funding_training.txt

                                      1776
                         AN INQUIRY INTO THE NATURE AND
                        CAUSES OF THE WEALTH OF NATIONS
                                 by Adam Smith
                 INTRODUCTION AND PLAN OF THE WORK

    THE annual labour of every nation is the fund which originally
supplies it with all the necessaries and conveniences of life which it
annually consumes, and which consist always either in the immediate
produce of that labour, or in what is purchased with that produce from
other nations.
    According therefore as this produce, or what is purchased with it,
bears a greater or smaller proportion to the number of those who are
to consume it, the nation will be better or worse supplied with all
the necessaries and conveniences for which it has occasion.
    But this proportion must in every nation be regulated by two
different circumstances; first, by the skill, dexterity, and
judgment with which its labour is generally applied; and, secondly, by
the proportion between the number of those who are employed in
useful labour, and that of those who are not so employed. Whatever
be the soil, climate, or extent of territory of any particular nation,
the abundance or scantiness of its annual supply must, in that
particular situation, depend upon those two circumstances.
    The abundance or scantiness of this supply, too, seems to depend
more upon the former of those two circumstances than upon the
latter. Among the savage nations of hunters and fishers, every
individual who is able to work, is more or less employed in useful
labour, and endeavours to provide, as well as he can, the
necessaries and 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 hunting and fishing. Such nations, however, are so miserably
poor that, from mere want, they are frequently reduced, or, at
least, think themselves reduced, to the necessity sometimes of
directly destroying, and sometimes of abandoning their infants,
their old people, and those afflicted with lingering diseases, to
perish with hunger, or to be devoured by wild beasts. Among
civilised and thriving nations, on the contrary, though a great number
of people do not labour at all, many of whom consume the produce of
ten times, frequently of a hundred times more labour than the
greater part of those who work; yet the produce of the whole labour of
the society is so great that all are often abundantly supplied, and
a workman, even of the lowest and poorest order, if he is frugal and
industrious, may enjoy a greater share of the necessaries and
conveniences of life than it is possible for any savage to acquire.
    The causes of this improvement, in the productive powers of
labour, and the order, according to which its produce is naturally
distributed among the different ranks and conditions of men in the
society, make the subject of the first book of this Inquiry.
    Whatever be the actual state of the skill, dexterity, and judgment
with which labour is applied in any nation, the abundance or
scantiness of its annual supply must depend, during the continuance of
that state, upon the proportion between the number of those who are
annually employed in useful labour, and that of those who are not so
employed. The number of useful and productive labourers, it will
hereafter appear, is everywhere in proportion to the quantity of
capital stock which is employed in setting them to work, and to the
particular way in which it is so employed. The second book, therefore,
treats of the nature of capital stock, of the manner in which it is
gradually accumulated, and of the different quantities of labour which
it puts into motion, according to the different ways in which it is
employed.
    Nations tolerably well advanced as to skill, dexterity, and
judgment, in the application of labour, have followed very different
plans in the general conduct or direction of it; those plans have
not all been equally favourable to the greatness of its produce. The
policy of some nations has given extraordinary encouragement to the
industry of the country; that of others to the industry of towns.
Scarce any nation has dealt equally and impartially with every sort of
industry. Since the downfall of the Roman empire, the policy of Europe
has been more favourable to arts, manufactures, and commerce, the
industry of towns, than to agriculture, the industry of the country.
The circumstances which seem to have introduced and established this
policy are explained in the third book.
    Though those different plans were, perhaps, first introduced by
the private interests and prejudices of particular orders of men,
without any regard to, or foresight of, their consequences upon the
general welfare of the society; yet they have given occasion to very
different theories of political economy; of which some magnify the
importance of that industry which is carried on in towns, others of
that which is carried on in the country. Those theories have had a
considerable influence, not only upon the opinions of men of learning,
but upon the public conduct of princes and sovereign states. I have
endeavoured, in the fourth book, to explain, as fully and distinctly
as I can, those different theories, and the principal effects which
they have produced in different ages and nations.
    To explain in what has consisted the revenue of the great body
of the people, or what has been the nature of those funds which, in
different ages and nations, have supplied their annual consumption, is
the object of these four first books. The fifth and last book treats
of the revenue of the sovereign, or commonwealth. In this book I
have endeavoured to show, first, what are the necessary expenses of
the sovereign, or commonwealth; which of those expenses ought to be
defrayed by the general contribution of the whole society; and which
of them by that of some particular part only, or of some particular
members of it: secondly, what are the different methods in which the
whole society may be made to contribute towards defraying the expenses
incumbent on the whole society, and what are the principal
advantages and inconveniences of each of those methods: and, thirdly
and lastly, what are the reasons and causes which have induced
almost all modern governments to mortgage some part of this revenue,
or to contract debts, and what have been the effects of those debts
upon the real wealth, the annual produce of the land and labour of the
society.
                            BOOK ONE
  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 anywhere directed, or applied, seem to have been the effects of the
division of labour.
    The effects of the division of labour, in the general business
of society, will be more easily understood by considering in what
manner it operates in some particular manufactures. It is commonly
supposed to be carried furthest in some very trifling ones; not
perhaps that it really is carried further in them than in others of
more importance: but in those trifling manufactures which are destined
to supply the small wants of but a small number of people, the whole
number of workmen must necessarily be small; and those employed in
every different branch of the work can often be collected into the
same workhouse, and placed at once under the view of the spectator. In
those great manufactures, on the contrary, which are destined to
supply the great wants of the great body of the people, every
different branch of the work employs so great a number of workmen that
it is impossible to collect them all into the same workhouse. We can
seldom see more, at one time, than those employed in one single
branch. Though in such manufactures, therefore, the work may really be
divided into a much greater number of parts than in those of a more
trifling nature, the division is not near so obvious, and has
accordingly been much less observed.
    To take an example, therefore, from a very trifling manufacture;
but one in which the division of labour has been very often taken
notice of, the trade of the pin-maker; a workman not educated to
this business (which the division of labour has rendered a distinct
trade), nor acquainted with the use of the machinery employed in it
(to the invention of which the same division of labour has probably
given occasion), could scarce, perhaps, with his utmost industry, make
one pin in a day, and certainly could not make twenty. But in the
way in which this business is now carried on, not only the whole
work is a peculiar trade, but it is divided into a number of branches,
of which the greater part are likewise peculiar trades. One man
draws out the wire, another straights it, a third cuts it, a fourth
points it, a fifth grinds it at the top for receiving, the head; to
make the head requires two or three distinct operations; to put it
on is a peculiar business, to whiten the pins is another; it is even a
trade by itself to put them into the paper; and the important business
of making a pin is, in this manner, divided into about eighteen
distinct operations, which, in some manufactories, are all performed
by distinct hands, though in others the same man will sometimes
perform two or three of them. I have seen a small manufactory of
this kind where ten men only were employed, and where some of them
consequently performed two or three distinct operations. But though
they were very poor, and therefore but indifferently accommodated with
the necessary machinery, they could, when they exerted themselves,
make among them about twelve pounds of pins in a day. There are in a
pound upwards of four thousand pins of a middling size. Those ten
persons, therefore, could make among them upwards of forty-eight
thousand pins in a day. Each person, therefore, making a tenth part of
forty-eight thousand pins, might be considered as making four thousand
eight hundred pins in a day. But if they had all wrought separately
and independently, and without any of them having been educated to
this peculiar business, they certainly could not each of them have
made twenty, perhaps not one pin in a day; that is, certainly, not the
two hundred and fortieth, perhaps not the four thousand eight
hundredth part of what they are at present capable of performing, in
consequence of a proper division and combination of their different
operations.
    In every other art and manufacture, the effects of the division of
labour are similar to what they are in this very trifling one; though,
in many of them, the labour can neither be so much subdivided, nor
reduced to so great a simplicity of operation. The division of labour,
however, so far as it can be introduced, occasions, in every art, a
proportionable increase of the productive powers of labour. The
separation of different trades and employments from one another
seems to have taken place in consequence of this advantage. This
separation, too, is generally called furthest in those countries which
enjoy the highest degree of industry and improvement; what is the work
of one man in a rude state of society being generally that of
several in an improved one. In every improved society, the farmer is
generally nothing but a farmer; the manufacturer, nothing but a
manufacturer. The labour, too, which is necessary to produce any one
complete manufacture is almost always divided among a great number
of hands. How many different trades are employed in each branch of the
linen and woollen manufactures from the growers of the flax and the
wool, to the bleachers and smoothers of the linen, or to the dyers and
dressers of the cloth! The nature of agriculture, indeed, does not
admit of so many subdivisions of labour, nor of so complete a
separation of one business from another, as manufactures. It is
impossible to separate so entirely the business of the grazier from
that of the corn-farmer as the trade of the carpenter is commonly
separated from that of the smith. The spinner is almost always a
distinct person from the weaver; but the ploughman, the harrower,
the sower of the seed, and the reaper of the corn, are often the same.
The occasions for those different sorts of labour returning with the
different seasons of the year, it is impossible that one man should be
constantly employed in any one of them. This impossibility of making
so complete and entire a separation of all the different branches of
labour employed in agriculture is perhaps the reason why the
improvement of the productive powers of labour in this art does not
always keep pace with their improvement in manufactures. The most
opulent nations, indeed, generally excel all their neighbours in
agriculture as well as in manufactures; but they are commonly more
distinguished by their superiority in the latter than in the former.
Their lands are in general better cultivated, and having more labour
and expense bestowed upon them, produce more in proportion to the
extent and natural fertility of the ground. But this superiority of
produce is seldom much more than in proportion to the superiority of
labour and expense. In agriculture, the labour of the rich country
is not always much more productive than that of the poor; or, at
least, it is never so much more productive as it commonly is in
manufactures. The corn of the rich country, therefore, will not
always, in the same degree of goodness, come cheaper to market than
that of the poor. The corn of Poland, in the same degree of
goodness, is as cheap as that of France, notwithstanding the
superior opulence and improvement of the latter country. The corn of
France is, in the corn provinces, fully as good, and in most years
nearly about the same price with the corn of England, though, in
opulence and improvement, France is perhaps inferior to England. The
corn-lands of England, however, are better cultivated than those of
France, and the corn-lands of France are said to be much better
cultivated than those of Poland. But though the poor country,
notwithstanding the inferiority of its cultivation, can, in some
measure, rival the rich in the cheapness and goodness of its corn,
it can pretend to no such competition in its manufactures; at least if
those manufactures suit the soil, climate, and situation of the rich
country. The silks of France are better and cheaper than those of
England, because the silk manufacture, at least under the present high
duties upon the importation of raw silk, does not so well suit the
climate of England as that of France. But the hardware and the
coarse woollens of England are beyond all comparison superior to those
of France, and much cheaper too in the same degree of goodness. In
Poland there are said to be scarce any manufactures of any kind, a few
of those coarser household manufactures excepted, without which no
country can well subsist.
    This great increase of the quantity of work which, in
consequence of the division of labour, the same number of people are
capable of performing, is owing to three different circumstances;
first, to the increase of dexterity in every particular workman;
secondly, to the saving of the time which is commonly lost in
passing from one species of work to another; and lastly, to the
invention of a great number of machines which facilitate and abridge
labour, and enable one man to do the work of many.
    First, the improvement of the dexterity of the workman necessarily
increases the quantity of the work he can perform; and the division of
labour, by reducing every man's business to some one simple operation,
and by making this operation the sole employment of his life,
necessarily increased very much dexterity of the workman. A common
smith, who, though accustomed to handle the hammer, has never been
used to make nails, if upon some particular occasion he is obliged
to attempt it, will scarce, I am assured, be able to make above two or
three hundred nails in a day, and those too very bad ones. A smith who
has been accustomed to make nails, but whose sole or principal
business has not been that of a nailer, can seldom with his utmost
diligence make more than eight hundred or a thousand nails in a day. I
have seen several boys under twenty years of age who had never
exercised any other trade but that of making nails, and who, when they
exerted themselves, could make, each of them, upwards of two
thousand three hundred nails in a day. The making of a nail,
however, is by no means one of the simplest operations. The same
person blows the bellows, stirs or mends the fire as there is
occasion, heats the iron, and forges every part of the nail: in
forging the head too he is obliged to change his tools. The
different operations into which the making of a pin, or of a metal
button, is subdivided, are all of them much more simple, and the
dexterity of the person, of whose life it has been the sole business
to perform them, is usually much greater. The rapidity with which some
of the operations of those manufacturers are performed, exceeds 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
commonly lost in passing from one sort of work to another is much
greater than we should at first view be apt to imagine it. It is
impossible to pass very quickly from one kind of work to another
that is carried on in a different place and with quite different
tools. A country weaver, who cultivates a small farm, must 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 trifles than applies to good purpose. The habit of sauntering
and of indolent careless application, which is naturally, or rather
necessarily acquired by every country workman who is obliged to change
his work and his tools every half hour, and to apply his hand in
twenty different ways almost every day of his life, renders him almost
always slothful and lazy, and incapable of any vigorous application
even on the most pressing occasions. Independent, therefore, of his
deficiency in point of dexterity, this cause alone must always
reduce considerably the quantity of work which he is capable of
performing.
    Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is
unnecessary to give any example. I shall only observe, therefore, that
the invention of all those machines by which labour is so much
facilitated and abridged seems to have been originally owing to the
division of labour. Men are much more likely to discover easier and
readier methods of attaining any object when the whole attention of
their minds is directed towards that single object than when it is
dissipated among a great variety of things. But in consequence of
the division of labour, the whole of every man's attention comes
naturally to be directed towards some one very simple object. It is
naturally to be expected, therefore, that some one or other of those
who are employed in each particular branch of labour should soon
find out easier and readier methods of performing their own particular
work, wherever the nature of it admits of such improvement. A great
part of the machines made use of in those manufactures in which labour
is most subdivided, were originally the 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
shown very pretty machines, which were the inventions of such
workmen in order to facilitate and quicken their 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 tying a string from the handle of the valve which
opened this communication to another part of the machine, the valve
would open and shut without his assistance, and leave him at liberty
to divert himself with his playfellows. One of the greatest
improvements that has been made upon this machine, since it was
first invented, was in this manner the discovery of a boy who wanted
to save his own labour.
    All the improvements in machinery, however, have by no means
been the inventions of those who had occasion to use the machines.
Many improvements have been made by the ingenuity of the makers of the
machines, when to make them became the business of a peculiar trade;
and some by that of those who are called philosophers or men of
speculation, whose trade it is not to do anything, but to observe
everything; and who, upon that account, are often capable of combining
together the powers of the most distant and dissimilar objects. In the
progress of society, philosophy or speculation becomes, like every
other employment, the principal or sole trade and occupation of a
particular class of citizens. Like every other employment too, it is
subdivided into a great number of different branches, each of which
affords occupation to a peculiar tribe or class of philosophers; and
this subdivision of employment in philosophy, as well as in every
other business, improves dexterity, and saves time. Each individual
becomes more expert in his own peculiar branch, more work is done upon
the whole, and the quantity of science is considerably increased by
it.
    It is the great multiplication of the productions of all the
different arts, in consequence of the division of labour, which
occasions, in a well-governed society, that universal opulence which
extends itself to the lowest ranks of the people. Every workman has
a great quantity of his own work to dispose of beyond what he
himself has occasion for; and every other workman being exactly in the
same situation, he is enabled to exchange a great quantity of his
own goods for a great quantity, or, what comes to the same thing,
for the price of a great quantity of theirs. He supplies them
abundantly with what they have occasion for, and they accommodate
him as amply with what he has occasion for, and a general plenty
diffuses itself through all the different ranks of the society.
    Observe the accommodation of the most common artificer or
day-labourer in a civilised and thriving country, and you will
perceive that the number of people of whose industry a part, though
but a small part, has been employed in procuring him this
accommodation, exceeds all computation. The woollen coat, for example,
which covers the day-labourer, as coarse and rough as it may appear,
is the produce of the joint labour of a great multitude of workmen.
The shepherd, the sorter of the wool, the wool-comber or carder, the
dyer, the scribbler, the spinner, the weaver, the fuller, the dresser,
with many others, must all join their different arts in order to
complete even this homely production. How many merchants and carriers,
besides, must have been employed in transporting the materials from
some of those workmen to others who often live in a very distant
part of the country! How much commerce and navigation in particular,
how many ship-builders, sailors, sail-makers, rope-makers, must have
been employed in order to bring together the different drugs made
use of by the dyer, which often come from the remotest corners of
the world! What a variety of labour, too, is necessary in order to
produce the tools of the meanest of those workmen! To say nothing of
such complicated machines as the ship of the sailor, the mill of the
fuller, or even the loom of the weaver, let us consider only what a
variety of labour is requisite in order to form that very simple
machine, the shears with which the shepherd clips the wool. The miner,
the builder of the furnace for smelting the ore, the seller of the
timber, the burner of the charcoal to be made use of in the
smelting-house, the brickmaker, the brick-layer, the workmen who
attend the furnace, the mill-wright, the forger, the smith, must all
of them join their different arts in order to produce them. Were we to
examine, in the same manner, all the different parts of his dress
and household furniture, the coarse linen shirt which he wears next
his skin, the shoes which cover his feet, the bed which he lies on,
and all the different parts which compose it, the kitchen-grate at
which he prepares his victuals, the coals which he makes use of for
that purpose, dug from the bowels of the earth, and brought to him
perhaps by a long sea and a long land carriage, all the other utensils
of his kitchen, all the furniture of his table, the knives and
forks, the earthen or pewter plates upon which he serves up and
divides his victuals, the different hands employed in preparing his
bread and his beer, the glass window which lets in the heat and the
light, and keeps out the wind and the rain, with all the knowledge and
art requisite for preparing that beautiful and happy invention,
without which these northern parts of the world could scarce have
afforded a very comfortable habitation, together with the tools of all
the different workmen employed in producing those different
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 civilised country could not be
provided, even according to what we very falsely imagine the easy
and simple manner in which he is commonly accommodated. Compared,
indeed, with the more extravagant luxury of the great, his
accommodation must no doubt appear extremely simple and easy; and
yet it may be true, perhaps, that the accommodation of a European
prince does not always so much exceed that of an industrious and
frugal peasant as the accommodation of the latter exceeds that of many
an African king, the absolute master of the lives and liberties of ten
thousand naked savages.
                            CHAPTER II
  Of the Principle which gives occasion to the Division of Labour

    THIS division of labour, from which so many advantages are
derived, is not originally the effect of any human wisdom, which
foresees and intends that general opulence to which it gives occasion.
It is the necessary, though very slow and gradual consequence of a
certain propensity in human nature which has in view no such extensive
utility; the propensity to truck, barter, and exchange one thing for
another.
    Whether this propensity be one of those original principles in
human nature of which no further account can be given; or whether,
as seems more probable, it be the necessary consequence of the
faculties of reason and speech, it belongs not to our present
subject to inquire. It is common to all men, and to be found in no
other race of animals, which seem to know neither this nor any other
species of contracts. Two greyhounds, in running down the same hare,
have sometimes the appearance of acting in some sort of concert.
Each turns her towards his companion, or endeavours to intercept her
when his companion turns her towards himself. This, however, is not
the effect of any contract, but of the accidental concurrence of their
passions in the same object at that particular time. Nobody ever saw a
dog make a fair and deliberate exchange of one bone for another with
another dog. Nobody ever saw one animal by its gestures and natural
cries signify to another, this is mine, that yours; I am willing to
give this for that. When an animal wants to obtain something either of
a man or of another animal, it has no other means of persuasion but to
gain the favour of those whose service it requires. A puppy fawns upon
its dam, and a spaniel endeavours by a thousand attractions to
engage the attention of its master who is at dinner, when it wants
to be fed by him. Man sometimes uses the same arts with his
brethren, and when he has no other means of engaging them to act
according to his inclinations, endeavours by every servile and fawning
attention to obtain their good will. He has not time, however, to do
this upon every occasion. In civilised society he stands at all
times in need of the cooperation and assistance of great multitudes,
while his whole life is scarce sufficient to gain the friendship of
a few persons. In almost every other race of animals each
individual, when it is grown up to maturity, is entirely
independent, and in its natural state has occasion for the
assistance of no other living creature. But man has almost constant
occasion for the help of his brethren, and it is in vain for him to
expect it from their benevolence only. He will be more likely to
prevail if he can interest their self-love in his favour, and show
them that it is for their own advantage to do for him what he requires
of them. Whoever offers to another a bargain of any kind, proposes
to do this. Give me that which I want, and you shall have this which
you want, is the meaning of every such offer; and it is in this manner
that we obtain from one another the far greater part of those good
offices which we stand in need of. It is not from the benevolence of
the butcher, the brewer, or the baker that we expect our dinner, but
from their regard to their own interest. We address ourselves, not
to their humanity but to their self-love, and never talk to them of
our own necessities but of their advantages. Nobody but a beggar
chooses to depend chiefly upon the benevolence of his fellow-citizens.
Even a beggar does not depend upon it entirely. The charity of
well-disposed people, indeed, supplies him with the whole fund of
his subsistence. But though this principle ultimately provides him
with all the necessaries of life which he has occasion for, it neither
does nor can provide him with them as he has occasion for them. The
greater part of his occasional wants are supplied in the same manner
as those of other people, by treaty, by barter, and by purchase.
With the money which one man gives him he purchases food. The old
clothes which another bestows upon him he exchanges for other old
clothes which suit him better, or for lodging, or for food, or for
money, with which he can buy either food, clothes, or lodging, as he
has occasion.
    As it is by treaty, by barter, and by purchase that we obtain from
one another the greater part of those mutual good offices which we
stand in need of, so it is this same trucking disposition which
originally gives occasion to the division of labour. In a tribe of
hunters or shepherds a particular person makes bows and arrows, for
example, with more readiness and dexterity than any other. He
frequently exchanges them for cattle or for venison with his
companions; and he finds at last that he can in this manner get more
cattle and venison than if he himself went to the field to catch them.
From a regard to his own interest, therefore, the making of bows and
arrows grows to be his chief business, and he becomes a sort of
armourer. Another excels in making the frames and covers of their
little huts or movable houses. He is accustomed to be of use in this
way to his neighbours, who reward him in the same manner with cattle
and with venison, till at last he finds it his interest to dedicate
himself entirely to this employment, and to become a sort of
house-carpenter. In the same manner a third becomes a smith or a
brazier, a fourth a tanner or dresser of hides or skins, the principal
part of the nothing of savages. And thus the certainty of being able
to exchange all that surplus part of the produce of his own labour,
which is over and above his own consumption, for such parts of the
produce of other men's labour as he may have occasion for,
encourages every man to apply himself to a particular occupation,
and to cultivate and bring to perfection whatever talent 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 perhaps
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 difference
of talents comes then to be taken notice of, and widens by degrees,
till at last the vanity of the philosopher is willing to acknowledge
scarce any resemblance. But without the disposition to truck,
barter, and exchange, every man must have procured to himself every
necessary and conveniency of life which he wanted. All must have had
the same duties to perform, and the same work to do, and there could
have been no such difference of employment as could alone give
occasion to any great difference of talents.
    As it is this disposition which forms that difference of
talents, so remarkable among men of different professions, so it is
this same disposition which renders that difference useful. Many
tribes of animals acknowledged to be all of the same species derive
from nature a much more remarkable distinction of genius, than what,
antecedent to custom and education, appears to take place among men.
By nature a philosopher is not in genius and disposition half so
different from a street porter, as a mastiff is from a 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
talents, for want of the power or disposition to barter and
exchange, cannot be brought into a common stock, and do not in the
least contribute to the better accommodation ind conveniency of the
species. Each animal is still obliged to support and defend itself,
separately and independently, and derives no sort of advantage from
that variety of talents with which nature has distinguished its
fellows. Among men, on the contrary, the most dissimilar geniuses
are of use to one another; the different produces of their
respective talents, by the general disposition to truck, barter, and
exchange, being brought, as it were, into a common stock, where
every man may purchase whatever part of the produce of other men's
talents he has occasion for.
                            CHAPTER III
  That the Division of Labour is limited by the Extent of the Market

    AS it is the power of exchanging that gives occasion to the
division of labour, so the extent of this division must always be
limited by the extent of that power, or, in other words, by the extent
of the market. When the market is very small, no person can have any
encouragement to dedicate himself entirely to one employment, for want
of the power to exchange all that surplus part of the produce of his
own labour, which is over and above his own consumption, for such
parts of the produce of other men's labour as he has occasion for.
    There are some sorts of industry, even of the lowest kind, which
can be carried on nowhere but in a great town. A porter, for
example, can find employment and subsistence in no other place. A
village is by much too narrow a sphere for him; even an ordinary
market town is scarce large enough to afford him constant
occupation. In the lone houses and very small villages which are
scattered about in so desert a country as the Highlands of Scotland,
every farmer must be butcher, baker and brewer for his own family.
In such situations we can scarce expect to find even a smith, a
carpenter, or a mason, within less than twenty miles of another of the
same trade. The scattered families that live at eight or ten miles
distance from the nearest of them must learn to perform themselves a
great number of little pieces of work, for which, in more populous
countries, they would call in the assistance of those workmen. Country
workmen are almost everywhere obliged to apply themselves to all the
different branches of industry that have so much affinity to one
another as to be employed about the same sort of materials. A
country carpenter deals in every sort of work that is made of wood:
a country smith in every sort of work that is made of iron. The former
is not only a carpenter, but a joiner, a cabinet-maker, and even a
carver in wood, as well as a wheel-wright, a plough-wright, a cart and
waggon maker. The employments of the latter are still more various. It
is impossible there should be such a trade as even that of a nailer in
the remote and inland parts of the Highlands of Scotland. Such a
workman at the rate of a thousand nails a day, and three hundred
working days in the year, will make three hundred thousand nails in
the year. But in such a situation it would be impossible to dispose of
one thousand, that is, of one day's work in the year.
    As by means of water-carriage a more extensive market is opened to
every sort of industry than what land-carriage alone can afford it, so
it is upon the sea-coast, and along the banks of navigable rivers,
that industry of every kind naturally begins to subdivide and
improve itself, and it is frequently not till a long time after that
those improvements extend themselves to the inland parts of the
country. A broad-wheeled waggon, attended by two men, and drawn by
eight horses, in about six weeks' time carries and brings back between
London and Edinburgh near four ton weight of goods. In about the
same time a ship navigated by six or eight men, and sailing between
the ports of London and Leith, frequently carries and brings back
two hundred ton weight of goods. Six or eight men, therefore, by the
help of water-carriage, can carry and bring back in the same time
the same quantity of goods between London and Edinburgh, as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried
by the cheapest land-carriage from London to Edinburgh, there must
be charged the maintenance of a hundred men for three weeks, and
both the maintenance, and, what is nearly equal to 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 burden, together
with the value of the superior risk, or the difference of the
insurance between land and water-carriage. Were there no other
communication between those two places, therefore, but by
land-carriage, as no goods could be transported from the one to the
other, except such whose price was very considerable in proportion
to their weight, they could carry on but a small part of that commerce
which at present subsists between them, and consequently could give
but a small part of that encouragement which they at present
mutually afford to each other's industry. There could be little or
no commerce of any kind between the distant parts of the world. What
goods could bear the expense of land-carriage between London and
Calcutta? Or if there were any so precious as to be able to support
this expense, with what safety could they be transported through the
territories of so many barbarous nations? Those two cities, however,
at present carry on a very considerable commerce with each other,
and by mutually affording a market, give a good deal of
encouragement to each other's industry.
    Since such, therefore, are the advantages of water-carriage, it is
natural that the first improvements of art and industry should be made
where this conveniency opens the whole world for a market to the
produce of every sort of labour, and that they should always be much
later in extending themselves into the inland parts of the country.
The inland parts of the country can for a long time have no other
market for the greater part of their goods, but the country which lies
round about them, and separates them from the sea-coast, and the great
navigable rivers. The extent of their market, therefore, must for a
long time be in proportion to the riches and populousness of that
country, and consequently their improvement must always be posterior
to the improvement of that country. In our North American colonies the
plantations have constantly followed either the sea-coast or the banks
of the navigable rivers, and have scarce anywhere extended
themselves to any considerable distance from both.
    The nations that, according to the best authenticated history,
appear to have been first civilised, were those that dwelt round the
coast of the Mediterranean Sea. That sea, by far the greatest inlet
that is known in the world, having no tides, nor consequently any
waves except such as are caused by the wind only, was, by the
smoothness of its surface, as well as by the multitude of its islands,
and the proximity of its neighbouring shores, extremely favourable
to the infant navigation of the world; when, from their ignorance of
the compass, men were afraid to quit the view of the coast, and from
the imperfection of the art of shipbuilding, to abandon themselves
to the boisterous waves of the ocean. To pass beyond the pillars of
Hercules, that is, to sail out of the Straits of Gibraltar, was, in
the ancient world, long considered as a most wonderful and dangerous
exploit of navigation. It was late before even the Phoenicians and
Carthaginians, the most skilful navigators and ship-builders of
those old times, attempted it, and they were for a long time the
only nations that did attempt it.
    Of all the countries on the coast of the Mediterranean Sea,
Egypt seems to have been the first in which either agriculture or
manufactures were cultivated and improved to any considerable
degree. Upper Egypt extends itself nowhere above a few miles from
the Nile, and in Lower Egypt that great river breaks itself into
many different canals, which, with the assistance of a little art,
seem to have afforded a communication by water-carriage, not only
between all the great towns, but between all the considerable
villages, and even to many farmhouses in the country; nearly in the
same manner as the Rhine and the Maas do in Holland at present. The
extent and easiness of this inland navigation was probably one of
the principal causes of the early improvement of Egypt.
    The improvements in agriculture and manufactures seem likewise
to have been of very great antiquity in the provinces of Bengal, in
the East Indies, and in some of the eastern provinces of China; though
the great extent of this antiquity is not authenticated by any
histories of whose authority we, in this part of the world, are well
assured. In Bengal the Ganges and several other great rivers form a
great number of navigable canals in the same manner as the Nile does
in Egypt. In the Eastern provinces of China too, several great
rivers form, by their different branches, a multitude of canals, and
by communicating with one another afford an inland navigation much
more extensive than that either of the Nile or the Ganges, or
perhaps than both of them put together. It is remarkable that
neither the ancient Egyptians, nor the Indians, nor the Chinese,
encouraged foreign commerce, but seem all to have derived their
great opulence from this inland navigation.
    All the inland parts of Africa, and all that part of Asia which
lies any considerable way north of the Euxine and Caspian seas, the
ancient Scythia, the modern Tartary and Siberia, seem in all ages of
the world to have been in the same barbarous and uncivilised state
in which we find them at present. The Sea of Tartary is the frozen
ocean which admits of no navigation, and though some of the greatest
rivers in the world run through that country, they are at too great
a distance from one another to carry commerce and communication
through the greater part of it. There are in Africa none of those
great inlets, such as the Baltic and Adriatic seas in Europe, the
Mediterranean and Euxine seas in both Europe and Asia, and the gulfs
of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime
commerce into the interior parts of that great continent: and the
great rivers of Africa are at too great a distance from one another to
give occasion to any considerable inland navigation. The commerce
besides which any nation can carry on by means of a river which does
not break itself into any great number of branches or canals, and
which runs into another territory before it reaches the sea, can never
be very considerable; because it is always in the power of the nations
who possess that other territory to obstruct the communication between
the upper country and the sea. The navigation of the Danube is of very
little use to the different states of Bavaria, Austria and Hungary, in
comparison of what it would be if any of them possessed the whole of
its course till it falls into the Black Sea.
                            CHAPTER IV
                   Of the Origin and Use of Money

    WHEN the division of labour has been once thoroughly
established, it is but a very small part of a man's wants which the
produce of his own labour can supply. He supplies the far greater part
of them by exchanging that surplus part of the produce of his own
labour, which is over and above his own consumption, for such parts of
the produce of other men's labour as he has occasion for. Every man
thus lives by exchanging, or becomes in some measure a merchant, and
the society itself grows to be what is properly a commercial society.
    But when the division of labour first began to take place, this
power of exchanging must frequently have been very much clogged and
embarrassed in its operations. One man, we shall suppose, has more
of a certain commodity than he himself has occasion for, while another
has less. The former consequently would be glad to dispose of, and the
latter to purchase, a part of this superfluity. But if this latter
should chance to have nothing that the former stands in need of, no
exchange can be made between them. The butcher has more meat in his
shop than he himself can consume, and the brewer and the baker would
each of them be willing to purchase a part of it. But they have
nothing to offer in exchange, except the different productions of
their respective trades, and the butcher is already provided with
all the bread and beer which he has immediate occasion for. No
exchange can, in this case, be made between them. He cannot be their
merchant, nor they his customers; and they are all of them thus
mutually less serviceable to one another. In order to avoid the
inconveniency of such situations, every prudent man in every period of
society, after the first establishment of the division of labour, must
naturally have endeavoured to manage his affairs in such a manner as
to have at alltimes by him, besides the peculiar produce of his own
industry, a certain quantity of some one commodity or other, such as
he imagined few people would be likely to refuse in exchange for the
produce of their industry.
    Many different commodities, it is probable, were successively both
thought of and employed for this purpose. In the rude ages of society,
cattle are said to have been the common instrument of commerce; and,
though they must have been a most inconvenient one, yet in old times
we find things were frequently valued according to the number of
cattle which had been given in exchange for them. The armour of
Diomede, says Homer, cost only nine oxen; but that of Glaucus cost
an hundred oxen. Salt is said to be the common instrument of
commerce and exchanges in Abyssinia; a species of shells in some parts
of the coast of India; dried cod at Newfoundland; tobacco in Virginia;
sugar in some of our West India colonies; hides or dressed leather
in some other countries; and there is at this day a village in
Scotland where it is not uncommon, I am told, for a workman to carry
nails instead of money to the baker's shop or the alehouse.
    In all countries, however, men seem at last to have been
determined by irresistible reasons to give the preference, for this
employment, to metals above every other commodity. Metals can not only
be kept with as little loss as any other commodity, scarce anything
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
durable commodities possess, and which more than any other quality
renders them fit to be the instruments of commerce and circulation.
The man who wanted to buy salt, for example, and had nothing but
cattle to give in exchange for it, must have been obliged to buy
salt to the value of a whole ox, or a whole sheep at a time. He
could seldom buy less than this, because what he was to give for it
could seldom be divided without loss; and if he had a mind to buy
more, he must, for the same reasons, have been obliged to buy double
or triple the quantity, the value, to wit, of two or three oxen, or of
two or three sheep. If, on the contrary, instead of sheep or oxen,
he had metals to give in exchange for it, he could easily proportion
the quantity of the metal to the precise quantity of the commodity
which he had immediate occasion for.
    Different metals have been made use of by different nations for
this purpose. Iron was the common instrument of commerce among the
ancient Spartans; copper among the ancient Romans; and gold and silver
among all rich and commercial nations.
    Those metals seem originally to have been made use of for this
purpose in rude bars, without any stamp or coinage. Thus we are told
by Pliny, upon the authority of Timaeus, an ancient historian, that,
till the time of Servius Tullius, the Romans had no coined money,
but made use of unstamped bars of copper, to purchase whatever they
had occasion for. These bars, therefore, performed 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,
requires at least very accurate weights and scales. The weighing of
gold in particular is an operation of some nicety. In the coarser
metals, indeed, where a small error would be of little consequence,
less accuracy would, no doubt, be necessary. Yet we should find it
excessively troublesome, if every time a poor man had occasion
either to buy or sell a farthing's worth of goods, he was obliged to
weigh the farthing. The operation of assaying is still more difficult,
still more tedious, and, unless a part of the metal is fairly melted
in the crucible, with proper dissolvents, any conclusion that can be
drawn from it, is extremely uncertain. Before the institution of
coined money, however, unless they went through this tedious and
difficult operation, people must always have been liable to the
grossest frauds and impositions, and instead of a pound weight of pure
silver, or pure copper, might receive in exchange for their goods an
adulterated composition of the coarsest and cheapest materials,
which had, however, in their outward appearance, been made to resemble
those metals. To prevent such abuses, to facilitate exchanges, and
thereby to encourage all sorts of industry and commerce, it has been
found necessary, in all countries that have made any considerable
advances towards improvement, to affix a public stamp upon certain
quantities of such particular metals as were in those countries
commonly made use of to purchase goods. Hence the origin of coined
money, and of those public offices called mints; institutions
exactly of the same nature with those of the aulnagers and
stamp-masters of woolen and linen cloth. All of them are equally meant
to ascertain, by means of a public stamp, the quantity and uniform
goodness of those different commodities when brought to market.
    The first public stamps of this kind that were affixed to the
current metals, seem in many cases to have been intended to ascertain,
what it was both most difficult and most important to ascertain, the
goodness or fineness of the metal, and to have resembled the
sterling mark which is at present affixed to plate and bars of silver,
or the Spanish mark which is sometimes affixed to ingots of gold,
and which being struck only upon one side of the piece, and not
covering the whole surface, ascertains the fineness, but not the
weight of the metal. Abraham weighs to Ephron the four hundred shekels
of silver which he had agreed to pay for the field of Machpelah.
They are said, however, to be the current money of the merchant, and
yet are received by weight and not by tale, in the same manner as
ingots of gold and bars of silver are at present. The revenues of
the ancient Saxon kings of England are said to have been paid, not
in money but in kind, that is, in victuals and provisions of all
sorts. William the Conqueror introduced the custom of paying them in
money. This money, however, was, for a long time, received at the
exchequer, by weight and not by tale.
    The inconveniency and difficulty of weighing those metals with
exactness gave occasion to the institution of coins, of which the
stamp, covering entirely both sides of the piece and sometimes the
edges too, was supposed to ascertain not only the fineness, but the
weight of the metal. Such coins, therefore, were received by tale as
at present, without the trouble of weighing.
    The denominations of those coins seem originally to have expressed
the weight or quantity of metal contained in them. In the time of
Servius Tullius, who first coined money at Rome, the Roman as or pondo
contained a Roman pound of good copper. It was divided in the same
manner as our Troyes pound, into twelve ounces, each of which
contained a real ounce of good copper. The English pound sterling,
in the time of Edward I, contained a pound, Tower weight, of silver,
of a known fineness. The Tower pound seems to have been something more
than the Roman pound, and something less than the Troyes pound. This
last was not introduced into the mint of England till the 18th of
Henry VIII. The French livre contained in the time of Charlemagne a
pound, Troyes weight, of silver of a known fineness. The fair of
Troyes in Champaign was at that time frequented by all the nations
of Europe, and the weights and measures of so famous a market were
generally known and esteemed. The Scots money pound contained, from
the time of Alexander the First to that of Robert Bruce, a pound of
silver of the same weight and fineness with the English pound
sterling. English, French, and Scots pennies, too, contained all of
them originally a real 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 ancient
statute of Henry III, then wastel bread of a farthing shall weigh
eleven shillings and four pence. The proportion, however, between
the shilling and either the penny on the one hand, or the pound on the
other, seems not to have been so constant and uniform as that
between the penny and the pound. During the first race of the kings of
France, the French sou or shilling appears upon different occasions to
have contained five, twelve, twenty, and forty pennies. Among the
ancient Saxons a shilling appears at one time to have contained only
five pennies, and it is not improbable that it may have been as
variable among them as among their neighbours, the ancient Franks.
From the time of Charlemagne among the French, and from that of
William the Conqueror among the English, the proportion between the
pound, the shilling, and the penny, seems to have been uniformly the
same as at present, though the value of each has been very
different. For in every country of the world, I believe, the avarice
and injustice of princes and sovereign states, abusing the
confidence of their subjects, have by degrees diminished the real
quantity of metal, which had been originally contained in their coins.
The Roman as, in the latter ages of the Republic, was reduced to the
twenty-fourth part of its original value, and, instead of weighing a
pound, came to weigh only half an ounce. The English pound and penny
contain at present about a third only; the Scots pound and penny about
a thirty-sixth; and the French pound and penny about a sixty-sixth
part of their original value. By means of those operations the princes
and sovereign states which performed them were enabled, in appearance,
to pay their debts and 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 creditor, and have sometimes produced a greater and
more universal revolution in the fortunes of private persons, than
could have been occasioned by a very great public calamity.
    It is in this manner that money has become in all civilised
nations the universal instrument of commerce, by the intervention of
which goods of all kinds are bought and sold, or exchanged for one
another.
    What are the rules which men naturally observe in exchanging
them either for money or for one another, I shall now proceed to
examine. These rules determine what may be called the relative or
exchangeable value of goods.
    The word value, it is to be observed, has two different
meanings, and sometimes expresses the utility of some particular
object, and sometimes the power of purchasing other goods which the
possession of that object conveys. The one may be called "value in
use"; the other, "value in exchange." The things which have the
greatest value in use have frequently little or no value in
exchange; and, on the contrary, those which have the greatest value in
exchange have frequently little or no value in use. Nothing is more
useful than water: but it will purchase scarce anything; scarce
anything can be had in exchange for it. A diamond, on the contrary,
has scarce any value in use; but a very great quantity of other
goods may frequently be had in exchange for it.
    In order to investigate the principles which regulate the
exchangeable value of commodities, I shall endeavour to show:
    First, what is the real measure of this exchangeable value; or,
wherein consists the real price of all commodities.
    Secondly, what are the different parts of which this real price is
composed or made up.
    And, lastly, what are the different circumstances which
sometimes raise some or all of these different parts of price above,
and sometimes sink them below their natural or ordinary rate; or, what
are the causes which sometimes hinder the market price, that is, the
actual price of commodities, from coinciding exactly with what may
be called their natural price.
    I shall endeavour to explain, as fully and distinctly as I can,
those three subjects in the three following chapters, for which I must
very earnestly entreat both the patience and attention of the
reader: his patience in order to examine a detail which may perhaps in
some places appear unnecessarily tedious; and his attention in order
to understand what may, perhaps, after the fullest explication which I
am capable of giving 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.
                           CHAPTER V
          Of the Real and Nominal Price of Commodities,
        or 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, conveniences, and amusements of
human life. But after the division of labour has once thoroughly taken
place, it is but a very small part of these with which a man's own
labour can supply him. The far greater part of them he must derive
from the labour of other people, and he must be rich or poor according
to the quantity of that labour which he can command, or which he can
afford to purchase. The value of any commodity, therefore, to the
person who possesses it, and who means not to use or consume it
himself, but to exchange it for other commodities, is equal to the
quantity of labour which it enables him to purchase or command.
Labour, therefore, is the real measure of the exchangeable value of
all commodities.
    The real price of everything, what everything really costs to
the man who wants to acquire it, is the toil and trouble of
acquiring it. What everything is really worth to the man who has
acquired it, and who wants to dispose of it or exchange it for
something else, is the toil and trouble which it can save to
himself, and which it can impose upon other people. What is bought
with money or with goods is purchased by labour as much as what we
acquire by the toil of our own body. That money or those goods
indeed save us this toil. They contain the value of a certain quantity
of labour which we exchange for what is supposed at the time to
contain the value of an equal quantity. Labour was the first price,
the original purchase-money that was paid for all things. It was not
by gold or by silver, but by labour, that all the wealth of the
world was originally purchased; and its value, to those who possess
it, and who want to exchange it for some new productions, is precisely
equal to the quantity of labour which it can enable them to purchase
or command.
    Wealth, as Mr. Hobbes says, is power. But the person who either
acquires, or succeeds to a great fortune, does not necessarily acquire
or succeed to any political power, either civil or military. His
fortune may, perhaps, afford him the means of acquiring both, but
the mere possession of that fortune does not necessarily convey to him
either. The power which that possession immediately and directly
conveys to him, is the power of purchasing; a certain command over all
the labour, or over all the produce of labour, which is then in the
market. His fortune is greater or less, precisely in proportion to the
extent of this power; or to the quantity either of other men's labour,
or, what is the same thing, of the produce of other men's labour,
which it enables him to purchase or command. The exchangeable value of
everything 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 of difficult to ascertain the proportion between
two different quantities of labour. The time spent in two different
sorts of work will not always alone determine this proportion. The
different degrees of hardship endured, and of ingenuity exercised,
must likewise be taken into account. There may be more labour in an
hour's hard work than in two hours' easy business; or in an hour's
application to a trade which it cost ten years' labour to learn,
than in a month's industry at an ordinary and obvious employment.
But it is not easy to find any accurate measure either of hardship
or ingenuity. In exchanging, indeed, the different productions of
different sorts of labour for one another, some allowance is
commonly made for both. It is adjusted, however, not by any accurate
measure, but by the higgling and bargaining of the market, according
to that sort of rough equality which, though not exact, is
sufficient for carrying on the business of common life.
    Every commodity, besides, is more frequently exchanged for, and
thereby compared with, other commodities than with labour. It is
more natural, therefore, to estimate its exchangeable value by the
quantity of some other commodity than by that of the labour which it
can purchase. The greater part of people, too, understand better
what is meant by a quantity of a particular commodity than by a
quantity of labour. The one is a plain palpable object; the other an
abstract notion, which, though it can be made sufficiently
intelligible, is not altogether so natural and obvious.
    But when barter ceases, and money has become the common instrument
of commerce, every particular commodity is more frequently exchanged
for money than for any other commodity. The butcher seldom carries his
beef or his mutton to the baker, or the brewer, in order to exchange
them for bread or for beer; but he carries them to the market, where
he exchanges them for money, and afterwards exchanges that money for
bread and for beer. The quantity of money which he gets for them
regulates, too, the quantity of bread and beer which he can afterwards
purchase. It is more natural and obvious to him, therefore, to
estimate their value by the quantity of money, the commodity for which
he immediately exchanges them, than by that of bread and beer, the
commodities for which he can exchange them only by the intervention of
another commodity; and rather to say that his butcher's meat is
worth 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, sometimes
of easier and sometimes of more difficult purchase. The quantity of
labour which any particular quantity of them can purchase or
command, or the quantity of other goods which it will exchange for,
depends always upon the fertility or barrenness of the mines which
happen to be known about the time when such exchanges are made. The
discovery of the abundant mines of America reduced, in the sixteenth
century, the value of gold and silver in Europe to about a third of
what it had been before. As it costs less labour to bring those metals
from the mine to the market, so when they were brought thither they
could purchase or command less labour; and this revolution in their
value, though perhaps the greatest, is by no means the only one of
which history gives some account. But as a measure of quantity, such
as the natural foot, fathom, or handful, which is continually
varying in its own quantity, can never be an accurate measure of the
quantity of other things; so a commodity which is itself continually
varying in its own value, can never be an accurate measure of the
value of other commodities. Equal quantities of labour, at all times
and places, may be said to be of equal value to the labourer. In his
ordinary state of health, strength and spirits; in the ordinary degree
of his skill and dexterity, he must always laydown the same portion of
his ease, his liberty, and his happiness. The price which he pays must
always be the same, whatever may be the quantity of goods which he
receives in return for it. Of these, indeed, it may sometimes purchase
a greater and sometimes a smaller quantity; but it is their value
which varies, not that of the labour which purchases them. At all
times and places that is dear which it is difficult to come at, or
which it costs much labour to acquire; and that cheap which is to be
had easily, or with very little labour. Labour alone, therefore, never
varying in its own value, is alone the ultimate and real standard by
which the value of all commodities can at all times and places be
estimated and compared. It is their real price; money is their nominal
price only.
    But though equal quantities of labour are always of equal value to
the labourer, yet to the person who employs him they appear
sometimes to be of greater and sometimes of smaller value. He
purchases them sometimes with a greater and sometimes with a smaller
quantity of goods, and to him the price of labour seems to vary like
that of all other things. It appears to him dear in the one case,
and cheap in the other. In reality, however, it is the goods which are
cheap in the one case, and dear in the other.
    In this popular sense, therefore, labour, like commodities, may be
said to have a real and a nominal price. Its real price may be said to
consist in the quantity of the necessaries and conveniences of life
which are given for it; its nominal price, in the quantity of money.
The labourer is rich or poor, is well or ill rewarded, in proportion
to the real, not to the nominal price of his labour.
    The distinction between the real and the nominal price of
commodities and labour is not a matter of mere speculation, but may
sometimes be of considerable use in practice. The same real price is
always of the same value; but on account of the variations in the
value of gold and silver, the same nominal price is sometimes of
very different values. When a landed estate, therefore, is sold with a
reservation of a perpetual rent, if it is intended that this rent
should always be of the same value, it is of importance to the
family in whose favour it is reserved that it should not consist in
a particular sum of money. Its value would in this case be liable to
variations of two different kinds; first, to those which arise from
the different quantities of gold and silver which are contained at
different times in coin of the same denomination; and, secondly, to
those which arise from the different values of equal quantities of
gold and silver at different times.
    Princes and sovereign states have frequently fancied that they had
a temporary interest to diminish the quantity of pure metal
contained in their coins; but they seldom have fancied that they had
any to augment it. The quantity of metal contained in the coins, I
believe of all nations, has, accordingly, been almost continually
diminishing, and hardly ever augmenting. Such variations, therefore,
tend almost always to diminish the value of a money rent.
    The discovery of the mines of America diminished the value of gold
and silver in Europe. This diminution, it is commonly supposed, though
I apprehend without any certain proof, is still going on gradually,
and is likely to continue to do so for a long time. Upon this
supposition, therefore, such variations are more likely to diminish
than to augment the value of a money rent, even though it should be
stipulated to be paid, not in such a quantity of coined money of
such a denomination (in so many pounds sterling, for example), but
in so many ounces either of pure silver, or of silver of a certain
standard.
    The rents which have been reserved in corn have preserved their
value much better than those which have been reserved in money, even
where the denomination of the coin has not been altered. By the 18th
of Elizabeth it was enacted that a third of the rent of all college
leases should be reserved in corn, to be paid, either in kind, or
according to the current prices at the nearest public market. The
money arising from this corn rent, though originally but a third of
the whole, is in the present times, according to Dr. Blackstone,
commonly near double of what arises from the other two-thirds. The old
money rents of colleges must, according to this account, have sunk
almost to a fourth part of their ancient value; or are worth little
more than a fourth part of the corn which they were formerly worth.
But since the reign of Philip and Mary the denomination of the English
coin has undergone little or no alteration, and the same number of
pounds, shillings and pence have contained very nearly the same
quantity of pure silver. This degradation, therefore, in the value
of the money rents of colleges, has arisen altogether from the
degradation in the value of silver.
    When the degradation in the value of silver is combined with the
diminution of the quantity of it contained in the coin of the same
denomination, the loss is frequently still greater. In Scotland, where
the denomination of the coin has undergone much greater alterations
than it ever did in England, and in France, where it has undergone
still greater than it ever did in Scotland, some ancient rents,
originally of considerable value, have in this manner been reduced
almost to nothing.
    Equal quantities of labour will at distant times be purchased more
nearly with equal quantities of corn, the subsistence of the labourer,
than with equal quantities of gold and silver, or perhaps of any other
commodity. Equal quantities of corn, therefore, will, at distant
times, be more nearly of the same real value, or enable the
possessor to purchase or command more nearly the same quantity of
the labour of other people. They will do this, I say, more nearly than
equal quantities of almost any other commodity; for even equal
quantities of corn will not do it exactly. The subsistence of the
labourer, or the real price of labour, as I shall endeavour to show
hereafter, is very different upon different occasions; more liberal in
a society advancing to opulence than in one that is standing still;
and in one that is standing still than in one that is going backwards.
Every other commodity, however, will at any particular time purchase a
greater or smaller quantity of labour in proportion to the quantity of
subsistence which it can purchase at that time. A rent therefore
reserved in corn is liable only to the variations in the quantity of
labour which a certain quantity of corn can purchase. But a rent
reserved in any other commodity is liable not only to the variations
in the quantity of labour which any particular quantity of corn can
purchase, but to the variations in the quantity of corn which can be
purchased by any particular quantity of that commodity.
    Though the real value of a corn rent, it is to be observed,
however, varies much less from century to century than that of a money
rent, it varies much more from year to year. The money price of
labour, as I shall endeavour to show hereafter, does not fluctuate
from year to year with the money price of corn, but seems to be
everywhere accommodated, not to the temporary or occasional, but to
the average or ordinary price of that necessary of life. The average
or ordinary price of corn again is regulated, as I shall likewise
endeavour to 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 market. But the value of
silver, though it sometimes varies greatly from century to century,
seldom varies much from year to year, but frequently continues the
same, or very nearly the same, for half a century or a century
together. The ordinary or average money price of corn, therefore, may,
during so long a period, continue the same or very nearly the same
too, and along with it the money price of labour, provided, at
least, the society continues, in other respects, in the same or nearly
in the same condition. In the meantime the temporary and occasional
price of corn may frequently be double, one year, of what it had
been the year before, or fluctuate, for example, from five and
twenty to fifty shillings the quarter. But when corn is at the
latter price, not only the nominal, but the real value of a corn
rent will be double of what it is when at the former, or will
command double the quantity either of labour or of the greater part of
other commodities; the money price of labour, and along with it that
of most other things, continuing the same during all these
fluctuations.
    Labour, therefore, it appears evidently, is the only universal, as
well as the only accurate measure of value, or the only standard by
which we can compare the values of different commodities at all times,
and at all places. We cannot estimate, it is allowed, the real value
of different commodities from century to century by the quantities
of silver which were given for them. We cannot estimate it from year
to year by the quantities of corn. By the quantities of labour we can,
with the greatest accuracy, estimate it both from century to century
and from year to year. From century to century, corn is a better
measure than silver, because, from century to century, equal
quantities of corn will command the same quantity of labour more
nearly than equal quantities of silver. From year to year, on the
contrary, silver is a better measure than corn, because equal
quantities of it will more nearly command the same quantity of labour.
    But though in establishing perpetual rents, or even in letting
very long leases, it may be of use to distinguish between real and
nominal price; it is of none in buying and selling, the more common
and ordinary transactions of human life.
    At the same time and place the real and the nominal price of all
commodities are exactly in proportion to one another. The more or less
money you get for any commodity, in the London market for example, the
more or less labour it will at that time and place enable you to
purchase or command. At the same time and place, therefore, money is
the exact measure of the real exchangeable value of all commodities.
It is so, however, at the same time and place only.
    Though at distant places, there is no regular proportion between
the real and the money price of commodities, yet the merchant who
carries goods from the one to the other has nothing to consider but
their money price, or the difference between the quantity of silver
for which he buys them, and that for which he is likely to sell
them. Half an ounce of silver at Canton in China may command a greater
quantity both of labour and of the necessaries and conveniences of
life than an ounce at London. A commodity, therefore, which sells
for half an ounce of silver at Canton may there be really dearer, of
more real importance to the man who possesses it there, than a
commodity which sells for an ounce at London is to the man who
possesses it at London. If a London merchant, however, can buy at
Canton for half an ounce of silver, a commodity which he can
afterwards sell at London for an ounce, he gains a hundred per cent by
the bargain, just as much as if an ounce of silver was at London
exactly of the same value as at Canton. It is of no importance to
him that half an ounce of silver at Canton would have given him the
command of more labour and of a greater quantity of the necessaries
and 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
different times and places, or the different degrees of power over the
labour of other people which it may, upon different occasions, have
given to those who possessed it. We must in this case compare, not
so much the different quantities of silver for which it was commonly
sold, as the different quantities 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 copper,
or some other coarse metal, for those of still smaller
consideration. They have always, however, considered one of those
metals as more peculiarly the measure of value than any of the other
two; and this preference seems generally to have been given to the
metal which they happened first to make use of as the instrument of
commerce. Having once begun to use it as their standard, which they
must have done when they had no other money, they have generally
continued to do so even when the necessity was not the same.
    The Romans are said to have had nothing but copper money till
within five years before the first Punic war, when they first began to
coin silver. Copper, therefore, appears to have continued always the
measure of value in that republic. At Rome all accounts appear to have
been kept, and the value of all estates to have been computed either
in asses or in sestertii. The as was always the denomination of a
copper coin. The word sestertius signifies two asses and a half.
Though the sestertius, therefore, was originally a silver coin, its
value was estimated in copper. At Rome, one who owed a great deal of
money was said to have a great deal of other people's copper.
    The northern nations who established themselves upon the ruins
of the Roman empire, seem to have had silver money from the first
beginning of their settlements, and not to have known either gold or
copper coins for several ages thereafter. There were silver coins in
England in the time of the Saxons; but there was little gold coined
till the time of Edward III nor any copper till that of James I of
Great Britain. In England, therefore, and for the same reason, I
believe, in all other modern nations of Europe, all accounts are kept,
and the value of all goods and of all estates is generally computed in
silver: and when we mean to express the amount of a person's
fortune, we seldom mention the number of guineas, but the number of
pounds sterling which we suppose would be given for it.
    Originally, in all countries, I believe, a legal tender of payment
could be made only in the coin of that metal, which was peculiarly
considered as the standard or measure of value. In England, gold was
not considered as a legal tender for a long time after it was coined
into money. The proportion between the values of gold and silver money
was not fixed by any public law or proclamation; but was left to be
settled by the market. If a debtor offered payment in gold, the
creditor might either reject such payment altogether, or accept of
it at such a valuation of the gold as he and his debtor could agree
upon. Copper is not at present a legal tender except in the change
of the smaller silver coins. In this state of things the distinction
between the metal which was the standard, and that which was not the
standard, was something more than a nominal distinction.
    In process of time, and as people became gradually more familiar
with the use of the different metals in coin, and consequently
better acquainted with the proportion between their respective values,
it has in most countries, I believe, been found convenient to
ascertain this proportion, and to declare by a public law that a
guinea, for example, of such a weight and fineness, should exchange
for one-and-twenty shillings, or be a legal tender for a debt of
that amount. In this state of things, and during the continuance of
any one regulated proportion of this kind, the distinction between the
metal which is the standard, and that which is not the standard,
becomes little more than a nominal distinction.
    In consequence of any change, however, in this regulated
proportion, this distinction becomes, or at least seems to become,
something more than nominal again. If the regulated value of a guinea,
for example, was either reduced to twenty, or raised to two-and-twenty
shillings, all accounts being kept and almost all obligations for debt
being expressed in silver money, the greater part of payments could in
either case be made with the same quantity of silver money as
before; but would require very different quantities of gold money; a
greater in the one case, and a smaller in the other. Silver would
appear to be more invariable in its value than gold. Silver would
appear to measure the value of gold, and gold would not appear to
measure the value of silver. The value of gold would seem to depend
upon the quantity of silver which it would exchange for; and the value
of silver would not seem to depend upon the quantity of gold which
it would exchange for. This difference, however, would be altogether
owing to the custom of keeping accounts, and of expressing the
amount of all great and small sums rather in silver than in gold
money. One of Mr. Drummond's notes for five-and-twenty or fifty
guineas would, after an alteration of this kind, be still payable with
five-and-twenty or fifty guineas in the same manner as before. It
would, after such an alteration, be payable with the same quantity
of gold as before, but with very different quantities of silver. In
the payment of such a note, gold would appear to be more invariable in
its value than silver. Gold would appear to measure the value of
silver, and silver would not appear to measure the value of gold. If
the custom of keeping accounts, and of expressing promissory notes and
other obligations for money in this manner, should ever become
general, gold, and not silver, would be considered as the metal
which was peculiarly the standard or measure of value.
    In reality, during the continuance of any one regulated proportion
between the respective values of the different metals in coin, the
value of the most precious metal regulates the value of the whole
coin. Twelve copper pence contain half a pound, avoirdupois, of
copper, of not the best quality, which, before it is coined, is seldom
worth sevenpence in silver. But as by the regulation twelve such pence
are ordered to exchange for a shilling, they are in the market
considered as worth a shilling, and a shilling can at any time be
had for them. Even before the late reformation of the gold coin of
Great Britain, the gold, that part of it at least which circulated
in London and its neighbourhood, was in general less degraded below
its standard weight than the greater part of the silver.
One-and-twenty worn and defaced shillings, however, were considered as
equivalent to a guinea, which perhaps, indeed, was worn and defaced
too, but seldom so much so. The late regulations have brought the gold
coin as near perhaps to its standard weight as it is possible to bring
the current coin of any nation; and the order, to receive no gold at
the public offices but by weight, is likely to preserve it so, as long
as that order is enforced. The silver coin still continues in the same
worn and degraded state as before the reformation of the gold coin. In
the market, however, one-and-twenty shillings of this degraded
silver coin are still considered as worth a guinea of this excellent
gold coin.
    The reformation of the gold coin has evidently raised the value of
the silver coin which can be exchanged for it.
    In the English mint a pound weight of gold is coined into
forty-four guineas and a half, which, at one-and-twenty shillings
the guinea, is equal to forty-six pounds fourteen shillings and
sixpence. An ounce of such gold coin, therefore, is worth L3 17s. 10
1/2d. in silver. In England no duty or seignorage is paid upon the
coinage, and he who carries a pound weight or an ounce weight of
standard gold bullion to the mint, gets back a pound weight or an
ounce weight of gold in coin, without any deduction. Three pounds
seventeen shillings and tenpence halfpenny an ounce, therefore, is
said to be the mint price of gold in England, or the quantity of
gold coin which the mint gives in return for standard gold bullion.
    Before the reformation of the gold coin, the price of standard
gold bullion in the market had for many years been upwards of L3
18s. sometimes L3 19s. and very frequently L4 an ounce; that sum, it
is probable, in the worn and degraded gold coin, seldom containing
more than an ounce of standard gold. Since the reformation of the gold
coin, the market price of standard gold bullion seldom exceeds L3 17s.
7d. an ounce. Before the reformation of the gold coin, the market
price was always more or less above the mint price. Since that
reformation, the market price has been constantly below the mint
price. But that market price is the same whether it is paid in gold or
in silver coin. The late reformation of the gold coin, therefore,
has raised not only the value of the gold coin, but likewise that of
the silver coin in proportion to gold bullion, and probably, too, in
proportion to all other commodities; through 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
proportion to them may not be so distinct and sensible.
    In the English mint a pound weight of standard silver bullion is
coined into sixty-two shillings, containing, in the same manner, a
pound weight of standard silver. Five shillings and twopence an ounce,
therefore, is said to be the mint price of silver in England, or the
quantity of silver coin which the mint gives in return for standard
silver bullion. Before the reformation of the gold coin, the market
price of standard silver bullion was, upon different occasions, five
shillings and fourpence, five shillings and fivepence, five
shillings and sixpence, five shillings and sevenpence, and very
often five shillings and eightpence an ounce. Five shillings and
sevenpence, however, seems to have been the most common price. Since
the reformation of the gold coin, the market price of standard
silver bullion has fallen occasionally to five shillings and
threepence, five shillings and fourpence, and five shillings and
fivepence an ounce, which last price it has scarce ever exceeded.
Though the market price of silver bullion has fallen considerably
since the reformation of the gold coin, it has not fallen so low as
the mint price.
    In the proportion between the different metals in the English
coin, as copper is rated very much above its real value, so silver
is rated somewhat below it. In the market of Europe, in the French
coin and in the Dutch coin, an ounce of fine gold exchanges for
about fourteen ounces of fine silver. In the English coin, it
exchanges for about fifteen ounces, that is, for more silver than it
is worth according to the common estimation of Europe. But as the
price of copper in bars is not, even in England, raised by the high
price of copper in English coin, so the price of silver in bullion
is not sunk by the low rate of silver in English coin. Silver in
bullion still preserves its proper proportion to gold; for the same
reason that copper in bars preserves its proper proportion to silver.
    Upon the reformation of the silver coin in the reign of William
III the price of silver bullion still continued to be somewhat above
the mint price. Mr. Locke imputed this high price to the permission of
exporting silver bullion, and to the prohibition of exporting silver
coin. This permission of exporting, he said, rendered the demand for
silver bullion greater than the demand for silver coin. But the number
of people who want silver coin for the common uses of buying and
selling at home, is surely much greater than that of those who want
silver bullion either for the use of exportation or for any other use.
There subsists at present a like permission of exporting gold bullion,
and a like prohibition of exporting gold coin: and yet the price of
gold bullion has fallen below the mint price. But in the English
coin silver was then, in the same manner as now, under-rated in
proportion to gold, and the gold coin (which at that time too was
not supposed to require any reformation) regulated then, as well as
now, the real value of the whole coin. As the reformation of the
silver coin did not then reduce the price of silver bullion to the
mint price, it is not very probable that a like reformation will do so
now.
    Were the silver coin brought back as near to its standard weight
as the gold, a guinea, it is probable, would, according to the present
proportion, exchange for more silver in coin than it would purchase in
bullion. The silver coin containing its full standard weight, there
would in this case be a profit in melting it down, in order, first, to
sell the bullion for gold coin, and afterwards to exchange this gold
coin for silver coin to be melted down in the same manner. Some
alteration in the present proportion seems to be the only method of
preventing this inconveniency.
    The inconveniency perhaps would be less if silver was rated in the
coin as much above its proper proportion to gold as it is at present
rated below it; provided it was at the same time enacted that silver
should not be a legal tender for more than the change of a guinea,
in the same manner as copper is not a legal tender for more than the
change of a shilling. No creditor could in this case be cheated in
consequence of the high valuation of silver in coin; as no creditor
can at present be cheated in consequence of the high valuation of
copper. The bankers only would suffer by this regulation. When a run
comes upon them they sometimes endeavour to gain time by paying in
sixpences, and they would be precluded by this regulation from this
discreditable method of evading immediate payment. They would be
obliged in consequence to keep at all times in their coffers a greater
quantity of cash than at present; and though this might no doubt be
a considerable inconveniency to them, it would at the same time be a
considerable security to their creditors.
    Three pounds seventeen shillings and tenpence halfpenny (the
mint price of gold) certainly does not contain, even in our present
excellent gold coin, more than an ounce of standard gold, and it may
be thought, therefore, should not purchase more standard bullion.
But gold in coin is more convenient than gold in bullion, and
though, in England, the coinage is free, yet the gold which is carried
in bullion to the mint can seldom be returned in coin to the owner
till after a delay of several weeks. In the present hurry of the mint,
it could not be returned till after a delay of several months. This
delay is equivalent to a small duty, and renders gold in coin somewhat
more valuable than an equal quantity of gold in bullion. If in the
English coin silver was rated according to it proper proportion to
gold, the price of silver bullion would probably fall below the mint
price even without any reformation of the silver coin; the value
even of the present worn and defaced silver coin being regulated by
the value of the excellent gold coin for which it can be changed.
    A small seignorage or duty upon the coinage of both gold and
silver would probably increase still more the superiority of those
metals in coin above an equal quantity of either of them in bullion.
The coinage would in this case increase the value of the metal
coined in proportion to the extent of this small duty; for the same
reason that the fashion increases the value of plate in proportion
to the price of that fashion. The superiority of coin above bullion
would prevent the melting down of the coin, and would discourage its
exportation. If upon any public exigency it should become necessary to
export the coin, the greater part of it would soon return again of its
own accord. Abroad it could sell only for its weight in bullion. At
home it would buy more than that weight. There would be a profit,
therefore, in bringing it home again. In France a seignorage of
about eight per cent is imposed upon the coinage, and the French coin,
when exported, is said to return home again of its own accord.
    The occasional fluctuations in the market price of gold and silver
bullion arise from the same causes as the like fluctuations in that of
all other commodities. The frequent loss of those metals from
various accidents by sea and by land, the continual waste of them in
gilding and plating, in lace and embroidery, in the wear and tear of
coin, and in that of plate; require, in all countries which possess no
mines of their own, a continual importation, in order to repair this
loss and this waste. The merchant importers, like all other merchants,
we may believe, endeavour, as well as they can, to suit their
occasional importations to what, they judge, is likely to be the
immediate demand. With all their attention, however, they sometimes
overdo the business, and sometimes underdo it. When they import more
bullion than is wanted, rather than incur the risk and trouble of
exporting it again, they are sometimes willing to sell a part of it
for something less than the ordinary or average price. When, on the
other hand, they import less than is wanted, they get something more
than this price. But when, under all those occasional fluctuations,
the market price either of gold or silver bullion continues for
several years together steadily and constantly, either more or less
above, or more or less below the mint price, we may be assured that
this steady and constant, either superiority or inferiority of
price, is the effect of something in the state of the coin, which,
at that time, renders a certain quantity of coin either of more
value or of less value than the precise quantity of bullion which it
ought to contain. The constancy and steadiness of the effect
supposes a proportionable constancy and steadiness in the cause.
    The money of any particular country is, at any particular time and
place, more or less an accurate measure 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 nature
of the thing would admit. But if, by rubbing and wearing, forty-four
guineas and a half generally contain less than a pound weight of
standard gold; the diminution, however, being greater in some pieces
than in others; the measure of value comes to be liable to the same
sort of uncertainty to which all other weights and measures are
commonly exposed. As it rarely happens that these are exactly
agreeable to their standard, the merchant adjusts the price of his
goods, as well as he can, not to what those weights and measures ought
to be, but to what, upon an average, he finds by experience they
actually are. In consequence of a like disorder in the coin, the price
of goods comes, in the same manner, to be adjusted, not to the
quantity of pure gold or silver which the corn 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 eightpence, for example, in the time of Edward I, I consider as
the same money-price with a pound sterling in the present times;
because it contained, as nearly as we can judge, the same quantity
of pure silver.
                            CHAPTER VI
        Of the Component 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 proportion
between the quantities of labour necessary for acquiring different
objects seems to be the only circumstance which can afford any rule
for exchanging them for one another. If among a nation of hunters, for
example, it usually costs twice the labour to kill a beaver which it
does to kill a deer, one beaver should naturally exchange for or be
worth two deer. It is natural that what is usually the produce of
two days' or two hours' labour, should be worth double of what is
usually the produce of one day's or one hour's labour.
    If the one species of labour should be more severe than the other,
some allowance will naturally be made for this superior hardship;
and the produce of one hour's labour in the one way may frequently
exchange for that of two 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 talents
will naturally give a value to their produce, superior to what would
be due to the time employed about it. Such talents can seldom be
acquired but in consequence of long application, and the superior
value of their produce may frequently be no more than a reasonable
compensation for the time and labour which must be spent in
acquiring them. In the advanced state of society, allowances of this
kind, for superior hardship and superior skill, are commonly made in
the wages of labour; and something of the same kind must probably have
taken place in its earliest and rudest period.
    In this state of things, the whole produce of labour belongs to
the labourer; and the quantity of labour commonly employed in
acquiring or producing any commodity is the only circumstance which
can regulate the quantity exchange for which it ought commonly to
purchase, command, or exchange for.
    As soon as stock has accumulated in the hands of particular
persons, some of them will naturally employ it in setting to work
industrious people, whom they will supply with materials and
subsistence, in order to make a profit by the sale of their work, or
by what their labour adds to the value of the materials. In exchanging
the complete manufacture either for money, for labour, or for other
goods, over and above what may be sufficient to pay the price of the
materials, and the wages of the workmen, something must be given for
the profits of the undertaker of the work who hazards his stock in
this adventure. The value which the workmen add to the materials,
therefore, resolves itself in this ease into two parts, of which the
one pays their wages, the other the profits of their employer upon the
whole stock of materials and wages which he advanced. He could have no
interest to employ them, unless he expected from the sale of their
work something more than what was sufficient to replace his stock to
him; and he could have no interest to employ a great stock rather than
a small one, unless his profits were to bear some proportion to the
extent of his stock.
    The profits of stock, it may perhaps be thought are only a
different name for the wages of a particular sort of labour, the
labour of inspection and direction. They are, however, altogether
different, are regulated by quite different principles, and bear no
proportion to the quantity, the hardship, or the ingenuity of this
supposed labour of inspection and direction. They are regulated
altogether by the value of the stock employed, and are greater or
smaller in proportion to the extent of this stock. Let us suppose, for
example, that in some particular place, where the common annual
profits of manufacturing stock are ten per cent, there are two
different manufactures, in each of which twenty workmen are employed
at the rate of fifteen pounds a year each, or at the expense of
three hundred a year in each manufactory. Let us suppose, too, that
the coarse materials annually wrought up in the one cost only seven
hundred pounds, while the finer materials in the other cost seven
thousand. The capital annually employed in the one will in this case
amount only to one thousand pounds; whereas that employed in the other
will amount to seven thousand three hundred pounds. At the rate of ten
per cent, therefore, the undertaker of the one will expect a yearly
profit of about one hundred pounds only; while that of the other
will expect about seven hundred and thirty pounds. But though their
profits are so very different, their labour of inspection and
direction may be either altogether or very nearly the same. In many
great works almost the whole labour of this kind is committed to
some principal clerk. His wages properly express the value of this
labour of inspection and direction. Though in settling them some
regard is had commonly, not only to his labour and skill, but to the
trust which is reposed in him, yet they never bear any regular
proportion to the capital of which he oversees the management; and the
owner of this capital, though he is thus discharged of almost all
labour, still expects that his 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
always belong to the labourer. He must in most cases share it with the
owner of the stock which employs him. Neither is the quantity of
labour commonly employed in acquiring or producing any commodity,
the only circumstance which can regulate the quantity which it ought
commonly to purchase, command, or exchange for. An additional
quantity, it is evident, must be due for the profits of the stock
which advanced the wages and furnished the materials of that labour.
    As soon as the land of any country has all become private
property, the landlords, like all other men, love to reap where they
never sowed, and demand a rent even for its natural produce. The
wood of the forest, the grass of the field, and all the natural fruits
of the earth, which, when land was in common, cost the labourer only
the trouble of gathering them, come, even to him, to have an
additional price fixed upon them. He must then pay for the licence
to gather them; and must give up to the landlord a portion of what his
labour either collects or produces. This portion, or, what comes to
the same thing, the price of this portion, constitutes the rent of
land, and in the price of the greater part of commodities makes a
third component part.
    The real value of all the different component parts of price, it
must be observed, is measured by the quantity of labour which they
can, each of them, purchase or command. Labour measures the value
not only of that part of price which resolves itself into labour,
but of that which resolves itself into rent, and of that which
resolves itself into profit.
    In every society the price of every commodity finally resolves
itself into some one or other, or all of those three parts; and in
every improved society, all the three enter more or less, as component
parts, into the price of the far greater part of commodities.
    In the price of corn, for example, one part pays the rent of the
landlord, another pays the wages or maintenance of the labourers and
labouring cattle employed in producing it, and the third pays the
profit of the farmer. These three parts seem either immediately or
ultimately to make up the whole price of corn. A fourth part, it may
perhaps be thought, is necessary for replacing the stock of the
farmer, or for compensating the wear and tear of his labouring cattle,
and other instruments of husbandry. But it must be considered that the
price of any instrument of husbandry, such as a labouring horse, is
itself made up of the same 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 maintenance of the horse, the whole price
still resolves itself either immediately or ultimately into the same
three parts of rent, labour, and profit.
    In the price of flour or meal, we must add to the price of the
corn, the profits of the miller, and the wages of his servants; in the
price of bread, the profits of the baker, and the wages of his
servants; and in the price of both, the labour of transporting the
corn from the house of the farmer to that of the miller, and from that
of the miner 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 flaxdresser, of the spinner, of the weaver, of the
bleacher, etc., together with the profits of their respective
employers.
    As any particular commodity comes to be more manufactured, that
part of the price which resolves itself into wages and profit comes to
be greater in proportion to that which resolves itself into rent. In
the progress of the manufacture, not only the number of profits
increase, but every subsequent profit is greater than the foregoing;
because the capital from which it is derived must always be greater.
The capital which employs the weavers, for example, must be greater
than that which employs the spinners; because it not only replaces
that capital with its profits, but pays, besides, the wages of the
weavers; and the profits must always bear some proportion to the
capital.
    In the most improved societies, however, there are always a few
commodities of which the price resolves itself into two parts only,
the wages of labour, and the profits of stock; and a still smaller
number, in which it consists altogether in the wages of labour. In the
price of sea-fish, for example, one part pays the labour of the
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 show 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 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
bringing it to market, must necessarily be profit to somebody.
    As the price or exchangeable value of every particular
commodity, taken separately, resolves itself into some one or other or
all of those three parts; so that of all the commodities which compose
the whole annual produce of the labour of every country, taken
complexly, must resolve itself into the same three parts, and be
parcelled out among different inhabitants of the country, either as
the wages of their labour, the profits of their stock, or the rent
of their land. The whole of what is annually either collected or
produced by the labour of every society, or what comes to the same
thing, the whole price of it, is in this manner originally distributed
among some of its different members. Wages, profit, and rent, are
the three original sources of all revenue as well as of all
exchangeable value. All other revenue is ultimately derived from
some one or other of these.
    Whoever derives his revenue from a fund which is his own, must
draw it either from his labour, from his stock, or from his land.
The revenue derived from labour is called wages. That derived from
stock, by the person who manages or employes it, is called profit.
That derived from it by the person who does not employ it himself, but
lends it to another, is called the interest or the use of money. It is
the compensation which the borrower pays to the lender, for the profit
which he has an opportunity of making by the use of the money. Part of
that profit naturally belongs to the borrower, who runs the risk and
takes the trouble of employing it; and part to the lender, who affords
him the opportunity of making this profit. The interest of money is
always a derivative revenue, which, if it is not paid from the
profit which is made by the use of the money, must be paid from some
other source of revenue, unless perhaps the borrower is a spendthrift,
who contracts a second debt in order to pay the interest of the first.
The revenue which proceeds altogether from land, is called rent, and
belongs to the landlord. The revenue of the farmer is derived partly
from his labour, and partly from his stock. To him, land is only the
instrument which enables him to earn the wages of this labour, and
to make the profits of this stock. All taxes, and an the revenue which
is founded upon them, all salaries, pensions, and annuities of every
kind, are ultimately derived from some one or other of those three
original sources of revenue, and are paid either immediately or
mediately from the wages of labour, the profits of stock, or the
rent of land.
    When those three different sorts of revenue belong to different
persons, they are readily distinguished; but when they belong to the
same they are sometimes confounded with one another, at least in
common language.
    A gentleman who farms a part of his own estate, after paying the
expense of cultivation, should gain both the rent of the landlord
and the profit of the farmer. He is apt to denominate, however, his
whole gain, profit, and thus confounds rent with profit, at least in
common language. The greater part of our North American and West
Indian planters are in this situation. They farm, the greater part
of them, their own estates, and accordingly we seldom hear of the rent
of a plantation, but frequently of its profit.
    Common farmers seldom employ any overseer to direct the general
operations of the farm. They generally, too, work a good deal with
their own hands, as ploughmen, harrowers, etc. What remains of the
crop after paying the rent, therefore, should not only replace to them
their stock employed in cultivation, together with its ordinary
profits, but pay them the wages which are due to them, both as
labourers and overseers. Whatever remains, however, after paying the
rent and keeping up the stock, is called profit. But wages evidently
make a part of it. The farmer, by saving these wages, must necessarily
gain them. Wages, therefore, are in this case confounded with profit.
    An independent manufacturer, who has stock enough both to purchase
materials, and to maintain himself till he can carry his work to
market, should gain both the wages of a journeyman who works under a
master, and the profit which that master makes by the sale of 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,
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 civilised 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 employed in
raising, preparing, and bringing that produce to market. If the
society were annually to employ all the labour which it can annually
purchase, as the quantity of labour would increase greatly every year,
so the produce of every succeeding year would be of vastly greater
value than that of the foregoing. But there is no country in which the
whole annual produce is employed in maintaining the industrious. The
idle everywhere consume a great part of it; and according to the
different proportions in which it is annually divided between those
two different orders of people, its ordinary or average value must
either annually increase, or diminish, or continue the same from one
year to another.
                            CHAPTER VII
          Of the Natural and Market Price of Commodities

    THERE is in every society or neighbourhood an ordinary or
average rate both of wages and profit in every different employment of
labour and stock. This rate is naturally regulated, as I shall show
hereafter, partly by the general circumstances of the society, their
riches or poverty, their advancing, stationary, or declining
condition; and partly by the particular nature of each employment.
    There is likewise in every society or neighbourhood an ordinary or
average rate of rent, which is regulated too, as I shall show
hereafter, partly by the general circumstances of the society or
neighbourhood in which the land is situated, and partly by the natural
or improved fertility of the land.
    These ordinary or average rates may be called the natural rates of
wages, profit, and rent, at the time and place in which they
commonly prevail.
    When the price of any commodity is neither more nor less than what
is sufficient to pay the rent of the land, the wages of the labour,
and the profits of the stock employed in raising, preparing, and
bringing it to market, according to their natural rates, the commodity
is then sold for what may be called its natural price.
    The commodity is then sold precisely for what it is worth, or
for what it really costs the person who brings it to market; for
though in common language what is called the prime cost of any
commodity does not comprehend the profit of the person who is to
sell it again, yet if he sell it at a price which does not allow him
the ordinary rate of profit in his neighbourhood, he is evidently a
loser by the trade; since by employing his stock in some other way
he might have made that profit. His profit, besides, is his revenue,
the proper fund of his subsistence. As, while he is preparing and
bringing the goods to market, he advances to his workmen their
wages, or their subsistence; so he advances to himself, in the same
manner, his own subsistence, which is generally suitable to the profit
which he may reasonably expect from the sale of his goods. Unless they
yield him this profit, therefore, they do not repay him what they
may very properly be said to have really cost him.
    Though the price, therefore, which leaves him this profit is not
always the lowest at which a dealer may sometimes sell his goods, it
is the lowest at which he is likely to sell them for any
considerable time; at least where there is perfect liberty, or where
he may change his trade as often as he pleases.
    The actual price at which any commodity is commonly sold is called
its market price. It may either be above, or below, or exactly the
same with its natural price.
    The market price of every particular commodity is regulated by the
proportion between the quantity which is actually brought to market,
and the demand of those who are willing to pay the natural price of
the commodity, or the whole value of the rent, labour, and profit,
which must be paid in order to bring it thither. Such people may be
called the effectual demanders, and their demand the effectual demand;
since it may be sufficient to effectuate the bringing of the commodity
to market. It is different from the absolute demand. A very poor man
may be said in some sense to have a demand for a coach and six; he
might like to have it; but his demand is not an effectual demand, as
the commodity can never be brought to market in order to satisfy it.
    When the quantity of any commodity which is brought to market
falls short of the effectual demand, all those who are willing to
pay the whole value of the rent, wages, and profit, which must be paid
in order to bring it thither, cannot be supplied with the quantity
which they want. Rather than want it altogether, some of them will
be willing to give more. A competition will immediately begin among
them, and the market price will rise more or less above the natural
price, according as either the greatness of the deficiency, or the
wealth and wanton luxury of the competitors, happen to animate more or
less the eagerness of the competition. Among competitors of equal
wealth and luxury the same deficiency will generally occasion a more
or less eager competition, according as the acquisition of the
commodity happens to be of more or less importance to them. Hence
the exorbitant price of the necessaries of life during the blockade of
a town or in a famine.
    When the quantity brought to market exceeds the effectual
demand, it cannot be all sold to those who are willing to pay the
whole value of the rent, wages, and profit, which must be paid in
order to bring it thither. Some part must be sold to those who are
willing to pay less, and the low price which they give for it must
reduce the price of the whole. The market price will sink more or less
below the natural price, according as the greatness of the excess
increases more or less the competition of the sellers, or according as
it happens to be more or less important to them to get immediately rid
of the commodity. The same excess in the importation of perishable,
will occasion a much greater competition than in that of durable
commodities; in the importation of oranges, for example, than in
that of old iron.
    When the quantity brought to market is just sufficient to supply
the effectual demand, and no more, the market price naturally comes to
be either exactly, or as nearly as can be judged of, the same with the
natural price. The whole quantity upon hand can be disposed of for
this price, and 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
commodity to market, that the quantity never should exceed the
effectual demand; and it is the interest of all other people that it
never should fall short of that demand.
    If at any time it exceeds the effectual demand, some of the
component parts of its price must be paid below their natural rate. If
it is rent, the interest of the landlords will immediately prompt them
to withdraw a part of their land; and if it is wages or profit, the
interest of the labourers in the one case, and of their employers in
the other, will prompt them to withdraw a part of their labour or
stock from this employment. The quantity brought to market will soon
be no more than sufficient to supply the effectual demand. All the
different parts of its price will rise to their natural rate, and
the whole price to its natural price.
    If, on the contrary, the quantity brought to market should at
any time fall short of the effectual demand, some of the component
parts of its price must rise above their natural rate. If it is
rent, the interest of all other landlords will naturally prompt them
to prepare more land for the raising of this commodity; if it is wages
or profit, the interest of all other labourers and dealers will soon
prompt them to employ more labour and stock in preparing and
bringing it to market. The quantity brought thither will soon be
sufficient to supply the effectual demand. All the different parts
of its price will soon sink to their natural rate, and the whole price
to its natural price.
    The natural price, therefore, is, as it were, the central price,
to which the prices of all commodities are continually gravitating.
Different accidents may sometimes keep them suspended a good deal
above it, and sometimes force them down even somewhat below it. But
whatever may be the obstacles which hinder them from settling in
this centre of repose and continuance, they are constantly tending
towards it.
    The whole quantity of industry annually employed in order to bring
any commodity to market naturally suits itself in this manner to the
effectual demand. It naturally aims at bringing always that precise
quantity thither which may be sufficient to supply, and no more than
supply, that demand.
    But in some employments the same quantity of industry will in
different years produce very different quantities of commodities;
while in others it will produce always the same, or very nearly the
same. The same number of labourers in husbandry will, in different
years, produce very different quantities of corn, wine, oil, hops,
etc. But the same number of spinners 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 demand; and as its
actual produce is frequently much greater and frequently much less
than its average produce, the quantity of the commodities brought to
market will sometimes exceed a good deal, and sometimes fall short a
good deal, of the effectual demand. Even though that demand
therefore should continue always the same, their market price will
be liable to great fluctuations, will sometimes fall a good deal
below, and sometimes rise a good deal above their natural price. In
the other species of industry, the produce of equal quantities of
labour being always the same, or very nearly the same, it can be
more exactly suited to the effectual demand. While that demand
continues the same, therefore, the market price of the commodities
is likely to do so too, and to be either altogether, or as nearly as
can be judged of, the same with the natural price. That the price of
linen and woolen cloth is liable neither to such frequent nor to
such great variations as the price of corn, every man's experience
will inform him. The price of the one species of commodities varies
only with the variations in the demand: that of the other varies,
not only with the variations in the demand, but with the much
greater and more frequent variations in the quantity of what is
brought to market in order to supply that demand.
    The occasional and temporary fluctuations in the market price of
any commodity fall chiefly upon those parts of its price which resolve
themselves into wages and profit. That part which resolves itself into
rent is less affected by them. A rent certain in money is not in the
least affected by them either in its rate or in its value. A rent
which consists either in a certain proportion or in a certain quantity
of the rude produce, is no doubt affected in its yearly value by all
the occasional and temporary fluctuations in the market price of
that rude produce; but it is seldom affected by them in its yearly
rate. In settling the terms of the lease, the landlord and farmer
endeavour, according to their best judgment, to adjust that rate,
not to the temporary and occasional, but to the average and ordinary
price of the produce.
    Such fluctuations affect both the value and the rate either of
wages or of profit, according as the market happens to be either
overstocked or understocked with commodities or with labour; with work
done, or with work to be done. A public mourning raises the price of
black cloth (with which the market is almost always understocked
upon such occasions), and augments the profits of the merchants who
possess any considerable quantity of it. It has no effect upon the
wages of the weavers. The market is understocked with commodities, not
with labour; with work done, not with work to be done. It raises the
wages of journeymen tailors. The market is here understocked with
labour. There is an effectual demand for more labour, for more work to
be done than can be had. It sinks the price of coloured silks and
cloths, and thereby reduces the profits of the merchants who have
any considerable quantity of them upon hand. It sinks, too, the
wages of the workmen employed in preparing such commodities, for which
all demand is stopped for six months, perhaps for a twelvemonth. The
market is here 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.
    When by an increase in the effectual demand, the market price of
some particular commodity happens to rise a good deal above the
natural price, those who employ their stocks in supplying that
market are generally careful to conceal this change. If it was
commonly known, their great profit would tempt so many new rivals to
employ their stocks in the same way that, the effectual demand being
fully supplied, the market price would soon be reduced to the
natural price, and perhaps for some time even below it. If the
market is at a great distance from the residence of those who supply
it, they may sometimes be able to keep the secret for several years
together, and may so long enjoy their extraordinary profits without
any new rivals. Secrets of this kind, however, it must be
acknowledged, can seldom be long kept; and the extraordinary profit
can last very little longer than they are kept.
    Secrets in manufactures are capable of being longer kept than
secrets in trade. A dyer who has found the means of producing a
particular colour with materials which cost only half the price of
those commonly made use of, may, with good management, enjoy the
advantage of his discovery as long as he lives, and even leave it as a
legacy to his posterity. His extraordinary gains arise from the high
price which is paid for his private labour. They properly consist in
the high wages of that labour. But as they are repeated upon every
part of his stock, and as their whole amount bears, upon that account,
a regular proportion to it, they are commonly considered as
extraordinary profits of stock.
    Such enhancements of the market price are evidently the effects of
particular accidents, of which, however, the operation may sometimes
last for many years together.
    Some natural productions require such a singularity of soil and
situation that all the land in a great country, which is fit for
producing them, may not be sufficient to supply the effectual
demand. The whole quantity brought to market, therefore, may be
disposed of to those who are willing to give more than what is
sufficient to pay the rent of the land which produced them, together
with the wages of the labour, and the profits of the stock which
were employed in preparing and bringing them to market, according to
their natural rates. Such commodities may continue for whole centuries
together to be sold at this high price; and that part of it which
resolves itself into the rent of land is in this case the part which
is generally paid above its natural rate. The rent of the land which
affords such singular and esteemed productions, like the rent of
some vineyards in France of a peculiarly happy soil and situation,
bears no regular proportion to the rent of other equally fertile and
equally well-cultivated land in its neighbourhood. The wages of the
labour and the profits of the stock employed in bringing such
commodities to market, on the contrary, are seldom out of their
natural proportion to those of the other employments of labour and
stock in their neighbourhood.
    Such enhancements of the market price are evidently the effect
of natural causes which may hinder the effectual demand from ever
being fully supplied, and which may continue, therefore, to operate
for ever.
    A monopoly granted either to an individual or to a trading company
has the same effect as a secret in trade or manufactures. The
monopolists, by keeping the market constantly understocked, by never
fully supplying the effectual demand, sell their commodities much
above the natural price, and raise their emoluments, whether they
consist in wages or profit, greatly above their natural rate.
    The price of monopoly is upon every occasion the highest which can
be got. The natural price, or the price of free competition, on the
contrary, is the lowest which can be taken, not upon every occasion,
indeed, but for any considerable time together. The one is upon
every occasion the highest which can be squeezed out of the buyers, or
which, it is supposed, they will consent to give: the other is the
lowest which the sellers can commonly afford to take, and at the
same time continue their business.
    The exclusive privileges of corporations, statutes of
apprenticeship, and all those laws which restrain, in particular
employments, the competition to a smaller number than might
otherwise go into them, have the same tendency, though in a less
degree. They are a sort of enlarged monopolies, and may frequently,
for ages together, and in whole classes of employments, keep up the
market price of particular commodities above the natural price, and
maintain both the wages of the labour and the profits of the stock
employed about them somewhat above their natural rate.
    Such enhancements of the market price may last as long as the
regulations of 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 employments. The effect of such
regulations, however, is not near so durable in sinking the
workman's wages below, as in raising them above their natural rate.
Their operation in the one way may endure for many centuries, but in
the other it can last no longer than the lives of some of the
workmen who were bred to the business in the time of its prosperity.
When they are gone, the number of those who are afterwards educated to
the trade will naturally suit itself to the effectual demand. The
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
concerning the deviations, whether occasional or permanent, of the
market price of commodities from the natural price.
    The natural price itself varies with the natural rate of each of
its component parts, of wages, profit, and rent; and in every
society this rate varies according to their circumstances, according
to their riches or poverty, their advancing, stationary, or
declining condition. I shall, in the four following chapters,
endeavour to explain, as fully and distinctly as I can, the causes
of those different variations.
    First, I shall endeavour to explain what are the circumstances
which naturally determine the rate of wages, and in what manner
those circumstances are affected by the riches or poverty, by the
advancing, stationary, or declining state of the society.
    Secondly, I shall endeavour to 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
different employments of labour and stock; yet a certain proportion
seems commonly to take place between both the pecuniary wages in all
the different employments of labour, and the pecuniary profits in
all the different employments of stock. This proportion, it will
appear hereafter, depends partly upon the nature of the different
employments, and partly upon the different laws and policy of the
society in which they are carried on. But though in many respects
dependent upon the laws and policy, this proportion seems to be little
affected by the riches or poverty of that society; by its advancing,
stationary, or declining condition; but to remain the same or very
nearly the same in all those different states. I shall, in the third
place, endeavour to explain all the different circumstances which
regulate this proportion.
    In the fourth and last place, I shall endeavour to 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.
                            CHAPTER VIII
                       Of the Wages of Labour

    THE produce of labour constitutes the natural recompense or
wages of labour.
    In that original state of things, which precedes both the
appropriation of land and the accumulation of stock, the whole produce
of labour belongs to the labourer. He has neither landlord nor
master to share with him.
    Had this state continued, the wages of labour would have augmented
with all those improvements in its productive powers to which the
division of labour gives occasion. All things would gradually have
become cheaper. They would have been produced by a smaller quantity of
labour; and as the commodities produced by equal quantities of
labour would naturally in this state of things be exchanged for one
another, they would have been purchased likewise with the produce of a
smaller quantity.
    But though all things would have become cheaper in reality, in
appearance many things might have become dearer than before, or have
been exchanged for a greater quantity of other goods. Let us
suppose, for example, that in the greater part of employments the
productive powers of labour had been improved to ten fold, or that a
day's labour could produce ten times the quantity of work which it had
done originally; but that in a particular employment they had been
improved, only to double, or that a day's labour could produce only
twice the quantity of work which it had done before. In exchanging the
produce of a day's labour in the greater part of employments for
that of a day's labour in this particular one, ten times the
original quantity of work in them would purchase only twice the
original quantity in it. Any particular quantity in it, therefore, a
pound weight, for example, would appear to be five times dearer than
before. In reality, however, it would be twice as cheap. Though it
required five times the quantity of other goods to purchase it, it
would require only half the quantity of labour either to purchase or
to produce it. The acquisition, therefore, would be twice as easy as
before.
    But this original state of things, in which the labourer enjoyed
the whole produce of his own labour, could not last beyond the first
introduction of the appropriation of land and the accumulation of
stock. It was at an end, therefore, long before the most
considerable improvements were made in the productive powers of
labour, and it would be to no purpose to trace further what might have
been its effects upon the recompense or wages of labour.
    As soon as land becomes private property, the landlord demands a
share of almost all the produce which the labourer can either raise,
or collect from it. His rent makes the first deduction from the
produce of the labour which is employed upon land.
    It seldom happens that the person who tills the ground has
wherewithal to maintain himself till he reaps the harvest. His
maintenance is generally advanced to him from the stock of a master,
the farmer who employs him, and who would have no interest to employ
him, unless he was to share in the produce of his labour, or unless
his stock was to be replaced to him with a profit. This profit,
makes a second deduction from the produce of the labour which is
employed upon land.
    The produce of almost all other labour is liable to the like
deduction of profit. In all arts and manufactures the greater part
of the workmen stand in need of a master to advance them the materials
of their work, and their wages and maintenance till it be completed.
He shares in the produce of their labour, or in the value which it
adds to the materials upon which it is bestowed; and in this share
consists his profit.
    It sometimes happens, indeed, that a single independent workman
has stock sufficient both to purchase the materials of his work, and
to maintain himself till it be completed. He is both master and
workman, and enjoys the whole produce of his own labour, or the
whole value which it adds to the materials upon which it is
bestowed. It includes what are usually two distinct revenues,
belonging to two distinct persons, the profits of stock, and the wages
of labour.
    Such cases, however, are not very frequent, and in every part of
Europe, twenty workmen serve under a master for one that is
independent; and the wages of labour are everywhere understood to
be, what they usually are, when the labourer is one person, and the
owner of the stock which employs him another.
    What are the common wages of labour, depends everywhere upon the
contract usually made between those two parties, whose interests are
by no means the same. The workmen desire to get as much, the masters
to give as little as possible. The former are disposed to combine in
order to raise, the latter in order to lower the wages of labour.
    It is not, however, difficult to foresee which of the two
parties must, upon all ordinary occasions, have the advantage in the
dispute, and force the other into a compliance with their terms. The
masters, being fewer in number, can combine much more easily; and
the law, besides, authorizes, or at least does not prohibit their
combinations, while it prohibits those of the workmen. We have no acts
of parliament against combining to lower the price of work; but many
against combining to raise it. In all such disputes the masters can
hold out much longer. A landlord, a farmer, a master manufacturer, a
merchant, though they did not employ a single workman, could generally
live a year or two upon the stocks which they have already acquired.
Many workmen could not subsist a week, few could subsist a month,
and scarce any a year without employment. In the long run the
workman may be as necessary to his master as his master is to him; but
the necessity is not so immediate.
    We rarely hear, it has been said, of the combinations of
masters, though frequently of those of workmen. But whoever
imagines, upon this account, that masters rarely combine, is as
ignorant of the world as of the subject. Masters are always and
everywhere in a sort of tacit, but constant and uniform combination,
not to raise the wages of labour above their actual rate. To violate
this combination is everywhere a most unpopular action, and a sort
of reproach to a master among his neighbours and equals. We seldom,
indeed, hear of this combination, because it is the usual, and one may
say, the natural state of things, which nobody ever hears of. Masters,
too, sometimes enter into particular combinations to sink the wages of
labour even below this rate. These are always conducted with the
utmost silence and secrecy, till the moment of execution, and when the
workmen yield, as they sometimes do, without resistance, though
severely felt by them, they are never heard of by other people. Such
combinations, however, are frequently resisted by a contrary defensive
combination of the workmen; who sometimes too, without any provocation
of this kind, combine of their own accord to raise 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 combinations, which, partly from
the interposition of the civil magistrate, partly from the necessity
superior steadiness of the masters, partly from the necessity which
the greater part of the workmen are under of submitting for the sake
of present subsistence, generally end in nothing, but the punishment
or ruin of the ringleaders.
    But though in disputes with their workmen, masters must
generally have the advantage, there is, however, a certain rate
below which it seems impossible to reduce, for any considerable
time, the ordinary wages even of the lowest species of labour.
    A man must always live by his work, and his wages must at least be
sufficient to maintain him. They must even upon most occasions be
somewhat more; otherwise it would be impossible for him to bring up
a family, and the race of such workmen could not last beyond the first
generation. Mr. Cantillon seems, upon this account, to suppose that
the lowest species of common labourers must everywhere earn at least
double their own maintenance, in order that one with another they
may be enabled to bring up two children; the labour of the wife, on
account of her necessary attendance on the children, being supposed no
more than sufficient to provide for herself. But one half the children
born, it is computed, die before the age of manhood. The poorest
labourers, therefore, according to this account, must, one with
another, attempt to rear at least four children, in order that two may
have an equal chance of living to that age. But the necessary
maintenance of four children, it is supposed, may be nearly equal to
that of one man. The labour of an able-bodied slave, the same author
adds, is computed to be worth double his maintenance; and that of
the meanest labourer, he thinks, cannot be worth less than that of
an ablebodied slave. Thus far at least seems certain, that, in order
to bring up a family, the labour of the husband and wife together
must, even in the lowest species of common labour, be able to earn
something more than what is precisely necessary for their own
maintenance; but in what proportion, whether in that above
mentioned, or 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 consistent
with common humanity.
    When in any country the demand for those who live by wages,
labourers, journeymen, servants of every kind, is continually
increasing; when every year furnishes employment for a greater
number than had been employed the year before, the workmen have no
occasion to combine in order to raise their wages. The scarcity of
hands occasions a competition among masters, who bid against one
another, in order to get workmen, and thus voluntarily break through
the natural combination of masters not to raise wages.
    The demand for those who live by wages, it is evident, cannot
increase but in proportion to the increase of the funds which are
destined for the payment of wages. These funds are of two kinds;
first, revenue which is over and above what is necessary for the
maintenance; and, secondly, the stock which is over and above what
is necessary for the employment of their masters.
    When the landlord, annuitant, or monied man, has a greater revenue
than what he judges sufficient to maintain his own family, he
employs either the whole or a part of the surplus in maintaining one
or more menial servants. Increase this surplus, and he will
naturally increase the number of those servants.
    When an independent workman, such as a weaver or shoemaker, has
got more stock than what is sufficient to purchase the materials of
his own work, and to maintain himself till he can dispose of it, he
naturally employs one or more journeymen with the surplus, in order to
make a profit by their work. Increase this surplus, and he will
naturally increase the number of his journeymen.
    The demand for those who live by wages, therefore, necessarily
increases with the increase of the revenue and stock of every country,
and cannot possibly increase without it. The increase of revenue and
stock is the increase of national wealth. The demand for those who
live by wages, therefore, naturally increases with the increase of
national wealth, and cannot possibly increase without it.
    It is not the actual greatness of national wealth, but its
continual increase, which occasions a rise in the wages of labour.
It is not, accordingly, in the richest countries, but in the most
thriving, or in those which are growing rich the fastest, that the
wages of labour are highest. England is certainly, in the present
times, a much richer country than any part of North America. The wages
of labour, however, are much higher in North America than in any
part of England. In the province of New York, common labourers 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
shillings and sixpence sterling; house carpenters and bricklayers,
eight shillings currency, equal to four shillings and sixpence
sterling; journeymen tailors, five shillings currency, equal to
about two shillings and tenpence sterling. These prices are all
above the London price; and wages are said to be as high in the
other colonies as in New York. The price of provisions is everywhere
in North America much lower than in England. A dearth has never been
known there. In the worst seasons they have always had a sufficiency
for themselves, though less for exportation. If the money price of
labour, therefore, be higher than it is anywhere in the mother
country, its real price, the real command of the necessaries and
conveniencies of life which it conveys to the labourer must be
higher in a still greater proportion.
    But though North America is not yet so rich as England, it is much
more thriving, and advancing with much greater rapidity to the further
acquisition of riches. The most decisive mark of the prosperity of any
country is the increase of the number of its inhabitants. In Great
Britain, and most other European countries, they are not supposed to
double in less than five hundred years. In the British colonies in
North America, it has been found that they double in twenty or
five-and-twenty years. Nor in the present times is this increase
principally owing to the continual importation of new inhabitants, but
to the great multiplication of the species. Those who live to old age,
it is said, frequently see there from fifty to a hundred, and
sometimes many more, descendants from their own body. Labour is
there so well rewarded that a numerous family of children, instead
of being a burthen, is a source of opulence and prosperity to the
parents. The labour of each child, before it can leave their house, is
computed to be worth a hundred pounds clear gain to them. A young
widow with four or five young children, who, among the middling or
inferior ranks of people in Europe, would have so little chance for
a second husband, is there frequently courted as a sort of fortune.
The value of children is the greatest of all encouragements to
marriage. We cannot, therefore, wonder that the people in North
America should generally marry very young. Notwithstanding the great
increase occasioned by such early marriages, there is a continual
complaint of the scarcity of hands in North America. The demand for
labourers, the funds destined for maintaining them, increase, it
seems, still faster than they can find labourers to employ.
    Though the wealth of a country should be very great, yet if it has
been long stationary, we must not expect to find the wages of labour
very high in it. The funds destined for the payment of wages, the
revenue and stock of its inhabitants, may be of the greatest extent;
but if they have continued for several centuries of the same, or
very nearly of the same extent, the number of labourers employed every
year could easily supply, and even more than supply, the number wanted
the following year. There could seldom be any scarcity of hands, nor
could the masters be obliged to bid against one another in order to
get them. The hands, on the contrary, would, in this case, naturally
multiply beyond their employment. There would be a constant scarcity
of employment, and the labourers would be obliged to bid against one
another in order to get it. If in such a country the wages of labour
had ever been more than sufficient to maintain the labourer, and to
enable him to bring up a family, the competition of the labourers
and the interest of the masters would soon reduce them to this
lowest rate which is consistent with common humanity. China has been
long one of the richest, that is, one of the most fertile, best
cultivated, most industrious, and most populous countries in world. It
seems, however, to have been long stationary. Marco Polo, who
visited it more than five hundred years ago, describes its
cultivation, industry, and populousness, almost in the same terms in
which they are described by travellers in the present times. It had
perhaps, even long before his time, acquired that full complement of
riches which the nature of its laws and institutions permits it to
acquire. The accounts of all travellers, inconsistent in many other
respects, agree in the low wages of labour, and in the difficulty
which a labourer finds in bringing up a family in China. If by digging
the ground a whole day he can get what will purchase a small
quantity of rice in the evening, he is contented. The condition of
artificers is, if possible, still worse. Instead of waiting indolently
in their workhouses, for the calls of their customers, as in Europe,
they are continually running about the streets with the tools of their
respective trades, offering their 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 destroying them. In all great towns several are every night
exposed in the street, or drowned like puppies in the water. The
performance of this horrid office is even said to be the avowed
business by which some people earn their subsistence.
    China, however, though it may perhaps stand still, does not seem
to go backwards. Its towns are nowhere deserted by their
inhabitants. The lands which had once been cultivated are nowhere
neglected. The same or very nearly the same annual labour must
therefore continue to be performed, and the funds destined for
maintaining it must not, consequently, be sensibly diminished. The
lowest class of labourers, therefore, notwithstanding their scanty
subsistence, must some way or another make shift to continue their
race so far as to keep up their usual numbers.
    But it would be otherwise in a country where the funds destined
for the maintenance of labour were sensibly decaying. Every year the
demand for servants and labourers would, in all the different
classes of employments, be less than it had been the year before. Many
who had been bred in the superior classes, not being able to find
employment in their own business, would be glad to seek it in the
lowest. The lowest class being not only overstocked with its own
workmen, but with the overflowings of all the other classes, the
competition for employment would be so great in it, as to reduce the
wages of labour to the most miserable and scanty subsistence of the
labourer. Many would not be able to find employment even upon these
hard terms, but would either starve, or be driven to seek a
subsistence either by begging, or by the perpetration perhaps of the
greatest enormities. Want, famine, and mortality would immediately
prevail in that class, and from thence extend themselves to all the
superior classes, till the number of inhabitants in the country was
reduced to what could easily be maintained by the revenue and stock
which remained in it, and which had escaped either the tyranny or
calamity which had destroyed the rest. This perhaps is nearly the
present state of Bengal, and of some other of the English
settlements in the East Indies. In a fertile country which had
before been much depopulated, where subsistence, consequently,
should not be very difficult, and where, notwithstanding, three or
four hundred thousand people die of hunger in one year, we may be
assured that the funds destined for the maintenance of the labouring
poor are fast decaying. The difference between the genius of the
British constitution which protects and governs North America, and
that of the mercantile company which oppresses and domineers in the
East Indies, cannot perhaps be better illustrated than by the
different state of those countries.
    The liberal reward of labour, therefore, as it is the necessary
effect, so it is the natural symptom of increasing national wealth.
The scanty maintenance of the labouring poor, on the other hand, is
the natural symptom that things are at a stand, and their starving
condition that they are going fast backwards.
    In Great Britain the wages of labour seem, in the present times,
to be evidently more than what is precisely necessary to enable the
labourer to bring up a family. In order to satisfy ourselves upon this
point it will not be necessary to enter into any tedious or doubtful
calculation of what may be the lowest sum upon which it is possible to
do this. There are many plain symptoms that the wages of labour are
nowhere in this country regulated by this lowest rate which is
consistent with common humanity.
    First, in almost every part of Great Britain there is a
distinction, even in the lowest species of labour, between summer
and winter wages. Summer wages are always highest. But on account of
the extraordinary expense of fuel, the maintenance of a family is most
expensive in winter. Wages, therefore, being highest when this expense
is lowest, it seems evident that they are not regulated by what is
necessary for this expense; but by the quantity and supposed value
of the work. A labourer, it may be said indeed, ought to save part
of his summer wages in order to defray his winter expense; and that
through the whole year they do not exceed what is necessary to
maintain his family through the whole year. A slave, however, or one
absolutely dependent on us for immediate subsistence, would not be
treated in this manner. His daily subsistence would be proportioned to
his daily necessities.
    Secondly, the wages of labour do not in Great Britain fluctuate
with the price of provisions. These vary everywhere from year to year,
frequently from month to month. But in many places the money price
of labour remains uniformly the same sometimes for half a century
together. If in these places, therefore, the labouring poor can
maintain their families in dear years, they must be at their ease in
times of moderate plenty, and in affluence in those of extraordinary
cheapness. The high price of provisions during these ten years past
has not in many parts of the kingdom been accompanied with any
sensible rise in the money price of labour. It has, indeed, in some,
owing probably more to the increase of the demand for labour than to
that of the price of provisions.
    Thirdly, as the price of provisions varies more from year to
year than the wages of labour, so, on the other hand, the wages of
labour vary more from place to place than the price of provisions. The
prices of bread and butcher's meat are generally the same or very
nearly the same through the greater part of the United Kingdom.
These and most other things which are sold by retail, the way in which
the labouring poor buy all things, are generally fully as cheap or
cheaper in great towns than in the remoter parts of the country, for
reasons which I shall have occasion to explain hereafter. But the
wages of labour in a great town and its neighbourhood are frequently a
fourth or a fifth part, twenty or five-and-twenty per cent higher than
at a few miles distance. Eighteenpence a day may be reckoned the
common price of labour in London and its neighbourhood. At a few miles
distance it falls to fourteen and fifteenpence. Tenpence may be
reckoned its price in Edinburgh and its neighbourhood. At a few
miles distance it falls to eightpence, the usual price of common
labour through the greater part of the low country of Scotland,
where it varies a good deal less than in England. Such a difference of
prices, which it seems is not always sufficient to transport a man
from one parish to another, would necessarily occasion so great a
transportation of the most bulky commodities, not only from one parish
to another, but from one end of the kingdom, almost from one end of
the world to the other, as would soon reduce them more nearly to a
level. After all that has been said of the levity and inconstancy of
human nature, it appears evidently from experience that 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 affluence where it is highest.
    Fourthly, the variations in the price of labour not only do not
correspond either in place or time with those in the price of
provisions, but they are frequently quite opposite.
    Grain, the food of the common people, is dearer in Scotland than
in England, whence Scotland receives almost every year very large
supplies. But English corn must be sold dearer in Scotland, the
country to which it is brought, than in England, the country from
which it comes; and in proportion to its quality it cannot be sold
dearer in Scotland than the Scotch corn that comes to the same
market in competition with it. The quality of grain depends chiefly
upon the quantity of flour or meal which it yields at the mill, and in
this respect English grain is so much superior to the Scotch that,
though often dearer in appearance, or in proportion to the measure
of its bulk, it is generally cheaper in reality, or in proportion to
its quality, or even to the measure of its weight. The price of
labour, on the contrary, is dearer in England than in Scotland. If the
labouring poor, therefore, can maintain their families in the one part
of the United Kingdom, they must be in affluence in the other. Oatmeal
indeed supplies the common people in Scotland with the greatest and
the best part of their food, which is in general much inferior to that
of their neighbours of the same rank in England. This difference,
however, in the mode of their subsistence is not the cause, but the
effect of the difference in their wages; though, by a strange
misapprehension, I have frequently heard it represented as the
cause. It is not because one man keeps a coach while his neighbour
walks afoot that the one is rich and the other poor; but because the
one is rich he keeps a coach, and because the other is poor he walks
afoot.
    During the course of the last century, taking one year with
another, grain was dearer in both parts of the United Kingdom than
during that of the present. This is a matter of fact which cannot
now admit of any reasonable doubt; and the proof of it is, if
possible, still more decisive with regard to Scotland than with regard
to England. It is in Scotland supported by the evidence of the
public fiars, annual valuations made upon oath, according to the
actual state of the markets, of all the different sorts of grain in
every different county of Scotland. If such direct proof could require
any collateral evidence to confirm it, I would observe that this has
likewise been the case in France, and probably in most other parts
of Europe. With regard to France there is the clearest proof. But
though it is certain that in both parts of the United Kingdom grain
was somewhat dearer in the last century than in the present, it is
equally certain that labour was much cheaper. If the labouring poor,
therefore, could bring up their families then, they must be much
more at their ease now. In the last century, the most usual
day-wages of common labour through the greater part of Scotland were
sixpence in summer and fivepence in winter. Three shillings a week,
the same price very nearly, still continues to be paid in some parts
of the Highlands and Western Islands. Through the greater part of
the low country the most usual wages of common labour are now
eightpence a day; tenpence, sometimes a shilling about Edinburgh, in
the counties which border upon England, probably on account of that
neighbourhood, and in a few other places where there has lately been a
considerable rise in the demand for labour, about Glasgow, Carron,
Ayrshire, etc. In England the improvements of agriculture,
manufactures, and commerce began much earlier than in Scotland. The
demand for labour, and consequently its price, must necessarily have
increased with those improvements. In the last century, accordingly,
as well as in the present, the wages of labour were higher in
England than in Scotland. They have risen, too, considerably since
that time, though, on account of the greater variety of wages paid
there in different places, it is more difficult to ascertain how much.
In 1614, the pay of a foot soldier was the same as in the present
times, eightpence a day. When it was first established it would
naturally be regulated by the usual wages of common labourers, the
rank of people from which foot soldiers are commonly drawn. Lord Chief
Justice Hales, who wrote in the time of Charles II, computes the
necessary expense of a labourer's family, consisting of six persons,
the father and mother, two children able to do something, and two
not able, at ten shillings a week, or twenty-six pounds a year. If
they cannot earn this by their labour, they must make it up, he
supposes, either by begging or stealing. He appears to have inquired
very carefully into this subject. In 1688, Mr. Gregory King, whose
skill in political arithmetic 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 expense of
such families to be about twenty pence a head. Both the pecuniary
income and expense of such families have increased considerably
since that time through the greater part of the kingdom; in some
places more, and in some less; though perhaps scarce anywhere so
much as some exaggerated accounts of the present wages of labour
have lately represented them to the public. The price of labour, it
must be observed, cannot be ascertained very accurately anywhere,
different prices being often paid at the same place and for the same
sort of labour, not only according to the different abilities of the
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 show
that law can never regulate them properly, though it has often
pretended to do so.
    The real recompense of labour, the real quantity of the
necessaries and conveniences of life which it can procure to the
labourer, has, during the course of the present century, increased
perhaps in a still greater proportion than its money price. Not only
grain has become somewhat cheaper, but many other things from which
the industrious poor derive an agreeable and wholesome variety of food
have become a great deal cheaper. Potatoes, for example, do not at
present, through the greater part of the kingdom, cost half the
price which they used to do thirty or forty years ago. The same
thing may be said of turnips, carrots, cabbages; things which were
formerly never raised but by the spade, but which are now commonly
raised by the plough. All sort of garden stuff, too, has become
cheaper. The greater part of the apples and even of the onions
consumed in Great Britain were in the last century imported from
Flanders. The great improvements in the coarser manufactures of both
linen and woollen cloth furnish the labourers with cheaper and
better clothing; 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 labouring 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 luxury extends
itself even to the lowest ranks of the people, and that the
labouring poor will not now be contented with the same food, clothing,
and lodging which satisfied them in former times, may convince us that
it is not the money price of labour only, but its real recompense,
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
inconveniency to the whole. No society can surely be flourishing and
happy, of which the far greater part of the members are poor and
miserable. It is but equity, besides, that they who feed, clothe,
and lodge the whole body of the people, should have such a share of
the produce of their own labour as to be themselves tolerably well
fed, clothed, and lodged.
    Poverty, though it no doubt discourages, does not always prevent
marriage. It seems even to be favourable to generation. A half-starved
Highland woman frequently bears more than twenty children, while a
pampered fine lady is often incapable of bearing any, and is generally
exhausted by two or three. Barrenness, so frequent among women of
fashion, is very rare among those of inferior station. Luxury in the
fair sex, while it inflames perhaps the passion for enjoyment, seems
always to weaken, and frequently to destroy altogether, the powers
of generation.
    But poverty, though it does not prevent the generation, is
extremely unfavourable to the rearing of children. The tender plant is
produced, but in so cold a soil and so severe a climate, soon
withers and dies. It is not uncommon, I have been frequently told,
in the Highlands of Scotland for a mother who has 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
children, however, is seldom seen anywhere than about a barrack of
soldiers. Very few of them, it seems, arrive at the age of thirteen or
fourteen. In some places one half the children 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 everywhere be found chiefly among the children of the
common people, who cannot afford to tend them with the same care as
those of better station. Though their marriages are generally more
fruitful than those of people of fashion, a smaller proportion of
their children arrive at maturity. In foundling hospitals, and among
the children brought up by parish charities, the mortality is still
greater than among those of the common people.
    Every species of animals naturally multiplies in proportion to the
means of their subsistence, and no species can ever multiply beyond
it. But in civilised society it is only among the inferior ranks of
people that the scantiness of subsistence can set limits to the
further multiplication of the human species; and it can do so in no
other way than by destroying a great part of the children which
their fruitful marriages produce.
    The liberal reward of labour, by enabling them to provide better
for their children, and consequently to bring up a greater number,
naturally tends to widen and extend those limits. It deserves to be
remarked, too, that it necessarily does this as nearly as possible
in the proportion which the demand for labour requires. If this demand
is continually increasing, the reward of labour must necessarily
encourage in such a manner the marriage and multiplication of
labourers, as may enable them to supply that continually increasing
demand by a continually increasing population. If the reward should at
any time be less than what was requisite for this purpose, the
deficiency of hands would soon raise it; and if it should at any
time be more, their excessive multiplication would soon lower it to
this necessary rate. The market would be so much understocked with
labour in the one case, and so much overstocked in the other, as would
soon force back its price to that proper rate which the
circumstances of the society required. It is in this manner that the
demand for men, like that for any other commodity, necessarily
regulates the production of men; quickens it when it goes on too
slowly, and stops it when it advances too fast. It is this demand
which regulates and determines the state of propagation in all the
different countries of the world, in North America, in Europe, and
in China; which renders it rapidly progressive in the first, slow
and gradual in the second, and altogether stationary in the last.
    The wear and tear of a slave, it has been said, is at the
expense of his master; but that of a free servant is at his own
expense. The wear and tear of the latter, however, is, in reality,
as much at the expense of his master as that of the former. The
wages paid to journeymen and servants of every kind must be such as
may enable them, one with another, to continue the race of
journeymen and servants, according as the increasing, diminishing,
or stationary demand of the society may happen to require. But
though the wear and tear of a free servant be equally at the expense
of his master, it generally costs him much less than that of a
slave. The fund destined for replacing or repairing, if I may say
so, the wear and tear of the slave, is commonly managed by a negligent
master or careless overseer. That destined for performing the same
office with regard to the free man, is managed by the free man
himself. The disorders which generally prevail in the economy of the
rich, naturally introduce themselves into the management of the
former: the strict frugality and parsimonious attention of the poor as
naturally establish themselves in that of the latter. Under such
different management, the same purpose must require very different
degrees of expense to execute it. It appears, accordingly, from the
experience of all ages and nations, I believe, that the work done by
freemen comes cheaper in the end than that performed by slaves. It
is found to do so even at Boston, New York, and Philadelphia, where
the wages of common labour are so very high.
    The liberal reward of labour, therefore, as it is the effect of
increasing wealth, so it is the cause of increasing population. To
complain of it is to lament over the necessary 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 acquisition,
rather than when it has acquired its full complement of riches, that
the condition of the labouring poor, of the great body of the
people, seems to be the happiest and the most comfortable. It is
hard in the stationary, and miserable in the declining state. The
progressive state is in reality the cheerful and the hearty state to
all the different orders of the society. The stationary is dull; the
declining, melancholy.
    The liberal reward of labour, as it encourages the propagation, so
it increases the industry of the common people. The wages of labour
are the encouragement of industry, which, like every other human
quality, improves in proportion to the encouragement it receives. A
plentiful subsistence increases the bodily strength of the labourer,
and the comfortable hope of bettering his condition, and of ending his
days perhaps in ease and plenty, animates him to exert that strength
to the utmost. Where wages are high, accordingly, we shall always find
the workmen more active, diligent, and expeditious than where they are
low: in England, for example, than in Scotland; in the neighbourhood
of great towns than in remote country places. Some workmen, indeed,
when they can earn in four days what will maintain them through the
week, will be idle the other three. This, however, is by no means
the case with the greater part. Workmen, on the contrary, when they
are liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a few
years. A carpenter in London, and in some other places, is not
supposed to last in his utmost vigour above eight years. Something
of the same kind happens in many other trades, in which the workmen
are paid by the piece, as they generally are in manufactures, and even
in country labour, wherever wages are higher than ordinary. Almost
every class of artificers is subject to some peculiar infirmity
occasioned by excessive application to their peculiar species of work.
Ramuzzini, an eminent Italian physician, has written a particular book
concerning such diseases. We do not reckon our soldiers the most
industrious set of people among us. Yet when soldiers have been
employed in some particular sorts of work, and liberally paid by the
piece, their officers have frequently been obliged to stipulate with
the undertaker, that they should not be allowed to earn above a
certain sum every day, according to the rate at which they were
paid. Till this stipulation was made, mutual emulation and the
desire of greater gain frequently prompted them to overwork
themselves, and to hurt their health by excessive labour. Excessive
application during four days of the week is frequently the real
cause of the idleness of the other three, so much and so loudly
complained of. Great labour, either of mind or body, continued for
several days together, is in most men naturally followed by a great
desire of relaxation, which, if not restrained by force or by some
strong necessity, is almost irresistible. It is the call of nature,
which requires to be relieved by some indulgence, sometimes of ease
only, but sometimes, too, of dissipation and diversion. If it is not
complied with, the consequences are often dangerous, and sometimes
fatal, and such as almost always, sooner or later, brings on the
peculiar infirmity of the trade. If masters would always listen to the
dictates of reason and humanity, they have frequently occasion
rather to moderate than to animate the application of many of their
workmen. It will be found, I believe, in every sort of trade, that the
man who works so moderately as to be able to work constantly not
only preserves his health the longest, but, in the course of the year,
executes the greatest quantity of work.
    In cheap years, it is pretended, workmen are generally more
idle, and in dear ones more industrious than ordinary. A plentiful
subsistence, therefore, it has been concluded, relaxes, and a scanty
one quickens their industry. That a little more plenty than ordinary
may render some workmen idle, cannot well be doubted; but that it
should have this effect upon the greater part, or that men in
general should work better when they are ill fed than when they are
well fed, when they are disheartened than when they are in good
spirits, when they are frequently sick than when they are generally in
good health, seems not very probable. Years of dearth, it is to be
observed, are generally among the common people years of sickness
and mortality, which cannot fail to diminish the produce of their
industry.
    In years of plenty, servants frequently leave their masters, and
trust their subsistence to what they can make by their own industry.
But the same cheapness of provisions, by increasing the fund which
is destined for the maintenance of servants, encourages masters,
farmers especially, to employ a greater number. Farmers upon such
occasions expect more profit from their corn by maintaining a few more
labouring servants than by selling it at a low price in the market.
The demand for servants increases, while the number of those who offer
to supply that demand diminishes. The price of labour, therefore,
frequently rises in cheap years.
    In years of scarcity, the difficulty and uncertainty of
subsistence make all such people eager to return to service. But the
high price of provisions, by diminishing the funds destined for the
maintenance of servants, disposes masters rather to diminish than to
increase the number of those they have. In dear years, too, poor
independent workmen frequently consume the little 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, however, than to imagine
that men in general should work less when they work for themselves,
than when they work for other people. A poor independent workman
will generally be more industrious than even a journeyman who works by
the piece. The one enjoys the whole produce of his own industry; the
other shares it with his master. The one, in his separate
independent state, is less liable to the temptations of bad company,
which in large manufactories so frequently ruin the morals of the
other. The superiority of the independent workman over those
servants who are hired by the month or by the year, and whose wages
and maintenance are the same whether they do much or do little, is
likely to be still greater. Cheap years tend to increase the
proportion of independent workmen to journeymen and servants of all
kinds, and dear years to diminish it.
    A French author of great knowledge and ingenuity, Mr. Messance,
receiver of the taillies in the election of St. Etienne, endeavours to
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 Rouen. It appears from
his account, which is copied from the registers of the public offices,
that the quantity and value of the goods made in all those three
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 backwards nor forwards.
    The manufacture of linen in Scotland, and that of coarse
woollens in the West Riding of Yorkshire, are growing manufactures, of
which the produce is generally, though with some variations,
increasing both in quantity and value. Upon examining, however, the
accounts which have been published of their annual produce, I have not
been able to observe that its variations have had any sensible
connection with the dearness or cheapness of the seasons. In 1740, a
year of great scarcity, both manufactures, indeed, appear to have
declined very considerably. But in 1756, another year of great
scarcity, the Scotch manufacture made more than ordinary advances. The
Yorkshire manufacture, indeed, declined, and its produce did not
rise to what it had been in 1755 till 1766, after the repeal of the
American Stamp Act. In that and the following year it greatly exceeded
what it had ever been before, and it has continued to advance ever
since.
    The produce of all great manufactures for distant sale must
necessarily depend, not so much upon the dearness or cheapness of
the seasons in the countries where they are carried on as upon the
circumstances which affect the demand in the countries where they
are consumed; upon peace or war, upon the prosperity or declension
of other rival manufactures, and upon the good or bad humour of
their principal customers. A great part of the extraordinary work,
besides, which is probably done in cheap years, never enters the
public registers of manufactures. The men servants who leave their
masters become independent labourers. The women return to their
parents, and commonly spin in order to make clothes for themselves and
their families. Even the independent workmen do not always work for
public sale, but are employed by some of their neighbours in
manufactures for family use. The produce of their labour, therefore,
frequently makes no figure in those public registers of which the
records are sometimes published with so much parade, and from which
our merchants and manufacturers would often vainly pretend to announce
the prosperity or declension of the greatest empires.
    Though the variations in the price of labour not only do not
always correspond with those in the price of provisions, but are
frequently quite opposite, we must not, upon this account, imagine
that the price of provisions has no influence upon that of labour. The
money price of labour is necessarily regulated by two circumstances;
the demand for labour, and the price of the necessaries and
conveniences 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 determined
by what is requisite for purchasing this quantity. Though the money
price of labour, therefore, is sometimes high where the price of
provisions is low, it would be still higher, the demand continuing the
same, if the price of provisions was high.
    It is because the demand for labour increases in years of sudden
and extraordinary plenty, and diminishes in those of sudden and
extraordinary scarcity, that the money price of labour sometimes rises
in the one and sinks in the other.
    In a year of sudden and extraordinary plenty, there are funds in
the hands of many of the employers of industry sufficient to
maintain and employ a greater number of industrious people than had
been employed the year before; and this extraordinary number cannot
always be had. Those masters, therefore, who want more workmen bid
against one another, in order to get them, which sometimes raises both
the real and the money price of their labour.
    The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than they
had been the year before. A considerable number of people are thrown
out of employment, who bid 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 labour,
tends to lower its price, as the high price of provisions tends to
raise it. The plenty of a cheap year, on the contrary, by increasing
the demand, tends to raise the price of labour, as the cheapness of
provisions tends to lower it. In the ordinary variations of the
price of provisions those two opposite causes seem to counterbalance
one another, which is probably in part the reason why the wages of
labour are everywhere so much more steady and permanent than the price
of provisions.
    The increase in the wages of labour necessarily increases the
price of many commodities, by increasing that part of it which
resolves itself into wages, and so far tends to diminish their
consumption both at home and abroad. The same cause, however, which
raises the wages of labour, the increase of stock, tends to increase
its productive powers, and to make a smaller quantity of labour
produce a greater quantity of work. The owner of the stock which
employs a great number of labourers, necessarily endeavours, for his
own advantage, to make such a proper division and distribution of
employment that they may be enabled to produce the greatest quantity
of work possible. For the same reason, he endeavours to supply them
with the best machinery which either he or they can think of. What
takes place among the labourers in a particular workhouse takes place,
for the same reason, among those of a great society. The greater their
number, the more they naturally divide themselves into different
classes and subdivisions of employment. More heads are occupied in
inventing the most proper machinery for executing the work of each,
and it is, therefore, more likely to be invented. There 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.
                            CHAPTER IX
                      Of the Profits of Stock

    THE rise and fall in the profits of stock depend upon the same
causes with the rise and fall in the wages of labour, the increasing
or declining state of the wealth of the society; but those causes
affect the one and the other very differently.
    The increase of stock, which raises wages, tends to lower
profit. When the stocks of many rich merchants are turned into the
same trade, their mutual competition naturally tends to lower its
profit; and when there is a like increase of stock in all the
different trades carried on in the same society, the same
competition must produce the same effect in them all.
    It is not easy, it has already been observed, to ascertain what
are the average wages of labour even in a particular place, and at a
particular time. We can, even in this case, seldom determine more than
what are the most usual wages. But even this can seldom be done with
regard to the profits of stock. Profit is so very fluctuating that the
person who carries on a particular trade cannot always tell you
himself what is the average of his annual profit. It is affected not
only by every variation of price in the commodities which he deals in,
but by the good or bad fortune both of his rivals and of his
customers, and by a thousand other accidents to which goods when
carried either by sea or by land, or even when stored in a
warehouse, are liable. It varies, therefore, not only from year to
year, but from day to day, and almost from hour to hour. To
ascertain what is the average profit of all the different trades
carried on in a great kingdom must be much more difficult; and to
judge of what it may have been formerly, or in remote periods of time,
with any degree of precision, must be altogether impossible.
    But though it may be impossible to determine, with any degree of
precision, what are or were the average profits of stock, either in
the present or in ancient times, some notion may be formed of them
from the interest of money. It may be laid down as a maxim, that
wherever a great deal can be made by the use of money, a great deal
will commonly be given for the use of it; and that wherever little can
be made by it, less will commonly be given for it. According,
therefore, as the usual market rate of interest varies in any country,
we may be assured that the ordinary profits of stock must vary with
it, must sink as it sinks, and rise as it rises. The progress of
interest, therefore, may lead us to form some notion of the progress
of profit.
    By the 37th of Henry VIII all interest above ten per cent was
declared unlawful. More, it seems, had sometimes been taken before
that. In the reign of Edward VI religious zeal prohibited all
interest. This prohibition, however, like all others of the same kind,
is said to have produced no effect, and probably rather increased than
diminished the evil of usury. The statute of Henry VIII was revived by
the 13th of Elizabeth, c. 8, and ten per cent continued to be the
legal rate of interest till the 21st of James I, when it was
restricted to eight per cent. It was reduced to six per cent soon
after the Restoration, and by the 12th of Queen Anne to five per cent.
All these different statutory regulations seem to have been made
with great propriety. They seem to have followed and not to have
gone before the market rate of interest, or the rate at which people
of good credit usually borrowed. Since the time of Queen Anne, five
per cent seems to have been rather above than below the market rate.
Before the late war, the government borrowed at three per cent; and
people of good credit in the capital, and in many other parts of the
kingdom, at three and a half, four, and four and a half per cent.
    Since the time of Henry VIII the wealth and revenue of the country
have been continually advancing, and, in the course of their progress,
their pace seems rather to have been gradually accelerated than
retarded. They seem not only to have been going on, but to have been
going on faster and faster. The wages of labour have been
continually increasing during the same period, and in the greater part
of the different branches of trade and manufactures the profits of
stock have been diminishing.