won
wonf
The Wealth of Nations
»»»»»»»»»»»»»»»»»»»»
AN INQUIRY INTO
THE NATURE AND CAUSES OF
THE WEALTH OF NATIONS
»»»»»»>»»»»»»»»»»»»»»»»»»»»»»»»»»»
BY
ADAM SMITH *
EDITED, WITH AN INTRODUCTION, NOTES, MARGINAL
SUMMARY AND AN ENLARGED INDEX BY
EDWIN CANNAN, M.A., LLD.
PROFESSOR OF POLITIC M FCO^OMY IN THF UNIVERSITY OP LONDON
WITH AN INTRODUCTION BY
MAX lERNFR
EDITOR or “the n \tion”
»>»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»
THE MODERN LIBRARY
NEW YORK
INTRODUCTION COPYRIGHT, 1 9 37, BY RANDOM HOUSE, INC.
»>»»»»»»»>»»»»»»»»»»»»»»»»»»»»»»»»»
THE MODERN LIBRARY
IS PUBLISHED BY
RANDOM HOUSE, INC.
BENNETT A. CERF • DONALD S. KLOPFER • ROBERT K. HAAS
(fJtianufactured in the United States of America
"Printed by Parkway Printing Company Paper by Richard Bauer B Co,
Bound by H, W'olff
INTRODUCTION
By Max Lerner
Like all great books, The Wealth of Nations is the outpouring not
only of a great mind, but of a whole epoch. The man who wrote it
had learning, wisdom, a talent for words; but equally important
was the fact that he stood with these gifts at the dawn of a new
science and the opening of a new era in Europe. What he wrote was
the expression of forces which were working, at the very time he
wrote it, to fashion that strange and terrible new species — homo
oeconomicus, or the economic man of the modern world. I use that
term not in the sense of the lifeless abstraction which economic
theorists have invented to slay any proposals for social change,
and which has in turn slain them. I use it rather for the very living
and human businessman, in defense of whom the economists have
written and in whose interests they have invented their lifeless ab-
straction. All the forces which were at work in Europe creating the
business man, and the society he was to dominate, were at work
also creating the framework of ideas and institutions within which
Adam Smith wrote his book. And that book, as though conscious
that one good turn deserved another, became in its own way a
powerful influence to further the work of those forces. Thus it is in
history. A new society, emerging from the shell of the old, creates
a framework within which a great thinker or artist is enabled to do
his work; and that work, in turn, serves to smash finally the shell
of the old society, and to complete and make firmer the outlines of
the new. Thus it has been with Machiavelli’s Prince, with Adam
Smith’s The Wealth of Nations, with Karl Marx’s Capital.
That is why the arguments of all the scholars who have been
thrashing about, seeking to determine how original Adam Smith
was, are essentially futile. No first-rate mind whose ideas sum up
an age and influence masses and movements to come is in any
purist sense original. The Wealth of Nations is undoubtedly the
foundation-work of modern economic thought. Yet you can pick it
to pieces, and find that there is nothing in it that might not have
been found somewhere in the literature before, and nothing that
comes out of it that has not to a great degree been punctured by
the literature that followed. What counts is, of course, not whether
particular doctrines were once shiny new, or have since stood the
ravages of time. What counts is the work as a whole — its scope,
conception and execution, the spirit that animates it and the place
it has had in history.
V
vi
INTRODUCTION
Here, then, is the thing itself: a strange mixture of a book— eco-
nomics, philosophy, history, political theory, practical program; a
book written by a man of vast learning and subtle insights — a man
with a mind that was a powerful analytic machine for sifting out
the stuff in his notebooks, and a powerful synthetic machine for
putting it together again in new and arresting combinations. Smith
was sensitive to the various elements on the intellectual horizon of
his day. Like Marx after him, he was no closet scholar, shut off
from the world; he was all antennae, reaching out for and absorb-
ing everything within reach. He wrote at the end of the break-up of
feudal Europe, at the beginning of a modern world in which the old
feudal institutions were still holding on with the tenacity that
the vested interests have always shown. It was against these vested
interests that he wrote. And the result is that his book has not been
merely for library shelves. It has gone through many editions, and
has been translated into almost every language. Those who read it
were chiefly those who stood to profit from its view of the world —
the rising class of businessmen, their political executive committees
in the parliaments of the world, and their intellectual executive
conunittees in the academies. Through them it has had an enormous
influence upon the underlying populations of the world, although
generally all unknown to them. And through them also it has had
an enormous influence upon economic opinion and national policy.
It has done as much perhaps as any modern book thus far to shape
the whole landscape of life as we live it today.
Who was the man who could do all this? At first glance Adam
Smith appears only as a mild, Scottish professor of moral philos-
ophy, retiring and absent-minded, a gentle sage with dynamite flow-
ing from his pen. His career had nothing extraordinary in it, except
that at three he was carried off by a band of gypsies, and only with
difficulty restored to his family. But whatever other adventure the
rest of his life held for him was to lie in the dangerous voyage of
the mind rather than in the glories or disasters of an adventurous
outward career. He had the traditional Scottish boyhood in a frugal
family; spent the traditional years at Oxford — ^years which served
as the basis for the caustic attack on universities which is to be
found in these pages; cooled his heels for the traditional period
while he waited for a suitable university appointment; was made
professor of logic and then professor of moral philosophy at Glas-
gow, giving lectures on theology, ethics, jurisprudence and po-
litical economy to students who probably cared more about their
careers in the rising merchant class than they did about moral phi-
losophy; wrote a book called The Theory of Moral Sentiments^
which made something of a splash at the time, and since it ex-
INTRODUCTION vii
plained the social psychology of human behavior in terms of the
sentiment of sympathy, got itself much talked about and read in
polite circles throughout the British Isles; gave up his university
post to go as traveling tutor to the stepson of the famous colonial-
baiter, Charles Townshend — the young Duke of Buccleugh, and
spent a year and a half at Toulouse and a year at Paris with him;
began, while on the trip, a treatise on economics, completing it ten
years after his return to Scotland; finally published his treatise in
1776 under the title of The Wealth of Nations; and spent the rest
of his life as commissioner of customs at Edinburgh, living quietly
with his mother and a maiden cousin.
That is one version of Adam Smith, and it is true enough — for
a half-truth. But there is another half-truth needed to complete the
picture. Adam Smith was always alive to what was going on in the
world. He was heterodox enough to remember with passion the futil-
ity of the ordinary university teaching, as he had experienced it at
Oxford. In his own teaching, while he had no eloquence, he could
communicate to his students his own fervor for ideas. Of his lectures
on jurisprudence, John Rae, his biographer, tells us that the course
^‘taught the young people to think. His opinions became the sub-
jects of general discussion, the branches he lectured upon became
fashionable in the town . . . stucco busts of him appeared in the book-
sellers^ windows, and the very peculiarities of his voice and pro-
nunciation received the homage of imitation.^^ The doctrine that
he was teaching was, it must be remembered, new doctrine — that of
economic liberalism and freedom from governmental interference.
To it were attached therefore at once the obstacles and advantages
of new doctrine; it met with the hostility of the entrenched and the
salvos of those who stood to gain by innovation. Smith himself was
by no means a recluse. The tutorship that was offered him was
lucrative, and yet there was a gamble in leaving his university chair.
That he did so is evidence of his restless desire to explore the
bounds of the new European society. He was a friend of Plume,
and in P'rance he found in addition Quesnay, Turgot, D^Alembert,
Helvetius — the physiocrats who were fashioning a new and exciting
economic science, and the philosophes who were constructing out of
the materials of the rational life instruments for shattering encum-
bering and irrational institutions. Smith kept his eyes and ears
open; he kept his notebooks ready; he kept his wits with him. He
started to write up his lectures on political economy, as he had
formerly written up his lectures on moral philosophy. But this was
a different matter. It wasn't merely the business of going back to
first principles, and then spinning the rest out of one's philosophic
entrails. Here was something that gave order and meaning to the
viii INTRODUCTION
newly emerged world of commerce and the newly emerging world of
industry. Here was something that could be used in fighting the
clumsy and obstructive vestiges of a society governed by a feudal
aristocracy. Smith trembled with anticipation, and could not help
communicating his excitement to his friends. They too trembled —
and waited. Smith took ten more years. He could not be hurried in
this task. He had to read and observe further. He poked his nose
into old books and new factories. He got led off on long excursions
into the history of silver coinage, the economics of ecclesiastical
institutions, the whole cultural history of Europe. He had to polish
his style, but, more important, he had to fashion and carry through
consistently a new way of looking at things — the hard-bitten eco-
nomic viewpoint. He had, above all else, to avoid making his book
merely a theoretical construction; it must deal with the burning
issues of national and international economic policy of his day.
When the book was finished, therefore, it was more than a book; it
was the summary of a new European consciousness.
You will find the basic principles that Smith embodied in his
book explained in all the histories of economic thought. What you
will not find is the skill, the charm, the greatness with which he
wove them into the fabric of his chapters. The principles are simple.
First, Smith assumes that the prime psychological drive in man as
an economic being is the drive of self-interest. Secondly, he assumes
the existence of a natural order in the universe which makes all the
individual strivings for self-interest add up to the social good.
Finally, from these postulates, he concludes that the best program
is to leave the economic process severely alone — ^what has come to be
known as laissez-faire, economic liberalism, or non-interventionism.
All this is now familiar enough. Largely through Smith’s book it
has made itself a part of the structure of our often unconscious be-
liefs, and is only now beginning to be dislodged. Of Smith’s first
postulate it must be said that while it is largely an abstraction from
experience, as the institutional school of economists have delighted
to point out, the experience from which it is abstracted does much
to verify it. The view which makes of man an economic automaton
is obviously oversimplified. But the view which makes out of him a
hard-headed and predatory seeker of his own gain is, as we look
back at the history of business enterprise, largely justified. What
we have learned, of course, is that it is not an inherent or universal
trait, but part oit an historical method of organizing economic life.
As for Smith’s second postulate — that there is a ^^natural order,’'
whereby the pursuit by each individual of his own self-interest con-
tributes ultimately to the social welfare, that must lie outside the
realm of science or of historical verification, and must be set down
INTRODUCTION ix
as a cardinal principle of the faith of the age. As Carl Becker has
pointed out, the ‘^natural order’’ which the eighteenth-century phi-
losophers postulated in order the better to fight the ecclesiastical
institutions and the political obscurantism of their day became
itself a source of a quasi-theological faith and of obscurantism.
The conclusion that Smith drew from these postulates was simple
enough. Since a natural order exists whereby the enlightened selfish-
ness of all men adds up to the maximum good of society* since there
is a ‘‘divine hand” which guides each man in pursuing his own gain
to contribute to the social welfare, it must follow that government
is superfluous except to preserve order and perform routine func-
tions. The best government is the government that governs least.
The best economic policy is that which arises from the spontaneous
and unhindered action of individuals. We recognize this, of course,
as the unregulated and individualistic capitalist economy — ^what
Carlyle has unforgettably termed “anarchy plus a constable.”
One warning is necessary. We must not conclude, because
Smith’s intellectual system can be presented in an orderly sequence
from postulates to conclusion, that he arrived at it by the samfe
sequence. It is much more likely, as with almost all intellectual con-
structions, that instead of Smith’s program flowing from his prin-
ciples, it was his principles that flowed from his program. He did not
start with truths about human behavior and the natural order, and
arrive at economic liberalism. John Maurice Clark suggests that his
system can be best understood in terms of what he was reacting
against. And it is true that Smith’s system of thought took its shape
from his intense reaction against the elaborate apparatus of controls
which the surviving feudal and mercantilist institutions were still
imposing on the individual. The need for removing these controls
was Smith’s un4€rlying theme. And it was the response which this
theme met from the mercantile and industrial class of Europe that
gave The Wealth of Nation^ its enormous impact upon Western
thougjit and Western institutions. Harold Laski has demonstrated,
in his Rise of Liberalism, how Smith’s arguments fitted in with the
prevailing middle-class temper in Europe. The businessmen Were
delighted. “To have their own longings elevated to the dignity of
natural law was to provide them with a driving force that had never
before beeniso powerful. . . . With Adam Smith the practical maxims
of business enterprise achieved the status of a theology.”
But there is another side of the shield. Smith was, to be sure,
an unconscious f mercenary in the service of a rising capitalist class
in Europe. It is true that he gave a new dignity to greed and a new
sanctification to the:predatory impulses. It is true that he ration^-
ized the economic interests of the class that was coming to power in
X INTRODUCTION
such a way that he fashioned for that class a panoply of ideas be-
hind which they are still protecting themselves against the assaults
of government regulation and the stirrings for socialization. It is
true that Smith’s economic individualism is now being used to op-
press where once it was used to liberate, and that it now entrenches
the old where once it blasted a path for the new. But it must be said
for Smith that his doctrine has been twisted in ways he would not
have approved, and used for purposes and causes at which he would
have been horrified.
Adam Smith was, in his own day and his own way, something of
a revolutionary. His doctrine revolutionized European society as
surely as Marx’s in a later epoch. He was, on the economic side, the
philosopher of the capitalist revolution, as John Locke was its phi-
losopher on the political side. His own personal sympathies were not
entirely with the capitalist. Eli Ginzberg has pointed out, in his
House of Adam Smithy how there runs through The Wealth of Na^
tions a strain of partisanship for apprentices and laborers, for
farmers, for the lowly and oppressed everywhere, and a hostility to
the business corporations, the big-businessmen of the day, the ec-
clesiasts and the aristocrats. Read the book with an eye for these
passages, and it becomes a revealing document showing Smith’s
concern for the common man. Far more important, of course, than
any of these more or less sentimental expressions of sympathy, is
the doctrine of labor value which is at the core of Smith’s eco-
nomics. In enunciating for the first time the doctrine that labor is
the sole source of value in commodities. Smith became the fore-
runner of Bray and Hodgskin and eventually of Marx. As an origi-
nator, Smith developed this doctrine clumsily. It remained for Marx
to refine it, convert it into an instrument of analysis, extract from
it the revolutionary implications that were inherent in it from the
start. This leads us, however, much too far afield. On Smith’s relation
to the labor theory of value there is a large and polemical literature.
On the validity or confusion of the theory itself there is a literature
even larger and more polemical.
All that concerns us is to see the curious paradox of Smith’s posi-
tion in history; to have fashioned his system of thought in order to
blast away the institutional obstructions from the past, and bring a
greater degree of economic freedom and therefore a greater total
wealth for all the people in a nation; and yet to have had his doc-
trine result in the glorification of economic irresponsibility and the
entrenchment of the middle class in power. A reading of Adam
Smith’s work and a study of its place in the history of ideas should
be one of the best solvents for smugness and intellectual absolutism.
m
CONTENTS
PACE
iNTRODtfCTION TO THE MODEEN LiBRAKY EDITION BY MAX
LERNER V
Preface xk
Editor’s Introduction vm'n
Introduction and Plan of the Work Ivii
BOOK I
Of the Causes of Improvement in the productive Powers of
Labour, and of the Order according to which its Produce
is naturally distributed among the different Ranks of the
People 3
CHAPTER I
Of the Division of Labour 3
CHAPTER n
Of the Principle which gives Occasion to the Division of Labour 13
CHAPTER III
Thai the Division of Labour is limted by the Extent of the Market 17
CHAPTER IV
0 / the Origin and Use of Money 22
CHAPTER V
Of the real and nominal Price of Commodities, or of their Price
in Labour, and their Price in Money
jd
3 ®
xii
CONTENTS
PAGE
CHAPTER VI
Of the component Parts of the Price of Commodities 47
CHAPTER VII
Of the natural and market Price of Commodities 55
CHAPTER VIII
Of the Wages of Labour 64
CHAPTER IX
Of the Profits of Stock 87
CHAPTER X
Of Wages and Profit in the different Employments of Labour and
Stock
Part I. Inequalities arising from the Nature of the Employ-
ments themselves 100
Part II. Inequalities occasioned by the Policy of Europe 118
CHAPTER XI
Of the Rent of Land 144
Part I. Of the Produce of Land which always affords Rent 146
Part II. 0 / the Produce of Land which sometimes does, and
sometimes does not, afford Rent 161
Part III. Of the Variations in the Proportion between the re-
spective Values of that Sort of Produce which always affords
Rent, and of that which sometimes does and sometimes does
not afford Rent
Digression concerning the Variations in the Value of Silver
during^ the Course of the Four last Centuries.
First Period 1^5
Second Period X91
Third Period 1^2
Variations in the Proportion between the respective Values of
Gold and Silver 21 1
Grounds of the Suspicion that the Value of Silver still continues
to decrease 216
Different Effects of the Progress of Improvement upon the real
price of three different Sorts of rude Produce 217
CONTENTS xiii
PAGE
First Sort 218
Second Sort 219
Third Sort 228
Conclusion of the Digression concerning the Variations in the
Value of Silver 237
Effects of the Progress of Improvement upon the real Price of
Manufactures 242
Conclusion of the Chapter 247
BOOK II
Of the Nature, Accumulation, and Employment of Stock
Introdtjction 259
CHAPTER I
Of the Division of Stock 262
CHAPTER II
Of Money considered as a particular Branch of the general Stock
of the Society, or of the Expence of maintaining the National
Capital 270
CHAPTER III
Of the Accumulation of Capital, or of productive and unpro^
ductive Labour 314
CHAPTER IV
Of Stock lent at Interest 333
CHAPTER V
Of the different Employment of Capitals
341
CONTENTS
PAGE
BOOK III
Of the dijfferent Progress of Opulence in different Nations
CHAPTER I
Of the Natural Progress of Opulence 356
CHAPTER n
Of the Discouragement of Agriculture in the ancient State of
Europe after the Fall of the Roman Empire 361
CHAPTER III
Of the Rise and Progress of Cities and Towns, after the Fall of the
Roman Empire 373
CHAPTER IV
How the Commerce of the Towns contributed to the Improvement
of the Country 384
BOOK IV
Of Systems of political (Economy
Introduction
397
CHAPTER I
Of the Principle of the commercial, or mercantile System 398
CHAPTER II
Of Restraints upon the Importation from foreign Countries of
such Goods as can be produced at Home
420
dONTEKTS
XV
PAGE
CHAPTER III
OJ ihe extraordinary Restraints upon the Importation of Goods of
almost all Kinds, from those Countries with which the
Balance is supposed to be disadvantageous 440
Part I. Of the U nreasonableness of those Restraints even upon
the Principles of the Commercial System 440
Digression, concerning Banks of Deposit, particularly concerning
that of Amsterdam 446
Part II. Of the Unreasonableness of those extraordinary
Restraints upon other Principles 455
CHAPTER IV
Of Drawbacks 466
CHAPTER V
Of Bounties 472
Digression concerning the Corn Trade and Corn Lrms 490
CHAPTER VI
Of Treaties of Commerce 51 1
CHAPTER VII
Of Colonies 523
Part I. Of the Motives for establishing new Colonies 523
Part II. Causes of the Prosperity of New Colonies 531
Part III. Of the Advantages which Europe has derived from
the Discovery of America, and from that of a Passage to the
East Indies by the Cape of Good Hope 557
CHAPTER VIII
Conclusion of the Mercantile System 607
CHAPTER rX
Of the Agricultural Systems, or of those Systems of Political
(Economy, which represent the Produce of Land, as either
the sole or the principal Source of the Revenue and Wealth
of every Country 627
xvi
CONTENTS
FAG£
BOOK V
Of the Revenue of the Sovereign or Commonwealth
CHAPTER I
Of the Expences of the Sovereign or Commonwealth 653
Part I. Of the Expence of Defence 653
Part II. Of the Expence of Justice 669
Part III. Of the Expence of Public Works and Public
Institutions 681
Article ist. Of the Public Works and Institutions for facili-
tating the Commerce of Society,
ist, For facilitating the general Commerce of the
Society 682
2dly, For facilitating particular Branches of Com-
merce 690
Article 2d. Of the Expence of the Institutions for the Edu>ca-
tion of Youth 716
Article 3d. Of the Expence of the Institutions for the Instruc-
tion of People of all Ages 740
Part IV. Of the Expence of supporting the Dignity of the
Sovereign ^ 766
Conclusion of the Chapter 767
CHAPTER II
I
Of the Sources of the general or public Revenue of the Society 769
Part I. Of the Funds or Sources of Reverme which may pecu-
liarly belong to the Sovereign or Commonwealth 769
Part II. Of Taxes 777
Article ist. Taxes upon Rent; Taxes upon the Rent of Land 779
Taxes which are proportioned^ not to the Rent, but to the Produce
of Land ygg
Taxes upon the Rent of Houses jgi
Article 2d. Taxes upon Profit, or upon the Revenue arising
from Stock 7^8
Taxes upon the Profit of particular Employments 803
Appendix to Articles ist and 2d. Taxes upon the Capi-
tal Value of Lands, Houses, and Stock 809
Article 3d. Taxes upon the Wages of Labour 815
Article 4th. Taxes which, it is intended, should fall indiffer-
ently upon every different Species of Revenue 818
Capitation Taxes 819
Taxes upon consumable Commodities 821
CONTENTS
XVI 1
PAGE
CHAPTER III
Of public Debts
859
Appendix on the Herring Bounty
901
Index I. Subjects
907
Index II. Authorities
971
[From “Introduction and Plan of the Work” to “Public Debts,” the Con-
tents are printed in the present edition as they appeared in eds. 3-5 Eds. i
and 2 neither enumerate the chapter “Conclusion of the Mercantile Sys-
tem,” nor divide Bk. V , ch 1 , Pt. iii , Art ist into sections, since the chap-
ter and one of the two sections appeared first in ed 3. Eds i and 2 also
lead “Inequalities in Wages and Profits arising from the Nature of the dif-
lerent Employments of both” at Bk. I , ch. x., Pt. i ]
PREFACE
The text of the present edition is copied from that of the fifth, the
last published before Adam Smith’s death. The fifth edition has
been carefully collated with the first, and wherever the two were
found to disagree the history of the alteration has been traced
through the intermediate editions. With some half-dozen utterly
insignificant exceptions such as a change of “these” to “those,”
“towards’’ to “toward,” and several haphazard substitutions ol
“conveniences” for “conveniencies,” the results of this collation are
all recorded in the footnotes, unless the difference between the edi-
tions is quite obviously and undoubtedly the consequence of mere
misprints, such as “is” for “it,” “that” for “than,” “becase” for
‘^because,” Even undoubted misprints are recorded if, as often
happens, they make a plausible misreading which has been copied
in modern texts, or if they present any other feature of interest.
As it does not seem desirable to dress up an eighteenth century
classic entirely in twentieth century costume, I have retained the
spelling of the fifth edition and steadily refused to attempt to make
it consistent with itself. The danger which would be incurred by
doing so may be shown by the example of “CromweL” Few mod-
ern readers would hesitate to condemn this as a misprint, but it is,
as a matter of fact, the spelling affected by Hume in his History ^
and was doubtless adopted from him by Adam Smith, though in the
second of the two places where the name is mentioned inadvertence
or the obstinacy of the printers allowed the usual “Cromwell” to
appear till the fourth edition was reached. I have been equally rig-
id in following the original in the matter of the use of capitals and
italics, except that in deference to modern fashion I have allowed
the initial words of paragraphs to appear in small letters instead of
capitals, the chapter headings to be printed in capitals instead of
italics, and the abbreviation “Chap.” to be replaced by “Chapter”
in full. I have also allowed each chapter to begin on a fresh page,
as the old practice of beginning a new chapter below the end of the
preceding one is inconvenient to a student who desires to use the
book for reference.
XX
PREFACE
In writing a marginal summary for the text I have felt like an
architect commissioned to place a new building alongside some an-
cient masterpiece: I have endeavoured to avoid on the one hand an
impertinent adoption of Smith’s words and style, and on the other
an obtrusively modern phraseology which might contrast unpleas-
antly with the text.
The original index, with some slight unavoidable changes of ty-
pography, is reprinted as it appeared in the third, fourth and fifth
editions. I have added to it a large number of new articles and ref-
erences. I have endeavoured by these additions to make it absolute-
ly complete in regard to names of places and persons, except that
it seemed useless to include the names of kings and others when
used merely to indicate dates, and altogether vain to hope to deal
comprehensively with “Asia,” “England,” “Great Britain” and
“Europe.” I have inserted a few catchwords which may aid in the
recovery of particularly striking passages, such as “Invisible
hand,” “Pots and pans,” “Retaliation,” “Shopkeepers, nation of.”
I have not thought it desirable to add to the more general of the
headings in the original index, such as “Commerce” and “Labour,”
since these might easily be enlarged till they included nearly every-
thing in the book. Authorities expressly referred to either in the
text or the Author’s notes are included, but as it would have been
inconvenient and confusing to add references to the Editor’s notes,
I have appended a second index in which all the authorities re-
ferred to in the text, in the Author’s notes, and in the Editor’s notes
are collected together. This will, I hope, be found useful by stu-
dents of the history of economics.
The Author’s references to his footnotes are placed exactly where
he placed them, though their situation is often somewhat curiously
selected, and the footnotes themselves are printed exactly as in the
fifth edition. Critics will probably complain of the trivial character
of many of the notes which record the result of the collation of the
editions, but I would point out that if I had not recorded all the
differences, readers would have had to rely entirely on my expres-
sion of opinion that the unrecorded differences were of no interest.
The evidence having been once collected at the expense of very
considerable labour, it was surely better to put it on record, espe-
cially as these trivial notes, though numerous, if collected together
would not occupy more than three or four pages of the present
work. Moreover, as is shown in the Editor’s Introduction, the most
trivial of the differences often throw interesting light upon Smith’s
way of regarding and treating his work.
The other notes consist chiefly of references to sources of Adam
XXI
PREFACE
Smith’s information. Where he quotes his authority by name, no
difficulty ordinarily arises. Elsewhere there is often little doubt
about the matter. The search for authorities has been greatly fa-
cilitated by the publication of Dr. Bonar’s Catalogue of the Li-
brary of Adam Smith in 1894, and of Adam Smith’s Lectures in
1896. The Catalogue tells us what books Smith had in his posses-
sion at his death, fourteen years after the Wealth of Nations was
published, while the Lectures often enable us to say that a par-
ticular piece of information must have been taken from a book
published before 1763. As it is known that Smith used the Advo-
cates’ Library, the Catalogue of that library, of which Part II was
printed in 1776, has also been of some use. Of course a careful com-
parison of words and phrases often makes it certain that a particu-
lar statement must have come from a particular source. Neverthe-
less many of the references given must be regarded as indicating
merely a possible source of information or inspiration. I have re-
frained from quoting or referring to parallel passages in other auth-
ors when it is impossible or improbable that Smith ever saw them.
That many more references might be given by an editor gifted with
omniscience I know better than any one. To discover a reference
has often taken hours of labour: to fail to discover one has often
taken days.
When Adam Smith misquotes or clearly misinterprets his au-
thority, I note the fact, but I do not ordinarily profess to decide
whether his authority is right or wrong. It is neither possible nor
desirable to rewrite the history of nearly all economic institutions
and a great many other institutions in the form of footnotes to the
Wealth of Nations,
Nor have I thought well to criticise Adam Smith’s theories in the
light of modern discussions. I would beseech any one who thinks
that this ought to have been done to consider seriously what it
would mean. Let him review the numerous portly volumes which
modern inquiry has produced upon every one of the immense num-
ber of subjects treated by Adam Smith, and ask himself whether
he really thinks the order of subjects in the Wealth of Nations a
convenient one to adopt in an economic encyclopaedia. The book is
surely a classic of great historical interest which should not be over-
laid by the opinions and criticisms of any subsequent moment —
still less of any particular editor.
Much of the heavier work involved in preparing the present edi-
tion, especially the collation of the original editions, has been done
by my friend Mrs. Norman Moor, without whose untiring assis-
tance the book could not have been produced.
xxii PREFACE
Numerous friends have given me the benefit of their knowledge
of particular points, and mv hearty thanks are due to them.
E.C.
London School of Economics, 1904
9
EDITOR^S INTRODUCTION
The first edition of the Wealth of Nations was published on the 9th
of March, ^ 1776, in two volumes quarto, of which the first, con-
taining Books I., II. and III., has 510 pages of text, and the second,
containing Books IV. and V., has 587. The title-page describes the
author as “Adam Smith, LL.D. and F.R.S. Formerly Professor of
Moral Philosophy in the University of Glasgow.’’ There is no pref-
ace or index. The whole of the Contents are printed at the begin-
ning of the first volume. The price was £i ids.^
The second edition appeared early in 1778, priced at £2 2s.,® but
differing little in appearance from its predecessor. Its pages very
nearly correspond, and the only very obvious difference is that the
Contents are now divided between the two volumes. There are,
however, a vast number of small differences between the first and
second editions. One of the least of these, the alteration of “late” to
“present,” ^ draws our attention to the curious fact that writing at
some time before the spring of 1776 Adam Smith thought it safe to
refer to the American troubles as “the late disturbances.” ® We can-
not tell whether he thought the disturbances were actually*over, or
only that he might safely assume they would be over before the
book was published. As “present disturbances” also occurs close to
“late disturbances,” ® we may perhaps conjecture that when correct-
ing his proofs in the winter of 1775-6, he had altered his opinion
and only allowed “late” to stand by an oversight. A very large pro-
portion of the alterations are merely verbal, and made for the sake
of greater elegance or propriety of diction, such as the frequent
change from “tear and wear” (which occurs also in Lectures, p. 208)
to the more ordinary “wear and tear.” Most of the footnotes appear
first in the second edition. A few corrections as to matters of fact
are made, such as that in relation to the percentage of the tax on
silver in Spanish America (p. 169). Figures are corrected on p. 328,
and pp. 838, 842. New information is added here and there: an ad-
^ John Rae, Lije of Adam Smith, 1895, p. 284.
^ Ibid., p. 285.
^Ibid., p. 324.
'‘•Below, pp. 465, 890.
" See p. 544, as well as the passages referred to in the previous note.
"Pp. S4I, 552, 581.
xxiv editor's introduction
ik
ditional way of raising money by fictitious bills is described in the
long note on p. 295; the details from Sandi as to the introduction
of the silk manufacture into Venice are added (p. 381) ; so also are
the accounts of the tax on servants in Holland (p. 809), and the
mention of an often forgotten but important quality of the land-
tax, the possibility of reassessment within the parish (p. 796).
There are some interesting alterations in the theory as to the emer-
gence of profit and rent from primitive conditions, though Smith
himself would probably be surprised at the importance which some
modern inquirers attach to the points in question (pp. 47-So)* On
pp. 97, 98, the fallacious argument to prove that high profits raise
prices more than high wages is entirely new, though the doctrine
itself is asserted in another passage (p. 565). The insertion in the
second edition of certain cross-references on pp. 193, 312, which do
not occur in the first edition, perhaps indicates that the Digressions
on the Corn Laws and the Bank of Amsterdam were somewhat late
additions to the scheme of the work. Beer is a necessary of life in
one place and a luxury in another in the first edition, but is no-
where a necessary in the second (pp. 432, 822). The epigrammatic
condemnation of the East India Company on pp. 602-3, a-ppears
first in the second edition. On p. 751, we find “Christian” substi-
tuted for “Roman Catholic,” and the English puritans, who were
“persecuted” in the first edition, are only “restrained” in the
second (p. 555) — defections from the ultra-protestant standpoint
perhaps due to the posthumous working of the influence of Hume
upon his friend.
Between the second edition and the third, published at the end
of 1784,'^ there are considerable differences. The third edition is in
three volumes, octavo, the first running to the end of Book II.,
chapter ii., and the second from that point to the end of the chapter
on Colonies, Book IV., chapter viii. The author by this time had
overcome the reluctance he felt in 1778 to have his office in the
customs added to his other distinctions® and consequently appears
on the title-page as “Adam Smith, LL.D. and F.R.S. of London and
Edinburgh: one of the commissioners of his Majesty’s Customs in
Scotland; and formerly professor of Moral Philosophy in the Uni-
versity of Glasgow.” The imprint is “London: printed for A. Stra-
han; and T. Cadell, in the Strand.” This edition was sold at one
guinea.® Prefixed to it is the following “Advertisement to the Third
Edition”: —
^ Rae, Life of Adam Smith, p. 362.
p. 323.
^ Ibid., p. 362.
editor’s introduction XXV
“The first Edition of the following Work was printed in the end of
the year 1775, and in the beginning of the year 1776. Through the
greater part of the Book, therefore, whenever the present state of
things is mentioned, it is to be understood of the state they were in,
either about that time, or at some earlier period, during the time I
was employed in writing the Book. To this"® third Edition, however,
I have made several additions, particularly to the chapter upon Draw-
backs, and to that upon Bounties; likewise a new chapter entitled,
The Conclusion of the Mercantile System; and a new article to the
chapter upon the expences of the sovereign. In all these additions,
the present state of things means always the state in which they were
during the year 1783 and the beginning of the present"" year 1784.”
Comparing the second and the third editions we find that the
additions to the third are considerable. As the Preface or ^‘Adver-
tisement” just quoted remarks, the chapter entitled “Conclusion of
the Mercantile System” (pp. 607-26) is entirely new, and so is the
section “Of the Public Works and Institutions which are necessary
for facilitating particular Branches of Commerce” (pp. 690-716).
Certain passages in Book IV., chapter iii., on the absurdity of the
restrictions on trade with France (pp. 440-1 and 462-3), the three
pages near the beginning of Book IV., chapter iv., upon the details
of various drawbacks (pp. 466-70), the ten paragraphs on the
herring fishery bounty (pp. 485-9) with the appendix on the same
subject (pp. 901-3), and a portion of the discussion of the effects
on the corn bounty (pp. 475-6) also appear first in the third edi-
tion. With several other additions and corrections of smaller size
these passages were printed separately in quarto under the title of
“Additions and Corrections to the First and Second Editions of Dr.
Adami Smith's Inquiry into the Nature and Causes of the Wealth
of Nations.” Writing to Cadell in December, 1782, Smith
says: —
“I hope in two or three months to send you up the second edition
corrected in many places, with three or four very considerable addi-
tions, chiefly to the second volume. Among the rest is a short but, 1
flatter myself, a complete history of all the trading companies in Great
Britain. These additions I mean not only to be inserted at their proper
places into the new edition, but to be printed separately and to be sold
for a shilling or half a crown to the purchasers of the old edition
Edition 4 alters “this” to “the.”
Edition 4 omits “present.”
^They are frequently found at the end of existing bound copies of the
second edition. The statement in Rae, Life of Adam Smith, p 362, that they
were published in 1783 is a mistake; cp. the “Advertisement to the Third
Edition” above.
xxvi editor’s introduction
The price must depend on the bulk of the additions when they are all
written out.’’^®
Besides the separately printed additions there are many minor
alterations between the second and third editions, such as the com-
placent note on the adoption of the house tax (p. 795), the correc-
tion of the estimate of possible receipts from the turnpikes (p. 685,
note 37), and the reference to the expense of the American war (p.
876), but none of these is of much consequence. More important is
the addition of the lengthy index surmounted by the rather quaint
superscription The Roman numerals refer to the Volume,
and the figures to the Page.” We should not expect a man of
Adam Smith’s character to make his own index, and we may be
quite certain that he did not do so when we find the misprint
^Tallie” on p. 787, reappearing in the index (5,^;. Montauban)
though 'Taille” has also a place there. But the index is far from
suggesting the work of an unintelligent hack, and the fact that the
^^Ayr bank” is named in it ($,v. Banks), though nameless in the
text, shows either that the index-maker had a certain knowledge of
Scotch banking history or that Smith corrected his work in places.
That Smith received a packet from Strahan '^containing some part
of the index” on 17th November, 1784, we know from his letter to
Cadell, published in the Economic Journal for September, 1898.
Strahan had inquired whether the index was to be printed in quarto
along with the Additions and Coirections, and Smith reminded him
that the numbers of the pages would all have to be altered "to
accommodate them to either of the two former editions, of which
the pages do not in many places correspond.” There is therefore no
reason for not treating the index as an integral part of the book.
The fourth edition, published in 1786, is printed in the same
style and with exactly the same pagination as the third. It reprints
the advertisement to the third edition, altering, however, the phrase
"this third Edition,” into "the third Edition,” and "the present year
1784” into "the year 1784,” and adds the following "Advertise-
ment to the Fourth Edition”; —
"In this fourth Edition I have made no alterations of any kind. I
now, however, find myself at liberty to acknowledge my very great
obligations to Mr. Henry Hop of Amsterdam. To that Gentleman I
“ Rae, Life of Adam Smith, p. 362.
Corrected to “Hope^^ in edition 5. The celebrated firm of Hope, mer-
chant-bankers in Amsterdam, was founded by a Scotchman in the seven-
teenth century (see Sir Thomas Hope in the Dictionary of National Biogra-
phy), Henry Hope was born in Boston, Mass., in 1736, and passed six years
in a banking house in England before he joined his relatives in Amsterdam.
editor’s introduction xxvii
owe the most distinct, as well as liberal information, concerning a very
interesting and important subject, the Bank of Amsterdam; of which
no printed account had ever appeared to me satisfactory, or even in-
telligible. The name of that Gentleman is so well known in Europe,
the information which comes from him must do so much honour to
whoever has been favoured with it, and my vanity is so much inter-
ested in making this acknowledgment, that I can no longer refuse my-
self the pleasure of prefixing this Advertisement to this new Edition
of my Book.”
In spite of his statement that he had made no alterations of any
kind, Smith either made or permitted a few trifling alterations be-
tween the third and fourth editions. The subjunctive is very fre-
quently substituted for the indicative after “if,” the phrase “if it
was” in particular being constantly altered to “if it were.” On p.
70, note 23, “late disturbances” is substituted for “present disturb-
ances.” The other differences are so trifling that they may be mis-
readings or unauthorised corrections of the printers.
The fifth edition, the last published in Smithes lifetime and con-
sequently the one from which the present edition has been copied,
is dated 1789. It is almost identical with the fourth, the only dif-
ference being that the misprints of the fourth edition are corrected
in the fifth and a considerable number of fresh ones introduced,
while several false concords — or concords regarded as false — are
corrected (see pp. 106, 682, 716).^*'^
It is clear from the passage on p. 643, that Smith regarded the
title “An Inquiry into the Nature and Causes of the Wealth of
Nations” as a synonym for “political ceconomy,” and it seems per-
haps a little surprising that he did not call his book *^Political
He became a partner with them, and on the death of Adrian Hope the
conduct of the whole of the business of the firm devolved upon him. When
the French invaded Holland in 1794 he retired to England. He died on 25th
February, 1811, leaving £1,160,000 {Gentleman^ s Magazine, March, 1811).
^®Most modern editions are copied from the fourth edition. Thorold
Rogers’ edition, however, though said in the preface to be copied from the
fourth, as a matter of fact follows the third. In one instance, indeed, the
omission of “so” before “as long as” on p. 41, line 32 (in the present
edition) , Rogers’ text agrees with that of the fourth edition rather than the
third, but this is an accidental coincidence in error ; the error is a particular-
ly easy one to make and it is actually corrected in the^ errata to the fourth
edition, so that it is not really the reading of that edition. The fifth edition
must not be confused with a spurious “fifth edition with additions” in 2
vols., 8vo, published in Dublin in 1793 with the “Advertisement” to the
third edition deliberately falsified by the substitution of “fifth” for “third”
in the sentence “To this third edition however I have made several addi-
tions.” It is perhaps the existence of this spurious “fifth edition” which
has led several writers (e.g., Rae, Life of Adam Smith, p. 293) to ignore
the genuine fifth edition. The sixth edition is dated 1791.
xxviii editor’s INTRODUCTION
(Economy^ or ^Trinciples of Political (Economy P But we must re-
member that the term was still in 1776 a very new one, and that
it had been used in the title of Sir James Steuart's great book, An
Inquiry into the Principles of Political (Economy: being an Essay
on the Science of Domestic Policy in Free Nations, which was pub-
lished in 1767. Nowadays, of course, no author has any special
claim to exclusive use of the title. We should as spon think of
claiming copyright for the title ^^Arithmetic’^ or ^'Elements of Geol-
ogy’’ as for ‘Trinciples of Political Economy.” But in 1776 Adam
Smith may well have refrained from using it simply because it had
been used by Steuart nine years before, especially considering the
fact that the Wealth of Nations was to be brought out by the pub-
lishers who had brought out Steuart’s book.^®
From 1759 at the latest an early draft of what subsequently de-
veloped into the Wealth of Nations existed in the portion of Smith’s
lectures on ^^Jurisprudence” which he called “Police, Revenue and
Arms,” the rest of “Jurisprudence” being “Justice” and the “Laws
of Nations.” Jurisprudence he defined as “that science which in-
quires into the general principles which ought to be the foundation
of the laws of all nations,” or as “the theory of the general prin-
ciples of law and government.” In forecasting his lectures on the
subject he told his students: —
“The four great objects of law are justice, police, revenue and arms.
“The object of justice is the security from injury, and it is the
foundation of civil government.
“The objects of police are the cheapness of commodities, public se-
curity, and cleanliness, if the two last were not too minute for a lec-
ture of this kind. Under this head we will consider the opulence of a
state.
“It is likewise necessary that the magistrate who bestows his time
and labour in the business of the state should be compensated for it.
For this purpose and for defraying the expenses of government some
fund must be raised. Hence the origin of revenue. The subject of con-
sideration under this head will be the proper means of levying reve-
nue, which must come from the people by taxes, duties, &c. In gen-
eral, whatever revenue can be raised most insensibly from the people
ought to be preferred, and in the sequel it is proposed to be shown
how far the laws of Britain and other European nations are calculated
for this purpose.
“Steuart*s Principles was “printed for A. Millar, and T. Cadell, in the
Strand.” and the Wealth of Nations “for W. Strahan; and T. Cadell, in the
Strand.”
Lectures on Justice, Police, Revenue and Arms, delivered in the Univer-
sity of Glasgow by Adam Smith. Reported by a student in 1763, and edited
with an Introduction and Notes by Edwin Cannan, 1896, pp. i, 3.
editor’s introduction
“As the best police cannot give security unless the government can
defend themselves from foreign injuries and attacks, the fourth thing
appointed by law is for this purpose; and under this head will be
shown the different species of arms with their advantages and disad-
vantages, the constitution of standing armies, militias, &c.
“After these will be considered the laws of nations . . ”
The connection of revenue and arms with the general principles
of law and government is obvious enough, and no question arises
as to the explanation on these heads given by the forecast. But to
‘^consider the opulence of a state’’ under the head of “police” seems
at first sight a little strange. For the explanation we turn to the be-
ginning of the part of the lectures relating to Police.
“Police is the second general division of jurisprudence. The name is
French, and is originally derived from the Greek xoXirem, which
properly signified the policy of civil government, but now it only
means the regulation of the inferior parts of government, viz : clean-
liness, security, and cheapness or plenty.” “
That this definition of the French word was correct is well shown
by the following passage from a book which is known to have been
in Smith’s possession at his death,-® Bielfeld’s Institutions poli-
tiques, 1760 (tom. i., p. 99).
“Le premier President du Harlay en recevant M. d’Argenson a la
charge de lieutenant general de police de la ville de Paris, lui adressa
ces paroles, qui meritent d’etre remarquees: Le Roi, Monsieur, vous
demande sfiret6, nettete, bon-marche. En effet ces trois articles com-
f)rennent toute la police, qui forme le troisi^me grand objet de la poli-
tique pour rinterieur de Tfitat.”
When we find that the chief of the Paris police in 1697 was ex-
pected to provide cheapness as well as security and cleanliness, we
wonder less at the inclusion of “cheapness or plenty” or the “opu-
lence of a state” in “jurisprudence” or “the general principles of
law and government.” “Cheapness is in fact the same thing with
plenty” and “the consideration of cheapness or plenty” is “the same
thing” as “the most proper way of securing wealth and abun-
dance.” If Adam Smith had been an old-fashioned believer in
state control of trade and industry he would have described the
pp. 3, 4.
'^Lectures, p. 154.
^ See James Bonar, Catalogue of the Library of Adam Smith, 1894.
Lectures, p. 157.
XXX EDITOR^S INTRODUCTION
most proper regulations for securing wealth and abundance, and
there would have been nothing strange in this description coming
under the “general principles of law and government.’’ The actual
strangeness is simply the result of Smith’s negative attitude — of his
belief that past and present regulations were for the most part
purely mischievous.
The two items, cleanliness and security, he managed to dismiss
very shortly: “the proper method of carrying dirt from the streets,
and the execution of justice, so far as it regards regulations for
preventing crimes or the method of keeping a city guard, though
useful, are too mean to be considered in a general discourse of this
kind.” He only offered the observation that the establishment of
arts and commerce brings about independency and so is the best
police for preventing crimes. It gives the common people better
wages, and “in consequence of this a general probity of manners
takes place through the whole country. Nobody will be so mad
as to expose himself upon the highway, when he can make better
bread in an honest and industrious manner.”
He thei;i came to “cheapness or plenty, or, which is the same
thing, the most proper way of securing wealth and abundance.”
He began this part of the subject by considering the “natural wants
of mankind which are to be supplied,” a subject which has since
acquired the title of “consumption” in economic treatises. Then he
showed th^ opulence arises from division of labour, and why this
is so, and how the division of labour “occasions a multiplication of
the product, and why it must be proportioned to the extent of
commerce. “Thus,” he said, “the division of labour is the great cause
of the increase of public opulence, which is always proportioned to
the industry of the people, and not to the quantity of gold and
silver as is foolishly imagined.” “Having thus shown what gives
occasion to public opulence,” he said he would go on to consider: —
‘Tirst, what circumstances regulate the price of commodities:
“Secondly, money in two different views, first as the measure of
value and then as the instrument of commerce:
“Thirdly, the history of commerce, in which shall be taken notice
of the causes of the slow progress of opulence, both in an-
cient and modern times, which causes shall be shown either
to affect agriculture or arts and manufactures;
p. 154.
’^Ibidy p. 156.
Lectures, p. 157,
^°Ibid., p. 163.
editor’s introduction ^
“Lastly, the effects of a commercial spirit, on the government, tem-
per, and manners of a people, whether good or bad, and the
proper remedies.”®®
Under the first of these heads he treated of natural and market
price and of difference of wages, and showed “that whatever police
tends to raise the market price above the natural, tends to diminish
public opulence.” Among such pernicious regulations he enumer-
ated taxes upon necessaries, monopolies, and exclusive privileges of
corporations. Regulations which bring market price below natural
price he regarded as equally pernicious, and therefore he con-
demned the corn bounty, which attracted into agriculture stock
which would have been better employed in some other trade. “It is
by far the best police to leave things to their natural course.”
Under the second head he explained the reasons for the use of
money as a common standard and its consequential use as the
instrument of commerce. He showed why gold and silver were
commonly chosen and why coinage was introduced, and proceeded
to explain the evils of tampering with the currency, and the diffi-
culty of keeping gold and silver money in circulation at the same
time. Money being a dead stock, banks and paper credit, which
enable money to be dispensed with and sent abroad, are beneficial.
The money sent abroad will “bring home materials for food, clothes,
and lodging,” and, “whatever commodities are imported, just so
much is added to the opulence of the country.” It is “a bad police
to restrain” banks.^® Mun, “a London merchant,” affirmed “that as
England is drained of its money it must go to ruin.” “Mr, Gee,
likewise a merchant,” endeavoured to “show that England would
soon be ruined by trade with foreign countries,” and that “in al-
most all our commercial dealings with other nations we are
losers.” Mr. Hume had shown the absurdity of these and other
such doctrines, though even he had not kept quite clear of “the
notion that public opulence consists in money.” Money is not
consumable, and “the consumptibility, if we may use the word, of
goods, is the great cause of human industry.”
pp. 173-3*
^ Ibid,, p. 178.
^ Ibid., p. 182.
^Lectures, p. 192.
"^Ibid., p. 195.
"^^ Ibid , p. 195.
Ibid., p. 196.
^^Ibid., p. 197.
“^^Ibid., p. 199.
xxxii editor’s INTRODUCTION
The absurd opinion that riches consist in money had given rise
to ‘^many prejudicial errors in practice,” such as the prohibition
of the exportation of coin and attempts to secure a favourable bal-
ance of trade. There will always be plenty of money if things are
left to their free course, and no prohibition of exportation will be
effectual. The desire to secure a favourable balance of trade has
led to “most pernicious regulations,” such as the restrictions on
trade with France.
“The absurdity of these regulations will appear on the least reflec-
tion. All commerce that is carried on betwixt any two countries must
necessarily be advantageous to both. The very intention of commerce
is to exchange your own commodities for others which you think will
be more convenient for you. When two men trade between themselves
it is undoubtedly for the advantage of both. . . . The case is exactly
the same betwixt any two nations. The goods which the English mer-
chants want to import from France are certainly more valuable to
them than what they give for them.”
These jealousies and prohibitions were most hurtful to the lich-
est nations, and it would benefit France and England especially,
if “all national prejudices were rooted out and a free and uninter-
rupted commerce established.” No nation was ever ruined by
this balance of trade. All political writers since the time of Charles
II. had been prophesying “that in a few years we would be re-
duced to an absolute state of poverty,” but “we find ourselves far
richer than before.”
The erroneous notion that national opulence consists in money
had also given rise to the absurd opinion that “no home consump-
tion can hurt the opulence of a country,”
It was this notion too that led to Law’s Mississippi scheme, com-
pared to which our own South Sea scheme was a trifle.^^
Interest does not depend on the value of money, but on the quan-
tity of stock. Exchange is a method of dispensing with the trans-
mission of money
Under the third heading, the history of commerce, or the causes
of the slow progress of opulence, Adam Smith dealt with “first,
natural impediments, and secondly, the oppression of civil govern-
^Ibid., p. 200.
^ Ibid., p. 204.
^ Ibid., p. 204.
^Lectures, p. 206.
^ Ibid., p. 207.
Ibid., p. 209.
^^Ibid., pp. 211-19.
Ibid , pp. 219-22.
editor’s introduction
ment.” He is not recorded to have mentioned any natural im-
pediments except the absence of division of labour in rude and
barbarous times owing to the want of stock.^^ But on the oppres-
sion of civil government he had much to say. At first governments
were so feeble that they could not offer their subjects that security
without which no man has any motive to be industrious. After-
wards, when governments became powerful enough to give internal
security, they fought among themselves, and their subjects were
harried by foreign enemies. Agriculture was hindered by great
tracts of land being thrown into the hands of single persons. This
led at first to cultivation by slaves, who had no motive to industry;
then came tenants by steelbow (metayers) who had no sufficient
inducement to improve the land; finally the present method of cul-
tivation by tenants was introduced, but these for a long time were
insecure in their holdings, and had to pay rent in kind, which made
them liable to be severely affected by bad seasons. Feudal subsidies
discouraged industry, the law of primogeniture, entails, and the
exp mse of transferring land prevented the large estates from being
divided. The restrictions on the export of corn helped to stop the
progress of agriculture. Progress in arts and commerce was also
hindered by slavery, as well as by the ancient contempt for indus-
try and commerce, by the want of enforcement of contracts, by
the various difficulties and dangers of transport, by the establish-
ment of fairs, markets and staple towns, by duties on imports and
exports, and by monopolies, corporation privileges, the statute of
apprenticeship and bounties.'^^
Under the fourth and last head, the influence of commerce on
the manners of a people, Smith pronounced that “whenever com-
merce is introduced into any country probity and punctuality al-
ways accompany it.'' The trader deals so often that he finds hon-
esty is the best policy. “Politicians are not the most remarkable
men in the world for probity and punctuality. Ambassadors from
different nations are still less so," the reason being that nations
treat with one another much more seldom than merchants.
But certain inconveniences arise from a commercial spirit. Men's
views are confined, and “when a person's whole attention is be-
stowed on the seventeenth part of a pin or the eightieth part of a
button," he becomes stupid. Education is neglected. In Scotland
*** Ibid,, p. 222.
pp. 222-3.
^Lectures, pp. 223-36.
*^lbid,, p. 253.
Ibid., p. 254.
^^Ibid,, p. 255.
xxxiv editor’s introduction
the meanest porter can read and write, but at Birmingham boys of
six or seven can earn threepence or sixpence a day, so that their
parents set them to work early and their education is neglected. To
be able merely to read is good as it “gives people the benefit of re-
ligion, which is a great advantage, not only considered in a pious
sense, but as it affords them subject for thought and specula-
tion.” There is too “another great loss which attends the put-
ting boys too soon to work.” The boys throw off parental authority,
and betake themselves to drunkenness and riot. The workmen in
the commercial parts of England are consequently in a “despicable
condition; their work through half the week is sufficient to main-
tain them, and through want of education they have no amusement
for the other but riot and debauchery. So it may very justly be said
that the people who clothe the whole world are in rags them-
selves.”
Further, commerce sinks courage and extinguishes martial spir-
it; the defence of the country is handed over to a special class, and
the bulk of the people grow effeminate and dastardly, as was shown
by the fact that in 1745 “four or five thousand naked unarmed
Highlanders would have overturned the government of Great Bri-
tain with little difficulty if they had not been opposed by a stand-
ing army.”
“To remedy” these evils introduced by commerce “would be an
object worthy of serious attention.”
Revenue, at any rate in the year when the notes of his lectures
were made, was treated by Adam Smith before the last head of po-
lice just discussed, ostensibly on the ground that it was in reality
one of the causes of the slow progress of opulence.*''*-
Originally, he taught, no revenue was necessary; the magistrate
was satisfied with the eminence of his station and any presents he
might receive. The receipt of presents soon led to corruption. At
first too soldiers were unpaid, but this did not last. The earliest
method adopted for supplying revenue was assignment of lands to
the support of government. To maintain the British government
would require at least a fourth of the whole of the land of the coun-
try. “After government becomes expensive, it is the worst possible
method to support it by a land rent.” Civilisation and expensive
government go together.
Taxes may be divided into taxes upon possessions and taxes
^Uhid., p. 256.
pp. 256, 257.
Lectures, p. 258.
Ibid., p. 236.
^Ibid., p. 239.
editor’s introduction XXXV
upon commodities. It is easy to tax land, but difficult to tax stock
or money ; the land tax is very cheaply collected and does not raise
the price of commodities and thus restrict the number of persons
who have stock sufficient to carry on trade in them. It is hard on
the landlords to have to pay both land tax and taxes on consump-
tion, which fact ^^perhaps occasions the continuance of what is
called the Tory interest.”
Taxes on consumptions are best levied by way of excise. They
have the advantage of “being paid imperceptibly,” since “when
we buy a pound of tea we do not reflect that the most part of the
price is a duty paid to the government, and therefore pay it con-
tentedly, as though it were only the natural price of the commo-
dity.” Such taxes too are less likely to ruin people than a land
tax, as they can always reduce their expenditure on dutiable ar-
ticles.
A fixed land tax like the English is better than one which varies
with the rent like the French, and “the English are the best finan-
ciers in Europe, and their taxes are levied with more propriety than
those of any other country whatever.” Taxes on importation are
hurtful because they divert industry into an unnatural channel,
but taxes on exportation are worse. The common belief that wealth
consists in money has not been so hurtful as might have been ex-
pected in regard to taxes on imports, since it has accidentally led
to the encouragement of the import of raw material and discour-
agement of the import of manufactured articles.^®
From treating of revenue Adam Smith was very naturally led
on to deal with national debts, and this led him into a discussion of
the causes of the rise and fall of stocks and the practice of stock-
jobbing.^^*^
Under Arms he taught that at first the whole people goes out to
war: then only the upper classes go and the meanest stay to culti-
vate the ground. But afterwards the introduction of arts and manu-
factures makes it inconvenient for the rich to leave their business,
and the defence of the state falls to the meanest. “This is our pres-
ent condition in Great Britain.” Discipline now becomes neces-
sary and standing armies are introduced. The best sort of army is
“a militia commanded by landed gentlemen in possession of the
pp. 241, 242.
^ Ibid.f pp. 242, 243.
Lectures f p. 243.
Ibid,, p. 245.
^ Ibid,, pp. 246, 247.
Ibid., pp. 247-52.
^Ibid., p. 261.
xxxvi editor’s introduction
public offices of the nation,” which ‘^can never have any prospect
of sacrificing the liberties of the country.” This is the case in
Sweden.
Now let us compare with this the drift of the Wealth of Nations,
not as it is described in the “Introduction and Plan,” but as we find
it in the body of the work itself.
Book I. begins by showing that the greatest improvement in the
productive powers of industry is due to division of labour. From
division of labour it proceeds to money, because money is necessary
in order to facilitate division of labour, which depends upon ex-
change. This naturally leads to a discussion of the terms on which
exchanges are effected, or value and price. Consideration of price
reveals the fact that it is divided between wages, profit and rent,
and is therefore dependent on the rates of wages, profit and rent,
so that it is necessary to discuss in four chapters variations in these
rates.
Book II. treats first of the nature and divisions of stock, second-
ly of a particularly important portion of it, namely money, and the
means by which that part may be economised by the operations
of banking, and thirdly the accumulation of capital, which is con-
nected with the employment of productive labour. Fourthly it con-
siders the rise and fall of the rate of interest, and fifthly and lastly
the comparative advantage of different methods of employing
capital.
Book III, shows that the natural progress of opulence is to direct
capital, first to agriculture, then to manufactures, and lastly to
foreign commerce, but that this order has been inverted by the
policy of modern European states.
Book IV. deals with two different systems of political economy:
(i) the system of commerce, and (2) the system of agriculture,
but the space given to the former, even in the first edition, is eight
times as great as that given to the latter. The first chapter shows
the absurdity of the principle of the commercial or mercantile sys-
tem, that wealth is dependent on the balance of trade; the next
five discuss in detail and show the futility of the various mean and
malignant expedients by which the mercantilists endeavoured to
secure their absurd object, namely, general protectionist duties,
prohibitions and heavy duties directed against the importation of
goods from particular countries with which the balance is supposed
to be disadvantageous, drawbacks, bounties, and treaties of com-
merce. The seventh chapter, which is a long one, deals with colo-
nies. According to the forecast at the end of chapter i. this subject
Ibid., p. 263.
editor’s introduction xxxvii
comes here because colonies were established in order to encourage
exportation by means of peculiar privileges and monopolies. But
in the chapter itself there is no sign of this. The history and prog-
ress of colonies is discussed for its own sake, and it is not alleged
that important colonies have been founded with the object sug-
gested in chapter i.
In the last chapter of the Book, the physiocratic system is de-
scribed, and judgement is pronounced against it as well as the com-
mercial system. The proper system is that of natural liberty, which
discharges the sovereign from ^The duty of superintending the in-
dustry of private people and of directing it towards the employ-
ments most suitable to the interest of the society.”
Book V. deals with the expenses of the sovereign in performing
the duties left to him, the revenues necessary to meet those ex-
penses and the results of expenses exceeding revenue. The discus-
sion of expenses of defence includes discussion of different kinds of
military organisation, courts of law, means of maintaining public
works, education, and ecclesiastical establishments.
Putting these two sketches together we can easily see how closely
related the book is to the lectures.
The title ^Tolice” being dropped as not sufficiently indicating
the subject, there is no necessity for the mention of cleanliness, and
the remarks on security are removed to the chapter on the accumu-
lation of capital. The two sections on the natural wants of mankind
are omitted, illustrating once more the difficulty which econo-
mists have generally felt about consumption. The next four sec-
tions, on division of labour, develop into the first three chapters of
Book I. of the Wealth of Nations. At this point in the lectures there
is an abrupt transition to prices, followed by money, the history of
commerce and the effects of a commercial spirit, but in the Wealth
of Nations this is avoided by taking money next, as the machinery
by the aid of which labour is divided, and then proceeding by a
very natural transition to prices. In the lectures the discussion of
money led to a consideration of the notion that wealth consisted in
money and of all the pernicious consequences of that delusion in
restricting banking and foreign trade. This was evidently over-
loading the theory of money, and consequently banking is post-
poned to the Book about capital, on the ground that it dispenses
with money, which is a dead stock, and thus economises capital,
while the commercial policy is relegated by itself to Book IV. In
the lectures, again, wages are only dealt with slightly under prices,
and profits and rent not at all; in the Wealth of Nations wages.
There is a reminiscence of them in the chapter on Rent, pp. 163-4
xxxviii editor’s INTRODUCTION
profits and rent are dealt with at length as component parts of
price, and the whole produce of the country is said to be distrib-
uted into them as three shares.
The next part of the lectures, that dealing with the causes of
the slow progress of opulence, forms the foundation for Book III,
of the Wealth of Nations, The influence of commerce on manners
disappears as an independent heading, but most of the matter
dealt with under it is utilised in the discussions of education and
military organisation.
Besides consumption, two other subjects, stock-jobbing and
the Mississippi scheme, which are treated at some length in the
lectures, are altogether omitted in the Wealth of Nations. The
description of stock-jobbing was probably left out because better
suited to the youthful hearers of the lectures than to the maturer
readers of the book. The Mississippi scheme was omitted, Smith
himself says, because it had been adequately discussed by Du
Verney.
Here and there discrepancies may be found between the opin-
ions expressed in the lectures and those expressed in the book. The
reasonable and straightforward view of the effects of the corn
bounty is replaced by a more recondite though less satisfactory
doctrine. The remark as to the inconvenience of regulations on
foreign commerce having been alleviated by the fact that they en-
courage trade with countries from which imported raw materials
came and discourage it with those from which manufactured goods
came does not reappear in the book. The passage in the Lectures
is probably much condensed, and perhaps misrepresents what
Adam Smith said. If it does not, it shows him to have been not en-
tirely free from protectionist fallacies at the time the lectures were
delivered.®^
There are some very obvious additions, the most prominent be-
ing ’the account of the French physiocratic or agricultural system
which occupies the last chapter of Book IV. The article on the re-
lations of church and state (Bk. V., ch. i., pt. iii., art. 3) also ap-
pears to be a clear addition, at any rate in so far as the lectures on
police and revenue are concerned, but, as we shall see presently,
tradition seems to say that Smith did deal with ecclesiastical estab-
lishments in this department of his lectures on jurisprudence, so
that possibly the lecture notes are deficient at this particular point,
or the subject was omitted for the particular year in which the
notes were taken. Then there is the long chapter on colonies. The
^ See above, p. xxxv.
See below, pp. liv, Iv, for a conjecture on this subject.
editor’s introduction xxxix
fact of colonies having attracted Adam Smith’s attention during
the interval between the lectures and the publication of his book
is not very surprising when we remember that the interval coincid-
ed almost exactly with the period from the beginning of the at-
tempt to tax the colonies to the Declaration of Independence.
But these additions are of small importance compared with the
introduction of the theory of stock or capital and unproductive
labour in Book II., the slipping of a theory of distribution into the
theory of prices towards the end of Book I., chapter vi., and the
emphasising of the conception of annual produce. These changes
do not make so much real difference to Smith’s own work as might
be supposed; the theory of distribution, though it appears in the
title of Book I., is no essential part of the work and could easily
be excised by deleting a few paragraphs in Book I., chapter vi., and
a few lines elsewhere; if Book II. were altogether omitted the
other Books could stand perfectly well by themselves. But to sub-
sequent economics they were of fundamental importance. They
settled the form of economic treatises for a century at least.
They were of course due to the acquaintance with the French
Economistes which Adam Smith made during his visit to France
with the Duke of Buccleugh in 1764-6. It has been said that he
might have been acquainted with many works of this school before
the notes of his lectures were taken, and so he might. But the notes
of his lectures are good evidence to show that as a matter of fact he
was not, or at any rate that he had not assimilated their main
economic theories. When we find that there is no trace of these
theories in the Lectures and a great deal in the Wealth of Nations ,
and that in the meantime Adam Smith had been to France and
mixed with all the prominent members of the ^^sect,” including their
master, Quesnay, it is difficult to understand why we should be
asked, without any evidence, to refrain from believing that he
came under physiocratic influence after and not before or during
his Glasgow period.
The confession of faith of the Economistes is embodied in Ques-
nay’s Tableau Economique, which one of them described as
worthy of being ranked, along with writing and money, as one of
the three greatest inventions of the human race.®’"'* It is reprinted
below from the facsimile of the edition of 1759, published by the
British Economic Association (now the Royal Economic Society)
in 1894.
Those who are curious as to the exact meaning of the zigzag lines
may study Quesnay’s Explication^ which the British Economic
Below, p. 643, note 19.
xi editor’s introduction
TABLEAU ECONOMIQUE,
Ohjets d considSrer, i°. Trois sortes de d6penses^ 2®. leur source; 3°. leurs
avances; 4®. leur distribution; 5®. leurs effets^ 6®. leur reproduction; 7®.
leurs rapports entr^elleSj 8®. leurs rapports awe la population; 9®. avec
V Agriculture; 10®. awe Vindustrie; ii®. avec le commerce; 12®. avec la
masse des richesses d^une Nation,
dMpensbs Dispenses du revenu, defenses
FRODUCTIVES VImpdt pril&oe, se partagtt STERILES
relatives d aux Depenses j^odtictives ei relatives^ d
V Agriculture^ b‘c. aux Depenses steriles. Vindustrie, &*c.
Avances annudles
Revernt
Avances annuelles
pour produire un revenu de
annuel
pour les Ouvrages des
tooll sont 600 II
de
Depenses steriles, sont
QQO'' prwlnueiti net,..*
300 “
Prodaefions " *
****..^
Onvragcs,
SOQ^C rejirodutsent net
....300^
^' 300 !!
” •"
i
’**'* -
\5C{^prodnl\ent net
....150
‘’3‘.*!::i5o
7 X^rrprod un eul vet
...."..75
37, lOT.,rf}>rodtn.\eni net
37.10
;7.‘.’V37. 10
18. iSijxjmldmseut vet
18.15.
14
vet.. ...
9...7,..S^
4.1.$... ^icproTitueiil net
4.I.$..!.9.
13...9
lOuxpwjildseuJ net,
2...6.I0.
net
l....$...5.
;;.:.’.:::3...3...5
V.:
QA\,.,Z.rrpf^dmsenl net
0.11. ..8.
1 1 ...s
0.,.,5. IQL.tcpioduiscHt net.
0...5.10-
0 ... 2 , 1 tTirprfxlfdscM nej
0...2.11.
0. .. J ..,S reprdduisent net
.. ....0...i...5.
b’c,
REFRODUIT TOTAL 600II, de reomu; de pluSj les frais annuels
de 600II et les intsrits des avances primitives dtt LaboureuTf de 300/Z que la terre
restitue. Ainsi la reproduction est de i^ooll compris le reoenu de 600IL qiii est la
base du calculi abstraction faite de Vimpdt prilevb, et des avances qu*exige sa
reproduction annuelle, ^c, Voyez V Explication d la page suivante.
editor’s introduction
Association published along with the table in 1894. For our pres-
ent purposes it is sufficient to see (i) that it involves a conception
of the whole annual produce or reproduction of a country; (2)
that it teaches that some labour is unproductive, that to maintain
the annual produce certain ^^avances^^ are necessary, and that this
annual produce is “distributed.” Adam Smith, as his chapter on
agricultural systems shows, did not appreciate the minutiae of the
table very highly, but he certainly took these main ideas and
adapted them as well as he could to his Glasgow theories. With
those theories the conception of an annual produce was in no way
inconsistent, and he had no difficulty in adopting annual produce
as the wealth -of a nation, though he very often forgetfully falls
back into older ways of speaking. As to unproductive labour, he
was not prepared to condemn the whole of Glasgow industry as
sterile, but was ready to place the mediaeval retainer and even the
modern menial servant in the unproductive class. He would even
go a little farther and put along with them all whose labour did
not produce particular vendible objects, or who were not employed
for the money-gain of their employers. Becoming somewhat con-
fused among these distinctions and the physiocratic doctrine of
^^avances^^ he imagined a close connexion between the employ-
ment of productive labour and the accumulation and employment
of capital. Hence with the aid of the common observation that
where a capitalist appears, labourers soon spring up, he arrived at
the view that the amount of capital in a country determines the
number of “useful and productive” labourers. Finally he slipped
into his theory of prices and their component parts the suggestion
that as the price of any one commodity is divided between wages,
profits and rent, so the whole produce is divided between labourers,
capitalists, \ and landlords.
These ideas about capital and unproductive labour are certain-
ly of great irnportance in the history of economic theory, but they
were fundamentally unsound, and were never so universally ac-
cepted as is commonly supposed. The conception of the wealth of
nations as an annual produce, annually distributed, however, has
been of immense value. Like other conceptions of the kind it was
certain to cbme. It might have been evolved direct from Davenant
or Petty nearly a century before. We need not suppose that some
one else would not soon have given it its place in English econom-
ics if Adam Smith had not done so, but that need not deter us from
recording the fact that it was he who introduced it, and that he in-
troduced it in consequence of his association with the Economistes.
If we attempt to carry the history of the origin of the Wealth of
xlii EDITOR^S INTRODUCTION
Nations farther back than the date of the lecture notes in 1763 or
thereabouts, we can still find a small amount of authentic informa-
tion. We know that Smith must have been using practically the
same divisions in his lectures in 1759, since he promises in the last
paragraph of the Moral Sentiments published in that year, ^^an-
other discourse” in which he would “endeavour to give an account
of the general principles of law and government, and of the differ-
ent revolutions they have undergone in the different ages and
periods of society, not only in what concerns justice, but in what
concerns police, revenue and arms, and whatever else is the object
of law.” It seems probable, however, that the economic portion of
the lectures was not always headed “police, revenue, and arms,”
since Millar, who attended the lectures when they were first de-
livered in 1751-2, says: —
“In the last part of his lectures he examined those political regula-
tions which are founded not upon the principle of justice^ but that of
expediency^ and which are calculated to increase the riches, the power
and the prosperity of a state. Under this view, he considered the po-
litical institutions relating to commerce, to finances, to ecclesiastical
and military establishments. What he delivered on these subjects con-
tained the substance of the work he afterwards published under the
title of ‘An Inquiry into the Nature and Causes of the Wealth of Na-
tions’.”®®
Of course this is not necessarily inconsistent with the economic
lectures having been denominated police, revenue, and arms, even
at that early date, but the italicising of “justice” and “expediency,”
if due to Millar, rather suggests the contrary, and there is no deny-
ing that the arrangement of “cheapness or plenty” under “police”
may very well have been an afterthought fallen upon to justify the
introduction of a mass of economic material into lectures on Juris-
prudence. As to the reason why that introduction took place the
circumstances of Smith’s first active session at Glasgow suggest
another motive besides his love for the subject, which, we may
notice, did not prevent him from publishing his views on Ethics
first.
His first appointment at Glasgow, it must be remembered, was
to the Professorship of Logic in January, 1751, but his engage-
ments at Edinburgh prevented his performing the duties that ses-
sion. Before the beginning of next session he was asked to act as
®®Dugald Stewart, in his “Account of the Life and Writings of Adam
Smith, read to the Royal Society of Edinburgh in 1795 and published in
Adam Smith’s posthumous Essays on Philosophical Subjects, 1795, p. xviii.
See Rae, Life of Adam Smith, pp. 53-5.
xliii
editor’s introduction
deputy for Craigie, the Professor of Moral Philosophy, who was
going away for the benefit of his health. He consented, and conse-
quently in the session of 1751-2 he had to begin the work of two
professorships, as to one of which he had very little previous warn-
ing.^*’’^ Every teacher in such a position would do his best to
utilise any suitable material which he happened to have by him,
and most men would even stretch a point to utilise even what was
not perfectly suitable.
Now we know that Adam Smith possessed in manuscript in the
hand of a clerk employed by him certain lectures which he read at
Edinburgh in the winter of 1750-1, and we know that in these lec-
tures he preached the doctrine of the beneficial effects of freedom,
and, according to Dugald Stewart, ‘‘many of the most important
opinions in the Wealth of Nations*" There existed when Stewart
wrote, “a short manuscript drawn up by Mr. Smith in the year
1755 and presented by him to a society of which he was then a
member.” Stewart says of this paper: —
“Many of the most important opinions in The Wealth of Nations
are there detailed; but I shall quote only the following sentences:
‘Man is generally considered by statesmen and projectors as the ma-
terials of a sort of political mechanics. Projectors disturb nature in
the course of her operations in human affairs; and it requires no more
than to let her alone, and give her fair play in the pursuit of her ends
that she may establish her own designs.’ And in another passage: ‘Lit-
tle else is requisite to carry a state to the highest degree of opulence
from the lowest barbarism, but peace, easy taxes, and a tolerable ad-
ministration of justice; all the rest being brought about by the natural
course of things. All governments which thwart this natural course,
which force things into another channel or which endeavour to arrest
the progress of society at a particular point, are unnatural, and to
support themselves are obliged to be oppressive and tyrannical. — ^A
great part of the opinions,’ he observes, ‘enumerated in this paper is
treated of at length in some lectures which I have still by me, and
which were written in the hand of a clerk who left my service six years
ago. They have all of them been the constant subjects of my lectures
since I first taught Mr. Craigie’s class, the first winter I spent in Glas-
gow, down to this day, without any considerable variation. They had
all of them been the subjects of lectures which I read at Edinburgh
the winter before I left it, and I can adduce innumerable witnesses
both from that place and from this, who will ascertain them suffici-
ently to be mine.’ ”
®^Rae, Life of Adam Smith, pp. 42-5.
‘^Stewart, in Smith’s Essays, pp. Ixxx, Ixxxi.
xliv editor’s introduction
It seems then that, when confronted with the two professorial
chairs in 1751, Smith had by him some lectures on progress, very
likely explaining “the slow progress of opulence,” and that, as
anyone in such circumstances would have liked to do, he put them
into his moral philosophy course.
As it happened, there was no difficulty in doing this. It seems
nearly certain that Craigie himself suggested that it should be
done. The request that Smith would take Craigie^s work came
through Cullen, and in answering Cullen’s letter, which has not
been preserved, Smith says, “You mention natural jurisprudence
and politics as the parts of his lectures which it would be most
agreeable for me to teach. I shall very willingly undertake both.”
Craigie doubtless knew what Smith had been lecturing upon in
Edinburgh in the previous winter and called it “politics.”
Moreover the traditions of the Chair of Moral Philosophy, as
known to Adam Smith, required a certain amount of economics.
A dozen years earlier he had himself been a student when Francis
Hutcheson was professor. So far as we can judge from Hutcheson’s
System of Moral Philosophy, which, as Dr. W. R. Scott has
shown,*^® was already in existence when Smith was a student,
though not published till 1755, Hutcheson lectured first on Ethics,
next upon what might very well be called Natural Jurisprudence,
and thirdly upon Civil Polity. Through the two latter parts a con-
siderable quantity of economic doctrine is scattered.
In considering “The Necessity of a Social Life,” Hutcheson
points out that a man in solitude, however strong and instructed in
the arts, “could scarce procure to himself the bare necessaries of
life even in the best soils or climates.”
“Nay ’tis well known that the produce of the labours of any given
number, twenty for instance, in providing the necessaries or conven-
iences of life, shall be much greater by assigning to one a certain sort
of work of one kind in which he will soon acquire skill and dexterity,
and to another assigning work of a different kind, than if each one of
the twenty were obliged to employ himself by turns in all the differ-
ent sorts of labour requisite for his subsistence without sufficient dex-
terity in any. In the former method each procures a great quantity of
goods of one kind, and can exchange a part of it for such goods ob-
tained by the labours of others as he shall stand in need of. One grows
expert in tillage, another in pasture and breeding cattle, a third in ma-
Rae, Life of Adam Smith, pp. 43-4.
R. Scott, Francis Hutcheson, 1900, pp. 210, 231. In the Introduc-
tion to Moral Philosophy, 1747, Civil Polity is replaced by “CEconomicks
and Politicks,” but “CEconomicks” only means domestic law, f.e., the rights
of husbands and wives, parents and children, masters and servants.
editor’s introduction xlv
sonry, a fourth in the chase, a fifth in iron-works, a sixth in the arts
of the loom, and so on throughout the rest. Thus all are supplied by
means of barter with the works of complete artists. In the other meth-
od scarce any one could be dexterous and skilful in any one sort of
labour.
“Again, some works of the highest use to multitudes can be effec-
tually executed by the joint labours of many, which the separate la-
bours of the same number could never have executed. The joint force
of many can repel dangers arising from savage beasts or bands of rob-
bers which might have been fatal to many individuals were they sep-
arately to encounter them. The joint labours of twenty men will cul-
tivate forests or drain marshes, for farms to each one, and provide
houses for habitation and inclosures for their flocks, much sooner than
the separate labours of the same number. By concert and alternate re-
lief they can keep a perpetual watch, which without concert they could
not accomplish.” ”
In explaining the “Foundation of Property” Hutcheson says
that when population was scanty, the country fertile and the cli-
mate mild, there was not much need for developing the rules of
property, but as things are, “universal industry is plainly neces-
sary for the support of mankind” and men must be excited to
labour by self-interest and family affection. If the fruits of men’s
labours are not secured to them, “one has no other motive to la-
bour than the general affection to his kind, which is commonly
much weaker than the narrower affections to our friends and re-
lations, not to mention the opposition which in this case would be
given by most of the selfish ones.” Willing industry could not be
secured in a communistic society
The largest continuous block of economic doctrine in the Sy^-
tem of Moral Philosophy is to be found in the chapter on “The
Values of Goods in Commerce and the Nature of Coin” which
occurs in the middle of the discussion of contracts. In this chapter
it is pointed out that it is necessary for commerce that goods
should be valued. The values of goods depend on the demand for
them and the difficulty of acquiring them. Values must be meas-
ured by some common standard, and this standard must be some-
thing generally desired, so that men may be generally willing to
take it in exchange. To secure this it should be something portable,
divisible without loss, and durable. Gold and silver best fulfil these
requirements. At first they were used by quantity or weight, with-
out coinage, but eventually the state vouched for quantity and
quality by its stamp. The stamp being “easy workmanship” adds
System of Moral Philosophy, vol. i., pp. 288, 289.
System of Moral Philosophy, vol. i., pp. 319-21.
xivi editor’s introduction
no considerable value. “Coin is ever valued as a commodity in
commerce as well as other goods; and that in proportion to the
rarity of the metal, for the demand is universal.'' The only way to
raise its value artificially would be by restricting the produce of
the mines.
“We say indeed commonly, that the rates of labour and goods have
risen since these metals grew plenty; and that the rates of labour and
goods were low when the metals were scarce; conceiving the value of
the metals as invariable, because the legal names of the pieces, the
pounds, shillings or pence, cpntinue to them always the same till a law
alters them. But a day's digging or ploughing was as uneasy to a man
a thousand years ago as it is now, though he could not then get so
much silver for it: and a barrel of wheat, or beef, was then of the
same use to support the human body, as it is now when it is exchanged
for four times as much silver. Properly, the value of labour, grain,
and cattle are always pretty much the same, as they afford the same
uses in life, where no new inventions of tillage or pasturage cause a
greater quantity in proportion to the demand.”
Lowering and raising the coins are unjust and pernicious opera-
tions. Copious mines abate the value of the precious metals.
“The standard itself is varying insensibly; and therefore if we would
settle fixed salaries which in all events would answer the same pur-
poses of life, or support those entituled to them in the same condition
with respect to others, they should neither be fixed in the legal names
of coin, nor in a certain number of ounces of gold and silver. A decree
of state may change the legal names; and the value of the ounces may
alter by the increase or decrease of the quantities of these metals. Nor
should such salaries be fixed in any quantities of more ingenious man-
ufactures, for nice contrivances to facilitate labour may lower the
value of such goods. The most invariable salary would be so many
days labour of men, or a fixed quantity of goods produced by the
plain inartificial labours, such goods as answer the ordinary purposes
of life. Quantities of grain come nearest to such a standard.”
Prices of goods depend upon the expenses, the interest of money
employed, and the “labours too, the care, attention, accounts and
correspondence about them.” Sometimes we must “take in also the
condition of the person so employed,” since “the expense of his
station of life must be defrayed by the price of such labours; and
they deserve compensation as much as any other. This additional
price of their labours is the just foundation of the ordinary profit
of merchants.”
'^System of Moral Philosophy, vol. ii., p. 58.
vol. ii., pp. 62, 63.
editor’s introduction Xlvii
In the next chapter, on “The Principal Contracts in a Social
Life,” we find the rent or hire of unfruitful goods, such as houses,
justified on the ground that the proprietor might have employed
his money or labour on goods naturally fruitful.
“If in any way of trade men can make far greater gains by help of
a large stock of money than they could have made without it, ’tis but
just that he who supplies them with the money, the necessary means
of this gain, should have for the use of it some share of the profit,
equal at least to the profit he could have made by purchasing things
naturally fruitful or yielding a rent. This shows the just foundation
of interest upon money lent, though it be not naturally fruitful. Hous-
es yield no fruits or increase, nor will some arable grounds yield any
without great labour. Labour employed in managing money in trade
or manufactures will make it as fruitful as anything. Were interest
prohibited, none would lend except in charity; and many industrious
hands who are not objects of charity would be excluded from large
gains in a way very advantageous to the public.”
Reasonable interest varies with the state of trade and the quan-
tity of coin. In a newly settled country great profits are made by
small sums, and land is worth fewer years^ purchase, so that a
higher interest is reasonable. Laws in settling interest must fol-
low “these natural causes,” otherwise they will be evaded.*^®
In the chapter “Of the Nature of Civil Laws and their Execu-
tion,” we find that after piety the virtues most necessary to a state
are sobriety, industry, justice and fortitude.
“Industry is the natural mine of wealth, the fund of all stores for
exportation by the surplus of which beyond the value of what a nation
imports, it must increase in wealth and power. Diligent agriculture
must furnish the necessaries of life and the materials for all manu-
factures; and all mechanic arts should be encouraged to prepare them
for use and exportation. Goods prepared for export should generally
be free from all burdens and taxes, and so should the goods be which
are necessarily consumed by the artificers, as much as possible; that
no other country be able to undersell like goods at a foreign market.
Where one country alone has certain materials, they may safely im-
pose duties upon them when exported; but such moderate ones as
shall not prevent the consumption of them abroad.
“If people have not acquired an habit of industry, the cheapness of
all the necessaries of life rather encourages sloth. The best remedy is
to raise the demand for all necessaries; not merely by premiums upon
exporting them, which is often useful too; but by increasing the num-
System of Moral Philosophy, pp. 71-2.
Ibid., vol. ii., p. 73.
xlviii editor’s INTRODUCTION
ber of people who consume them; and when they are dear, more la-
bour and application will be requisite in all trades and arts to procure
them. Industrious foreigners should therefore be invited to us, and all
men of industry should live with us unmolested and easy. Encourage-
ment should be given to marriage and to those who rear a numerous
offspring to industry. The unmarried should pay higher taxes as they
are not at the charge of rearing new subjects to the state. Any foolish
notions of meanness in mechanic arts, as if they were unworthy of
men of better families, should be borne down, and men of better con-
dition as to birth or fortune engaged to be concerned in such occupa-
tions. Sloth should be punished by temporary servitude at least. For-
eign materials should be imported and even premiums given, when
necessary, that all our own hands may be employed; and that, by ex-
porting them again manufactured, we may obtain from abroad the
price of our labours. Foreign manufactures and products ready for
consumption should be made dear to the consumer by high duties, if
we cannot altogether prohibit the consumption; that they may never
be used by the lower and more numerous orders of the people whose
consumption would be far greater than those of the few who are
wealthy. Navigation, or the carriage of goods foreign or domestic,
should be encouraged, as a gainful branch of business surpassing often
all the profit made by the merchant. This too is a nursery of fit hands
for defence at sea.
“ ’Tis vain to allege that luxury and intemperance are necessary to
the wealth of a state as they encourage all labour and manufactures
by making a great consumption. It is plain there is no necessary vice
in the consuming of the finest products or the wearing of the dearest
manufactures by persons whose fortunes can allow it consistently with
the duties of life. And what if men grew generally more frugal and
abstemious in such things? more of these finer goods could be sent
abroad; or if they could not, industry and wealth might be equally
promoted by the greater consumption of goods less chargeable: as he
who saves by abating of his own expensive splendour could by gener-
ous ofiSces to his friends, and by some wise methods of charity to the
poor, enable others to live so much better and make greater consump-
tion than was made formerly by the luxury of one. , , . Unless there-
fore a nation can be found where all men are already provided with
all the necessaries and conveniencies of life abundantly, men may,
without any luxury, make the very greatest consumption by plentiful
provision for their children, by generosity and liberality to kinsmen
and indigent men of worth, and by compassion to the distresses of the
poor ”
Under “Military skill and fortitude” Hutcheson discusses what
Adam Smith afterwards placed under “Arms,” and decides in
favour of a trained militia.'^^
'^System of Moral Philosophy, vol. ii., pp. 318-21.
vol. ii., pp. 323-5.
editor’s introduction
In the same chapter he has a section with the marginal title
‘^what taxes or tributes most eligible/’ which contains a repudia-
tion of the policy of taxation for revenue only: —
“As to taxes for defraying the public expenses, these are most con-
venient which are laid on matters of luxury and splendour rather than
the necessaries of life; on foreign products and manufactures rather
than domestic; and such as can be easily raised without many expen-
sive offices for collecting them. But above all, a just proportion to the
wealth of people should be observed in whatever is raised from them,
otherways than by duties upon foreign products and manufactures,
for such duties are often necessary to encourage industry at home,
though there were no public expenses.” ™
This proportionment of taxation to wealth he thinks cannot be
attained except by means of periodical estimation of the wealth of
families, since land taxes unduly oppress landlords in debt and let
moneyed men go free, while duties and excises are paid by the
consumer, so that ‘^hospitable generous men or such as have nu-
merous families supported genteelly bear the chief burden here,
and the solitary sordid miser bears little or no share of it.”
It is quite clear from all this that Smith was largely influenced
by the traditions of his chair in selecting his economic subjects.
Dr. Scott draws attention to the curious fact that the very order in
which the subjects happen to occur in Hutcheson’s System is al-
most identical with the order in which the same subjects occur in
Smith’s Lectures?^ We are strongly tempted to surmise that when
Smith had hurriedly to prepare his lectures for Craigie’s class, he
looked through his notes of his old master’s lectures (as hundreds
of men in his position have done before and after him) and grouped
the economic subjects together as an introduction and sequel to the
lectures which he had brought with him from Edinburgh. Hutche-
son was an inspiring teacher. His colleague, Leechman, says: —
“As he had occasion every year in the course of his lectures to ex-
plain the origin of government and compare the different forms of it,
he took peculiar care, while on that subject, to inculcate the impor-
tance of civil and religious liberty to the happiness of mankind: as a
warm love of liberty and manly zeal for promoting it were ruling
principles in his own breast, he always insisted upon it at great length
and with the greatest strength of argument and earnestness of persua-
sion: and he had such success on this important point, that few, if
any, of his pupils, whatever contrary prejudices they might bring
Ibid,, pp, 340-1.
^System of Moral Philosophy, vol. ii, pp. 341-2.
Francis Hutcheson, pp. 232-5.
1 editor’s introduction
along with them, ever left him without favourable notions of that side
of the question which he espoused and defended ”
Half a century later Adam Smith spoke of the Glasgow Chair of
Moral Philosophy as an ‘^office to which the abilities and virtues
of the never-to-be-forgotten Dr. Hutcheson had given a superior
degree of illustration.”
But while we may well believe that Adam Smith was influenced
in the general direction of liberalism by Hutcheson, there seems
no reason for attributing to Hutcheson’s influence the belief in the
economic beneficence of self-interest which permeates the Wealth
of Nations and has afforded a starting ground for economic specu-
lation ever since. Hutcheson, as some of the passages just quoted
show, was a mercantilist, and all the economic teaching in his Sys-
tem is very dry hopes compared to Smith’s vigorous lectures on
Cheapness or Plenty, with their often repeated denunciation of
the ^^absurdity” of current opinions and the “pernicious regula-
tions” to which they gave rise. Twenty years after attending his
lectures, Adam Smith criticised Hutcheson expressly on the ground
that he thought too little of self-love. In the chapter of the Theory
of Moral Sentiments on the systems of philosophy which make vir-
tue consist in benevolence, he says that Hutcheson believed that it
was benevolence only which could stamp upon any action the
character of virtue: the most benevolent action was that which
aimed at the good of the largest number of people, and self-love
was a principle which could never be virtuous, though it was inno-
cent when it had no other effect than to make the individual take
care of his own happiness. This “amiable system, a system which
has a peculiar tendency to nourish and support in the human heart
the noblest and the most agreeable of all affections,” Smith consid-
ered to have the “defect of not sufficiently explaining from whence
arises our approbation of the inferior virtues of prudence, vigi-
lance, circumspection, temperance, constancy, firmness.”
“Regard,” he continues, “to our own private happiness and interest
too, appear upon many occasions very laudable principles of action.
The habits of oeconomy, industry, discretion, attention and application
of thought, are generally supposed to be cultivated from self-inter-
ested motives, and at the same time are apprehended to be very
praise-worthy qualities which deserve the esteem and approbation of
every body. . . . Carelessness and want of oeconomy are universally
®®In the preface to Hutcheson’s System of Moral Philosophy j pp. xxxv,
xxxvi.
^Rae, Life of Adam Smith, p. 411.
editor’s introduction
disapproved of, not, however, as proceeding from a want of benevo-
lence, but from a want of the proper attention to the objects of self-
interest.’^ ^
Adam Smith clearly believed that Hutcheson’s system did not
give a sufficiently high place to self-interest. It was not Hutcheson
that inspired his remark, “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.” He may have obtained
a general love of liberty from Hutcheson, but whence did he ob-
tain the belief that self-interest works for the benefit of the whole
economic community? He might possibly of course have evolved
it entirely in his own mind without even hearing another lecture or
reading another book after he left Hutcheson’s class. But it seems
probable — ^we cannot safely say more — ^that he was assisted by
his study of Mandeville, a writer who has had little justice done
him in histories of economics, though McCulloch gives a useful
hint on the subject in his Literature of Political Economy, In the
chapter of the Moral Sentiments which follows the one which con-
tains the criticism of Hutcheson just quoted, Smith deals with
“Licentious Systems.” The appearances in human nature, he says,
which seem at first sight to favour such systems were “slightly
sketched out with the elegance and delicate precision of the duke
of Rochefaucault, and afterwards more fully represented with the
lively and humorous, though coarse and rustic eloquence of Dr.
Mandeville.” ««
Mandeville, he says, attributes all commendable acts to “a love
of praise and commendation,” or “vanity,” and not content with
that, endeavours to point out the imperfection of human virtue in
many other respects.
“Wherever our reserve with regard to pleasure falls short of the
most ascetic abstinence, he treats it as gross luxury and sensuality.
Every thing according to him, is luxury which exceeds what is abso-
lutely necessary for the support of human nature, so that there is vice
even in the use of a clean shirt or of a convenient habitation.”
But, Smith thinks, he has fallen into the great fallacy of repre-
senting every passion as wholly vicious if it is so in any degree and
direction: —
Moral Sentiments, 1759, PP- 464-6.
Below, vol. i., p. 16.
Moral Sentiments, 1759, p. 474.
^ Ibid., 1759, P. 4S3.
EDITOR^S INTRODUCTION
‘It is thus that he treats everything as vanity which has any refer-
ence either to what are or to what ought to be the sentiments of oth-
ers: and it is by means of this sophistry that he establishes his fav-
ourite conclusion that private vices are public benefits. If the love of
magnificence, a taste for the elegant arts and improvements of human
life, for whatever is agreeable in dress, furniture, or equipage, for
architecture, statuary, painting and music, is to be regarded as luxury,
sensuality and ostentation, even in those whose situation allows, with-
out any inconveniency, the indulgence of those passions, it is certain
that luxury, sensuality and ostentation are public benefits: since, with-
out the qualities upon which he thinks proper to bestow such oppro-
brious names, the arts of refinement could never find encouragement
and must languish for want of employment.”
‘^Such/’ Smith concludes, “is the system of Dr. Mandeville,
which once made so much noise in the world.’’ However destruc-
tive it might appear, he thought “it could never have imposed upon
so great a number of persons, nor have occasioned so general an
alarm among those who are friends of better principles, had it not
in some respects bordered upon the truth.”
Mandeville’s work originally consisted merely of a poem of 400
lines called “The Grumbling Hive; or Knaves Turn’d Honest,”
which according to his own account was first published as a six-
penny pamphlet about 1705.^® In 1714 he reprinted it, appending
a very much larger quantity of prose, under the title of The Fable
of the Bees: or Private Vices, Public Benefits; with an Essay oii
Charity and Charity Schools and a Search into the Nature of SocU
ety. In 1729 he added further a second part, nearly as large as the
first, consisting of a dialogue on the subject. The “grumbling hive,’'
which is in reality a human society, is described in the poem as
prospering greatly so long as it was full of vice: —
“The worst of all the multitude
Did something for the common good.
This was the state’s craft, that maintain’d
The whole, of which each part complain’d:
This, as in musick harmony,
Made jarrings in the main agree ;
Parties directly opposite,
Assist each oth’r, as ’twere for spight;
And temp’rance with sobriety
Serve drunkenness and gluttony.
The root of evil, avarice,
That damn’d ill-natur’d baneful vice,
Was slave to prodigality,
^ Ibid., p. 485.
^ Moral Sentiments, 1759, p. 487.
^ Fable of the Bees, 1714, preface.
editor’s introduction 1“
That noble sin ; whilst luxury
Employ’d a million of the poor,
And odious pride a million more:
Envy itself and vanity
Were ministers of industry ;
Their darling folly, fickleness
In diet, furniture, and dress,
That strange ridic’lous vice, was made
The very wheel that turn’d the trade.
Their laws and deaths were equally
Objects of mutability;
For what was well done for a time.
In half a year became a crime ,*
Yet whilst they altered thus their laws,
Still finding and correcting flaws.
They mended by inconstancy
Faults which no prudence could foresee.
Thus vice nursed ingenuity,
Which join’d with time and industry.
Had carry’d life’s conveniencies.
It’s real pleasures, comforts, ease,
To such a height, the very poor
Lived better than the rich before;
And nothing could be added more.”
But the bees grumbled till Jove in anger swore he would rid the
hive of fraud. The hive became virtuous, frugal and honest, and
trade was forthwith ruined by the cessation of expenditure. At the
end of the “Search into the Nature of Society’’ the author sums up
his conclusion as follows:
“After this I flatter myself to have demonstrated that neither the
friendly qualities and kind affections that are natural to man, nor the
real virtues he is capable of acquiring by reason and self-denial, are
the foundation of society: but that what we call evil in the world,
moral as well as natural, is the grand principle that makes us sociable
creatures, the solid basis, the life and support of all trades and em-
ployments without exception: that there we must look for the true
origin of all arts and sciences, and that the moment evil ceases the
society must be spoiled, if not totally dissolved.’'
In a letter to the London Journal of loth August, 1723, which
he reprinted in the edition of 1724, Mandeville defended this pas-
sage vigorously against a hostile critic. If, he said, he had been
writing to be understood by the meanest capacities, he would have
explained that every want was an evil: —
“That on the multiplicity of those wants depended all those mutual
services which the individual members of a society pay to each other:
®^Pp. 11-13 in the ed. of 1705.
®®Pp. 427-8 in 2nd ed., 1723.
liv editor’s introduction
and that consequently, the greater variety there was of wants, the
larger number of individuals might find their private interest in la-
bouring for the good of others, and united together, compose one
body.”*®
If we bear in mind Smith’s criticism of Hutcheson and Mande-
ville in adjoining chapters of the Moral Sentiments, and remember
further that he must almost certainly have become acquainted
with the Fable of the Bees when attending Hutcheson’s lectures or
soon afterwards, we can scarcely fail to suspect that it was Man-
deville who first made him realise that “it is not from the benevo-
lence of the butcher, the brewer or the baker that we expect our
dinner, but from their regard to their own interest.” Treating the
word “vice” as a mistake for self-love, Adam Smith could have re-
peated with cordiality Mandeville’s lines already quoted: —
“Thus vice nursed ingenuity,
Which join’d with time and industry,
Had carry’d life’s conveniencies.
It’s real pleasures, comforts, ease,
To such a height, the very poor
Lived better than the rich before.”
Smith put the doggerel into prose, and added something from
the Hutchesonian love of liberty when he propounded what is
really the text of the polemical portion of the Wealth of Na-
tions : —
*‘The natural effort of every individual to better his own condition,
when suffered to exert itself with freedom and security, is so power-
ful a principle, that it is alone and without any assistance, not only
capable of carrying on the society to wealth and prosperity, but of
surmounting a hundred impertinent obstructions with which the folly
of human laws too often incumbers its operations.”
Experience shows that a general belief in the beneficence of the
economic working of self-interest is not always sufficient to make
even a person of more than average intelligence a free-trader. Con-
sequently it would be rash to suppose that Smith’s disbelief in the
mercantile system was merely the natural outcome of his general
belief in economic freedom. Dugald Stewart’s quotations from his
paper of 1755 do not contain anything to show that he was pour-
ing contempt on the doctrine before he left Edinburgh and in his
early years at Glasgow. It seems very likely that the reference in
the lectures to Hume’s “essays showing the absurdity of these and
*®P. 465 in ed. of 1724.
Below, p. 508.
editor’s introduction
other such doctrines” is to be regarded as an acknowledgment
of obligation, and therefore that it was Hume, by his Political Dis-
courses on Money and the Balance of Trade in 1752, who first
opened Adam Smith’s eyes on this subject. The probability of this
is slightly increased by the fact that in the lectures the mercantile
fallacies as to the balance of trade were discussed in connexion
with Money, as in Hume’s Discourses, instead of in the position
which they would have occupied if Smith had either followed
Hutcheson’s order, or placed them among the causes of the “slow
progress of opulence.” It is, too, perhaps, not a mere coincidence
that while both Hume in the Discourses in 1752 and Smith in his
lectures ten years later rejected altogether the aim of securing a
favourable balance of trade, Hume still clearly believed in the
utility of protection for home industries, and Smith is at any rate
reported to have made a considerable concession in its favour.^®
It would be useless to carry the inquiry into the origin of Adam
Smith’s views any further here. Perhaps it has been carried too far
already. In the course of the Wealth of Nations Smith actually
quotes by their own name or that of their authors almost one hun-
dred books. An attentive study of the notes to the present edition
will convince the reader that though a few of these are quoted at
second hand the number actually used was far greater. Usually but
little, sometimes only a single fact, phrase or opinion, is taken from
each, so that few authors are less open than Adam Smith to the
reproach of having rifled another man’s work. That charge has in-
deed never seriously been brought against him, except in regard to
Turgot’s Riflexions, and in that case not a particle of evidence has
ever been produced to show that he had used or even seen the book
in question. The Wealth of Nations was not written hastily with
the impressions of recent reading still vivid on the author’s brain.
Its composition was spread over at least the twenty-seven years
from 1749 to 1776. During that period economic ideas crossed and
recrossed the Channel many times, and it is as useless as it is in-
vidious to dispute about the relative shares of Great Britain and
France in the progress effected. To go further and attempt to ap-
portion the merit between different authors is like standing on
some beach and discussing whether this or that particular wave
had most to do with the rising tide. One wave may appear to have
Lectures, p. 197.
Above pp. XXXV, xxxviii. Moreover, before bringing out the second edition
of his Discourses, Hume wrote to Adam Smith asking for suggestions. That
Smith made no remark on the protectionist passage in the discourse on the
Balance of Trade seems to be indicated by the fact that it remained un-
altered (see Hume’s Essays, ed. Green & Grose, vol. i., pp. 59, 343 and 344).
EDITOR^S INTRODUCTION
what credit there is in sweeping over a child’s first sand castle and
another wave may evidently wipe out his second, but both would
have been swamped just as effectually, and almost as soon, on a
perfectly calm day.
AN INQUIRY INTO THE NATURE AND CAUSES
OF THE
WEALTH OF NATIONS
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 im-
mediate 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 use-
ful 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 annusd supply must, in that par-
ticular situation, depend upon those two circumstances.
The abundance or scantiness of this supply too seems to depend
^This word, with “annually” just below, at once marks the transition
from the older British economists' ordinary practice of reprding the wealth
of a nation as an accumulated fund. Following the physiocrats, Smith sees
that the important thing is how much can be produced in a given time.
^Cp. with this phrase Locke, Some Considerations of the Consequences
of the Lowering of Interest and Raising the Value of Money, ed. of 1696,
p. 66, “the intrinsic natural worth of anything consists in its fitness to sup-
ply the necessities or serve the conveniencies of human life ”
‘‘The implication that the nation's welfare is to be reckoned by the av-
erage welfare of its members, not by the aggregate, is to be noticed.
* Ed. I reads “with which labour is generally applied^ in it.”
“ This second circumstance may be stretched so as to include the duration
and intensity of the labour of those who are usefully employed, but an-
other important circumstance, the quantity and quality of the accumulated
instruments of production, is altogether omitted.
Ivii
The pro-
duce of
annual
labour
supplies
annual
consump-
tion,
better or
worse ac-
cording
to the
propor-
tion of
produce
to people,
which
propor-
tion is
regulated
by the
skill, etc.,
of the
Iviii
labour
and the
propor-
tion of
useful
labourers,
and more
by the
sWll, etc.,
than by
the pro-
portion of
useful
labourers,
as is
shown by
the great-
er pro-
duce of
civilised
societies.
The
causes of
improve-
ment and
natural
distribu-
tion are
the sub-
ject of
Book I.
Capital
stock,
which
regulates
the pro-
portion of
useful
labourers,
is treated
of in
Book 11 .
PLAN OF WORK
4
more upon the former of those two circumstances than upon the
latter. Among the savage nations of hunters and fishers, every in-
dividual who is able to work, is more or less employed in useful
labour, and endeavours to provide, as well as he can, the necessa-
ries and conveniences of life, for himself, or ^ such of his family or
tribe as are either too old, or too young, or too infirm to go a hunt-
ing 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 destroy-
ing, 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 na-
tions, on the contrary, though a great number of people do not la-
bour at all, many of whom consume the produce of ten times, fre-
quently of a hundred times more labour than the greater part of
those who work; yet the produce of the whole labour of the so-
ciety 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 con-
veniencies 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 judg-
ment with which labour is applied in any nation, the abundance or
scantiness of its annual supply must depend, during the continu-
ance 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 produc-
tive ® labourers, it will hereafter appear, is every where in propor-
tion 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.
® Ed. I reads “and.”^
’ Only one cause, the division of labour, is actually treated,
®For the physiocratic origin of the technical use of the terms “distribute'’
and “distribution,” see the Editor’s Introduction.
® This word slips in here as an apparently unimportant synonym of “use-
ful,” but subsequently ousts “useful” altogether, and is explained in such a
way that unproductive labour may be useful; see esp. below p. 315,
PLAN OF WORK
Nations tolerably well advanced as to skill, dexterity, and judg-
ment, 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 prod-
uce. The policy of some nations has given extraordinary encour-
agement to the industry of the country; that of others to the in-
dustry of towns. Scarce any nation has dealt equally and impar-
tially with every sort of industry. Since the downfall of the Roman
empire, the policy of Europe has been more favourable to arts,
manufactures, and commerce, the industry of towns; than to ag-
riculture, 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 ceconomy; of which some magnify
the importance of that industry which is carried on in towns, oth-
ers 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 consump-
tion, 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 show; first, what are the necessary
expences of the sovereign, or commonwealth; which of those ex-
pences 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 expences incumbent on the whole
society, and what are the principal advantages and inconveniencies
See the index fot the examples of the use of this term.
Ed. I does not contain “to explain.”
^“Ed. I reads “what is the nature.”
^“Ed. I reads “is treated of in.”
^*Ed. I reads “of the society.”
The cir-
cum-
stances
which led
Europe to
encourage
the indus-
try of the
towns and
discour-
age agri-
culture
are dealt
with in
Book III.
The
theories
to which
different
policies
have
given rise
are ex-
plained in
Book IV.
The ex-
penditure,
revenue
and debts
of the
sovereign
are
treated of
in Book
V.
lx
PLAN OF WORK
of each of those methods: and, thirdly and lastly, what are the
reasons and causes which have induced almost all modern govern-
ments 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.^'
Read in conjunction with the first two paragraphs, this sentence makes
it clear that the wealth of a nation is to be reckoned by its per capita in-
come. But this view is often temporarily departed from in the course of
the work; see the index, sj;o. Wealth.
THE WEALTH OF NATIONS
#
BOOK I
Of the Causes of Improvement in the productive Powers of Labour,
and of the Order according to which its Produce is naturally
distributed among the different Ranks of the People,
CHAPTER I
OF THE DIVISION OF LABOUR ^
The greatest improvement ^ in the productive powers of labour,
and the greater part of the skill, dexterity, and judgment with
which it is any where 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
^ This phrase, if used at all before this time, was not a familiar one. Its
presence here is probably due to a passage in Mandeville, Fable of the Bees,
pt. ii. (1729) dial, vi., p. 335: “Cleo. . . . when once men come to be gov-
erned by written laws, all the rest comes on apace ... No number of men,
when once they enjoy quiet, and no man needs to fear his neighbour, will
be long without learning to divide and subdivide their labour. Hor. I don’t
understand you, Cleo. Man, as I have hinted before, naturally loves to im-
itate what he sees others do, which is the reason that savage people all do
the same thing: this hinders them from meliorating their condition, though
they are always wishing for it: but if one will wholly apply himself to the
making of bows and arrows, whilst another provides food, a third builds
huts, a fourth makes garments, and a fifth utensils, they not only become
useful to one another, but the callings and employments themselves will, in
the same number of years, receive much greater improvements, than if all
had been promiscuously followed by every one of the five. Hor. I believe
you are perfectly right there; and the truth of what you say is in nothing so
conspicuous as it is in watch-making, which is come to a higher degree of
perfection than it would have been arrived at yet, if the whole had always
remained the employment of one person ; and I am persuaded that even the
plenty we have of clocks and watches, as well as the exactness and beauty
they may be made of, are chiefly owing to the division that has been made
of that art into many branches.” The index contains, “Labour, The useful-
ness of dividing and subdividing it.” Joseph Harris, Essay upon Money and
Coins, 1757, pt. i., § 12, treats of the “usefulness of distinct trades,” or “the
advantages accruing to mankind from their betaking themselves severally to
different occupations,” but does not use the phrase “division of labour.”
*Ed. I reads “improvements.”
Division
of labour
is the
great
cause of
3
its in-
creased
powers,
as may be
better un-
derstood
from a
particular
example,
such as
pin-mak-
ing.
4 THE WEALTH OF NATIONS
society, will be more easily understood, by considering in what
manner it operates in some particular manufactures. It is com-
monly 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 peo-
ple, 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 con-
trary, 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 manu-
factures,^ 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 manufac-
ture; but one in which the division of labour has been very often
taken notice of, the trade of the pin-maker; a workman not edu-
cated to this business (which the division of labour has rendered a
distinct trade),® nor acquainted with the use of the machinery em-
ployed in it (to the invention of which the same division of labour
has probably given occasion), could scarce, perhaps, with his ut-
most 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 opera-
tions; to put it on, is a peculiar business, to whiten the pins is an-
other; 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 manufacto-
® Ed. I reads “Though in them.”
* Another and perhaps more important reason for taking an example like
that which follows is the possibility of exhibiting the advantages of ^vision
of labour in statistical form.
This parenthesis would alone be sufficient to show that those are wrong
who believe Smith did not include the separation of employments in “divi-
sion of labour.”
5
DIVISION OF LABOUR
ries, 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 dis-
tinct 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 dif-
ferent operations.
In every other art and manufacture, the effects of the division of The effect
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 trades
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 vision of*
proportionable increase of the productive powers of labour. The employ-
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
® In Adam Smith’s Lectures, p. 164, the business is, as here, divided inta
eighteen operations This number is doubtless taken from the Encyclop&die,
tom. V. (published in 1755), s,v. fipingle. The article is ascribed to M. De-
laire, “qui decrivait la fabrication de P^pingle dans les ateliers meme des
ouvriers,” p. 807 In some factories the division was carried further, E.
Chambers, Cyclopcedia, vol. ii., 2nd ed., 1738, and 4th ed., 1741, s,v. Pin,
makes the number of separate operations twenty-five.
6
THE WEALTH OF NATIONS
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 manufac-
tures. 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 al-
most 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 re-
turning 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 ^ways 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 expence 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 pro-
portion to the superiority of labour and expence. 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, there-
fore, 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 de-
gree 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 tnose of Poland. But though the poor coun-
try, 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
" Ed. I reads “the.”
^ Ed. I reads “the lands” here and in the line above.
DIVISION OF LABOUR 7
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 hard-ware 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 except-
ed, without which no country can well subsist.
This great increase of the quantity of work, which, in conse-
quence of the division of labour, the same number of people are cap-
able 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 workman necessar-
ily increases the quantity of the work he can perform; and the divi-
sion 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
®Ed. I reads “because the silk manufacture does not suit the climate of
England”
^®In Lectures, p. 164, the comparison is between English and French
“toys,” ie., small metal articles.
^^Ed. I places “in consequence of the division of labour” here instead of
in the line above,
““Pour la c 616 rit 6 du travail et la perfection de I’ouvrage, elles depend-
ent enticement de la multitude des ouvriers rassembles. Lorsqu’une manu-
facture est nombreuse, chaque operation occupe un homme dif£6rent. Tel
ouvrier ne fait et ne fera de sa vie qu’une seule et unique chose; tel autre
une autre chose: d'ou il arrive que chacune s’exCute bien et promptement,
et que Touvrage le mieux fait est encore celui qu’on a k meilleur march6.
D’ailleurs le goht et la fa^on se perfectionnent necessairement entre un grand
nombre d’ouvriers, parce qu’il est difficile qu’il ne s’en rencontre quelques-
uns capables de refiChir, de combiner, et de trouver enfin le seul moyen qui
puisse les mcttre audessus de leurs semblables; le moyen ou d’epargner la
matiCe, ou d’allonger le temps, ou de surfaire lindustrie, soit par une ma-
chine nouvelle, soit par une manoeuvre plus conmodp.^^’—Encyclopidie, tom
i. (1751), p. 717, s.v. Art. All three advantages mentioned in the text above
are included here.
The ad-
vantage is
due to
three dr.
cum-
stances,
(i) im-
proved
dexterity.
(2) sav-
i^of
time.
S THE WEALTH OF NATIONS
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 thous-
and 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 opera-
tions. 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 differ-
ent operations into which the making of a pin, or of a metal but-
ton,^® is subdivided, are all of them much more simple, and the dex-
terity 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, ex-
ceeds what the human hand could, by those who had never seen
them, be supposed capable of acquiring.
Secondly, the advantage which is gained by saving the time com-
monly 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 impos-
sible 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 lose 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 tri-
fles than applies to good purpose. The habit of sauntering and of in-
dolent 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 al-
ways slothful and lazy, and incapable of any vigorous application
“In Lectures, p. i66, “a country smith not accustomed to make nails will
work very hard for three or four hundred a day and those too very bad,”
“ In Lectures, p. i66, “a boy used to it will easily make two thousand and
those incomparably better”
“ In Lectures, p. 255, it is implied that the labour of making a button was
divided among eighty persons.
“The same example occurs in Lectures, p. 166.
DIVISION OF LABOUR 9
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 perform-
ing.
Thirdly, and lastly, every body must be sensible how much la-
bour is facilitated and abridged by the application of proper ma-
chinery. It is unnecessary to give any example.^^ I shall only ob-
serve, therefore,^® that the invention of all those machines by which
labour is so much facilitated and abridged, seems to have been orig-
inally 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 naturily 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, wherever the nature of it ad-
mits of such improvement. A great part of the machines made use
of in those manufactures in which labour is most subdivided,
were originally the inventions 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 ma-
chines, 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,^^ 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 ty-
ing a string from the handle of the valve which opened this com-
munication 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.
Examples are given in Lectures, p. 167; “Two men and three horses will
do more in a day with the plough than twenty men without it. The miller
and his servant will do more with the water mill than a dozen with the hand
mill, though it too be a machine ”
Ed. I reads “I shall, therefore, only observe.”
Ed. I reads “machines employed.” ^ Ed. i reads “of common.”
I e., steam-engines.
and (3)
applica-
tion of
machin-
ery,
invented
by work-
men,
or by ma-
chine-
makers
and philo-
sophers.
THE WEALTH OE NATIONS
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 mak-
ers of the machines, when to make them became the business of a
peculiar trade; and some by that of those who are called philoso-
phers 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 spec-
ulation 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 dif-
ferent 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, improves dexterity,
and saves time. Each individual becomes more expert in his own pe-
culiar branch, more work is done upon the whole, and the quantity
of science is considerably increased by it.^^
^ This pretty story is largely, at any rate, mythical. It appears to have
grown out of a misreading (not necessarily by Smith) of the following pas-
sage: ‘‘They used before to work with a buoy in the cylinder enclosed in a
pipe, which buoy rose when the steam was strong, and opened the injection,
and made a stroke; thereby they were capable of only giving six, eight or
ten strokes in a minute, till a boy, Humphry Potter, who attended the en-
gine, added (what he called scoggan) a catch that the beam Q always
opened; and then it would go fifteen or sixteen strokes in a minute. But this
being perplexed with catches and strings, Mr. Henry Beighton, in an engine
he had built at Newcastle-on-Tyne in 1718, took them all away, the beam
itself simply supplying all much better.”—}. T. Desaguliers, Course of Ex-
perimental Philosophy, vol. ii., 1744, p. 533. From pp. 469, 471, it appears
that hand labour was originally used before the “buoy” was devised.
“ In Lectures, p. 167, the invention of the plough is conjecturally attrib-
uted to a farmer and that of the hand-mill to a slave, while the invention of
the water-wheel and the steam engine is credited to philosophers. Mandc-
viHe is very much less favourable to the claims of the philosophers: “They
are veiy seldom the same sort of people, those that invent arts and improve-
ments in them and those that inquire into the reason of things: this latter is
most commonly practised by such as are idle and indolent, that are fond of
retirement, hate business and take delight in speculation; whereas none suc-
ceed oftener in the first than active, stirring and laborious men, such as will
put their hand to the plough, try experiments and give all their attention to
what they are about.”— Fable of the Bees, pt. ii. (1729), dial, iii., p. 151. He
goes on to give as examples the improvements in soap-boiling, grain-dyeing,
etc.
®^The advantage of producing particular commodities wholly or chiefly in
the countries most naturally fitted for their production is recognised below,
p. 425, but the fact that div^on of labour is necessary for its attainment is
not noticed. The fact that division of labour allows different workers to be
DIVISION OF LABOUR
It is the great multiplication of the productions of all the differ-
ent arts, in consequei ce 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 day-
labourer 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 accommoda-
tion, 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 ^1 join their different arts in order to com-
plete even this homely production. How many merchants and car-
riers, besides, must have been employed in transporting the mate-
rials 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-mak-
ers, must have been employed in order to bring together the differ-
ent drugs made use of by the dyer, which often come from the re-
motest corners of the world! What a variety of labour too is neces-
sary 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 brick-maker, the brick-layer, the work-
men who attend the furnace, the mill-wright, the forger, the smith,
put exclusively to the kind of work for which they are best fitted by quali-
ties not acquired by education and practice, such as age, sex, size and strength,
is in part ignored and in part denied below, pp. 13, 16. The disadvantage of
division of labour or specialisation is dealt with below, pp. 734-736*
Hence the
universal
opulence
of a well-
governed
society,
even the
day-la-
bourer’s
coat being
the pro-
duce of a
vast num-
ber of
workmen.
12
THE WEALTH OF NATIONS
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 prepar-
ing 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 conveniences ; 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 ima-
gine, the easy and simple manner in which he is commonly accom-
modated. Compared, indeed, with the more extravagant luxury of
the great, his accommodation must no doubt appear extremely sim-
ple and easy; and yet it may be true, perhaps, that the accommoda-
tion of an European prince does not always so much exceed that of
an industrious and frugal peasant, as the accommodation of the lat-
ter exceeds that of many an African king, the absolute master of the
lives and liberties of ten thousand naked savages.^'*^
®This paragraph was probably taken bodily from the MS. of the auth-
or^s lectures. It appears to be founded on Mun, England's Treasure by For-
raign Trade, chap, iii., at end; Locke, Civil Government, 43; Mandeville,
Fable of the Bees, pt. i., Remark P, 2nd ed., 1723, p. 182, and perhaps Har-
ris, Essay upon Money and Coins, pt. i., § 12. See Lectures, pp. 161-162 and
notes.
CHAPTER II
OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION
OF LABOUR
This division of labour, from which so many advantages are de-
rived, is not originally the effect of any human wisdom, which fore-
sees 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 ex-
tensive utility; the propensity to truck, barter, and exchange one
thing for another.
Whether this propensity be one of those original principles in hu-
man nature, of which no further account can be given; or whether,
as seems more probable, it be the necessary consequence of the fac-
ulties of reason and speech, it belongs not to our present subject to
enquire. 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 ges-
tures 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
it is not the effect of any conscious regulation by the state or society,
like the “law of Sesostris,” that every man should follow the employment of
his father, referred to in the corresponding passage in Lectures, p. i68. The
denial that it is the effect of individual wisdom recognismg the advantage of
exercising special natural talents comes lower down, p. 15.
® It is by no means clear what object there could be in exchanging one bone
for another.
Thedivi-
sion of la-
bour
arises
from a
propen-
sity in
human
nature to
exchange.
This pro-
pensity Is
found in
man
alone.
13
14 THE WEALTH^ OF NATIONS
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 en-
gaging 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 assist-
ance 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 entire-
ly ^ independent, and in its natural state has occasion for the assist-
ance of no other living creature. But man has almost constant occa-
sion 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. Who-
ever 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
chuses 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 pur-
chase. With the money which one man gives him he purchases food.
The old cloaths which another bestows upon him he exchanges for
other old cloaths which suit him better, or for lodging, or for food,
or for money, with which he can buy either food, cloaths, or lodg-
ing, as he has occasion.^
® Misprinted ‘‘intirely’^ in eds. 1-5. “Entirely” occurs a little lower down
in all eds.
*The paragraph is repeated from Lectures, p. 169. It is founded on Mande-
viUe, Fable of the Bees, pt. ii. (1729), dial, vi., pp. 421, 422.
ORIGIN OF DIVISION OF LABOUR ^5
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 com-
panions; 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 man-
ner with cattle and with venison, till at last he finds it his interest to
dedicate himself entirely to this emplo3nnent, 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 princi-
pal 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 occupa-
tion, and to cultivate and bring to perfection whatever talent or
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 into the world,
and for the first six or eight years of their existence, they were, per-
haps,*^ very much alike, and neither their parents nor playfellows
could perceive any remarkable difference. About that age, or soon
after, they come to be employed in very different occupations. The
^Lectures, pp. 169-170.
® This is apparently directed against Harris, Money and Coins, pt. i., § ii,
and is in accordance with the view of Hume, who asks readers to “consider
how nearly equal all men are in their bodily force, and even in their mental
powers and faculties, ere cultivated by education.”--“Of the Original Con-
tract,” in Essays, Moral and Political, 1748, p. 291.
“Perhaps” is omitted in eds. 2 and 3, and restored in the errata to ed. 4.
It is en-
couraged
by self-in-
terest and
leads to
division of
labour.
thus giv-
ing rise to
differences
of talent
more im-
portant
than the
natural
differ-
ences,
aiKi ren-
dering
those dif-
ferences
useful
XH^; WEALTH OF NATIONS
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 an-
imals acknowledged to be all of the same species, derive from na-
ture a much more remarkable distinction of genius, than what, an-
tecedent 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 greyhound, or
a greyhound 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 tal-
ents, 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
taleiits, 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.
^ Lectures f pp, 170-171.
«
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 en-
couragement 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 occa-
sion for.
There are some sorts of industry, even of the lowest kind, which
can be carried on no where but in a great town. A porter, for ex-
ample, 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 occupa-
tion. 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 carpen-
ter, 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 every where obliged to apply them-
selves to all the different branches of industry that have so much
affinity to one another as to be employed about the same sort of ma-
terials. 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 wheelwright, a ploughwright,
a cart and waggon maker. The employments of the latter are still
17
Division
of labour
is limited
by the ex-
tent of the
power of
exchang-
ing.
Various
trades
cannot be
carried on
except in
towns.
Water-
carriage
widens
the mar-
ket,
IS the wealth.of nations
more varioul 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 im-
possible 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 riv-
ers, 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 Lon-
don 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 the 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 supe-
rior 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 trans-
ported 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 encour-
^ The superiority of carriage by sea is here considerably less than in Lee-
tures, p. 172, but is still probably exaggerated. W. Playfair, ed. of Wealth of
Nations, 1805, vol. i., p. 29, says a waggon of the kind described could carry
eight tons, but, of course, some allowance must be made for thirty years of
road improvement.
® Ed. I reads “which is at present carried on.”
19
LIMIT OF DIVISION OF LABOUR
agement which they at present mutually afford to each other’s in-
dustry. There could be little or no commerce of any kind between
the distant parts of the world. What goods could bear the expence
of land-carriage between London and Calcutta? ^ Or if there were ^
any so precious as to be able to support this expence, 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 af-
fording a market, give a good deal of encouragement to each other’s
industry.
Since such, therefore, are the advantages of water-carriage, it is and so the
natural that the first improvements of art and industry should be
made where this conveniency opens the whole world for a market to ^ents are
the produce of every sort of labour, and that they should always be on the
much later in extending themselves into the inland parts of the
country. The inland parts of the country can for a long time have gable
no other market for the greater part of their goods, but the country elvers,
which lies round about them, and separates them from the sea-
coast, and the great navigable rivers. The extent of their market,
therefore, must for a long time be in proportion to the riches and
populousness of that country, and consequently thfeirdmproveinent
must always be posterior to the improvement of that country. In
our North American colonies the plantations have constantly fol-
lowed either the sea-coast or the banks of navijgable rivers, and have
scarce any where extended themselves to any considerable distance
from both.
The nations that, according to the best authenticated history, ap- for ex-
pear to have been first civilized, were those that dwelt round the
coast of the Mediterranean sea. That sea, by far the greatest inlet thean-
that is known in the world, having no tides, nor consequently any cient na-
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, terranean
and the proximity of its neighbouring shores, extremely favourable '
to the infant navigation of the world; when, from their ignorance nf
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 Streights of Gibraltar, was, in
® Playfair, op. dt., p. 30, says that equalising the out and home voyages
goods were carried from London to Calcutta by sea at the same price (12s
per cwt.) as from London to Leeds by land.
^ Ed. I reads “was.”
® Ed. I reads “carry on together a very considerable commerce.”
® This shows a curious belief in the wave-producing capacity of the tides.
Improve-
ments
first took
place in
Egypt,
Bengal
and
China;
while Af-
rica, Tar-
tary and
Siberia,
and also
Bavaria,
Austria
and Hun-
gary are
backward.
20 the wealth of nations
the antient world, long considered as a most wonderful and danger-
ous exploit of navigation. It was late before even the Phenicians 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 manufac-
tures were cultivated and improved to any considerable degree. Up-
per Egypt extends itself nowhere above a few miles from the Nile,
and in Lower Egypt that great river breaks itself into many differ-
ent 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 iii 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 like-
wise to have been of very great antiquity in the provinces of Ben-
gal in the East Indies, and in some of the eastern provinces of
China; though the great extent of this antiquity is not authenticat-
ed by any histories of whose authority we, in this part of the world,
are well assured. In Bengal the Ganges and several other great riv-
ers 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 remark-
able that neither the antient 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 an-
tient 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 great-
est rivers in the wcrl-^ run through that country,^ they are at too
^It is only in recent times that this word has become applicable especially
to artificial channels; see Murray, Oxford English Dictionary ^ s.v.
® Ed. I reads “break themselves into many canals.'*
®The real difficulty is that the mouths of the rivers are in the Arctic Sea,
LIMIT OF DIVISION OF LABOUR 21
great a distance from one another to carry commerce and communi-
cation 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 gulphs of Arabia, Persia, India, Bengal, and Siam, in Asia, to
carry maritime commerce into the interior parts of that great conti-
nent: 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 branch-
es 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.^^
so that they are separated. One of the objects of the Siberian railway is to
connect them.
Ed. I reads “any one” here.
“ The passage corresponding to this chapter is comprised in one paragraph
in Lectures, p, 172.
Division
of labour
being es-
tablished,
every
man lives
by ex-
changing.
Difficul-
ties of
barter
lead to
the selec-
tion of
one com-
modity as
money,
CHAPTER IV
OF THE ORIGIN AND USE OF MONEY
When the division of labour has been once thoroughly establishea,
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 so-
ciety.
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 off?r in exchange, except the different pro-
ductions of their respective trades, and the butcher is already pro-
vided with all the bread and beer which he has immediate occasion
for. No exchange can, in this case, be made between them. He can-
not 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 ceitain quantity of some one com-
22
23
ORIGIN AND USE OF MONEY
modity 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 com-
merce; 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 an hundred oxen.^ Salt is said to be the common in-
strument of commerce and exchanges in Abyssinia;^ a species of
shells in some parts of the coast of India; dried cod at Newfound-
land; tobacco in Virginia;^ sugar in some of our West India colo-
nies; 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 deter-
mined by irresistible reasons to give the preference, for this employ-
ment, 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 reunited again; a quality which no other equally
^The paragraph has a close resemblance to Harris, Money and Coins, pt. i.,
§§ I9j 20.
^ Iliad, vi., 236: quoted with the same object in Pliny, Hist, Nat., lib. xxxiii.,
cap. i. ; Pufendorf, De jure naturae et gentium, lib. v., cap. v., § i ; Martin-
Leake, Historical Account of English Money, 2nd ed., 1745, p. 4 and elsewhere.
** Montesquieu, Esprit des lois, liv. xxii., chap i., note.
*W. Douglass, A Summary Historical and Political of the First Planting,
Progressive Improvements and Present State of the British Settlements in
North America, 1760, vol. ii., p. 364. Certain law officers' fees in Washington
were still computed in tobacco in 1888.— J’. J. Lalor, Cyclopaedia of Political
Science, 1888, s.v. Money, p. 879.
® Playfair, ed. of Wealth of Nations, 1805, vol. i., p. 36, says the explana-
tion of this is that factors furnish the nailers with materials, and during the
time they are working give them a credit for bread, cheese and chandlery
goods, which they pay for in nails when the iron is worked up. The fact that
nails are metal is forgotten at the beginning of the next paragraph in the
text above.
® For earlier theories as to these reasons see Grotius, De jure belli et pads,
lib. ii., cap. xii., § 17; Pufendorf, De jure naturae et gentium, lib. v., cap. i., §
13 ; Locke, Some Considerations, 2nd ed., 1696, p. 31 ; Law, Money and Trade,
1705, ch. i.; Hutcheson, System of Moral Philosophy, 1755, vol. ii., pp. 55, $6;
Montesquieu, Esprit des lois, liv. xxii., ch. ii. ; Cantillon, Essai sur la Nature
du Commerce en giniral, 1755, pp. 153, 3 SS- 3 S 7 ; Harris, Money and Coins,
pt. i., §§ 22-27, and cp. Lectures, pp. 182-185.
for ex-
ample,
cattle,
salt,
shells,
cod, to-
bacco,
sugar,
leather
and nails.
Metals
were
eventually
preferred
because
durable
and divis-
ible.
H
Iron, cop-
per, gold
and silver,
were at
first used
in un-
stamped
bars,
and after-
wards
stamped
to show
quantity
and fine-
ness;
THE WEALTH OF NATIONS
durable commodities possess, and which more than any other qual-
ity renders them fit to be the instruments of commerce and circula-
tion. The man who wanted to buy salt, for example, and had noth-
ing 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 ox-
en, he had metals to give in exchange for it, he could easily propor-
tion the quantity of the metal to the precise quantity of the com-
modity 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 antient Spartans; copper among the antient 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,'^ upon the authority of Timaeus, an antient 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, per-
formed at this time the function of money.
The use of metals in this rude state was attended with two very
considerable inconveniencies; 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, re-
quires at least very accurate weights and scales. The weighing of
gold in particular is an operation of some nicety. In the coarser met-
als, indeed, where a small error would be of little consequence, less
accuracy would, no doubt, be necessary. Yet we should find it ex-
cessively 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
^Plin. Hist. Nat. lib. 33. cap. 3. “Servius rex primus signavit aes. Antea
rudi uses Romae Timaeus tradit.” Ed. i reads “authority of one Remeus, an
antient author,” Remeus being the reading in the edition of Pliny in Smith’s
library, cp. Bonar’s Catalogue of the Library of Adam Smith, 1894, p- 87.
Ed. I does not contain the note.
® Ed. I reads “weighing them.”
® Ed. I reads “with the trouble.’
25
ORIGIN AND USE OF MONEY
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 sil-
ver, 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 re-
semble those metals. To prevent such abuses, to facilitate ex-
changes, and thereby to encourage aU sorts of industry and com-
merce, it had 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 stampmasters 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 cur- stamps to
rent metals, seem in many cases to have been intended to ascertain,
what it was both most difficult and most important to ascertain, the intro-
goodness or fineness of the metal, and to have resembled the sterl- duced
ing mark which is at present affixed to plate and bars of silver, or ’
the Spanish mark which is sometimes a^ed to ingots of gold, and
which being struck only upon one side of the piece, and not cover-
ing 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 antient 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.
Aristotle, Politics, 1257a, 38-41; quoted by Pufendorf, De jure naturae
et gentium, Hb. v,, cap. i., § 12.
“•The aulnager measur^ woollen doth in England under 25 Ed. III., st. 4,
c. I. See John Smith, Chronicon Rusticum-Commerciale or Memoirs of Wool,
1747, vol, i., p. 37. The stampmasters of linen cloth in the linen districts of
Scotland were appointed under 10 Ann., c. 21, to prevent “divers abuses and
deceits” which “have of late years been used in the manufacturies of linen
doth . . . with respect to the lengths, breadths and unequal sorting of yarn,
which leads to the great debasing and undervaluing of the said linen cloth
both at home and in foreign parts.”— Statutes of the Realm, vol. ix., p. 682.
” Genesis xxiii. 16.
and coin-
age to
show
weight
later.
The
names of
coins ori-
ginally
expressed
their
weight.
26 the wealth of nations
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 ex-
pressed the weight or quantity of metal contained in them. In the
time of Servius Tullius, who first coined money at Rome,^” the Ro-
man 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 L, 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 i8th of Henry 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. Eng-
lish, French, and Scots pennies too, contained all of them originally
a real pennyweight 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 antient statute of
Henry III. then wastel bread of a farthing shall weigh eleven shill-
ings and four pence}^ The proportion, however, between the shill-
“ “King William the First, for the better pay of his warriors, caused the
firmes which till his time had for the most part been answered in victuals, to
be converted in peemiam numeratam.^^—tomidcs, Report containing an Es-
say for the Amendment of the Silver Coins, 1695, P* 4- Hume, whom Adam
Smith often follows, makes no such absurd statement, History, ed. of 1773,
vol. i., pp. 225, 226.
“ Lowndes, Essay, p. 4. “ Above, p. 24.
^ The Assize of Bread and Ale, 51 Hen. III., contains an elaborate scale be-
giiming, “When a quarter of wheat is sold for xii d. then wastel bread of a
farthing shall weigh vi 1. and xvi s.” and goes on to the figures quoted in the
text above. The statute is quoted at second-hand from Martin Folkes’ Table
of English Silver Coins with the same object by Harris, Essay upon Money
ORIGIN AND USE OF MONEY 27
ing 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 an-
tient Saxons a shilling appears at one time to have contained only
five pennies,^® and it is not improbable that it may have been as va-
riable among them as among their neighbours, the antient Franks.
From the time of Charlemagne among the French,^® and from that
of William the Conqueror among the English,^® the proportion be-
tween 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 av-
arice and injustice of princes and sovereign states, abusing the con-
fidence of their subjects, have by degrees diminished the real quan-
tity 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 weigh-
ing 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 to 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
and Coins, pt. i., § 29, but Harris does not go far enough in the scale to bring
in the penny as a weight. As to this scale see below, pp. 178, 182, 183.
Ed. I reads “twenty, forty and forty-eight pennies.” Gamier, Recherches
sur la nature et les causes de la richesse des nations, par Adam Smith, 1802,
tom. V., p. ss, in a note on this passage says that the sou was always twelve
deniers.
^®Hume, History of England, ed. of 1773, i., p. 226. Fleetwood, Chronicon
Preciosum, 1707, p. 30. These authorities say there were 48 shillings in the
pound, so that 240 pence would still make £1.
Harris, Money and Coins, pt. i., § 29.
“It is thought that soon after the Conquest a pound sterling was divided
into twenty shillings.” — ^Hume, History of England, ed. of 1773, vol. i., p. 227,
Pliny, Hist. Nat., lib. xxxiii., cap. iii.; see below, pp. 883, 884.
Harris, Money and Coins, p. i., § 30, note, makes the French livre about
one seventieth part of its original value.
The next
inquiry is
what rules
determine
exchange-
able
value.
Value
may mean
either
value in
use or
value in
exchange.
Three
questions,
(i) where-
in consists
the real
price of
commodi-
ties,
28 the wealth of nations
creditor, and have sometimes produced a greater and more univer-
sal 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 an-
other
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 posses-
sion 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 wa-
ter: 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 fre-
quently be had in exchange for it.^®
In order to investigate the principles which regulate the ex-
changeable 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.
^The subject of debased and depreciated coinage occurs again below, pp.
35 j i94> 516-522, 882-886. One of the reasons why gold and silver became the
most usual forms of money is dealt with below, pp. 171, 172. See Coin and
Money in the index.
®*In Lectures, pp. 182-190, where much of this chapter is to be found,
money is considered “first as the measure of value and then as the medium of
permutation or exchange.” Money is said to have had its origin in the fact
that men naturally fell upon one commodity with which to compare the value
of all other commodities. When this commodity was once selected it becafne
the medium of exchange. In this chapter money comes into use from the first
as a medium of exchange, and its use as a measure of value is not mentioned.
The next chapter explains that it is vulgarly used as a measure of value be-
cause it is used as an instrument of commerce or medium of exchange.
^Lectures, p. 157. Law, Money and Trade, 1705, ch. i. (followed by Harris,
Money and Coins, pt. i., § 3), contrasts the value of water with that of dia-
monds. The cheapness of water is referred to by Plato, Euthydem, 304 B.,
quoted by Pufendorf, De jure naturce et gentium, lib. v., cap. i., § 6; cp. Bar-
beyrac’s note on § 4.
29
ORIGIN AND USE OF MONEY
And, lastly, what are the different circumstances which some-
times 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 of 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.
“ Ed. I reads “subject which is.”
♦
(2) what
are the
different
parts of
this price,
(3) why
the mar-
ket price
sometimes
diverges
from this
price,
will be
answered
in the
next three
chapters.
CHAPTER V
Labour is
the real
measure
of ex-
change-
able
value,
and the
first price
paid for
all things.
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 exchange-
able 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 pur-
chased; and its value, to those who possess it, and who want to ex-
^ “La richesse en elle-meme n’est autre chose que la nourriture, les com-
modit^s et les agrements de la vie ”#-Cantillon, Essaz, pp. i, 2.
® “Everything in the world is purchased by labour.’'— Hume, “Of Com-
merce,” in Political Discourses^ 1752, p. 12.
REAL AND NOMINAL PRICE 3i
change it for some new productions, is precisely equal to the quan-
tity 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 for-
tune may, perhaps, af ord 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 inge-
nuity. 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 purchase. The greater part of people too understand better
'^“Also riches joined with liberality is Power, because it procureth friends
and servants; without liberality not so, because in this case they defend not
but expose men to envy as a Leviathan, L, x.
*This paragraph appears first in Additions and Corrections and ed. 3 .
® The absence of any reference to the lengthy discussion of this subject in
chap. X. is curious.
Wealth is
power of
purchas-
ing la-
bour.
But value
is not
common-
ly esti-
mated by
labour,
because
labour is
difficult
to mea-
sure,
and com-
modities
are more
frequently
exchanged
for other
commodi-
ties,
32
THE WEALTH OF NATIONS
especially
money,
which is
therefore
more fre-
quently
used in es-
timating
value.
But gold
and silver
vary in
value,
sometimes
costing
more and
sometimes
less la-
bour,
whereas
equal la-
bour al-
ways
means
equal sac-
rifice to
the la-
bourer,
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 intelli-
gible, is not altogether so natural and obvious.
But when barter ceases, and money has become the common in-
strument of commerce, every particular commodity is more fre-
quently 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 car-
ries them to the market, where he exchanges them for money, and
afterwards exchanges that money for bread and for beer. The quan-
tity of money which he gets for them regulates too the quantity of
bread and beer which he can afterwards purchase. It is more natur-
al and obvious to him, therefore, to estimate their value by the
quantity of money, the commodity for which he immediately ex-
changes 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
threepence 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, some>
times of easier and sometimes of more difficult purchase. The quan-
tity 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
* Below, p. 191.
^ Ed. I reads “there.’
REAL AND NOMINAL PRICE 33
which is itself continually varying in its own value, can never be an
accurate measure of the value of other commodities. Equal quanti-
ties 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, what-
ever may be the quantity of goods which he receives in return for
it. Of these, indeed, it may sometimes purchase a greater and some-
times 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 com-
modities 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 pur-
chases 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 pro-
portion to the real, not to the nominal price of his labour.
The distinction between the real and the nominal price of com-
modities 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 fam-
ily in whose favour it is reserved, that it should not consist in a par-
* Ed. I reads ‘Tqual quantities of labour must at all times and places be.”
® The words from “In his ordinary state of health” to “dexterity” appear
first in ed. 2 .
although
the em-
ployer re-
gards la-
bour as
varying in
value.
So regard-
ed, labour
has a real
and a
nominal
price.
The dis-
tinction
between
real and
nominal is
sometimes
useful in
practice,
since the
amount of
metal in
coins
tends to
diminish,
and the
value of
gold and
silver to
fall.
English
rents re-
served in
money
have fal-
len to a
34 THE WEALTH OF NATIONS
ticular sum of money Its value would in this case be liable to va-
riations of two different kinds; first, to those which arise from the
different quantities of gold and silver which are contained at differ-
ent 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 contin-
ually 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 sup-
posed, 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 ex-
ample) , 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 1 8th 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
“Be above all things careful how you make any composition or agreement
for any long space of years to receive a certain price of money for the corn
that is due to you, although for the present it may seem a tempting bargain.”
—Fleetwood, Chronicon Predosum, p. 174.
^ Above, pp. 26-27. ^ Below, pp. 215-217.
“ C. 6, which applies to Oxford, Cambridge, Winchester and Eton, and pro-
vides that no college shall make any lease for lives or years of tithes, arable
land or pasture without securing that at least one-third of “tholde” (presum-
ably the whole not the old) rent should be paid in coin. The Act was pro-
moted by Sir Thomas Smith to the astonishment, it is said, of his fellow-mem-
bers of Parliament, who could not see what difference it would make. “But the
knight took the advantage of the present cheapness; knowing hereafter grain
would grow dearer, mankind daily multiplying, and licence being lately given
for transportation. So that at this day much emolument redoundeth to the
colleges in each university, by the passing of this Act; and though their rents
stand still, their revenues do increase.”— Fuller, HisU of the University of
Cambridge, 1655, p. 144, quoted in Strype, Life of the learned Sir Thomas
Smith, 1698, p. 192.
REAL AND NOMINAL PRICE 35
kind, or according to the current prices at the nearest public mar- fourth
ket. The money arising from this corn rent, though originally but a ^
third of the whole, is in the present times, according to Doctor
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 al-
teration, and the same number of pounds, shillings and pence have
contained very nearly the same quantity of pure silver. This degra-
dation, therefore, in the value of the money rents of colleges, has
arisen altogether from the degradation in the value of silver.
When the degradation in the value of silver is combined with the and simi-
diminution of the quantity of it contained in the coin of the same
denomination, the loss is frequently still greater. In Scotland, where French
the denomination of the coin has undergone much greater altera- rents al-
tions than it ever did in England, and in France, where it has under- nothing,
gone 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 Corn
more nearly with equal quantities of corn, the subsistence of the la-
bourer, than with equal quantities of gold and silver, or perhaps of stable
any other commodity. Equal quantities of corn, therefore, will, at
distant times, be more nearly of the same real value, or enable the ^nts7
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
show hereafter,^® is very different upon different occasions; more
liberal in a society advancing to opulence, than in one that is stand-
ing still; and in one that is standing still, than in one that is going
backwards. Every other commodity, however, will at any particu-
lar time purchase a greater or smaller quantity of labour in propor-
tion to the quantity of subsistence which it can purchase at that
time. A rent therefore reserved in corn is liable only to the varia-
tions 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
Commentaries, vol. ii., p. 322.
“Above, p. 27. “ Below, pp. 69-73.
but liable
to much
larger an-
nual vari-
ations.
so that
labour is
the only
universal
standard.
36 the wealth of nations
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 how-
ever, 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 la-
bour, as I shall endeavour to show hereafter,^^ does not fluctuate
from year to year with the money price of corn, but seems to be
every where 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 like-
wise endeavour to show 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 mar-
ket. But the value of silver, though it sometimes varies greatly from
century to century, seldom varies much from year to year, but fre-
quently continues the same, or very nearly the same, for half a cen-
tury 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 la-
bour, provided, at least, the society continues, in other respects, in
the same or nearly in the same condition. In the mean time the tem-
porary 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 com
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 fluc-
tuations.
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 com. By the quantities of
labour we can, with the greatest accuracy, estimate it both from
Below, pp. 74, 85, 86.
'®Ed. I reads “it”
Below, chap, xi, see esp. p. 191.
“ Ed. I places the “for example” here.
37
REAL AND NOMINAL PRICE
century to century and from year to year. From century to century,
corn is a better measure than silver, because from century to cen-
tury, 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 ,21
But though in establishing perpetual rents, or even in letting very But in or-
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 or- tions
dinary transactions of human life. money is
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 fectly ac-
example, the more or less labour it will at that time and place en- curate at
able you to purchase or command. At the same time and place, time and
therefore, money is the exact measure of the real exchangeable place,
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 and the
the real and the money price of commodities, yet the merchant who to
carries goods from the one to the other has nothing to consider but sidered in
their money price, or the difference between the quantity of silver transac-
for which he buys them, and that for which he is likely to sell them. tween^S?-
Half an ounce of silver at Canton in China may command a greater tant
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
England and this part of the world, wheat being the constant and
most general food, not altering with the fashion, not growing by chance: but
as the farmers sow more or less of it, which they endeavour to proportion, as
near as can be guessed to the consumption, abstracting the overplus of the
precedent year in their provision for the next; and vice versa, it must needs
fall out that it keeps the nearest proportion to its consumption (which is more
studied and designed in this than other commodities) of anything, if you take
it for seven or twenty years together: though perhaps the scarcity of one year,
caused by the accidents of the season, may very much vary it from the im-
mediately precedent or following. Wheat, therefore, in this part of the world
(and that grain which is the constant general food of any other country) is
the fittest measure to judge of the altered value of things in any long tract of
time: and therefore wheat here, rice in Turkey, etc., is the fittest thing to re-
serve a rent in, which is designed to be constantly the same for all future
ages. But money is the best measure of the altered value of things in a few
years: because its vent is the same and its quantity alters slowly.^ But wheat,
or any other grain, cannot serve instead of money: because of its bulkiness
and too quick change of its quantity.” — ^Locke, Some Considerations of the
Consequences of the Lowering of Interest and Raising the Value of Money,
ed. of 1696, pp. 74, 75.
So it is no
wonder
that
money
price has
been more
attended
to.
In this
work corn
prices will
sometimes
be used.
Several
metals
have been
coined,
but only
one is
used as
the stan-
3S the wealth of nations
more real importance to the man who possesses it there, than a com-
modity which sells for an ounce at London is to the man who pos-
sesses it at London. If a London merchant, however, can buy at
Canton for half an ounce of silver, a commodity which he can after-
wards 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 ex-
actly 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 neces-
saries and conveniences 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 dif-
ferent 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 of 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 cop-
per, or some other coarse metal, for those of still smaller considera-
tion. They have always, however, considered one of those metals as
more peculiarly the measure of value than any of the other two ; and
“ Ed. I reads “than one which sells for an ounce at London to.’
^ Below, chap. xi. passim.
REAL AND NOMINAL PRICE 39
this preference seems generally to have been given to the metal
which they happened first to make use of as the instrument of com-
merce. 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,^’^ 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 comput-
ed, either in Asses or in Sestertii, The As was always the denomina-
tion of a copper coin. The word Sestertius signifies two ^45^65 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.2®
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 be-
lieve, 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 pecu-
liarly 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 dis-
dard, and
one first
that usu-
ally the
used in
com-
merce,
as the Ro-
mans used
copper,
and mod-
ern
European
nations
silver
The
standard
metal
originally
was the
only legal
tender,
Pliny, lib. xxxiii. c 3 . This note is not in ed. i.
^ Eds. I and 2 read “always ^ Habere aes alienum
^Ed. I does not contain “sterling.” ^Ed. i places the “originally” here.
^ Ed. I places the “only” here.
later the
propor-
tion be-
tween the
values of
the two
metals is
declared
by law,
and both
are legal
tender,
the dis-
tinction
between
them
ceasing to
be of im-
portance,
except
when a
change is
made in
the regu-
lated pro-
portion.
40 THE WEALTH OF NATIONS
linction between the metal which was the standard, and that which
was not the standard, was something more than a nominal distinc-
tion.
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 tor 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, be-
comes little more than a nominal distinction.^^
In consequence of any change, however, in this regulated propor-
tion, this distinction becomes, or at least seems to become, some-
thing 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 pay-
ments 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 ap-
pear 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
^The Act, 19 Hen. VII., c. S, ordered that certain gold coins should pass
for the sums for which they were coined, and 5 and 6 Ed. VI, prescribed pen-
alties for giving or taking more than was warranted by proclamation. The
value of the guinea was supposed to be fixed by the proclamation of 1717, for
which see Economic Journal, March, 1898. Lead tokens were coined by indi-
viduaJs in the reign of Elizabeth, James 1 . coined copper farthing tokens, but
abstdned from proclaiming them as money of that value. In 1672 copper half-
pennies were issued, and both halfpennies and farthings were ordered to pass
as money of those values in all payments under sixpence.— Harris, Money md
Coins, pt. i., § 39; Liverpool, Treatise on the Coins of the Realm, 1803, pp,
130, 131.
®^Ed, I reads “sum.”
if 21 pounds may be paid with 420 silver shillings or with gold guin-
eas it does not matter whether a “pound” properly signifies 20 silver shillings
or I? of a gold guinea.
REAL AND NOMINAL PRICE 4 i
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 man-
ner 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 meas-
ure 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 consid-
ered as the metal which was peculiarly the standard or measure of
value.
In reality, during the continuance of any one regulated propor-
tion, 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, avoirdu-
pois, 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 be-
low 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 de-
faced 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 pre-
serve it so, as long as that order is enforced. The silver coin still con-
tinues in the same worn and degraded state as before the reforma-
tion of the gold coin. In the market, however, one-and-twenty shill-
ings of this degraded silver coin are still considered as worth a
guinea of this excellent gold coin.
“ This happens to have been usually, though not always, true, but it is so
simply because it has usually happened that the most precious metal in use as
money has been made or become the standard. Gold was already the standard
in England, though the fact was not generally recognised; see Harris, Money
and CoinSj pt. ii., §§ 36, 37, and below, pp. 519-522.
**In 1774.
These regulations, issued in 1774, provided that guineas should not pass
when they had lost a certain portion of their weight, varying with their age —
Liverpool, Coins of the Realm, p. 216, note.
During
the con-
tinuance
of a regu-
lated pro-
portion,
the value
of the
most
precious
metal
regulates
the value
of the
whole
coinage,
as in
Great
Britain,
where the
reforma-
tion of the
gold coin
has raised
the value
of the sil-
ver coin.
42 the wealth of nations
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 six-pence.
An ounce of such gold coin, therefore, is worth ^l.ij s.io^d, in sil-
ver. 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 shill-
ings and ten-pence 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 L
18 s. sometimes 3 L 19 s. and very frequently 4 1 . an ounce; that
sum, it is probable, in the worn and degraded gold coin, seldom con-
taining more than an ounce of standard gold. Since the reformation
of the gold coin, the market price of standard gold bullion seldom
exceeds 3 /. 1 7 5. 7 d. 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, there-
fore, 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 either of gold or silver coin in propor-
tion 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 two-pence 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 stan-
dard silver bullion. Before the reformation of the gold coin, the
market price of' standard silver bullion was, upon different occa-
sions, five shillings and four-pence, five shillings and five-pence, five
shillings and six-pence, five shillings and seven-pence, and very
often five shillings and eight-pence an ounce. Five shillings and
seven-pence, 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 three-
43
REAL AND NOMINAL PRICE
pence, five shillings and four-pence, and five shillings and five-pence
an ounce, which last price it has scarce ever exceeded. Though the
market price of silver bullion has fallen considerably since the re-
formation 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 ex-
changes 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 permis-
sion 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 ex-
porting 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 reform-
ation of the silver coin did not then reduce the price of silver bul-
®®Magens, Universal Merchant, ed. Horsley, 1733, pp. 53-53, gives the pro-
portions thus: French coin, i to Dutch, i to Him hi English, i to
i$imi
®^Full weight silver coins would not remain m circulation, as the bullion in
them was worth more reckoned in guineas and in the ordinary old and worn
silver coins than the nominal amount stamped on them.
Locke, Further Considerations Concerning Raising the Value of Money,
2nd ed., 1695, pp. 58-60. The exportation of foreign coin (misprinted ‘‘kind”
in Pickering) or bullion of gold or silver was permitted by 15 Car. II , c 7, on
the ground that it was “found by experience that” money and bullion were
“carried in greatest abundance (as to a common market) to such places as give
free liberty for exporting the same” and in order “the better to keep in and
increase the current coins” of the kingdom.
Silver is
rated be-
low its
value in
England.
Locke’s
explana-
tion of the
high price
of silver
bullion is
wrong.
If the sil-
ver coin
were re-
formed, it
would be
melted.
Silver
ought to
be rated
higher
and
should
not be le-
gal tender
for more
than a
guinea.
If it were
properly
rated, sil-
ver bul-
lion
would fall
below the
mint price
without
any re-
coinage.
44 the wealth of NATIONS
lion 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 pres-
ent 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 valu-
ation 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 six-pences, 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 ten-pence 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 bul-
lion. But gold in coin is more convenient than gold in bullion, and
though, in England, the coinage is free, yet the gold which is car-
ried 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 bul-
Harris, writing nearly twenty years earlier, had said, “it would be a ri-
diculous and vain attempt to make a standard integer of gold, whose parts
should be silver; or to make a motley standard, part gold and part silver.”—
Money and Coins, pt. i., § 36 .
45
REAL AND NOMINAL PRICE
lion.^^ 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 be-
ing 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 sil-
ver 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 re-
turn 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 sil-
ver 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, how-
ever, they sometimes over-do the business, and sometimes under-
do it. When they import more bullion than is wanted, rather than
incur the risk and trouble of exporting it again, they are some-
an ounce of standard gold would not actually fetch £3 17s. 10 Jd. if
sold for cash down.
" This erroneous statement is repeated below, pp. 445, and on p. 518, where
the calculations on which it is based are given. See the note on that passage.
The question of seignorage is further discussed at some length in the chap-
ter on Commercial Treaties, pp. 516-522.
Ed I reads “m the tear and wear of coin, and in the tear and wear of
plate.”
A seignor-
age would
prevent
melting
and dis-
courage
exporta-
tion.
Fluctua-
tions in
the mar-
ket price
of gold
and silver
are due to
ordinary
commer-
cial causes,
but steady
diver-
gence
from mint
price is
due to the
state of
the coin.
The price
of goods
is adjust-
ed to the
actual
contents
of the
coinage
46 the wealth of nations
times willing to sell a part of it for something less than the ordin-
ary 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 quant-
ity 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 of 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 na-
ture 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 ad-
justed, 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.
t
CHAPTER VI
OF THE COMPONENT PARTS 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 propor-
tion between the quantities of labour necessary for acquiring dif-
ferent 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 ex-
change 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 hours 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 tal-
ents, will naturally give a value to their produce, superior to what
would be due to the time employed about it. Such talents can sel-
dom be acquired buf 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, allow-
ances 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
^ Ed. I does not contain “the whole produce of labour belongs to the la-
bourer , and.” The words, however, occur in all eds. at p. 64 below.
47
Quantity
of labour
is origin-
ally the
only rule
of value,
allowance
being
made for
superior
hardship,
and for
uncom-
mon dex-
terity and
ingenuity,
The whole
produce
then be-
longs to
the la-
bourer,
but when
stock is
used,
something
must be
given for
the profits
of the un-
dertaker,
and the
value of
work re-
solves it-
self into
wages and
profits.
Profits are
not mere-
ly wages
of inspec-
tion and
direction.
48 the wealth oe nations
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 per-
sons, some of them will naturally employ it in setting to work in
dustrious people, whom they will supply with materials and sub-
sistence, 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 othei
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 em-
ployer upon the whole stock of materials and wages which he ad-
vanced. He could have no interest to employ them, unless he ex-
pected 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 dif-
ferent name for the wages of a particular sort of labour, the labour
of inspection and direction. They are, however, altogether differ-
ent, are regulated by quite sufficient principles, and bear no pro-
portion to the quantity, the hardship, or the ingenuity of this sup-
posed 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 ex-
pence 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 under-
taker of the one will expect an yearly profit of about one hundred
pounds only; while that of the other will expect about seven hun-
““The capital annually employed” is the working expenses for twelve
months, not the capital in the usual modem sense.
COMPONENT PARTS OF PRICE 49
dred and thirty pounds. But though their profits are so very differ-
ent, their labour of inspection and direction may be either alto-
gether 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 com-
monly, 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 profits 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 al-
ways 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 com-
modity, 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 prop-
erty, 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 give up to the landlord
a portion of what his labour either collects or produces. This por-
tion, 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.®
® Ed. I inserts “frequently.” * Eds. i and 2 read “proportion to it.”
® Ed. I reads “profits of stock are a source of value.”
®Ed. I reads from the beginning of the paragraph: “In this state of things,
therefore, the quantity of labour commonly employed in acquiring or produc-
ing any commodity is by no means the only circumstance.”
^ Buchanan, ed. Wealth of Nations, 1814, vol. i., p. 80, says: “They do so.
But the question is why this apparently unreasonable demand is so generally
complied with. Other men love also to reap where they never sowed, but the
landlords alone, it would appear, succeed in so desirable an object.”
® Ed. I does not contain “the labourer” and “even to him.”
‘^Ed. I in place of these two sentences reads: “Men must then pay for the
licence to gaSier them; and in exchanging them either for money, for labour,
The la-
bourer
shares
with the
employer,
and la-
bour
alone no
longer
regulates
value.
When
land has
all become
private
property,
rent con-
stitutes a
third
compo-
nent part
of the
price of
most
commodi-
ties.
50
THE WEALTH OF NATIONS
The real
value of
all three
parts is
measured
by labour
In an im-
proved
society all
three
parts are
generally
present,
for ex-
ample, in
corn,
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 it-
self 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 im-
mediately 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 three 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 main-
tenance of the horse, the whole price still resolves itself either im-
mediately or ultimately into the same three parts of rent, labour,^®
and profit.
or for other goods, over and above what is due, both for the labour of gath-
ering them, and for the profits of the stock which employs that labour, some
allowance must be made for the price of the licence, which constitutes the first
rent of land. In the price therefore of the greater part of commodities the rent
of land comes in this manner to constitute a third source of value. In this state
of things, neither the quantity of labour commonly employed in acquiring or
producing any commodity, nor the profits of the stock which advanced the
wages and furnished the materials of that labour, are the only circumstances
which can regulate the quantity of labour which it ought commonly to pur-
chase, command or exchange for. A third circumstance must likewise be taken
into consideration ; the rent of the land ; and the commodity must commonly
purchase, command or exchange for, an additional quantity of labour, in order
to enable the person who brings it to market to pay this rent.”
^®Ed. I reads “The real value of all the different component parts of price
is in this manner measured.”
“ Smith overlooks the fact that his inclusion of the maintenance of labour-
ing cattle here as a sort of wages requires him to include it in the national in-
come or “wealth of the nation,” and therefore to reckon the cattle themselves
as part of the nation.
Ed. I reads “tear and wear.”
The use of “labour” instead of the more natural “wages” here is more
COMPONENT PARTS OF PRICE 5 ^
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 serv-
ants; 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, &c.
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 oqly replaces that capital with its profits, but pays, besides, the
wages of the weavers; and the profits must always bear some pro-
portion 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
fishermen, 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 wages
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
probably the result of its use five lines higher up than of any feeling of diffi-
culty about the maintenance of cattle. On p. 56 below “rent, labour and prof-
it” and “rent, wages and profit” are both used; see below, p. 316, and note.
The fact that the later manufacturer has to replace what is here called the
capital, ie., the periodical expenditure of the earlier manufacturer, does not
necessarily require him to have a greater capital to deal with the same prod-
uce. It need not be greater if he requires less machinery and buildings and a
smaller stock of materials.
“ Below, p. 143.
in flour or
meal.
and in
flax
Rent is a
smaller
propor-
tion in
highly
manufac-
tured
commodi-
ties
A few
commodi-
ties have
only two
or even
one of the
three
compo-
nent
parts.
But all
must have
at least
one,
and the
price of
the whole
annual
produce
resolves
itself into
wages,
profits
and rent,
which are
the only
original
kinds of
revenue.
52 the wealth of nations
which is paid to them by the stone-cutter is altogether the wages of
their labour; neither rent nor profit make any 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 bring-
ing it to market, must necessarily be profit to somebody.^^
As the price or exchangeable value of every particular commod-
ity, talcen 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 pro-
duced 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 exchange-
able value. All othpr 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 t^es the trouble of employing
it; and part to the lender, who affords him the opportunity of mak-
ing this profit. The interest of money is always a derivative rev-
enue, 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 rev-
enue, unless perhaps the borrower is a spendthrift, who contracts
Only true if “commodity” be understood to include solely goods which
constitute income.
The “whole annual produce” must be taken to mean the income and not
the whole mass of goods produced, including those which perish or are used
up in the creation of others.
^ Some parts of this “other revenue,” viz,, interest and taxes, are mentioned
in the next paragraph. It is perhaps also intended to include the rent of
houses; see below, pp. 264, 265.
COMPONENT PARTS OF PRICE 53
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 instru-
ment 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
expence 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 gen-
eral operations of the farm. They generally too work a good deal
with their own hands, as ploughmen, harrowers, &c. What remains
of the crop after paying the rent, therefore, should not only replace
to them their stock employed in cultivation, together with its ordi-
nary profits, but pay them the wages which are due to them, both
as labourers and overseers. Whatever remains, however, after pay-
ing 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 con-
founded 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 the 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,
^ Ed. I reads “sale of his work.” “ Below, pp. 111-113.
They are
sometimes
con-
founded,
for ex-
ample, a
gentle-
man
farmer^s
rent is
called
profit,
a common
farmer’s
wages
are called
profit,
and so are
an inde-
pendent
manufac-
turer’s
wages,
while the
rent and
54
profit of a
gardener
cultivat-
ing his
own land
are con-
sidered
earnings
of labour.
A great
part of
the an-
nual pro-
duce goes
to the
idle; the
propor-
tion regu-
lates the
increase
or dimi-
nution of
the pro-
duce.
THE WEALTH OF NATIONS
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 em-
ployed in raising, preparing, and bringing that produce to market.
If tibe society were annudly 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 main-
taining the industrious. The idle every where consume a great part
of it; and according to the different proportions in which it is an-
nually divided between those two different orders of people, its
ordinary or average value must either annually increase, or dimin-
ish, or continue the same from one year to another.
^ Eds. 1-3 read “was.”
t
CHAPTER VII
OF THE NATURAL AND MARKET PRICE OF COMMODITIES^
There is in every society or neighbourhood an ordinary or aver-
age rate both of wages and profit in every different employment of
labour and stock. This rate is naturally regulated, as I shall show
hereafter, 2 partly by the general circumstances of the society, their
riches or poverty, their advancing, stationary, or declining con-
dition; 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 show here-
after,^ partly by the general circumstances of the society or neigh-
bourhood 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 commod-
ity 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 bring-
ing the goods to market, he advances to his workmen their wages,
or their subsistence; so he advances to himself, in the same manner,
^ The chapter follows Lectures, pp. 173-182, very closely.
® Below, chaps, viii. and ix. ® Below, chap. xi.
Ordinary
or average
rates of
wages,
profit,
and rent
may be
called
natural
rates,
to pay
which a
commo-
dity is
sold at its
natural
price,
or for
what it
really
costs,
which in-
cludes
profit,
55
since no
one will
go on sell-
ing with-
out profit.
Market
price
is regu-
lated by
the quan-
tity
brought
to market
and the
effectual
demand.
When the
quantity
brought
falls short
of the ef-
fectual
demand,
the mar-
ket price
rises
above the
natural;
56 the wealth of nations
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 ef-
fectual demand; since it may be sufficient to effectuate the bringing
of the commodity to market. It is different from the absolute de-
mand. 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 de-
mand 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 ani-
mate more or less the eagerness of the competition. Among com-
petitors of equal wealth and luxury the same deficiency ® will gen-
erally occasion a more or less eager competition, according as the
acquisition of the commodity happens to be of more or less im-
portance to them.'^ Hence the exorbitant price of the necessaries of
life during the blockade of a town or in a famine.
* The same phrase occurs below, pp. 62, 99. ® Above, p. 50 and note 13.
®Ed. I, beginning three lines higher up, reads “according as the greatness of
the deficiency increases more or less the eagerness of this competition. The
same deficiency.”
^ Ed. I reads “the competitors.”
NATURAL AND MARKET PRICE 57
When the quantity brought to market exceeds the effectual de-
mand, 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 ex-
cess increases more or less the competition of the sellers, or accord-
ing as it happens to be more or less important to them to get im-
mediately rid of the commodity. The same excess in the importa-
tion of perishable, will occasion a much greater competition than in
that of durable commodities; in the importation of oranges, for ex-
ample, 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 cannot 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 commod-
ity 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 com-
ponent 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 pre-
pare more land for the raising of this commodity; if it is wages or
profit, the interest of all other labourers and dealers will soon
® Ed. I reads “fall short of it.”
when it
exceeds
the effec-
tual de-
mand the
market
price falls
below the
natural;
when it is
just equal
to the ef-
fectual
demand
the mar-
ket and
natural
price co-
incide.
It natur-
ally suits
itself to
the effec-
tual de-
mand.
When it
exceeds
that de-
mand,
some of
the com-
ponent
parts of
its price
are below
their
natural
rate;
when it
falls short,
some of
the com-
ponent
parts are
above
their na-
tural rate.
THE WEALTH OF NATIONS
Natural
price is
the cen-
tral price
to which
actual
prices
gravitate.
Industry
suits itself
to the ef-
fectual
demand,
but the
quantity
produced
by a given
amount of
industry
sometimes
fluctuates.
58
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 be-
low it. But whatever may be the obstacles which hinder them from
settling in this center of repose and continuance, they are con-
stantly tending towards it.
The whole quantity of industry annually employed in order to
bring any commodity to market, naturally suits itself in this man-
ner 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 differ-
ent years, produce very different quantities of corn, wine, oil, hops,
&c. But the same number of spinners and 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 de-
mand; 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 some-
times 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
® See below, p. ii6.
NATURAL AND MARKET PRICE 59
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 re-
solve 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 land-
lord 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
over-stocked or under-stocked 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
under-stocked 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 under-
stocked wilJi commodities, not with labour; with work done, not
with work to be done. It raises the wages of journeymen taylors.
The market is here under-stocked with labour. There is an effect-
ual 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 work-
men employed in preparing such commodities, for which all de-
mand is stopped for six months, perhaps for a twelvemonth. The
market is here over-stocked 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 police,
may, in many commodities, keep up the market price, for a long
time together, a good deal above the natural price.
Repeated below, p. ii6. Ed. i does not contain “more,”
The fluc-
tuations
fall on
wages and
profit
more than
on rent,
affecting
them in
different
propor-
tions ac-
cording to
the supply
of com-
modities
and la-
bour
But mar-
ket price
maybe
kept
above na-
tural for a
long time,
in conse-
quence of
want of
general
knowl-
edge of
high pro-
fits,
or in con-
sequence
of secrets
in manif-
factures,
which
may oper-
ate for
long peri-
ods,
or in con-
sequence
of scarcity
of pecu-
liar soils,
6o the wealth of nations
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 com-
monly 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 mar-
ket 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 with-
out any new rivsds. Secrets of this kind, however, it must be ac-
knowledged, 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, up-
on 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 pro-
ducing them, may not be sufficient to supply the effectual demand.
The whole quantity brought to market, therefore, may be dis-
posed of to those who are willing to give more than what is suf-
ficient 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, accord-
ing to their natural rates. Such commodities may continue for
whole centuries together to be sold at this high price; and that
“They are called profits simply because all the gains of the master-manu-
facturer are called profits. They can scarcely be said to have been “consid-
ered” at all; if they had been, they would doubtless have been pronounced to
be, in the words of the next paragraph, “the effects of a particular accident,”
namely, the possession of peculiar knowledge on the part of the dyer.
^ Ed. I places “for whole centuries together” here instead of where printed.
NATURAL AND MARKET PRICE
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 neighbour-
hood. The wages of the labour and the profits of the stock em-
ployed 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 which
of natural causes which may hinder the effectual demand from ever
being fully supplied, and which may continue, therefore, to operate ever,
for ever.
A monopoly granted either to an individual or to a trading com- Amono-
pany has the same effect as a secret in trade or manufactures. The fhe^g^me
monopolists, by keeping the market constantly under-stocked, by effect as a
never fully supplying the effectual demand, sell their commodities trade se-
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 the price
can be got. The natural price, or the price of free competition, on pQiy
the contrary, is the lowest which can be taken, not upon every oc- thehigh-
casion 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 apprentice- Corpora-
ship,^^ and all those laws which restrain, in particular employ- leges^Sr,"
ments, the competition to a smaller number than might otherwise are en-
go into them, have the same tendency, though in a less degree, ^^’^sed
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.
See below, pp. 118-130. Playfair, in a note on this passage, ed. Wealth of
Nations, 1805, vol. i., p. 97, says: “This observation about corporations and
apprenticeships scarcely applies at all to the present day. In London, for ex-
ample, the freemen only can carry on certain businesses within the city: there
is not one of those businesses that may not be carried on elsewhere, and the
produce sold in the city. If Mr. Smith’s principle applied, goods would be
dearer in Cheapside than in Bond Street, which is not the case.”
Market
price is
seldom
long be-
low natu-
ral price,
though
appren-
ticeship
and cor-
poration
laws
sometimes
reduce
wages
much be-
low the
natural
rate for a
certain
period.
Natural
price
varies
with the
natural
rate of
wages,
62 the wealth of nations
Such enhancements of the market price may last as long as the
regulations of police 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 so 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 em-
ployments. 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 en-
dure 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 police 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 con-
cerning 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 so-
ciety 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 ex-
“ Above, p. 56, and below, p. 99.
In Lectures, p. 168, the Egyptian practice is attributed to “a law of Scsos-
tris.”
NATURAL AND MARKET PRICE 63
plain, 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 show 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 dif-
ferent 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 prof-
its in all the different employments of stock. This proportion, it
will appear hereafter, depends partly upon the nature of the dif-
ferent employments, and partly upon the different laws and policy
of the society in which they are carried on. But though in many re-
spects 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 show 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.
t
profit and
rent
Wages
will be
dealt with
in chapter
viii. ,
profit in
chapter
ix. ,
differences
of wages
and profit
in chapter
X.,
and rent
in chapter
xi.
CHAPTER VIII
OF THE WAGES OF LABOUR
Produced
the natur-
al wages
of labour.
Originally
the whole
belonged
to the la-
bourer.
Ifthishad
continued,
all things
would
have be-
come
cheaper,
though in
appear-
ance
many
things
might
have be-
come
dearer.
The produce of labour constitutes the natural recompence or wages
of labour.
In that original state of things, which precedes both the appro-
priation 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 aug-
mented 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
^ The same nine words occur above, p. 47, in ed. 2 and later eds.
^The word “cheaper” is defined by the next sentence as “produced by a
smaller quantity of labour.”
®It would be less confusing if the sentence ran: “But though all things
would have become cheaper in the^nse just attributed to the word, yet in the
sense in which the words cheaper and dearer are ordinarily used many things
might have become dearer than before.”
64
WAGES OF LABOUR 65
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 con-
siderable 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 in-
terest 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 de-
duction of profit. In all arts and manufactures the greater part of
the workmen stand in need of a master to advance them the ma-
terials of their work, and their wages and maintenance till it be
compleated.® 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 work-
man has stock sufficient both to purchase the materials of his work,
and to maintain himself till it be compleated. He is both master
^ I.e,, “would in the ordinary sense of the word be five times dearer than
before.”
^ l.e,f “in the sense attributed to the word above ”
® If the amount of labour necessary for the acquisition of a thing measures
its value, “twice as cheap” means simply, twice as easy to acquire.
’ Ed. I reads “of whatever produce.”
® The provision of tools to work with and buildings to work in is forgotten.
® Cp. with this account that given at the beginning of chap vi., pp. 47, 48
above.
This state
was ended
by the ap-
propria-
tion of
land and
accumula-
tion of
stock,
rent being
the first
deduction,
and profit
the sec-
ond, both
in agricul-
ture,
and other
arts and
manufac-
tures.
The inde-
pendent
workman
gets pro-
fits as well
as wages,
but this
case is in-
frequent.
Wages de-
pend on
contract
between
masters
and work-
men.
The mas-
ters have
\he ad-
vantage.
though
less is
heard of
masters’
combina-
tions than
of work-
men’s.
66 the wealth of NATIONS
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, be-
longing 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 in-
dependent; and the wages of labour are every where 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 every where up-
on 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 dis-
posed 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 dis-
pute, 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 agamst 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 em-
ployment. 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 im-
mediate.
We rarely hear, it has been said, of the combinations of masters,
though frequently of those of workmen. But whoever imagines, up-
on this account, that masters rarely combine, is as ignorant of the
world as of the subject. Masters are always and every where in a
sort of tacit, but constant and uniform combination, not to raise
Ed. I reads, “The masters being fewer in number can not only combine
more easily, but the law authorises their combinations, or at least does not
prohibit them.”
7 Geo. I., stat. i, c. 13, as to London tailors; 12 Geo. I., c. 34, as to
woolcombers and weavers; 12 Geo. L, c. 35, as to brick and tile makers with-
in fifteen miles of London; 22 Geo. II., c. 27, § 12, as to persons employed in
the woollen manufacture and many others.
WAGES OF LABOUR 67
the wages of labour above their actual rate. To violate this com-
bination is every where a most unpopular action, and a sort -of re-
proach 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 con-
ducted 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 fre-
quently resisted by a contrary defensive combination of the work-
men; who sometimes too, without any provocation of this kind,
combine of their own accord to raise the 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 combinations of servants, labourers,
and journeymen. The workmen, accordingly, very seldom derive
any advantage from the violence of those tumultuous combina-
tions, 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 sub-
mitting for the sake of present subsistence, generally end in noth-
ing, but the punishment or ruin of the ring-leaders.
But though in disputes with their workmen, masters must gen- But mas-
erally have the advantage, there is however a certain rate below
which it seems impossible to reduce, for any considerable time, the duce
ordinary wages even of the lowest species of labour. wages be-
A man must always live by his work, and his wages must at least tain ra?e'
be sufficient to maintain him. They must even upon most occasions
“ The word is used as elsewhere in Adam Smith without the implication of
falsity now attached to it: a pretence is simply something put forward.
“Ed. I does not contain “either.”
68
namely,
subsist-
ence for a
man and
something
over for a
family.
Wages
maybe
consider-
ably
above this
rate,
when
there is an
increasing
demand
for la-
bourers,
THE WEALTH OF NATIONS
be somewhat more; otherwise it would be impossible for him to
bring up a family, and the race of such workmen could not last be-
yond the first generation. Mr. Cantillon seems, upon this account,
to suppose that the lowest species of common labourers must every
where 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 low-
est 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 in any 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 consist-
ent with common humanity.
When in any country the demand for those who live by wages;
labourers, journeymen, servants of every kind, is continually in-
creasing; 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 volun-
tarily break through the natural combination of masters not to
raise wages.
Essai sur la nature du commerce en giniral, 1755, PP- 42-47. The “seems”
is not meaningless, as Cantillon is unusually obscure in the passage referred to.
It is not clear whether he intends to include the woman’s earnings or not.
“ Le , before completing their seventeenth year, as stated by Dr. Halley,
quoted by Cantillon, Essd, pp. 42, 43.
Cantillon himself, p. 44, says: “C’est une matifere qui n’admet pas un cal-
cul exact, et dans laquelle la prteion n’est pas m^me fort n^cessaire, il suf&t
qu’on ne s’y eloigne pas beaucoup de la r6alit6.”
” Ed. I reads “them.”
WAGES OF LABOUR 69
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 for 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 rev-
enue 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 shoe-maker,
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 coun-
try, and cannot possibly increase without it. The increase of rev-
enue 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 con-
tinual increase, which occasions a rise in the wages of labour. It
is not, accordingly, in the richest countries, but in the most thriv-
ing, 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
There is no attempt to define “maintenance,” and consequently the di-
vision of a man’s revenue into what is necessary for his maintenance and what
is over and above is left perfectly vague.
^ It seems to be implied here that keeping a menial servant, even to per-
form the most necessary offices (e.g., to nurse the infant child of a widower),
is not “maintaining” a family.
Above, in the Introduction and Plan of the Work, the wealth of a nation
was treated as synonymous with its annual produce, and there has been hith-
erto no suggestion that its stock must be considered.
“^Apparently this is a slip for “occasions high wages.” At any rate the next
sentences require this assertion and not that actually made.
““ The method of calculating wealth by the amount of annual produce per
head adopted above, in the Introduction and Plan of the Work, is departed
from here and below, p. 71, and frequently in later passages, in favour of the
calculation by amount of capital wealth.
which is
caused by
an in-
crease of
the funds
destined
for the
payment
of wages
The funds
consist of
surplus
revenue,
and sur-
plus stock
The de-
mand for
labourers
therefore
increases
with the
increase
of nation-
al wealth.
High
wages are
occa-
sioned by
the in-
crease,
not by the
actual
greatness
of nation-
al wealth.
North
America
is more
thiiving
than Eng-
land.
70 THE WEALTH OF NATIONS
earn 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 shil-
lings and sixpence sterling; house carpenters and bricklayers, eight
shillings currency, equal to four shillings and sixpence sterling;
journeymen taylors, five shillings currency, equal to about two
shillings and ten pence sterling. These prices are all above the Lon-
don price; and wages are said to be as high in the other colonies as
in New York. The price of provisions is every where in North Amer-
ica 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 la-
bour, therefore, be higher than it is any where in the mother coun-
try, its real price, the real command of the necessaries and con-
veniences 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 in-
habitants. 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 burthen is a source of opulence and
prosperity to the parents. The labour of each child, before it can
““This was written in 1773, before the commencement of the late dis-
turbances. Ed. I does not contain this note ; eds. 2 and 3 read “present dis-
turbances.”
Petty, Political Arithmetic, 1699, P- 18, made the period for England 360
years. Gregory King, quoted by Davenant, Works, ed. Whitworth, 1771, voL
ii., p. 176, m^es it 43$ years in the past and probably 600 in the future. In
1703 the population of Virginia was 60,000, in 1755 it was 300,000, and in
1763 it was $00,000, “by which they appear to have doubled their numbers
every twenty years as nigh as may be.”— Present State of Great Britain
and North America with regard to Agriculture, Population, Trade and Manu-
factures, 1767, p. 22, note. “The original number of persons who in 1643 had
settled in New England was 21,200. Ever since, it is reckoned that more have
left them than have gone to them. In the year 1760 they were increased to
half a million They have therefore all along doubled their own number in
twenty-five years ” — Richard Price, Observations on Reversionary PaymentSf
etc., 1771, pp. 204, 205. The statement as to America is repeated below, p. 392.
71
WAGES OF LABOUR
leave their housej 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 Wages are
has been long stationary, we must not expect to find the wages of sta-
labour very high in it. The funds destined for the payment of wages, tionary
the revenue and stock of its inhabitants, may be of the greatest ex-
tent; but if they have continued for several centuries of the same,
or very nearly of the same extent, the number of labourers em-
ployed 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 labour-
ers would be obliged to bid against one another in order to get it. If
in such a country the wages of labour had ever been more than suf-
ficient 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 this lowest rate which is con-
sistent with common humanity. China has been long one of the
richest, that is, one of the most fertile, best cultivated, most in-
dustrious, 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, in-
dustry, 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,
""’Here we have a third method of calculating the riches or wealth of a
country, namely by the amount of produce per acre. For other references to
this “wealth” of China see the index, s.v., China.
-‘’The date of his arrival was 1275.
72 the wealth of nations
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 con-
tinually running about the streets with the tools of their respective
trades, offering their service, 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 destroy-
ing 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.^®
^ “Les artisans courent les villes du matin au soir pour chercher pratique,”
Quesnay, Ephimindes du citoyen, Mars, 1767; (Euvres, ed. Oncken, 188S,
p. S8i.
^ “Cependant quelque sobre et quelque industrieux que soit le peuple de la
Chine, le grand nombre de ses habitants y cause beaucoup de mis^re. On en
voit de si pauvres, que ne pouvant fournir a leurs enfants les aliments n^ces-
saires, ils les exposent dans les rues, surtout lorsque les m6res tombent mal-
ades, ou qu’elles manquent de lait pour les nourrir. Ces pctits innocents sont
condamnes en quelque mani^re a la mort presque au meme instant quails ont
commence de vivre: cela frappe dans les grandes villes, comme Peking, Can-
ton; car dans les autres villes h peine s^en apergoit-on.
‘‘C’est ce qui a porte les missionnaires a entretenir dans ces endroits tr^s
peuples, un nombre de cat6chistes, qui en partagent entre eux tous les quar-
ters, et les parcourent tous les matins, pour procurer la grice du baptSme
k une multitude d’enfants moribonds.
“Dans la meme vue on a quelquefois gagne des sages-femmes infid^les afin
qu^elles permissent k des filles chretiennes de ses suivre dans les diff^rentes
maisons oh elles sont appelees: car il arrive quelquefois que les Chinois se
trouvant hors d’etat de nourrir une nombreuse famille, engagent ces sages-
femmes k etouffer dans un bassin plein d’eau les petits filles aussitdt qu’elles
sont nees ; ces chretiennes ont soin de les baptiser, et par ce moyen ces tristes
victimes de I’indigence de leurs parents trouvent la vie eternelle dans ces
mSmes eaux, qui leur ravissent une vie courte et perissable.” — ^Du Halde, De-
scription giographique, historique, chronologiqtie, politique et physique de
Vempire de la Chine et de la Tartarie chinoise, 173$, tom. ii., pp. 73, 74. The
statement in the text above that drowning babies is a special business is pos-
sibly founded on a mistranslation of “sages-femmes.”
WAGES OF LABOUR 73
China, however, though it may perhaps stand still, does not seem
to go backwards. Its towns are no-where deserted by their inhabit-
ants. The lands which had once been cultivated are no-where
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 emplo3mient 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 emplo3mient 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 be able to find employment even up-
on 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 immedi-
ately prevail in that class, and from thence extend themselves to
all the superior classes, till the number of inhabitants in the coun-
try 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 Eng-
lish 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 may be
assured that the funds destined for the maintenance of the labour-
ing 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 ef-
fect, so it is the natural symptom of increasing national wealth.
The scanty maintenance of the labouring poor, on the other hand.
China is
not going
back-
wards
and la-
bourers
there keep
up their
numbers.
In a de-
clining
country
this would
not be the
case.
In Great
Britain
wages are
above the
lowest
rate,
since (i)
there is a
difference
between
winter
and sum-
mer
wages,
( 2 ) wages
do not
fluctuate
with the
price of
provi-
sions,
( 3 ) wages
vary more
from
place to
place than
the price
of provi-
sions,
74 THE WEALTH OF NATIONS
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 which it
is possible to do this. There are many plain symptoms that the
wages of labour are no-where in this country regulated by this low-
est 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 expence of fewel, the maintenance of a family is most
expensive in winter. Wages, therefore, being highest when this ex-
pence is lowest, it seems evident that they are not regulated by
what is necessary for this expence; but by the quantity and sup-
posed 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 ex-
pence; 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 subsist-
ence, 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 every-where 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 extra-
ordinary 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 la-
bour vary more from place to place than the price of provisions.
The prices of bread and butcher’s meat are generally the same or
very nearly the same through the greater part of the united king-
dom. These and most other things which are sold by retail, the way
in which the labouring poor buy all things, are generally fully as
WAGES OF LABOUR 75
cheap or cheaper in great towns than in the remoter parts of the
country, for reasons which I shall have occasion to explain here-
after.^^ But the wages of labour in a great town and its neighbour-
hood 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 Lon-
don and its neighbourhood. At a few miles distance it falls to four-
teen and fifteen pence. Ten pence may be reckoned its price in
Edinburgh and its neighbourhood. At a few miles distance it falls
to eight pence, 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 na-
ture, it appears evidently from experience that a 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 afflu-
ence 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 pro-
visions, 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 com 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 3delds 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 la-
bouring poor, therefore, can maintain their families in the one part
Below, p. 1 13.
^ The difference between England and Scotland in this respect is attributed
to the English law of settlement below, p, 140.
and (4)
frequently
wages and
the price
of provi-
sions vary
in oppo-
site direc-
tions, as
grain is
cheaper
and wages
are higher
in Eng-
land than
in Scot-
land;
and in last
century
grain was
dearer
and wages
were low-
er than in
this;
76 the wealth op nations
of the united kingdom, they must be in affluence in the other. Oat-
meal 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 neigh-
bour walks a-foot, that the one is rich and the other poor; but be-
cause 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 an-
other, 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 pos-
sible, still more decisive with regard to Scotland than with regard
to England. It is in Scotland supported by the evidence of the pub-
lic fiars, annual valuations made upon oath, according to the actual
state of the markets, of all the different sorts of grain in every dif-
ferent county of Scotland. If such direct proof could require any
collateral evidence to confirm it, I would observe that this has like-
wise 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 five-pence 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; ten-pence, sometimes a shilling about Edin-
burgh, 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, Ayr-shire, &c. In England the improve-
ments 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.
The inferiority of oatmeal is again insisted on below, p 160.
Authorities are quoted below, pp. 240.
WAGES OF LABOUR 77
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 1 614, the pay of a foot soldier was the same
as in the present times, eight pence a dsyp 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 expence of a labourer’s
family, consisting of six persons, the father and mother, two chil-
dren 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 sub-
ject.®^ In 1688, Mr. Gregory King, whose skill in political arith-
metic is so much extolled by Doctor 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 expence of such fam-
ilies to be about twenty pence a head. Both the pecuniary income
and expence 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 any where 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 any where,
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
workmen, 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
®®Huine, History, ed. of 1773, vol. vi., p. 178, quoting R3aner’s Foedera,
tom. xvi., p. 717. This was for service in Germany.
Sir Matthew Hale.
^ See his scheme for the maintenance of the Poor, in Burn’s History of the
Poor-laws. This note appears first in ed. 2. Hale’s Discourse Touching Pro-
vision for the Poor was printed in 1683. It contains no internal evidence of the
careful inquiry attributed to it above.
Davenant, Essay upon the probable Methods of Making a People Gainers
in the Balance of Trade, 1699, pp, 15, 16; in Works, ed. ’^^itworth, vol. ii.,
p. 175*
Scheme D in Davenant, Balance of Trade, in Works Scheme B, vol. ii , p
184. See below, p. 196, note.
while
other ne-
cessaries
and con-
veniencies
have also
become
cheaper.
ffigh
earnings
of labour
are an ad-
vantage
to the so-
ciety.
78 the wealth of nations
show 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 neces-
saries 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 com-
monly 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 manufactures of
both linen and woollen cloth furnish the labourers with cheaper
and better cloathing; and those in the manufactures 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 labour-
ing poor are 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 lux-
ury extends itself even to the lowest ranks of the people, and that
the labouring poor will not now be contented with the same food,
cloathing and lodging which satisfied them in former limes, 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 sight 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 an
Berkeley, Querist, 5th ed., 1752, qu. 2, asks “whether a people can be
called poor where the common sort are well fed, clothed and lodged.” Hume,
“On Commerce,” says: “The greatness of a state and the happiness of its
subjects, however independent they may be supposed in some respects, are
commonly allowed to be inseparable with regard to commerce. ’^—Political
Discourses, 1752, p. 4.
WAGES OF LABOUR 79
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, cloath
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, cloathed 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 chil-
dren, 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 sta-
tion. 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 ex-
tremely 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 borne 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 chil-
dren, however, is seldom seen any where 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 born 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 every where 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
beyond 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.
Poverty
does not
prevent
births,
but is un-
favour-
able to
the rear-
ing of
children,
andso re-
strains
multipli-
cation,
while the
liberal re-
ward of
labour en-
courages
it,
as the
wear and
tear of the
free man
must be
paid for
just like
that of
the slave,
though
not so ex-
trava-
gantly.
the wealth of nations
The liberal rewatd of labour, by enabling them to provide bet-
ter for their children, and consequently to bring up a greater num-
ber, naturally tends to widen and extend those limits. It deserves
to be remarked too, that it necessarily does this as nearly as pos-
sible 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 multi-
plication of labourers, as may enable them to supply that continu-
ally 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
under-stocked with labour in the one case, and so much over-
stocked in the other, as would soon force back its price to that
proper rate which the circunastances 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 pro-
gressive 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 expence
of his master; but that of a free servant is at his own expence. The
wear and tear of the latter, however, is, in reality, as much at the
expence 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 de-
mand of the society may happen to require. But though the wear
and tear of a free servant be equally at the expence 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
Cantillon, Essai, pt. i., ch. ix., title, “Le nombre de laboureurs, artisans et
autres qui travaillent dans un etat se proportionne naturellement au besoin
qu’on en a.”
'®Ed. ireads “If it.”
Berkeley, Querist, qu. 62, asks “whether a country inhabited by people
well fed, clothed and lodged would not become every day more populous?
And whether a numerous stock of people in such circumstances would not
constitute a flourishing nation?”
^ Ed, I reads “tear and wear” here and in the three other cases where the
phrase is used in this paragraph.
WAGES OF LABOUR Si
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 free man, is managed by the free man himself. The
disorders which generally prevail in the oeconomy 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 dif-
ferent management, the same purpose must require very different
degrees of expence 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 in-
creasing wealth, so it is the cause of increasing population. To
complain of it, is to lament over the necessary effect and cause 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 acqyisition,
rather than when it has acquired its full complement of riches, th^t
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 progres-
sive 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, accord-
ingly, 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 re-
mote 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 over-work themselves, and to ruin
"This is a more favourable view than that taken in Lectures, p. 257.
High
wages in-
crease
popula-
tion.
The pro-
gressive
state is
the best
for the la-
bouring
poor.
High
wages en-
courage
industry.
The opin-
ion that
cheap
years en-
courage
idleness is
erroneous.
S2 the wealth of nations
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 ex-
cessive application to their peculiar species of work. Ramiizzini, an
eminent Italian physician, has written a particular book concern-
ing such diseases.^'^ We do not reckon our soldiers the most indus-
trious set of people among us. Yet when soldiers have been em-
ployed 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 de-
sire of greater gain, frequently prompted them to over-work them-
selves, 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 com-
plained 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 work-
men. 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, exe-
cutes the greatest quantity of work.
In cheap years, it is pretended, workmen are generally more idle,
and in dear ones more industrious than ordinary. A plentiful sub-
sistence 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 well be doubted; but that
it should have this effect upon the greater part, or that men in
morbis artificum diatriba, 1700, translated into English (A Treatise
on the Diseases of Tradesmen) by R. James, 1746.
WAGES OF LABOUR ^3
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 pro-
^ duce of their industry.
In years of plenty, servants frequently leave their masters, and
trust their subsistence to what they can make by their own in-
dustry. 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 main-
taining 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 uncertainity of subsist-
ence make all such people eager to return to service. But the high
price of provisions, by diminishing the funds destined for the main-
tenance of servants, disposes masters rather to diminish than to
increase the number of those they have. In dear years too, poor in-
dependent workmen frequently consume the little stocks 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 can 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, how-
ever, 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
Wag^are
high in
cheap
years,
and low
in dear
years,
so that
masters
commend
dear
years.
Messance
shows
that in
some
French
manufac-
tures
more is
produced
in cheap
years.
No con-
nexion is
visible be-
tween
dearness
or cheap-
ness of
the years
and the
variations
in Scotch
linen and
Yorkshire
woollen
manufac-
tures.
84 THE WEALTH OF NATIONS
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 work-
men to journeymen and servants of all kinds, and dear years to
diminish it.
A French author of great knowledge and ingenuity, Mr. Mes-
sance, receiver of the tailles in the election of St. Etienne, en-
deavours to show 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 Rou-
en.^® 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 manufactures 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 back-
wards nor forwards.
The manufacture of linen in Scotland, and that of coarse wool-
lens in the west riding of Yorkshire, are growing manufactures, of
which the produce is generally, though with some variations, in-
creasing 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, ap-
pear to have declined very considerably. But in 1756, another year
of great scarcity, the Scotch manufacture made more than ordi-
nary 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
Misprinted “taillies” in eds. 3-5.
^Recherches sur la population des giniralitis d' Auvergne, de Lyon, de
Rouen, et de quelques provinces et villes du royaume, avec des rS flexions sur
la valeur du bled tant en France giden Angleterre, depuis 1674 jusqu^en 1764,
par M. Messance, receveur des taOles de l’ 61 ection de Saint-Etienne, 1766, pp.
287-292, 3o5-'?o8
*^Ed. I reads “continued to do so.”
WAGES OF LABOUR S5
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 declen-
sion 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 cloaths 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 reg-
isters 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.
Though the variations in the price of labour, not only do not al-
ways 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 circum-
stances; 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
quantity of the necessaries and conveniencies of life which must
be given to the labourer; and the money price of labour is de-
termined 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 con-
tinuing 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, suflicient to main-
tain 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
The pro-
duce de-
pends on
other cir-
cum-
stances,
and more
of it es-
capes be-
ing reck-
oned in
cheap
years.
There is,
however,
a con-
nexion
between
the price
of labour
and that
of provi-
sions.
In years
of plenty
there is a
greater
demand
for la-
bour,
and in
years of
scarcity a
less de-
mand,
and the
effect of
variations
in the
price of
provisions
is thus
counter-
balanced.
Increase
of wages
increases
prices,
but the
cause of
increased
wages
tends to
diminish
prices.
86 the wealth of NATIONS
sometimes raises both the real and the money price of their labour.
The contrary of this happens in a year of sudden and extraor-
dinary scarcity. The funds destined for employing industry are less
than they had been the year before. A considerable number of peo-
ple are thrown out of employment, who bid against one 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 la-
bour, 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 increas-
ing the demand, tends to raise the price of labour, as the cheapness
of provisions tends to lower it. In the ordinary variations of the
price of provisions, those two opposite causes seem to counterbal-
ance one another; which is probably in part the reason why the
wages of labour are every-where so much more steady and per-
manent 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 re-
solves itself into wages, and so far tends to diminish their consump-
tion 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 employ-
ment. More heads are occupied in inventing the most proper ma-
chinery for executing the work of each, and it is, therefore, more
likely to be invented. There are many commodities, therefore,
which, in consequence of these improvements, come to be produced
by so much less labour than before, that the increase of its price
is more than compensated by the diminution of its quantity
Ed. I reads “that the increase of its price does not compensate the dim-
inution of its quantity.” The meaning is that the increase in the amount paid
for a given quantity of labour is more than counterbalanced by the diminu-
tion in the quantity required. The statement is repeated below, p. 242, 243.
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 some 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 fluctuat-
ing, that the person who carries on a particular trade cannot always
tell you himself what is the average of his annual profit. It is af-
fected, 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.
'•This statement is somewhat amplified below, p. 336, where the increas-
ing intensity of the competition between the owners of capital is attributed
to the gradually increasing difficulty of finding “a profitable method of em-
ploying any new capital.”
Profits de-
pend on
increase
and de-
crease of
wealth,
falling
with the
increase
of wealth.
The rate is
difficult
to ascer-
tain,
but may
be in-
ferred
from the
rate of in-
terest,
which has
fallen in
England,
88 the wealth^ of NATIONS
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 wher-
ever little can be made by it, less will commonly be given for it.^
According, therefore, as lie usual market rate of interest varies in
any country, we may be assured that the ordinary profits of stock
must vary with it, fnust 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 be-
fore 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 in-
creased 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
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
® Defined above, p. 52.
® But that interest will not always bear the same proportion to profit is
recognised below, pp. 96, 97,
* C. 9, “an act against usury.” On the ground that previous Acts and laws
had been obscure it repeals them all, and prohibits the repurchase of goods
sold within three months before, and the obtaining by any device more than
10 per cent, per annum for forbearing payment of money. Its real effect was
to legalise interest up to 10 per cent.
® 5 & 6 Ed. VI., c. 20, forbade all interest, and repealed 37 Hen. VIII., c.
9, alleging in its preamble that that Act was not intended to allow usury, as
“divers persons blinded with inordinate love of themselves” imagined, but
was intended against all usury, “and yet nevertheless the same was by the
said act permitted for the avoiding of a more ill and inconvenience that be-
fore that time was used.”
® On the ground that 5 & 6 Ed. VI., c. 20, “hath not done so much good
as was hoped it should but rather the said vice of usury and especially by
way of sale of wares and shifts of interest hath much more exceedingly
abounded to the utter undoing of many gentlemen, merchants, occupiers and
other.”
^ C. 17, which alleges that the fall of prices which had taken place made
the maintenance of “so high a rate” as 10 per cent, prejudicial to agriculture
and commerce, and therefore reduces the maximum to 8 per cent, for the fu-
ture. It concludes with the very empty proviso that “no words in this law
contained shall be construed or expounded to allow the practice of usury in
point of religion or conscience.”
® It had already been so reduced by a Commonwealth Act of Parliament,
passed in August, 1651, which adopts the reasons given by 21 Jac. L, c. 17.
But of course this, like other Acts of the Commonwealth, had to be ignored
PROFITS OF STOCK ^9
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 ac-
celerated 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 manufac-
tures 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 em-
ployed in every branch of trade, and Idle number of rich com-
by the Restoration Parliament, which, by 12 Car. IL, c. 13, re-made the re-
duction on the grounds that the abatement of interest from 10 per cent, “in
former times hath been found by notable experience beneficial to the ad-
vancement of trade and improvement of lands by good husbandry, with
many other considerable advantages to this nation, especially the reducing
of it to a nearer proportion with foreign states with whom we traffic,” and
because “in fresh memory the like fall from eight to six in the hundred by a
late constant practice hath found the like success to the general contentment
of this nation as is visible by several improvements,” while “it is the en-
deavour of some at present to reduce it back again in practice to the allow-
ance of the statute still in force to eight in the hundred to the great discour-
agement of ingenuity and industry in the husbandry trade and commerce of
this nation.”
®By 12 Ann. st. 2, c. 16, which speaks of the benefit to trade and agricul-
ture resulting from the earlier reductions, of the burdens which the war had
laid on landowners, and of the decay of foreign trade owing to the high in-
terest and profit of money at home, which things made it “absolutely neces-
sary to reduce the high rate of interest” to a nearer proportion with the in-
terest allowed in foreign states.
^®That of 1756-1763.
Holders of 4 per cent, annuities who declined to accept in exchange new
stock bearing interest for some years at 3-5 and afterwards at 3 per cent,
were paid off by means of money raised by a 3 per cent, loan in 1750. See
Sinclair, History of the Public Revenue, 1785, pt. ii., p. 113. From that time
till the beginning of 1755 the 3 per cents, were usually above par. Then they
gradually sank to 63 in January, 1762; rose to 96 in March, 1763; fell again
to 80 in October, 1764; after that they were seldom above 90 before the pub-
lication of the Wealth of Nations (Sinclair, op. cit., pt. iii., 1790, Appendix
iii.) . The policy of a legal regulation of interest is discussed below, pp. 339,
340.
Below, pp. 327, 328.
while
wealth
has been
increasing.
Profits are
lower in
towns,
where
there is
much
stock,
than in
the coun-
try, where
there is
little.
Interest is
higher in
Scotland,
a poor
country,
than in
England.
So too in
France, a
country
probably
less rich
than Eng-
land,
90 THE WEALTH OF NATIONS
petitors, generally reduce the rate of profit in the former below
what it is in the latter. But the wages of labour are generally high-
er 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 em-
ploy 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.’"'
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 3^ per cent. In 1725 it was again raised to
the twentieth penny, or to five per cent. In 1766, during the ad-
ministration of Mr. Laverdy, it was reduced to the twenty-fifth
penny, or to four per cent. The Abbe 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 re-
ducing 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
Above, p. 75. “Below, p. 189.
^®See Denisart, Article Taux des Interets, tom. iii. p, 18. J. B. Denisait,
Collection de decisions nouvettes et de notions relatives d la jurisprudence ac-
tuelle, 7th ed., 1771, s.v. Interet, subdivision Taux des Interets. This does not
go so far as the reduction of 1766. The note appears first in ed. 2.
PROFITS OF STOCK 9^
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 coun-
tenance 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 pos-
sibly 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 coun-
try than England. The government there borrows 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
profits 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 re-
tain a very large share. The great property which they possess both
in the French and English funds, about forty millions, it is said, in
the latter (in which I suspect, however, there is a considerable ex-
aggeration) the great sums which they lend to private people in
Below, p. 340.
Postlethwayt, Dictionary of Commerce, 2nd ed., 1757, vol. i., p. 877, s.v.
Funds, says that the amount of British funds held by foreigners has been
estimated by some at one-fifth and by others at one-fourth of the whole
debt. But Magens, Universal Merchant (ed. Horsley), 1753, p, 13, thought
it “more than probable that foreigners are not concerned in anything like
one-fourth.’’ He had been informed “that most of the money which the
Dutch have here is in Bank, East India and South Sea stocks, and that their
interest in them might amount to one-third of the whole.” Fairman, Account
but lower
in Hol-
land,
which is
richer
than Eng-
land.
In the pe-
culiar case
of new
colonies
high
wages and
high pro-
fits go to-
gether,
but pro-
fits gradu-
ally di-
minish.
92 the wealth of nations
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 col-
onies both the legal and the market rate of interest run from six to
eight per cent. High wages of labour and high profits of stock, how-
ever, are things, perhaps, which scarce ever go together, except in
the peculiar circumstances of new colonies. A new colony must al-
ways for some time be more under-stocked in proportion to the
extent of its territory, and more under-peopled 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 em-
ployment 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 in-
creases, 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
of the Public Funds, 7th ed., 1824, p. 229, quotes “an account drawn up in
the year 1762, showing how much of the several funds transferable at the
Bank of England then stood in the names of foreigners,” which is also in
Sinclair, History of the Public Revenue, pt. iii., 1790, p. 366. From this it
appears that foreigners held £4,627,858 of Bank stock and £10,328,537 in the
other funds, which did not include South Sea and East India stock. Fairman
had reason to believe that the South Sea holding amounted to £2,500,000 and
the East Indian to more than £500,000, which would make in all about
£18,000,000. In 1806, he says, the total claiming exemption from income tax
(foreigners were exempt) was £18,500,000, but this did not include Bank
stock
“Eds, 1-3 read “lapds.”
93
PROFITS OF STOCK
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 re-
duced during the course of the present century. As riches, improve-
ment, and population have increased, interest has declined. The
wages of labour do not sink with the profits of slock. The demand
for labour increases with the increase of stock whatever be its
profits; and after these are diminished, stock may not only con-
tinue 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, Newterri-
may sometimes raise the profits of stock, and with them the interest
of money, even in a country which is fast advancing in the acqui- may raise
sition of riches. The stock of the country not being sufficient for the
whole accession of business, which such acquisitions present to the country^
different people among whom it is divided, is applied to those par- advancing
ticular 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
less 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 sup-
posing 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 num-
“ Below, pp. 314-332.
Above, pp. 64-68.
Diminu-
tion of
capital
stock
raises pro-
fits.
In a coun-
try as rich
as it pos-
sibly
could be,
profits as
well as
wages
would be
very low,
94 THE WEALTH OF NATIONS
ber 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
expence 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 low-
ers the wages of labour, so it raises the profits of stock, and con-
sequently 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 expence 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 profits, therefore, being augmented at both ends, can
well af ord a large interest. The great fortunes so suddenly and so
easily acquired in Bengal and the other British settlements in the
East Indies, may satisfy us that, as the wages of labour are very
low, so the profits of stock are very high in those ruined countries.
The interest of money is proportionably so. In Bengal, money is
frequently lent to the farmers at forty, fifty, and sixty per cent,
and the succeeding crop is mortgaged for the payment. As the
profits which can afford such an interest must eat up almost the
whole rent of the landlord, so such enormous usury must in its turn
eat up the greater part of those profits. Before the fall of the Ro-
man republic, a usury of the same kind seems to have been common
in the provinces, under the ruinous administration of their procon-
suls. The virtuous Brutus lent money in Cyprus at eight-and-
forty per cent, as we learn from the letters of Cicero.^"^
In a country which had acquired that full complement of riches
which the nature of its soil and climate, and its situation with re-
spect to other countries, allowed it to acquire; which could, there-
fore, advance no further, and which was not going backwards, both
the wages of labour and the profits of stock would probably be very
low. In a country fully peopled in proportion to what either its ter-
ritory could maintain or its stock employ, the competition for em-
ployment would necessarily be so great as to reduce the wages of
^ Below, pp. 328, 329, 881. Eds. i and 2 read ^‘cheaper.”
“ Ed. I reads “five and forty,” 8 having? probably been misread as 5.
Ad Atticum, VI., i., s, 6. Cicero had arranged that a six-year-old debt
should be repaid with interest at the rate of 12 per cent, per annum, the
principal being increased by that amount for each of the six years. This
would have very nearly doubled the principal, but Brutus, through ^is
agent, kept asking for 48 per cent., which would have multiplied it by more
^an fifteen. However, Cicero asserted that the 12 per cent, would have sat-
isfied the cruellest usurers.
PROFITS OF STOCK 95
labour to what was barely sufficient to keep up the number of la-
bourers, and, the country being already fully peopled, that number
could never be augmented. In a country fully stocked in proportion
to all the business it had to transact, as great a quantity of stock
would be employed in every particular branch as the nature and
extent of the trade would admit. The competition, therefore, would
every-where be as great, and consequently the ordinary profit as
low as possible.
But perhaps no country has ever yet arrived at this degree of
opulence. China seems to have been long stationary, and had prob-
ably long ago acquired that full complement of riches which is con-
sistent with the nature of its laws and institutions. But this com-
plement may be much inferior to what, with other laws and
institutions, the nature of its soil, climate, and situation might ad-
mit of. A country which neglects or despises foreign commerce, and
which admits the vessels of foreign nations into one or two of its
ports only, cannot transact the same quantity of business which it
might do with different laws and institutions. In a country too,
where, though the rich or the owners of large capitals enjoy a good
deal of security, the poor or the owners of small capitals enjoy
scarce any, but are liable, under the pretence of justice, to be pil-
laged and plundered at any time by the inferior mandarines, the
quantity of stock employed in all the different branches of business
transacted within it, can never be equal to what the nature and ex-
tent of that business might admit. In every different branch, the
oppression of the poor must establish the monopoly of the rich,
who, by engrossing the whole trade to themselves, will be able to
make very large profits. Twelve per cent, accordingly is said to be
the common interests of money in China, and the ordinary profits
of stock must be sufficient to afford this large interest.
A defect in the law may sometimes raise the rate of interest con-
siderably above what the condition of the country, as to wealth or
poverty, would require. When the law doe^ not enforce the per-
formance of contracts, it puts all borrowers nearly upon the same
footing with bankrupts or people of doubtful credit in better regu-
lated countries. The uncertainty of recovering his money makes the
lender exact the same usurious interest which is usually required
from bankrupts. Among the barbarous nations who over-ran the
western provinces of the Roman empire, the performance of con-
tracts was left for many ages to the faith of the contracting
parties.^'" The courts of justice of their kings seldom intermeddled
in it. The high rate of interest which took place in those
^Lectures, pp. 130-134.
but there
has never
yet been
any such
country.
Interest is
raised by
defective
enforce-
ment of
contracts.
and by
prohibi-
tion.
The low-
est rate of
profit
must be
more than
enough to
compen-
sate
losses,
and so
must the
lowest
rate of in-
terest.
In a coun-
try as rich
as it pos-
sibly
could be
interest
would be
so low
that only
the
wealthiest
people
could live
on it.
96 the wealth of nations
ancient times may perhaps be partly accounted for from this cause.
When the law prohibits interest altogether, it does not prevent it.
Many people must borrow, and nobody will lend without such a
consideration for the use of their money as is suitable, not only to
what can be made by the use of it, but to the difficulty and danger
of evading the law. The high rate of interest among all Mahometan
nations is accounted for by Mr. Montesquieu, not from their pov-
erty, but partly from this,^® and partly from the difficulty of re-
covering the money
The lowest ordinary rate of profit must always be something
more than what is sufficient to compensate the occasional losses to
which every employment of stock is exposed. It is this surplus only
which is neat or clear profit. What is called gross profit compre-
hends frequently, not only this surplus, but what is retained for
compensating such extraordinary losses. The interest which the
borrower can afford to pay is in proportion to the clear profit only.
The lowest ordinary rate of interest must, in the same manner,
be something more than sufficient to compensate the occasional
losses to which lending, even with tolerable prudence, is exposed.
Were it not more, charity or friendship could be the only motives
for lending.
In a country which had acquired its full complement of riches,
where in every particular branch of business there was the greatest
quantity of stock that could be employed in it, as the ordinary rate
of clear profit would be very small, so the usual market rate of in-
terest which could be afforded out of it, would be so low as to
render it impossible for any but the very wealthiest people to live
upon the interest of their money. All people of small or middling
fortunes would be obliged to superintend themselves the employ-
ment of their own stocks. It would be necessary that almost every
man should be a man of business, or engage in some sort of trade.
The province of -Holland seems to be approaching near to this
state. It is there unfashionable not to be a man of business.^®
Necessity makes it usual for almost every man to be so, and custom
every where regulates fashion. As it is ridiculous not to dress, so is
“/.e., the danger of evading the law.
'-^Esprit des lois, liv. xxii., ch. 19, “L’usure augmentc dans les pays ma-
hometans a proportion de la severite de la defense: le pr8teur slndemnise du
peril de la contravention. Dans ces pays d’Orient, la plupart des hommes
n’ont rien d^assur^; il n’y a presque point de rapport entre la possession ac-
tuelle d’une somme et Tesperance de la ravoir apr^s Tavoir pret^e: I’usure y
augmente done k proportion du peril de l’insolvabilit6,”
^Joshua Gee, Trade and Navigation of Great Britain Considered, 1729,
p. 128, notices the fact of the Dutch being all engaged in trade and ascribes
it to the deficiency of valuable land.
97
PROFITS OF STOCK
it, in some measure, not to be employed, like other people. As a
man of a civil profession seems awkward in a camp or a garrison,
and is even in some danger of being despised there, so does an idle
man among men of business.
The highest ordinary rate of profit may be such as, in the price
of the greater part of commodities, eats up the whole of what should
go to the rent of the land, and leaves only what is sufficient to pay
the labour of preparing and bringing them to market, according to
the lowest rate at which labour can any-where be paid, the bare sub-
sistence of the labourer. The workman must always have been fed
in some way or other while he was about the work; but the land-
lord may not always have been paid. The profits of the trade which
the servants of the East India Company carry on in Bengal may
not perhaps be very far from this rate.^®
The proportion which the usual market rate of interest ought to
bear to the ordinary rate of clear profit, necessarily varies as profit
rises or falls. Double interest is in Great Britain reckoned, what the
merchants call, a good, moderate, reasonable profit; terms which I
apprehend mean no more than a common and usual profit. In a
country where the ordinary rate of clear profit is eight or ten per
cent., it may be reasonable that one half of it should go to interest,
wherever business is carried on with borrowed money. The stock is
at the risk of the borrower, who, as it were, insures it to the lender;
and four or five per cent, may, in the greater part of trades, be both
a sufficient profit upon the risk of this insurance, and a sufficient
recompence for the trouble of employing the stock. But the pro-
portion between interest and clear profit might not be the same in
countries where the ordinary rate of profit was either a good deal
lower, or a good deal higher. If it were a good deal lower, one half
of it perhaps could not be afforded for interest; and more might be
afforded if it were a good deal higher.
In countries which are fast advancing to riches, the low rate of
profit may, in the price of many commodities, compensate the high
wages of labour, and enable those countries to sell as cheap as their
less thriving neighbours, among whom the wages of labour may be
lower.
In reality high profits tend much more to raise the price of work
than high wages. If in the linen manufacture, for example, the
wages of the different working people, the flax-dressers, the spin-
ners, the weavers, &c. should, all of them, be advanced two pence a
day; it would be necessary to heighten the price of a piece of linen
only by a number of two pences equal to the number of people that
See below, pp. 603-605.
The high-
est rate of
profit
would eat
up all rent
and leave
only
wages.
The pro-
portion of
interest to
profit
rises and
falls with
the rate of
profit.
Countries
with low
profits
can sell as
cheap as
those with
low
wages;
and in
reality
high pro-
fits tend
to raise
prices
more than
high
wages.
9 ^ the wealth of nations
had been employed about it, multiplied by the number of days
during which they had been so employed. That part of the price of
the commodity which resolved itself into wages would, through all
the different stages of the manufacture, rise only in arithmetical
proportion to this rise of wages. But if the profits of all the differ-
ent employers of those working people should be raised five per
cent, that part of the price of the commodity which resolved itself
into profit, would, through all the different stages of the manufac-
ture, rise in geometrical proportion to this rise of profit. The em-
ployer of the flax-dressers would in selling his flax require an
additional five per cent, upon the whole value of the materials and
wages which he advanced to his workmen. The employer of the
spinners would require an additional five per cent, both upon the
advanced price of the flax and upon the wages of the spinners. And
the employer of the weavers would require a like five per cent, both
upon the advanced price of the linen yarn and upon the wages of
the weavers. In raising the price of commodities the rise of wages
operates in the same manner as simple interest does in the accumu-
lation of debt. The rise of profit operates like compound interest.^®
Our merchants and master-manufacturers complain much of the
bad effects of high wages in raising the price, and thereby lessening
the sale of their goods both at home and abroad. They say nothing
concerning the bad effects of high profits. They are silent with re-
gard to the pernicious effects of their own gains. They complain
only of those of other people.^^
According to the view of the subject here set forth, if the three employ-
ers each spend iioo in wages and materials, and profits are at first s per
cent, and then rise to lo per cent., the finished commodity must rise from
£331 os. 3d. to £364 2S., while if, on the other hand, the wages rise from £100
to £ios, the commodity will only rise to £347 ns. 3d. It is assumed either
that profits mean profits on turn-over and not on capital per annum, or else
that the employers each have their capital turned over once a year. But even
when one or other of these assumptions is granted, it is clear that the “simple
interest” may easily be greater than the “compound.” In the examples just
given we doubled profits, but only added one-twentieth to wages. If we
double wages and leave profits at $ per cent., the commodity should rise
from £331 os. 3d. to £662 os. 6d.
^ This paragraph is not in ed. i ; the epigram at the end, however, did not
make its appearance here for the first time in ed. 2, since it occurs in a slightly
less polished form below, p. 566.
CHAPTER X
OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR
AND STOCK ^
The whole of the advantages and disadvantages of the different
employments of labour and stock must, in the same neighbour-
hood, be either perfectly equal or continually tending to equality.
If in the same neighbourhood, there was any employment evidently
either ^ more or less advantageous than the rest, so many people
would crowd into it in the one case, and so many would desert it in
the other, that its advantages would soon return to the level of
other employments. This at least would be the case in a society
where things were left to follow their natural course, where there
was perfect liberty,^ and where every man was perfectly free both
to chuse what occupation he thought proper, and to change it as
often as he thought proper. Every man’s interest would prompt him
lo seek the advantageous, and to shun the disadvantageous em-
oloyment.
Pecuniary wages and profit, indeed, are every-where in Europe
extremely different according to the different employments of la-
bour and stock. But this difference arises partly from certain cir-
cumstances in the employments themselves, which, either really, or
at least in the imaginations of men, make up for a small pecuniary
gain in some, and counter-balance a great one in others; and partly
from the policy of Europe, which no-where leaves things at perfect
hberty.
The particular consideration of those circumstances and of that
policy will divide this chapter into two parts.
^The general design of this chapter, as well as many of its details, was
doubtless suggested by Cantillon, Essai, pt. i, chaps, vii. and viii. The first
of these chapters is headed: “Le travail d’un laboureur vaut moins que celui
d’un artisan,” and the second: “Les artisans gagnent les uns plus les autres
moins selon les cas et les circonstances differentes.” The second ends thus:
“Par ces inductions et cent autres qu’on pourrait tirer de Texperience ordi-
naire, on peut voir facilement que la difference de prix qu’on paie pour le
travail joumalier est fondee sur des raisons naturelles et sensibles.”
“Ed. I reads “either evidently.” ® Above pp. 56, 62.
Advan-
tages and
disadvan-
tages tend
to equal-
ity where
there is
perfect
liberty.
Actual
differences
of pecu-
niary
wages and
profits are
due partly
to count-
erbalanc-
ing dr-
cura-
stances
and partly
to want
of perfect
liberty.
99
There are
five
counter-
balancing
circum-
stances:
(i) Wages
vary with
the agree-
ableness
of the em-
ployment
Some very
agreeable
employ-
100 XHE WEALTH OF NATIONS
Parti
Inequalities arising from the Nature of the Employments them-
selves ^
The five following are the principal circumstances which, so far as
I have been able to observe, make up for a small pecuniary gain
in some employments, and counter-balance a great one in others:
first, the agreeableness or disagreeableness of the employments
themselves; secondly, the easiness and cheapness, or the difficulty
and expence of learning them; thirdly, the constancy or incon-
stancy of employment in them; fourthly, the small or great trust
which must be reposed in those who exercise them; and fifthly, the
probability or improbability of success in them.
First, The wages of labour vary with the ease or hardship, the
cleanliness or dirtiness, the honourableness or dishonourableness of
the employment. Thus in most places, take the year round, a jour-
neyman taylor earns less than a journeyman weaver. His work is
much easier. A journeyman weaver earns less than a journeyman
smith. His work is not always easier, but it is much cleanlier. A
journeyman blacksmith, though an artificer, seldom earns so much
in twelve hours as a collier, who is only a labourer, does in eight.
His work is not quite so dirty, is less dangerous, and is carried on in
day-light, and above ground. Honour makes a great part of the re-
ward of all honourable professions. In point of pecuniary gain, all
things considered, they are generally under-recompensed, as I shall
endeavour to show by and by.^ Disgrace has the contrary effect.
The trade of a butcher is a brutal and an odious business; but it is
in most places more profitable than the greater part of common
trades. The most detestable of all employments, that of public ex-
ecutioner, is, in proportion to the quantity of work done, better
paid than any common trade whatever.
Hunting and fishing, the most important employments of man-
kind in the rude state of society, become in its advanced state their
'‘The foregoing introductory paragraphs would lead a logical reader to
expect part i of the chapter to be entitled. “Inequalities of pecuniary wages
and profit which merely counterbalance inequalities of other advantages and
disadvantages.” The rather obscure tide actually chosen is due to the fact
that nearly a quarter of the part is occupied by a discussion of three further
conditions which must be present in addition to “perfect freedom” in order
to bring about the equality of total advantages and disadvantages. The chap-
ter would have been clearer if this discussion had been placed at the begin-
ning, but it was probably an afterthought.
® Below, pp. 105-107.
INEQUALITIES OF WAGES AND PROFIT
most agreeable amusements, and they pursue for pleasure what
they once followed from necessity. In the advanced state of society,
therefore, they are all very poor people who follow as a trade, what
other people pursue as a pastime. Fishermen have been so since the
time of ^ Theocritus. A poacher is every-where a very poor man in
Great Britain. In countries where the rigour of the law suffers no
poachers, the licensed hunter is not in a much better condition. The
natural taste for those employments makes more people follow
them than can live comfortably by them, and the produce of their
labour, in proportion to its quantity, comes always too cheap to
market to afford anything but the most scanty subsistence to the
labourers.
Disagreeableness and disgrace affect the profits of stock in the
same manner as the wages of labour. The keeper of an inn or tav-
ern, who is never master of his own house, and who is exposed to
the brutality of every drunkard, exercises neither a very agreeable
nor a very creditable business. But there is scarce any common
trade in which a small stock yields so great a profit.
Secondly, The wages of labour vary with the easiness and cheap-
ness, or the difficulty and expence of learning the business.
"W^en any expensive machine is erected, the extraordinary work
to be performed by it before it is worn out, it must be expected, will
replace the capital laid out upon it, with at least the ^ ordinary
profits. A man educated at the expence of much labour and time to
any of those employments which require extraordinary dexterity
and skill, may be compared to one of those expensive machines.
The work which he learns to perform, it must be expected, over and
above the usual wages of common labour, will replace to him the
whole expence of his education, with at least the ordinary profits
of an equally valuable capital. It must do this too in a reasonable
time, regard being had to the very uncertain duration of human
life, in the same manner as to the more certain duration of the ma-
chine.
The difference between the wages of skilled labour and those of
common labour, is founded upon this principle.
The policy of Europe considers the labour of all mechanics, arti-
ficers, and manufacturers, as skilled labour; and that of all country
labourers as common labour. It seems to suppose that of the former
to be of a more nice and delicate nature than that of the latter. It is
so perhaps in some cases; but in the greater part it is quite other-
® See Idyllium xxi. This merely describes the life of two poor fishermen,
The note appears first in ed. 2 .
^ Ed. I reads “its.”
ments are
exceeding-
ly ill paid.
The same
thing is
true of
profits.
(2) Wages
vary with
the cost of
learning
the busi-
ness.
The cost
of ap-
prentice-
ship ac-
counts for
the wages
of manu-
facturers
being
higher
than those
of coun-
try la-
bourers
Education
for liberal
profes-
sion'^ is
more cost-
102 the wealth of nations
wise, as I shall endeavour to shew by and by.® The laws and cus-
toms of Europe, therefore, in order to qualify any person for exer-
cising the one species of labour, impose the necessity of an appren-
ticeship, though with different degrees of rigour in different places.
They leave the other free and open to every body. During the con-
tinuance of the apprenticeship, the whole labour of the apprentice
belongs to his master. In the mean time he must, in many cases, be
maintained by his parents or relations, and in almost all cases must
be cloathed by them. Some money too is commonly given to the
master for teaching him his trade. They who cannot give money,
give time, or become bound for more than the usual number of
years; a consideration which, though it is not always advantageous
to the master, on account of the usual idleness of apprentices, is al-
ways disadvantageous to the apprentice. In country labour, on the
contrary, the labourer, while he is employed about the easier, learns
the more difficult parts of his business, and his own labour maintains
him through all the different stages of his employment. It is reason-
able, therefore, that in Europe the wages of mechanics, artificers,
and manufacturers, should be somewhat higher than those of com-
mon labourers.^ They are so accordingly, and their superior gains
make them in most places be considered as a superior rank of
people. This superiority, however, is generally very small; the
daily or weekly earnings of journeymen in the more common sorts
of manufactures, such as those of plain linen and woollen cloth,
computed at an average, are, in most places, very little more than
the day wages of common labourers. Their employment, indeed, is
more steady and uniform, and the superiority of their earnings,
taking the whole year together, may be somewhat greater. It seems
evidently, however, to be no greater than what is sufficient to com-
pensate the superior expence of their education.
Education in the ingenious arts and in the liberal professions, is
still more tedious and expensive. The pecuniary recompence, there-
fore, of painters and sculptors, of lawyers and physicians, ought
to be much more liberal: and it is so accordingly.
® Below, p. 126.
This argument seems to be modelled closely on Cantillon, Essai, pp. 23,
24, but probably also owes something to Mandeville, Fable of the Bees, pt.
ii., dialogue vi., vol. ii., p. 423. Cp. Lectures, pp. 173-175.
^®The “ought” is equivalent to “it is reasonable they should be” in the
previous paragraph, and to ‘‘must” in “must not only maintain him while he
is idle” on p. 103. Cp, “doivent” in Cantillon, Essai, p. 24: “Ceux done qui
emploient des artisans ou gens de metier, doivent necessairement payer leur
travail plus haut que celui d’un laboureur ou manoeuvre.” The meaning need
not be that it is ethically right that a person on whose education much has
been spent should receive a large reward, but only that it is economically
desirable, since otherwise there would be a deficiency of such persons.
INEQUALITIES OF WAGES AND PROFIT
The profits of stock seem to be very little affected by the easiness ly and the
or difficulty of learning the trade in which it is employed. All the
different ways in which stock is commonly employed in great towns pense
seem, in reality, to be almost equally easy and equally difficult to
learn. One branch either of foreign or domestic trade, cannot well highe/
be a much more intricate business than another. Profits are
Thirdly, The wages of labour in different occupations vary with
the constancy or inconstancy of emplo5mient.i^ by this
Employment is much more constant in some trades than in drcum-
others. In the greater part of manufactures, a journeyman may be
pretty sure of employment almost every day in the year that he is wages
able to work. A mason or bricklayer, on the contrary, can work va^with
neither in hard frost nor in foul weather, and his employment at all constancy
other times depends upon the occasional calls of his customers. He
is liable, in consequence, to be frequently without any. What he
earns, therefore, while he is employed, must not only maintain him
while he is idle, but make him some compensation for those anxious
and desponding moments which the thought of so precarious a situ-
ation must sometimes occasion. Where the computed earnings of
the greater part of manufacturers, accordingly, are nearly upon a
level with the day wages of common labourers, those of masons and
bricklayers are generally from one half more to double those wages.
Where common labourers earn four and five shillings a week, ma-
sons and bricklayers frequently earn seven and eight; where the
former earn six, the latter often earn nine and ten, and where the
fromer earn nine and ten, as in London, the latter commonly earn
fifteen and eighteen. No species of skilled labour, however, seems
more easy to learn than that of masons and bricklayers. Chairmen
in London, during the summer season, are said sometimes to be em-
ployed as bricklayers. The high wages of those workmen, therefore,
are not so much the recompence of their skill, as the compensation
for the inconstancy of their emplo3mient.
A house carpenter seems to exercise rather a nicer and more in-
genious trade than a mason. In most places, however, for it is not
universally so, his day-wages are somewhat lower. His employ-
ment, though it depends much, does not depend so entirely upon
^ The treatment of this head would have been clearer if it had begun with
a distinction between “day-wages” (mentioned lower down on the page)
and annual earnings. The first paragraph of the argument claims that an-
nual earnings as well as day-wages will be higher in the inconstant employ-
ment so as to counterbalance the disadvantage or repulsive force of having
“anxious and desponding moments.” In the subsequent paragraphs, how-
ever, this claim is lost sight of, and the discussion proceeds as if the thesis
was that annual earnings are equal though day-wages may be unequal.
104 THE WEALTH OF NATIONS
the occasional calls of his customers; and it is not liable to be in-
terrupted by the weather.
When the trades which generally afford constant employment,
happen in a particular place not to do so, the wages of the work-
men always rise a good deal above their ordinary proportion to
those of common labour. In London almost all journeymen artifi-
cers are liable to be called upon and dismissed by their masters
from day to day, and from week to week, in the same manner as
day-labourers in other places. The lowest order of artificers, jour-
neymen taylors, accordingly, earn their half a crown a day,^^
though eighteen pence may be reckoned the wages of common la-
bour. In small towns and country villages, the wages of journey-
men taylors frequently scarce equal those of common labour; but
in London they are often many weeks without employment, par-
ticularly during the summer.
When the inconstancy of employment is combined with the
hardship, disagreeableness, and dirtiness of the work, it sometimes
raises the wages of the most common labour above those of the
most skilful artificers. A collier working by the piece is supposed, at
Newcastle, to earn commonly about double, and in many parts of
Scotland about three times the wages of common labour. His high
wages arise altogether from the hardship, disagreeableness, and
dirtiness of his work. His employment may, upon most occasions,
be as constant as he pleases. The coal-heavers in London exercise a
trade which in hardship, dirtiness, and disagreeableness, almost
equals that of colliers; and from the unavoidable irregularity in the
arrivals of coal-ships, the employment of the greater part of them
is necessarily very inconstant. If colliers, therefore, commonly earn
double and triple the wages of common labour, it ought not to seem
unreasonable that coal-heavers should sometimes earn four and
five times those wages. In the enquiry made into their condition a
few years ago, it was found that at the rate at which they were then
paid, they could earn from six to ten shillings a day. Six shillings
are about four times the wages of common labour in London, and in
every particular trade, the lowest common earnings may always be
considered as those of the far greater number. How extravagant so-
ever those earnings may appear, if they were more than sufficient
to compensate all the disagreeable circumstances of the business,
there would soon be so great a number of competitors as, in a trade
which has no exclusive privilege, would quickly reduce them to a
lower rate.
Below, p. 141, 142.
INEQUALITIES OF WAGES AND PROFIT
The constancy or inconstancy of employment cannot affect
the ordinary profits of stock in any particular trade. Whether the
stock is or is not constantly employed depends, not upon the trade,
but the trader.^^
Fourthly, The wages of labour vary according to the small or
great trust which must be reposed in the workmen.^^
The wages of goldsmiths and jewellers are every-where superior
to those of many other workmen, not only of equal, but of much
superior ingenuity; on account of the precious materials with which
they are intrusted.
We trust our health to the physician; our fortune and sometimes
our life and reputation to the lawyer and attorney. Such confidence
could not safely be reposed in people of a very mean or low condi-
tion. Their reward must be such, therefore, as may give them that
rank in the society which so important a trust requires. The long
time and the great expence which must be laid out in their educa-
tion, when combined with this circumstance, necessarily enhance
still further the price of their labour.
When a person employs only his own stock in trade, there is no
trust; and the credit which he may get from other people, depends,
not upon the nature of his trade, but upon their opinion of ids for-
tune, probity, and prudence. The different rates of profit, therefore,
in the different branches of trade, cannot arise from the different
degrees of trust reposed in the traders.^®
“Misprinted “effect” in ed. 5.
“ That “stock” consists of actual objects seems to be overlooked here. The
constancy with which such objects can be employed is various* the con-
stancy with which the hearse of a village is employed depends on the num-
ber of deaths, which may be said to be “the trade,” and is certainly not “the
trader ” There is no difference of profits corresponding to differences of day-
wages due to unequal constancy of employment, for the simple reason that
“profits” are calculated by their amount per annum, but the rural under-
taker, liable to long interruption of business in healthy seasons, may just as
well as the bricklayer be supposed to receive “some compensation for those
anxious and desponding moments which the thought of so precarious a situ-
ation must sometimes occasion ”
“ The argument foreshadowed in the introductory paragraphs of the chap-
ter requires an allegation that it is a disadvantage to a person to have trust
reposed in him, but no such allegation is made Cantillon, Essai, p. 27, says:
“lorsqu’il faut de la capacity et de la confiance, on paie encore le travail plus
cher, comme aux jouailliers, teneurs de compte, caissiers, et autres ” Hume,
History, ed. of 1773, vol. viii., p 323, says* “It is a familiar rule in all busi-
ness that every man should be paid in proportion to the trust reposed in him
and the power which he enjoys.”
“ But some trades, e.g , that of a banker, may be necessarily confined to
persons of more than average trustworthiness, and this may raise the rate of
profit above the ordinary level if such persons are not sufficiently plentiful.
Con-
stancy
does not
affect pro-
fits.
(4) Wages
vary with
the trust
to be re-
posed.
Profits are
unaffected
by trust.
( 5 ) Wages
vary with
the pro-
bability of
success.
Law and
similar
profes-
sions are
neverthe-
less
crowded.
io6 the wealth of NATIONS
Fifthly, The wages of labour in different employments vary ac-
cording to the probability or improbability of success in them.^'^
The probability that any particular person shall ever be qualified
for the employment to which he is educated, is very different in dif-
ferent occupations. In the greater part of mechanic trades, success
is almost certain; but very uncertain in the liberal professions. Put
your son apprentice to a shoemaker, there is little doubt of his
learning to make a pair of shoes: But send him to study the law, it
is at least twenty to one if ever he makes such proficiency as will en-
able him to live by the business. In a perfectly fair lottery, those
who draw the prizes ought to gain all that is lost by those who draw
the blanks. In a profession where twenty fail for one that succeeds,
that one ought to gain all that should have been gained by the un-
successful twenty. The counsellor at law who, perhaps, at near forty
years of age, begins to make something by his profession, ought to
receive the retribution, not only of his own so tedious and expensive
education, but of that of more than twenty others who are never
likely to make any thing by it. How extravagant soever the fees of
counsellors at law may sometimes appear, their real retribution is
never equal to this.^"^ Compute in any particular place, what is like-
ly to be annually gained, and what is likely to be annually spent, by
all the different workmen in any common trade, such as that of
shoemakers or weavers, and you will find that the former sum will
generally exceed the latter. But make the same computation with
regard to all the counsellors and students of law, in all the different
inns of court, and you will find that their annual gains bear but a
very small proportion to their annual expence, even though you rate
the former as high, and the latter as low, as can well be done. The
lottery of the law, therefore, is very far from being a perfectly fair
lottery; and that, as well as many other liberal and honourable pro-
fessions, is,^® in point of pecuniary gain, evidently under-recom-
penced.
Those professions keep their level, however, with other occupa-
tions, and, notwithstanding these discouragements, all the most
generous and liberal spirits are eager to crowd into them. Two dif-
ferent causes contribute to recommend them. First, the desire of the
reputation which attends upon superior excellence in any of them;
The argument under this head, which is often misunderstood, is that pe-
cuniary wages are (on the average, setting great gains against small ones)
less in trades where there aie high prizes and many blanks. The remote pos-
sibility of obtaining one of the high prizes is one of the circumstances which
“in the imaginations of men make up for a small pecuniary gain” (p. 99).
Cantillon, Essai, p. 24, is not so subtle, merely making remuneration pro-
portionate to ri^.
^Lectures, p. 175. ^'^Eds. 1-4 read “are.”
INEQUALITIES OF WAGES AND PROFIT
and, secondly, the natural confidence which every man has more or
less, not only in his own abilities, but in his own good fortune.
To excel in any profession, in which but few arrive at mediocrity,
is the most decisive mark of what is called genius or superior tal-
ents. The public admiration which attends upon such distinguished
abilities, makes always a part of their reward; a greater or smaller
in proportion as it is higher or lower in degree. It makes a consider-
able part of that reward in the profession of physic; a still great-
er perhaps in that of law; in poetry and philosophy it makes almost
the whole.
There are some very agreeable and beautiful talents of which the
possession commands a certain sort of admiration; but of which the
exercise for the sake of gain is considered, whether from reason or
prejudice, as a sort of public prostitution. The pecuniary recom-
pence, therefore, of those who exercise them in this manner, must be
sufficient, not only to pay for the time, labour, and expence of ac-
quiring the talents, but for the discredit which attends the employ-
ment of them as the means of subsistence. The exorbitant rewards
of players, opera-singers, opera-dancers, &c. are founded upon those
two principles; the rarity and beauty of the talents, and the dis-
credit of employing them in this manner. It seems absurd at first
sight tliat we should despise their persons, and yet reward their tal-
ents with the most profuse liberality. While we do the one, however,
we must of necessity do the other. Should the public opinion or pre-
judice ever alter with regard to such occupations, their pecuniary
recompence would quickly diminish. More people would apply to
them, and the competition would quickly reduce the price of their
labour. Such talents, though far from being common, are by no
means so rare as is imagined. Many people possess them in great
perfection, who disdain to make this use of them; and many more
are capable of acquiring them, if any thing could be made honour-
ably by them.
The over-weening conceit which the greater part of men have of
their own abilities, is an ancient evil remarked by the philosophers
and moralists of all ages. Their absurd presumption in their own
good fortune, has been less taken notice of. It is, however, if pos-
sible, still more universal. There is no man living who, when in tol-
erable health and spirits, has not some share of it. The chance of
gain is by every man more or less over-valued, and the chance of
loss is by most men under-valued, and by scarce any man, who is in
tolerable health and spirits, valued more than it is worth,
Public ad-
miration
makes a
part of
the re-
ward of
superior
abilities.
except in
the pecu-
liar case
of players,
opera-
singers,
&c.
The
greater
part of
men have
an over-
weening
conceit of
their abi-
lities:
^Ed. I reads “of it.’
lotteries
show that
the
chance of
gain is
over-
valued.
and the
moderate
profit of
insurers
shows
that the
chance of
loss is
under-
valued.
io8 the wealth of NATIONS
That the chance of gain is naturally over-valued, we may learn
from the universal success of lotteries. The world neither ever saw,
nor ever will see, a perfectly fair lottery; or one in which the whole
gain compensated the whole loss; because the undertaker could
make nothing by it. In the state lotteries the tickets are really not
worth the price which is paid by the original subscribers, and yet
commonly sell in the market for twenty, thirty, and sometimes forty
per cent, advance. The vain hope of gaining some of the great prizes
is the sole cause of this demand. The soberest people scarce look
upon it as a folly to pay a small sum for the chance of gaining ten
or twenty thousand pounds; though they know that even that small
sum is perhaps twenty or thirty per cent, more than the chance is
worth. In a lottery in which no prize exceeded twenty pounds,
though in other respects it approached much nearer to a perfectly
fair one than the common state lotteries, there would not be the
same demand for tickets. In order to have a better chance for some
of the great prizes, some people purchase several tickets, and oth-
ers, small shares in a still greater number. There is not, however, a
more certain proposition in mathematics, than that the more tickets
you adventure upon, the more likely you are to be a loser. Adven-
ture upon all the tickets in the lottery, and you lose for certain ; and
the greater the number of your tickets the nearer you approach to
this certainty.
That the chance of loss is frequently undervalued, and scarce
ever valued more than it is worth, we may learn from the very mod-
erate profit of insurers. In order to make insurance, either from fire
or sea-risk, a trade at all, the common premium must be sufficient
to compensate the common losses, to pay the expence of manage-
ment, and to afford such a profit as might have been drawn from an
equal capital employed in any common trade. The person who pays
no more than this, evidently pays no more than the real value of the
risk, or the lowest price at which he can reasonably expect to insure
it. But though many people have made a little money by insurance,
very few have made a great fortune; and from this consideration
alone, it seems evident enough, that the ordinary balance of profit
and loss is not more advantageous in this, than in other common
trades by which so many people make fortunes. Moderate, how-
ever, as the premium of insurance commonly is, many people de-
spise the risk too much to care to pay it. Taking the whole kingdom
at an average, nineteen houses in twenty, or rather, perhaps, ninety-
nine in a hundred, are not insured from fire. Sea risk is more alarm-
ing to the greater part of people, and the proportion of ships insured
to those not insured is much greater. Many sail, however, at all sea-
INEQUALITIES OF WAGES AND PROFIT ^^9
sons, and even in time of war, without any insurance. This may
sometimes perhaps be done without any imprudence. When a great
company, or even a great merchant, has twenty or thirty ships at
sea, they may, as it were, insure one another. The premium saved
upon them all, may more than compensate such losses as they are
likely to meet with in the common course of chances. The neglect of
insurance upon shipping, however, in the same manner as upon
houses, is, in most cases, the effect of no such nice calculation, but
of mere thoughtless rashness and presumptuous contempt of the
risk.
The contempt of risk and the presumptuous hope of success, are
in no period of life more active than at the age at which young peo-
ple chuse their professions. How little the fear of misfortune is then
capable of balancing the hope of good luck, appears still more evi-
dently in the readiness of the common people to enlist as soldiers,
or to go to sea, than in the eagerness of those of better fashion to
enter into what are called the liberal professions.
What a common soldier may lose is obvious enough. Without re-
garding the danger, however, young volunteers never enlist so read-
ily as at the beginning of a new war; and though they have scarce
any chance of preferment, they figure to themselves, in their youth-
ful fancies, a thousand occasions of acquiring honour and distinc-
tion which never occur. These romantic hopes make the whole price
of their blood. Their pay is less than that of common labourers, and
in actual service their fatigues are much greater.
The lottery of the sea is not altogether so disadvantageous as
that of the army. The son of a creditable labourer or artificer may
frequently go to sea with his father’s consent; but if he enlists as a
soldier, it is always without it. Other people see some chance of his
making something by the one trade: nobody but himself sees any
of his making any thing by the other. The great admiral is less the
object of public admiration than the great general, and the highest
success in the sea service promises a less brilliant fortune and repu-
tation than equal success in the land. The same difference runs
through all the inferior degrees of preferment in both. By the rules
of precedency a captain in the navy ranks with a colonel in the
army: but he does not rank with him in the common estimation. As
the great prizes in the lottery are less, the smaller ones must be
more numerous. Common sailors, therefore, more frequently get
some fortune and preferment than common soldiers; and the hope
of those prizes is what principally recommends the trade. Though
their skill and dexterity are much superior to that of almost any
artificers, and though their whole life is one continual scene of
Young
people are
particu-
larly
prone to
over-
value the
chance of
gain and
under-
value the
risk of
loss.
For this
reason
soldiers
are poorly
paid,
and sail-
ors not
much
better.
Dangers
which can
be sur-
mounted
attract,
though
mere un-
whole-
semeness
repels.
Profits '
vary with
IIO the wealth of nations
hardship and danger, yet for all this dexterity and skill, for al
those hardships and dangers, while they remain in the condition of
common sailors, they receive scarce any other recompence but the
pleasure of exercising the one and of surmounting the other. Their
wages are not greater than those of common labourers at the port
which regulates the rate of seamen^s wages. As they are continually
going from port to port, the monthly pay of those who sail from all
the different ports of Great Britain, is more nearly upon a level
than that of any other workmen in those different places; and the
rate of the port to and from which the greatest number sail, that is
the port of London, regulates that of all the rest. At London the
wages of the greater part of the different classes of workmen are
about double those of the same classes at Edinburgh. But the sail
ors who sail from the port of London seldom earn above three or
four shillings a month more than those who sail from the port of
Leith, and the difference is frequently not so great. In time of
peace, and in the merchant service, the London price is from a
guinea to about seven-and-twenty shillings the calendar month. A
common labourer in London, at the rate of nine or ten shillings a
week, may earn in the calendar month from forty to five-and-forty
shillings. The sailor, indeed, over and above his pay, is supplied
with provisions. Their value, however, may not perhaps always ex-
ceed the difference between his pay and that of the common labour-
er; and though it sometimes should, the excess will not be clear
gain to the sailor, because he cannot share it with his wife and fam-
ily, whom he must maintain out of his wages at home.
The dangers and hair-breadth escapes of a life of adventures, in-
stead of disheartening young people, seem frequently to recom-
mend a trade to them. A tender mother, among the inferior ranks
of people, is often afraid to send her son to school at a sea-port
town, lest the sight of the ships and the conversation and adven-
tures of the sailors should entice him to go to sea. The distant pros-
pect of hazards, from which we can hope to extricate ourselves by
courage and address, is not disagreeable to us, and does not raise
the wages of labour in any employment. It is otherwise with those
in which courage and address can be of no avail. In trades which
are known to be very unwholesome, the wages of labour are always
remarkably high. Unwholesomeness is a species of disagreeable-
ness, and its effects upon the wages of labour are to be ranked un-
der that general head.
In all the different employments of stock, the ordinary rate of
profit varies more or less with the certainty or uncertainty of the
INEQUALITIES OF WAGES AND PROFIT
returns. These are in general less uncertain in the inland than in
the foreign trade, and in some branches of foreign trade than in
others; in the trade to North America, for example, than in that to
Jamaica. The ordinary rate of profit always rises more or less with
the risk. It does not, however, seem to rise in proportion to it, or so
as to compensate it completely. Bankruptcies are most frequent in
the most hazardous trades. The most hazardous of all trades, that
of a smuggler, though when the adventure succeeds it is likewise
the most profitable, is the infallible road to bankruptcy. The pre-
sumptuous hope of success seems to act here as upon all other occa-
sions, and to entice so many adventurers into those hazardous
trades, that their competition reduces the profit below what is
sufficient to compensate the risk. To compensate it completely, the
common returns ought, over and above the ordinary profits of
stock, not only to make up for all occasional losses, but to afford a
surplus profit to the adventurers of the same nature with the profit
of insurers. But if the common returns were sufficient for all this,
bankruptcies would not be more frequent in these than in other
tiades.^^
Of the five circumstances, therefore, which vary the wages of la-
bour, two only affect the profits of stock; the agreeableness or dis-
agreeableness of the business, and the risk or security with which
it is attended. In point of agreeableness or disagreeableness, there
is little or no difference in the far greater part of the different em-
ployments of stock; but a great deal in those of labour; and the or-
dinary profit of stock, though it rises with the risk, does not always
seem to rise in proportion to it. It should follow from all this, that,
in the same society or neighbourhood, the average and ordinary
rates of profit in the different employments of stock should be more
nearly upon a level than the pecuniary wages of the different sorts
of labour. They are so accordingly. The difference between the
earnings of a common labourer and those of a well employed law-
yer or physician, is evidently much greater than that between the
ordinary profits in any two different branches of trade. The appar-
ent difference, besides, in the profits of different trades, is generally
a deception arising from our not always distinguishing what ought
to be considered as wages, from what ought to be considered as
profit.^®
^ Eds. 4 and 5 read “their,” doubtless a misprint
The fact is overlooked that the numerous bankruptcies may be counter-
balanced by the instances of great gain. Below, on p. 125, the converse mis-
take is made of comparing great successes and leaving out of account great
failures.
^ Above, p. 53.
certainty
of return.
Profits are
less un-
equal than
wages,
and their
inequality
is often
only due
to the in-
cluaon of
wages,
as in the
case of
the profit
of an apo-
thecary,
or coun-
try grocer
The great-
er diSer-
ence be-
tween re-
tail and
wholesale
profits in
town than
II2 XHE WEALTH OE NATIONS
Apothecaries profit is become a bye-word, denoting something
uncommonly extravagant. This great apparent profit, however, is
frequently no more than the reasonable wages of labour. The skill
of an apothecary is a much nicer and more delicate matter than
that of any artificer whatever; and the trust which is reposed in
him is of much greater importance. He is the physician of the poor
in all cases, and of the rich when the distress or danger is not very
great. His reward, therefore, ought to be suitable to his skill and
his trust, and it arises generally from the price at which he sells his
drugs. But the whole drugs which the best employed apothecary, in
a large market town, will sell in a year, may not perhaps cost him
above thirty or forty pounds. Though he should sell them, there-
fore, for three or four hundred, or at a thousand per cent, profit,
this may frequently be no more than the reasonable wages of his
labour charged, in the only way in which he can charge them, upon
the price of his drugs. The greater part of the apparent profit is
real wages disguised in the garb of profit.
In a small sea-port town,^^ a little grocer will make forty or fifty
per cent, upon a stock of a single hundred pounds, while a consid-
erable wholesale merchant in the same place will scarce make eight
or ten per cent, upon a stock of ten thousand. The trade of the gro-
cer may be necessary for the conveniency of the inhabitants, and
the narrowness of the market may not admit the employment of a
larger capital in the business. The man, however, must not only
live by his trade, but live by it suitably to the qualifications which
it requires. Besides possessing a little capital, he must be able to
read, write, and account, and must be a tolerable judge too of, per-
haps, fifty or sixty different sorts of goods, their prices, qualities,
and the markets where they are to be had cheapest. He must have
all the knowledge, in short, that is necessary for a great merchant,
which nothing hinders him from becoming but the want of a suffi-
cient capital. Thirty or forty pounds a year cannot be considered as
too great a recompence for the labour of a person so accomplished.
Deduct this from the seemingly great profits of his capital, and little
more will remain, perhaps, than the ordinary profits of stock. The
greater part of the apparent profit is, in this case too, real wages.
The difference between the apparent profit of the retail and that
of the wholesale trade, is much less in the capital than in small
towns and country villages. Where ten thousand pounds can be em-
ployed in the grocery trade, the wages of the grocer’s labour make
but a very trifling addition to the real profits of so great a stock.
The apparent profits of the wealthy retailer, therefore, are there
Doubtless Kirkcaldy was in Smith’s mind
INEQUALITIES OF WAGES AND PROFIT ^^3
more nearly upon a level with those of the wholesale merchant. It is
upon this account that goods sold by retail are generally as cheap
and frequently much cheaper in the capital than in small towns and
country villages.^^ Grocery goods, for example, are generally much
cheaper; bread and butcher’s meat frequently as cheap. It costs no
more to bring grocery goods to the great town than to the country
village; but it costs a great deal more to bring corn and cattle, as
the greater part of them must be brought from a much greater dis-
tance, The prime cost of grocery goods, therefore, being the same
in both places, they are cheapest where the least profit is charged
upon them. The prime cost of bread and butcher’s meat is greater
in the great town than in the country village; and though the profit
is less, therefore they are not always cheaper there, but often equal-
ly cheap. In such articles as bread and butcher’s meat, the same
cause, which diminishes apparent profit, increases prime cost. The
extent of the market, by giving emplo3rment to greater stocks, dim-
inishes apparent profit; but by requiring supplies from a greater
distance, it increases prime cost. This diminution of the one and in-
crease of the other seem, in most cases, nearly to counter-balance
one another; which is probably the reason that, though the prices
of corn and cattle are commonly very different in different parts of
the kingdom, those of bread and butcher’s meat are generally very
nearly the same through the greater part of it.
Though the profits of stock both in the wholesale and retail trade
are generally less in the capital than in small towns and country
villages, yet great fortunes are frequently acquired from small be-
ginnings in the former, and scarce ever in the latter. In small towns
and country villages, on account of the narrowness of the market,
trade cannot always be extended as stock extends. In such places,
therefore, though the rate of a particular person’s profits may be
very high, the sum or amount of them can never be very great, nor
consequently that of his annual accumulation. In great towns, on
the contrary, trade can be extended as stock increases, and the
credit of a frugal and thriving man increases much faster than his
stock. His trade is extended in proportion to the amount of both,
and the sum or amount of his profits is in proportion to the extent
of his trade, and his annual accumulation in proportion to the
amount of his profits. It seldom happens, however, that great for-
tunes are made even in great towns by any one regular, estab-
lished, and well-known branch of business, but in consequence of a
long life of industry, frugality, and attention. Sudden fortunes, in-
deed, are sometimes made in such places by what is called the trade
“ Above, p. 75.
countiyis
due to the
same
cause
The lesser
rate of
profit in
towns
yields
larger for-
tunes, but
these
mostly
arise from
specula
tion.
The five
:ircum-
stances
thus
counter-
balance
difference
of pecuni-
ary gains,
but three
things are
necessary
as well as
perfect
freedom:
(i) the
employ-
ments
must be
well
known
and long
Estab-
lished,
since new
trades
yield
higher
wages,
IH THE WEALTH OF NATIONS
of speculation. The speculative merchant exercises no one regular,
established, or well known branch of business. He is a corn mer-
chant this year, and a wine merchant the next, and a sugar, tobac-
co, or tea merchant the year after. He enters into every trade when
he foresees that it is likely to be more than commonly profitable,
and he quits it when he foresees that its profits are likely to return
to the level of other trades. His profits and losses, therefore, can
bear no regular proportion to those of any one established and well-
known branch of business. A bold adventurer may sometimes ac-
quire a considerable fortune by two or three successful specula-
tions; but is just as likely to lose one by two or three unsuccessful
ones. This trade can be carried on no where but in great towns. It is
only in places of the most extensive commerce and correspondence
that the intelligence requisite for it can be had.
The five circumstances above mentioned, though they occasion
considerable inequalities in the wages of labour and profits of stock,
occasion none in the whole of the advantages and disadvantages,
real or imaginary, of the different employments of either. The na-
ture of those circumstances is such, that they make up for a small
pecuniary gain in some, and counter-balance a great one in others.
In order, however, that this equality may take place in the whole
of their advantages or disadvantages, three things are requisite
even where there is the most perfect freedom. First, the employ-
ments must be well known and long established in the neighbour-
hood; secondly, they must be in their ordinary, or what may be
called their natural state; and, thirdly, they must be the sole or
principal employments of those who occupy them.
First, this equality can take place only in those employments
which are well known, and have been long established in the neigh-
bourhood.
Where all other circumstances are equal, wages are generally
higher in new than in old trades. When a projector attempts to es-
tablish a new manufacture, he must at first entice his workmen
from other employments by higher wages than they can either earn
in their own trades, or than the nature of his work would otherwise
require, and a considerable time must pass away before he can ven-
ture to reduce them to the common level. Manufactures for which
the demand arises altogether from fashion and fancy, are continu-
ally changing, and seldom last long enough to be considered as old
established manufactures. Those, on the contrary, for which the de-
mand arises chiefly from use or necessity, are less liable to change,
and the same form or fabric may continue in demand for whole
centuries together. The wages of labour, therefore, are likely to be
INEQUALITIES OF WAGES AND PROFIT
higher in manufactures of the former, than in those of the latter
kind. Birmingham deals chiefly in manufactures of the former
kind; Sheffield in those of the latter; and the wages of labour in
those two different places, are said to be suitable to this difference
in the nature of their manufactures.
The establishment of any new manufacture, of any new branch
of commerce, or of any new practice in agriculture, is always a
speculation, from which the projector promises himself extraordi-
nary profits. These profits sometimes are very great, and some-
times, more frequently, perhaps, they are quite otherwise; but in
general they bear no regular proportion to those of other old trades
in the neighbourhood. If the project succeeds, they are commonly
at first very high. When the trade or practice becomes thoroughly
established and well known, the competition reduces them to the
level of other trades.
Secondly, This equality in the whole of the advantages and dis-
advantages of the different employments of labour and stock, can
take place only in the ordinary, or what may be called the natural
state of those employments.
The demand for almost every different species of labour is some-
times greater and sometimes less than usual. In the one case the ad-
vantages of the employment rise above, in the other they fall below
the common level. The demand for country labour is greater at hay-
time and harvest, than during the greater part of the year; and
wages rise with the demand. In time of war, when forty or fifty
thousand sailors are forced from the merchant service into that of
the king, the demand for sailors to merchant ships necessarily rises
with their scarcity, and their wages upon such occasions commonly
rise from a guinea and seven-and-twenty shillings, to forty shillings
and three pounds a month. In a decaying manufacture, on the con-
trary, many workmen, rather than quit their old trade, are content-
ed with smaller wages than would otherwise be suitable to the na-
ture of their employment.
The profits of stock vary with the price of the commodities in
which it is employed. As the price of any commodity rises above
the ordinary or average rate, the profits of at least some part of
the stock that is employed in bringing it to market, rise above their
proper level, and as it falls they sink below it. All commodities are
more or less liable to variations of price, but some are much more
so than others. In all commodities which are produced by human
industry, the quantity of industry annually employed is necessarily
regulated by the annual demand, in such a manner that the average
annual produce may, as nearly as possible, be equal to the average
and high-
er profits:
(2) the
employ-
ments
must be in
their
natural
state,
since the
demand
for labour
in each
employ-
ment
varies
from time
to time
and pro-
fits fluctu-
ate with
the price
of the
commod-
ity pro-
duced:
and (3)
the em-
ployments
must be
the prin-
cipal em-
ployment
of iose
who oc-
cupy
them,
smce
people
main-
tained by
one em-
ployment
will work
cheap at
another,
like the
Scotch
cotters,
116 XHE WEALTH OF NATIONS
annual consumption. In some employments, it has already been ob-
served,-^ the same quantity of industry will always produce the
same, or very nearly the same quantity of commodities. In the linen
or woollen manufactures, for example, the same number of hands
will annually work up very nearly the same quantity of linen and
woollen cloth. The variations in the market price of such commod-
ities, therefore, can arise only from some accidental variation in
the demand. A public mourning raises the price of black cloth.^^
But as the demand for most sorts of plain linen and woollen cloth
is pretty uniform, so is likewise the price. But there are other em-
plo3mients in which the same quantity of industry will not always
produce the same quantity of commodities. The same quantity of
industry, for example, will, in different years, produce very different
quantities of corn, wine, hops, sugar, tobacco, &c. The price of such
commodities, therefore, varies not only with the variations of de-
mand, but with the much greater and more frequent variations of
quantity, and is consequently extremely fluctuating. But the profit
of some of the dealers must necessarily fluctuate with the price of
the commodities. The operations of the speculative merchant are
principally employed about such commodities. He endeavours to
buy them up when he foresees that their price is likely to rise, and
to sell them when it is likely to fall.
Thirdly, This equality in the whole of the advantages and disad-
vantages of the different employments of labour and stock, can
take place only in such as are the sole or principal employments of
those who occupy them.
When a person derives his subsistence from one employment,
which does not occupy the greater part of his time; in the intervals
of his leisure he is often willing to work at another for less wages
than would otherwise suit the nature of the employment.
There still subsists in many parts of Scotland a set of people
called Cotters or Cottagers, though they were more frequent some
years ago than they are now. They are a sort of out-servants of the
landlords and farmers. The usual reward which they receive from
their masters is a house, a small garden for pot herbs, as much grass
as will feed a cow, and, perhaps, an acre or two of bad arable land.
When their master has occasion for their labour, he gives them, be-
sides, two pecks of oatmeal a week, worth about sixteen pence ster-
ling. During a great part of the year he has little or no occasion for
their labour, and the cultivation of their own little possession is not
sufficient to occupy the time which is left at their own disposal.
When such occupiers were more numerous than they are at pres-
Above, p. 58. ^ The illustration has already been used above, p. 59
INEQUALITIES OF WAGES AND PROFIT ^^7
ent, they are said to have been willing to give their spare time for
a very small recompence to any body, and to have wrought for less
wages than other labourers. In ancient times they seem to have
been common all over Europe. In countries ill cultivated and worse
inhabited, the greater part of the landlords and farmers could not
otherwise provide themselves with the extraordinary number of
hands, which country labour requires at certain seasons. The daily
or weekly recompence which such labourers occasionally received
from their masters, was evidently not the whole price of their la-
bour. Their small tenement made a considerable part of it. This
daily or weekly recompence, however, seems to have been consid-
ered as the whole of it, by many writers who have collected the
prices of labour and provisions in ancient times, and who have
taken pleasure in representing both as wonderfully low.
The produce of such labour comes frequently cheaper to market
than would otherwise be suitable to its nature. Stockings in many
parts of Scotland are knit much cheaper than they can any-where
be wrought upon the loom. They are the work of servants and la-
bourers, who derive the principal part of their subsistence from
some other employment. More than a thousand pair of Shetland
stockings are annually imported into Leith, of which the price is
from five pence to seven pence a pair. At Learwick, the small capi-
tal of the Shetland islands, ten pence a day, I have been assured, is
a common price of common labour. In the same islands they knit
worsted stockings to the value of a guinea a pair and upwards.
The spinning of linen yarn is carried on in Scotland nearly in the
same way as the knitting of stockings, by servants who are chiefly
hired for other purposes. They earn but a very scanty subsistence,
who endeavour to get their whole livelihood by either of those
trades. In most parts of Scotland she is a good spinner who can earn
twenty pence a week.
In opulent countries the market is generally so extensive that any
one trade is sufficient to employ the whole labour and stock of those
who occupy it. Instances of people’s living by one employment, and
at the same time deriving some little advantage from another, oc-
cur chiefly in poor countries. The following instance, however, of
something of the same kind is to be found in the capital of a very
rich one. There is no city in Europe, I believe, in which house-rent
is dearer than in London, and yet I know no capital in which a fur-
nished apartment can be hired so cheap. Lodging is not only much
cheaper in London than in Paris ; it is much cheaper than in Edin-
burgh of the same degree of goodness j and what may seem extraor-
dinary, the dearness of house-rent is the cause of the cheapness of
Shetland
knitters,
Scotch
linen spin-
ners,
and Lon-
don lodg-
ing house
keepers.
The
policy of
Europe
occasions
more im-
portant
inequali-
ties
in three
ways:
(i)It
restricts
competi-
tion in
the wealth op nations
lodging. The dearness of house-rent in London arises, not only from
those causes which render it dear in all great capitals, the dearness
of labour, the dearness of all the materials of building, which must
generally be brought from a great distance, and above all the dear-
ness of ground-rent, every landlord acting the part of a monopo-
list, and frequently exacting a higher rent for a single acre of bad
land in a town, that can be had for a hundred of the best in the
country; but it arises in part from the peculiar manners and cus-
toms of the people which oblige every master of a family to hire a
whole house from top to bottom. A dwelling-house in England
means every thing diat is contained under the same roof. In
France, Scotland, and many other parts of Europe, it frequently
means no more than a single story. A tradesman in London is ob-
liged to hire a whole house in that part of the town where his cus-
tomers live. His shop is upon the ground-floor, and he and his fam-
ily sleep in the garret; and he endeavours to pay a part of his
house-rent by letting the two middle stories to lodgers. He expects
to maintain his family by his trade, and not by his lodgers. Where-
as, at Paris and Edinburgh, the people who let lodgings have com-
monly no other means of subsistence; and the price of the lodging
must pay, not only the rent of the house, but the whole expence of
the family.
Part II
Inequalities occasioned by the Policy of Europe
Such are the inequalities in the whole of the advantages and dis-
advantages of the different employments of labour and stock,
which the defect of any of the three requisites above-mentioned
must occasion, even where there is the most perfect liberty. But the
policy of Europe, by not leaving things at perfect liberty, occasions
other inequalities of much greater importance.
It does this chiefly in the three following ways. First, by restrain-
ing the competition in some employments to a smaller number than
would otherwise be disposed to enter into them; secondly, by in-
creasing it in others beyond what it naturally would be; and, third-
ly, by obstructing the free circulation of labour and stock, both
froni employment to employment and from place to place.
First, The policy of Europe occasions a very important inequal-
ity in the whole of the advantages and disadvantages of the differ-
ent employments of labour and stock, by restraining the compel!-
INEQUALITIES OF WAGES AND PROFIT ^^9
tion in some employments to a smaller number than might other-
wise be disposed to enter into them.
The exclusive privileges of corporations are the principal means
it makes use of for this purpose.
The exclusive privilege of an incorporated trade necessarily re-
strains the competition, in the town where it is established, to those
who are free of the trade. To have served an apprenticeship in the
town, under a master properly qualified, is commonly the necessary
requisite for obtaining this freedom. The bye-laws of the corpora-
tion regulate sometimes the number of apprentices which any mas-
ter is allowed to have, and almost always the number of years
which each apprentice is obliged to serve. The intention of both
regulations is to restrain the competition to a much smaller number
than might otherwise be disposed to enter into the trade. The limi-
tation of the number of apprentices restrains it directly. A long
term of apprenticeship restrains it more indirectly, but as effectu-
ally, by increasing the expence of education.
In Sheffield no master cutler can have more than one apprentice
at a time, by a bye-law of the corporation. In Norfolk and Norwich
no master weaver can have more than two apprentices, under pain
of forfeiting five pounds a month to the king.^® No master hatter
can have more than two apprentices any-where in England, or in
the English plantations, under pain of forfeiting five pounds a
month, half to the king, and half to him who shall sue in any court
of record.^^ Both these regulations, though they have been con-
firmed by a public law of the kingdom, are evidently dictated by
the same corporation spirit which enacted the bye-law of Shef-
field.^^ The silk weavers in London had scarce been incorporated a
year when they enacted a bye-law, restraining any master from hav-
ing more than two apprentices at a time. It required a particular act
of parliament to rescind this bye-law.^^
Under 13 and 14 Car. II., c. 5, § 18.
“^8 Eliz., c. IT, § 8; I Jac. I., c. 17, § 3 ; 5 Geo. II., c. 23 , ^
8 Eliz., c. II, was enacted “at the lamentable suit and complmnt
not of the hatters but of the cap-makers, who alleged that they were being
impoverished by the excessive use of hats, which were made of foreign wool,
and the extension to the colonies of the restriction on apprentices by 5
Geo. II., c. 22, was doubtless suggested by the English hatters’ jealousy of
the American hatters, so that this regulation was not dictated by quite the
same spirit as the Sheffield by-law.
The preamble of 13 and 14 Car. IL, c. 15, says that the company of silk
throwers in London were incorporated in 1629, and the preamble 01 20
Car, IL, c. 6, says that the trade had lately been obstructed because the com-
pany had endeavoured to put into execution a certain by-law made by them
nearly forty years since, restricting the freemen to 160 spindles and the as-
sistants to 240. The act 20 Car. IL, c. 6, accordingly declares this by-law
void. It also enacts that “no by-law already made or hereafter to be made
some em-
ploy-
ments,
principal-
ly by giv-
ing exclu-
sive privi-
leges to
corpora-
tions,
which re-
quire long
appren-
ticeship
and limit
the num-
ber of ap-
prentices.
120
Seven
years is
the usual
period of
appren-
ticeship.
The Sta-
tute of
Appren-
ticeship,
which re-
quired it
every-
where in
England,
has been
confined
to market
towns,
and to
trades
THE WEALTH OF NATIONS
Seven years seem anciently to have been, all over Europe, the
usual term established for the duration of apprenticeships in the
greater part of incorporated trades. All such incorporations were
anciently called universities; which indeed is the proper Latin name
for any incorporation whatever. The university of smiths, the uni-
versity of taylors, &c. are expressions which we commonly meet
with in the old charters of ancient towns.^^ When those particular
incorporations which are now peculiarly called universities were
first established, the term of years which it was necessary to study,
in order to obtain the degree of master of arts, appears evidently to
have been copied from the term of apprenticeship in common
trades, of which the incorporations were much more ancient. As to
have wrought seven years under a master properly qualified, was
necessary, in order to entitle any person to become a master, and to
have himself apprentices in a common trade; so to have studied
seven years under a master properly qualified, was necessary to en-
title him to become a master, teacher, or doctor (words anciently
S3monimous) in the liberal arts, and to have scholars or apprentices
(words likewise originally synonimous) to study under him.
By the sth of Elizabeth, commonly called the Statute of Ap-
prenticeship,^^ it was enacted, that no person should for the future
exercise any trade, craft, or mystery at that time exercised in Eng-
land, unless he had previously served to it an apprenticeship of
seven years at least ; and what before had been the bye-law of many
particular corporations, became in England the general and public
law of all trades carried on in market towns. For though the words
of the statute are very general, and seem plainly to include the
whole kingdom, by interpretation its operation has been limited to
market towns, it having been held that in country villages a person
may exercise several different trades, though he has not served a
seven years apprenticeship to each, they being necessary for the
conveniency of the inhabitants, and the number of people frequently
not being sufficient to supply each with a particular set of hands.^^
By a strict interpretation of the words too the operation of this
by the said company shall limit the number of apprentices to less than
three.
®'‘Tn Italy a mestiere or company of artisans and tradesmen was some-
times styled an ars or miversitas The company of mercers of Rome
are styled nmversitas mercianorum, and the company of bakers there mti-
versitas Madox, Fima Burgi, 1726, p 32
®C. 4, § 31.
“It hath been held that this statute doth not restrain a man from using
several trades, so as he had been an apprentice to aU; wherefore it indemni-
fies all petty chapmen m httle towns and villages because their masters kept
fte same imed todes before.”-Matthew Bacon, New Abridgement of Te
Law, 3rd ed., 1768, vol. m,, p. JSS, t-V- Master and servant.
INEQUALITIES OF WAGES AND PROFIT 121
statute has been limited to those trades which were established in
England before the sth of Elizabeth, and has never been extended
to such as have been introduced since that time.^^ This limitation
has given occasion to several distinctions which, considered as rules
of police, appear as foolish as can well be imagined. It has been ad-
judged, for example, that a coach-maker can neither himself make
nor employ journeymen to make his coach-wheels; but must buy
them of a master wheel-wright; this latter trade having been exer-
cised in England before the sth of Elizabeth.^^^ But a wheel-wright,
though he has never served an apprenticeship to a coach-maker,
may either himself make or employ journeymen to make coaches;
the trade of a coach-maker not being within the statute, because
not exercised in England at the time when it was made.^® The
manufactures of Manchester, Birmingham, and Wolverhampton,
are many of them, upon this account, not within the statute; not
having been exercised in England before the 5th of Elizabeth.
In France, the duration of apprenticeships is different in different
towns and in different trades. In Paris, five years is the term re-
quired in a great number; but before any person can be qualified to
exercise the trade as a master, he must, in many of them, serve five
years more as a journeyman. During this latter term he is called the
companion of his master, and the term itself is called his com-
panionship.^®
In Scotland there is no general law which regulates universally
the duration of apprenticeships. The term is different in different
corporations. Where it is long, a part of it may generally be re-
deemed by paying a small fine. In most towns too a very small fine
is sufficient to purchase the freedom of any corporation. The weav-
ers of linen and hempen cloth, the principal manufactures of the
country, as well as all other artificers subservient to them, wheel-
makers, reel-makers, &c. may exercise their trades in any town cor-
porate without paying any fine. In all towns corporate all persons
are free to sell butcher’s meat upon any lawful day of the week.
Three years is in Scotland a common term of apprenticeship, even
in* some very nice trades; and in general I know of no country in
Europe in which corporation laws are so little oppressive.
The property which every man has in his own labour, as it is the
original foundation of all other property,®® so it is the most sacred
Ihid.i vol. iii., p. 552. lUd., vol. i , p. 553.
“Bacon (ihid.j iii., 553), however, says (Mstinctly: “A coachmaker is
within this statute,” on the authority of Ventria’ Reports, p. 346.
^ Corapagnon. “ Compagnonnage.
“ Contrast with this the account of the origin of property in the Lectures,
pp. 107-127.
existing
when it
was
passed,
The term
varies in
France,
and Scot-
land,
where the
regula-
tions are
less op-
pressive.
All such
regula-
tions are
as imper-
tinent as
oppres-
sive.
Long ap-
prentice-
ships are
no secur-
ity against
bad work,
and do
not form
young
people to
industry.
Appren-
ticeships
were un-
known to
122 XHE WEALTH OF NATIONS
and inviolable. The patrimony of a poor man lies in the strength
and dexterity of his hands; and to hinder him from employing this
strength and dexterity in what manner he thinks proper without in-
jury to his neighbour, is a plain violation of this most sacred prop-
erty. It is a manifest encroachment upon the just liberty both of
the workman, and of those who might be disposed to employ him.
As it hinders the one from working at what he thinks proper, so it
hinders the others from employing whom they think proper. To
judge whether he is fit to be employed, may surely be trusted to
the discretion of the employers whose interest it so much concerns.
The affected anxiety of the law-giver lest they should employ an
improper person, is evidently as impertinent as it is oppressive.
The institution of long apprenticeships can give no security that
insufficient workmanship shdl not frequently be exposed to public
sale. When this is done it is generally the effect of fraud, and not of
inability; and the longest apprenticeship can give no security
against fraud. Quite different regulations are necessary to prevent
this abuse. The sterling mark upon plate, and the stamps upon
linen and woollen cloth,^^ give the purchaser much greater secur-
ity than any statute of apprenticeship. He generally looks at these,
but never thinks it worth while to enquire whether the workmen had
served a seven years apprenticeship.
The institution of long apprenticeships has no tendency to form
young people to industry. A journeyman who works by the piece is
likely to be industrious, because he derives a benefit from every
exertion of his industry. An apprentice is likely to be idle, and al-
most always is so, because he has no immediate interest to be other-
wise. In the inferior employments, the sweets of labour consist al-
together in the recompence of labour. They who are soonest in a
condition to enjoy the sweets of it, are likely soonest to conceive a
relish for it, and to acquire the early habit of industry. A young
man naturally conceives an aversion to labour, when for a long
time he receives no benefit from it. The boys who are put out ap-
prentices from public charities are generally bound for more than
the usual number of years, and they generally turn out very idle
and worthless.
Apprenticeships were altogether unknown to the ancients. The
reciprocal duties of master and apprentice make a considerable ar-
ticle in every modern code.^^ x'he Roman law is perfectly silent with
^“Of Scotch manufacture, lo Ann., c. 21; 13 Geo. I, c. 26.
39 Eliz., c 20 ; 43 Eliz., c. 10, § 7.
The article on apprentices occupies twenty-four pages in Richard Burn’s
Jushce of the Peace, 1764.
INEQUALITIES OF WAGES AND PROFIT 123
regard to them. I know no Greek or Latin work (I might venture, I
believe, to assert that there is none) which expresses the idea we now
annex to the word Apprentice, a servant bound to work at a par-
ticular trade for the benefit of a master, during a term of years, up-
on condition that the master shall teach him that trade.
Long apprenticeships are altogether unnecessary. The arts, which
are much superior to common trades, such as those of making clocks
and watches, contain no such mystery as to require a long course of
instruction. The first invention of such beautiful machines, indeed,
and even that of some of the instruments employed in making them,
must, no doubt, have been the work of deep thought and long time,
and may justly be considered as among the happiest efforts of hu-
man ingenuity. But when both have been fairly invented and are
well understood, to explain to any young man, in the completest
manner, how to apply the instruments and how to construct the ma-
chines, cannot well require more than the lessons of a few weeks:
perhaps those of a few days might be sufficient. In the common me-
chanic trades, those of a few days might certainly be sufficient. The
dexterity of hand, indeed, even in common trades, cannot be ac-
quired without much practice and experience. But a young man
would practise with much more diligence and attention, if from the
beginning he wrought as a journeyman, being paid in proportion to
the little work which he could execute, and paying in his turn for
the materials which he might sometimes spoil through awkwardness
and inexperience. His education would generally in this way be more
effectual, and always less tedious and expensive. The master, indeed,
would be a loser. He would lose all the wages of the apprentice,
which he now saves, for seven years together. In the end, perhaps,
the apprentice himself would be a loser. In a trade so easily learnt
he would have more competitors, and his wages, when he came to be
a complete workman, would be much less than at present. The same
increase of competition would reduce the profits of the masters as
well as the wages of the workmen. The trades, the crafts, the mys-
teries,^’"^ would all be losers. But the public would be a gainer, the
work of all artificers coming in this way much cheaper to market.
It is to prevent this reduction of price, and consequently of wages
and profit, by restraining that free competition which would most
certainly occasion it, that all corporations, and the greater part of
corporation laws, have been established. In order to erect a cor-
^®The last two terms seem to be used rather contemptuously. Probably
Smith had fresh in his recollection the passage in which Madox ridicules as a
“piece of puerility” the use of the English word “misterie derived from
“the Gallick word mestera, mistera and misteria,” as if it “signified some-
thing fjLvffTTipLwdes, mysterious.”— Ffma B'urgi, 1726, pp. 33 - 35 -
the an-
cients.
Long ap-
prentice-
ships are
altogether
unneces-
sary.
Corpora-
tions were
estab-
lished to
keep up
prices and
conse-
quently
wages and
profit;
by means
of which
the towns
gained at
the ex-
pense of
the coun-
try,
bang en-
abled to
get the
produce
of a larg-
er quan-
124 THE WEALTH OF NATIONS
poration, no other authority in ancient times was requisite in many
parts of Europe, but that of the town corporate in which it was es^-
tablished. In England, indeed, a charter from the king was likewise
necessary. But this prerogative of the crown seems to have been re-
served rather for extorting money from the subject, than for the de-
fence of the common liberty against such oppressive monopolies.
Upon paying a fine to the king, the charter seems generally to have
been reaily granted; and when any particular class of artificers or
traders thought proper to act as a corporation without a charter,
such adulterine guilds, as they were called, were not always dis-
franchised upon that account, but obliged to fine annually to the
king for permission to exercise their usurped privileges.'^^ The im-
mediate inspection of all corporations, and of the bye-laws which
they might think proper to enact for their own government, be-
longed to the town corporate in which they were established; and
whatever discipline was exercised over them, proceeded commonly,
not from the king, but from that greater incorporation of which
those subordinate ones were only parts or members.'*^
The government of towns corporate was altogether in the hands
of traders and artificers; and it was the manifest interest of every
particular class of them, to prevent the market from being over-
stocked, as they commonly express it, with their own particular
species of industry; which is in reality to keep it always under-
stocked. Each class was eager to establish regulations proper for this
purpose, and, provided it was allowed to do so, was willing to con-
sent that every other class should do the same. In consequence of
such regulations, indeed, each class was obliged to buy the goods
they had occasion for from every other within the town, somewhat
dearer than they otherwise might have done. But in recompence,
they were enabled to sell their own just as much dearer; so that so
far it was as broad as long, as they say; and in the dealings of the
different classes within the town with one another, none of them
were losers by these regulations. But in their dealings with the
country they were all great gainers; and in these latter dealings con-
sists the whole trade which supports and enriches every town.
Every town draws its whole subsistence, and all the materials of
its industry, from the country. It pays for these chiefly in two ways;
first, by sending back to die country a part of those materials
wrought up and manufactured; in which case their price is aug-
"See Madox Firma Burgi, p. 26, &c. This note appears first in ed. 2.
^"“Peradventure from these secular gilds or in imitation of them sprang
the method or practice of gildating and embodying whole towns."— Madox,
Tirma Burgi, p. 27,
INEQUALITIES OF WAGES AND PROFIT ^^5
mented by the wages of the workmen, and the profits of their mas-
ters or immediate employers: secondly, by sending to it a part both
of the rude and manufactured produce, either of other countries, or
of distant parts of the same country, imported into the town; in
which case too the original price of those goods is augmented by the
wages of the carriers or sailors, and by the profits of the merchants
who employ them. In what is gained upon the first of those two
branches of commerce, consists the advantage which the town
makes by its manufactures; in what is gained upon the second, the
advantage of its inland and foreign trade. The wages of the work-
men, and the profits of their different employers, make up the whole
of what is gained upon both. Whatever regulations, therefore, tend
to increase those wages and profits beyond what they otherwise
would be, tend to enable the town to purchase, with a smaller
quantity of its labour, the produce of a greater quahtity of the la-
bour of the country. They give the traders and artificers in the town
an advantage over the landlords, farmers, and labourers in the
country, and break down that natural equality which would other-
wise take place in the commerce which is carried on between them.
The whole annual produce of the labour of the society is annually
divided between those two different sets of people. By means of
those regulations a greater share of it is given to the inhabitants of
the town than would otherwise fall to them; and a less to those of
the country.
The price which the town really pays for the provisions and ma-
terials annually imported into it, is the quantity of manufactures
and other goods annually exported from it. The dearer the latter are
sold, the cheaper the former are bought. The industry of the town
becomes more, and that of the country less advantageous.
That the industry which is carried on in towns is, every-where in
Europe, more advantageous than that which is carried on in the
country, without entering into any very nice computations, we may
satisfy ourselves by one very simple and obvious observation. In
every country of Europe we find, at least, a hundred people who
have acquired great fortunes from small beginnings by trade and
manufactures, the industry which properly belongs to towns, for
one who has done so by that which properly belongs to the country,
the raising of rude produce by the improvement and cultivation of
land. Industry, therefore, must be better rewarded, the wages of
labour and the profits of stock must evidently be greater in the one
situation than in the other But stock and labour naturally seek
The argument is unsound in the absence of any proof that the more
numerous successes are not counterbalanced by equally numerous failures;
cp. above p. in, note.
tity of
country
labour in
exchange
for the
produce
of a smal-
ler quan-
tity of
their own,
as the ex-
ports of a
town are
the real
price of
its im-
ports.
That
town in-
dustry is
better
paid is
shown by
the large
fortunes
made in it
Combina-
tion is
easy to
the in-
habitants
of a town,
and diffi-
cult to
those of
the coun-
try. who
are dis-
persed
and not
governed
by the
corpora-
tion spirit.
No ap-
nrentice-
‘^hip is
prescribed
for farm-
ing,
though a
difficult
art,
126 the wealth of nations
the most advantageous employment. They naturally, therefore, re-
sort as much as they can to the town, and desert the country.
The inhabitants of a town, being collected into one place, can
easily combine together. The most insignificant trades carried on in
towns have accordingly, in some place or other, been incorporated;
and even where they have never been incorporated, yet the cor-
poration spirit, the jealousy of strangers, the aversion to take ap-
prentices, or to communicate the secret of their trade, generally
prevail in them, and often teach them, by voluntary associations
and agreements, to prevent that free competition which they cannot
prohibit by bye-laws. The trades which employ but a small number
of hands, run most easily into such combinations. Half a dozen
wool-combers, perhaps, are necessary to keep a thousand spinners
and weavers at work. By combining not to take apprentices they
can not only engross the employment, but reduce the whole manu-
facture into a sort of slavery to themselves, and raise the price of
their labour above what is due to the nature of their work.
The inhabitants of the country, dispersed in distant places, can-
not easily combine together.'^’^ They have not only never been in-
corporated, but the corporation spirit never has prevailed among
them. No apprenticeship has ever been thought necessary to qualify
for husbandry, the great trade of the country. After what are called
the fine arts, and the liberal professions, however, there is perhaps
no trade which requires so great a variety of knowledge and experi-
ence. The innumerable volumes which have been written upon it in
all languages, may satisfy us, that among the wisest and most
learned nations, it has never been regarded as a matter very easily
understood. And from all those volumes we shall in vain attempt to
collect that knowledge of its various and complicated operations,
which is commonly possessed even by the common farmer; how con-
temptuously soever the very contemptible authors of some of them
may sometimes affect to speak of him. There is scarce any common
mechanic trade, on the contrary, of which all the operations may
not be as completely and distinctly explained in a pamphlet of a
very few pages, as it is possible for words illustrated by figures to
explain them. In the history of the arts, now publishing by the
French academy of sciences, several of them are actually ex-
plained in this manner. The direction of operations, besides, which
must be varied with every change of the weather, as well as with
many other accidents, requires much more judgment and discretion.
Below, pp. 619, 620,
^ Descriptions des Arts et Mitiers fcdtes ou approuvees par Messieur!> de
VAcademie Royale des Sciences, 1761-88.
INEQUALITIES OE WAGES AND PROFIT ^27
than that of those which are always the same or very nearly the
same.
Not only the art of the farmer, the general direction of the opera-
tions of husbandry, but many inferior branches of country labour,
require much more skill and experience than the greater part of me-
chanic trades. The man who works upon brass and iron, works with
instruments and upon materials of which the temper is always the
same, or very nearly the same. But the man who ploughs the ground
with a team of horses or oxen, works with instruments of which the
health, strength, and temper, are very different upon different oc-
casions. The condition of the materials which he works upon too is
as variable as that of the instruments which he works with, and both
require to be managed with much judgment and discretion. The
common ploughman, though generally regarded as the pattern of
stupidity and ignorance, is seldom defective in this judgment and
discretion. He is less accustomed, indeed, to social intercourse than
the mechanic who lives in a town. His voice and language are more
uncouth and more difficult to be understood by those who are not
used to them. His understanding, however, being accustomed to
consider a greater variety of objects, is generally much superior to
that of the other, whose whole attention from morning till night
is commonly -occupied in performing one or two very simple opera-
tions. How much the lower ranks of people in the country are really
superior to those of the town, is well known to every man whom
either business or curiosity has led to converse much with both.'^^
In China and Indostan accordingly both the rank and’the wages of
country labourers are said to be superior to those of the greater part
of artificers and manufacturers. They would probably be so every-
where, if corporation laws and the corporation spirit did not pre-
vent it.
The superiority which the industry of the towns has every-where
in Europe over that of the country, is not altogether owing to cor-
porations and corporation laws. It is supported by many other regu-
lations. The high duties upon foreign manufactures and upon all
goods imported by alien merchants, all tend to the same purpose.
Corporation laws enable the inhabitants of towns to raise their
prices, without fearing to be under-sold by the free competition of
their ov^n countrymen. Those other regulations secure them equally
against that of foreigners. The enhancement of price occasioned by
both is every-where finally paid by the landlords, farmers, and la-
bourers of the country, who have seldom opposed the establishment
of such monopolies. They have commonly neither inclination nor
Lectures, p. 255.
or for the
inferior
branches
of coun-
try la-
bour,
which re-
quire
more skill
than most
mechanic
trades.
The su-
periority
of town
industry
is en-
hanced by
other
regula-
tions, such
as high
duties on
foreign
manufac-
tures.
128
THE WEALTH OF NATIONS
fitness to enter into combinations; and the clamour and sophistry
of merchants and manufacturers easily persuade them that the
private interest of a part, and of a subordinate part of the society, is
the general interest of the whole.
The su- In Great Britain the superiority of the industry of the towns over
periority that of the country, seems to have been greater formerly than in
c^Sin P^^sent times. The wages of country labour approach nearer to
Great those of manufacturing labour, and the profits of stock employed in
Britain. agriculture to those of trading and manufacturing stock, than they
are said to have done in the last century, or in the beginning of the
present. This change may be regarded as the necessary, though very
late consequence of the extraordinary encouragement given to the
industry of the towns. The stock accumulated in them comes in time
to be so great, that it can no longer be employed with the ancient
profit in that species of industry which is peculiar to them. That in-
dustry has its limits like every other; and the increase of stock, by
increasing the competition, necessarily reduces the profit. The
lowering of profit in the town forces out stock to the country, where,
by creating a new demand for country labour, it necessarily raises
its wages. It then spreads itself, if I may say so, over the face of the
land, and by being employed in agriculture is in part restored to the
country, at the expence of which, in a great measure, it had orig-
inally been accumulated in the town. That every-where in Europe
the greatest improvements of the country have been owing to such
overflowings of the stock originally accumulated in the towns, I
shall endeavour to show hereafter; and at the same time to dem-
onstrate, that though some countries have by this course attained
to a considerable degree of opulence, it is in itself necessarily slow,
uncertain, liable to be disturbed and interrupted by innumerable
accidents, and in every respect contrary to the order of nature and
of reason. The interests, prejudices, laws and customs which have
given occasion to it, I shall endeavour to explain as fully and dis-
tinctly as I can in the third and fourth books of this inquiry.
Meetings People of the same trade seldom meet together, even for merri-
ment and diversion, but the conversation ends in a conspiracy
same against the public, or in some contrivance to raise prices. It is im-
possible indeed to prevent such meetings, by any law which either
to be fa- executed, or would be consistent with liberty and justice,
dlitated, But though the law cannot hinder people of the same traae from
sometimes assembling together, it ought to do nothing to facilitate
such assemblies; much less to render them necessary.
as by A regulation which obliges all those of the same trade in a par-
registra- ^
®°Bdow, pp. 384-396.
INEQUALITIES OF WAGES AND PROFIT ^^9
ticular town to enter their names and places of abode in a public
register, facilitates such assemblies. It connects individuals who
might never otherwise be known to one another, and gives every
man of the trade a direction where to find every other man of it.
A regulation which enables those of the same trade to tax them-
selves in order to provide for their poor, their sick, their widows and
orphans, by giving them a common interest to manage, renders such
assemblies necessary.
An incorporation not only renders them necessary, but makes the
act of the majority binding upon the whole. In a free trade an ef-
fectual combination cannot be established but by the unanimous
consent of every single trader,®^ and it cannot last longer than every
single trader continues of the same mind. The majority of a cor-
poration can enact a bye-law with proper penalties, which will limit
the competition more effectually and more durably than any volun-
tary combination whatever.
The pretence that corporations are necessary for the better gov-
ernment of the trade, is without any foundation. The real and ef-
fectual discipline which is exercised over a workman, is not that of
his corporation, but that of his customers. It is the fear of losing
their employment which restrains his frauds and corrects his negli-
gence. An exclusive corporation necessarily weakens the force of this
discipline. A particular set of workmen must then be employed, let
them behave well or ill. It is upon this account, that in many large
incorporated towns no tolerable workmen are to be found, even in
some of the most necessary trades. If you would have your work
tolerably executed, it must be done in the suburbs, where the work-
men, having no exclusive privilege, have nothing but their char-
acter to depend upon, and you must then smuggle it into the town
as well as you can.
It is in this manner that the policy of Europe, by restraining the
competition in some employments to a smaller number than would
otherwise be disposed to enter into them, occasions a very important
inequality in the whole of the advantages and disadvantages of the
different employments of labour and stock.
Secondly, The policy of Europe, by increasing the competition
in some employments beyond what it naturally would be, occasions
another inequality of an opposite kind in the whole of the advan-
tages and disadvantages of the different employments of labour and
stock.
It has been considered as of so much importance that a proper
number of young people should be educated for certain professions,
“ Ed. I reads ‘‘single member of it” here and in the next line.
tion of
traders,
by the es-
tablish-
ment of
funds for
the sick,
widows
and or-
phans,
or by in-
corpora-
tion.
Corpora-
tions are
unneces-
sary, and
corrupt
the work-
men.
( 2 ) The
policy of
Europe
increases
competi-
tion in
some
trades.
It cheap-
ens the
education
of the
clergy
and there-
by re-
duces
their
earnings;
130 THE WEALTH OF NATIONS
that, sometimes the public, and sometimes the piety of private
founders have established many pensions, scholarships, exhibitions,
bursaries, &c. for this purpose, which draw many more people into
those trades than could otherwise pretend to follow them. In all
Christian countries, I believe, the education of the greater part of
churchmen is paid for in this manner. Very few of them are edu-
cated altogether at their own expence. The long, tedious, and ex-
pensive education, therefore, of those who are, will not always pro-
cure them a suitable reward, the church being crowded with people
who, in order to get employment, are willing to accept of a much
smaller recompence than what such an education would otherwise
have entitled them to; and in this manner the competition of the
poor takes away the reward of the rich. It would be indecent, no
doubt, to compare either a curate or a chaplain with a journeyman
in any common trade. The pay of a curate or chaplain, however,
may very properly be considered as of the same nature with the
wages of a journeyman. They are, all three, paid for their work ac-
cording to the contract which they may happen to make with their
respective superiors. Till after the middle of the fourteenth century,
five merks, containing about as much silver as ten pounds of our
present money, was in England the usual pay of a curate or
stipendiary parish priest, as we find it regulated by the decrees of
several different national councils.*"^^ At the same period four pence
a day, containing the same quantity of silver as- a shilling of our
present money, was declared to be the pay of a master mason, and
three pence a day, equal to nine pence of our present money, that of
a journeyman mason.®^ The wages of both these labourers, there-
fore, supposing them to have been constantly employed, were much
superior to those of the curate. The wages of the master mason,
supposing him to have been without employment one third of the
year, would have fully equalled them. By the 12 th of Queen Anne,
c. 12, it is declared, ^That whereas for want of sufficient mainte-
nance and encouragement to curates, the cures have in several places
been meanly supplied, the bishop is, therefore, empowered to ap-
point by writing under his hand and seal a sufficient certain stipend
or allowance, not exceeding fifty and not less than twenty pounds
a year.” Forty pounds a year is reckoned at present very good pay
“ Eds. 4 and 5 erroneously insert “a” here.
“According to Richard Burn’s Ecclesiastical Law, 1763, s,v Curates, six
marks was the pay ordered by a constitution of Archbishop Islip till 1378,
when it was raised to eight.
“^See the Statute of labourers, 25 Ed. III. Below, p. 177. The note is not
in ed. i.
“The quotation is not intended to be verbatim, in spite of the inverted
commas.
INEQUALITIES OF WAGES AND PROFIT
for a curate, and notwithstanding this act of parliament, there are
many curacies under twenty pounds a year. There are journe3niien
shoemakers in London who earn forty pounds a year, and there is
scarce an industrious workman of any kind in that metropolis who
does not earn more than twenty. This last sum indeed does not ex-
ceed what is frequently earned by common labourers in many coun-
try parishes. Whenever the law has attempted to regulate the wages
of workmen, it has always been rather to lower them than to raise
them. But the law has upon many occasions attempted to raise
the wages of curates, and for the dignity of the church, to oblige the
rectors of parishes to give them more than the wretched mainte-
nance which they themselves might be willing to accept of. And in
both cases the law seems to have been equally ineffectual, and has
never either been able to raise the wages of curates, or to sink those
of labourers to the degree that was intended; because it has never
been able to hinder either the one from being willing to accept of
less than the legal allowance, on account of the indigence of their
situation and the multitude of their competitors; or the other from
receiving more, on account of the contrary competition of those who
expected to derive either profit or pleasure from employing them.
The great benefices and other ecclesiastical dignities support the
honour of the church, notwithstanding the mean circumstances of‘
some of its inferior members. The respect paid to the profession too
makes some compensation even to them for the meanness of their
pecuniary recompence. In England, and in all Roman Catholic
countries, the lottery of the church is in reality much more ad-
vantageous than is necessary. The example of the church of Scot-
land, of Geneva, and of several other protestant churches, may
satisfy us, that in so creditable a profession, in which education is
so easily procured, the hopes of much more moderate benefices will
draw a sufficient number of learned, decent, and respectable men
into holy orders.
In professions in which there are no benefices, such as law and
physic, if an equal proportion of people were educated at the pub-
lic expence, the competition would soon be so great, as to sink very
much their pecuniary reward. It might then not be worth any man’s
while to educate his son to either of those professions at his own ex-
pence. They would be entirely abandoned to such as had been edu-
cated by those public charities, whose numbers and necessities
would oblige them in general to content themselves with a very
miserable recompence, to the entire degradation of the now re-
spectable professions of law and physic.
That unprosperous race of men commonly called men of letters,
so that it
is only the
great ben-
efices,
etc.,
which
support
the hon-
our of the
English
and Ro-
man
Catholic
Churches.
The same
cause, if
present,
would
lower the
reward of
lawyers
and phy-
sicians,
as it has
done that
of men of
letters,
and that
of
teachers,
who were
much bet-
ter paid
in ancient
times.
132 THE WEALTH OF NATIONS
is pretty much in the situation which lawyers and physicians prob-
ably would be in upon the foregoing supposition. In every part of
Europe the greater part of them have been educated for the church,
but have been hindered by different reasons from entering into holy
orders. They have generally, therefore, been educated at the public
expence, and their numbers are every-where so great as commonly
to reduce the price of their labour to a very paultry recompence.
Before the invention of the art of printing, the only employment
by which a man of letters could make any thing by his talents, was
that of a public or private teacher, or by communicating to other
people the curious and useful knowledge which he had acquired
himself: And this is still surely a more honourable, a more useful,
and in general even a more profitable employment than that other
of wTiting for a bookseller, to which the art of printing has given oc-
casion. The time and study, the genius, knowledge, and application
requisite to qualify an eminent teacher of the sciences, are at least
equal to what is necessary for the greatest practitioners in law and
physic. But the usual reward of the eminent teacher bears no pro-
portion to that of the lawyer or physician; because the trade of the
one is crowded with indigent people who have been brought up to it
at the public expence; whereas those of the other two are incum-
bered with very few who have not been educated at their own. The
usual recompence, however, of public and private teachers, small
as it may appear, would undoubtedly be less than it is, if the com-
petition of those yet more indigent men of letters who write for
bread was not taken out of the market. Before the invention of the
art of printing, a scholar and a beggar seem to have been terms very
nearly synonymous. The different governors of the universities be-
fore tibat time appear to have often granted licences to their scholars
to beg.®'^
In ancient times, before any charities of this kind had been estab-
lished for the education of indigent people to the learned profes-
sions, the rewards of eminent teachers appear to have been much
more considerable. Isocrates, in what is called his discourse against
the sophists, reproaches the teachers of his own times with incon-
sistency. ^They make the most magnificent promises to their schol-
ars, says he, and undertake to teach them to be wise, to be happy,
and to be just, and in return for so important a service they stipu-
late the paultry reward of four or five minae. They who teach wis-
dom, continues he, ought certainly to be wise themselves; but if
“ Ed, I does not contain “or private ”
®^Huine, History, ed. of 1773, vol. iii., p. 403, quotes n Hen. VIL, c. 22,
which forbids students to beg without permission from the chancellor.
INEQUALITIES OF WAGES AND PROFIT ^33
any man were to sell such a bargain for such a price, he would be
convicted of the most evident folly.” He certainly does not mean
here to exaggerate the reward, and we may be assured that It was
not less than he represents it. Four minse were equal to thirteen
pounds six shillings and eight pence: five minse to sixteen pounds
thirteen shillings and four pence. Something not less than the larg-
est of those two sums, therefore, must at that time have been usually
paid to the most eminent teachers at Athens. Isocrates himself de-
manded ten minse,®® or thirty-three pounds six shillings and eight
pence, from each scholar. When he taught at Athens, he is said to
have had an hundred scholars. I understand this to be the number
whom he taught at one time, or who attended what we would call
one course of lectures, a number which will not appear extraordin-
ary from so great a city to so famous a teacher, who taught too
what was at that time the most fashionable of all sciences, rhetoric.
He must have made, therefore, by each course of lectures, a thou-
sand minae, or 3,333/. 6 s. Sd. A thousand minae, accordingly, is said
by Plutarch in another place, to have been his Didactron, or usual
price of teaching.®^ Many other eminent teachers in those times ap-
pear to have acquired great fortunes. Gorgias made a present to the
temple of Delphi of his own statue in solid gold.®^ We must not, I
presume, suppose that it was as large as the life. His way of living,
as well as that of Hippias and Protagoras, two other eminent teach-
ers of those times, is represented by Plato as splendid even to os-
tentation.®® Plato himself is said to have lived with a good deal of
magnificence. Aristotle, after having been tutor to Alexander, and
most munificently rewarded, as it is universally agreed, both by
him and his father Philip,®^ thought it worth while, notwithstand-
ing, to return to Athens, in order to resume the teaching of his
school. Teachers of the sciences were probably in those times less
®®Eds. 1-3 read “was.”
3> 4. A very free but not incorrect translation. Arbuthnot, Tables of
Ancient Coins, Weights and Measures, 2nd ed., 1754, p. 198, refers to but
does not quote the passage as his authority for stating the reward of a sophist
at four or five minae. He treats the mina as equal to £3 4s. 7d., which at the
rate of 62s. to the pound troy is considerably too low.
Plutarch, Demosthenes, c. v., § 3 ; Isocrates, § 30.
Arbuthnot, Tables of Ancient Coins, p. 198, says, “Isocrates had from
his disciples a didactron or reward of 1,000 minse, £3,229 3s. 4d.,” and quotes
“Pint, in Isocrate,” which says nothing about a “didactron,” but only that
Isocrates charged ten minae and had 100 pupils. — §§ 9, 12, 30.
®^This story is from Pliny, H. N., xxxiii., cap. iv., who remarks, “Tantus
erat docendae oratoriae quaestus,” but the commentators point out that
earlier authorities ascribe the erection of the statue not to Gorgias, but to
the whole of Greece.
®®It is difficult to discover on what passage this statement is based.
Plutarch, Alexander.
Perhaps
this
cheapness
of teach-
ing is no
disad-
vantage
to the
public.
( 3 ) The
policy of
Europe
obstructs
the free
circula-
tion of
labour.
Appren-
ticeship
and cor-
poration
privileges
obstruct
circula-
tion from
employ-
ment to
employ-
ment and
from
place to
place.
So that
the
134 THE WEALTH OF NATIONS
common than they came to be in an age or two afterwards, when
the competition had probably somewhat reduced both the price of
their labour and the admiration for their persons. The most emin-
ent of them, however, appear always to have enjoyed a degree of
consideration much superior to any of the like profession in the
present times. The Athenians sent Carneades the academic, and
Diogenes the stoic, upon a solemn embassy to Rome; and though
their city had then declined from its former grandeur, it was still
an independent and considerable republic. Carneades too was a
Babylonian by birth,®® and as there never was a people more jealous
of admitting foreigners to public offices than the Athenians, their
consideration for him must have been very great.
This inequality is upon the whole, perhaps, rather advantageous
than hurtful to the public. It may somewhat degrade the profession
of a public teacher; but the Cheapness of literary education is
surely an advantage which greatly over-balances this trifling incon-
veniency. The public too might derive still greater benefit from it,
if the constitution of those schools and colleges, in which education
is carried on, was more reasonable than it is at present through the
greater part of Europe.®®
Thirdly, The policy of Europe, by obstructing the free circulation
of labour and stock both from employment to employment, and
from place to place, occasions in some cases a very inconvenient in-
equality in the whole of the advantages and disadvantages of their
different employments.
The statute of apprenticeship ®^ obstructs the free circulation of
labour from one employment to another, even in the same place.
The exclusive privileges of corporations obstruct it from one place
to another, even in the same employment.
It frequently happens that while high wages are given to the
workmen in one manufacture, those in another are obliged to con-
tent themselves with bare subsistence. The one is in an advancing
state, and has, therefore, a continual demand for new hands: The
other is in a declining state, and the super-abundance of hands is
continually increasing. Those two manufactures may sometimes be
in the same town, and sometimes in the same neighbourhood, with-
out being able to lend the least assistance to one another. The stat-
ute of apprenticeship may oppose it in the one case, and both that
and an exclusive corporation in the other. In many different manu-
factures, however, the operations are so much alike, that the work-
®This is a slip, Carneades was a native of Cyrene, and it was his col-
league Diogenes who was a Babylonian by birth.
“ Below, pp. 716-728. Above, p. 120.
INEQUALITIES OF WAGES AND PROFIT ^35
men could easily change trades with one another, if those absurd
laws did not hinder them. The arts of weaving plain linen and plain
silk, for example, are almost entirely the same. That of weaving
plain woollen is somewhat different; but the difference is so in-
significant, that either a linen or a silk weaver might become a
tolerable workman in a very few days. If any of those three capital
manufactures, therefore, were decaying, the workmen might find a
resource in one of the other two which was m a more prosperous
condition; and their wages would neither rise too high in the thriv-
ing, nor sink too low in the decaying manufacture. The linen manu-
facture indeed is, in England, by a particular statute,^® open to
every body; but as it is not much cultivated through the greater
part of the country, it can afford no general resource to the work-
men of other decaying manufactures, who, wherever the statute of
apprenticeship takes place, have no other choice but either to come
upon the parish, or to work as common labourers, for which, by
their habits, they are much worse qualified than for any sort of
manufacture that bears any resemblance to their own. They gen-
erally, therefore, chuse to come upon the parish.
Whatever obstructs the free circulation of labour from one em-
ployment to another, obstructs that of stock likewise; the quantity
of stock which can be employed in any branch of business depend-
ing very much upon that of the labour which can be employed in
it. Corporation laws, however, give less obstruction to the free cir-
culation of stock from one place to another than to that of labour.
It is every-where much easier for a wealthy merchant to obtain the
privilege of trading in a town corporate, than for a poor artificer to
obtain that of working in it.
The obstruction which corporation laws give to the free circula-
tion of labour is common, I believe, to every part of Europe. That
which is given to it by the poor laws is, so far as I know,’’'^ peculiar
to England. It consists in the difficulty which a poor man finds in
obtaining a settlement, or even in being allowed to exercise his
industry in any parish but that to which he belongs. It is the la-
bour of artificers and manufacturers only of which the free circula-
tion is obstructed by corporation laws. The difficulty of obtaining
settlements obstructs even that of common labour. It may be worth
while to give some account of the rise, progress, and present state of
this disorder, the greatest perhaps of any in the police of England.
When by the destruction of monasteries the poor had been de-
prived of the charity of those religious houses, after some other in-
changes of
employ-
ment
necessary
to equal-
ise wages
are pre-
vented.
What ob-
structs the
circula-
tion of
labour
also ob-
structs
that of
stock.
In Eng-
land the
circula-
tion of
labour is
further
obstruct-
ed by the
poor law,
Each par-
ish was
15 Car. II., c. 15
Ed I places the “is” here.
Ed I does not contain “the.’
to sup-
port its
own poor
under 43
Eliz., c. 2 ;
these were
deter-
mined by
13 and 14
Car. 11 . to
be such as
had resid-
ed forty
days,
within
which
time,
however,
a new in-
habitant
might be
removed.
Notice in
writing
was re-
quired
from the
new in-
habitant
by I
James IL
Such
notice
136 THE WEALTH OF NATIONS
effectual attempts for their relief, it was enacted by the 43d of
Elizabeth, c. 2. that every parish should be bound to provide for its
own poor; and that overseers of the poor should be annually ap-
pointed, who, with the church-wardens, should raise, by a parish
rate, competent sums for this purpose.
By this statute the necessity of providing for their own poor was
indispensably imposed upon every parish. Who were to be con-
sidered as the poor of each parish, became, therefore, a question of
some importance. This question, after some variation, was at last
determined by the 13th and 14th of Charles when it was en-
acted, that forty days undisturbed residence should gain any per-
son a settlement in any parish; but that within that time it should
be lawful for two justices of the peace, upon complaint made by
the churchwardens or overseers of the poor, to remove any new in-
habitant to the parish where he was last legally settled; unless he
either rented a tenement of ten pounds a year, or could give such
security for the discharge of the parish where he was then living, as
those justices should judge sufficient.
Some frauds, it is said, were committed in consequence of this
statute; parish officers sometimes bribing their own poor to go
clandestinely to another parish and by keeping themselves concealed
for forty days to gain a settlement there, to the discharge of that to
which they properly belonged. It was enacted, therefore, by the ist
of James 11 .'^^ that the forty days undisturbed residence of any per-
son necessary to gain a settlement, should be accounted only from
the time of his delivering notice in writing, of the place of his abode
and the number of his family, to one of the churchwardens or over-
seers of the parish where he came to dwell.
But parish officers, it seems, were not always more honest with
regard to their own, than they had been with regard to other
^C. 12.
” This account of the provisions of the Acts regarding settlement, though
not incorrect, inverts the order of the ideas which prompted them. The pre-
amble complains that owing to defects in the law “poor people are not re-
strained from going from one parish to another and therefore do endeavour
to settle themselves in those parishes where there is the best stock,” and so
forth, and the Act therefore gives the justices power, “within forty days
after any such person or persons coming so to settle as aforesaid,” to remove
them “to such parish where he or they were last legally settled either as a
native, householder, sojourner, apprentice or servant for the space of forty
days at the least.” The use of the term “settlement” seems to have originated
with this Act.
C. 17, “An act for reviving and continuance of several acts.” The reason
given is that “such poor persons at their first coming to a parish do com-
monly conceal themselves.” Nothing is said either here or in Burn’s Poor
Law or Justice of the Peace about parish officers bribing their poor to go to
another parish.
INEQUALITIES OF WAGES AND PROFIT ^37
parishes, and sometimes connived at such intrusions, receiving the
notice, and taking no proper steps in consequence of it. As every
person in a parish, therefore, was supposed to have an interest to
prevent as much as possible their being burdened by such intruders,
it was further enacted by the 3d of William IIL^^ that the forty
days residence should be accounted only from the publication of
such notice in writing on Sunday in the church, immediately after
divine service.
^‘After all,’^ says Doctor Burn, “this kind of settlement, by con-
tinuing forty days after publication of notice in writing, is very sel-
dom obtained; and the design of the acts is not so much for gaining
of settlements, as for the avoiding of them by persons coming into a
parish clandestinely: for the giving of notice is only putting a force
upon the parish to remove. But if a person’s situation is such, that
it is doubtful whether he is actually removeable or not, he shall by
giving of notice compel the parish either to allow him a settlement
uncontested, by suffering him to continue forty days; or, by remov-
ing him, to try the right.”
This statute, therefore, rendered it almost impracticable for a
poor man to gain a new settlement in the old way, by forty days in-
habitancy. But that it might not appear to preclude altogether the .
common people of one parish from ever establishing themselves
with security in another, it appointed four other ways by which a
settlement might be gained without any notice delivered or pub-
lished. The first was, by being taxed to parish rates and paying
them ; the second, by being elected into an annual parish office, and
serving in it a year; the third, by serving an apprenticeship in the
parish; the fourth, by being hired into service there for a year, and
continuing in the same service during the whole of it.'^®
Nobody can gain a settlement by either of the two first ways, but
by the public deed of the whole parish, who are too well aware of the
consequences to adopt any new-comer who has nothing but his la-
bour to support him, either by taxing him to parish rates, or by
electing him into a parish office.
No married man can well gain any settlement in either of the two
last ways. An apprentice is scarce ever married; and it is expressly
enacted, that no married servant shall gain any settlement by being
hired for a year.^^ The principal effect of introducing settlement by
service, has been to put out in a great measure the old fashion of
’*3 W. and M., c. ii, § 3.
™ Richard Burn, Justice oj the Peace, 1764, vol. ii., p. 253.
’^§§ 6 , 8 .
§ 7 confines settlement by service to unmarried persons without chil-
dren.
was to be
published
in church
under 3
W.III.
There
were four
other
ways of
gaining
a settle-
ment,
two of
which
were im-
possible
to all
poor men,
and the
other two
to all
married
men,
and to all
independ-
ent work-
men.
Certifi-
cates were
invented
to enable
persons to
138 THE WEALTH OF NATIONS
hiring for a year, which before had been so customary in England,
that even at this day, if no particular term is agreed upon, the law
intends that every servant is hired for a year. But masters are not
always willing to give their servants a settlement by hiring them in
this manner ; and servants are not always willing to be so hired, be-
cause, as every last settlement discharges all the foregoing, they
might thereby lose their original settlement in the places of their
nativity, the habitation of their parents and relations.
No independent workman, it is evident, whether labourer or
artificer, is likely to gain any new settlement either by apprentice-
ship or by service. When such a person, therefore, carried his in-
dustry to a new parish, he was liable to be removed, how healthy
and industrious soever, at the caprice of any churchwarden or over-
seer, unless he either rented a tenement of ten pounds a year, a
thing impossible for one who has nothing but his labour to live by;
or could give such security for the discharge of the parish as two
justices of the peace should judge sufficient. What security they
shall require, indeed, is left altogether to their discretion; but they
cannot well require less than thirty pounds, it having been enacted,
that the purchase even of a freehold estate of less than thirty pounds
•value, shall not gain any person a settlement, as not being sufficient
for the discharge of the parish.^^ But this is a security which scarce
any man who lives by labour can give; and much greater security is
frequently demanded.
In order to restore in some measure that free circulation of la-
bour which those different statutes had almost entirely taken
away,”^® the invention of certificates was fallen upon. By the 8th and
9th of William III.®^ it was enacted, that if any person should
9 Geo. I, c. 7.
™The Act, 13 & 14 Car. II., c. 12, giving the justices power to remove the
immigrant within forty days was certainly obstructive to the free circulation
of labour, but the other statutes referred to in the text, by making the at-
tainment of a settlement more difficult, would appear to have made it less
necessary for a parish to put in force the power of removal, and therefore to
have assisted rather than obstructed the free circulation of labour. The poor
law commissioners of 1834, long after the power of removal had been abol-
ished in 1795, found the law of settlement a great obstruction to the free
circulation of labour, because men were afraid of gaining a new settlement,
not because a new settlement was denied them.
C. 30, “An act for supplying some defects in the laws for the relief of
the poor of this kingdom ” The preamble recites, “Forasmuch as many poor
persons chargeable to the parish, township or place where they live, merely
for want of work, would in any other place when sufficient employment is
to be had maintain themselves and families without being burdensome to
any parish, township or place.” But certificates were invented long before
to. The Act 13 & 14 Car. II., c. 12, provides for their issue to persons going
into another parish for harvest or any other kind of work, and the preamble
of 8 & 9 W. III., c. 30, shows that they were commonly given. Only tempo-
INEQUALITIES OF WAGES AND PROFIT ^39
bring a certificate from the parish where he was last legally settled,
subscribed by the churchwardens and overseers of the poor, and al-
lowed by two justices of the peace, that every other parish should
be obliged to receive him; that he should not be removeable merely
upon account of his being likely to become chargeable, but only up-
on his becoming actually chargeable, and that then the parish which
granted the certificate should be obliged to pay the expence both of
his maintenance and of his removal And in order to give the most
perfect security to the parish where such certificated man should
come to reside, it was further enacted by the same statute,®^ that
he should gain no settlement there by any means whatever, except
either by renting a tenement of ten pounds a year, or by serving
upon his own account in an annual parish office for one whole year;
and consequently neither by notice, nor by service, nor by appren-
ticeship, nor by paying parish rates. By the 12th of Queen Anne too,
stat. I. c, 18. it was further enacted, that neither the servants nor
apprentices of such certificated man should gain any settlement in
the parish where he resided under such certificate.®^
How far this invention has restored that free circulation of la-
bour which the preceding statutes had almost entirely taken away,
we may learn from the following very judicious observation of Doc-
tor Burn. ^‘It is obvious,” says he, “that there are divers good rea-
sons for requiring certificates with persons coming to settle in any
place; namely, that persons residing under them can gain no settle-
ment, neither by apprenticeship, nor by service, nor by giving no-
tice, nor by paying parish rates; that they can settle neither appren-
tices nor servants; that if they become chargeable, it is certainly
known whither to remove them, and the parish shall be paid for the
removal, and for their maintenance in the mean time; and that if
they fall sick, and cannot be removed, the parish which gave the
certificate must maintain them: none of all which can be without
a certificate. Which reasons will hold proportionably for parishes
not granting certificates in ordinary cases; for it is far more than
an equal chance, but that they will have the certificated persons
again, and in a worse condition.” The moral of this observation
seems to be, that certificates ought always to be required by the
parish where any poor man comes to reside, and that they ought
very seldom to be granted by that which he proposes to leave.
rary employment, however, was contemplated, and, on the expiration of the
job, the certificated person became removable.
Rather by the explanatory Act, 9 & 10 W. III., c. ii.
All these statutes are conveniently collected in Richard Burn’s History
of the Poor Laws, 1764, pp. 94-100
®®Bum, Justice of the Peace, 1764, vol. ii., p. 274.
reside in
a parish
without
being im-
mediately
removable
and with-
out gain-
ing a set-
tlement.
Certifi-
cates were
required
by the
new par-
ish but
refused by
the old.
The
courts de-
clined to
torce
overseers
to give a
certificate.
This law
is the
cause of
the very
unequal
price of
labour in
Englaivi,
140 THE WEALTH OF NATIONS
“There is somewhat of hardship in this matter of certificates,”
says the same very intelligent Author, in his History of , the Poor
Laws, ‘'by putting it in the power of a parish officer, to imprison a
man as it were for life; however inconvenient it may be for him to
continue at that place where he has had the misfortune to acquire
what is called a settlement, or whatever advantage he may propose
to himself by living elsewhere.”
Though a certificate carries along with it no testimonial of good
behaviour, and certifies nothing but that the person belongs to the
parish to which he really does belong, it is altogether discretionary
in the parish officers either to grant or to refuse it. A mandamus was
once moved for, says Doctor Bum, to compel the churchwardens
and overseers to sign a certificate; but the court of King’s Bench
rejected the motion as a very strange attempt.®^
The very unequal price of labour which we frequently find in
England in places at no great distance from one another, is prob-
ably owing to the obstruction which the law of settlements gives to
a poor man who would carry his industry from one parish to an-
other without a certificate. A single man, indeed, who is healthy and
industrious, may sometimes reside by sufferance without one; but
a man with a wife and family who should attempt to do so, would in
most parishes be sure of being removed, and if the single man
should afterwards marry, he would generally be removed likewise.®®
The scarcity of hands in one parish, therefore, cannot always be re-
lieved by their superabundance in another, as it is constantly in
Scotland, and, I believe, in all other countries where there is no
difficulty of settlement. In such countries, though wages may some-
times rise a little in the neighbourhood of a great town, or wherever
else there is an extraordinary demand for labour, and sink gradu-
ally as the distance from such places increases, till they fall back to
the common rate of the country; yet we never meet with those sud-
den and unaccountable differences in the wages of neighbouring
places which we sometimes find in England, where it is often more
difficult for a poor man to pass the artificial boundary of a parish,
than an arm of the sea or a ridge of high mountains, natural bound-
aries which sometimes separate very distinctly different rates of
wages in other countries.
^ Burn, History of the Poor Laws, 1764, pp. 235, 236, where it is observed
that “it was the easy method of obtaining a settlement by a residency of
forty days that brought parishes into a state of war against the poor and
against one another ” and that if settlement were reduced to the place of
birth or of inhabitancy for one or more years, certificates would be got rid of.
“ Burn, Justice, vol. ii., p. 209. The date given is 1730.
Since the fact of the father having no settlement would not free the par-
ish from the danger of having at some future time to support the children.
INEQUALITIES OF WAGES AND PROFIT ^41
To remove a man who has committed no misdemeanour from the
parish where he chuses to reside, is an evident violation of natural
liberty and justice. The common people of England, however, so
jealous of their liberty, but like the common people of most other
countries never rightly understanding wherein it consists, have now
for more than a century together suffered themselves to be exposed
to this oppression without a remedy. Though men of reflection too
have sometimes complained of the law of settlements as a public
grievance; yet it has never been the object of any general popular
clamour, such as that against general warrants, an abusive prac-
tice undoubtedly, but such a one as was not likely to occasion any
general oppression. There is scarce a poor man in England of forty
years of age, I will venture to say, who has not in some part of his
life felt himself most cruelly oppressed by this ill-contrived law
of settlements.
I shall conclude this long chapter with observing, that though an-
ciently it was usual to rate wages, first by general laws extending
over the whole kingdom, and afterwards by particular orders of the
justices of peace in every particular county, both these practices
have now gone entirely into disuse. “By the experience of above four
hundred years,” says Doctor Bum, “it seems time to lay aside all
endeavours to bring under strict regulations, what in its own nature
seems incapable of minute limitation: for if all persons in the same
kind of work were to receive equal wages, there would be no emu-
lation, and no room left for industry or ingenuity.”
Particular acts of parliament, however, still attempt sometimes
to regulate wages in particular trades and in particular places. Thus
the 8th of George III.®® prohibits under heavy penalties all master
Some evidence in support of this assertion would have been acceptable.
Sir Frederic M. Eden, State of the Poor, 1797, vol. i., pp. 296-298, may be
consulted on the other side. William Hay’s Remarks on the Laws Relating
to the Poor, 1735, which Eden regards as giving a very exaggerated view of
the obstruction caused by the law of settlement, was in the Edinburgh Ad-
vocates’ Library in 1776, and Adam Smith may have seen it.
^ History of the Poor Laws, p. 130, loosely quoted. After “limitation” the
passage runs, “as thereby it leaves no room for industry or ingenuity ; for if
all persons in the same kind of work were to' receive equal wages there would
be no emulation.”
^ 7 Geo. L, stat. i, c. 13, was passed, according to its preamble, because
journeymen taylors had lately departed from their service without just
cause, and had entered into “combinations to advance their wages to un-
reasonable prices, and lessen their usual hours of work, which is of evil ex-
ample, and manifestly tends to the prejudice of trade, to the encouragement
of idleness, and to the great increase of the poor.” It prescribed hours, 6 a.m.
to 8 P.M., and wages, 2s. a day in the second quarter and is. 8d. for the rest
of the year. Quarter sessions might alter these rates. This Act was amended
by 8 Geo. III., c. 17, under which the hours were to be 6 a.m. to 7 p.m., and
wages a maximum of 2s. 7^ d. a day. Masters inside the area were forHd-
andan
evident
violation
of natural
liberty,
though
tamely
submitted
to.
Wages
were an-
ciently
rated by
law or by
justices of
peace.
London
taylors’
wages are
still rated
by law.
Attempts
were also
made to
regulate
profits by
fixing
prices,
and the
assize of
bread still
remains.
142 the wealth of nations
taylors in London, and five miles round it, from giving, and their
workmen from accepting, more than two shillings and sevenpence
halfpenny a day, except in the case of a general mourning. When-
ever the legislature attempts to regulate the diSerences between
masters and their workmen, its counsellors are always the masters.
When the regulation, therefore, is in favour of the workmen, it is
always just and equitable; but it is sometimes otherwise when in
favour of the masters. Thus the law which obliges the masters in
several different trades to pay their workmen in money and not in
goods, is quite just and equitable.^^ It imposes no real hardship
upon the masters. It only obliges them to pay that value in money,
which they pretended to pay, but did not always really pay, in
goods. This law is in favour of the workmen; but the 8th of George
III. is in favour of the masters. When masters combine together in
order to reduce the wages of their workmen, they commonly enter
into a private b(md or agreement, not to give more than a certain
wage under a certain penalty. Were the workmen to enter into a
contrary combination of the same kind, not to accept of a certain
wage under a certain penalty, the law would punish them very se-
verely; and if it dealt impartially, it would treat the masters in
the same manner. But the 8th of George III. enforces by law that
very regulation which masters sometimes attempt to establish by
such combinations. The complaint of the workmen, that it puts the
ablest and most industrious upon the same footing with an ordinary
workman, seems perfectly well founded.
In ancient times too it was usual to attempt to regulate the profits
of merchants and other dealers, by rating the price both of provis-
ions and other goods, The assize of bread is, so far as I know, the
only remnant of this ancient usage. Where there is an exclusive cor-
poration, it may perhaps be proper to regulate the price of the first
neassary of life. But where there is none, the competition will
regulate it much better than any assize. The method of fixing the
assize of bread established by the 31st of George II.®^ could not be
put in practice in Scotland, on account of a defect in the law; its
execution depending upon the office of derk of the market, which
does not exist there. This defect was not remedied till the 3d of
dm to pay more to workers outside the area than was allowed by the Act
I Ann., stat. 2, c. 18, applied to workmen, in the woollen, linen, fustian,
cotton md iron mmufacture; 13 Geo. II., c. 8, to manufacturers of doves,
boote, shoes and other leather wares. The second of these Acts only prohibits
truck payments when made without the request and consent of the work-
men.
"C. 29.
INEQUALITIES OF WAGES AND PROFIT ^43
George III.^- The want of an assize occasioned no sensible incon-
veniency, and the establishment of one in the few places where it
has yet taken place, has produced no sensible advantage. In the
greater part of the towns of Scotland, however, there is an incorpo-
ration of bakers who claim exclusive privileges, though they are not
very strictly guarded.
The proportion between the different rates both of wages and
profit in the different emplo3mients of labour and stock, seems not
to be much affected, as has already been observed,^® by the riches
or poverty, the advancing, stationary, or declining state of the so-
ciety. Such revolutions in the public welfare, though they affect the
general rates both of wages and profit, must in the end affect them
equally in all different employments. The proportion between them,
therefore, must remain the same, and cannot well be altered, at
least for any considerable time, by any such revolutions.
'’^C. 6. The preamble relates the defect. Above, p. 63.
The in-
equalities
of wages
and pro-
fits are
not much
affected
by the ad-
vancing or
declining
state of
the
society.
CHAPTER XI
Rent is
the pro-
duce
which is
over what
is neces-
sary to
pay the
farmer
ordinary
profit.
It is not
merely
interest
on stock
laid out
in im-
prove-
ments,
OF THE RENT OF LAND
Rent, considered as the price paid for the use of land, is naturally
the highest which the tenant can afford to pay in the actual cir-
cumstances of the land. In adjusting the terms of the lease, the
landlord endeavours to leave him no greater share of the produce
than what is sufficient to keep up the stock from which he furnishes
the seed, pays the labour, and purchases and maintains the cattle
and other instruments of husbandry, together with the ordinary
profits of farming stock in the neighbourhood. This is evidently the
smallest share with which the tenant can content himself without
being a loser, and the landlord seldom means to leave him any
more. Whatever part of the produce, or, what is the same thing,
whatever part of its price, is over and above this share, he naturally
endeavours to reserve to himself as the rent of his land, which is
evidently the highest the tenant can afford to pay in the actual
circumstances of the land. Sometimes, indeed, the liberality, more
frequently the ignorance, of the landlord, makes him accept of
somewhat less than this portion; and sometimes too, though more
rarely, the ignorance of the tenant makes him undertake to pay
somewhat more, or to content himself with somewhat less, than the
ordinary profits of farming stock in the neighbourhood. This por-
tion, however, may still be considered as the natural rent of land,
or the rent for which it is naturally meant that land should for the
most part be let.
The rent of land, it may be thought, is frequently no more than a
reasonable profit or interest for the stock laid out by the landlord
upon its improvement. This, no doubt, may be partly the case upon
some occasions; for it can scarce ever be more than partly the case.
The landlord demands a rent even for unimproved land, and the
supposed interest or profit upon the expence of improvement is
generally an addition to this original rent. Those improvements,
besides, are not always made 4y the stock of the landlord, but
sometimes by that of the tenant. When the lease comes to be re-
144
INEQUALITIES OF WAGES AND PROFIT HS
newed, however, the landlord commonly demands the same aug-
mentation of rent, as if they had been all made by his own.
He sometimes demands rent for what is altogether incapable of
human improvement. Kelp is a species of sea-weed, which, when
burnt, yields an alkaline salt, useful for making glass, soap, and for
several other purposes. It grows in several parts of Great Britain,
particularly in Scotland, upon such rocks only as lie within the high
water mark, which are twice every day covered with the sea, and of
which the produce, therefore, was never augmented by human in-
dustry. The landlord, however, whose estate is bounded by a kelp
shore of this kind, demands a rent for it as much as for his corn
fields.
The sea in the neighbourhood of the islands of Shetland is more
than commonly abundant in fish, which make a great part of the
subsistence of their inhabitants. But in order to profit by the pro-
duce of the water, they must have a habitation upon the neighbour-
ing land. The rent of the landlord is in proportion, not to what the
farmer can make by the land, but to what he can make both by
the land and by ^ the water. It is partly paid in sea-fish; and one
of the very few instances in which rent makes a part of the price
of that commodity, is to be found in that country.
The rent of land, therefore, considered as the price paid for the
use of the land, is naturally a monopoly price. It is not at all pro-
portioned to what the landlord may have laid out upon the im-
provement of the land, or to what he can afford to take; but to
what the farmer can afford to give.
Such parts only of the produce of land can commonly be brought
to market of which the ordinary price is sufficient to replace the
stock which must be employed in bringing them thither, together
with its ordinary profits. If the ordinary price is more than this, the
surplus part of it will naturally go to the rent of the land. If it is
not more, though the commodity may be brought to market, it can
afford no rent to the landlord. Whether the price is, or is not more,
depends upon the demand.
There are some parts of the produce of land for which the de-
mand must always be such as to afford a greater price than what is
sufficient to bring them to market; and there are others for which it
either may or may not be such as to afford this greater price. The
former must always afford a rent to that landlord. The latter some-
times may, and sometimes may not, according to different circum-
stances.
Rent, it is to be observed, therefore, enters into the composition
and is
sometimes
obtained
for land
incapable
of im-
prove-
ment,
such as
rocks
where
kelp
grows;
and for .
the op-
portunity
to fish.
It is
therefore
a monop-
oly
price.
Whether
particu-
lar parts
of pro-
duce fetch
a price
sufficient
to yield a
rent de-
pends on
the de-
mand.
Some
parts are
always in
sufficient
demand;
others
sometimes
are and
^ “By” appears first in ed. 3*
sometimes
are not.
Wages
and profit
are causes
of price;
rent is an
effect.
The chap-
ter is di-
vided into
three
parts.
Food can
always
purchase
as much
labour as
it can
maintain.
Almost all
Ihnd pro-
duces
more than
enough
food to
maintain
^ the labour
and pay
the pro-
fits, and
therefore
146 the wealth of nations
of the price of commodities in a different way from wages and
profit. High or low wages and profit, are the causes of high or low
price; high or low rent is the effect of it. It is because high or low
wages and profit must be paid, in order to bring a particular com-
modity to market, that its price is high or low. But it is because its
price is high or low; a great deal more, or very little more, or no
more, than what is sufficient to pay those wages and profit, that it
affords a high rent, or a low rent, or no rent at all.
The particular consideration, first, of those parts of the produce
of land which always afford some rent; secondly, of those which
sometimes may and sometimes may not afford rent; and, thirdly, of
the variations which, in the different periods of improvement, nat-
urally take place, in the relative value of those two different sorts
of rude produce, when compared both with one another and with
manufactured commodities, will divide this chapter into three
parts.
Part I
Of the Produce of Land which always awards Rent
As men, like all other animals, naturally multiply in proportion to
the means of their subsistence, food is always, more or less, in de-
mand. It can always purchase or command a greater or smaller
quantity of labour, and somebody can always be found who is will-
ing to do something in order to obtain it. The quantity of labour,
indeed, which it can purchase, is not always equal to what it could
maintain, if managed in the most (economical manner, on account
of the high wages which are sometimes given to labour. But it can
always purchase such a quantity of labour as it can maintain, ac-
cording to the rate at which that sort of labour is commonly main-
tained in the neighbourhood.
But land, in almost any situation, produces a greater quantity of
food ffian what is sufficient to maintain all the labour necessary for
bringing it to market, in the most liberal way in which that labour
is ever maintained. The surplus too is always more than sufficient
to replace the stock which employed that labour, together with its
profits. Something, therefore, always remains for a rent to the land-
lord.
The most desart moors in Norway and Scotland produce some
sort of pasture for cattle, of which the milk and the increase are
INEQUALITIES OF WAGES AND PROFIT H 7
always more than sufficient, not only to maintain all the labour
necessary for tending them, and to pay the ordinary profit to the
farmer or owner of the herd or flock; but to afford some small rent
to the landlord. The rent mcreases in proportion to the goodness of
the pasture. The same extent of ground not only maintains a great-
er number of cattle, but as they are brought within a smaller com-
pass, less labour becomes requisite to tend them, and to collect
their produce. The landlord gains both ways; by the increase of the
produce, and by the diminution of the labour which must be main-
tained out of it.
The rent of land not only varies with its fertility, whatever be
its produce, but with its situation, whatever be its fertility.^ Land
in the neighbourhood of a town gives a greater rent than land
equally fertile in a distant part of the country. Though it may cost
no more labour to cultivate the one than the other, it must always
cost more to bring the produce of the distant land to market. A
greater quantity of labour, therefore, must be maintained out of it;
and the surplus, from which are drawn both the profit of the farm-
er and the rent of the landlord, must be diminished. But in remote
parts of the country the rate of profits, as has already been shown, ^
is generally higher than in the neighbourhood of a large town. A
smaller proportion of this diminished surplus, therefore, must be-
long to the landlord.
Good roads, canals, and navigable rivers, by diminishing the
expence of carriage, put the remote parts of the country more near-
ly upon a level with those in the neighbourhood of the town. They
are upon that account the greatest of all improvements. They en-
courage the cultivation of the remote, which must always be the
most extensive circle of the country. They are advantageous to the
town, by breaking down the monopoly of the country in its neigh-
bourhood. They are advantageous even to that part of the country.
Though they introduce some rival commodities into the old mar-
ket, they open many new markets to its produce. Monopoly, be-
sides, is a great enemy to good management, which can never be
universally established but in consequence of that free and uni-
versal competition which forces everybody to have recourse to it
for the sake of self-defence. It is not more than fifty years ago, that
some of the counties in the neighbourhood of London petitioned
the parliament against the extension of the turnpike roads into the
remoter counties. Those remoter counties, they pretended, from the
® Eds. 1 and 2 read ‘The rent of land varies with its fertility, whatever be
its produce, and with its situation, whatever be its fertility.”
® Above, pp. 89, 90.
yields
rent.
The rent
varies
with situ-
ation as
well as
with fer-
tility.
Good
roads,
etc., di-
minish
differ-
ences of
rent.
Corn land
yields a
larger
supply of
food after
maintain-
ing labour
than pas-
ture.
In early
times
meat is
cheaper
than
bread,
but later
on it be-
comes
dearer,
148 THE WEALTH OF NATIONS
cheapness of labour, would be able to sell their grass and corn
cheaper in the London market than themselves, and would thereby
reduce their rents, and ruin their cultivation. Their rents, however,
have risen, and their cultivation has been improved since that time.
A corn field of moderate fertility produces a much greater quan-
tity of food for man, than the best pasture of equal extent. Though
its cultivation requires much more labour, yet the surplus which
remains after replacing the seed and maintaining all that labour, is
likewise much greater. If a pound of butcher^s-meat, therefore, was
never supposed to be worth more than a pound of bread, this great-
er surplus would every-where be of greater value, and constitute a
greater fund both for the profit of the farmer and the rent of the
landlord. It seems to have done so universally in the rude begin-
nings of agriculture.
But the relative values of those two different species of food,
bread, and butcher^s-meat, are very different in the different periods
of agriculture. In its rude beginnings, the unimproved wilds, which
then occupy the far greater part of the country, are all abandoned
to cattle. There is more butcher’s-meat than bread, and bread,
therefore, is the food for which there is the greatest competition,
and which consequently brings the greatest price. At Buenos Ayres,
we are told by Ulloa, four reals, one-and-twenty pence halfpenny
sterling, was, forty or fifty years ago, the ordinary price of an ox,
chosen from a herd of two or three hundred.'* He says nothing of
the price of bread, probably because he found nothing remarkable
about it. An ox there, he says, costs little more than the labour of
catching him. But com can no-where be raised without a great deal
of labour, and in a country which lies upon the river Plate, at that
time the direct road from Europe to the silver mines of Potosi, the
money price of labour could not be very cheap. It is otherwise when
cultivation is extended over the greater part of the country. There
is then more bread than butcher^s-meat. The competition changes
its direction, and the price of butcher's-meat becomes greater than
the price of bread.
By the extension besides of cultivation the unimproved wilds be-
come insufficient to supply the demand for butcher’s-meat. A great
part of the cultivated lands must be employed in rearing and fat-
tening cattle, of which the price, therefore, must be sufficient to
pay, not only the labour necessary for tending them, but the rent
* Vol. i., p. 532, in the French translation of Juan and Ulloa’s work, Voy-
age historique de VAmerique meridionale par don George Juan et don An-
toine de Ulloa, 1752. The statement is repeated in almost the same words,
substituting “three or four hundred” for “two or three hundred,” below, o.
f 7 tr
INEQUALITIES OF WAGES AND PROFIT ^49
which the landlord and the profit which the farmer could have
drawn from such land employed in tillage. The cattle bred upon the
most uncultivated moors, when brought to the same market, are, in
proportion to their weight or goodness, sold at the same price as
those which are reared upon the most improved land. The pro-
prietors of those moors profit by it, and raise the rent of their land
in proportion to the price of their cattle. It is not more than a
century ago that in many parts of the highlands of Scotland,
butcher’s-meat was as cheap or cheaper than even bread made of
oat-meal. The union opened the market of England to the highland
cattle. Their ordinary price is at present about three times greater
than at the beginning of the century, and the rents of many high-
land estates have been tripled and quadrupled in the same time.®
In almost every part of Great Britain a pound of the best butcher’s-
meat is, in the present times, generally worth more than two pounds
of the best white bread ; and in plentiful years it is sometimes worth
three or four pounds.
It is thus that in the progress of improvement the rent and
profit of unimproved pasture come to be regulated in some measure
by the rent and profit of what is improved, and these again by the
rent and profit of corn. Corn is an annual crop. Butcher’s-meat, a
crop which requires four or five years to grow. As an acre of land,
therefore, will produce a much smaller quantity of the one species
of food than of the other, the inferiority of the quantity must be
compensated by the superiority of the price. If it was more than
compensated, more corn land would be turned into pasture; and if
it was not compensated, part of what was in pasture would be
brought back into corn.
This equality, however, between the rent and profit of grass and
those of corn; of the land of which the immediate produce is food
for cattle, and of that of which the immediate produce is food for
men; must be understood to take place only through the greater
part of the improved lands of a great country. In some particular
local situations it is quite otherwise, and the rent and profit of grass
are much superior to what can be made by corn.
Thus in the neighbourhood of a great town, the demand ^or milk
and for forage to horses, frequently contribute, together with the
high price of butcher’s-meat, to raise the value of grass above what
may be called its natural proportion to that of corn. This local
advantage, it is evident, cannot be communicated to the lands at a
distance.
Particular circumstances have sometimes rendered some coun-
^ See below, pp. 162, 220.
and pas-
ture yields
as good a
rent as
corn land,
and some-
times a
greater
one,
as in the
neigh-
bourhood
of a great
town.
or all over
a popu-
lous coun-
try
which im-
ports
corn,
such as
Holland
and an-
cient
Italy,
and occa-
sionally in
a country
where en-
closure is
unusual.
Ordinarily
the rent
ISO the wealth of nations
tries so populous, that the whole territory, like the lands in the
neighbourhood of a great town, has not been sufficient to produce
both the grass and the corn necessary for the subsistence of their
inhabitants. Their lands, therefore, have been principally em-
ployed in the production of grass, the more bulky commodity, and
which cannot be so easily brought from a great distance; the corn,
the food of the great body of the people, has been chiefly imported
from foreign countries. Holland is at present in this situation, and a
considerable part of ancient Italy seems to have been so during the
prosperity of the Romans. To feed well, old Cato said, as we are
told by Cicero, was the first and most profitable thing in the man-
agement of a private estate; to feed tolerably well, the second; and
to feed ill, the third. To plough, he ranked only in the fourth place
of profit and advantage.® Tillage, indeed, in that part of ancient
Italy which lay in the neighbourhood of Rome, must have been
very much discouraged by the distributions of corn which were fre-
quently made to the people, either gratuitously, or at a very low
price. This corn was brought from the conquered provinces, of
which several, instead of taxes, were obliged to furnish a tenth part
of their produce at a stated price, about sixpence a peck, to the re-
public.'^ The low price at which this corn was distributed to the
people, must necessarily have sunk the price of what could be
brought to the Roman market from Latium, or the ancient terri-
tory of Rome, and must have discouraged its cultivation in that
country.
In an open country too, of which the principal produce is corn, a
well-enclosed piece of grass will frequently rent higher than any
corn field in its neighbourhood. It is convenient for the mainten-
ance of the cattle employed in the cultivation of the corn, and its
high rent is, in this case, not so properly paid from the value of its
own produce, as from that of the corn lands which are cultivated
by means of it. It is likely to fall, if ever the neighbouring lands are
completely enclosed. The present high rent of enclosed land in
Scotland seems owing to the scarcity of enclosure, and will prob-
ably last no longer than that scarcity. The advantage of enclosure
is greater for pasture than for corn. It saves the labour of guarding
the cattle, which feed better too when they are not liable to be dis-
turbed by their keeper or his dog.
But where there is no local advantage of this kind, the rent and
profit of corn, or whatever else is the common vegetable food of the
® Cicero, De officiis, lib. ii. ad fin. Quoted in Lectures, p. 229.
^See below, pp. 218, 219.
RENT OF LAND FROM HUMAN FOOD
people, must naturally regulate, upon the land which is fit for pro-
ducing it, the rent and profit of pasture.
The use of the artificial grasses, of turnips, carrots, cabbages,
and the other expedients which have been fallen upon to make an
equal quantity of land feed a greater number of cattle than when
in natural grass, should somewhat reduce, it might be expected, the
superiority which, in an improved country, the price of butcher^s-
meat naturally has over that of bread. It seems accordingly to have
done so; and there is some reason for believing that, at least in the
London market, the price of butcher’s-meat in proportion to the
price of bread, is a good deal lower in the present times than it was
in the beginning of the last century.
In the appendix to the Life of Prince Henry^ Doctor Birch has
given us an account of the prices of butcher^s-meat as commonly
paid by that prince. It is there said that the four quarters of an ox
weighing six hundred pounds usually cost him nine pounds ten
shillings, or thereabouts; that is, thirty-one shillings and eight
pence per hundred pounds weight.^ Prince Henry died on the 6th of
November 1612, in the nineteenth year of his age.®
In March 1764, there was a parliamentary inquiry into the
causes of the high price of provisions at that time. It was then,
among other proof to the same purpose, given in evidence by a Vir-
ginia merchant, that in March 1763, he had victualled his ships for
twenty-four or twenty-five shillings the hundred weight of beef,
which he considered as the ordinary price; whereas, in that dear
year, he had paid twenty-seven shillings for the same weight and
sort.^® This high price in 1764 is, however, four shillings and eight
pence cheaper than the ordinary price paid by prince Henry; and
it is the best beef only, it must be observed, which is fit to be salted
for those distant voyages.
The price paid by prince Henry amounts to per pound
weight of the whole carcase, coarse and choice pieces taken togeth-
er; and at that rate the choice pieces could not have been sold by
retail for less than 4^rf. or srf. the pound.
In the parliamentary inquiry in 1764, the witness stated the
of corn
land
regulates
that of
pasture.
Improved
methods
of feed-
ing cattle
lower
meat in
propor-
tion to
bread.
The price
of meat
was high-
er at the
beginning
of the
seven-
teenth
century
than in
1763-4;
® The Lije of Henry Prince of Wales, by Thomas Birch, D.D., 1760, p. 346.
^ Ibid., p. 271.
A Report from the Committee who, upon the Uh day of February, 1764,
were appointed to inquire into the Causes of the High Price of Provisions with
the proceedings of the House thereupon. Published by order of the House of
Commons, 1764, paragraph 4, where, however, there is no definite statement
to the effect that the Virginia merchant, Mr. Capel Hanbury, considered 24s.
or 25s. as the ordinary price.
whereas
wheat
was
cheaper.
The rent
and profit
of corn
land and
pasture
regulate
those of
all other
land.
The ap-
parently
greater
rent or
profit of
some
other
kinds is
only in-
terest on
greater
expense,
as in hop,
and fruit
gardens;
152 the wealth of nations
price of the choice pieces of the best beef to be to the consumer 4^.
and 4^. the pound; and the coarse pieces in general to be from
seven farthings to 2^, and and this they said was in general
one half-penny dearer than the same sort of pieces had usually been
sold in the month of March.^^ But even this high price is still a
good deal cheaper than what we can well suppose the ordinary re-
tail price to have been in the time of prince Henry.
During the twelve first years of the last century, the average
price of the best wheat at the Windsor market was i^. i8j. the
quarter of nine Winchester bushels.
But in the twelve years preceding 1764, including that year, the
average price of the same measure of the best wheat at the same
market was 2I is.
In the twelve first years of the last century, therefore, wheat ap-
pears to have been a good deal cheaper, and butcher’s-meat a good
deal dearer, than in the twelve years preceding 1764, including that
year.
In all great countries the greater part of the cultivated lands are
employed in producing either food for men or food for cattle. The
rent and profit of these regulate the rent and profit of all other cul-
tivated land. If any particular produce afforded less, the land
would soon be turned into corn or pasture; and if any afforded
more, some part of the lands in corn or pasture would soon be
turned to that produce.
Those productions, indeed, which require either a greater orig-
inal expence of improvement, ox^a, greater annual expence of culti-
vation, in order to fit the land for them, appear commonly to af-
ford, the one a greater rent, the other a greater profit than corn or
pasture. This superiority, however, will seldom be found to amount
to more than a reasonable interest or compensation for this superior
expence.
In a hop garden, a fruit garden, a kitchen garden, both the rent
of the landlord, and the profit of the farmer, are generally greater
than in a corn or grass field. But to bring the ground into this con-
dition requires more expence. Hence a greater rent becomes due to
the landlord. It requires too a more attentive and skilful manage-
ment. Hence a greater profit becomes due to the farmer. The crop
too, at least in the hop and fruit garden, is more precarious. Its
^Report from the Committee, paragraph 3 almost verbatim. The Commit-
tee resolved that the high price of provisions of late has been occasioned
partly by circumstances peculiar to the season and the year, and partly by the
defect of the laws in force for convicting and punishing all persons con-
cerned in forestalling cattle in their passage to market.”
“These prices are deduced from the tables at the end of the chapter.
RENT OF LAND FROM HUMAN FOOD ^53
price, therefore, besides compensating all occasional losses, must
afford something like the profit of insurance^^ The circumstances
of gardeners, generally mean, and always moderate, may satisfy us
that their great ingenuity is not commonly over-recompenced. Their
delightful art is practised by so many rich people for amusement,
that little advantage is to be made by those who practise it for
profit; because the persons who should naturally be their best
customers, supply themselves with all their most precious produc-
tions.
The advantage which the landlord derives from such improve- kitchen-
ments seems at no time to have been greater than what was suffi- gardens,
cient to compensate the original expence of making them. In the an-
cient husbandry, after the vineyard, a well-watered kitchen garden
seems to have been the part of the farm which was supposed to
yield the most valuable produce. But Democritus, who wrote upon
husbandry about two thousand years ago, and who was regarded by
the ancients as one of the fathers of the art, thought they did not act
wisely who enclosed a kitchen garden. The profit, he said, would not
compensate the expence of a stone wall; and bricks (he meant, I
suppose, bricks baked in the sun) mouldered with the rain, and the
winter storm, and required continual repairs. Columella, who re-
ports this judgment of Democritus, does not controvert it, but pro-
poses a very frugal method of enclosing with a hedge of brambles
and briars, which, he says, he had found by experience to be both a
lasting and an impenetrable fence; but which, it seems, was not
commonly known in the time of Democritus. Palladius adopts the
opinion of Columella, which had before been recommended by Var-
In the judgment of those ancient improvers, the produce of a
kitchen garden had, it seems, been little more than sufficient to pay
the extraordinary culture and the expence of watering; for in coun-
tries so near the sun, it was thought proper, in those times as in the
present, to have the command of a stream of water, which could be
conducted to every bed in the garden. Through the greater part of
Europe, a kitchen garden is not at present supposed to deserve a
better enclosure than that recommended by Columella. In Great
Britain, and some other northern countries, the finer fruits cannot
“Only if the extra risk deters people from entering the business, and ac-
cording to pp. no, III above it would not.
Ed. I reads “thorns.”
“ Columella, De re rustica, xi., 3, but the recommendation of the fence is
“Et haec quidem claudendi horti ratio maxime est antiquis probata.”
“ Gesnerus’ edition of Columella in Scriptores rei rusticae in Adam Smith’s
library (see Sonar’s Catalogue, s.v. Gesnerus), commenting on the passage re-
ferred to above, quotes the opinions of Varro, De re rustica, i., 14, and Pal-
ladius, De re rustica, i., 34.
154 THE WEALTH OF NATIONS
be brought to perfection but by the assistance of a wall. Their price,
therefore, in such countries, must be sufficient to pay the expence
of building and maintaining what they cannot be had without. The
fruit-wall frequently surrounds the kitchen garden, which thus en-
joys the benefit of an enclosure which its own produce could seldom
pay for.
and vine- That the vineyard, when properly planted and brought to perf ec-
yards. tion, was the most valuable part of the farm, seems to have been an
undoubted maxim in the ancient agriculture, as it is in the modern
through all the wine countries. But whether it was advantageous to
plant a new vineyard, was a matter of dispute among the ancient
Italian husbandmen, as we learn from Columella. He decides, like a
true lover of all curious cultivation, in favour of the vineyard, and
endeavours to show, by a comparison of the profit and expence, that
it was a most advantageous improvement.^'^ Such comparisons, how-
ever, between the profit and expence of new projects, are commonly
very fallacious; and in nothing more so than in agriculture. Had the
gain actually made by such plantations been commonly as great as
he imagined it might have been, there could have been no dispute
about it. The same point is frequently at this day a matter of con-
troversy in the wine countries. Their writers on agriculture, indeed,
the lovers and promoters of high cultivation, seem generally dis-
posed to decide with Columella in favour of the vineyard. In France
the anxiety of the proprietors of the old vineyards to prevent the
planting of any new ones, seems to favour their opinion, and to indi-
cate a consciousness in those who must have the experience, that
this species of cultivation is at present in that country more profit-
able than any other. It seems at the same time, however, to indicate
another opinion, that this superior profit can last no longer than the
laws which at present restrain the free cultivation of the vine. In
1731, they obtained an order of council, prohibiting both the plant-
ing of new vineyards, and the renewal of those old ones, of which the
cultivation had been interrupted for two years, without a particular
permission from the king, to be granted only in consequence of an
information from the intendant of the province, certifying that he
had examined the land, and that it was incapable of any other cul-
ture. The pretence of this order was the scarcity of corn and pasture,
and the super-abundance of wine. But had this super-abundance
been real, it would, without any order of council, have effectually
prevented the plantation of new vineyards, by reducing the profits
of this species of cultivation below their natural proportion to those
of corn and pasture. With regard to the supposed scarcity of corn
re rmtica, iu., 3.
RENT OF LAND FROM HUMAN FOOD ^55
occasioned by the multiplication of vineyards, corn is nowhere in
France more carefully cultivated than in the wine provinces, where
the land is fit for producing it; as in Burgundy, Guienne, and the
Upper Languedoc. The numerous hands employed in the one species
of cultivation necessarily encourage the other, by affording a ready
market for its produce. To diminish the number of those who are
capable of paying for it, is surely a most unpromising expedient for
encouraging the cultivation of corn. It is like the policy which
would promote agriculture by discouraging manufactures.
The rent and profit of those productions, therefore, which require
either a greater original expence of improvement in order to fit the
land for them, or a greater annual expence of cultivation, though
often much superior to those of corn and pasture, yet when they do
no more than compensate such extraordinary expence, are in reality
regulated by the rent and profit of those common crops.
It sometimes happens, indeed, that the quantity of land which Land fit-
can be fitted for some particular produce, is too small to supply the
effectual demand. The whole produce can be disposed of to those larpro-
who are willing to give somewhat more than what is sufficient to ducemay
pay the whole rent, wages and profit necessary for raising and bring-
ing it to market, ancording to their natural rates, or according to oly,
the rates at which they are paid in the greater part of other culti-
vated land. The surplus part of the price which remains after de-
fraying the whole expence of improvement and cultivation may
commonly, in this case, and in this case only, bear no regular pro-
portion to the like surplus in corn or pasture, but may exceed it in
almost any degree ; and the greater part of this excess naturally goes
to the rent of the landlord. ,
SUCil 3fS
The usual and natural proportion, for example, between the rent that
and profit of wine and those of corn and pasture, must be under- which
stood to take place only with regard to those vineyards which pro-
duce nothing but good common wine, such as can be raised almost particular
any-where, upon any light, gravelly, or sandy soil, and which has flavour,
nothing to recommend it but its strength and wholesomeness. It is
with such vineyards only that common land of the country can be
brought into competition; for with those of a peculiar qudity it is
evident .that it cannot.
The vine is more affected by the difference of soils than any other
fruit tree. From some it derives a flavour which no culture or man-
agement can equal, it is supposed, upon any other. This flavour,
real or imaginary, is sometimes peculiar to the produce of a few
vineyards; sometimes it extends through the greater part of a small
district, and sometimes through a considerable part of a large prov-
or the
West In-
dian sugar
colonies,
156 THE WEALTH OF NATIONS
ince. The whole quantity of such wines that is brought to market
falls short of the effectual demand, or the demand of those who
would be willing to pay the whole rent, profit and wages necessary
for preparing and bringing them thither, according to the ordinary
rate, or according to the rate at which they are paid in common
vineyards. The whole quantity, therefore, can be disposed of to
those who are willing to pay more, which necessarily raises the
price above that of common wine. The difference is greater or less,
according as the fashionableness and scarcity of the wine render
the competition of the buyers more or less eager. Whatever it be,
the greater part of it goes to the rent of the landlord. For though
such vineyards are in general more carefully cultivated than most
others, the high price of the wine seems to be, not so much the effect,
as the cause of this careful cultivation. In so valuable a produce the
loss occasioned by negligence is so great as to force even the most
careless to attention. A small part of this high price, therefore, is
sufficient to pay the wages of the extraordinary labour bestowed up-
on their cultivation, and the profits of the extraordinary stock which
puts that labour into motion.
The sugar colonies possessed by the European nations in the West
Indies, may be compared to those precious vineyards. Their whole
produce falls short of the effectual demand of Europe, and can be
disposed of to those who are willing to give more than what is suf-
ficient to pay the whole rent, profit and wages necessary for pre-
paring and bringing it to market, according to the rate at which they
are commonly paid by any other produce. In Cochin-china the finest
white sugar commonly sells for three piastres the quintal, about
thirteen shillings and sixpence of our money, as we are told by Mr.
Poivre,^^ a very careful observer of the agriculture of that country.
What is there called the quintal weighs from a hundred and fifty to
two hundred Paris pounds, or a hundred and seventy-five Paris
pounds at a medium,^^’ which reduces the price of the hundred
weight English to about eight shillings sterling, not a fourth part of
what is commonly paid for the brown or muskavada sugars im-
ported from our colonies, and not a sixth part of what is paid for the
finest white sugar. The greater part of the cultivated lands in Co-
“ Ed. I reads “their.”
“Voyages d’un Philosophe [ou observations sur les moeurs et les arts des
pears first h^ed^2T ^ ^fnirique, 1768, pp. 92, 93. The note ap-
“ The French original says the Cochin-China quintal “equivaut a i 76 .
For ex-
ample,
hides and
wool,
stone and
timber.
162 the wealth of nations
their value. In the one state a great part of them is thrown away as
useless, and the price of what is used is considered as equal only to
the labour and expence of fitting it for use, and can, therefore, afford
no rent to the landlord. In the other they are all made use of, and
there is frequently a demand for more than can be had. Somebody
is always willing to give more for every part of them than what is
sufficient to pay the expence of bringing them to market. Their
price, therefore, can always afford some rent to the landlord.
The skins of the larger animals were the original materials of
cloathing. Among nations of hunters and shepherds, therefore,
whose food consists chiefly in the flesh of those animals, every man,
by providing himself with food, provides himself with the materials
of more cloathing than he can wear. If there was no foreign com-
merce, the greater part of them would be thrown away as things of
no value. This was probably the case among the hunting nations of
North America, before their country was discovered by the Euro-
peans, with whom they now exchange their surplus peltry, for
blankets, fire-arms, and brandy, which gives it some value. In the
present commercial state of the known world, the most barbarous
nations, I believe, among whom land property is established, have
some foreign commerce of this kind, and find among their wealthier
neighbours such a demand for all the materials of cloathing, which
their land produces, and which can neither be wrought up nor con-
consumed at home, as raises their price above what it costs to send
them to those wealthier neighbours.^® It affords, therefore, some
rent to the landlord. When the greater part of the highland cattle
were consumed on their own hills, the exportation of their hides
made the most considerable article of the commerce of that coun-
try, and what they were exchanged for afforded some addition to
the rent of the highland estates.^® The wool of England, which in
old times could neither be consumed nor wrought up at home, found
a market in the then wealthier and more industrious country of
Flanders, and its price afforded something to the rent of the land
which produced it. In countries not better cultivated than England
was then, or than the highlands of Scotland are now, and which had
no foreign commerce, the materials of cloathing would evidently bf
so super-abundant, that a great part of them would be thrown
away as useless, and no part could afford any rent to the landlord.
The materials of lodging cannot always be transported to so great
a distance as those of cloathing, and do not so readily become an
This “always” is qualified almost to the extent of contradiction on d i6<
below.
•“ Ed. I reads “thither.” "Above, p. 149, and below, p. 220.
RENT OE LAND FROM HUMAN FOOD ^63
object of foreign commerce. When they are super-abundant in the
country which produces them, it frequently happens, even in the
present commercial state of the world, that they are of no value to
the landlord. A good stone quarry in the neighbourhood of London
would afford a considerable rent. In many parts of Scotland and
Wales it affords none. Barren timber for building is of great value
in a populous and well-cultivated country, and the land which pro-
duces it affords a considerable rent. But in many parts of North
America the landlord would be much obliged to any body who
would carry away the greater part of his large trees. In some parts
of the highlands of Scotland the bark is the only part of the wood
which, for want of roads and water-carriage, can be sent to mar-
ket. The timber is left to rot upon the ground. When the materials
of lodging are so super-abundant, the part made use of is worth
only the labour and expence of fitting it for that use. It affords no
rent to the landlord, who generally grants the use of it to whoever
takes the trouble of asking it. The demand of wealthier nations,
however, sometimes enables him to get a rent for it. The paving of
the streets of London has enabled the owners of some barren rocks
on the coast of Scotland to draw a rent from what never afforded
any before. The woods of Norway and of the coasts of the Baltic,
find a market in many parts of Great Britain which they could not
find at home, and thereby afford some rent to their proprietors.
Countries are populous, not in proportion to the number of peo-
ple whom their produce can cloath and lodge, but in proportion to
that of those whom it can feed. When food is provided, it is easy to
find the necessary cloathing and lodging. But though these are at
hand, it may often be difficult to find food. In some parts even of
the British dominions what is called A House, may be built by one
day’s labour of one man. The simplest species of cloathing, the
skins of animals, require somewhat more labour to dress and pre-
pare them for use. They do not, however, require a great deal.
Among savage and barbarous nations, a hundredth or little more
than a hundredth part of the labour of the whole year, will be suffi-
cient to provide them with such cloathing and lodging as satisfy
the greater part of the people. All the other ninety-nine parts are
frequently no more than enough to provide them with food.
But when by the improvement and cultivation of land the labour
of one family can provide food for two, the labour of half the so-
ciety becomes sufficient to provide food for the whole. The other
half, therefore, or at least the greater part of them, can be employed
in providing other things, or in satisfying the other wants and fan-
cies of mankind. Cloathing and lodging, household furniture, and
Popula-
tion de-
pends on
food;
so the de-
mand for
the mate-
rials of
clothing
and lodg-
ing is in-
creased by
greater
ease
of obtain-
ing food,
which
thus
makes
them af-
ford rent.
They do
not, how-
ever, even
then al-
ways af-
ford rent:
164 THE WEALTH OF NATIONS
what is called Equipage, are the principal objects of the greater part
of those wants and fancies. The rich man consumes no more food
than his poor neighbour. In quality it may be very different, and to
select and prepare it may require more labour and art; but in quan-
tity it is very nearly the same. But compare the spacious palace and
great wardrobe of the one, with the hovel and the few rags of the
other, and you will be sensible that the difference between their
cloathing, lodging, and household furniture, is almost as great in
quantity as it is in quality. The desire of food is limited in every
man by the narrow capacity of the human stomach; but the desire
of the conveniencies and ornaments of building, dress, equipage,
and household furniture, seems to have no limit or certain boundary.
Those, therefore, who have the command of more food than they
themselves can consume, are always willing to exchange the surplus,
or, what is the same thing, the price of it, for gratifications of this
other kind. What is over and above satisfying the limited desire, is
given for the amusement of those desires which cannot be satisfied,
but seem to be altogether endless. The poor, in order to obtain food,
exert themselves to gratify those fancies of the rich, and to obtain
it more certainly, they vie with one another in the cheapness and
perfection of their work. The number of workmen increases with the
increasing quantity of food, or with the growing improvement and
cultivation of the lands; and as the nature of their business admits
of the utmost subdivisions of labour, the quantity of materials
which they can work up, increases in a much greater proportion
than their numbers. Hence arises a demand for every sort of ma-
terial which human invention can employ, either usefully or orna-
mentally, in building, dress, equipage, or household furniture; for
the fossils and minerals contamed in the bowels of the earth, the
precious metals, and the precious stones.
Food is in this manner, not only the original source of rent, but
every other part of the produce of land which afterwards affords
rent, derives that part of its value from the improvement of the
powers of labour in producing food by means of the improvement
and cultivation of land.®®
Those other parts of the produce of land, however, which after-
wards afford rent, do not afford it always. Even in improved and
cultivated countries, the demand for them is not always such as to
afford a greater price than what is sufficient to pay the labour, and
replace, together with its ordinary profits, the stock which must be
Parapphs appear to be based on the disser-
RENT OF LAND FROM HUMAN FOOD
employed in bringing them to market. Whether it is or is not such,
depends upon different circumstances.
Whether a coal-mine, for example, can afford any rent, depends
partly upon its fertility, and partly upon its situation.
A mine of any kind may be said to be either fertile or barren, ac-
cording as the quantity of mineral which can be brought from it
by a certain quantity of labour, is greater or less than what can be
brought by an equal quantity from the greater part of other mines
of the same kind.
Some coal-mines advantageously situated, cannot be wrought on
account of their barrenness. The produce does not pay the expence.
They can afford neither profit nor rent.
There are ^ome of which the produce is barely sufficient to pay
the labour,®^ and replace, together with its ordinary profits, the
stock employed in working them. They afford some profit to the
undertaker of the work, but no rent to the landlord. They can be
wrought advantageously by nobody but the landlord, who being
himself undertaker of the work, gets the ordinary profit of the
capital which he employs in it. Many coal-mines in Scotland are
wrought in this manner, and can be wrought in no other. The land-
lord will allow nobody else to work them without paying some rent,
and nobody can afford to pay any.
Other coal-mines in the same country sufficiently fertile, cannot
be wrought on account of their situation. A quantity of mineral suf-
ficient to defray the expence of working, could be brought from the
mine by the ordinary, or even less than the ordinary quantity of
labour: But in an inland country, thinly inhabited, and without
either good roads or water-carriage, this quantity could not be sold.
Coals are a less agreeable fewel than wood: they are said too to
be less wholesome. The expence of coals, therefore, at the place
where they are consumed, must generally be somewhat less than
that of wood.
The price of wood again varies with the state of agriculture,
nearly in the same manner, and exactly for the same reason, as the
price of cattle. In its rude beginnings the greater part of every
country is covered with wood, which is then a mere incumbrance of
no value to the landlord, who would glady give it to any body for
the cutting. As agriculture advances, the woods are partly cleared
by the progress of tillage, and partly go to decay in consequence of
the increased number of cattle. These, though they do not increase
in the same proportion as corn, which is altogether the acquisition
of human industry, yet multiply under the care and protection of
for ex-
ample,
some
coal-
mines
are too
barren to
afford
rent,
ortoodis-
advanta-
geously
situated.
The price
of coal is
kept
down by
that of
wood,
which
varies
with the
state of
agricul-
ture.
“ Misprinted ^‘labourer” m ed. S.
But in the
coal coun-
tries coal
is every-
where
much be*
low this
'rice.
XHE WEALTH OF NATIONS
men ; who store up in the season of plenty what may maintain them
in that of scarcity, who through the whole year furnish them with
a greater quantity of food than uncultivated nature provides for
them, and who by destroying and extirpating their enemies, secure
them in the free enjoyment of all that she provides. Numerous
herds of cattle, when allowed to wander through the woods, though
they do not destroy the old trees, hinder any young ones from com-
ing up, so that in the course of a century or two the whole forest
goes to ruin. The scarcity of wood then raises its price. It affords a
good rent, and the landlord sometimes finds that he can scarce em-
ploy his best lands more advantageously than in growing barren
timber, of which the greatness of the profit often compensates the
lateness of the returns. This seems in the present times to be nearly
the state of things in several parts of Great Britain, where the profit
of planting is found to be equal to that of either corn or pasture.
The advantage which the landlord derives from planting, can no-
where exceed, at least for any considerable time, the rent which
these could afford him; and in an inland country which is highly
cultivated, it will frequently not fall much short of this rent. Upon
the sea-coast of a well-improved country, indeed, if coals can con-
veniently be had for fewel,^^ it may sometimes be cheaper to bring
barren timber for building from less cultivated foreign countries,
than to raise it at home. In the new town of Edinburgh, built with-
in these few years,^^ there is not, perhaps, a single stick of Scotch
timber.
Whatever may be the price of wood, if that of coals is such that
the expence of a coal-fire is nearly equal to that of a wood one, we
may be assured, that at that place, and in these circumstances, the
price of coals is as high as it can be. It seems to be so in some of
the inland parts of England, particularly in Oxfordshire, where it
is usual, even in the fires of the common people, to mix coals and
wood together, and where the difference in the expence of those
two sorts of fewel cannot, therefore, be very great.
Coals, in the coal countries, are every-where much below this
highest price. If they were not, they could not bear the expence of
a distant carriage, either by land or by water. A small quantity
only could be sold, and the coal masters and coal proprietors find it
more for their interest to sell a great quantity at a price somewhat
Ed. I reads “if it can conveniently get coals for fewel.”
®®The North Bridge was only made passable in 1772: in 1778 the buildings
along Princes Street had run to a considerable length, and St. Andrew’s Square
and the streets connected with it were almost complete. A plan of that date
shows the whole block between Queen Street and Princes Street (Arnot, His-
tory of Edinburgh, 1779, pp. 333, 31$, 31S, 319).
RENT OF LAND FROM HUMAN FOOD ^^7
above the lowest, than a small quantity at the highest. The most
fertile coal-mine too, regulates the price of coals at all the other
mines in its neighbourhood.^^ Both the proprietor and the under-
taker of the work find, the one that he can get a greater rent, the
other that he can get a greater profit, by somewhat underselling all
their neighbours. Their neighbours are soon obliged to sell at the
same price, though they cannot so well af ord it, and though it al-
ways diminishes, and sometimes takes away altogether both their
rent and their profit. Some works are abandoned altogether; others
can afford no rent, and can be wrought only by the proprietor.
The lowest price at which coals can be sold for any considerable
time, is, like th4t of all other commodities, the price which is
barely sufficient to replace, together with its ordinary profits, the
stock which must be employed in bringing them to market. At a
coal-mine for which the landlord can get no rent, but which he
must either work himself or let it alone altogether, the price of
coals must generally be nearly about this price.
Rent, even where coals afford one, has generally a smaller share
in their price than in that of most other parts of the rude produce
of land. The rent of an estate above ground, commonly amounts to
what is supposed to be a third of the gross produce; and it is gen-
erally a rent certain and independent of the occasional variations
in the crop. In coal-mines a fifth of the gross produce is a very
great rent; a tenth the common rent, and it is seldom a rent certain,
but depends upon the occasional variations in the produce. These
are so great, that in a country where thirty years purchase is con-
sidered as a moderate price for the property for a landed estate, ten
years purchase is regarded as a good price for that of a coal-mine.
The value of a coal-mine to the proprietor frequently depends
as much upon its situation as upon its fertility. That of a metallic
mine depends more upon its fertility, and less upon its situation.
The coarse, and stiU more the precious metals, when separated from
the ore, are so valuable that they can generally bear the expence of
a very long land, and of the most distant sea carriage. Their market
is not confined to the countries in the neighbourhood of the mine,
but extends to the whole world. The copper of Japan makes an ar-
ticle of commerce in Europe; the iron of Spain in that of Chili and
Buchanan (ed. of Wealth of Nations, vol. i , p. 279), commenting on this
passage, remarks judiciously; “It is not by the produce of one coal mine,
however fertile, but by the joint produce of all the coal mines that can be
worked, that the price of coals is fixed. A certain quantity of coals only can
be consumed at a certain price. If the mines that can be worked pmduce
more than this quantity the price will fall; if they produce less it will rise.”
^ Ed. I reads “depends frequently.”
^ Ed. I reads “article in the commerce of Europe.”
The low-
est pos-
sible price
is that
which
only re-
places
stock with
profits.
Rent
forms a
smaller
propor-
tion of
the price
of coal
than of
that of
most
other rude
produce.
The situa-
tion of a
metallic
mine is
less im-
portant
than that
of a coal
mine,
metals
from all
parts of
the world
being
brought
into com-
petition.
Rent has
therefore
a small
share in
the price
of metals.
Tin and
lead
mines pay
a sixth in
Cornwall
and Scot-
land.
The silver
mines of
Peru for-
i68 XHE WEALTH OF NATIONS
Peru. The silver of Peru finds its way, not only to Europe, but from
Europe to China.
The price of coals in Westmorland or Shropshire can have little
effect on their price at Newcastle; and their price in the Lionnois
can have none at all. The productions of such distant coal-mines can
never be brought into competition with one another. But the pro-
ductions of the most distant metallic mines frequently may, and in
fact commonly are. The price, therefore, of the coarse, and still
more that of the precious metis, at the most fertile mines in the
world, must necessarily more or less affect their price at every other
in it. The price of copper in Japan must have some influence
upon its price at the copper mines in Europe. The price of silver in
Peru, or the quantity either of labour or of other goods which it
will purchase there, must have some influence on its price, not only
at the silver mines of Europe, but at those of China. After the dis-
covery of the mines of Peru, the silver mines of Europe were, the
greater part of them, abandoned. The value of silver was so much
reduced that their produce could no longer pay the expence of work-
ing them, or replace, with a profit, the food, cloaths, lodging and
other necessaries which were consumed in that operation. This was
the case too with the mines of Cuba and St. Domingo, and even
with the ancient mines of Peru, after the discovery of those of
Potosi,
The price of every metal at every mine, therefore, being regu-
lated in some measure by its price at the most fertile mine in the
world that is actually wrought, it can at the greater part of mines
do very little more than pay the expence of working, and can sel-
dom afford a very high rent to the landlord. Rent, accordingly,
seems at the greater part of mines to have but a small share in the
price of the coarse, and a still smaller in that of the precious met-
als. Labour and profit make up the greater part of both.
A sixth part of the gross produced may be reckoned the average
rent of the tin mines of Cornwall, the most fertile that are known
in the world, as we are told by the Rev. Mr. Borlace, vice-warden
of the stannaries. Some, he says, afford more, and some do not af-
ford so much.®^ A sixth part of the gross produce is the rent too of
several very fertile lead mines in Scotland.
In the silver mines of Peru, we are told by Frezier and Ulloa, the
proprietor frequently exacts no other acknowledgment from the un-
dertaker of the mine, but that he will grind the ore at his mill, pay-
^ Natural History of Cornwall, by William Borlase, 1758, p. 175, but noth-
ing is there said as to the landlord sometimes receiving more than one-sixth.
RENT OE LAND FROM HUMAN FOOD 1^9
ing him the ordinary multure or price of grinding.^® Till 1736, in- merly
deed, the tax of the king of Spain amounted to one-fifth of the
standard silver, which till then might be considered as the real rent
of the greater part of the silver mines of Peru, the richest which
have been known in the world. If there had been no tax, this fifth
would naturally have belonged to the landlord, and many mines
might have been wrought which could not then be wrought, be-
cause they could not afford this tax.®^ The tax of the duke of Corn-
wall upon tin is supposed to amount to more than five per cent, or
one-twentieth part of the value; and whatever may be his pro-
portion, it would naturally too belong to the proprietor of the mine,
if tin was duty free. But if you add one-twentieth to one-sixth, you
will find that the whole average rent of the tin mines of Cornwall,
was to the whole average rent of the silver mines of Peru, as thir- and now
teen to twelve. But the silver mines of Peru are not now able to pay
even this low rent, and the tax upon silver was, in 1736, reduced
from one-fifth to one-tenth.*^^ Even this tax upon silver too gives
more temptation to smuggling than the tax of one-twentieth upon
tin; and smuggling must be much easier in the precious than in
the bulky commodity. The tax of the king of Spain accordingly is
said to be very ill paid, and that of the duke of Cornwall very well.
Rent, therefore, it is probable, makes a greater part of the price of
tin at the most fertile tin mines, than it does of silver at the most
fertile silver mines in the world. After replacing the stock em-
ployed in working those different mines, together with its ordinary
profits, the residue which remains to the proprietor, is greater it
seems in the coarse, than in the precious metal.
Neither are the profits of the undertakers of silver mines c.om-
^ “Those who are willing to labour themselves easily obtain of the miner a
vein to work on; what they get out of it is their own, paying him the I^g’s
duty and the hire of the mill, which is so considerable that some are satisfied
with the profit it yields without employing any to work for them in the
mines.” — ^Frezier, Voyage to the South Sea and along the Coasts of Chili and
Peru in the Years 1712, 1713 and 1714, with a Postscript by Dr. Edmund HaU
ley, 1717, p. 109. For Ulloa see below, p. 171, note. ^ ^
In place of these two sentences ed. i reads, “The tax of the King of Spam,
indeed, amounts to one-fifth of the standard silver, which may be considered
as the real rent of the greater part of the silver mines of Peru, the rich^t
which are known in the world. If there was no tax, this fifth would naturally
belong to the landlord, and many mines might be wrought which cannot be
wrought at present, because they cannot afford this tax.”
The sum of more than £10,000 paid on £190,954 worth of produce is men-
tioned by Borlase. The duty was 4s. per cwt— Natural History of Cornwall,
p. 183.
^^Ed. I reads “is.”
‘^The reduction is mentioned again below, pp. 202, 214. Ed. i does not
contain this sentence, and begins the next with “The high tax upon silver, too,
gives much greater temptation to smuggling than the low tax upon tin.
while
profits are
small.
Mining is
encour-
aged in
Peru by
the inter-
est of the
sovereign.
The gold
mines of
Peru now
pay only a
twentieth
in rent.
THE WEALTH OF NATIONS
monly very great in Peru. The same most respectable and well in-
formed authors acquaint us, that when any person undertakes to
work a new mine in Peru, he is universally looked upon as a man
destined to bankruptcy and ruin, and is upon that account shunned
and avoided by every body.^^ Mining, it seems, is considered there
in the same light as here, as a lottery, in which the prizes do not
compensate the blanks, though the greatness of some tempts many
adventurers to throw away their fortunes in such unprosperous
projects.
As the sovereign, however, derives a considerable part of his rev-
enue from the produce of silver mines, the law in Peru gives every
possible encouragement to the discovery and working of new ones.
Whoever discovers a new mine, is entitled to measure off two hun-
dred and forty-six feet in length, according to what he supposes to
be the direction of the vein, and half as much in breadth.^^ He be-
comes proprietor of this portion of the mine, and can work it with-
out paying any acknowledgment to the landlord. The interest of
the duke of Cornwall has given occasion to a regulation nearly of
the same kind in that ancient dutchy. In waste and uninclosed lands
any person who discovers a tin mine, may mark out its limits to a
certain extent, which is called bounding a mine. The bounder be-
comes the real proprietor of the mine, and may either work it him-
self, or give it in lease to another, without the consent of the owner
of the land, to whom, however, a very small acknowledgment must
be paid upon working it.^^ In both regulations the sacred rights of
private property are sacrificed to the supposed interests of public
revenue.
The same encouragement is given in Peru to the discovery and
working of new gold mines; and in gold the king’s tax amounts only
to a twentieth part of the standard metal. It was once a fifth, and
afterwards a tenth, as in silver; but it was found that the work
could not bear even the lowest of these two taxes.^® If it is rare, how-
Quand un homme temoigne avoir dessein de fouiller dans quelque mine,
Ics autres le regardent comme un extravagant qui court a sa perte, et qui risque
une ruine certame pour des esperances eloignees et tres-douteuses. Ils tSchent
de le detoumer de son dessein, et s’ils n'y peuvent reussir, ils le fuyent en I’^vi-
tant, comme s’ils craignaient qu’il ne leur communiquat son Voyage
msionque ae VAmerique miridionale par don George Juan et par don An-
toine de Ulloa, 1752, tom. i., p. 379. The statement relates to the province of
yuito, and the condition of things is contrasted with that prevailing in Peru
proper. For Frezier see next page, note 47. h s u
"Frezier, Voyage, p. 109,
PP- 167, 175. If the land was
bounded (boundmg could only take place on “wastrel or common”) the
i<^^d of the soil received only a fifteenth.
could not bear it*” ^ ^ ^
RENT OE LAND FROM HUMAN FOOD ^71
ever, say the same authors, Frezier and Ulloa, to find a person who
has made his fortune by a silver, it is still much rarer to find one
who has done so by a gold mine.'^’' This twentieth part seems to be
the whole rent which is paid by the greater part of the gold mines
in Chili and Peru. Gold too is much more liable to be smuggled than
even silver; not only on account of the superior value of the metal
in proportion to its bulk, but on account of the peculiar way in
which nature produces it. Silver is very seldom found virgin, but,
like most other metals, is generally mineralized with some other
body, from which it is impossible to separate it in such quantities
as will pay for the expence, but by a very laborious and tedious
operation, which cannot well be carried on but in workhouses
erected for the purpose, and therefore exposed to the inspection of
the king’s officers. Gold, on the contrary, is almost always found
virgin. It is sometimes found in pieces of some bulk; and even when
mixed in small and almost insensible particles with sand, earth, and
other extraneous bodies, it can be separated from them by a very
short and simple operation, which can be carried on in any private
house by any body who is possessed of a small quantity of mercury.
If the king’s tax, therefore, is but ill paid upon silver, it is likely to
be much worse paid upon gold; and rent must make a much smaller
part of the price of gold, than even of that of silver.
The lowest price at which the precious metals can be sold, or the
smallest quantity of other goods for which they can be exchanged
during any considerable time, is regulated by the same principles
which fix the lowest ordinary price of all other goods. The stock
which must commonly be employed, the food, cloaths, and lodging
which must commonly be consumed in bringing them from the mine
to the market, determine it. It must at least be sufficient to replace
that stock, with the ordinary profits.
Their highest price, however, seems not to be necessarily deter-
mined by any thing but the actual scarcity or plenty of those metals
themselves. It is not determined by that of any other commodity,
in the same manner as the price of coals is by that of wood, beyond
which no scarcity can ever raise it. Increase the scarcity of gold to a
“It is more rare to see a gold miner rich than a silver miner or of any
other metal.”-~Frezier, Voyage, p. io8. There seems nothing in either Frezier
or Ulloa to indicate that they took the gloomy view of the prospects of the
gold and silver miner which is ascribed to them in the text From this and the
curious way in which they are coupled together, here and above (pp. i68,
169) , and also the fact that no mention is made of the title of either of their
books, it seems probable that Smith is quoting from memory or from notes
which had become mixed. It is possible that he confused Frezier with UUoa’s
collaborator, Don George Juan, but Ulloa is quoted without Frezier above,
p. 148, and below, p. 186.
The low-
est price
of the
precious
metals
must re-
place
stock with
ordinary
profits,
but their
highest
price is
deter-
mined by
their
scarcity.
The de-
mand for
them
arises
from
their
utility
and
beauty:
and the
merit of
beauty is
enhanced
by their
scarcity.
The de-
mand for
precious
stones
arises al-
together
from their
beauty
enhanced
by their
scarcity.
172 the wealth of nations
certain degree, and the smallest bit of it may become more precious
than a diamond, and exchange for a greater quantity of other goods.
The demand for those metals arises partly from their utility, and
partly from their beauty. If you except iron, they are more useful
than, perhaps, any other metal. As they are less liable to rust and
impurity, they can more easily be kept clean; and the utensils either
of the table or the kitchen are often upon that account more agree-
able when made of them. A silver boiler is more cleanly that a lead,
copper, or tin one; and the same quality would render a gold boiler
still better than a silver one. Their principal merit, however, arises
from their beauty, which renders them peculiarly fit for the orna-
ments of dress and furniture. No paint or dye can give so splendid
a colour as gilding. The merit of their beauty is greatly enhanced by
their scarcity. With the greater part of rich people, the chief enjoy-
ment of riches consists in the parade of riches, which in their eye is
never so complete as when they appear to possess those decisive
marks of opulence which nobody can possess but themselves. In
their eyes the merit of an object which is in any degree either useful
or beautiful, is greatly enhanced by its scarcity, or by the great la-
bour which it requires to collect any considerable quantity of it, a
labour which nobody can afford to pay but themselves. Such objects
they are willing to purchase at a higher price than things much
more beautiful and useful, but more common. These qualities of
utility, beauty, and scarcity, are the original foundation of the high
price of those metals, or of the great quantity of other goods for
which they can every-where be exchanged. This value was anteced-
ent to and independent of their being employed as coin, and was the
quality which fitted them for that employment. That employment,
however, by occasioning a new demand, and by diminishing the
quantity which could be employed in any other way, may have
afterwards contributed to keep up or increase their value.
The demand for the precious stones arises altogether from their
beauty. They are of no use, but as ornaments; and the merit of
their beauty is greatly enhanced by their scarcity, or by the diffi-
culty and expence of getting them from the mine. Wages and profit
accordingly make up, upon most occasions, almost the whole of their
high price. Rent comes in but for a very small share; frequently for
no share; and the most fertile mines only afford any considerable .
rent. When Tavernier, a jeweller, visited the diamond mines of Gol-
conda and Visiapour, he was informed that the sovereign of the
country, for whose benefit they were wrought, had ordered all of
them to be shut up, except those which yielded the largest and finest
RENT OF LAND FROM HUMAN FOOD ^73
stones.^® The others, it seems, were to the proprietor not worth the
working.
As the price both of the precious metals and of the precious
stones is regulated all over the world by their price at the most
fertile mine in it, the rent which a mine of either can afford to its
proprietor is in proportion, not to its absolute, but to what may be
called its relative fertility, or to its superiority over other mines of
the same kind. If new mines were discovered as much superior to
those of Potosi as they were superior to those of Europe, the value
of silver might be so much degraded as to render even the mines of
Potosi not worth the working. Before the discovery of the Spanish
West Indies, the most fertile mines in Europe may have afforded as
great a rent to their proprietor as the richest mines in Peru do at
present. Though the quantity of silver was much less, it might have
exchanged for an equal quantity of other goods, and the proprie-
tor’s share might have enabled him to purchase or command an
equal quantity either of labour or of commodities. The value both
of the produce and of the rent, the real revenue which they afforded
Doth to the public and to the proprietor, might have been the same.
The most abundant mines either of the precious metals or of the
precious stones could add little to the wealth of the world. A produce
of which the value is principally derived from its scarcity, is neces-
sarily degraded by its abundance. A service of plate, and the other
frivolous ornaments of dress and furniture, could be purchased for
a smaller quantity of labour, or for a smaller quantity of commodi-
ties; and in this would consist the sole advantage which the world
could derive from that abundance.
It is otherwise in estates above ground. The value both of their
produce and of their rent is in proportion to their absolute, and not
to their relative fertility. The land which produces a certain quan-
tity of food, deaths, and lodging, can always feed, cloath, and
lodge a certain number of people; and whatever may be the pro-
portion of the landlord, it will always give him a proportionable
command of the labour of those people, and of the commodities
with which that labour can supply him. The value of the most bar-
^ The Six Voyages of John Baptista Tavernier , a noble man of France now
living, through Turkey into Persia and the East Indies, translated by J. P.,
1678, does not appear to contain any such statement. Possibly it is merely
founded on Tavernier’s remark that “there was a mine discovered between
Coulour and Raolconda, which the King caused to be shut up again by reason
of some cheats that were used there ; for they found therein that sort of stones
which had this green outside, fair and transparent, and which appeared more
fair than the others, but when they came to the mill they crumbled to pieces’’
i5 Hen. VI, c. 2.
From that
it sank
gradually
to 2 oz. at
the begin-
ning of
the six-
teenth
century
and re-
mained at
that til]
1570.
i8o
THE WEALTH OF NATIONS
The same
fall has
been ob-
served in
France.
It may
have been
ported if the price was not above six shillings and eight-pence the
quarter.®^ The legislature had imagined, that when the price was
so low, there could be no inconveniency in exportation, but that
when it rose higher, it became prudent to allow of importation. Six
shillings and eight-pence, therefore, containing about the same
quantity of silver as thirteen shillings and four-pence of our pres-
ent money (one third part less than the same nominal sum con-
tained in the time of Edward III), had in those times been consid-
ered as what is called the moderate and reasonable price of wheat.
In 1554, by the ist and 2d of Philip and Mary; and in 1558,
by the ist of Elizabeth,®^ the exportation of wheat was in the same
manner prohibited, whenever the price of the quarter should ex-
ceed six shillings and eight-pence, which did not then contain two
penny worth more silver than the same nominal sum does at pres-
ent. But it had soon been found that to restrain the exportation of
wheat till the price was so very low, was in reality, to prohibit it al-
together. In 1562, therefore, by the 5th of Elizabeth,^^ the expor-
tation of wheat was allowed from certain ports whenever the price
of the quarter should not exceed ten shillings, containing nearly
the same quantity of silver as the nominal sum does at present.
This price had at this time, therefore, been considered as what is
called the moderate and reasonable price of wheat. It agrees nearly
with the estimation of the Northumberland book in 1512,
That in France the average price of grain was, in the same man-
ner, much lower in the end of the fifteenth and beginning of the
sixteenth century, than in the two centuries preceding, has been
observed both by Mr. Dupre de St. Maur, and by the elegant au-
thor of the Essay on the police of grain. Its price, during the
same period, had probably sunk in the same manner through the
greater part of Europe.
This rise in the value of silver, in proportion to that of corn, may
either have been owing altogether to the increase of the demand for
“3 Ed. IV„ c. 2.
I and 2 P . and M., c. 5, § 7. Licences for exportation, however, are recog-
nised by the Act.
c ^ however, merely partially exempts Norfolk and
Suffolk from regulations intended to prevent exportation from places where
no custom-house existed.
“sEHz.,c.5, §17.
Neither his Reckerckes s»r la vakw des Uonnoies el sur les prix des
grams avant el aprh k concUe de Francfort, 1762, nor his Essai sur les Mon-
nms. ou riflenons sur h rapport entre Vargent el Us denries, 1746, contain
any clear justification for this reference.
“From 1446 to 1515 “k ble fut plus has que dans les sikles precedents.”
— Asso! sur lapobce ginirale des grains sur leur pm et sur les egets de I’agri-
culture, I7SS (by C. J. Herbert), pp. 259, 260. 0 ue ^
DIGRESSION ON SILVER iSi
that metal, in consequence of increasing improvement and cultiva-
tion, the supply in the mean time continuing the same as before:
Or, the demand continuing the same as before, it may have been
owing altogether to the gradual diminution of the supply; the
greater part of the mines which were then known in the world, be-
ing much exhausted, and consequently the expence of working
them much increased: Or it may have been owing partly to the one
and partly to the other of those two circumstances. In the end of
the fifteenth and beginning of the sixteenth centuries, the greater
part of Europe was approaching towards a more settled form of
government than it had enjoyed for several ages before. The in-
crease of security would naturally increase industry and improve-
ment; and the demand for the precious metals, as well as for every
other luxury and ornament, would naturally increase with the in-
crease of riches. A greater annual produce would require a greater
quantity of coin to circulate it; and a greater number of rich people
would require a greater quantity of plate and other ornaments of
silver. It is natural to suppose too, that the greater part of the
mines which then supplied the European market with silver, might
be a good deal exhausted, and have become more expensive in the
working. They had been wrought many of them from the time of
the Romans.
It has been the opinion, however, of the greater part of those
who have written upon the prices of commodities in ancient times,
that, from the Conquest, perhaps from the invasion of Julius
Caesar, till the discovery of the mines of America, the value of sil-
ver was continually diminiiSiing. This opinion they seem to have
been led into, partly by the observations which they had occasion
to make upon the prices both of corn and of some other parts of the
rude produce of land; and partly by the popular notion, that as the
quantity of silver naturally increases in every country with the in-
crease of v^ealth, so its value diminishes as its quantity increases.
In their observations upon the prices of corn, three different cir-
cumstances seem frequently to have misled them.
First, In ancient times almost all rents were paid in kind; in a
certain quantity of corn, cattle, poultry, &c. It sometimes hap-
pened, however, that the landlord would stipulate, that he should
be at liberty to demand of the tenant, either the annual payment
in kind, or a certain sum of money instead of it. The price at which
the pa)nnent in kind was in this manner exchanged for a certain
sum of money, is in Scotland called the conversion price. As the op-
tion is always in the landlord to take either the substance or the
^ Ed. I reads “with the tenant” here and omits “of the tenant” in next line.
due to the
increase
of de-
mand for
silver or
to a dimi-
nution of
supply.
Most
writers,
however,
have sup-
posed that
the value
of silver
continual-
ly fell.
They
have been
misled in
their ob-
servations
on the
price of
corn,
(i) by
confusing
conver-
sion
prices
\irith mar-
ket prices;
(2) by the
slovenly
transcrip-
tion of
ancient
statutes of
assize;
182 the wealth of nations
price, it is necessary for the safety of the tenant, that the conver-
sion price should rather be below than above the average market
price. In many places, accordingly, it is not much above one-half of
this price. Through the greater part of Scotland this custom still
continues with regard to poultry, and in some places with regard to
cattle. It might probably have continued to take place too with re-
gard to corn, had not the institution .of the public fiars put an end
to it. These are annual valuations, according to the judgment of an
assize, of the average price of all the different sorts of grain, and of
all the different qualities of each, according to the actual market
price in every different county. This institution rendered it suffi-
ciently safe for the tenant, and much more convenient for the land-
lord, to convert, as they call it, the corn rent, rather at what should
happen to be the price of the fiars of each year,®® than at any cer-
tain fixed price. But the writers who have collected the prices of
corn in ancient times, seem frequently to have mistaken what is
called in Scotland the conversion price for the actual market price.
Fleetwood acknowledges, upon one occasion, that he had made this
mistake. As he wrote his book, however, for a particular purpose,
he does not think proper to make this acknowledgment till after
transcribing this conversion price fifteen times.®® The price is eight
shillings the quarter of wheat. This sum in 1423, the year at which
he begins with it, contained the same quantity of silver as sixteen
shillings of our present money. But in 1562, the year at which he
ends with it, it contained no more than the same nominal sum does
at present.
Secondly, They have been misled by the slovenly manner in
which some ancient statutes of assize had been sometimes tran-
scribed by lazy copiers; and sometimes perhaps actually composed
by the legislature.
The ancient statutes of assize seem to have begun always with
determining what ought to be the price of bread and ale when the
price of wheat and barley were at the lowest, and to have proceeded
gradually to determine what it ought to be, according as the prices
of those two sorts of grain should gradually rise above this lowest
price. But the transcribers of those statutes seem frequently to
have thought it sufficient, to copy the regulation as far as the three
or four first and lowest prices; saving in this manner their own la-
® Ed. I reads “rent at the price of the fiars of each year rather.”
^Ckronicon Predosum, 1707, pp. 121, 122. Fleetwood does not “acknowl-
edge” any “mistake,” but says that thought the price was not the market price
it might have been “well agreed upon.” His “particular purpose” was to
prove that in order to qualify for a fellowship a man might conscientiously
swear his income to be much less than it was.
DIGRESSION ON SILVER 1S3
hour, and judging, I suppose, that this was enough to show what
proportion ought to be observed in all higher prices.
Thus in the assize of bread and ale, of the 51st of Henry III, the
price of bread was regulated according to the different prices of
wheat, from one shilling to twenty shillings the quarter, of the
money of those times. But in the manuscripts from which all the
different editions of the statutes, preceding that of Mr. Ruffhead,
were printed, the copiers had never transcribed this regulation be-
yond the price of twelve shillings.'^® Several writers, therefore, be-
ing misled by this faulty transcription, very naturally concluded
that the middle price, or six shillings the quarter, equal to about
eighteen shillings of our present money, was the ordinary or aver-
age price of wheat at that time.
In the statute of Tumbrel and Pillory enacted nearly about
the same time, the price of ale is regulated according to every six-
pence rise in the price of barley, from two shillings to four shillings
the quarter. That four shillings, however, was not considered as
the highest price to which barley might frequently rise in those
times, and that these prices were only given as an example of the
proportion which ought to be observed in all other prices, whether
higher or lower, we may infer from the last words of the statute;
“et sic deinceps crescetur vel diminuetur per sex denarios.” The ex-
pression is very slovenly, but the meaning is plain enough; “That
the price of ale is in this manner to be increased or diminished ac-
cording to every sixpence rise or fall in the price of barley.” In the
composition of this statute the legislature itself seems to have been
as negligent as the copiers were in the transcription of the other.
In an ancient manuscript of the Regiam Majestatem, an old
Scotch law book, there is a statute of assize, in which the price of
bread is regulated according to all the different prices of wheat,
from ten-pence to three shillings the Scotch boll, equal to about
half an English quarter. Three shillings Scotch, at the time when
this assize is supposed to have been enacted, were equal to about
nine shillings sterling of our present money. Mr. Ruddiman*^^
seems to conclude from this that three shillings was the highest
price to which wheat ever rose in those times, and that ten-pence,
a shilling, or at most two shillings, were the ordinary prices. Upon
™The statement is too sweeping. See Statutes of tU Realm, vol. i., pp.
xxiv and 199, notes. Ruifhead’s edition began to be published in 1762.
'^’•Judicium Pillorie, temp, incert., ascribed to 51 Hen. III., stat. 6.
Eds. I and 2 read “Rudiman.”
” See his preface to Anderson’s Diplomata Scoriae. [Selectus diplomatum et
mmismatum Scotiae thesaurus, 1739, p. 82, and in the translation, An Intro-
duction to Mr, James Anderson’s Diplomata Scotiae, by Thomas Ruddiman,
M.A., Edinburgh, 1773, pp. 170, 174, 228. The note appears first in ed. 2.]
or by mis-
under-
standings
of those
statutes;
and (3)
by at-
tributing
too much
import-
ance to
excessive-
ly low
prices.
184 THE WEALTH OE NATIONS
consulting the manuscript, however, it appears evidently, that all
these prices are only set down as examples of the proportion which
ought to be observed between the respective prices of wheat and
bread. The last words of the statute are “reliqua judicabis secun-
dum praescripta habendo respectum ad pretium bladi.’^ “You shall
judge of the remaining cases according to what is above written
having a respect to the price of corn.’’
Thirdly, They seem to have been misled too by the very low
price at which wheat was sometimes sold in very ancient times; and
to have imagined, that as its lowest price was then much lower than
in later times, its ordinary price must likewise have been much
lower. They might have found, however, that in those ancient
times, its highest price was fully as much above, as its lowest price
was below any thing that had ever been known in later times.
Thus in 1270, Fleetwood gives us two prices of the quarter of
wheat.'^® The one is four pounds sixteen shillings of the money of
those times, equal to fourteen pounds eight shillings of that of the
present; the other is six pounds eight shillings, equal to nineteen
pounds four shillings of our present money. No price can be found
in the end of the fifteenth, or beginning of the sixteenth century,
which approaches to the extravagance of these. The price of corn,
though at all times liable to variation,^® varies most in those tur-
bulent and disorderly societies, in which the interruption of all
commerce and communication hinders the plenty of one part of the
country from relieving the scarcity of another. In the disorderly
state of England under the Plantagenets, who governed it from
about the middle of the twelfth, till towards the end of the fifteenth
century, one district might be in plenty, while another at no great
distance, by having its crop destroyed either by some accident of
the seasons, or by the incursion of some neighbouring baron, might
be suffering all the horrors of a famine; and yet if the lands of some
hostile lord were interposed between them, the one might not be
able to give the least assistance to the other. Under the vigorous
administration of the Tudors, who governed England during the
latter part of the fifteenth, and through the whole of the sixteenth
^^The manuscript appears to be the Alexander FouKs MS., now 25. 4. 10.
in the Edinburgh Advocates’ Library, No. viii. of the MSS., described in
Acts of the Parliaments of Scotland, vol. i. The exact words are “Memoran-
dum quod reliqua judicabis secundum praedicta habendo respectum ad prae-
scripta bladi precium duplicando.”
'^^Chronicon Preciosum, p. 78. Fleetwood quotes the author of Antiq. Bri-
tan. in Vita Joh. Pecham as saying that “provisions were so scarce that par-
ents did eat their own children.”
’®Eds. I to 3 read “variations.”
DIGRESSION ON SILVER 185
century, no baron was powerful enough to dare to disturb the pub-
lic security.
The reader will find at the end of this chapter all the prices of
wheat which have been collected by Fleetwood from 1202 to 1597,
both inclusive, reduced to the money of the present times, and di-
gested according to the order of time, into seven divisions of twelve
years each. At the end of each division too, he will find the average
price of the twelve years of which it consists. In that long period of
time, Fleetwood has been able to collect the prices of no more than
eighty years, so that four years are wanting to make out the last
twelve years. I have added, therefore, from the accounts of Eton
College, the prices of 1598, 1599, 1600, and 1601.''^ It is the only
addition which I have made. The reader will see, that from the be-
ginning of the thirteenth, till after the middle of the sixteenth cen-
tury, the average price of each twelve years grows gradually lower
and lower; and that towards the end of the sixteenth century it be-
gins to rise again. The prices, indeed, which Fleetwood has been
able to collect, seem to have been those chiefly which were remark-
able for extraordinary dearness or cheapness; and I do not pretend
that any very certain conclusion can be drawn from them. So far,
however, as they prove any thing at all, they confirm the account
which I have been endeavouring to give. Fleetwood himself, how-
ever, seems, with most other writers, to have believed,'^® that during
all this period the value of silver, in consequence of its increasing
abundance, was continually diminishing. The prices of corn which
he himself has collected, certainly do not agree with this opinion.
They agree perfectly with that of Mr. Dupre de St. Maur, and
with that which I have been endeavouring to explain. Bishop Fleet-
wood and Mr. Dupre de St. Maur are the two authors who seem to
have collected, with the greatest diligence and fidelity, the prices
of things in ancient times. It is somewhat curious that, though their
opinions are so very different, their facts, so far as they relate to
the price of corn at least, should coincide so very exactly.
It is not, however, so much from the low price of corn, as from
that of some other parts of the rude produce of land, that the most
judicious writers have inferred the great value of silver in those
very ancient times. Corn, it has been said, being a sort of manufac-
ture, was, in those rude ages, much dearer in proportion than the
^ See the table, pp. 251-255 below.
This appears to be merely an inference from the fact that he does not
take notice of fluctuations.
Above, p. 180.
The fig-
ures at
the end of
the chap-
ter con-
firm this
account.
Some-
times the
value of
silver has
been mea-
sured by
the price
of cattle,
poultry,
etc. But
the low
price of
these
things
shows
their
cheapness,
not the
dearness
of silver,
for labour
is the real
measure.
Cattle,
poultry,
etc., are
produced
by very
different
quantities
of labour
at differ-
ent times,
whereas
com
the wealth of nations
greater part of other commodities; it is meant, I suppose, than the
greater part of unmanufactured commodities ; such as cattle, poul-
try, game of all kinds, &c. That in those times of poverty and bar-
barism these were proportionably much cheaper than corn, is un-
doubtedly true. But this cheapness was not the effect of the high
value of silver, but of the low value of those commodities. It was
not because silver would in such times purchase or represent a
greater quantity of labour, but because such commodities would
purchase or represent a much smaller quantity than in times of
more opulence and improvement. Silver must certainly be cheaper
in Spanish America than in Europe; in the country where it is pro-
duced, than in the country to which it is brought, at the expence of
a long carriage both by land and by sea, of a freight and an insur-
ance, One-and-twenty pence halfpenny sterling, however, we are
told by Ulloa, was, not many years ago, at Buenos Ayres, the price
of an ox chosen from a herd of three or four hundred.®^ Sixteen
shillings sterling, we are told by Mr. B3T:on, was the price of a good
horse in the capital of Chili.^^ In a country naturally fertile, but of
which the far greater part is altogether uncultivated, cattle, poul-
try, game of all kinds, &c. as they can be acquired with a very small
quantity of labour, so they will purchase or command but a very
small quantity. The low money price for which they may be sold,
is no proof that the real value of silver is there very high, but that
the real value of those commodities is very low.
Labour, it must always be remembered, and not any particular
commodity or set of commodities, is the real measure of the value
both of silver and of all other commodities.
But in countries almost waste, or but thinly inhabited, cattle,
poultry, game of all kinds, &c. as they are the spontaneous produc-
tions of nature, so she frequently produces them in much greater
quantities than the consumption of the inhabitants requires. In
such a state of things the supply commonly exceeds the demand. In
different states of society, in different stages of improvement, there-
fore, such commodities will represent, or be equivalent to, very
different quantities of labour.
In every state of society, in every stage of improvement, corn
is the production of human industry. But the average produce of
Ed. I reads “that” instead of “because,” here and also two lines above.
^Voyage historiqm de VAmirique mSridionale, vol. i , p. 552, where, how-
ever, the number of cattle is two or three hundred, as correctly quoted above,
p. 148.
Narrative of the Hon, John Byron, containing an account of the Great
Distresses suffered by himself and his companions on the Coast of Patagonia
from 1740 tq 1746, 1768, pp. 212, 220.
DIGRESSION ON SILVER
187
every sort of industry is always suited, more or less exactly, to the
average consumption; the average supply to the average demand.
In every different stage of improvement, besides, the raising of
equal quantities of corn in the same soil and climate, will, at an
average, require nearly equal quantities of labour; or what comes
to the same thing, the price of nearly equal quantities; the con-
tinual increase of the productive powers of labour in an improv-
ing state of cultivation being more or less counterbalanced by
the continually increasing price of cattle, the principal instru-
ments of agriculture. Upon all these accounts, therefore, we may
rest assured, that equal quantities of corn wiU, in every state of
society, in every stage of improvement, more nearly represent, or
be equivalent to, equal quantities of labour, than equal quantities
of any other part of the rude produce of land. Corn, accordingly,
it has already been observed,®^ is, in all the different stages of
wealth and improvement, a more accurate measure of value than
any other commodity or set of commodities. In all those different
stages, therefore, we can judge better of the real value of silver, by
comparing it with corn, than by comparing it with any other com-
modity, or set of commodities.
Corn, besides, or whatever else is the common and favourite
vegetable food of the people, constitutes, in every civilized coun-
try, the principal part^of the subsistence of the labourer. In con-
sequence of the extension of agriculture, the land of every country
produces a much greater quantity of vegetable than of animal
food, and the labourer every-where lives chiefly upon the whole-
some food that is cheapest and most abundant. Butcher’s-meat,
except in the most thriving countries, or where labour is most
highly rewarded, makes but an insignificant part of his subsist-
ence; poultry makes a still smaller part of it, and game no part of
it. In France, and even in Scotland, where labour is somewhat
better rewarded than in France, the labouring poor seldom eat
butcher^s-meat, except upon holidays, and other extraordinary oc-
casions. The money price of labour, therefore, depends much
more upon the average money price of com, the subsistence of the
labourer, than upon that of butcher's-meat, or of any other part
of the rude produce of land. The real value of gold and silver,
therefore, the real quantity of labour which they can purchase or
command, depends much more upon the quantity of corn which
they can purchase or command, than upon that of butcher’s-meat,
or any other part of the rude produce of land.
Such slight observations, however, upon the prices either of
“Above, p. 38.
scarcely
varies at
all,
and also
regulates
the money
price of
labour
“Misprinted “improved” in ed. 5.
The
authors
were also
misled by
the notion
that silver
falls in
value as
its quan-
tity in-
creases.
Increase
of quan-
tity aris-
ing from
greater
abun-
dance of
the mines
is con-
nected
with di-
minution
of value,
but in-
crease of
quantity
resulting
from the
increased
wealth of
a country
is not.
Gold and
silver are
dearer in
a rich
country,
iS8 the wealth of nations
corn or of other commodities, would not probably have misled so
many intelligent authors, had they not been influenced, at the
same time, by the popular notion, that as the quantity of silver
naturally increases in every country with the increase of wealth,
so its value diminishes as its quantity increases. This notion, how-
ever, seems to be altogether groundless.
The quantity of the precious metals may increase in any coun-
try from two different causes: either, first, from the increased
abundance of the mines which supply it; or, secondly, from the
increased wealth of the people, from the increased produce of
their annual labour. The first of these causes is no doubt neces-
sarily connected with the diminution of the value of the precious
metals; but the second is not.
When more abundant mines are discovered, a greater quantity
of the precious metals is brought to market, and the quantity of
the necessaries and conveniences of life for which they must be
exchanged being the same as before, equal quantities of the
metals must be exchanged for smaller quantitife of commodities.
So far, therefore, as the increase of the quantity of the precious
metals in any country arises from the increased abundance of the
mines, it is necessarily connected with some diminution of their
value.
When, on the contrary, the wealth of any country increases^
when the annual produce of its labour becomes gradually greater
and greater, a greater quantity of coin becomes necessary in order
to circulate a greater quantity of commodities: and the people, as
they can afford it, as they have more commodities to give for it,
will naturally purchase a greater and a greater quantity of plate.
The quantity of their coin will increase from necessity; the quan-
tity of their plate from vanity and ostentation, or from the same
reason that the quantity of fine statues, pictures, and of every
other luxury and curiosity, is likely to increase among them. But
as statuaries and painters are not likely to be worse rewarded in
times of wealth and prosperity, than in times of poverty and de-
pression, so gold and silver are not likely to be worse paid for.
The price of gold and silver, when the accidental discovery of
more abundant mines does not keep it down, as it naturally rises
with the wealth of every country, so, whatever be the state of the
mines, it is at all times naturally higher in a rich than in a poor
country. Gold and silver, like all other commodities, naturally
seek the market where the best price is given for them, and the
best price is commonly given for every thing in the country which
^ Ed. I reads “had they not been agreeable to the popular notion.’^
DIGRESSION ON SILVER 1S9
can best af ord it. Labour, it must be remembered, is the ultimate
price which is paid for every thing, and in countries where labour
is equally well rewarded, the money price of labour will be in pro-
portion to that of the sul3sistence of the labourer. But gold and sil-
ver will naturally exchange for a greater quantity of subsistence
in a rich than in a poor country, in a country which abounds with
subsistence, than in one which is but indifferently supplied with it.
If the two countries are at a great distance, the difference may be
very great; because though the metals naturally fly from the
worse to the better market, yet it may be difficult to transport
them in such quantities as to bring their price nearly to a level in
both. If the countries are near, the difference will be smaller, and
may sometimes be scarce perceptible; because in this case the
transportation will be easy. China is a much richer country than as may be
any part of Europe, and the difference between the price of sub- co^r-^
sistence in China and in Europe is very great. Rice in China is jpg China
much cheaper than wheat is any-where in Europe. England is a with
much richer country than Scotland; but the difference between andSwt^
the money-price of corn in those two countries is much smaller, land with
and is but just perceptible. In proportion to the quantity or meas-
ure, Scotch corn generally appears to be a good deal cheaper than price 0 /
English; but in proportion to its quality, it is certainly somewhat subsist-
dearer. Scotland receives almost every year very large supplies
from England, and every commodity must commonly be some-
what dearer in the country to which it is brought than in that
from which it comes. English com, therefore, must be dearer in
Scotland than in England, and yet in proportion to its quality, or
to the quantity and goodness of the flour or meal which can be
made from it, it cannot commonly be sold higher there than the
Scotch corn which comes to market in competition with it.
The difference between the money price of labour in China and
in Europe, is still greater than that between the money price of
subsistence; because the real recompence of labour is higher in
Europe than in China, the greater part of Europe being in an im-
proving state, while China seems to be standing still. The money
price of labour is lower in Scotland than in England, because the
real recompence of labour is much lower; Scotland, though ad-
vancing to greater wealth, is advancing much more slowly than
England.®® The frequency of emigration from Scotland, and the
rarity of it from England, sufficiently prove that the demand for
labour is very different in the two countries.®’^ The proportion be-
tween the real recompence of labour in different countries, it must
Above, p. 90.
®^This sentence is not in ed. i.
Gold and
silver are
cheapest
among the
poorest
nations.
The fact
that corn
is dearer
in towns
is due to
its dear-
ness there,
not to the
cheapness
of silver,
and this is
true also
in Hol-
land,
Genoa,
etc.
So no in-
crease of
silver due
to the in-
190 XHE WEALTH OF NATIONS
be remembered, is naturally regulated, not by their actual wealth
or poverty, but by their advancing, stationary, or declining con-
dition.
Gold and silver, as they are naturally of the greatest value
among the richest, so they are naturally of the least value among
the poorest nations. Among savages, the poorest of all nations,
they are of scarce any value.
In great towns corn is always dearer than in remote parts of
the country. This, however, is the effect, not of the real cheapness
of silver, but of the real dearness of corn. It does not cost less la-
bour to bring silver to the great town than to the remote parts of
the country; but it costs a great deal more to bring corn.
In some very rich and commercial countries, such as Holland
and the territory of Genoa, corn is dear for the same reason that
it is dear in great towns. They do not produce enough to maintain
their inhabitants. They are rich in the industry and skill of their
artificers and manufacturers; in every sort of machinery which
can facilitate and abridge labour; in shipping, and in all the other
instruments and means of carriage and commerce: but they are
poor in corn, which, as it must be brought to them from distant
countries, must, by an addition to its price, pay for the carriage
from those countries. It does not cost less labour to bring silver
to Amsterdam than to Dantzick; but it costs a great deal more to
bring corn. The real cost of silver must be nearly the same in both
places; but that of corn must be very different. Diminish the real
opulence either of Holland or of the territory of Genoa, while the
number of their inhabitants remains the same: diminish their
power of supplying themselves from distant countries; and the
price of corn, instead of sinking with that diminution in the quan-
tity of their silver, which must necessarily accompany this declen-
sion either as its cause or as its effect, will rise to the price of a
famine. When we are in want of necessaries we must part with all
superfluities, of which the value, as it rises in times of opulence
and prosperity, so it sinks in times of poverty and distress. It is
otherwise with necessaries. Their real price, the quantity of labour
which they can purchase or command, rises in times of poverty
and distress, and sinks in times of opulence and prosperity, which
are always times of great abundance; for they could not other-
wise be times of opulence and prosperity. Corn is a necessary, sil-
ver is only a superfluity.
Whatever, therefore, may have been the increase in the quan-
tity of the precious metals, which, during the period between the
middle of the fourteenth and that of the sixteenth century, arose
DIGRESSION ON SILVER
191
from the increase of wealth and improvement, it could have no crease of
tendency to diminish their value either in Great Britain, or in any
other part of Europe. If those who have collected the prices of havere-
things in ancient times, therefore, had, during this period, no rea- ducedits
son to infer the diminution of the value of silver, from any obser-
vations which they had made upon the prices either of corn or of
other commodities, they had still less reason to infer it from any
supposed increase of wealth and improvement.
Second Period
But how various soever may have been the opinions of the No doubt
learned concerning the progress of the value of silver during this
first period, they are unanimous concerning it during the second, second
From about 1570 to about 1640, during a period of about sev- period,
enty years, the variation in the proportion between the value of
silver and that of corn, held a quite opposite course. Silver sunk in ^^^and
its real value, or would exchange for a smaller quantity of labour a quarter
than before; and corn rose in its nominal price, and instead of be- com
ing commonly sold for about two ounces of silver the quarter, or b^^orth
about ten shillings of our present money, came to be sold for six 6oz.or8
and eight ounces of silver the quarter, or about thirty and forty
shillings of our present money.
The discovery of abundant mines of America, seems to have This was
been the sole cause of this diminution in the value of silver in pro-
portion to that of corn. It is accounted for accordingly in the same covery of
manner by every body; and there never has been any dispute theabun-
either about the fact, or about the cause of it. The greater part of Amwican
Europe was, during this period, advancing in industry and im- mines,
provement, and the demand for silver must consequently have
been increasing. But the increase of the supply had, it seems, so
far exceeded that of the demand, that the value of that metal sunk
considerably. The discovery of the mines of America, it is to be
observed, does not seem to have had any very sensible effect upon
the prices of things in England till after 1570; though even the
mines of Potosi had been discovered more than twenty years
before.®^
From 1595 to 1620, both inclusive, the average price of the Wheat
quarter of nine bushels of the best wheat at Windsor market, ap- win^r
pears from the accounts of Eton College,®^ to have been 2I, is. 6 d. market.
® In 1545. Ed. I reads “thirty” instead of “twenty.” In ed. 2 the correction
is in the errata. See below p. 201, notes 4 and 5.
“ See the table at the end of the chapter, p. 256.
The effect
of the dis-
covery of
the
American
mines
was com-
plete
about
1636.
From
1637 to
1700 there
was a
very slight
rise of
wheat at
Windsor,
due to the
civil war,
192 the wealth of nations
From which sum, neglecting the fraction, and deducting a
ninth, or 4$, the price of the quarter of eight bushels comes
out to have been iL i6s, lod. And from this sum, neglecting
likewise the fraction, and deducting a ninth, or 4s. id. •^, for the
difference between the price of the best wheat and that of the
middle wheat,^® the price of the middle wheat comes out to have
been about iL 12s. M. |, or about six ounces and one-third of an
ounce of silver.
From 1621 to 1636, both inclusive, the average price of the
same measure of the best wheat at the same market, appears, from
the same accounts, to have been 2I. 105.; from which making the
like deductions as in the foregoing case, the average price of the
quarter of eight bushels of middle wheat comes out to have been
iL igs. 6d. or about seven ounces and two-thirds of an ounce of
silver.
Third Period
Between 1630 and 1640, or about 1636, the effect of the discov-
ery of the mines of America in reducing the value of silver, ap-
pears to have been completed, and the value of that metal seems
never to have sunk lower in proportion to that of corn than it was
about that time. It seems to have risen somewhat in the course of
the present century, and it had probably begun to do so even
some time before the end of the last.
From 1637 to 1700, both inclusive, being the sixty-four last
years of the last century, the average price of the quarter of nine
bushels of the best wheat at Windsor market, appears, from the
same accounts, to have been 2L iis. od.j; which is only od.
dearer than it had been during the sixteen years before. But in
the course of these sixty-four years there happened two events
which must have produced a much greater scarcity of corn than
what the course of the seasons would otherwise have occasioned,
and which, therefore, without supposing any further reduction in
the value of silver, will much more than account for this very
small enhancement of price.
The first of these events was the civil war, which, by discourag-
ing tillage and interrupting commerce, must have raised the price
of corn much above what the course of the seasons would other-
“The deduction of this ninth is recommended by Charles Smith, T/iree
Tracts on the Corn Trade and Corn Laws, 2nd ed., 1766, p. 104, because, “it
hath been found that the value of all the wheat fit for bread, if mixed to-
gether, would be eight-ninths of the value of the best wheat.”
DIGRESSION ON SILVER ^93
wise have occasioned. It must have had this effect more or less at
all the different markets in the kingdom, but particularly at those
in the neighbourhood of London, which require to be supplied
from the greatest distance. In 1648, accordingly, the price of the
best wheat at Windsor market, appears, from the same accounts,
to have been 4Z. 55. and in 1649 to have been 4L the quarter of
nine bushels. The excess of those two years above 2I. 105. (the
average price of the sixteen years preceding 1637) is 3/. 55.;
which divided among the sixty-four last years of the last century,
will alone very nearly account for that small enhancement of price
which seems to have taken place in them. These, however, though
the highest, are by no means the only high prices which seem to
have been occasioned by the civil wars.
The second event was the bounty upon the exportation of corn,
granted in 1688.^^ The bounty, it has been thought by many
people, by encouraging tillage, may, in a long course of years,
have occasioned a greater abundance, and consequently a greater
cheapness of corn in the home-market, than what would other-
wise have taken place there. How far the bounty could produce
this effect at any time, I shall examine hereafter I shall only
observe at present, that between 1688 and 1700, it had not time
to produce any such effect.^^ During this short period its only
effect must have been, by encouraging the exportation of the sur-
plus produce of every year, and thereby hindering the abundance
of one year from compensating the scarcity of another, to raise
the price in the home-market. The scarcity which prevailed in
England from 1693 to 1699, both inclusive, though no doubt
principally owing to the badness of the seasons, and, therefore,
extending through a considerable part of Europe, must have been
somewhat enhanced by the bounty. In 1699, accordingly, the fur-
ther exportation of corn was prohibited for nine months.
®^By I W. & M., c. 12, “An act for the encouraging the exportation of
corn,” the preamble of which alleges that “it hath been found by experience,
that the exportation of com and grain into foreign parts, when the price
thereof is at a low rate in this kingdom, hath been a great advantage not only
to the owners of land but to the trade of this kingdom in general.” It pro-
vides that when malt or barley does not exceed 24s. per Winchester quarter,
rye 32s. and wheat 48s. in any port, every person exporting such corn on an
English ship with a crew at least two-thirds English shall receive from the
Customs 2s. 6d. for every quarter of barley or malt, 3s. 6d. for every quar-
ter of rye and 3s. for every quarter of wheat.
“Below, pp. 473-483. _
^ In place, of “How far the bounty could produce this effect at any time I
shall examine hereafter: I shall only observe at present that,” ed. i reads
simply “But.”
For “not” ed. i reads “no,” and for “any such” it reads “this.”
The Act 10 Will. III., c. 3, prohibits exportation for one year from loth
the
bounty on
the ex-
portation
of com.
and the
cKpping
and wear-
ing of the
coin,
which was
then much
greater
than in
the pres-
ent cen-
tury.
194 THE WEALTH OF NATIONS
There was a third event which occurred in the course of the
same period, and which, though it could not occasion any scarcity
of corn, nor, perhaps, any augmentation in the real quantity of
silver which was usually paid for it, must necessarily have occa-
sioned some augmentation in the nominal sum. This event was
the great debasement of the silver coin, by clipping and wear-
ing. This evil had begun in the reign of Charles II. and had gone
on continually increasing till 1695; at which time, as we may
learn from Mr. Lowndes, the current silver coin was, at an aver-
age, near five-and-twenty per cent, below its standard value.®'^
But the nominal sum which constitutes the market-price of every
commodity is necessarily regulated, not so much by the quantity
of silver, which, according to the standard, ought to be contained
in it, as by that which, it is found by experience, actually is con-
tained in it. This nominal sum, therefore, is necessarily higher
when the coin is much debased by clipping and wearing, than
when near to its standard value.
In the course of the present century, the silver coin has not at
any time been more below its standard weight than it is at pres-
ent. But though very much defaced, its value has been kept up by
that of the gold coin for which it is exchanged.^^ For though be-
fore the late re-coinage, the gold coin was a good deal defaced too,
it was less so than the silver. In 1695, on the contrary, the value
of the silver coin was not kept up by the gold coin; a guinea then
commonly exchanging for thirty shillings of the worn and dipt
silver.^^*® Before the late re-coinage of the gold, the price of silver
February, 1699. The mistake “nine months” is probably due to a misreading
of C. Smith, Tracts on the Corn Trade, p. 9, wheat “growing, and continuing
dearer till 1698, the exportation was forbid for one year, and then for nme
months the bounty was suspended” (cp. pp. 44, 119). As a matter of fact, the
bounty was suspended by ii & 12 Will. III., c. i, from 9th February, 1699,
to 29th September, 1700, or not much more than seven months and a half.
The Act II & 12 Will. III., c. i, alleges that the Act granting the bounty “was
grounded upon the highest wisdom and prudence and has succeeded to the
greatest benefit and advantage to the nation by the greatest encouragement
of tillage,” and only suspends it because “it appears that the present stock
and quantity of corn in this kingdom may not be sufficient for the use and
service of the people at home should there be too great an exportation into
parts beyond the seas, which many persons may be prompted to do for their
own private advantage and the lucre of the said bounty .”— of the
Realm, vol. vii,, p. 544.
®®For “debasement” ed. i reads “degradation.”
^ Lowndes says on p. 107 of his Report Containing an Essay for the Am-
endment of the Silver Coins, 1695, “the moneys commonly current are dimin-
ished near one-half, to wit, in a proportion something greater than that of ten
to twenty-two.” But in the text above, the popular estimate, as* indicated by
the price of silver bullion, is accepted, as in the next paragraph.
"^Ed. I reads “degraded.” ®®See above, p, 41.
^“Lowndes, Essay, p. 88
DIGRESSION ON SILVER i 9 S
bullion was seldom higher than five shillings and seven-pence an
ounce^ which is but five-pence above the mint price. But in 1695,
the common price of silver bullion was six shillings and five-pence
an ounce/®^ which is fifteen-pence above the mint price. Even
before the late re-coinage of the gold,^®^ therefore, the coin, gold
and silver together, when compared with silver bullion, was not
supposed to be more than eight per cent, below its standard value.
In 169s, on the contrary, it had been supposed to be near five-
and-twenty per cent, below that value. But in the beginning of
the present century, that is, immediately after the great re-coin-
age in King William^s time, the greater part of the current silver
coin must have been still nearer to its standard weight than it is at
present. In the course of the present century too there has been no
great public calamity, such as the civil war, which could either
discourage tillage, or interrupt the interior commerce of the coun-
try. And though the bounty which has taken place through the
greater part of this century, must always raise the price of com
somewhat higher than it otherwise would be in the actual state of
tillage; yet as, in the course of this century, the bounty has
had full time to produce all the good effects commonly imputed to
it, to encourage tillage, and thereby to increase the quantity of
corn in the home market, it may, upon the principles of a system
which I shall explain and examine hereafter, be supposed to
have done something to lower the price of that commodity the one
way, as well as to raise it the other. It is by many people sup-
posed to have done more.^^® In the sixty-four first years of the
present century accordingly, the average price of the quarter of
nine bushels of the best wheat at Windsor market, appears, by
the accounts of Eton College, to have been 2I. o^. 6d. whici
is about ten shillings and sixpence, or more than five-and-twenty
per cent, cheaper than it had been during the sixty-four last
years of the last century; and about nine shillings and sixpence
cheaper than it had been during the sixteen years preceding 1636,
Lowndes’s Essay on the Silver Coin, p. 68. This note appears first in
ed. 2.
^ Above, p. 41.
^°®The meaning is “given a certain area and intensity of cultivation, the
bounty will raise the price of corn.”
^“^Ed. I does not contain “upon the principles of a system which I shall
explain hereafter.” The reference is presumably to pp. 473-483.
^ Ed. I reads here “a notion which I shall examine hereafter.”
^ Doubtless by a misprint ed. 5 omits “first.” The term is used again at
the end of the paragraph and also on pp. 197, 198.
^ See the table at the end of the chapter: is a mistake for^^.
“®The 23 per cent, is erroneously reckoned on the £2 os. 6j|d. instead of
on the £2 IIS. ojd. The fall of price is really less than 21 per cent.
Moreover
the
bounty
has been
long
enough in
existence
to pro-
duce any
possible
effect in
lowering
the price
of corn.
Silver has
risen
somewhat
since the
beginning
of the
century,
and the
rise began
before ;
as is
shown by
Mr.
King’s
calcula-
tions.
196 THE WEALTH OF NATIONS
when the discovery of the abundant mines of America may be
supposed to have produced its full effect; and about one shilling
cheaper than it had been in the twenty-six years preceding 1620,
before that discovery can well be supposed to have produced its
full effect. According to this account, the average price of middle
wheat, during these sixty-four first years of the present century,
comes out to have been about thirty-two shillings the quarter of
eight bushels.
The value of silver, therefore, seems to have risen somewhat in
proportion to that of com during the course of the present cen-
tury, and it had probably begun to do so even some time before
the end of the last.
In 1687, the price of the quarter of nine bushels of the best
wheat at Windsor market was il, 5^. 2d, the lowest price at which
it had ever been from 1595.
In 1688, Mr. Gregory King, a man famous for his knowledge in
matters of this kind, estimated the average price of wheat in years
of moderate plenty to be to the grower 35. 6^f. the bushel, or eight-
and-twenty shillings the quarter.^®^ The grower’s price I under-
stand to be the same with what is sometimes called the contract
price, or the price at which a farmer contracts for a certain num-
ber of years to deliver a certain quantity of corn to a dealer. As a
contract of this kind saves the farmer the expence and trouble of
marketing, the contract price is generally lower than what is sup-
posed to be the average market price. Mr. King had judged eight-
and-twenty shillings the quarter to be at that time the ordinary
contract price in years of moderate plenty. Before the scarcity
occasioned by the late extraordinary course of bad seasons, it was,
I have been assured, the ordinary contract price in all common
years.
In 1688 was granted the parliamentary bounty upon the exporta-
tion of corn.^^^ The country gentlemen, who then composed a still
greater proportion of the legislature than they do at present, had
felt that the money price of corn was falling. The bounty was an ex-
““ The date is taken from the heading of Scheme D in Davenant, Essay
upon the Probable Means of Making a People Gainers in the Balance of
Trade, 1699, P- 22, Works, ed. Whitworth, 1771, vol. ii., p, 184. Cp. Natural
and Political Observations and Conclusions upon the State and Condition of
England, by Gregory King, Esq., Lancaster, H., in George Chalmers’ Esti-
mate of the Comparative Strength of Great Britain, 1802, p. 429; in Dave-
nant, Balance of Trade, pp. 7ij 72> Works, vol. ii., p. 217. Davenant says “this
value is what the same is worth upon the spot where the corn grew; but this
value is increased by the carriage to the place where it is at last spent, at
least i part more.”
Ed. I does not contain this parenthesis.
Above, p. 193, note.
DIGRESSION ON SILVER
197
pedient to raise it artifically to the high price at which it had fre-
quently been sold in the times of Charles 1. and II. It was to take
place, therefore, till wheat was so high as forty-eight shillings the
quarter; that is twenty shillings, or fths dearer than Mr. King
had in that very year estimated the grower’s price to be in times of
moderate plenty. If his calculations deserve any part of the reputa-
tion which they have obtained very universally, eight-and-forty
shillings the quarter was a price which, without some such expedi-
ent as the bounty, could not at that time be expected, except in
years of extraordinary scarcity. But the government of King Wil-
liam was not then fully settled. It was in no condition to refuse any
thing to the country gentlemen, from whom it was at that very
time soliciting the first establishment of the annual land-tax.
The value of silver, therefore, in proportion to that of corn, had
probably risen somewhat before the end of the last century; and it
seems to have continued to do so during the course of the greater
part of the present; though the necessary operation of the bounty
must have hindered that rise from being so sensible as it otherwise
would have been in the actual state of tillage.
In plentiful years the bounty, by occasioning an extraordinary
exportation, necessarily raises the price of corn above what it other-
wise would be in those years. To encourage tillage, by keeping up
the price of corn even in the most plentiful years, was the avowed
end of the institution.
In years of great scarcity, indeed, the bounty has generally been
suspended. It must, however, have had some effect even upon the
prices of many of those years. By the extraordinary exportation
which it occasions in years of plenty, it must frequently hinder the
plenty of one year from compensating the scarcity of another.
Both in years of plenty and in years of scarcity, therefore, the
bounty raises the price of corn above what it naturally would be in
the actual state of tillage. If, during the sixty-four first years of the
present century, therefore, the average price has been lower than
during the sixty-four last years of the last century, it must, in the
same state of tillage, have been much more so, had it not been for
this operation of the bounty.
But without the bounty, it may be said, the state of tillage would
not have been the same. What may have been the effects of this
institution upon the agriculture of the country, I shall endeavour
to explain hereafter, when I come to treat particularly of boun-
ties. I shall only observe at present, that this rise in the value of
Apart
from its
effect in
extending
tillage,
the
bounty
raises the
price of
com, both
in times
of plenty
and of
scarcity.
It is said
to have
extended
tillage
(and so to
havere-
^ Ed. s, doubtless by a misprint, omits “even.’
Below, pp. 473-483-
THE WEALTH OF NATIONS
ducedthe
price),
but the
rise of
silver has
not been
peculiar
to Eng-
land.
The al-
teration
should be
regarded
as a rise
of silver
rather
than a fall
of corn.
The re-
cent high
price of
corn is
merely
the effect
of unfa-
vourable
seasons.
198
silver, in proportion to that of corn, has not been peculiar to Eng-
land. It has been observed to have taken place in France during the
same period, and nearly in the same proportion too, by three very
faithful, diligent, and laborious collectors of the prices of corn, Mr.
Dupre de St. Maur, Mr. Messance, and the author of the Essay on
the police of grain.^’-^ But in France, till 1764, the exportation of
grain was by law prohibited; and it is somewhat difficult to sup-
pose, that nearly the same diminution of price which took place in
one country, notwithstanding this prohibition, should in another be
owing to the extraordinary encouragement given to exportation.
It would be more proper, perhaps, to consider this variation in
the average money price of com as the effect rather of some gradual
rise in the real value of silver in the European market, than of any
fall in the real average value of corn. Corn, it has already been ob-
served,^^^ is at distant periods of time a more accurate measure of
value than either silver, or perhaps any other commodity- When,
after the discovery of the abundant mines of America, corn rose to
three and four times its former money price, this change was uni-
versally ascribed, not to any rise in the real value of corn, but to a
fall in the real value of silver. If during the sixty-four first years of
the present century, therefore, the average money price of corn has
fallen somewhat below what it had been during the greater part of
the last century, we should in the same manner impute this change,
not to any fall in the real value of corn, but to some rise in the real
value of silver in the European market.
The high price of corn during these ten or twelve years past, in-
deed, has occasioned a suspicion that the real value of silver still
continues to fall in the European market. This high price of corn,
however, seems evidently to have been the effect of the extraordin-
ary unfavourableness of the seasons, and ought therefore to be re-
garded, not as a permanent, but as a transitory and occasional
event. The seasons for these ten or twelve years past have been un-
favourable through the greater part of Europe; and the disorders
of Poland have very much increased the scarcity in all those coun-
tries, which, in dear years, used to be supplied from that market.
So long a course of bad seasons, though not a very common event,
is by no means a singular one; and whoever has enquired much in-
“^The references to Dupre de St. Maur and the Essay (see above, p. 180,
note), as well as the whole argument of the paragraph, are from Messance.
Recherches sur la population des giniralitSs d’ Auvergne, etc., p. 281. Mes-
sance’s quotations are from Dupre’s Essai sur les Monnoies, 1746, p. 68, and
Herbert’s Essai sur la police generate des grains, 1755, PP- i^j lit 189; cp. be-
low, p. 240.
““Above, pp. 35, 36.
““Examined below, p. 216, 217.
DIGRESSION ON SILVER ^99
to the history of the prices of corn in former times, will be at no
loss to recollect several other examples of the same kind. Ten years
of extraordinary scarcity, besides, are not more wonderful than ten
years of extraordinary plenty. The low price of corn from 1741 to
1750, both inclusive, may very well be set in opposition to its high
price during these last eight or ten years. From 1741 to 1750, the
average price of the quarter of nine bushels of the best wheat at
Windsor market, it appears from the accounts of Eton College, was
only iL i^s, which is nearly 6s. 3d. below the average
price of the sixty-four first years of the present century.^^^ The
average price of the quarter of eight bushels of middle wheat, comes
out, according to this account, to have been, during these ten years,
only iL 6s.
Between 1741 and 1750, however, the bounty must have hind-
ered the price of corn from falling so low in the home market as it
naturally would have done. During these ten years the quantity of
all sorts of grain exported, it appears from the custom-house books,
amounted to no less than eight millions twenty-nine thousand one
hundred and fifty-six quarters one bushel. The bounty paid for this
amounted to 1,514,962^. 17^. 4d. In 1749 accordingly, Mr.
Pelham, at that time prime minister, observed to the House of
Commons, that for the three years preceding, a very extraordin-
ary sum had been paid as bounty for the exportation of corn. He
had good reason to make this observation, and in the following year
he might have had still better. In that single year the bounty paid
amounted to no less than 324,176^. los. 6d.^^^ It is unnecessary to
See the table at the end of the chapter.
“•®This figure is obtained, as recommended by Charles Smith {Tracts on
the Corn Trade ^ 1766, p. 104), by deducting one-ninth for the greater size of
the Windsor measure and one-ninth from the remainder for the difference be-
tween best and middling wheat.
“Tract 3d,” referred to a few lines farther on, only gives the quantities
of each kind of grain exported in each year (pp. no, iii), so that if the
figures in the text are taken from it they must have been obtained by some-
what laborious arithmetical operations. The particulars are as follows:—
Exported. Bounty payable.
Qr. Bush.
Wheat .... 3,784,524 I 1946,131 0
Rye .... 765,056 6 133,884 18 7J
Barley, malt and oats 3479,575 2 434,946 18 il
8,029,156 I £1,514,962 17 4J
^ “Years” is apparently a mistake for “months.” “There is such a super-
abundance of corn that incredible quantities have been lately exported. I
should be afraid to mention what quantities have been exported if it did not
appear upon our custom-house books, but from them it appears that lately
there was in three months’ time above £220,000 paid for bounties upon corn
expoxted.^^— Parliamentary History (Hansard), vol. xiv., p 589
^ See Tracts on the Com Trade ; Tract 3d. This note appears fir§t in ed.
The
bounty
kept up
the price
between
1741 and
1750.
200
THE WEALTH OF NATIONS
The sud-
den
change at
1750 was
due to ac-
cidental
variation
of the
seasons.
The rise
in the
price of
labour
has been
due to in-
crease of
demand
for la-
bour, not
to a dimi-
nution in
the value
of silver.
observe how much this forced exportation must have raised the
price of corn above what it otherwise would have been in the home
market.
At the end of the accounts annexed to this chapter the reader will
find the particular account of those ten years separated from the
rest. He will find there too the particular account of the preceding
ten years, of which the average is likewise below, though not so
much below, the general average of the sixty-four first years of the
century. The year 1740, however, was a year of extraordinary scar-
city. These twenty years preceding 1750, may very well be set in
opposition to the twenty preceding 1770. As the former were a good
deal below the general average of the century, notwithstanding the
intervention of one or two dear years; so the latter have been a good
deal above it, notwithstanding the intervention of one or two cheap
ones, of 1759, for example. If the former have not been as much be-
low the general average, as the latter have been above it, we ought
probably to impute it to the bounty. The change has evidently been
too sudden to be ascribed to any change in the value of silver,
which is always slow and gradual. The suddenness of the effect
can be accounted for only by a cause which can operate suddenly,
the accidental variation of the seasons.
The money price of labour in Great Britain has, indeed, risen
during the course of the present century. This, however, seems to be
the effect, not so much of any diminution in the value of silver in
the European market, as of an increase in the demand for labour
in Great Britain, arising from the great, and almost universal pros-
perity of the country. In France, a country not altogether so pros-
perous, the money price of labour has, since the middle of the last
century, been observed to sink gradually with the average money
price of corn. Both in the last century and in the present, the day-
wages of common labour are there said to have been pretty uni-
formly about the twentieth part of the average price of the septier
of Wheat, a measure which contains a little more than four Win
Chester bushels. In Great Britain the real recompence of labour, it
has already been shown, the real quantities of the necessaries
and conveniences of life which are given to the labourer, has in-
creased considerably during the course of the present century. The
rise in its money price seems to have been the effect, not of any
diminution of the value of silver in the general market of Europe,
but of a rise in the real price of labour in the particular market of
2. The exports for 1750 are given in C. Smith, op. dt., p, in, as 947,602 qr
I bush, of wheat, 99,049 qr. 3 bush of rye, and 559,538 qr. 5 bush, of barley
malt and oats. The bounty on these quantities would be £324,176, los
^ Above, pp. 76-78. “®Ed. i, perhaps correctly, reads “quantity.”
DIGRESSION ON SILVER 201
Great Britain, owing to the peculiarly happy circumstances of the
country.
For some time after the first discovery of America, silver would
continue to sell at its former, or not much below its former price.
The profits of mining would for some time be very great, and much
above their natural rate. Those who imported that metal into Eu-
rope, however, would soon find that the whole annual importation
could not be disposed of at this high price. Silver would gradually
exchange for a smaller and a smaller quantity of goods. Its price
would sink gradually lower and lower till it fell to its natural price;
or to what was just sufficient to pay, according to their natural
rates, the wages of the labour, the profits of the stock, and the rent
of the land, which must be paid in order to bring it from the mine
to the market. In the greater part of the silver mines of Peru, the
tax of the king of Spain, amounting to a tenth of the gross pro-
duce, eats up, it has already been observed,^^® the whole rent of the
land. This tax was originally a half; it soon afterwards fell to a
third, then to a fifth, and at last to a tenth, at which rate it still con-
tinues.^^® In the greater part of the silver mines of Peru, this, it
seems, is all that remains, after replacing the stock of the under-
taker of the work, together with its ordinary profits; and it seems
to be universally acknowledged that these profits, which were once
very high, are now as low as they can well be, consistently with car-
rying on the works.
The tax of the king of Spain was reduced to a fifth part of the
registered silver in 1504/^^ one-and-forty years before iS 4 S/^^
the date of the discovery of the mines of Potosi. In the course of
ninety years,^^® or before 1636, these mines, the most fertile in all
America, had time sufficient to produce their full effect, or to reduce
the value of silver in the European market as low as it could well
fall, while it continued to pay this tax to the king of Spain. Ninety
years is time sufficient to reduce any commodity, of which there
is no monopoly, to its natural price, or to the lowest price at which,
while it pays a particular tax, it can continue to be sold for any
considerable time together.
Ed. I reads “fifth ” Above, pp. 169, 170. ^
Ed. I reads “fell to a third and then to a fifth, at which rate it still con-
tinues.”
^Solorzano, vol. ii. Solorzano-Pereira, De Indiarum Jure, Madrid, i 777 »
lib. V., cap. i., §§ 22, 23; vol. ii., p. 883, col. 2. Ed. i does not contain the
note. . .
Ed. I reads “one and thirty years before iSSS- The date iS 4 S is given m
Solorzano, op. cit., vol. ii., p. 882, col 2.
^-’®Ed. I reads “In the course of a century.”
Ed. I reads “A hundred years.”
The de-
crease in
the rent
and profit
of mines
of gold
and silver
202
THE WEALTH OE NATIONS
has been
stayed by
the gra-
dual en-
largement
of the
market,
(I) in
Europe,
(2) in
America
itself,
The price of silver in the European market might perhaps have
fallen still lower, and it might have become necessary either to re-
duce the tax upon it, not only to one tenth, as in 1736, but to one
twentieth,^®^ in the same manner as that upon gold, or to give up
working the greater part of the American mines which are now
wrought. The gradual increase of the demand for silver, or the
gradual enlargement of the market for the produce of the silver
mines of America, is probably the cause which has prevented this
from happening, and which has not only kept up the value of silver
in the European market, but has perhaps even raised it somewhat
higher than it was about the middle of the last century.
Since the first discovery of America, the market for the produce
of its silver mines has been growing gradually more and more ex-
tensive.
First, The market of Europe has become gradually more and
more extensive. Since the discovery of America, the greater part of
Europe has been much improved. England, Holland, France and
Germany; even Sweden, Denmark, and Russia, have all advanced
considerably both in agriculture and in manufactures. Italy seems
not to have gone backwards. The fall of Italy preceded the conquest
of Peru. Since that time it seems rather to have recovered a little.
Spain and Portugal, indeed, are supposed to have gone backwards.
Portugal, however, is but a very small part of Europe, and the de-
clension of Spain is not, perhaps, so great as is commonly imagined.
In the beginning of the sixteenth century, Spain was a very poor
country, even in comparison with France, which has been so much
improved since that time. It was the well-known remark of the Em-
peror Charles V. who had travelled so frequently through both
countries, that every thing abounded in France, but that every
thing was wanting in Spain. The increasing produce of the agricul-
ture and manufactures of Europe must necessarily have required a
gradual increase in the quantity of silver coin to circulate it; and
the increasing number of wealthy individuals must have required
the like increase in the quantity of their plate and other ornaments
of silver.
Secondly, America is itself a new market for the produce of its
own silver mines; and as its advances in agriculture, industry, and
population, are much more rapid than those of the most thriving
countries in Europe, its demand must increase much more rapidly.
The English colonies are altogether a new market, which partly
for coin and partly for plate, requires a continually augmenting
Ed. I reads “lower” instead of “reduce,” and does not contain “not only
to one-tenth, as in 1736, but to one-twentieth.” See above, p. 169, note
203
DIGRESSION ON SILVER
supply of silver through a great continent where there never was
any demand before. The greater part too of the Spanish and Portu-
guese colonies are altogether new markets. New Granada, the Yuca-
tan, Paraguay, and the Brazils were, before discovered by the Euro-
peans, inhabited by savage nations, who had neither arts nor agri-
culture. A considerable degree of both has now been introduced into
all of them. Even Mexico and Peru, though they cannot be con-
sidered as altogether new markets, are certainly much more exten-
sive ones than they ever were before. After all the wonderful tales
which have been published concerning the splendid state of those
countries in ancient times, whoever reads, with any degree of sober
judgment, the history of their first discovery and conquest, will evi-
dently discern that, in arts, agriculture, and commerce, their in-
habitants were much more ignorant than the Tartars of the Uk-
raine are at present. Even the Peruvians, the more civilized nation
of the two, though they made use of gold and silver as ornaments,
had no coined money of any kind. Their whole commerce was car-
ried on by barter, and there was accordingly scarce any division of
labour among them. Those who cultivated the ground were obliged
to build their own houses, to make their own household furniture,
their own clothes, shoes, and instruments of agriculture. The few
artificers among them are said to have been all maintained by the
sovereign, the nobles, and the priests, and were probably their serv-
ants or slaves. All the ancient arts of Mexico and Peru have never
furnished one single manufacture to Europe.^®^ The Spanish armies,
though they scarce ever exceeded five hundred men, and frequently
did not amount to half that number, found almost every-where
great difficulty in procuring subsistence. The famines which they
are said to have occasioned almost wherever they went, in countries
too which at the same time are represented as very populous and
well-cultivated, sufficiently demonstrate that the story of this popu-
lousness and high cultivation is in a great measure fabulous. The
Spanish colonies are under a government in many respects less fa-
vourable to agriculture, improvement and population, than that of
the English colonies.^^^ They seem, however, to be advancing in all
these much more rapidly than any country in Europe. In a fertile
soil and happy climate, the great abundance and cheapness of
land, a circumstance common to all new colonies, is, it seems, so
great an advantage as to compensate many defects in civil govern-
ment. Frezier, who visited Peru in 1713, represents Lima as contain-
Below, p. 335. Raynal, Histoire philosophique, Amsterdam ed, i773j tom.
iii , pp 1 13, 1 16, takes the same view of the Peruvians.
Below, pp. S33-S54, passim.
^nd (3)
'nthe
East In-
dies,
204 THE WEALTH OF NATIONS
ing between twenty-five and twenty-eight thousand inhabitants.^^^
Ulloa, who resided in the same country between 1 740 and 1 746, rep-
resents it as containing more than fifty thousand.^®® The difference
in their accounts of the populousness of several other principal
towns in Chili and Peru is nearly the same; and as there seems
to be no reason to doubt of the good information of either, it marks
an increase which is scarce inferior to that of the English colonies.
America, therefore, is a new market for the produce of its own sil-
ver mines, of which the demand must increase much more rapidly
than that of the most thriving country in Europe.
Thirdly, The East Indies is another market for the produce of
the silver mines of America, and a market which, from the time of
the first discovery of those mines, has been continually taking off a
greater and a greater quantity of silver. Since that time, the direct
trade between America and the East Indies, which is carried on by
means of the Acapulco ships,^^*^ has been continually augmenting,
and the indirect intercourse by the way of Europe has been aug-
menting in a still greater proportion. During the sixteenth century,
the Portuguese were the only European nation who carried on any
regular trade to the East Indies. In the last years of that century the
Dutch began to encroach upon this monopoly, and in a few years
expelled them from their principal settlements in India. During the
greater part of the last century those two nations divided the most
considerable part of the East India trade between them; the trade
of the Dutch continually augmenting in a still greater proportion
than that of the Portuguese declined. The English and French car-
ried on some trade with India in the last century, but it has been
greatly augmented in the course of the present. The East India
trade of the Swedes and Danes began in the course of the present
century. Even the Muscovites now trade regularly with China by a
sort of caravans which go over land through Siberia and Tartary to
Pekin. The East India trade of all these nations, if we except that of
the French, which the last war had well nigh annihilated, has been
almost continually augmenting. The increasing consumption of
^Voyage to the South Sea, p. 218, but the number mentioned is twenty-
five to thirty thousand.
^Voyage histonque, tom i, p. 443, 445: “sixteen to eighteen thousand
persons of Spanish extraction, a comparatively small number of Indians and
half-breeds, the greater part of the population being negroes and mulattoes ”
^E.g., Santiago and Callao, Frezier, Voyage, pp. 102, 202; Juan and Ul-
loa, Voyage kistorique, vol. i , p. 468; vol ii , p. 49.
“^Originally one ship, and, after 1720, two ships, were allowed to sail be-
tween Acapulco in Mexico and the Philippines. For the regulations applied to
the trade see Uztariz, Theory and Practice of Commerce and Maritime Af-
fairs, trans. by John Kippax, 1751, vol. i., pp. 206-208.
DIGRESSION ON SILVER 205
East India goods in Europe is, it seems, so great, as to afford a
gradual increase of employment to them all. Tea, for example, was
a drug very little used in Europe before the middle of the last cen-
tury. At present the value of the tea annually imported by the Eng-
lish East India Company, for the use of their own countrymen,
amounts to more than a million and a half a year; and even this is
not enough; a great deal more being constantly smuggled into the
country from the ports of Holland, from Gottenburg in Sweden, and
from the coast of France too, as long as the French East India Com-
pany was in prosperity. The consumption of the porcelain of China,
of the spiceries of the Moluccas, of the piece goods of Bengal, and
of innumerable other articles, has increased very nearly in a like
proportion. The tonnage accordingly of all the European shipping
employed in the East India trade, at any one time during the last
century, was not, perhaps, much greater than that of the English
East India Company before the late reduction of their shipping.^®®
But in the East Indies, particularly in China and Indostan, the
value of the precious metals, when the Europeans first began to
trade to those countries, was much higher than in Europe; and it
still continues to be so. In rice countries, which generally yield two,
sometimes three crops in the year, each of them more plentiful than
any common crop of corn, the abundance of food must be much
greater than in any corn country of equal extent. Such countries are
accordingly much more populous. In them too the rich, having a
greater super-abundance of food to dispose of beyond what they
themselves can consume, have the means of purchasing a much
greater quantity of the labour of other people. The retinue of a
grandee in China or Indostan accordingly is, by all accounts, much
more numerous and splendid than that of the richest subjects in Eu-
rope. The same super-abundance of food, of which they have the
disposal, enables them to give a greater quantity of it for all those
singular and rare productions which nature furnishes but in very
small quantities; such as the precious metals and the precious
stones, the great objects of the competition of the rich. Though the
mines, therefore, which supplied the Indian market had been as
abundant as those which supplied the European, such commodities
would naturally exchange for a greater quantity of food in India
“In order to prevent the great consumption of timber fit for the con-
struction of large ships of war, the East India Company were prohibited from
building, or allowing to be built for their service, any new ships, till the ship-
ping in their employment should be reduced under 45,000 tons, or employing
any ships built after i8th March, 1772. But they are at liberty to build any
vessel whatever in India or the colonies, or to charter any vessel built in In-
dia or the colonies, 12 Geo. III., c. 54.” — ^Macpherson, Annals of Commerce,
1805, A.D. 1772, vol. iii., pp. 521, S22.
where the
value of
gold and
silver was,
and still
is, higher
than in
Europe.
2o6 the wealth of NATIONS
than in Europe. But the mines which supplied the Indian market
with the precious metals seem to have been a good deal less abun-
dant, and those which supplied it with the precious stones a good
deal more so, than the mines which supplied the European. The
precious metals, therefore, would naturally exchange in India for
somewhat a greater quantity of the precious stones, and for a much
greater quantity of food than in Europe. The money price of
diamonds, the greatest of all superfluities, would be somewhat
lower, and that of food, the first of all necessaries, a great deal lower
in the one country than in the other. But the real price of labour,
the real quantity of the necessaries of life which is given to the la-
bourer, it has already been observed,^^^ is lower both in China and
Indostan, the two great markets of India, than it is through the
greater part of Europe. The wages of the labourer will there pur-
chase a smaller quantity of food; and as the money price of food is
much lower in India than in Europe, the money price of labour is
there lower upon a double account; upon account both of the small
quantity of food which it will purchase, and of the low price of that
food. But in countries of equal art and industry, the money price of
the greater part of manufactures will be in proportion to the money
price of labour; and in manufacturing art and industry, China and
Indostan, though inferor, seem not to be much inferior to any part
of Europe. The money price of the greater part of manufactures,
therefore, will naturally be much lower in those great empires than
it is any-where in Europe. Through the greater part of Europe too
the expence of land-carriage increases very much both the real and
nominal price of most manufactures. It costs more labour, and
therefore more money, to bring first the materials, and afterwards
the complete manufacture to market. In China and Indostan the
extent and variety of inland navigations save the greater part of
this labour, and consequently of this money, and thereby reduce
still lower both the real and the nominal price of the greater part of
their manufactures. Upon all these accounts, the precious metals are
a commodity which it always has been, and still continues to be,
extremely advantageous to carry from Europe to India. There is
scarce any commodity which brings a better price there; or which,
in proportion to the quantity of labour and commodities which it
costs in Europe, will purchase or command a greater quantity of la-
bour and commodities in India. It is more advantageous too to carry
silver thither than gold ; because in China, and the greater part of
the other markets of India, the proportion between fine silver and
^ Ed. I places “in India” here instead of in the line above.
Above, p. 73
DIGRESSION ON SILVER 207
fine gold is but as ten, or at most as twelve, to one; whereas in
Europe it is as fourteen or fifteen to one. In China, and the greater
part of the other markets of India, ten, or at most twelve, ounces of
silver will purchase an ounce of gold; in Europe it requires from
fourteen to fifteen ounces. In the cargoes, therefore, of the greater
part of European ships which sail to India, silver has generally been
one of the most valuable articles. It is the most valuable article
m the Acapulco ships which sail to Manilla. The silver of the new
continent seems in this manner to be one of the principal commodi-
ties by which the commerce between the two extremities of the
old one is carried on, and it is by means of it, in a great measure,
that those distant parts of the world are connected with one an-
other.
In order to supply so very widely extended a market, the quan- The sup-
tity of silver annually brought from the mines must not only be 0^ sil-
sufficient to support that continual increase both of coin and of pro^d^
plate which is required in all thriving countries; but to repair that for waste
continual waste and consumption of silver which takes place in all well as
* ^ l]lCr63S&
countries where that metal is used. of plate
The continual consumption of the precious metals in coin by and coin,
wearing, and in plate both by wearing and cleaning, is very sensible;
and in commodities of which the use is so very widely extended,
would alone require a very great annual supply. The consumption able,
of those metals in some particular manufactures, though it may not
perhaps be greater upon the whole than this gradual consumption,
is, however, much more sensible, as it is much more rapid. In the
manufactures of Birmingham alone, the quantity of gold and silver
annually employed in gilding and plating, and thereby disqualified
from ever afterwards appearing in the shape of those metals, is
said to amount to more than fifty thousand pounds sterling. We may
from thence form some notion how great must be the annual con-
sumption in all the different parts of the world, either in manufac-
tures of the same kind with those of Birmingham, or in laces, em-
broideries, gold and silver stuffs, the gilding of books, furniture, &c.
A considerable quantity too must be annually lost in transporting
Ed. I does not contain “or at most as twelve” here and two lines lower
down.
Newton, in his Representation to the Lords of the Treasury , 1717 (re-
printed in the Universal Merchant, quoted on the next page), says that in
China and Japan the ratio is 9 or 10 to i and in India 12 to i, and this car-
ries away the silver from all Europe. Magens, in a note to this passage (Z7?m-
versal Merchant, p. 90), says that down to 1732 such quantities of silver went
to China to fetch back gold that the price of gold in China rose and it became
no longer profitable to send silver there.
^^®Ed. I reads “be the principal commodity.”
^ Ed. I reads “chiefly.’
Six mil-
lions of
^Id and
silver are
imported
at Cadiz
and Lis-
bon,
as shown
by
Magens,
Raynal,
208 XHE WEALTH OF NATIONS
those metals from one place to another both by sea and by land.
In the greater part of the governments of Asia, besides, the almost
universal custom of concealing treasures in the bowels of the earth,
of which the knowledge frequently dies with the person who makes
the concealment, must occasion the loss of a still greater quantity.
The quantity of gold and silver imported at both Cadiz and Lis-
bon (including not only what comes under register, but what may
be supposed to be smuggled) amounts, according to the best ac-
counts,^^® to about six millions sterling a year.
According to Mr. Meggens^^® the annual importation of the
precious metals into Spain, at an average of six years; viz. from
1748 to 1753, both inclusive; and into Portugal, at an average of
seven years; viz. from 1747 to 1733, both inclusive; amounted
in silver to 1,101,107 pounds weight; and in gold to 49^940 pounds
weight. The silver, at sixty-two shillings the pound Troy, amounts
to 3,413,431/. 10^.^^® sterling. The gold, at forty-four guineas and a
half the pound Troy, amounts to 2,333,446/. 14^. sterling. Both to-
gether amount to 5,746,878/. 45. sterling. The account of what was
imported under register, he assures us is exact. He gives us the de-
tail of the particular places from which the gold and silver were
brought, and of the particular quantity of each metal, which, ac-
cording to the register, each of them afforded. He makes an allow-
ance too for the quantity of each metal which he supposes may
have been smuggled. The great experience of this judicious mer-
chant renders his opinion of considerable weight.
According to the eloquent and, sometimes, well-informed Au-
The same words are used below, p. 412.
^"Postscript to the Universal Merchant, p. 15 and 16. This Postscript was
not printed till 1756, three years after the publication of the book, which has
never had a second edition. The postscript is, therefore, to be found in few
copies: It corrects several errors in the book. This note appears first in ed. 2,
The title of the work referred to is Farther Explanations of some particular
subjects relating to Trade, Coin, and Exchanges, contained in the Universal
Merchant, by N. M., 1756. On p. i N. M. claims the authorship of the book
“published by Mr. Horsley under the too pompous title of The Universal
Merchant” In the dedication of The Universal Merchant, 1753, William
Horsley, the editor, says the author “though an alien by birth is an English-
man by interest.” Sir James Steuart, who calls him “Mr. Megens,” says he
lived long in England and wrote the Universal Merchant in German, from
which it had been translated {Inquiry into the Principles of Political Econ-
omy, vol. ii., pp. 158, 292). The Gentleman’s Magazine for August, 1764,
p. 398, contains in the obituary, under date August 18, 1764, “Nicolas Magens
Esq. a merchant worth £100,000.”
^^“^The two periods are really five years, April, 1748, to April, 1753, and six
years, January, 1747, to January, 1753, but the averages are correct, being
taken from Magens.
The los. here should be 14s., and two lines lower down the 14s. should
be los.
DIGRESSION ON SILVER 209
thor of the Philosophical and Political History of the Establishment
of the Europeans in the two Indies, the annual importation of regis-
tered gold and silver into Spain, at an average of eleven years; viz.
from I7S4 to 1764, both inclusive; amounted to 13,984,185!^^^
piastres of ten reals. On account of what may have been smuggled,
however, the whole annual importation, he supposes, may have
amounted to seventeen millions of piastres; which, at 45. 6 d. the
piastre, is equal to 3 ,82 5,000/. sterling. He gives the detail too of the
particular places from which the gold and silver were brought, and
of the particular quantities of each metal which, according to the
register, each of them afforded.^®*^ He informs us too, that if we were
to judge of the quantity of gold annually imported from the Bra-
zils into Lisbon by the amount of the tax paid to the king of Port-
ugal, which it seems is one-fifth of the standard metal, we might
value it at eighteen millions of cruzadoes, or forty-five millions of
French livres, equal to about two millions sterling. On account of
what may have been smuggled, however, we may safely, he says,
add to this sum an eighth more, or 250,000/. sterling, so that the
whole will amount to 2,250,000/. sterling.^®^ According to this ac-
count, therefore, the whole annual importation of the precious met-
als into both Spain and Portugal, amounts to about 6,075,000/.
sterling.
Several other very well authenticated, though manuscript,^®^
accounts, I have been assured, agree, in making this whole annual
importation amount at an average to about six millions sterling;
sometimes a little more, sometimes a little less.
The annual importation of the precious metals into Cadiz and
Lisbon, indeed, is not equal to the whole annual produce of the
mines of America. Some part is sent annually by the Acapulco ships
to Manilla; some part is employed in the contraband trade which
the Spanish colonies carry on with those of other European na-
tions; and some part, no doubt, remains in the country. The mines
of America, besides, are by no means the only gold and silver
mines in the world. They are, however, by far the most abundant.
The produce of all the other mines which are known, is insignifi-
cant, it is acknowledged, in comparison with theirs; and the far
greater part of their produce, it is likewise acknowledged, is an-
nually imported into Cadiz and Lisbon. But the consumption of
Birmingham alone, at the rate of fifty thousand pounds a year,^®^
Misprinted 13,984,185! in ed. 2 and later editions
Ra3aial, Histoire philosophigue et politique de$ itablissemens et du com-
merce des Europeens dans les deux Indes, Amsterdam ed., i773j tom. iii., p. 310 ,
“^Raynal, Histoire philosophigue , Amsterdam ed., i 773 » tom. iii., p. 385.
Ed. I does not contain “though manuscript.” ^ Above, p. 207.
and other
authors.
This is
not tike
whole of
thean-^
nual sup-
ply, but
by far
the great-
er part.
Brass and
iron in-
crease,
but we do
not expect
them to
fall in
value.
Why then
gold and
silver ?
Inconse-
quence of
their
durability
the
metals,
especially
gold and
silver,
vary little
in value
from year
to year.
210 the wealth of nations
is equal to the hundred-and-twentieth part of this annual importa-
tion at the rate of six millions a year. The whole annual consump-
tion of gold and silver, therefore, in all the different countries of
the world where those metals are used, may perhaps be nearly
equal to the whole annual produce. The remainder may be no more
than sufficient to supply the increasing demand of all thriving
countries. It may even have fallen so far short of this demand as
somewhat to raise the price of those metals in the European
market.
The quantity of brass and iron annually brought from the mine
to the market is out of all proportion greater than that of gold and
silver. We do not, however, upon this account, imagine that those
coarse metals are likely to multiply beyond the demand, or to be-
come gradually cheaper and cheaper. Why should we imagine that
the precious metals are likely to do so? The coarse metals, indeed,
though harder, are put to much harder uses, and, as they are of less
value, less care is employed in their preservation. The precious
metals, however, are not necessarily immortal any more than they,
but are liable too to be lost, wasted, and consumed in a great variety
of ways.
The price of all metals, though liable to slow and gradual varia-
tions, varies less from year to year than that of almost any other
part of rude produce of land; and the price of the precious metals is
even less liable to sudden variations than that of the coarse ones.
The durableness of metals is the foundation of this extraordinary
steadiness of price. The com which was brought to market last year,
will be all or almost all consumed long before the end of this year.
But some part of the iron which was brought from the mine two or
three hundred years ago, may be still in use, and perhaps some part
of the gold which was brought from it two or three thousand years
ago. The different masses of corn which in different years must sup-
ply the consumption of the world, will always be nearly in propor-
tion to the respective produce of those different years. But the pro-
portion between the different masses of iron which may be in use
in two different years, will be very little affected by any accidental
difference in the produce of the iron mines of those two years; and
the proportion between the masses of gold will be still less affected
by any such difference in the produce of the gold mines. Though
the produce of the greater part of metallic mines, therefore, varies,
perhaps, still more from year to year than that of the greater part
of corn-fields, those variations have not the same effect upon the
price of the one species of commodities, as upon that of the other.
DIGRESSION ON SILVER 211
Vdridtions in the Proportion between the respective Values of Gold
and Silver
Before the discovery of the mines of America, the value of fine
gold to fine silver was regulated in the different mints of Europe,
between the proportions of one to ten and one to twelve; that is, an
ounce of fine gold was supposed to be worth from ten to twelve
ounces of fine silver. About the middle of the last century it came
to be regulated, between the proportions of one to fourteen and one
to fifteen; that is, an ounce of fine gold came to be supposed worth
between fourteen and fifteen ounces of fine silver. Gold rose in its
nominal value, or in the quantity of silver which was given for it.
Both metals sunk in their real value, or in the quantity of labour
which they could purchase; but silver sunk more than gold. Though
both the gold and silver mines of America exceeded in fertility all
those which had ever been known before, the fertility of the silver
mines had, it seems, been proportionably still greater than that of
the gold ones.
The great quantities of silver carried annually from Europe to
India, have, in some of the English settlements, gradually reduced
the value of that metal in proportion to gold. In the mint of Cal-
cutta, an ounce of fine gold is supposed to be worth fifteen ounces
of fine silver, in the same manner as in Europe. It is in the mint
perhaps rated too high for the value which it bears in the market
of Bengal. In China, the proportion of gold to silver still continues
as one to ten, or one to twelve.^®^ In Japan, it is said to be as one
to eight.^®®
The proportion between the quantities of gold and silver an-
nually imported into Europe, according to Mr. Meggen’s account,
is as one to twenty-two nearly; that is, for one ounce of gold
there are imported a little more than twenty-two ounces of silver.
The great quantity of silver sent annually to the East Indies, re-
duces, he supposes, the quantities of those metals which remain in
Europe to the proportion of one to fourteen or fifteen, the propor-
tion of their values. The proportion between their values, he seems
to think,^®*^ must necessarily be the same as that between their
Ed. I does not contain “or one to twelve.”
Cantillon gives one to ten for China and one to eight for Japan, Essai^ p.
36s
Above, pp. 208, 209. The exact figure given by Magens, Farther Ea:-
planations, p. 16, is i to 22 yV*
^ Ibid., p. 17.
After the
discovery
of the
American
mipes sil-
ver fell in
propor-
tion to
gold.
It is high-
er in the
East.
Magens
seems to
think the
propor-
tion of
value
should be
the same
as the
propor-
tion of
quantity,
212
THE WEALTH OF NATIONS
but this
is absurd.
The whole
of a cheap
commod-
ity is
commonly
worth
more than
the whole
of a dear
one, and
this is the
case 'with
silver and
gold.
quantities, and would therefore be as one to twenty-two, were it not
for this greater exportation of silver.
But the ordinary proportion between the respective values of two
commodities is not necessarily the same as that between the quanti-
ties of them which are commonly in the market. The price of an
ox, reckoned at ten guineas, is about threescore times the price of a
lamb, reckoned at 35. 6 d, It would be absurd, however, to infer from
thence, that there are commonly in the market threescore lambs for
one ox: and it would be just as absurd to infer, because an ounce of
gold will commonly purchase from fourteen to fifteen ounces of sil-
ver^ that there are commonly in the market only fourteen or fifteen
ounces of silver for one ounce of gold.
The quantity of silver commonly in the market, it is probable, is
much greater in proportion to that of gold, than the value of a cer-
tain quantity of gold is to that of an equal quantity of silver. The
whole quantity of a cheap commodity brought to market, is com-
monly not only greater, but of greater value, than the whole quan-
tity of a dear one. The whole quantity of bread annually brought
to market, is not only greater, but of greater value than the whole
quantity of butcher ’s-meat; the whole quantity of butcher^s-meat,
than the whole quantity of poultry; and the whole quantity of
poultry, than the whole quantity of wild fowl. There are so many
more purchases for the cheap than for the dear commodity, that,
not only a greater quantity of it, but a greater value, can commonly
be disposed of. The whole quantity, therefore, of the cheap com-
modity must commonly be greater in proportion to the whole
quantity of the dear one, than the value of a certain quantity of
the dear one, is to the value of an equal quantity of the cheap one.
When we compare the precious metis with one another, silver is a
cheap, and gold a dear commodity. We ought naturally to expect,
therefore, that there should always be in the market, not only a
greater quantity, but a greater value of silver than of gold. Let any
man, who has a little of both, compare his own silver with his gold
plate, and he will probably find, that, not only the quantity, but
the value of the former greatly exceeds that of the latter. Many
people, besides, have a good deal of silver who have no gold plate,
which, even with those who have it, is generally confined to watch-
cases, snuff-boxes, and such like trinkets, of which the whole
amount is seldom of great value. In the British coin, indeed, the
value of the gold preponderates greatly, but it is not so in that of
all countries. In the coin of some countries the value of the two
metals is nearly equal. In the Scotch coin, before tbe union with
England, the gold preponderated very little, though it did some-
DIGRESSION ON SILVER 213
what,^®® as it appears by the accounts of the mint. In the coin of
many countries the silver preponderates. In France, the largest
sums are commonly paid in that metal, and it is there difficult to
get more gold than what is necessary to carry about in your poc-
ket. The superior value, however, of the silver plate above that of
the gold, which takes place in all countries, will much more than
compensate the preponderancy of the gold coin above the silver,
which takes place only in some countries.
Though, in one sense of the word, silver always has been, and
probably always will be, much cheaper than gold; yet in another
sense, gold may, perhaps, in the present state of the Spanish
market, be said to be somewhat cheaper than silver. A commodity
may be said to be dear or cheap, not only according to the abso-
lute greatness or smallness of its usual price, but according as that
price is more or less above the lowest for which it is possible to
bring it to market for any considerable time together. This lowest
price is that which barely replaces, with a moderate profit, the
stock which must be employed in bringing the commodity thither.
It is the price which affords nothing to the landlord, of which rent
makes not any component part, but which resolves itself altogether
into wages and profit. But, in the present state of the Spanish
market, gold is certainly somewhat nearer to this lowest price than
silver. The tax of the King of Spain upon gold is only one-twen-
tieth part of the standard metal, or five per cent.; whereas his tax
upon silver amounts to one-tenth part of it, or to ten per cent.^®^
In these taxes too, it has already been observed,^®^ consists the
whole rent of the greater part of the gold and silver mines of Span-
ish America; and that upon gold is still worse paid than that upon
silver. The profits of the undertakers of gold mines too, as they
more rarely make a fortune, must, in general, be still more mod-
erate than those of the undertakers of silver mines.^®^ The price of
Spanish gold, therefore, as it affords both less rent and less profit,
must, in the Spanish market, be somewhat nearer to the lowest
price for which it is possible to bring it thither, than the price of
^“See Ruddiman’s Preface to Anderson’s Diplomata, &c. Scotiae. Selectus
diplomatum et numismatum thesaurus (quoted above, p. 183), pp. 84, 85 ; and
in the translation, pp. 175, 176.
