour or meal which it yields at the mill ;

and, in this respect, English grain is so much superior to the Scotch, that

though often dearer in appearance, or in proportion to the measure of its

bulk, it is generally cheaper in reality, or in proportion to its quality,

or even to the measure of its weight. The price of labour, on the contrary,

is dearer in England than in Scotland. If the labouring poor, therefore, can

maintain their families in the one part of the united kingdom, they must be

in affluence in the other. Oatmeal, indeed, supplies the common people in

Scotland with the greatest and the best part of their food, which is, in

general, much inferior to that of their neighbours of the same rank in

England. This difference, however, in the mode of their subsistence, is not

the cause, but the effect, of the difference in their wages; though, by a

strange misapprehension, I have frequently heard it represented as the

cause. It is not because one man keeps a coach, while his neighbour walks

a-foot, that the one is rich, and the other poor; but because the one is

rich, he keeps a coach, and because the other is poor, he walks a-foot.

During the course of the last century, taking one year with another, grain

was dearer in both parts of the united kingdom than during that of the

present. This is a matter of fact which cannot now admit of any reasonable

doubt ; and the proof of it is, if possible, still more decisive with regard

to Scotland than with regard to England. It is in Scotland supported by the

evidence of the public fiars, annual valuations made upon oath, according to

the actual state of the markets, of all the different sorts of grain in

every different county of Scotland. If such direct proof could require any

collateral evidence to confirm it, I would observe, that this has likewise

been the case in France, and probably in most other parts of Europe. With

regard to France, there is the clearest proof. But though it is certain,

that in both parts of the united kingdom grain was somewhat dearer in the

last century than in the present, it is equally certain that labour was much

cheaper. If the labouring poor, therefore, could bring up their families

then, they must be much more at their ease now. In the last century, the

most usual day-wages of common labour through the greater part of Scotland

were sixpence in summer, and fivepence in winter. Three shillings a-week,

the same price, very nearly still continues to be paid in some parts of the

Highlands and Western islands. Through the greater part of the Low country,

the most usual wages of common labour are now eight pence a-day ; tenpence,

sometimes a shilling, about Edinburgh, in the counties which border upon

England, probably on account of that neighbourhood, and in a few other

places where there has lately been a considerable rise in the demand for

labour, about Glasgow, Carron, Ayrshire, etc. In England, the improvements

of agriculture, manufactures, and commerce, began much earlier than in

Scotland. The demand for labour, and consequently its price, must

necessarily have increased with those improvements. In the last century,

accordingly, as well as in the present, the wages of labour were higher in

England than in Scotland. They have risen, too, considerably since that

time, though, on account of the greater variety of wages paid there in

different places, it is more difficult to ascertain how much. In 1614, the

pay of a foot soldier was the same as in the present times, eightpence

a-day. When it was first established, it would naturally be regulated by the

usual wages of common labourers, the rank of people from which foot soldiers

are commonly drawn. Lord-chief-justice Hales, who wrote in the time of

Charles II. computes the necessary expense of a labourer's family,

consisting of six persons, the father and mother, two children able to do

something, and two not able, at ten shillings a-week, or twenty-six pounds

a-year. If they cannot earn this by their labour, they must make it up, he

supposes, either by begging or stealing. He appears to have enquired very

carefully into this subject {See his scheme for the maintenance of the

poor, in Burn's History of the Poor Laws.}. In 1688, Mr Gregory King, whose

skill in political arithmetic is so much extolled by Dr Davenant, computed

the ordinary income of labourers and out-servants to be fifteen pounds

a-year to a family, which he supposed to consist, one with another, of three

and a half persons. His calculation, therefore, though different in

appearance, corresponds very nearly at bottom with that of Judge Hales. Both

suppose the weekly expense of such families to be about twenty-pence a-head.

Both the pecuniary income and expense of such families have increased

considerably since that time through the greater part of the kingdom, in

some places more, and in some less, though perhaps scarce anywhere so much

as some exaggerated accounts of the present wages of labour have lately

represented them to the public. The price of labour, it must be observed,

cannot be ascertained very accurately anywhere, different prices being often

paid at the same place and for the same sort of labour, not only according

to the different abilities of the workman, but according to the easiness or

hardness of the masters. Where wages are not regulated by law, all that we

can pretend to determine is, what are the most usual; and experience seems

to shew that law can never regulate them properly, though it has often

pretended to do so.

The real recompence of labour, the real quantity of the necessaries and

conveniencies of life which it can procure to the labourer, has, during the

course of the present century, increased perhaps in a still greater

proportion than its money price. Not only grain has become somewhat cheaper,

but many other things, from which the industrious poor derive an agreeable

and wholesome variety of food, have become a great deal cheaper. Potatoes,

for example, do not at present, through the greater part of the kingdom,

cost half the price which they used to do thirty or forty years ago. The

same thing may be said of turnips, carrots, cabbages ; things which were

formerly never raised but by the spade, but which are now commonly raised by

the plough. All sort of garden stuff, too, has become cheaper. The greater

part of the apples, and even of the onions, consumed in Great Britain, were,

in the last century, imported from Flanders. The great improvements in the

coarser manufactories of both linen and woollen cloth furnish the labourers

with cheaper and better clothing; and those in the manufactories of the

coarser metals, with cheaper and better instruments of trade, as well as

with many agreeable and convenient pieces of household furniture. Soap,

salt, candles, leather, and fermented liquors, have, indeed, become a good

deal dearer, chiefly from the taxes which have been laid upon them. The

quantity of these, however, which the labouring poor an under any necessity

of consuming, is so very small, that the increase in their price does not

compensate the diminution in that of so many other things. The common

complaint, that luxury extends itself even to the lowest ranks of the

people, and that the labouring poor will not now be contented with the same

food, clothing, and lodging, which satisfied them in former times, may

convince us that it is not the money price of labour only, but its real

recompence, which has augmented.

Is this improvement in the circumstances of the lower ranks of the people to

be regarded as an advantage, or as an inconveniency, to the society ? The

answer seems at first abundantly plain. Servants, labourers, and workmen of

different kinds, make up the far greater part of every great political

society. But what improves the circumstances of the greater part, can never

be regarded as any inconveniency to the whole. No society can surely be

flourishing and happy, of which the far greater part of the members are poor

and miserable. It is but equity, besides, that they who feed, clothe, and

lodge the whole body of the people, should have such a share of the produce

of their own labour as to be themselves tolerably well fed, clothed, and

lodged.

Poverty, though it no doubt discourages, does not always prevent, marriage.

It seems even to be favourable to generation. A half-starved Highland woman

frequently bears more than twenty children, while a pampered fine lady is

often incapable of bearing any, and is generally exhausted by two or three.

Barrenness, so frequent among women of fashion, is very rare among those of

inferior station. Luxury, in the fair sex, while it inflames, perhaps, the

passion for enjoyment, seems always to weaken, and frequently to destroy

altogether, the powers of generation.

But poverty, though it does not prevent the generation, is extremely

unfavourable to the rearing of children. The tender plant is produced ; but

in so cold a soil, and so severe a climate, soon withers and dies. It is not

uncommon, I have been frequently told, in the Highlands of Scotland, for a

mother who has born twenty children not to have two alive. Several officers

of great experience have assured me, that, so far from recruiting their

regiment, they have never been able to supply it with drums and fifes, from

all the soldiers' children that were born in it. A greater number of fine

children, however, is seldom seen anywhere than about a barrack of soldiers.

Very few of them, it seems, arrive at the age of thirteen or fourteen. In

some places, one half the children die before they are four years of age, in

many places before they are seven, and in almost all places before they are

nine or ten. This great mortality, however will everywhere be found chiefly

among the children of the common people, who cannot afford to tend them with

the same care as those of better station. Though their marriages are

generally more fruitful than those of people of fashion, a smaller

proportion of their children arrive at maturity. In foundling hospitals, and

among the children brought up by parish charities, the mortality is still

greater than among those of the common people.

Every species of animals naturally multiplies in proportion to the

means of their subsistence, and no species can ever multiply be yond it. But

in civilized society, it is only among the inferior ranks of people that the

scantiness of subsistence can set limits to the further multiplication of

the human species ; and it can do so in no other way than by destroying a

great part of the children which their fruitful marriages produce.

The liberal reward of labour, by enabling them to provide better for their

children, and consequently to bring up a greater number, naturally tends to

widen and extend those limits. It deserves to be remarked, too, that it

necessarily does this as nearly as possible in the proportion which the

demand for labour requires. If this demand is continually increasing, the

reward of labour must necessarily encourage in such a manner the marriage

and multiplication of labourers, as may enable them to supply that

continually increasing demand by a continually increasing population. If the

reward should at any time be less than what was requisite for this purpose,

the deficiency of hands would soon raise it ; and if it should at any time

be more, their excessive multiplication would soon lower it to this

necessary rate. The market would be so much understocked with labour in the

one case, and so much overstocked in the other, as would soon force back its

price to that proper rate which the circumstances of the society required.

It is in this manner that the demand for men, like that for any other

commodity, necessarily regulates the production of men, quickens it when it

goes on too slowly, and stops it when it advances too fast. It is this

demand which regulates and determines the state of propagation in all the

different countries of the world ; in North America, in Europe, and in China

; which renders it rapidly progressive in the first, slow and gradual in the

second, and altogether stationary in the last.

The wear and tear of a slave, it has been said, is at the expense of his

master ; but that of a free servant is at his own expense. The wear and tear

of the latter, however, is, in reality, as much at the expense of his master

as that of the former. The wages paid to journeymen and servants of every

kind must be such as may enable them, one with another to continue the race

of journeymen and servants, according as the increasing, diminishing, or

stationary demand of the society, may happen to require. But though the wear

and tear of a free servant be equally at the expense of his master, it

generally costs him much less than that of a slave. The fund destined for

replacing or repairing, if I may say so, the wear and tear of the slave, is

commonly managed by a negligent master or careless overseer. That destined

for performing the same office with regard to the freeman is managed by the

freeman himself. The disorders which generally prevail in the economy of the

rich, naturally introduce themselves into the management of the former; the

strict frugality and parsimonious attention of the poor as naturally

establish themselves in that of the latter. Under such different management,

the same purpose must require very different degrees of expense to execute

it. It appears, accordingly, from the experience of all ages and nations, I

believe, that the work done by freemen comes cheaper in the end than that

performed by slaves. It is found to do so even at Boston, New-York, and

Philadelphia, where the wages of common labour are so very high.

The liberal reward of labour, therefore, as it is the effect of increasing

wealth, so it is the cause of increasing population. To complain of it, is

to lament over the necessary cause and effect of the greatest public

prosperity.

It deserves to be remarked, perhaps, that it is in the progressive state,

while the society is advancing to the further acquisition, rather than when

it has acquired its full complement of riches, that the condition of the

labouring poor, of the great body of the people, seems to be the happiest

and the most comfortable. It is hard in the stationary, and miserable in the

declining state. The progressive state is, in reality, the cheerful and the

hearty state to all the different orders of the society; the stationary is

dull ; the declining melancholy.

The liberal reward of labour, as it encourages the propagation, so it

increases the industry of the common people. The wages of labour are the

encouragement of industry, which, like every other human quality, improves

in proportion to the encouragement it receives. A plentiful subsistence

increases the bodily strength of the labourer, and the comfortable hope of

bettering his condition, and of ending his days, perhaps, in ease and

plenty, animates him to exert that strength to the utmost. Where wages are

high, accordingly, we shall always find the workmen more active, diligent,

and expeditious, than where they are low ; in England, for example, than in

Scotland; in the neighbourhood of great towns, than in remote country

places. Some workmen, indeed, when they can earn in four days what will

maintain them through the week, will be idle the other three. This, however,

is by no means the case with the greater part. Workmen, on the contrary,

when they are liberally paid by the piece, are very apt to overwork

themselves, and to ruin their health and constitution in a few years. A

carpenter in London, and in some other places, is not supposed to last in

his utmost vigour above eight years. Something of the same kind happens in

many other trades, in which the workmen are paid by the piece; as they

generally are in manufactures, and even in country labour, wherever wages

are higher than ordinary. Almost every class of artificers is subject to

some peculiar infirmity occasioned by excessive application to their

peculiar species of work. Ramuzzini, an eminent Italian physician, has

written a particular book concerning such diseases. We do not reckon our

soldiers the most industrious set of people among us; yet when soldiers have

been employed in some particular sorts of work, and liberally paid by the

piece, their officers have frequently been obliged to stipulate with the

undertaker, that they should not be allowed to earn above a certain sum

every day, according to the rate at which they were paid. Till this

stipulation was made, mutual emulation, and the desire of greater gain,

frequently prompted them to overwork themselves, and to hurt their health by

excessive labour. Excessive application, during four days of the week, is

frequently the real cause of the idleness of the other three, so much and so

loudly complained of. Great labour, either of mind or body, continued for

several days together is, in most men, naturally followed by a great desire

of relaxation, which, if not restrained by force, or by some strong

necessity, is almost irresistible. It is the call of nature, which requires

to be relieved by some indulgence, sometimes of ease only, but sometimes too

of dissipation and diversion. If it is not complied with, the consequences

are often dangerous and sometimes fatal, and such as almost always, sooner

or later, bring on the peculiar infirmity of the trade. If masters would

always listen to the dictates of reason and humanity, they have frequently

occasion rather to moderate, than to animate the application of many of

their workmen. It will be found, I believe, in every sort of trade, that the

man who works so moderately, as to be able to work constantly, not only

preserves his health the longest, but, in the course of the year, executes

the greatest quantity of work.

In cheap years it is pretended, workmen are generally more idle, and in dear

times more industrious than ordinary. A plentiful subsistence, therefore, it

has been concluded, relaxes, and a scanty one quickens their industry. That

a little more plenty than ordinary may render some workmen idle, cannot be

well doubted; but that it should have this effect upon the greater part, or

that men in general should work better when they are ill fed, than when they

are well fed, when they are disheartened than when they are in good spirits,

when they are frequently sick than when they are generally in good health,

seems not very probable. Years of dearth, it is to be observed, are

generally among the common people years of sickness and mortality, which

cannot fail to diminish the produce of their industry.

In years of plenty, servants frequently leave their masters, and trust their

subsistence to what they can make by their own industry. But the same

cheapness of provisions, by increasing the fund which is destined for the

maintenance of servants, encourages masters, farmers especially, to employ a

greater number. Farmers, upon such occasions, expect more profit from their

corn by maintaining a few more labouring servants, than by selling it at a

low price in the market. The demand for servants increases, while the number

of those who offer to supply that demand diminishes. The price of labour,

therefore, frequently rises in cheap years.

In years of scarcity, the difficulty and uncertainty of subsistence make all

such people eager to return to service. But the high price of provisions, by

diminishing the funds destined for the maintenance of servants, disposes

masters rather to diminish than to increase the number of those they have.

In dear years, too, poor independent workmen frequently consume the little

stock with which they had used to supply themselves with the materials of

their work, and are obliged to become journeymen for subsistence. More

people want employment than easily get it ; many are willing to take it upon

lower terms than ordinary ; and the wages of both servants and journeymen

frequently sink in dear years.

Masters of all sorts, therefore, frequently make better bargains with their

servants in dear than in cheap years, and find them more humble and

dependent in the former than in the latter. They naturally, therefore,

commend the former as more favourable to industry. Landlords and farmers,

besides, two of the largest classes of masters, have another reason for

being pleased with dear years. The rents of the one, and the profits of the

other, depend very much upon the price of provisions. Nothing can be more

absurd, however, than to imagine that men in general should work less when

they work for themselves, than when they work for other people. A poor

independent workman will generally be more industrious than even a

journeyman who works by the piece. The one enjoys the whole produce of his

own industry, the other shares it with his master. The one, in his separate

independent state, is less liable to the temptations of bad company, which,

in large manufactories, so frequently ruin the morals of the other. The

superiority of the independent workman over those servants who are hired by

the month or by the year, and whose wages and maintenance are the same,

whether they do much or do little, is likely to be still greater. Cheap

years tend to increase the proportion of independent workmen to journeymen

and servants of all kinds, and dear years to diminish it.

A French author of great knowledge and ingenuity, Mr Messance, receiver of

the taillies in the election of St Etienne, endeavours to shew that the poor

do more work in cheap than in dear years, by comparing the quantity and

value of the goods made upon those different occasions in three different

manufactures; one of coarse woollens, carried on at Elbeuf; one of linen,

and another of silk, both which extend through the whole generality of

Rouen. It appears from his account, which is copied from the registers of

the public offices, that the quantity and value of the goods made in all

those three manufactories has generally been greater in cheap than in dear

years, and that it has always been; greatest in the cheapest, and least in

the dearest years. All the three seem to be stationary manufactures, or

which, though their produce may vary somewhat from year to year, are, upon

the whole, neither going backwards nor forwards.

The manufacture of linen in Scotland, and that of coarse woollens in the

West Riding of Yorkshire, are growing manufactures, of which the produce is

generally, though with some variations, increasing both in quantity and

value. Upon examining, however, the accounts which have been published of

their annual produce, I have not been able to observe that its variations

have had any sensible connection with the dearness or cheapness of the

seasons. In 1740, a year of great scarcity, both manufactures, indeed,

appear to have declined very considerably. But in 1756, another year or

great scarcity, the Scotch manufactures made more than ordinary advances.

The Yorkshire manufacture, indeed, declined, and its produce did not rise to

what it had been in 1755, till 1766, after the repeal of the American stamp

act. In that and the following year, it greatly exceeded what it had ever

been before, and it has continued to advance ever since.

The produce of all great manufactures for distant sale must necessarily

depend, not so much upon the dearness or cheapness of the seasons in the

countries where they are carried on, as upon the circumstances which affect

the demand in the countries where they are consumed; upon peace or war, upon

the prosperity or declension of other rival manufactures and upon the good

or bad humour of their principal customers. A great part of the

extraordinary work, besides, which is probably done in cheap years, never

enters the public registers of manufactures. The men-servants, who leave

their masters, become independent labourers. The women return to their

parents, and commonly spin, in order to make clothes for themselves and

their families. Even the independent workmen do not always, work for public

sale, but are employed by some of their neighbours in manufactures for

family use. The produce of their labour, therefore, frequently makes no

figure in those public registers, of which the records are sometimes

published with so much parade, and from which our merchants and

manufacturers would often vainly pretend to announce the prosperity or

declension of the greatest empires.

Through the variations in the price of labour not only do not always

correspond with those in the price of provisions, but are frequently quite

opposite, we must not, upon this account, imagine that the price of

provisions has no influence upon that of labour. The money price of labour

is necessarily regulated by two circumstances; the demand for labour, and

the price of the necessaries and conveniencies of life. The demand for

labour, according as it happens to be increasing, stationary, or declining,

or to require an increasing, stationary, or declining population, determines

the quantities of the necessaries and conveniencies of life which must be

given to the labourer; and the money price of labour is determined by what

is requisite for purchasing this quantity. Though the money price of labour,

therefore, is sometimes high where the price of provisions is low, it would

be still higher, the demand continuing the same, if the price of provisions

was high.

It is because the demand for labour increases in years of sudden and

extraordinary plenty, and diminishes in those of sudden and extraordinary

scarcity, that the money price of labour sometimes rises in the one, and

sinks in the other.

In a year of sudden and extraordinary plenty, there are funds in the hands

of many of the employers of industry, sufficient to maintain and employ a

greater number of industrious people than had been employed the year before

; and this extraordinary number cannot always be had. Those masters,

therefore, who want more workmen, bid against one another, in order to get

them, which sometimes raises both the real and the money price of their

labour.

The contrary of this happens in a year of sudden and extraordinary scarcity.

The funds destined for employing industry are less than they had been the

year before. A considerable number of people are thrown out of employment,

who bid one against another, in order to get it, which sometimes lowers both

the real and the money price of labour. In 1740, a year of extraordinary

scarcity, many people were willing to work for bare subsistence. In the

succeeding years of plenty, it was more difficult to get labourers and

servants. The scarcity of a dear year, by diminishing the demand for labour,

tends to lower its price, as the high price of provisions tends to raise it.

The plenty of a cheap year, on the contrary, by increasing the demand, tends

to raise the price of labour, as the cheapness of provisions tends to lower

it. In the ordinary variations of the prices of provisions, those two

opposite causes seem to counterbalance one another, which is probably, in

part, the reason why the wages of labour are everywhere so much more steady

and permanent than the price of provisions.

The increase in the wages of labour necessarily increases the price of many

commodities, by increasing that part of it which resolves itself into wages,

and so far tends to diminish their consumption, both at home and abroad. The

same cause, however, which raises the wages of labour, the increase of

stock, tends to increase its productive powers, and to make a smaller

quantity of labour produce a greater quantity of work. The owner of the

stock which employs a great number of labourers necessarily endeavours, for

his own advantage, to make such a proper division and distribution of

employment, that they may be enabled to produce the greatest quantity of

work possible. For the same reason, he endeavours to supply them with the

best machinery which either he or they can think of. What takes place among

the labourers in a particular workhouse, takes place, for the same reason,

among those of a great society. The greater their number, the more they

naturally divide themselves into different classes and subdivisions of

employments. More heads are occupied in inventing the most proper machinery

for executing the work of each, and it is, therefore, more likely to be

invented. There me many commodities, therefore, which, in consequence of

these improvements, come to be produced by so much less labour than be.

fore, that the increase of its price is more than compensated by the

diminution of its quantity.

CHAPTER IX.

OF THE PROFITS OF STOCK.

The rise and fall in the profits of stock depend upon the same causes with

the rise and fall in the wages of labour, the increasing or declining state

of the wealth of the society ; but those causes affect the one and the other

very differently.

The increase of stock, which raises wages, tends to lower profit. When the

stocks of many rich merchants are turned into the same trade, their mutual

competition naturally tends to lower its profit; and when there is a like

increase of stock in all the different trades carried on in the same

society, the same competition must produce the same effect in them all.

It is not easy, it has already been observed, to ascertain what are the

average wages of labour, even in a particular place, and at a particular

time. We can, even in this case, seldom determine more than what are the

most usual wages. But even this can seldom be done with regard to the

profits of stock. Profit is so very fluctuating, that the person who carries

on a particular trade, cannot always tell you himself what is the average of

his annual profit. It is affected, not only by every variation of price in

the commodities which he deals in, but by the good or bad fortune both of

his rivals and of his customers, and by a thousand other accidents, to which

goods, when carried either by sea or by land, or even when stored in a

warehouse, are liable. It varies, therefore, not only from year to year, but

from day to day, and almost from hour to hour. To ascertain what is the

average profit of all the different trades carried on in a great kingdom,

must be much more difficult; and to judge of what it may have been formerly,

or in remote periods of time, with any degree of precision, must be

altogether impossible.

But though it may be impossible to determine, with any degree of precision,

what are or were the average profits of stock, either in the present or in

ancient times, some notion may be formed of them from the interest of money.

It may be laid down as a maxim, that wherever a great deal can be made by

the use of money, a great deal will commonly be given for the use of it; and

that, wherever little can be made by it, less will commonly he given for it.

Accordingly, therefore, as the usual market rate of interest varies in any

country, we may be assured that the ordinary profits of stock must vary with

it, must sink as it sinks, and rise as it rises. The progress of interest,

therefore, may lead us to form some notion of the progress of profit.

By the 37th of Henry VIII. all interest above ten per cent. was declared

unlawful. More, it seems, had sometimes been taken before that. In the reign

of Edward VI. religious zeal prohibited all interest. This prohibition,

however, like all others of the same kind, is said to have produced no

effect, and probably rather increased than diminished the evil of usury. The

statute of Henry VIII. was revived by the 13th of Elizabeth, cap. 8. and ten

per cent. continued to be the legal rate of interest till the 21st of James

I. when it was restricted to eight per cent. It was reduced to six per cent.

soon after the Restoration, and by the 12th of Queen Anne, to five per cent.

All these different statutory regulations seem to have been made with great

propriety. They seem to have followed, and not to have gone before, the

market rate of interest, or the rate at which people of good credit usually

borrowed. Since the time of Queen Anne, five per cent. seems to have been

rather above than below the market rate. Before the late war, the government

borrowed at three per cent. ; and people of good credit in the capital, and

in many other parts of the kingdom, at three and a-half, four, and four and

a-half per cent.

Since the time of Henry VIII. the wealth and revenue of the country have

been continually advancing, and in the course of their progress, their pace

seems rather to have been gradually accelerated than retarded. They seem not

only to have been going on, but to have been going on faster and faster. The

wages of labour have been continually increasing during the same period,

and, in the greater part of the different branches of trade and

manufactures, the profits of stock have been diminishing.

It generally requires a greater stock to carry on any sort of trade in a

great town than in a country village. The great stocks employed in every

branch of trade, and the number of rich competitors, generally reduce the

rate of profit in the former below what it is in the latter. But the wages

of labour are generally higher in a great town than in a country village. In

a thriving town, the people who have great stocks to employ, frequently

cannot get the number of workmen they want, and therefore bid against one

another, in order to get as many as they can, which raises the wages of

labour, and lowers the profits of stock. In the remote parts of the

country, there is frequently not stock sufficient to employ all the people,

who therefore bid against one another, in order to get employment, which

lowers the wages of labour, and raises the profits of stock.

In Scotland, though the legal rate of interest is the same as in England,

the market rate is rather higher. People of the best credit there seldom

borrow under five per cent. Even private bankers in Edinburgh give four per

cent. upon their promissory-notes, of which payment, either in whole or in

part may be demanded at pleasure. Private bankers in London give no interest

for the money which is deposited with them. There are few trades which

cannot be carried on with a smaller stock in Scotland than in England. The

common rate of profit, therefore, must be somewhat greater. The wages of

labour, it has already been observed, are lower in Scotland than in England.

The country, too, is not only much poorer, but the steps by which it

advances to a better condition, for it is evidently advancing, seem to be

much slower and more tardy.

The legal rate of interest in France has not during the course of the present century, been

always regulated by the market rate { See Denisart, Article Taux des Interests, tom. iii, p.13}.

In 1720, interest was reduced from the twentieth to the fiftieth penny, or from five to two per

cent. In 1724, it was raised to the thirtieth penny, or to three and a third per cent. In 1725, it

was again raised to the twentieth penny, or to five per cent. In 1766, during the administration

of Mr Laverdy, it was reduced to the twenty-fifth penny, or to four per cent. The Abbé Terray

raised it afterwards to the old rate of five per cent. The supposed purpose of many of those

violent reductions of interest was to prepare the way for reducing that of the public debts ; a

purpose which has sometimes been executed. France is, perhaps, in the present times, not so

rich a country as England; and though the legal rate of interest has in France frequently been

lower than in England, the market rate has generally been higher; for there, as in other

countries, they have several very safe and easy methods of evading the law. The profits of

trade, I have been assured by British merchants who had traded in both countries, are higher

in France than in England ; and it is no doubt upon this account, that many British subjects

chuse rather to employ their capitals in a country where trade is in disgrace, than in one where

it is highly respected. The wages of labour are lower in France than in England. When you go

from Scotland to England, the difference which you may remark between the dress and

countenance of the common people in the one country and in the other, sufficiently indicates

the difference in their condition. The contrast is still greater when you return from France.

France, though no doubt a richer country than Scotland, seems not to be going forward so fast.

It is a common and even a popular opinion in the country, that it is going backwards ; an

opinion which I apprehend, is ill-founded, even with regard to France, but which nobody can

possibly entertain with regard to Scotland, who sees the country now, and who saw it twenty

or thirty years ago.

The province of Holland, on the other hand, in proportion to the extent of

its territory and the number of its people, is a richer country than

England. The government there borrow at two per cent. and private people of

good credit at three. The wages of labour are said to be higher in Holland

than in England, and the Dutch, it is well known, trade upon lower profits

than any people in Europe. The trade of Holland, it has been pretended by

some people, is decaying, and it may perhaps be true that some particular

branches of it are so; but these symptoms seem to indicate sufficiently that

there is no general decay. When profit diminishes, merchants are very apt to

complain that trade decays, though the diminution of profit is the natural

effect of its prosperity, or of a greater stock being employed in it than

before. During the late war, the Dutch gained the whole carrying trade of

France, of which they still retain a very large share. The great property

which they possess both in French and English funds, about forty millions,

it is said in the latter (in which, I suspect, however, there is a

considerable exaggeration ), the great sums which they lend to private

people, in countries where the rate of interest is higher than in their own,

are circumstances which no doubt demonstrate the redundancy of their stock,

or that it has increased beyond what they can employ with tolerable profit

in the proper business of their own country; but they do not demonstrate

that that business has decreased. As the capital of a private man, though

acquired by a particular trade, may increase beyond what he can employ in

it, and yet that trade continue to increase too, so may likewise the capital

of a great nation.

In our North American and West Indian colonies, not only the wages of

labour, but the interest of money, and consequently the profits of stock,

are higher than in England. In the different colonies, both the legal and

the market rate of interest run from six to eight percent. High wages of

labour and high profits of stock, however, are things, perhaps, which scarce

ever go together, except in the peculiar circumstances of new colonies. A

new colony must always, for some time, be more understocked in proportion to

the extent of its territory, and more underpeopled in proportion to the

extent of its stock, than the greater part of other countries. They have

more land than they have stock to cultivate. What they have, therefore, is

applied to the cultivation only of what is most fertile and most favourably

situated, the land near the sea-shore, and along the banks of navigable

rivers. Such land, too, is frequently purchased at a price below the value

even of its natural produce. Stock employed in the purchase and improvement

of such lands, must yield a very large profit, and, consequently, afford to

pay a very large interest. Its rapid accumulation in so profitable an

employment enables the planter to increase the number of his hands faster

than he can find them in a new settlement. Those whom he can find,

therefore, are very liberally rewarded. As the colony increases, the profits

of stock gradually diminish. When the most fertile and best situated lands

have been all occupied, less profit can be made by the cultivation of what

is inferior both in soil and situation, and less interest can be afforded

for the stock which is so employed. In the greater part of our colonies,

accordingly, both the legal and the market rate of interest have been

considerably reduced during the course of the present century. As riches,

improvement, and population, have increased, interest has declined. The

wages of labour do not sink with the profits of stock. The demand for labour

increases with the increase of stock, whatever be its profits; and after

these are diminished, stock may not only continue to increase, but to

increase much faster than before. It is with industrious nations, who are

advancing in the acquisition of riches, as with industrious individuals. A

great stock, though with small profits, generally increases faster than a

small stock with great profits. Money, says the proverb, makes money. When

you have got a little, it is often easy to get more. The great difficulty is

to get that little. The connection between the increase of stock and that of

industry, or of the demand for useful labour, has partly been explained

already, but will be explained more fully hereafter, in treating of the

accumulation of stock.

The acquisition of new territory, or of new branches of trade, may sometimes

raise the profits of stock, and with them the interest of money, even in a

country which is fast advancing in the acquisition of riches. The stock of

the country, not being sufficient for the whole accession of business which

such acquisitions present to the different people among whom it is divided,

is applied to those particular branches only which afford the greatest

profit. Part of what had before been employed in other trades, is

necessarily withdrawn from them, and turned into some of the new and more

profitable ones. In all those old trades, therefore, the competition comes

to be Jess than before. The market comes to be less fully supplied with many

different sorts of goods. Their price necessarily rises more or less, and

yields a greater profit to those who deal in them, who can, therefore,

afford to borrow at a higher interest. For some time after the conclusion of

the late war, not only private people of the best credit, but some of the

greatest companies in London, commonly borrowed at five per cent. who,

before that, had not been used to pay more than four, and four and a half

per cent. The great accession both of territory and trade by our

acquisitions in North America and the West Indies, will sufficiently account

for this, without supposing any diminution in the capital stock of the

society. So great an accession of new business to be carried on by the old

stock, must necessarily have diminished the quantity employed in a great

number of particular branches, in which the competition being less, the

profits must have been greater. I shall hereafter have occasion to mention

the reasons which dispose me to believe that the capital stock of Great

Britain was not diminished, even by the enormous expense of the late war.

The diminution of the capital stock of the society, or of the funds destined

for the maintenance of industry, however, as it lowers the wages of labour,

so it raises the profits of stock, and consequently the interest of money.

By the wages of labour being lowered, the owners of what stock remains in

the society can bring their goods at less expense to market than before ;

and less stock being employed in supplying the market than before, they can

sell them dearer. Their goods cost them less, and they get more for them.

Their profi