AN INQUIRY INTO THE NATURE AND CAUSES OF

THE WEALTH OF NATIONS
by

Adam Smith
AN ELECTRONIC CLASSICS SERIES PUBLICATION

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Contents
INTRODUCTION AND PLAN OF THE WORK ... 9

BOOK I ................................................ 12
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. .............................................................. 12 CHAPTER I .............................................................. 12 OF THE DIVISION OF LABOUR.......................... 12 CHAPTER II ............................................................ 20 OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR .................... 20 CHAPTER III ........................................................... 24 THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET .............. 24 CHAPTER IV ........................................................... 28 OF THE ORIGIN AND USE OF MONEY............. 28 CHAPTER V ............................................................ 34 OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY ...................... 34

CHAPTER VI ........................................................... 49 OF THE COMPONENT PART OF THE PRICE OF COMMODITIES ................................................ 49 CHAPTER VII .......................................................... 56 OF THE NATURAL AND MARKET PRICE OF COMMODITIES ................................................ 56 CHAPTER VIII ........................................................ 64 OF THE WAGES OF LABOUR .............................. 64 CHAPTER IX ........................................................... 84 OF THE PROFITS OF STOCK ............................... 84 CHAPTER X ............................................................ 94 OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK . 94 CHAPTER XI ......................................................... 133 OF THE RENT OF LAND .................................... 133

BOOK II ............................................. 235
OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK ................................. 235 INTRODUCTION ................................................ 235 CHAPTER I ............................................................ 238 OF THE DIVISION OF STOCK .......................... 238

CHAPTER II .......................................................... 245 OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL ........... 245 CHAPTER III ......................................................... 286 OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR ........................................................... 286 CHAPTER IV ......................................................... 303 OF STOCK LENT AT INTEREST ........................ 303 CHAPTER V .......................................................... 311 OF THE DIFFERENT EMPLOYMENTS OF CAPITALS .................................................................. 311

BOOK III ............................................ 325
OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS ............................. 325 CHAPTER I ............................................................ 325 OF THE NATURAL PROGRESS OF OPULENCE 325 CHAPTER II .......................................................... 330 OF THE DISCOURAGEMENT OF ..................... 330 AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE ............................................................. 330

CHAPTER III ......................................................... 340 OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE ............................................................. 340 CHAPTER IV ......................................................... 350 HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY ........................................................ 350

BOOK IV ............................................ 362
OF SYSTEMS OF POLITICAL ECONOMY ........ 362 CHAPTER I ............................................................ 363 OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM .................................. 363 CHAPTER II .......................................................... 383 OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME ................... 383 CHAPTER III ......................................................... 401 OF THE EXTRAORDINARY RESTRAINTS UPON THE IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS ........................ 401
Part I — Of the Unreasonableness of those Restraints, even upon thePrinciples of the Commercial System. ....................................... 401 PART II. — Of the Unreasonableness of those extraordinary Restraints, upon other Principles. ................................................. 415

CHAPTER IV ......................................................... 425 OF DRAWBACKS .................................................. 425 CHAPTER V .......................................................... 430 OF BOUNTIES ...................................................... 430 CHAPTER VI ......................................................... 464 OF TREATIES OF COMMERCE .......................... 464 CHAPTER VII ........................................................ 475 OF COLONIES ...................................................... 475 CHAPTER VIII ...................................................... 553 CONCLUSION OF THE MERCANTILE SYSTEM 553 CHAPTER IX ......................................................... 571 OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY ................... 571 APPENDIX TO BOOK IV ................................... 595

BOOK V ............................................. 598
OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH ....................................... 598

CHAPTER I ............................................................ 598 OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH ....................................... 598
PART I .......................................................................................... ....................................................................................................... Of the Expense of Defence .............................................................. PART II ........................................................................................ ....................................................................................................... Of the Expense of Justice ................................................................ PART III ......................................................................................... ....................................................................................................... Of the Expense of public Works and public Institutions ................. PART IV......................................................................................... ....................................................................................................... Of the Expense of supporting the Dignity of the Sovereign ............. CONCLUSION ............................................................................. 598 598 598 614 614 614 626 626 626 705 705 705 705

CHAPTER II .......................................................... 708 OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY ................ 708
PART I .......................................................................................... 708 Of the Funds, or Sources, of Revenue, which may peculiarly belong to the Sovereign or Commonwealth .............................................. 708 PART II ......................................................................................... 716 Of Taxes .......................................................................................... 716

CHAPTER III ......................................................... 792 OF PUBLIC DEBTS............................................... 792

Adam Smith

AN INQUIRY INTO THE NATURE AND CAUSES OF

THE WEALTH OF NATIONS
by

Adam Smith
INTRODUCTION AND PLAN OF THE WORK
THE ANNUAL LABOUR of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations. According, therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion. But this proportion must in every nation be regulated by two different circumstances: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances. The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among

9

The Wealth of Nations the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life, for himself, and such of his family or tribe as are either too old, or too young, or too infirm, to go a-hunting and fishing. Such nations, however, are so miserably poor, that, from mere want, they are frequently reduced, or at least think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire. The causes of this improvement in the productive powers of labour, and the order according to which its produce is naturally distributed among the different ranks and conditions of men in the society, make the subject of the first book of this Inquiry. Whatever be the actual state of the skill, dexterity, and judgment, with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed. Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed very different plans in the general conduct or direction of it; and those plans have not all been equally favourable to the greatness of its produce. The policy of some nations has given extraordinary encouragement to the industry of the country; that of others to the industry of towns. Scarce any nation has dealt equally and impartially with every sort of industry. Since the down-fall of the Roman empire, the

10

Adam Smith policy of Europe has been more favourable to arts, manufactures, and commerce, the industry of towns, than to agriculture, the Industry of the country. The circumstances which seem to have introduced and established this policy are explained in the third book. Though those different plans were, perhaps, first introduced by the private interests and prejudices of particular orders of men, without any regard to, or foresight of, their consequences upon the general welfare of the society; yet they have given occasion to very different theories of political economy; of which some magnify the importance of that industry which is carried on in towns, others of that which is carried on in the country. Those theories have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states. I have endeavoured, in the fourth book, to explain as fully and distinctly as I can those different theories, and the principal effects which they have produced in different ages and nations. To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds, which, in different ages and nations, have supplied their annual consumption, is the object of these four first books. The fifth and last book treats of the revenue of the sovereign, or commonwealth. In this book I have endeavoured to shew, first, what are the necessary expenses of the sovereign, or commonwealth; which of those expenses ought to be defrayed by the general contribution of the whole society, and which of them, by that of some particular part only, or of some particular members of it: secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society, and what are the principal advantages and inconveniencies of each of those methods; and, thirdly and lastly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society.

11

The Wealth of Nations

BOOK I
OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE. CHAPTER I OF THE DIVISION OF LABOUR
THE GREATEST IMPROVEMENTS in the productive powers of labour, and the greater part of the skill, dexterity, and judgment, with which it is anywhere directed, or applied, seem to have been the effects of the division of labour. The effects of the division of labour, in the general business of society, will be more easily understood, by considering in what manner it operates in some particular manufactures. It is commonly supposed to be carried furthest in some very trifling ones; not perhaps that it really is carried further in them than in others of more importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator. In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts, than in those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed.

12

Adam Smith To take an example, therefore, from a very trifling manufacture, but one in which the division of labour has been very often taken notice of, the trade of a pin-maker: a workman not educated to this business (which the division of labour has rendered a distinct trade, nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind, where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of fortyeight 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

13

The Wealth of Nations employments from one another, seems to have taken place in consequence of this advantage. This separation, too, is generally carried furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man, in a rude state of society, being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labour, too, which is necessary to produce any one complete manufacture, is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the, weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour, in this art, does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expense bestowed upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive, as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn-provinces, fully as good, and in most years nearly about the same price with the corn of

14

Adam Smith England, though, in opulence and improvement, France is perhaps inferior to England. The corn-lands of England, however, are better cultivated than those of France, and the corn-lands of France are said to be much better cultivated than those of Poland. But though the poor country, notwithstanding the inferiority of its cultivation, can, in some measure, rival the rich in the cheapness and goodness of its corn, it can pretend to no such competition in its manufactures, at least if those manufactures suit the soil, climate, and situation, of the rich country. The silks of France are better and cheaper than those of England, because the silk manufacture, at least under the present high duties upon the importation of raw silk, does not so well suit the climate of England as that of France. But the hardware and the coarse woollens of England are beyond all comparison superior to those of France, and much cheaper, too, in the same degree of goodness. In Poland there are said to be scarce any manufactures of any kind, a few of those coarser household manufactures excepted, without which no country can well subsist. This great increase in the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. First, the improvement of the dexterity of the workmen, necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man’s business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman. A common smith, who, though accustomed to handle the hammer, has never been used to make nails, if, upon some particular occasion, he is obliged to attempt it, will scarce, I am assured, be able to make above two or three hundred nails in a day, and those, too, very bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailer, can seldom, with his utmost diligence, make more than eight hundred or a thousand nails in a day. I have seen several boys, under twenty years of age, who had never exercised any other trade but that of making nails, and who, when they exerted themselves, could make, each of them, upwards of two thousand three hundred nails in a day. The making of a nail, however, is by no means one of the simplest operations. The same person blows the bellows, stirs or mends the fire as there is occasion, heats the

15

The Wealth of Nations iron, and forges every part of the nail: in forging the head, too, he is obliged to change his tools. The different operations into which the making of a pin, or of a metal button, is subdivided, are all of them much more simple, and the dexterity of the person, of whose life it has been the sole business to perform them, is usually much greater. The rapidity with which some of the operations of those manufactures are performed, exceeds what the human hand could, by those who had never seen them, he supposed capable of acquiring. Secondly, The advantage which is gained by saving the time commonly lost in passing from one sort of work to another, is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools. A country weaver, who cultivates a small farm, must loose a good deal of time in passing from his loom to the field, and from the field to his loom. When the two trades can be carried on in the same workhouse, the loss of time is, no doubt, much less. It is, even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another. When he first begins the new work, he is seldom very keen and hearty; his mind, as they say, does not go to it, and for some time he rather trifles than applies to good purpose. The habit of sauntering, and of indolent careless application, which is naturally, or rather necessarily, acquired by every country workman who is obliged to change his work and his tools every half hour, and to apply his hand in twenty different ways almost every day of his life, renders him almost always slothful and lazy, and incapable of any vigorous application, even on the most pressing occasions. Independent, therefore, of his deficiency in point of dexterity, this cause alone must always reduce considerably the quantity of work which he is capable of performing. Thirdly, and lastly, everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. It is unnecessary to give any example. I shall only observe, therefore, that the invention of all those machines by which labour is 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

16

being each of them employed in some very simple operation. upon that account. Each individual becomes more expert in his own peculiar branch. according as the piston either ascended or descended. or men of speculation. the valve would open and shut without his assistance. observed that. A great part of the machines made use of in those manufactures in which labour is most subdivided. who. the principal or sole trade and occupation of a particular class of citizens. and saves time. and this subdivision of employment in philosophy. whenever the nature of it admits of such improvement. who loved to play with his companions. as well as in every other business. and some by that of those who are called philosophers.Adam Smith 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. have by no means been the inventions of those who had occasion to use the machines. One of those boys. and who. when to make them became the business of a peculiar trade. It is the great multiplication of the productions of all the different arts. too. each of which affords occupation to a peculiar tribe or class of philosophers. must frequently have been shewn very pretty machines. in consequence of the division of labour. that universal opulence which extends itself to the lowest 17 . since it was first invented. In the first fire engines {this was the current designation for steam engines}. it is subdivided into a great number of different branches. however. like every other employment. whose trade it is not to do any thing. naturally turned their thoughts towards finding out easier and readier methods of performing it. and leave him at liberty to divert himself with his play-fellows. in a well-governed society. was in this manner the discovery of a boy who wanted to save his own labour. One of the greatest improvements that has been made upon this machine. more work is done upon the whole. All the improvements in machinery. Like every other employment. in order to facilitate and quicken their own particular part of the work. and the quantity of science is considerably increased by it. Many improvements have been made by the ingenuity of the makers of the machines. philosophy or speculation becomes. which were the inventions of such workmen. are often capable of combining together the powers of the most distant and dissimilar objects in the progress of society. which occasions. but to observe every thing. by tying a string from the handle of the valve which opened this communication to another part of the machine. improve dexterity. Whoever has been much accustomed to visit such manufactures. a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder. were originally the invention of common workmen.

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. the forger. the wool-comber or carder. The woollen coat. the millwright. for the price of a great quantity of theirs. rope-makers. sailors. perhaps. and every other workman being exactly in the same situation. must all join their different arts in order to complete even this homely production. by a long sea and a long land-car- 18 . and a general plenty diffuses itself through all the different ranks of the society. The miner. he is enabled to exchange a great quantity of his own goods for a great quantity or. the mill of the fuller. The shepherd. though but a small part. How many merchants and carriers. the dyer. for example. 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. and they accommodate him as amply with what he has occasion for.The Wealth of Nations ranks of the people. with many others. is the produce of the joint labour of a great multitude of workmen. must have been employed in order to bring together the different drugs made use of by the dyer. the coarse linen shirt which he wears next his skin. all the different parts of his dress and household furniture. dug from the bowels of the earth. the burner of the charcoal to be made use of in the smelting-house. too. which covers the daylabourer. and you will perceive that the number of people. and brought to him. exceeds all computation. the weaver. what comes to the same thing. the spinner. and all the different parts which compose it. the fuller. the kitchen-grate at which he prepares his victuals. the bed which he lies on. the shoes which cover his feet. which often come from the remotest corners of the world? What a variety of labour. the smith. the scribbler. the dresser. must all of them join their different arts in order to produce them. how many ship-builders. has been employed in procuring him this accommodation. the coals which he makes use of for that purpose. besides. the sorter of the wool. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for. the workmen who attend the furnace. He supplies them abundantly with what they have occasion for. the brickmaker. sail-makers. of whose industry a part. the builder of the furnace for smelting the ore the feller of the timber. Were we to examine. Observe the accommodation of the most common artificer or daylabourer in a civilized and thriving country. 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. as coarse and rough as it may appear. in the same manner. the shears with which the shepherd clips the wool. the bricklayer.

what we very falsely imagine.Adam Smith riage. the knives and forks. with all the knowledge and art requisite for preparing that beautiful and happy invention. the different hands employed in preparing his bread and his beer. that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant. the absolute masters of the lives and liberties of ten thousand naked savages. and yet it may be true. and keeps out the wind and the rain. indeed. all the other utensils of his kitchen. Compared. the easy and simple manner in which he is commonly accommodated. 19 . without the assistance and co-operation of many thousands. with the more extravagant luxury of the great. the earthen or pewter plates upon which he serves up and divides his victuals. perhaps. all the furniture of his table. without which these northern parts of the world could scarce have afforded a very comfortable habitation. I say. his accommodation must no doubt appear extremely simple and easy. even according to. we shall be sensible that. as the accommodation of the latter exceeds that of many an African king. and consider what a variety of labour is employed about each of them. all these things. together with the tools of all the different workmen employed in producing those different conveniencies. if we examine. the very meanest person in a civilized country could not be provided. the glass window which lets in the heat and the light.

consequence of a certain propensity in human nature. I am willing to give this for that. however. or of another animal. In civi- 20 . It is the necessary. is not originally the effect of any human wisdom. but of the accidental concurrence of their passions in the same object at that particular time. or endeavours to intercept her when his companion turns her towards himself. it has no other means of persuasion. by its gestures and natural cries signify to another. and exchange one thing for another. which seem to know neither this nor any other species of contracts. and when he has no other means of engaging them to act according to his inclinations. of which no further account can be given. from which so many advantages are derived. He has not time. in running down the same hare. as seems more probable. however.The Wealth of Nations CHAPTER II OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR THIS DIVISION OF LABOUR. have sometimes the appearance of acting in some sort of concert. A puppy fawns upon its dam. it belongs not to our present subject to inquire. or whether. though very slow and gradual. and a spaniel endeavours. which foresees and intends that general opulence to which it gives occasion. it be the necessary consequence of the faculties of reason and speech. When an animal wants to obtain something either of a man. This. but to gain the favour of those whose service it requires. It is common to all men. Nobody ever saw one animal. is not the effect of any contract. endeavours by every servile and fawning attention to obtain their good will. by a thousand attractions. this is mine. when it wants to be fed by him. Each turns her towards his companion. to do this upon every occasion. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. the propensity to truck. and to be found in no other race of animals. that yours. Two greyhounds. Whether this propensity be one of those original principles in human nature. to engage the attention of its master who is at dinner. which has in view no such extensive utility. Man sometimes uses the same arts with his brethren. barter.

than if he himself went to the field to catch them. is entirely independent. a particular person makes bows and arrows. or for money. He frequently exchanges them for cattle or for venison. clothes. with his companions. In a tribe of hunters or shepherds. The old clothes which another bestows upon him he exchanges for other clothes which suit him better. with which he can buy either food. but to their self-love. by barter. In almost every other race of animals. therefore. and in its natural state has occasion for the assistance of no other living creature. Whoever offers to another a bargain of any kind. and you shall have this which you want. and he finds at last that he can. each individual. and shew them that it is for their own advantage to do for him what he requires of them. or the baker that we expect our dinner. with more readiness and dexterity than any other. indeed. From a regard to his own interest. and by purchase. by barter. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. 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. The greater part of his occasional wants are supplied in the same manner as those of other people. get more cattle and venison. Even a beggar does not depend upon it entirely. He will be more likely to prevail if he can interest their self-love in his favour. and by purchase.Adam Smith lized society he stands at all times in need of the co-operation and assistance of great multitudes. or lodging. the making of bows and arrows grows to be his chief business. so it is this same trucking disposition which originally gives occasion to the division of labour. But man has almost constant occasion for the help of his brethren. but of their advantages. as he has occasion. and never talk to them of our own necessities. proposes to do this. for example. supplies him with the whole fund of his subsistence. and he becomes a sort of armourer. Another excels in making the frames and covers of their little 21 . it neither does nor can provide him with them as he has occasion for them. or for food. or for lodging. is the meaning of every such offer. while his whole life is scarce sufficient to gain the friendship of a few persons. It is not from the benevolence of the butcher the brewer. The charity of well-disposed people. But though this principle ultimately provides him with all the necessaries of life which he has occasion for. but from their regard to their own interest. that we obtain from one another the greater part of those mutual good offices which we stand in need of. With the money which one man gives him he purchases food. Give me that which I want. by treaty. not to their humanity. We address ourselves. in this manner. when it is grown up to maturity. and it is in vain for him to expect it from their benevolence only. As it is by treaty.

which is over and above his own consumption. till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. is. or soon after. and education. The difference of talents comes then to be taken notice of. in reality. About that age. When they came in to the world. and neither their parents nor playfellows could perceive any remarkable difference. for example. and there could have been no such difference of employment as could alone give occasion to any great difference of talents. and the same work to do. And thus the certainty of being able to exchange all that surplus part of the produce of his own labour. and to cultivate and bring to perfection whatever talent of genius he may possess for that particular species of business. perhaps. But without the disposition to truck. seems to arise not so much from nature. acknowledged to be all of the same species. till at last he finds it his interest to dedicate himself entirely to this employment. a tanner or dresser of hides or skins. the principal part of the clothing of savages. Many tribes of animals. As it is this disposition which forms that difference of talents. or this last from a shepherd’s dog. as a mastiff is from a grey-hound. In the same manner a third becomes a smith or a brazier. and exchange. as from habit. By nature a philosopher is not in genius and disposition half so different from a street porter. custom. or a grey-hound from a spaniel. who reward him in the same manner with cattle and with venison. and the very different genius which appears to distinguish men of different professions. than what. barter. and to become a sort of house-carpenter. they come to be employed in very different occupations. so remarkable among men of different professions. though all of 22 . every man must have procured to himself every necessary and conveniency of life which he wanted. for such parts of the produce of other men’s labour as he may have occasion for. as the effect of the division of labour. Those different tribes of animals. very much alike. is not upon many occasions so much the cause. however. antecedent to custom and education. and widens by degrees. encourages every man to apply himself to a particular occupation. when grown up to maturity. appears to take place among men. He is accustomed to be of use in this way to his neighbours. The difference between the most dissimilar characters. much less than we are aware of. All must have had the same duties to perform. they were. so it is this same disposition which renders that difference useful. a fourth. and for the first six or eight years of their existence. derive from nature a much more remarkable distinction of genius. between a philosopher and a common street porter.The Wealth of Nations huts or moveable houses. The difference of natural talents in different men.

or by the docility of the shepherd’s dog. cannot be brought into a common stock. separately and independently. and derives no sort of advantage from that variety of talents with which nature has distinguished its fellows. Each animal is still obliged to support and defend itself. by the general disposition to truck. for want of the power or disposition to barter and exchange. as it were. The strength of the mastiff is not in the least supported either by the swiftness of the greyhound. being brought.Adam Smith the same species are of scarce any use to one another. 23 . on the contrary. and exchange. into a common stock. The effects of those different geniuses and talents. or by the sagacity of the spaniel. where every man may purchase whatever part of the produce of other men’s talents he has occasion for. barter. and do not in the least contribute to the better accommodation and conveniency of the species. the different produces of their respective talents. the most dissimilar geniuses are of use to one another. Among men.

baker. for example. or. they would call in the assistance of those workmen. The former is not only a carpenter. There are some sorts of industry. a carpenter. and brewer. in more populous countries. so the extent of this division must always be limited by the extent of that power. The employments of the latter are still more various. A porter. 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. In such situations we can scarce expect to find even a smith. even of the lowest kind. which is over and above his own consumption. in other words. The scattered families that live at eight or ten miles distance from the nearest of them. even an ordinary market-town is scarce large enough to afford him constant occupation. can find employment and subsistence in no other place.The Wealth of Nations 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. or a mason. which can be carried on nowhere but in a great town. within less than twenty miles of another of the same trade. but a joiner. every farmer must be butcher. A village is by much too narrow a sphere for him. and even a carver in wood. must learn to perform themselves a great number of little pieces of work. for want of the power to exchange all that surplus part of the produce of his own labour. a cabinetmaker. a cart and waggon-maker. for which. 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 ploughwright. as well as a wheel-wright. for his own family. no person can have any encouragement to dedicate himself entirely to one employment. It is impossible there should be such a trade as even that of 24 . for such parts of the produce of other men’s labour as he has occasion for. by the extent of the market. When the market is very small. In the lone houses and very small villages which are scattered about in so desert a country as the highlands of Scotland.

Upon two hundred tons of goods. that industry of every kind naturally begins to subdivide and improve itself. at present carry on a very considerable commerce with each other. and drawn by eight horses. In about the same time a ship navigated by six or eight men. of one day’s work in the year. there must be charged the maintenance of a hundred men for three weeks. and along the banks of navigable rivers. except such whose price was very considerable in proportion to their weight. by the help of water-carriage. and both the maintenance and what is nearly equal to maintenance the wear and tear of four hundred horses. will make three hundred thousand nails in the year. Six or eight men. and consequently could give but a small part of that encouragement which they at present mutually afford to each other’s industry. A broad-wheeled waggon. but by land-carriage. frequently carries and brings back two hundred ton weight of goods.Adam Smith a nailer in the remote and inland parts of the highlands of Scotland. they could carry on but a small part of that commerce which at present subsists between them. however. attended by two men. carries and brings back between London and Edinburgh near four ton weight of goods. therefore. upon the same quantity of goods carried by water. 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. a more extensive market is opened to every sort of industry than what landcarriage alone can afford it. Such a workman at the rate of a thousand nails a-day. that is. attended by a hundred men. and sailing between the ports of London and Leith. together with the value of the superior risk. carried by the cheapest land-carriage from London to Edinburgh. and three hundred working days in the year. as well as of fifty great waggons. and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. in about six weeks time. and the wear and tear of a ship of two hundred tons burthen. But in such a situation it would be impossible to dispose of one thousand. there is to be charged only the maintenance of six or eight men. with what safety could they be transported through the territories of so many barbarous nations? Those two cities. or the difference of the insurance between land and water-carriage. can carry and bring back. Were there no other communication between those two places. There could be little or no commerce of any kind between the distant parts of the world. therefore. As by means of water-carriage. as no goods could be transported from the one to the other. in the same time. and by mutually 25 . the same quantity of goods between London and Edinburgh as fifty broad-wheeled waggons. and drawn by four hundred horses. so it is upon the sea-coast. Whereas. therefore.

The extent of the market. according to the best authenticated history. That sea. was. and consequently their improvement must always be posterior to the improvement of that country. attempted it. and in Lower Egypt. with the assistance of a little art. and have scarce anywhere extended themselves to any considerable distance from both. and even to many farm-houses in the country. to abandon themselves to the boisterous waves of the ocean. that is. to sail out of the straits of Gibraltar. but between all the considerable villages. not only between all the great towns. the plantations have constantly followed either the sea-coast or the banks of the navigable rivers. and separates them from the sea-coast. which. the most skilful navigators and ship-builders of those old times. Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. but the country which lies round about them. was. men were afraid to quit the view of the coast. Of all the countries on the coast of the Mediterranean sea. give a good deal of encouragement to each other’s industry. as well as by the multitude of its islands. were those that dwelt round the coast of the Mediterranean sea. must for a long time be in proportion to the riches and populousness of that country. seem to have afforded a communication by watercarriage. by the smoothness of its surface. for a long time. nearly in the 26 . long considered as a most wonderful and dangerous exploit of navigation. by far the greatest inlet that is known in the world. and the proximity of its neighbouring shores. except such as are caused by the wind only. and they were. The nations that. appear to have been first civilized. in the ancient world.The Wealth of Nations affording a market. nor consequently any waves. when. and from the imperfection of the art of ship-building. and the great navigable rivers. from their ignorance of the compass. Upper Egypt extends itself nowhere above a few miles from the Nile. that great river breaks itself into many different canals. extremely favourable to the infant navigation of the world. The inland parts of the country can for a long time have no other market for the greater part of their goods. therefore. and that they should always be much later in extending themselves into the inland parts of the country. It was late before even the Phoenicians and Carthaginians. having no tides. 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. Since such. To pass beyond the pillars of Hercules. In our North American colonies. are the advantages of water-carriage. the only nations that did attempt it. therefore.

too. There are in Africa none of those great inlets. till it falls into the Black sea. nor the Indians. and in some of the eastern provinces of China. or. in all ages of the world. encouraged foreign commerce. and Siam. in the East Indies.Adam Smith same manner as the Rhine and the Maese do in Holland at present. which admits of no navigation. the Ganges. in comparison of what it would be. though the great extent of this antiquity is not authenticated by any histories of whose authority we. All the inland parts of Africa. in the same manner as the Nile does in Egypt. form a great number of navigable canals. 27 . Bengal. 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. India. such as the Baltic and Adriatic seas in Europe. that neither the ancient Egyptians. a multitude of canals. but seem all to have derived their great opulence from this inland navigation. and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas. Persia. are well assured. than both of them put together. by communicating with one another. they are at too great a distance from one another to carry commerce and communication through the greater part of it. The commerce. and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. to carry maritime commerce into the interior parts of that great continent. The sea of Tartary is the frozen ocean. perhaps. The navigation of the Danube is of very little use to the different states of Bavaria. seem. besides. In Bengal. and several other great rivers. several great rivers form. and which runs into another territory before it reaches the sea. and Hungary. which any nation can carry on by means of a river which does not break itself into any great number of branches or canals. if any of them possessed the whole of its course. and though some of the greatest rivers in the world run through that country. the ancient Scythia. and the gulfs of Arabia. It is remarkable. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt. can never be very considerable. to have been in the same barbarous and uncivilized state in which we find them at present. nor the Chinese. Austria. in Asia. the Mediterranean and Euxine seas in both Europe and Asia. afford an inland navigation much more extensive than that either of the Nile or the Ganges. in this part of the world. the modern Tartary and Siberia. In the eastern provinces of China. by their different branches. and. The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal.

In the rude ages of society. no exchange can be made between them. which is over and above his own consumption. and the latter to purchase. it is probable. and the brewer and the baker would each of them be willing to purchase a part of it. as to have at all times by him. But they have nothing to offer in exchange. and the butcher is already provided with all the bread and beer which he has immediate occasion for. would be glad to dispose of. in this case. for such parts of the produce of other men’s labour as he has occasion for. He cannot be their merchant. in some measure. every prudent man in every period of society. a part of this superfluity. 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. No exchange can. But if this latter should chance to have nothing that the former stands in need of. besides the peculiar produce of his own industry. a certain quantity of some one commodity or other. were successively both thought of and employed for this purpose. must naturally have endeavoured to manage his affairs in such a manner. or becomes. we shall suppose. while another has less. One man. Many different commodities. such as he imagined few people would be likely to refuse in exchange for the produce of their industry. The former.The Wealth of Nations CHAPTER IV OF THE ORIGIN AND USE OF MONEY WHEN THE DIVISION OF LABOUR has been once thoroughly established. The butcher has more meat in his shop than he himself can consume. cattle are 28 . He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour. nor they his customers. consequently. has more of a certain commodity than he himself has occasion for. it is but a very small part of a man’s wants which the produce of his own labour can supply. after the first establishment of the division of labour. and the society itself grows to be what is properly a commercial society. In order to avoid the inconveniency of such situations. be made between them. except the different productions of their respective trades. a merchant. and they are all of them thus mutually less serviceable to one another. Every man thus lives by exchanging.

If. be divided into any number of parts. The man who wanted to buy salt. Thus we are told by Pliny (Plin. because what he was to give for it could seldom be divided without loss. though they must have been a most inconvenient one. In all countries. and gold and silver among all rich and commercial nations. as by fusion those parts can easily be re-united again. to metals above every other commodity. cap. 29 . to purchase whatever they had occasion for. a species of shells in some parts of the coast of India. The armour of Diomede. tobacco in Virginia. and which. the Romans had no coined money. therefore. where it is not uncommon. scarce any thing being less perishable than they are. to wit. he had metals to give in exchange for it. Metals can not only be kept with as little loss as any other commodity. and there is at this day a village In Scotland. or a whole sheep. but that of Glaucus cost a hundred oxen. without any loss. he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for. sugar in some of our West India colonies.Adam Smith said to have been the common instrument of commerce. performed at this time the function of money. at a time. in old times. he must. copper among the ancient Romans. for a workman to carry nails instead of money to the baker’s shop or the ale-house. till the time of Servius Tullius. have been obliged to buy double or triple the quantity. 3). and had nothing but cattle to give in exchange for it. and. a quality which no other equally durable commodities possess. men seem at last to have been determined by irresistible reasons to give the preference. instead of sheep or oxen. He could seldom buy less than this. however. These rude bars. yet. but they can likewise. for this employment. must have been obliged to buy salt to the value of a whole ox. for example. Hist Nat. Those metals seem originally to have been made use of for this purpose in rude bars. but made use of unstamped bars of copper. we find things were frequently valued according to the number of cattle which had been given in exchange for them. without any stamp or coinage. lib. upon the authority of Timaeus. more than any other quality. or of two or three sheep. Salt is said to be the common instrument of commerce and exchanges in Abyssinia. says Homer. for the same reasons. cost only nine oxen. dried cod at Newfoundland. Iron was the common instrument of commerce among the ancient Spartans. and if he had a mind to buy more. hides or dressed leather in some other countries. on the contrary. the value. that. I am told. renders them fit to be the instruments of commerce and circulation. of two or three oxen. Different metals have been made use of by different nations for this purpose. 33. an ancient historian.

Before the institution of coined money. and of those public offices called mints. All of them are equally meant to ascertain.The Wealth of Nations The use of metals in this rude state was attended with two very considerable inconveniences. They are said. as were in those countries commonly made use of to purchase goods. however. in their outward appearance. the goodness or fineness of the metal. however. The weighing of gold. requires at least very accurate weights and scales. and to have resembled the sterling mark which is at present affixed to plate and bars of silver. To prevent such abuses. 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. been made to resemble those metals. to be the current money of the mer- 30 . and thereby to encourage all sorts of industry and commerce. Hence the origin of coined money. indeed. it has been found necessary. an adulterated composition of the coarsest and cheapest materials. still more tedious. ascertains the fineness. first. 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. where a small error would be of little consequence. and not covering the whole surface. however. which had. with the trouble of weighing. and secondly. people must always have been liable to the grossest frauds and impositions. in exchange for their goods. no doubt. The operation of assaying is still more difficult. in all countries that have made any considerable advances towards improvement. or the Spanish mark which is sometimes affixed to ingots of gold. even the business of weighing. what it was both most difficult and most important to ascertain. unless a part of the metal is fairly melted in the crucible. by means of a public stamp. to affix a public stamp upon certain quantities of such particular metals. unless they went through this tedious and difficult operation. and. any conclusion that can be drawn from it is extremely uncertain. be necessary. to facilitate exchanges. being struck only upon one side of the piece. is an operation of some nicety In the coarser metals. and which. institutions exactly of the same nature with those of the aulnagers and stamp-masters of woollen and linen cloth. or pure copper. In the precious metals. with proper exactness. with proper dissolvents. Abraham weighs to Ephron the four hundred shekels of silver which he had agreed to pay for the field of Machpelah. and instead of a pound weight of pure silver. with that of assaying them. but not the weight of the metal. where a small difference in the quantity makes a great difference in the value. in particular. seem in many cases to have been intended to ascertain. he was obliged to weigh the farthing. might receive. less accuracy would.

and forty pennies. not in money. however. the French sou or shilling appears upon different occasions to have contained five. “When wheat is at twelve shillings the quarter. covering entirely both sides of the piece. in the same manner as our Troyes pound. of silver of a known fineness. contained a pound. received at the exchequer. that is. was for a long time. French. but the weight of the metal. seems not to have been so constant and uniform as that between the penny and the pound. a shilling appears 31 . seems originally to have been the denomination of a weight. or the pound on the other. as at present. and not by tale. This last was not introduced into the mint of England till the 18th of Henry the VIII. by weight. were received by tale. William the Conqueror introduced the custom of paying them in money. The English pound sterling. of which the stamp. therefore. English. Tower weight. of silver of a known fineness. and the weights and measures of so famous a market were generally known and esteemed. in the same manner as ingots of gold and bars of silver are at present. The denominations of those coins seem originally to have expressed the weight or quantity of metal contained in them. and sometimes the edges too. the twentieth part of an ounce. and something less than the Troyes pound. This money. gave occasion to the institution of coins. contained all of them originally a real penny-weight of silver. The proportion. and the two hundred-and-fortieth part of a pound. between the shilling. but in kind. from the time of Alexander the First to that of Robert Bruce. in the time of Edward I. The Tower pound seems to have been something more than the Roman pound. The fair of Troyes in Champaign was at that time frequented by all the nations of Europe. In the time of Servius Tullius. in the time of Charlemagne. a pound. too. “then wastel bread of a farthing shall weigh eleven shillings and fourpence”. Such coins. in victuals and provisions of all sorts. too. who first coined money at Rome. the Roman as or pondo contained a Roman pound of good copper. The shilling. was supposed to ascertain not only the fineness.” says an ancient statute of Henry III. The inconveniency and difficulty of weighing those metals with exactness.Adam Smith chant. During the first race of the kings of France. without the trouble of weighing. and Scots pennies. It was divided. however. Among the ancient Saxons. into twelve ounces. and either the penny on the one hand. The Scots money pound contained. each of which contained a real ounce of good copper. twelve. and yet are received by weight. The revenues of the ancient Saxon kings of England are said to have been paid. Troyes weight. The French livre contained. twenty. and not by tale. a pound of silver of the same weight and fineness with the English pound sterling.

therefore. and the French pound and penny about a sixty-sixth part of their original value. have always proved favourable to the debtor. or for one another. or exchanged for one another. the proportion between the pound. I believe. seems to have been uniformly the same as at present. These rules determine what may be called the relative or exchangeable value of goods. in exchanging them either for money. The one may be called ‘value in use. though the value of each has been very different. on the contrary. From the time of Charlemagne among the French. The word VALUE. the princes and sovereign states which performed them were enabled. in all civilized nations. instead of weighing a pound. By means of those operations.The Wealth of Nations at one time to have contained only five pennies. was reduced to the twenty-fourth part of its original value. the shilling. and. in appearance. to pay their debts and fulfil their engagements with a smaller quantity of silver than would otherwise have been requisite. and sometimes the power of purchasing other goods which the possession of that object conveys. It is in this manner that money has become. The English pound and penny contain at present about a third only. for in every country of the world. and ruinous to the creditor. the avarice and injustice of princes and sovereign states. ‘value in exchange. have by degrees diminished the real quantity of metal. than could have been occasioned by a very great public calamity. Such operations. for their creditors were really defrauded of a part of what was due to them. Noth- 32 . and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old. which had been originally contained in their coins. in the latter ages of the republic. and sometimes expresses the utility of some particular object. has two different meanings. All other debtors in the state were allowed the same privilege. and the penny. abusing the confidence of their subjects. and. the universal instrument of commerce. and it is not improbable that it may have been as variable among them as among their neighbours. It was indeed in appearance only.’ The things which have the greatest value in use have frequently little or no value in exchange. and from that of William the Conqueror among the English. the ancient Franks. those which have the greatest value in exchange have frequently little or no value in use. I shall now proceed to examine. The Roman as. and have sometimes produced a greater and more universal revolution in the fortunes of private persons. it is to be observed.’ the other. by the intervention of which goods of all kinds are bought and sold. the Scots pound and penny about a thirty-sixth. came to weigh only half an ounce. What are the rules which men naturally observe.

I am always willing to run some hazard of being tedious. in order to understand what may perhaps. in some places. scarce any thing can be had in exchange for it. for which I must very earnestly entreat both the patience and attention of the reader: his patience. but a very great quantity of other goods may frequently be had in exchange for it. and sometimes sink them below. from coinciding exactly with what may be called their natural price. their natural or ordinary rate. what are the causes which sometimes hinder the market price. in order to be sure that I am perspicuous. and. I shall endeavour to explain. some obscurity may still appear to remain upon a subject. but it will purchase scarce any thing. First. 33 . lastly. In order to investigate the principles which regulate the exchangeable value of commodities.Adam Smith ing is more useful than water. has scarce any value in use. what are the different circumstances which sometimes raise some or all of these different parts of price above. that is. what are the different parts of which this real price is composed or made up. or. as fully and distinctly as I can. after the fullest explication which I am capable of giving it. perhaps. or wherein consists the real price of all commodities. A diamond. and his attention. Secondly. those three subjects in the three following chapters. the actual price of commodities. on the contrary. I shall endeavour to shew. appear still in some degree obscure. And. appear unnecessarily tedious. what is the real measure of this exchangeable value. in order to examine a detail which may. after taking the utmost pains that I can to be perspicuous. in its own nature extremely abstracted.

or exchange it for something else. is the toil and trouble which it can save to himself. what every thing really costs to the man who wants to acquire it. but to exchange it for other commodities. conveniencies. They contain the value of a certain quantity of labour. or with goods. the original purchase money that was paid for all things. is power. and its value. It was not by gold or by silver. that all the wealth of the world was originally purchased. indeed. AND THEIR PRICE IN MONEY EVERY MAN IS RICH OR POOR according to the degree in which he can afford to enjoy the necessaries. or those goods. That money. Labour therefore. as much as what we acquire by the toil of our own body. is the toil and trouble of acquiring it. and who means not to use or consume it himself. The value of any commodity. The real price of every thing. is precisely equal to the quantity of’ labour which it can enable them to purchase or command. Labour was the first price. What is bought with money. What every thing is really worth to the man who has acquired it and who wants to dispose of it. But after the division of labour has once thoroughly taken place. and amusements of human life. to the person who possesses it. is equal to the quantity of labour which it enables him to purchase or command. but by labour. and which it can impose upon other people. as Mr Hobbes says. or which he can afford to purchase. is the real measure of the exchangeable value of all commodities. OR OF THEIR PRICE IN LABOUR. and who want to exchange it for some new productions. and he must be rich or poor according to the quantity of that labour which he can command. therefore. Wealth. which we exchange for what is supposed at the time to contain the value of an equal quantity. to those who possess it.The Wealth of Nations CHAPTER V OF THE REAL AND NOMINAL PRICE OF COMMODITIES. 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. is purchased by labour. save us this toil. But the person who either ac- 34 .

therefore. though not exact. which though it can be made sufficiently intelligible. His fortune may. not by any accurate measure. The one is a plain palpable object. is the power of purchasing a certain command over all the labour. or in an hour’s application to a trade which it cost ten years labour to learn. besides. is not altogether so natural and obvious. what is the same thing. and thereby compared with. The greater part of people. understand better what is meant by a quantity of a particular commodity. perhaps. It is more natural. and of ingenuity exercised. some allowance is commonly made for both. than by that of the labour which it can produce. at an ordinary and obvious employment. the other an abstract notion. too. afford him the means of acquiring both. There may be more labour in an hour’s hard work. It is adjusted. to estimate its exchangeable value by the quantity of some other commodity. however. Every commodity. The different degrees of hardship endured. does not necessarily acquire or succeed to any political power. is sufficient for carrying on the business of common life. His fortune is greater or less. every particular commodity is more frequently exchanged for money than for any other commodity. In exchanging. but by the higgling and bargaining of the market. The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner. than by a quantity of labour. precisely in proportion to the extent of this power. indeed. But it is not easy to find any accurate measure either of hardship or ingenuity. of the produce of other men’s labour. The power which that possession immediately and directly conveys to him. than with labour. other commodities. But though labour be the real measure of the exchangeable value of all commodities. Is more frequently exchanged for. either civil or military. and money has become the common instrument of commerce. which it enables him to purchase or command. or. it is not that by which their value is commonly estimated. The time spent in two different sorts of work will not always alone determine this proportion. the different productions of different sorts of labour for one another. in order to ex- 35 . than in a month’s industry. or to the quantity either of other men’s labour. It is often difficult to ascertain the proportion between two different quantities of labour. must likewise be taken into account. But when barter ceases. or succeeds to a great fortune. or over all the produce of labour which is then in the market.Adam Smith quires. according to that sort of rough equality which. than in two hours easy business. but the mere possession of that fortune does not necessarily convey to him either. The butcher seldom carries his beef or his mutton to the baker or the brewer.

sometimes of easier and sometimes of more difficult purchase. that is dear which it is difficult to come at. and rather to say that his butcher’s meat is worth three-pence or fourpence a-pound. and his happiness. Of these. at all times and places. or handful. the quantity of bread and beer which he can afterwards purchase. The quantity of money which he gets for them regulates. The quantity of labour which any particular quantity of them can purchase or command. It is more natural and obvious to him. or which it 36 . The price which he pays must always be the same. so. the value of gold and silver in Europe to about a third of what it had been before. may be said to be of equal value to the labourer. Equal quantities of labour. Gold and silver. can never be an accurate measure of the value of other commodities. is by no means the only one of which history gives some account. the commodity for which he immediately exchanges them. are sometimes cheaper and sometimes dearer. that the exchangeable value of every commodity is more frequently estimated by the quantity of money. when they were brought thither. but he carries them to the market. but it is their value which varies. it may sometimes purchase a greater and sometimes a smaller quantity. to estimate their value by the quantity of money. too. they could purchase or command less labour. and afterwards exchanges that money for bread and for beer. his liberty. than that it is worth three or four pounds of bread. and this revolution in their value. where he exchanges them for money. which is continually varying in its own quantity. But as a measure of quantity. like every other commodity. not that of the labour which purchases them. reduced. indeed. can never be an accurate measure of the quantity of other things. fathom. depends always upon the fertility or barrenness of the mines which happen to be known about the time when such exchanges are made.The Wealth of Nations change them for bread or for beer. in the sixteenth century. than by that of bread and beer. vary in their value. so a commodity which is itself continually varying in its own value. such as the natural foot. he must always lay down the same portion of his ease. or the quantity of other goods which it will exchange for. The discovery of the abundant mines of America. and spirits. than by the quantity either of labour or of any other commodity which can be had in exchange for it. At all times and places. the commodities for which he can exchange them only by the intervention of another commodity. in the ordinary degree of his skill and dexterity. therefore. or three or four quarts of small beer. strength. though perhaps the greatest. however. whatever may be the quantity of goods which he receives in return for it. In his ordinary state of health. Hence it comes to pass. As it cost less labour to bring those metals from the mine to the market.

its nominal price. therefore. however. The discovery of the mines of America diminished the value of gold and 37 . yet to the person who employs him they appear sometimes to be of greater. I believe of all nations. to those which arise from the different values of equal quantities of gold and silver at different times. but on account of the variations in the value of gold and silver. Princes and sovereign states have frequently fancied that they had a temporary interest to diminish the quantity of pure metal contained in their coins. it is the goods which are cheap in the one case. money is their nominal price only. it is of importance to the family in whose favour it is reserved. In reality. and dear in the other. but they seldom have fancied that they had any to augment it. if it is intended that this rent should always be of the same value. and cheap in the other. and that cheap which is to be had easily. is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. and. but may sometimes be of considerable use in practice. The quantity of metal contained in the coins. Its real price may be said to consist in the quantity of the necessaries and conveniencies of life which are given for it. and hardly ever augmenting. The distinction between the real and the nominal price of commodities and labour is not a matter of mere speculation. like commodities. In this popular sense. Its value would in this case be liable to variations of two different kinds: first. He purchases them sometimes with a greater. and to him the price of labour seems to vary like that of all other things. not to the nominal price of his labour. Labour alone. and sometimes with a smaller quantity of goods. But though equal quantities of labour are always of equal value to the labourer. never varying in its own value. therefore. is sold with a reservation of a perpetual rent. tend almost always to diminish the value of a money rent. has accordingly been almost continually diminishing. in the quantity of money. labour. Such variations. or with very little labour. secondly. the same nominal price is sometimes of very different values. in proportion to the real. therefore. and sometimes of smaller value. The labourer is rich or poor. The same real price is always of the same value. It appears to him dear in the one case.Adam Smith costs much labour to acquire. that it should not consist in a particular sum of money. When a landed estate. therefore. is well or ill rewarded. It is their real price. to those which arise from the different quantities of gold and silver which are contained at different times in coin of the same denomination. may be said to have a real and a nominal price.

have sunk almost to a fourth part of their ancient value. The 38 . The old money rents of colleges must. Upon this supposition. such variations are more likely to diminish than to augment the value of a money rent. though originally but a third of the whole. though I apprehend without any certain proof. been reduced almost to nothing. They will do this. will. of any other commodity. Equal quantities of corn. has arisen altogether from the degradation in the price of silver. and pence. or of silver of a certain standard. This diminution. therefore. at distant times. it was enacted. even where the denomination of the coin has not been altered. according to Dr. according to this account. the subsistence of the labourer. even though it should be stipulated to be paid. for even equal quantities of corn will not do it exactly. In Scotland. is still going on gradually. or. or according to the current prices at the nearest public market. at distant times. originally of considerable value. have contained very nearly the same quantity of pure silver. But since the reign of Philip and Mary. Blackstone. and in France. in the present times. and is likely to continue to do so for a long time. be purchased more nearly with equal quantities of corn. commonly near double of what arises from the other two-thirds. therefore. not in such a quantity of coined money of such a denomination (in so many pounds sterling. or enable the possessor to purchase or command more nearly the same quantity of the labour of other people. where the denomination of the coin has undergone much greater alterations than it ever did in England. Equal quantities of labour will. but in so many ounces. have preserved their value much better than those which have been reserved in money. it is commonly supposed. have. in the value of the money rents of colleges. and the same number of pounds. to be paid either in kind. or are worth little more than a fourth part of the corn which they were formerly worth. The rents which have been reserved in corn. I say. either of pure silver. where it has undergone still greater than it ever did in Scotland. that a third of the rent of all college leases should be reserved in corn. than with equal quantities of gold and silver. more nearly than equal quantities of almost any other commodity. The money arising from this corn rent. perhaps. be more nearly of the same real value.The Wealth of Nations silver in Europe. shillings. in this manner. some ancient rents. therefore. 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. for example). the denomination of the English coin has undergone little or no alteration. the loss is frequently still greater. This degradation. is. By the 18th of Elizabeth.

more liberal in a society advancing to opulence. in order to bring any particular quantity of silver from the mine to the market. or fluctuate. or will command double the quantity either of labour. or very nearly the same. than in one that is going backwards. therefore. The ordinary or average money price of corn. but the real value of a corn rent. Though the real value of a corn rent. from five-and-twenty to fifty shillings the quarter. but seems to be everywhere accommodated. But a rent reserved in any other commodity is liable. continuing the same during all these fluctuations. too. The money price of labour. varies much less from century to century than that of a money rent. but to the variations in the quantity of corn which can be purchased by any particular quantity of that commodity. by the richness or barrenness of the mines which supply the market with that metal. it is to be observed. in other respects. by the value of silver. The average or ordinary price of corn. however. will. purchase a greater or smaller quantity of labour. as I shall likewise endeavour to shew hereafter. in proportion to the quantity of subsistence which it can purchase at that time. seldom varies much from year to year. at any particular time. than in one that is standing still. In the mean time. and in one that is standing still. and consequently of corn which must be consumed. 39 . may. not only to the variations in the quantity of labour which any particular quantity of corn can purchase. or of the greater part of other commodities. and along with it that of most other things. at least. will be double of what it is when at the former. it varies much more from year to year. or nearly in the same. not only the nominal. and along with it the money price of labour. A rent. Every other commodity. but to the average or ordinary price of that necessary of life. or the real price of labour. during so long a period. as I shall endeavour to shew hereafter. is very different upon different occasions. though it sometimes varies greatly from century to century. again is regulated. but frequently continues the same. or by the quantity of labour which must be employed. But when corn is at the latter price. the society continues. for example. however. therefore. for half a century or a century together. reserved in corn. as I shall endeavour to shew hereafter. does not fluctuate from year to year with the money price of corn. or very nearly the same. in the same. the money price of labour. provided. not to the temporary or occasional.Adam Smith subsistence of the labourer. condition. But the value of silver. is liable only to the variations in the quantity of labour which a certain quantity of corn can purchase. the temporary and occasional price of corn may frequently be double one year of what it had been the year before. continue the same.

with the greatest accuracy. he gains a hundred per cent. the more or less labour it will at that time and place enable you to purchase or command. a commodity which he can afterwards sell at London for an ounce. the real value of different commodities from century to century by the quantities of silver which were given for them. Half an ounce of silver at Canton in China may command a greater quantity both of labour and of the necessaries and conveniencies of life. both from century to century. The more or less money you get for any commodity. If a London merchant. By the quantities of labour. because. corn is a better measure than silver. equal quantities of corn will command the same quantity of labour more nearly than equal quantities of silver. we can. in establishing perpetual rents. than a commodity which sells for an ounce at London is to the man who possesses it at London. it is allowed. however. money is the exact measure of the real exchangeable value of all commodities. It is so. because equal quantities of it will more nearly command the same quantity of labour. for example. which sells for half an ounce of silver at Canton. can buy at Canton. and that for which he is likely to sell them. as well as the only accurate. has nothing to consider but the money price. in the London market. We cannot estimate it from year to year by the quantities of corn. the more common and ordinary transactions of human life. and from year to year. by the bargain. At the same time and place. therefore. it appears evidently.The Wealth of Nations Labour. for half an ounce of silver. At the same time and place. We cannot estimate. estimate it. from century to century. yet the merchant who carries goods from the one to the other. or the difference between the quantity of silver for which he buys them. the real and the nominal price of all commodities are exactly in proportion to one another. From year to year. therefore. on the contrary. silver is a better measure than corn. is the only universal. than an ounce at London. or the only standard by which we can compare the values of different commodities. or even in letting very long leases. measure of value. of more real importance to the man who possesses it there. however. it may be of use to distinguish between real and nominal price. just as much as if an ounce of silver was at London exactly of the same value as at Canton. and 40 . at the same time and place only. it is of none in buying and selling. A commodity. may there be really dearer. It is of no importance to him that half an ounce of silver at Canton would have given him the command of more labour. But though. at all times. therefore. Though at distant places there is no regular proportion between the real and the money price of commodities. and at all places. From century to century.

We must in this case compare. for those of still smaller consideration. We must generally. xxxiii. not so much the different quantities of silver for which it was commonly sold. but as being the nearest approximation which can commonly be had to that proportion. therefore. which half an ounce could have done there. or the different degrees of power over the labour of other people which it may. An ounce at London will always give him the command of double the quantity of all these. however. though they have in few places been regularly recorded. commercial nations have found it convenient to coin several different metals into money. In such a work as this. have given to those who possessed it. which finally determines the prudence or imprudence of all purchases and sales. they have generally continued to do so even when the necessity was not the same. and the value of all estates to have been computed. either in asses or in sestertii. we cannot wonder that it should have been so much more attended to than the real price. therefore. As it is the nominal or money price of goods. silver for purchases of moderate value. as the different quantities or labour which those different quantities of silver could have purchased. cap. gold for larger payments. lib. or some other coarse metal. which they must have done when they had no other money. The Romans are said to have had nothing but copper money till within five years before the first Punic war (Pliny. it may sometimes be of use to compare the different real values of a particular commodity at different times and places. however. and this is precisely what he wants. at distant times and places. They have always. content ourselves with them. are in general better known. and have been more frequently taken notice of by historians and other writers. therefore. when they first began to coin silver. considered one of those metals as more peculiarly the measure of value than any of the other two. But the current prices of labour. and thereby regulates almost the whole business of common life in which price is concerned. The as was always the denomination of a 41 . and this preference seems generally to have been given to the metal which they happen first to make use of as the instrument of commerce. not as being always exactly in the same proportion as the current prices of labour. Having once begun to use it as their standard.Adam Smith of a greater quantity of the necessaries and conveniencies of life than an ounce can do at London. 3). Copper. Those of corn. upon different occasions. can scarce ever be known with any degree of exactness. At Rome all accounts appear to have been kept. appears to have continued always the measure of value in that republic. and copper. In the progress of industry. I shall hereafter have occasion to make several comparisons of this kind.

but the number of pounds sterling which we suppose would be given for it. the distinction between the metal which was the standard. and that which is not the standard. The word sestertius signifies two asses and a half. in this regulated proportion. in all other modern nations of Europe. or be a legal tender for a debt of that amount. and not to have known either gold or copper coins for several ages thereafter.The Wealth of Nations copper coin. Copper is not at present a legal tender. except in the change of the smaller silver coins. In this state of things. and the value of all goods and of all estates is generally computed. In England. and during the continuance of any one regulated proportion of this kind. In this state of things. of Great Britain. 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. but there was little gold coined till the time of Edward III nor any copper till that of James I. The proportion between the values of gold and silver money was not fixed by any public law or proclamation. I believe. was originally a silver coin. There were silver coins in England in the time of the Saxons. or accept of it at such a valuation of the gold as he and his debtor could agree upon. The northern nations who established themselves upon the ruins of the Roman empire. At Rome. and to declare by a public law. been found convenient to ascertain this proportion. or at least seems to become. seem to have had silver money from the first beginning of their settlements. however. its value was estimated in copper. in silver: and when we mean to express the amount of a person’s fortune. one who owed a great deal of money was said to have a great deal of other people’s copper. I believe. it has. was something more than a nominal distinction. and as people became gradually more familiar with the use of the different metals in coin. that a guinea. and for the same reason. therefore. in all countries. the distinction between the metal. therefore. of such a weight and fineness. and that which was not the standard. all accounts are kept. In consequence of any change. Originally. gold was not considered as a legal tender for a long time after it was coined into money. we seldom mention the number of guineas. should exchange for one-and-twenty shillings. I believe. the creditor might either reject such payment altogether. becomes little more than a nominal distinction. for example. this distinction becomes. but was left to be settled by the market. in most countries. In England. If a debtor offered payment in gold. Though the sestertius. and consequently better acquainted with the proportion between their respective values. In process of time. which is the standard. something more 42 .

were considered as equivalent to a guinea. But as. of not the best quality. after such an alteration. Twelve copper pence contain half a pound avoirdupois of copper. that part of it at least which circulated in London and its neighbourhood. the value of the most precious metal regulates the value of the whole coin. after an alteration of this kind. but with very different quantities of silver. the gold. and a smaller in the other. in this manner should ever become general. by the regulation. 43 . and gold would not appear to measure the value of silver. Gold would appear to measure the value of silver. the greater part of payments could in either case be made with the same quantity of silver money as before. and not silver. would be altogether owing to the custom of keeping accounts. It would. in silver money. and almost all obligations for debt being expressed. gold would appear to be more invariable in its value than silver. and silver would not appear to measure the value of gold. would be considered as the metal which was peculiarly the standard or measure of value. perhaps. One-and-twenty worn and defaced shillings. be still payable with five-and-twenty or fifty guineas. a greater in the one case. during the continuance of any one regulated proportion between the respective values of the different metals in coin. One of Mr Drummond’s notes for five-and-twenty or fifty guineas would. Silver would appear to be more invariable in its value than gold. twelve such pence are ordered to exchange for a shilling.Adam Smith than nominal again. was either reduced to twenty. Silver would appear to measure the value of gold. and the value of silver would not seem to depend upon the quantity of gold which it would exchange for. to its standard weight as it is possible to bring the current coin of any nation. If the custom of keeping accounts. was in general less degraded below its standard weight than the greater part of the silver. however. and of expressing the amount of all great and small sums rather in silver than in gold money. or raised to two-and-twenty shillings. all accounts being kept. but would require very different quantities of gold money. be payable with the same quantity of gold as before. Even before the late reformation of the gold coin of Great Britain. and a shilling can at any time be had for them. The value of gold would seem to depend upon the quantity of silver which it would exchange for. and of expressing promissorynotes and other obligations for money. indeed. they are in the market considered as worth a shilling. which. for example. is seldom worth seven-pence in silver. before it is coined. however. was worn and defaced too. perhaps. The late regulations have brought the gold coin as near. This difference. In reality. which. gold. but seldom so much so. If the regulated value of a guinea. in the same manner as before. In the payment of such a note.

or the quantity of silver coin which the mint gives in return for standard silver bullion. a pound weight of standard silver. therefore. the market price was always more or less above the mint price. a pound weight of standard silver bullion is coined into sixty-two shillings. The late reformation of the gold coin. In England. gets back a pound weight or an ounce weight of gold in coin. which at one-and-twenty shillings the guinea. but likewise that of the silver coin in proportion to gold bullion. in proportion to all other commodities. no duty or seignorage is paid upon the coinage. a pound weight of gold is coined into forty-four guineas and a half. containing. been upwards of £3:18s. is said to be the mint price of gold in England. But that market price is the same whether it is paid in gold or in silver coin. the price of standard gold bullion in the market had. The silver coin still continues in the same worn and degraded state as before the reformation of the cold coin. sometimes £ 3:19s. though the price of the greater part of other commodities being influenced by so many other causes. Before the reformation of the gold coin.The Wealth of Nations and the order to receive no gold at the public offices but by weight. therefore. one-and-twenty shillings of this degraded silver coin are still considered as worth a guinea of this excellent gold coin. is said to be the mint price of silver in England. The reformation of the gold coin has evidently raised the value of the silver coin which can be exchanged for it. is likely to preserve it so. Before the reformation of the gold coin. the market price of standard gold bullion seldom exceeds £ 3:17:7 an ounce. In the market. that sum. 44 . is worth £ 3:17:10½ in silver. and very frequently £4 an ounce. as long as that order is enforced. it is probable. therefore. seldom containing more than an ounce of standard gold. Three pounds seventeen shillings and tenpence halfpenny an ounce. is equal to forty-six pounds fourteen shillings and sixpence. Five shillings and twopence an ounce. Since the reformation of the gold coin. and probably. too. in the same manner. without any deduction. Before the reformation of the gold coin. has raised not only the value of the gold coin. Since that reformation. and he who carries a pound weight or an ounce weight of standard gold bullion to the mint. An ounce of such gold coin. the market price has been constantly below the mint price. In the English mint. for many years. or the quantity of gold coin which the mint gives in return for standard gold bullion. the rise in the value of either gold or silver coin in proportion to them may not be so distinct and sensible. the market price of standard silver bullion was. however. therefore. In the English mint. in the worn and degraded gold coin.

according to the common estimation of Europe. five shillings and fourpence.. which last price it has scarce ever exceeded. raised by the high price of copper in English coin. In the proportion between the different metals in the English coin. seems to have been the most common price. But as the price of copper in bars is not. it is probable. Silver in bullion still preserves its proper proportion to gold. as well as now. in the reign of William III. 45 . was not supposed to require any reformation) regulated then. and a like prohibition of exporting gold coin.Adam Smith upon different occasions. an ounce of fine gold exchanges for about fourteen ounces of fine silver. as copper is rated very much above its real value. it has not fallen so low as the mint price. five shillings and sevenpence. As the reformation of the silver coin did not then reduce the price of silver bullion to the mint price. for the same reason that copper in bars preserves its proper proportion to silver. the price of silver bullion still continued to be somewhat above the mint price. a guinea. There subsists at present a like permission of exporting gold bullion. and to the prohibition of exporting silver coin. for more silver than it is worth. is surely much greater than that of those who want silver bullion either for the use of exportation or for any other use. But in the English coin. that is. it exchanges for about fifteen ounces. Since the reformation of the gold coin. rendered the demand for silver bullion greater than the demand for silver coin. five shillings and fourpence. Five shillings and sevenpence. underrated in proportion to gold. and the gold coin (which at that time. and very often five shillings and eightpence an ounce. so silver is rated somewhat below it. in the French coin and in the Dutch coin. silver was then. This permission of exporting. five shillings and sixpence. In the English coin. In the market of Europe. five shillings and fivepence. the real value of the whole coin. Upon the reformation of the silver coin. would. even in England. it is not very probable that a like reformation will do so now. according to the present proportion. Though the market price of silver bullion has fallen considerably since the reformation of the gold coin. in the same manner as now. however. he said. Were the silver coin brought back as near to its standard weight as the gold. so the price of silver in bullion is not sunk by the low rate of silver in English coin. But the number of people who want silver coin for the common uses of buying and selling at home. too. and five shillings and fivepence an ounce. Mr Locke imputed this high price to the permission of exporting silver bullion. the market price of standard silver bullion has fallen occasionally to five shillings and threepence. and yet the price of gold bullion has fallen below the mint price.

and renders gold in coin somewhat more valuable than an equal quantity of gold in bullion. more than an ounce of standard gold. by paying in sixpences. perhaps. in this case. Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly does not contain. silver was rated according to its proper proportion to gold. This delay is equivalent to a small duty. and it may be thought. even in our present excellent gold coin. be a profit in melting it down. provided it was at the same time enacted. be a considerable inconveniency to them. the coinage is free. the price of silver bullion would probably fall below the mint price. and they would be precluded by this regulation from this discreditable method of evading immediate payment. The silver coin containing its full standard weight. and though this might. that silver should not be a legal tender for more than the change of a guinea. there would in this case. to be melted down in the same manner. should not purchase more standard bullion. if silver was rated in the coin as much above its proper proportion to gold as it is at present rated below it. Some alteration in the present proportion seems to be the only method of preventing this inconveniency. When a run comes upon them. it could not be returned till after a delay of several months. The bankers only would suffer by this regulation. no doubt. in consequence. No creditor could. and afterwards to exchange this gold coin for silver coin. as no creditor can at present be cheated in consequence of the high valuation of copper. increase the value of the metal coined in proportion to the 46 . But gold in coin is more convenient than gold in bullion. 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. even without any reformation of the silver coin. would be less. it would. in the same manner as copper is not a legal tender for more than the change of a shilling. be cheated in consequence of the high valuation of silver in coin. in this case. at the same time. can seldom be returned in coin to the owner till after a delay of several weeks. The coinage would. be a considerable security to their creditors. first to sell the bullion for gold coin. They would be obliged. they sometimes endeavour to gain time. in order. In the present hurry of the mint. in England. 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 inconveniency.The Wealth of Nations exchange for more silver in coin than it would purchase in bullion. therefore. and though. in the English coin. to keep at all times in their coffers a greater quantity of cash than at present. If. yet the gold which is carried in bullion to the mint.

for the same reason that the fashion increases the value of plate in proportion to the price of that fashion. is the effect of something in the state of the coin. either more or less above. and the French coin. we may be assured that this steady and constant. is imposed upon the coinage. But when. in order to repair this loss and this waste. the continual waste of them in gilding and plating. rather than incur the risk and trouble of exporting it again. we may believe. The frequent loss of those metals from various accidents by sea and by land. of its own accord. as well as they can. in lace and embroidery. endeavour. like all other merchants. or eleven ounces of fine 47 . upon any public exigency. and in that of plate. The superiority of coin above bullion would prevent the melting down of the coin. the greater part of it would soon return again. require. according as the current coin is more or less exactly agreeable to its standard. At home. therefore. and would discourage its exportation. the market price either of gold or silver bullion continues for several years together steadily and constantly. it should become necessary to export the coin. they get something more than this price. of its own accord. at that time. The money of any particular country is. to suit their occasional importations to what they judge is likely to be the immediate demand. or more or less below the mint price. If. With all their attention. or contains more or less exactly the precise quantity of pure gold or pure silver which it ought to contain. 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. forty-four guineas and a half contained exactly a pound weight of standard gold. a seignorage of about eight per cent. and sometimes underdo it. which.Adam Smith extent of this small duty. they sometimes overdo the business. When they import more bullion than is wanted. in all countries which possess no mines of their own. on the other hand. Abroad. 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. either superiority or inferiority of price. If in England. it could sell only for its weight in bullion. more or less an accurate measure or value. under all those occasional fluctuations. When. they import less than is wanted. however. when exported. a continual importation. There would be a profit. at any particular time and place. The constancy and steadiness of the effect supposes a proportionable constancy and steadiness in the cause. in the wear and tear of coin. for example. it would buy more than that weight. they are sometimes willing to sell a part of it for something less than the ordinary or average price. The merchant importers. In France. in bringing it home again. is said to return home again.

but to that which. it is found. upon an average. he finds. they actually are. By the money price of goods. the price of goods comes. I understand always the quantity of pure gold or silver for which they are sold.. 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. not to the quantity of pure gold or silver which the coin ought to contain. forty-four guineas and a half generally contain less than a pound weight of standard gold. the diminution.The Wealth of Nations gold. as nearly as we can judge. but to what. by experience. it actually does contain. 48 . without any regard to the denomination of the coin. As it rarely happens that these are exactly agreeable to their standard. the same quantity of pure silver. for example. by experience. it is to be observed. to be adjusted. But if. Six shillings and eight pence. being greater in some pieces than in others. in the same manner. by rubbing and wearing. I consider as the same money price with a pound sterling in the present times. not to what those weights and measures ought to be. the measure of value comes to be liable to the same sort of uncertainty to which all other weights and measures are commonly exposed. however. and one ounce of alloy. because it contained. in the time of Edward I. In consequence of a like disorder in the coin. upon an average. the merchant adjusts the price of his goods as well as he can.

Such talents can seldom be acquired but in consequence of long application. and something of the same kind must probably have taken place in its earliest and rudest period. is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase. some allowance will naturally be made for this superior hardship. for example. If the one species of labour should be more severe than the other. command. superior to what would be due to the time employed about it. 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. seems to be the only circumstance which can afford any rule for exchanging them for one another.Adam Smith CHAPTER VI OF THE COMPONENT PART OF THE PRICE OF COMMODITIES IN THAT EARLY and rude state of society which precedes both the accumulation of stock and the appropriation of land. and the produce of one hour’s labour in the one way may frequently exchange for that of two hour’s labour in the other. Or if the one species of labour requires an uncommon degree of dexterity and ingenuity. 49 . It is natural that what is usually the produce of two days or two hours labour. If among a nation of hunters. In this state of things. allowances of this kind. or exchange for. and the quantity of labour commonly employed in acquiring or producing any commodity. one beaver should naturally exchange for or be worth two deer. the whole produce of labour belongs to the labourer. for superior hardship and superior skill. the proportion between the quantities of labour necessary for acquiring different objects. As soon as stock has accumulated in the hands of particular persons. the esteem which men have for such talents. should be worth double of what is usually the produce of one day’s or one hour’s labour. are commonly made in the wages of labour. In the advanced state of society. will naturally give a value to their produce. it usually costs twice the labour to kill a beaver which it does to kill a deer.

the undertaker of the one will expect a yearly profit of about one hundred pounds only. His wages properly express the value of this labour of inspection and direction. whereas that employed in the other will amount to seven thousand three hundred pounds. altogether different. in order to make a profit by the sale of their work. and are greater or smaller in proportion to the extent of this stock. Let us suppose. of which the one pays their wages. there are two different manufactures. and he could have no interest to employ a great stock rather than a small one. that in some particular place. Let us suppose. too. amount only to one thousand pounds. at the rate of fifteen pounds a year each. unless his profits were to bear some proportion to the extent of his stock. In exchanging the complete manufacture either for money. are only a different name for the wages of a particular sort of labour. or for other goods. At the rate of ten per cent. are regulated by quite different principles. that the coarse materials annually wrought up in the one cost only seven hundred pounds. for example. unless he expected from the sale of their work something more than what was sufficient to replace his stock to him. their labour of inspection and direction may be either altogether or very nearly the same. whom they will supply with materials and subsistence. while that of the other will expect about seven hundred and thirty pounds. resolves itself in this case into two parts. who hazards his stock in this adventure. the hardship. therefore.The Wealth of Nations some of them will naturally employ it in setting to work industrious people. but to the trust which is reposed in 50 . They are regulated altogether by the value of the stock employed. The profits of stock. where the common annual profits of manufacturing stock are ten per cent. The value which the workmen add to the materials. or the ingenuity of this supposed labour of inspection and direction. something must be given for the profits of the undertaker of the work. while the finer materials in the other cost seven thousand. over and above what may be sufficient to pay the price of the materials. in this case. not only to his labour and skill. In many great works. the labour of inspection and direction. or at the expense of three hundred a-year in each manufactory. or by what their labour adds to the value of the materials. and the wages of the workmen. and bear no proportion to the quantity. They are. however. But though their profits are so very different. therefore. it may perhaps be thought. almost the whole labour of this kind is committed to some principal clerk. in each of which twenty workmen are employed. The capital annually employed in the one will. the other the profits of their employer upon the whole stock of materials and wages which he advanced. Though in settling them some regard is had commonly. He could have no interest to employ them. for labour.

though he is thus discharged of almost all labour. the grass of the field. the only circumstance which can regulate the quantity which it ought commonly to purchase. In this state of things. must be due for the profits of the stock which advanced the wages and furnished the materials of that labour. or all of those three parts. when land was in common. therefore. He must then pay for the licence to gather them. love to reap where they never sowed. purchase or command. command or exchange for. into the price of the far greater part of commodities. In every society. like all other men. As soon as the land of any country has all become private property. and regulated by quite different principles. it is evident. the price of every commodity finally resolves itself into some one or other. A fourth part. In the price of corn. An additional quantity. as component parts. but of that which resolves itself into rent. one part pays the rent of the landlord. or for compensating the wear and 51 . and demand a rent even for its natural produce. each of them. The real value of all the different component parts of price. is measured by the quantity of labour which they can. cost the labourer only the trouble of gathering them. even to him. more or less. or. and in every improved society. and all the natural fruits of the earth. the landlords. Labour measures the value. the profits of stock constitute a component part altogether different from the wages of labour. He must in most cases share it with the owner of the stock which employs him. it may perhaps be thought is necessary for replacing the stock of the farmer. These three parts seem either immediately or ultimately to make up the whole price of corn. The wood of the forest. the price of this portion. constitutes the rent of land. and the third pays the profit of the farmer. all the three enter. another pays the wages or maintenance of the labourers and labouring cattle employed in producing it. Neither is the quantity of labour commonly employed in acquiring or producing any commodity. and in the price of the greater part of commodities. what comes to the same thing. and of that which resolves itself into profit. for example. it must be observed. In the price of commodities. the whole produce of labour does not always belong to the labourer. This portion. yet they never bear any regular proportion to the capital of which he oversees the management. makes a third component part. still expects that his profit should bear a regular proportion to his capital. come. not only of that part of price which resolves itself into labour. and must give up to the landlord a portion of what his labour either collects or produces. and the owner of this capital. which.Adam Smith him. to have an additional price fixed upon them.

In some parts of Scotland. as well as wares and profit. must be greater than that which employs the spinners. and a still smaller number. a few poor people make a trade of gathering. and profit. therefore. In the price of flour or meal. and in the price of both. In the most improved societies. and the profits of the farmer. the wages of the weavers: and the profits must always bear some proportion to the capital. and the wages of his servants. the whole price still resolves itself. 52 . one part pays the labour of the fisherman. labour. such as a labouring horse. may pay the price as well as the maintenance of the horse. of the spinner. into the same three parts of rent. at least through the greater part of Europe. in which it consists altogether in the wages of labour. together with the profits of those who advance the wages of that labour. is itself made up of the same time parts. that the price of any instrument of husbandry. of the weaver. and other instruments of husbandry. and the wages of his servants. It is otherwise. and the profits of stock. In the price of sea-fish. in the price of bread. The capital which employs the weavers. the labour of transporting the corn from the house of the farmer to that of the miller. that part of the price which resolves itself into wages and profit. makes a part of the price of a salmon. for example. and from that of the miller to that of the baker. because the capital from which it is derived must always be greater. In the price of linen we must add to this price the wages of the flax-dresser. but pays. because it not only replaces that capital with its profits. together with the profits of their respective employers. and the other the profits of the capital employed in the fishery. as I shall shew hereafter. in river fisheries. the labour of tending and rearing him. of the bleacher. In the progress of the manufacture. who advances both the rent of this land. the profits of the baker. but every subsequent profit is greater than the foregoing. the rent of the land upon which he is reared. there are always a few commodities of which the price resolves itself into two parts only the wages of labour. etc. we must add to the price of the corn. though it cannot well be called the rent of land. and rent. however. the profits of the miller. though it does sometimes. for example. The price of flax resolves itself into the same three parts as that of corn. comes to be greater in proportion to that which resolves itself into rent. A salmon fishery pays a rent. Though the price of the corn. and the wages of this labour. not only the number of profits increase. besides. But it must be considered.The Wealth of Nations tear of his labouring cattle. Rent very seldom makes any part of it. either immediately or ultimately. As any particular commodity comes to be more manufactured.

for the profit which he has an opportunity of making by the use of the money. is called profit. is in this manner originally distributed among some of its different members. are the three original sources of all revenue. and rent. and bringing it to market. the whole price of it. or. manufacturing. The revenue which proceeds altogether from land. unless perhaps the borrower is a spendthrift. Wages. profit. The whole of what is annually either collected or produced by the labour of every society. and belongs to the landlord.Adam Smith along the sea-shore. who affords him the opportunity of making this profit. must resolve itself into the same three parts. Whoever derives his revenue from a fund which is his own. as whatever part of it remains after paying the rent of the land. or all of those three parts. who runs the risk and takes the trouble of employing it. The revenue of the farmer is derived partly from his labour. taken separately. is called the interest or the use of money. by the person who manages or employs it. resolves itself into some one or other. All taxes. must be paid from some other source of revenue. so that of all the commodities which compose the whole annual produce of the labour of every country. that derived from stock. But the whole price of any commodity must still finally resolve itself into some one or other or all of those three parts. from his stock. what comes to the same thing. must necessarily be profit to somebody. taken complexly. those little variegated stones commonly known by the name of Scotch pebbles. or the rent of their land. if it is not paid from the profit which is made by the use of the money. land is only the instrument which enables him to earn the wages of this labour. must draw it either from his labour. and partly from his stock. As the price or exchangeable value of every particular commodity. and part to the lender. as well as of all exchangeable value. or from his land. and the price of the whole labour employed in raising. It is the compensation which the borrower pays to the lender. and to make the profits of this stock. and be parcelled out among different inhabitants of the country. either as the wages of their labour. The interest of money is always a derivative revenue. that derived from it by the person who does not employ it himself. who contracts a second debt in order to pay the interest of the first. neither rent nor profit makes an part of it. The revenue derived from labour is called wages. Part of that profit naturally belongs to the borrower. is altogether the wages of their labour. All other revenue is ultimately derived from some one or other of these. the profits of their stock. which. but lends it to another. The price which is paid to them by the stonecutter. is called rent. and all the revenue which is founded upon 53 . To him.

who has stock enough both to purchase materials. and the wages of the third. is commonly considered as the earnings of his labour. But wages evidently make a part of it. however. his whole gain. after paying the expense of cultivation. or the rent of land. and are paid either immediately or mediately from the wages of labour. but when they belong to the same. must necessarily gain them. however. therefore. together with its ordinary profits. and labourer. both as labourers and overseers. their own estates: and accordingly we seldom hear of the rent of a plantation. are ultimately derived from some one or other of those three original sources of revenue. work a good deal with their own hands. should gain both the rent of the landlord and the profit of the farmer. and annuities of every kind. An independent manufacturer. is called profit. What remains of the crop. Both rent and profit are. they are readily distinguished. should gain both the wages of a journeyman who works under a master. Whatever remains. are commonly called profit. should pay him the rent of the first. however. as ploughmen. confounded with profit. As in a civilized country there are but few commodities of which the exchangeable value arises from labour only. of landlord. His produce. and the profit which that master makes by the sale of that journeyman’s work. therefore. profit. rent and profit contributing largely to that of the far greater part of them. all salaries. after paying the rent and keeping up the stock. When those three different sorts of revenue belong to different persons. the profits of stock. harrowers. in this case. They farm. A gardener who cultivates his own garden with his own hands. at least in common language. confounded with wages. Wages. but frequently of its profit. pensions. unites in his own person the three different characters.The Wealth of Nations them. and to maintain himself till he can carry his work to market. A gentleman who farms a part of his own estate. and thus confounds rent with profit. etc. the greater part of them. at least in common language. The farmer. but pay them the wages which are due to them. should not only replace to them their stock employed in cultivation. farmer. They generally. and wages are. too. The greater part of our North American and West Indian planters are in this situation. however. in this case. too. after paying the rent. He is apt to denominate. are in this case confounded with profit. His whole gains. by saving these wages. The whole. the profit of the second. so the annual produce of its 54 . therefore. Common farmers seldom employ any overseer to direct the general operations of the farm. they are sometimes confounded with one another.

The idle everywhere consume a great part of it. and. If the society were annually to employ all the labour which it can annually purchase. or continue the same from one year to another. 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. 55 . and bringing that produce to market. so the produce of every succeeding year would be of vastly greater value than that of the foregoing. preparing. But there is no country in which the whole annual produce is employed in maintaining the industrious.Adam Smith labour will always be sufficient to purchase or command a much greater quantity of labour than what was employed in raising. as the quantity of labour would increase greatly every year.

As. is his revenue. or their subsistence. since. so he advances to himself. both of wages and profit. These ordinary or average rates may be called the natural rates of wages. at the time and place in which they commonly prevail. The commodity is then sold precisely for what it is worth. partly by the general circumstances of the society. stationary. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land. he might have made that profit. besides. he is evidently a loser by the trade. and partly by the particular nature of each employment. what is called the prime cost of any commodity does not comprehend the profit of the person who is to sell it again. he advances to his workmen their wages. preparing. their advancing. and partly by the natural or improved fertility of the land. and bringing it to market. Unless they yield him this profit. or for what it really costs the person who brings it to market. the wages of the labour. if he sells it at a price which does not allow him the ordinary rate of profit in his neighbourhood. and the profits of the stock employed in raising. while he is preparing and bringing the goods to market. their riches or poverty. the commodity is then sold for what may be called its natural price. in the same manner. as I shall shew hereafter. his own subsistence. yet. for though. in common language.The Wealth of Nations CHAPTER VII OF THE NATURAL AND MARKET PRICE OF COMMODITIES THERE IS IN EVERY SOCIETY or neighbourhood an ordinary or average rate. profit and rent. This rate is naturally regulated. in every different employment of labour and stock. His profit. or declining condition. according to their natural rates. by employing his stock in some other way. there- 56 . partly by the general circumstances of the society or neighbourhood in which the land is situated. which is generally suitable to the profit which he may reasonably expect from the sale of his goods. as I shall shew hereafter. too. the proper fund of his subsistence. There is likewise in every society or neighbourhood an ordinary or average rate of rent. which is regulated.

according as either the greatness of the deficiency. at least where there is perfect liberty. Among competitors of equal wealth and luxury. and profit. wages. and the demand of those who are willing to pay the natural price of the commodity. which must be paid in order to bring it thither. The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market. A very poor man may be said. and profit. it cannot be all sold to those who are willing to pay the whole value of the rent. Though the price. It is different from the absolute demand. and the market price will rise more or less above the natural price. and the low price which they give for it must reduce the price of the whole. since it maybe sufficient to effectuate the bringing of the commodity to market. all those who are willing to pay the whole value of the rent. which leaves him this profit. it is the lowest at which he is likely to sell them for any considerable time. Hence the exorbitant price of the necessaries of life during the blockade of a town. Some part must be sold to those who are willing to pay less. When the quantity of any commodity which is brought to market falls short of the effectual demand. to have a demand for a coach and six. or below. but his demand is not an effectual demand. Such people may be called the effectual demanders. according as the acquisition of the commodity happens to be of more or less importance to them. is called its market price. The actual price at which any commodity is commonly sold. and their demand the effectual demand. or where he may change his trade as often as he pleases. they do not repay him what they may very properly be said to have really cost him. or the whole value of the rent. is not always the lowest at which a dealer may sometimes sell his goods.Adam Smith fore. wages. as the commodity can never be brought to market in order to satisfy it. which must be paid in order to bring it thither. some of them will be willing to give more. A competition will immediately begin among them. in some sense. happen to animate more or less the eagerness of the competition. When the quantity brought to market exceeds the effectual demand. The mar- 57 . or the wealth and wanton luxury of the competitors. which must be paid in order to bring it thither. or exactly the same with its natural price. the same deficiency will generally occasion a more or less eager competition. he might like to have it. therefore. labour. It may either be above. or in a famine. Rather than want it altogether. cannot be supplied with the quantity which they want. and profit.

If it is rent. the market price naturally comes to be either exactly. All the different parts of its price will soon sink to their natural rate. therefore. All the different parts of its price will rise to their natural rate. Different accidents 58 . that the quantity never should exceed the effectual demand. on the contrary. and the whole price to its natural price. for example. or as nearly as can be judged of. in the importation of oranges. If at any time it exceeds the effectual demand. or stock. and can not be disposed of for more. if it is wages or profit. and it is the interest of all other people that it never should fall short of that demand. 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. If it is rent. It is the interest of all those who employ their land. in bringing any commodity to market. The same excess in the importation of perishable. than in that of old iron. the quantity brought to market should at any time fall short of the effectual demand. The quantity of every commodity brought to market naturally suits itself to the effectual demand. but does not oblige them to accept of less. the interest of all other landlords will naturally prompt them to prepare more land for the raising of this commodity. The quantity brought to market will soon be no more than sufficient to supply the effectual demand. The natural price. will prompt them to withdraw a part of their labour or stock. or according as it happens to be more or less important to them to get immediately rid of the commodity. If. The quantity brought thither will soon be sufficient to supply the effectual demand. is. The competition of the different dealers obliges them all to accept of this price. as it were. to which the prices of all commodities are continually gravitating. the interest of the landlords will immediately prompt them to withdraw a part of their land. and if it is wages or profit. The whole quantity upon hand can be disposed of for this price. will occasion a much greater competition than in that of durable commodities. some of the component parts of its price must be paid below their natural rate. the interest of the labourers in the one case. from this employment. the central price. the same with the natural price. and the whole price to its natural price. and no more.The Wealth of Nations ket 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. and of their employers in the other. When the quantity brought to market is just sufficient to supply the effectual demand. labour. some of the component parts of its price must rise above their natural rate.

That part which resolves itself into rent is less affected by them. the produce of equal quantities of labour being always the same. and more frequent. that demand. and sometimes fall short a good deal. but with the much greater. The same number of labourers in husbandry will. But the same number of spinners or weavers will every year produce the same. or very nearly the same. in order to supply that demand. naturally suits itself in this manner to the effectual demand. in some employments. it can be more exactly suited to the effectual demand. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply. and sometimes force them down even somewhat below it. as the price of corn. or as nearly as can be judged of. the market price of the commodities is likely to do so too. will sometimes fall a good deal below. But. and no more than supply. in any respect. 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. nor to such great variations. and as its actual produce is frequently much greater. their market price will be liable to great fluctuations. A rent certain in money is not in the least affected by 59 . The price of the one species of commodities varies only with the variations in the demand. hops. But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance. wine. of the effectual demand. produce very different quantities of commodities. in different years.Adam Smith may sometimes keep them suspended a good deal above it. and to be either altogether. they are constantly tending towards it. to the effectual demand. While that demand continues the same. quantity of linen and woollen cloth. That the price of linen and woollen cloth is liable neither to such frequent. every man’s experience will inform him. In the other species of industry. and frequently much less. the quantity of the commodities brought to market will sometimes exceed a good deal. therefore. Even though that demand. and sometimes rise a good deal above. the same with the natural price. the same quantity of industry will. or very nearly the same. it will produce always the same. oil. while. should continue always the same. therefore. that of the other varies not only with the variations in the demand. The whole quantity of industry annually employed in order to bring any commodity to market. in different years. than its average produce. or very nearly the same. produce very different quantities of corn. variations in the quantity of what is brought to market. in others. etc. their natural price. It is only the average produce of the one species of industry which can be suited.

not with work to be done. with work done. keep up the market price. of the rude produce. the market price of some particular commodity happens to rise a good deal above the natural price. for more work to be done. The market is here overstocked both with commodities and with labour. and thereby reduces the profits of the merchants who have any considerable quantity of them upon hand. or with work to be done. their great profit would tempt so many new rivals to employ their stocks in the same way. in many commodities. they may sometimes be able to keep the secret for several years together. is no doubt affected in its yearly value by all the occasional and temporary fluctuations in the market price of that rude produce. In settling the terms of the lease. not to the temporary and occasional. either in its rate or in its value. It sinks. but to the average and ordinary price of the produce. may. for a long time together. Such fluctuations affect both the value and the rate. that. too.The Wealth of Nations them. perhaps. If it was commonly known. not with labour. for which all demand is stopped for six months. But though the market price of every particular commodity is in this manner continually gravitating. but it is seldom affected by them in its yearly rate. towards the natural price. a good deal above the natural price. either of wages or of profit. or in a certain quantity. the effectual demand being fully supplied. The market is here understocked with labour. A public mourning raises the price of black cloth ( with which the market is almost always understocked upon such occasions). according as the market happens to be either overstocked or understocked with commodities or with labour. those who employ their stocks in supplying that market. and may so long enjoy their extraordinary profits 60 . If the market is at a great distance from the residence of those who supply it. and. by an increase in the effectual demand. than can be had. When. for some time even below it. There is an effectual demand for more labour. the landlord and farmer endeavour. are generally careful to conceal this change. It sinks the price of coloured silks and cloths. the wages of the workmen employed in preparing such commodities. yet sometimes particular accidents. to adjust that rate. according to their best judgment. with work done. sometimes natural causes. and augments the profits of the merchants who possess any considerable quantity of it. The market is understocked with commodities. A rent which consists either in a certain proportion. the market price would soon be reduced to the natural price. It has no effect upon the wages of the weavers. and sometimes particular regulations of policy. if one may say so. perhaps for a twelvemonth. It raises the wages of journeymen tailors.

may not be sufficient to supply the effectual demand. and the profits of the stock employed in bringing such commodities to market. which may hinder the effectual demand from ever being fully supplied. 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. bears no regular proportion to the rent of other equally fertile and equally well cultivated land in its neighbourhood. They properly consist in the high wages of that labour. His extraordinary gains arise from the high price which is paid for his private labour. is in this case the part which is generally paid above its natural rate. can seldom be long kept. to operate for ever. and which may continue. enjoy the advantage of his discovery as long as he lives. The wages of the labour. they are commonly considered as extraordinary profits of stock. it must be acknowledged. and that part of it which resolves itself into the rent of land. however. a regular proportion to it. therefore. 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. like the rent of some vineyards in France of a peculiarly happy soil and situation. Such enhancements of the market price are evidently the effects of particular accidents. Such enhancements of the market price are evidently the effect of natural causes. however. and even leave it as a legacy to his posterity. and the extraordinary profit can last very little longer than they are kept. that all the land in a great country. Secrets in manufactures are capable of being longer kept than secrets in trade. may. the operation may sometimes last for many years together. Secrets of this kind. 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. therefore. The monopolists. Some natural productions require such a singularity of soil and situation. has the same effect as a secret in trade or manufactures.Adam Smith without any new rivals. But as they are repeated upon every part of his stock. are seldom out of their natural proportion to those of the other employments of labour and stock in their neighbourhood. on the contrary. of which. upon that account. by keeping the market constantly understocked by never fully supplying 61 . Such commodities may continue for whole centuries together to be sold at this high price. with good management. which is fit for producing them. and as their whole amount bears. The rent of the land which affords such singular and esteemed productions. The whole quantity brought to market. A monopoly granted either to an individual or to a trading company.

on the contrary. and in whole classes of employments. The effect of such regulations. though in a less degree. The same statutes of apprenticeship and other corporation laws. statutes of apprenticeship. is not near so durable in sinking the workman’s wages below. the number of those who are 62 . The market price of any particular commodity. for ages together. and would immediately withdraw either so much land or no much labour. have the same tendency. the competition to a smaller number than might otherwise go into them. though it may continue long above. the other is the lowest which the sellers can commonly afford to take. and raise their emoluments. and all those laws which restrain in particular employments. indeed. when it decays. enable the workman to raise his wages a good deal above their natural rate. and at the same time continue their business. The natural price. sometimes oblige him. as in raising them above their natural rate. the persons whose interest it affected would immediately feel the loss. and may frequently. Their operation in the one way may endure for many centuries. whether they consist in wages or profit. or so much stock. so in the other they exclude him from many employments. can seldom continue long below. from being employed about it. is the lowest which can be taken. not upon every occasion indeed. Its market price. The one is upon every occasion the highest which can be squeezed out of the buyers. Such enhancements of the market price may last as long as the regulations of policy which give occasion to them. would soon rise to the natural price. or the price of free competition. that the quantity brought to market would soon be no more than sufficient to supply the effectual demand. to let them down a good deal below it. They are a sort of enlarged monopolies.The Wealth of Nations the effectual demand. this at least would be the case where there was perfect liberty. greatly above their natural rate. Whatever part of it was paid below the natural rate. and maintain both the wages of the labour and the profits of the stock employed about them somewhat above their natural rate. when a manufacture is in prosperity. its natural price. As in the one case they exclude many people from his employment. keep up the market price of particular commodities above the natural price. sell their commodities much above the natural price. 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. however. therefore. The exclusive privileges of corporations. The price of monopoly is upon every occasion the highest which can be got. or which it is supposed they will consent to give. which. but for any considerable time together.

The natural price itself varies with the natural rate of each of its component parts. This is all that I think necessary to be observed at present concerning the deviations. but to remain the same. I shall. profit. or declining condition. and partly upon the different laws and policy of the society in which they are carried on. I shall endeavour to shew what are the circumstances which naturally determine the rate of profit. Though pecuniary wages and profit are very different in the different employments of labour and stock. whether occasional or permanent. In the fourth and last place. and in what manner those circumstances are affected by the riches or poverty. which can in any particular employment. First. I shall. I shall endeavour to shew what are the circumstances which regulate the rent of land. But though in many respects dependent upon the laws and policy. and in what manner. and which either raise or lower the real price of all the different substances which it produces. by its advancing. endeavour to explain all the different circumstances which regulate this proportion. sink either the wages of labour or the profits of stock below their natural rate. endeavour to explain. The policy must be as violent as that of Indostan or ancient Egypt (where every man was bound by a principle of religion to follow the occupation of his father.Adam Smith afterwards educated to the trade will naturally suit itself to the effectual demand. by the advancing. I shall endeavour to explain what are the circumstances which naturally determine the rate of wages. or very nearly the same. in the third place. their advancing. depends partly upon the nature of the different employments. or declining state of the society. it will appear hereafter. in all those different states. yet a certain proportion seems commonly to take place between both the pecuniary wages in all the different employments of labour. Secondly. This proportion. as fully and distinctly as I can. those circumstances are affected by the like variations in the state of the society. and in every society this rate varies according to their circumstances. of wages. and was supposed to commit the most horrid sacrilege if he changed it for another). according to their riches or poverty. and for several generations together. this proportion seems to be little affected by the riches or poverty of that society. stationary. of the market price of commodities from the natural price. too. stationary. and rent. and the pecuniary profits in all the different employments of stock. or declining condition. stationary. the causes of those different variations. 63 . in the four following chapters.

or that a day’s labour could produce ten times the quantity of work which it had done originally. or have been exchanged for a greater quantity of other goods. a pound weight. would be twice as easy as before. Though it required five times the quantity of other goods to purchase it. in appearance many things might have become dearer. Any particular quantity in it. and as the commodities produced by equal quantities of labour would naturally in this state of things be exchanged for one another. In reality. could not last beyond the first introduction of 64 . for example. therefore. the whole produce of labour belongs to the labourer. in which the labourer enjoyed the whole produce of his own labour. or that a day’s labour could produce only twice the quantity of work which it had done before. All things would gradually have become cheaper. 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. to which the division of labour gives occasion. they would have been purchased likewise with the produce of a smaller quantity. Had this state continued. But this original state of things. They would have been produced by a smaller quantity of labour. Let us suppose. that in the greater part of employments the productive powers of labour had been improved to tenfold. for example. ten times the original quantity of work in them would purchase only twice the original quantity in it. but that in a particular employment they had been improved only to double. however. would appear to be five times dearer than before. than before. But though all things would have become cheaper in reality. The acquisition. He has neither landlord nor master to share with him. therefore. the wages of labour would have augmented with all those improvements in its productive powers. it would be twice as cheap. it would require only half the quantity of labour either to purchase or to produce it.The Wealth of Nations CHAPTER VIII OF THE WAGES OF LABOUR THE PRODUCE OF LABOUR constitutes the natural recompence or wages of labour In that original state of things which precedes both the appropriation of land and the accumulation of stock.

depends everywhere upon the contract usually made between those two parties. indeed. therefore. belonging to two distinct persons. the wages of labour. The workmen desire to get as much. or unless his stock was to be replaced to him with a profit. the latter in order to lower. He shares in the produce of their labour. what they usually are. and enjoys the whole produce of his own labour. and the owner of the stock which employs him another. and in every part of Europe twenty workmen serve under a master for one that is independent. and their wages and maintenance. to advance them the materials of their work.Adam Smith the appropriation of land and the accumulation of stock. The former are disposed to combine in order to raise. It includes what are usually two distinct revenues. the masters to give as little. and to maintain himself till it be completed. His rent makes the first deduction from the produce of the labour which is employed upon land. As soon as land becomes private property. as possible. This profit makes a second deduction from the produce of the labour which is employed upon land. difficult to foresee which of the two parties must. that a single independent workman has stock sufficient both to purchase the materials of his work. whose interests are by no means the same. It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. however. It sometimes happens. and it would be to no purpose to trace further what might have been its effects upon the recompence or wages of labour. What are the common wages of labour. are not very frequent. and the wages of labour. He is both master and workman. unless he was to share in the produce of his labour. long before the most considerable improvements were made in the productive powers of labour. when the labourer is one person. His maintenance is generally advanced to him from the stock of a master. till it be completed. or the whole value which it adds to the materials upon which it is bestowed. and in this share consists his profit. the farmer who employs him. The produce of almost all other labour is liable to the like deduction of profit. Such cases. It was at an end. the greater part of the workmen stand in need of a master. It is not. the landlord demands a share of almost all the produce which the labourer can either raise or collect from it. the profits of stock. and the wages of labour are everywhere understood to be. or in the value which it adds to the materials upon which it is bestowed. however. 65 . and who would have no interest to employ him. In all arts and manufactures.

but constant and uniform. combination. Masters are always and everywhere in a sort of tacit. they are never heard of by other people. have the advantage in the dispute. We rarely hear. But whether their combinations be offensive or defensive. but the necessity is not so immediate. upon these occasions. We seldom. of the combinations of masters. We have no acts of parliament against combining to lower the price of work. they are always abundantly heard of. and force the other into a compliance with their terms. besides. being fewer in number. the natural state of things. however. and the rigor- 66 . while it prohibits those of the workmen. In the long run. indeed. A landlord. too. the masters can hold out much longer. sometimes enter into particular combinations to sink the wages of labour even below this rate. combine. the workman may be as necessary to his master as his master is to him. To violate this combination is everywhere a most unpopular action. though they did not employ a single workman. a farmer. sometimes the great profit which their masters make by their work. The masters. though frequently of those of workmen. and when the workmen yield. without employment. which nobody ever hears of. it has been said. because it is the usual. they have always recourse to the loudest clamour. The masters. and scarce any a year. who must either starve. are just as clamorous upon the other side. though severely felt by them. who sometimes. Their usual pretences are. and sometimes to the most shocking violence and outrage. can combine much more easily: and the law. and act with the folly and extravagance of desperate men. In all such disputes. These are always conducted with the utmost silence and secrecy till the moment of execution. of their own accord. Such combinations. without any provocation of this kind. could generally live a year or two upon the stocks. or frighten their masters into an immediate compliance with their demands. but many against combining to raise it. or merchant. Masters. a master manufacturer. and. sometimes the high price of provisions. authorises. or at least does not prohibit. In order to bring the point to a speedy decision. not to raise the wages of labour above their actual rate. hear of this combination. are frequently resisted by a contrary defensive combination of the workmen. few could subsist a month. and never cease to call aloud for the assistance of the civil magistrate. Many workmen could not subsist a week. and a sort of reproach to a master among his neighbours and equals.The Wealth of Nations upon all ordinary occasions. upon this account. as they sometimes do without resistance. They are desperate. their combinations. one may say. too. that masters rarely combine. which they have already acquired. to raise tile price of their labour. But whoever imagines. is as ignorant of the world as of the subject.

67 . partly from the interposition of the civil magistrate. Mr Cantillon seems. cannot be worth less than that of an able-bodied slave. But the necessary maintenance of four children. but in what proportion. the labour of the wife. which sometimes give the labourers an advantage. they may be enabled to bring up two children. for any considerable time. a certain rate.Adam Smith ous execution of those laws which have been enacted with so much severity against the combination of servants. in order that two may have an equal chance of living to that age. or many other. otherwise it would be impossible for him to bring up a family. A man must always live by his work. therefore. whether in that above-mentioned. very seldom derive any advantage from the violence of those tumultuous combinations. labourers. When in any country the demand for those who live by wages. to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance. in order that. accordingly. however. labourers. Thus far at least seems certain. he thinks. and journeymen. the ordinary wages even of the lowest species of labour. being supposed no more than sufficient to provide for herself: But one half the children born. is computed to be worth double his maintenance. partly from the superior steadiness of the masters. attempt to rear at least four children. that. masters must generally have the advantage. however. The poorest labourers. in disputes with their workmen. The labour of an able-bodied slave. upon this account. evidently the lowest which is consistent with common humanity. the labour of the husband and wife together must. in order to bring up a family. partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence. die before the age of manhood. one with another. even in the lowest species of common labour. and enable them to raise their wages considerably above this rate. it is computed. The workmen. on account of her necessary attendance on the children. it is supposed. and the race of such workmen could not last beyond the first generation. But though. must. according to this account. which. the same author adds. below which it seems impossible to reduce. there is. be able to earn something more than what is precisely necessary for their own maintenance. There are certain circumstances. and that of the meanest labourer. generally end in nothing but the punishment or ruin of the ringleaders. may be nearly equal to that of one man. They must even upon most occasions be somewhat more. one with another. I shall not take upon me to determine. and his wages must at least be sufficient to maintain him.

in the richest countries. cannot increase but in proportion to the increase of the funds which are destined to the payment of wages. Increase this surplus. It is not. in order to make a profit by their work. worth sixpence sterling. such as a weaver or shoemaker. he employs either the whole or a part of the surplus in maintaining one or more menial servants. annuitant. who bid against one another in order to get workmen. It is not the actual greatness of national wealth. that the wages of labour are highest. it is evident. Increase this surplus. three shillings and sixpence currency. however. The scarcity of hands occasions a competition among masters. has a greater revenue than what he judges sufficient to maintain his own family. he naturally employs one or more journeymen with the surplus. therefore. servants of every kind. These funds are of two kinds. and cannot possibly increase without it. the revenue which is over and above what is necessary for the maintenance. has got more stock than what is sufficient to purchase the materials of his own work. but in the most thriving. ship-carpenters. secondly. and thus voluntarily break through the natural combination of masters not to raise wages. The wages of labour. equal to two shillings sterling. the workmen have no occasion to combine in order to raise their wages. are much higher in North America than in any part of England. The demand for those who live by wages. a-day. and he will naturally increase the number of his journeymen. When an independent workman. therefore. and. England is certainly. or in those which are growing rich the fastest. In the province of New York. ten shillings and sixpence currency. and to maintain himself till he can dispose of it. accordingly. and cannot possibly increase without it. The increase of revenue and stock is the increase of national wealth. equal in all to six shillings and six- 68 . The demand for those who live by wages.The Wealth of Nations journeymen. When the landlord. or monied man. The demand for those who live by wages. and he will naturally increase the number of those servants. when every year furnishes employment for a greater number than had been employed the year before. before the commencement of the late disturbances. in the present times. common labourers earned in 1773. which occasions a rise in the wages of labour. the stock which is over and above what is necessary for the employment of their masters. but its continual increase. naturally increases with the increase of national wealth. a much richer country than any part of North America. with a pint of rum. necessarily increases with the increase of the revenue and stock of every country. first. is continually increasing.

equal to four shillings and sixpence sterling. and advancing with much greater rapidity to the further acquisition of riches. The funds destined for the payment of wages. the real command of the necessaries and conveniencies of life which it conveys to the labourer. that a numerous family of children. there is a continual complaint of the scarcity of hands in North America. The price of provisions is everywhere in North America much lower than in England. is computed to be worth a hundred pounds clear gain to them. eight shillings currency. These prices are all above the London price. We cannot. In Great Britain. A dearth has never been known there. be higher than it is anywhere in the mother-country. is there frequently courted as a sort of fortune. and most other European countries. it is much more thriving. In the British colonies in North America. house-carpenters and bricklayers. but to the great multiplication of the species. wonder that the people in North America should generally marry very young. among the middling or inferior ranks of people in Europe. therefore. The value of children is the greatest of all encouragements to marriage. Notwithstanding the great increase occasioned by such early marriages. Those who live to old age. may be of the greatest extent. frequently see there from fifty to a hundred. But though North America is not yet so rich as England. before it can leave their house. we must not expect to find the wages of labour very high in it. would have so little chance for a second husband. five shillings currency. Labour is there so well rewarded. they are not supposed to double in less than five hundred years. must be higher in a still greater proportion. The most decisive mark of the prosperity of any country is the increase of the number of its inhabitants. instead of being a burden. though less for exportation. If the money price of labour. The demand for labourers. the revenue and stock of its inhabitants. equal to about two shillings and tenpence sterling. A young widow with four or five young children. it has been found that they double in twenty or five-and-twenty years. who. or very nearly of the same extent. its real price. it is said. and sometimes many more. Nor in the present times is this increase principally owing to the continual importation of new inhabitants. is a source of opulence and prosperity to the parents. it seems.Adam Smith pence sterling. therefore. The labour of each child. but if they have continued for several centuries of the same. Though the wealth of a country should be very great. journeymen tailors. the funds destined for maintaining them increase. descendants from their own body. still faster than they can find labourers to employ. In the worst seasons they have always had a sufficiency for themselves. and wages are said to be as high in the other colonies as in New York. yet if it has been long stationary. the 69 .

on the contrary. and the labourers would be obliged to bid against one another in order to get it. the competition of the labourers and the interest of the masters would soon reduce them to the lowest rate which is consistent with common humanity. would. acquired that full complement of riches which the nature of its laws and institutions permits it to acquire. almost in the same terms in which they are described by travellers in the present times. 70 . but live constantly in little fishing-boats upon the rivers and canals. one of the most fertile. The performance of this horrid office is even said to be the avowed business by which some people earn their subsistence. it is commonly said. they are continually running about the streets with the tools of their respective trades. perhaps. but by the liberty of destroying them. There could seldom be any scarcity of hands. offering their services. the number wanted the following year. The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. most industrious. as in Europe. and most populous. There would be a constant scarcity of employment. It had. Instead of waiting indolently in their work-houses for the calls of their customers.The Wealth of Nations number of labourers employed every year could easily supply. It seems. as it were. he is contented. or drowned like puppies in the water. not by the profitableness of children. Marco Polo. even long before his time. The condition of artificers is. best cultivated. naturally multiply beyond their employment. and to enable him to bring up a family. countries in the world. The hands. If in such a country the wages off labour had ever been more than sufficient to maintain the labourer. The subsistence which they find there is so scanty. that is. In the neighbourhood of Canton. for example. China has been long one of the richest. agree in the low wages of labour. industry. who visited it more than five hundred years ago. Any carrion. The accounts of all travellers. several are every night exposed in the street. many hundred. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening. the carcase of a dead dog or cat. in this case. that they are eager to fish up the nastiest garbage thrown overboard from any European ship. Marriage is encouraged in China. describes its cultivation. nor could the masters be obliged to bid against one another in order to get them. and populousness. though half putrid and stinking. however. to have been long stationary. inconsistent in many other respects. if possible. is as welcome to them as the most wholesome food to the people of other countries. many thousand families have no habitation on the land. begging employment. and even more than supply. and in the difficulty which a labourer finds in bringing up a family in China. In all great towns. and. still worse.

In a fertile country. This. which protects and governs North America. perhaps. and which had escaped either the tyranny or calamity which had destroyed the rest. consequently. on the other hand. The scanty maintenance of the labouring poor. three or four hundred thousand people die of hunger in one year. must. therefore. Many who had been bred in the superior classes. but would either starve. 71 . would be glad to seek it in the lowest. that they are going fast backwards. either by begging. is the natural symptom that things are at a stand. the competition for employment would be so great in it. The lowest class of labourers. cannot. be sensibly diminished. are nowhere neglected.Adam Smith China. consequently. and mortality. does not seem to go backwards. and the funds destined for maintaining it must not. notwithstanding their scanty subsistence. and where. The lands which had once been cultivated. should not be very difficult. perhaps. and of some other of the English settlements in the East Indies. perhaps. be better illustrated than by the different state of those countries. The liberal reward of labour. The lowest class being not only overstocked with its own workmen. and their starving condition. would immediately prevail in that class. stand still. The same. or by the perpetration perhaps. But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. continue to be performed. be less than it had been the year before. though it may. annual labour. we maybe assured that the funds destined for the maintenance of the labouring poor are fast decaying. famine. therefore. in all the different classes of employments. or very nearly the same. Want. therefore. which had before been much depopulated. and that of the mercantile company which oppresses and domineers in the East Indies. is nearly the present state of Bengal. The difference between the genius of the British constitution. where subsistence. Its towns are nowhere deserted by their inhabitants. or be driven to seek a subsistence. as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. not being able to find employment in their own business. must some way or another make shift to continue their race so far as to keep up their usual numbers. Many would not be able to find employment even upon these hard terms. notwithstanding. 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. so it is the natural symptom of increasing national wealth. as it is the necessary effect. Every year the demand for servants and labourers would. but with the overflowings of all the other classes. however. of the greatest enormities.

It has. on account of the extraordinary expense of fuel. for reasons which I shall have occasion to explain hereafter. in great towns than in the remoter parts of the country. it seems evident that they are not regulated by what is necessary for this expense. fluctuate with the price of provisions. has not. There are many plain symptoms. or cheaper. probably. on the other hand. Secondly. would not be treated in this manner. and that. which is consistent with common humanity. the money price of labour remains uniformly the same. even in the lowest species of labour. in these places. These. in order to defray his winter expense. it may be said. The prices of bread and butchers’ meat are generally the same. First. In order to satisfy ourselves upon this point. owing. they do not exceed what is necessary to maintain his family through the whole year. the wages of labour do not. in many parts of the kingdom. frequently from month to month. A labourer. His daily subsistence would be proportioned to his daily necessities. and in affluence in those of extraordinary cheapness. than to that of the price of provisions. indeed. sometimes for half a century together. But. or very nearly the same. If. but by the quantity and supposed value of the work. therefore.The Wealth of Nations In Great Britain. as the price of provisions varies more from year to year than the wages of labour. between summer and winter wages. ought to save part of his summer wages. so. the wages of labour vary more from place to place than the price of provisions. But in many places. in some. to be evidently more than what is precisely necessary to enable the labourer to bring up a family. the labouring poor can maintain their families in dear years. through the greater part of the united kingdom. they must be at their ease in times of moderate plenty. in almost every part of Great Britain there is a distinction. therefore. But the wages of labour in a great town and its 72 . that the wages of labour are nowhere in this country regulated by this lowest rate. however. and most other things which are sold by retail. more to the increase of the demand for labour. A slave. in Great Britain. it will not be necessary to enter into any tedious or doubtful calculation of what may be the lowest sum upon winch it is possible to do this. the way in which the labouring poor buy all things. the maintenance of a family is most expensive in winter. Thirdly. are generally fully as cheap. been accompanied with any sensible rise in the money price of labour. indeed. the wages of labour seem. or one absolutely dependent on us for immediate subsistence. Wages. The high price of provisions during these ten years past. Summer wages are always highest. These vary everywhere from year to year. through the whole year. being highest when this expense is lowest. in the present times.

as would soon reduce them more nearly to a level. can maintain their families in the one part of the united kingdom. 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. it appears evidently from experience. At a few miles distance. the country to which it is brought. Such a difference of prices. Fourthly. in this respect. If the labouring poor. it falls to eightpence. the usual price of common labour through the greater part of the low country of Scotland. but they are frequently quite opposite. on the contrary. but the effect. the most difficult to be transported. much inferior to that of their neighbours of the same rank in England. the country from which it comes. This difference. it falls to fourteen and fifteen pence. whence Scotland receives almost every year very large supplies. they must be in affluence where it is highest. Grain. twenty or fiveand—twenty per cent. is not the cause. which is. The price of labour. it seems. and. that man is. or in proportion to the measure of its bulk. the food of the common people. with those in the price of provisions. of the difference in their wages. which. I have frequently heard it 73 . If the labouring poor. 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. At a few miles distance. in the mode of their subsistence. can maintain their families in those parts of the kingdom where the price of labour is lowest. of all sorts of luggage. than in England. are frequently a fourth or a fifth part. English grain is so much superior to the Scotch.Adam Smith neighbourhood. it is generally cheaper in reality. After all that has been said of the levity and inconstancy of human nature. in general. indeed. is dearer in Scotland than in England. though. that though often dearer in appearance. or in proportion to its quality. higher than at a few miles distance. But English corn must be sold dearer in Scotland. they must be in affluence in the other. either in place or time. the variations in the price of labour not only do not correspond. almost from one end of the world to the other. supplies the common people in Scotland with the greatest and the best part of their food. therefore. where it varies a good deal less than in England. Oatmeal. not only from one parish to another. The quality of grain depends chiefly upon the quantity of flour or meal which it yields at the mill. or even to the measure of its weight. by a strange misapprehension. is dearer in England than in Scotland. therefore. Tenpence may be reckoned its price in Edinburgh and its neighbourhood. Eighteen pence a day may be reckoned the common price of labour in London and its neighbourhood. however. but from one end of the kingdom.

If such direct proof could require any collateral evidence to confirm it. considerably since that time. and the proof of it is. Lord-chief-justice Hales. about Glasgow. according to the actual state of the markets. and consequently its price. and fivepence in winter. who wrote in the time of Charles II. annual valuations made upon oath. probably on account of that neighbourhood. it would naturally be regulated by the usual wages of common labourers. In the last century. When it was first established. the wages of labour were higher in England than in Scotland. of all the different sorts of grain in every different county of Scotland. the rank of people from which foot soldiers are commonly drawn. if possible. taking one year with another. It is in Scotland supported by the evidence of the public fiars. I would observe. But though it is certain. the most usual wages of common labour are now eight pence a-day. the same price. In the last century. Through the greater part of the Low country. and because the other is poor. he keeps a coach. the pay of a foot soldier was the same as in the present times. They have risen. began much earlier than in Scotland. During the course of the last century. If the labouring poor. though. Three shillings a-week. accordingly. as well as in the present. could bring up their families then. but because the one is rich. there is the clearest proof. tenpence. in the counties which border upon England. too. eightpence a-day. it is equally certain that labour was much cheaper. In England. the most usual day-wages of common labour through the greater part of Scotland were sixpence in summer. With regard to France. still more decisive with regard to Scotland than with regard to England. grain was dearer in both parts of the united kingdom than during that of the present. that this has likewise been the case in France. must necessarily have increased with those improvements. and commerce. It is not because one man keeps a coach. on account of the greater variety of wages paid there in different places. computes 74 . very nearly still continues to be paid in some parts of the Highlands and Western islands. The demand for labour. that in both parts of the united kingdom grain was somewhat dearer in the last century than in the present. about Edinburgh. the improvements of agriculture. In 1614. that the one is rich. and probably in most other parts of Europe. therefore.The Wealth of Nations represented as the cause. etc. while his neighbour walks a-foot. Carron. it is more difficult to ascertain how much. sometimes a shilling. they must be much more at their ease now. Ayrshire. and the other poor. This is a matter of fact which cannot now admit of any reasonable doubt. he walks a-foot. and in a few other places where there has lately been a considerable rise in the demand for labour. manufactures.

things which were formerly never raised but by the spade. and even of the onions. but which are now commonly raised by the plough. two children able to do something. during the course of the present century. do not at present. one with another. not only according to the different abilities of the workman. has become cheaper. they must make it up. The price of labour. cabbages. in some places more. whose skill in political arithmetic is so much extolled by Dr Davenant. and experience seems to shew that law can never regulate them properly. increased perhaps in a still greater proportion than its money price. cannot be ascertained very accurately anywhere. The great improvements in the coarser manufactories of both linen and woollen cloth furnish the labourers with cheaper and better clothing. consisting of six persons. Where wages are not regulated by law. computed the ordinary income of labourers and out-servants to be fifteen pounds a-year to a family. The real recompence of labour. In 1688. corresponds very nearly at bottom with that of Judge Hales. of three and a half persons. though it has often pretended to do so. the real quantity of the necessaries and conveniencies of life which it can procure to the labourer. too. Both suppose the weekly expense of such families to be about twenty-pence a-head. though different in appearance. If they cannot earn this by their labour. and in some less. through the greater part of the kingdom. has.Adam Smith the necessary expense of a labourer’s family.}. and two not able. carrots. Both the pecuniary income and expense of such families have increased considerably since that time through the greater part of the kingdom. the father and mother. it must be observed. Not only grain has become somewhat cheaper. at ten shillings a-week. All sort of garden stuff. and those in 75 . were. from which the industrious poor derive an agreeable and wholesome variety of food. or twenty-six pounds a-year. but according to the easiness or hardness of the masters. what are the most usual. therefore. in the last century. have become a great deal cheaper. Mr Gregory King. though perhaps scarce anywhere so much as some exaggerated accounts of the present wages of labour have lately represented them to the public. His calculation. for example. he supposes. Potatoes. cost half the price which they used to do thirty or forty years ago. either by begging or stealing. in Burn’s History of the Poor Laws. The greater part of the apples. which he supposed to consist. consumed in Great Britain. The same thing may be said of turnips. but many other things. He appears to have enquired very carefully into this subject {See his scheme for the maintenance of the poor. imported from Flanders. different prices being often paid at the same place and for the same sort of labour. all that we can pretend to determine is.

but in so cold a soil. Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage. I have been frequently told. while a pampered fine lady is often incapable of bearing any. does not always prevent. so far from recruiting their regiment. make up the far greater part of every great political society. and lodged. chiefly from the taxes which have been laid upon them. though it does not prevent the generation. Luxury. Soap. perhaps. the powers of generation. for a mother who has born twenty children not to have two alive. clothing. The quantity of these. indeed. It is but equity. clothe. and lodge the whole body of the people. candles. that. It is not uncommon. can never be regarded as any inconveniency to the whole. and so severe a climate. so frequent among women of fashion. which has augmented. which the labouring poor an under any necessity of consuming. in the fair sex. as well as with many agreeable and convenient pieces of household furniture. Barrenness. from all the soldiers’ children that were born in it. though it no doubt discourages. of which the far greater part of the members are poor and miserable. may convince us that it is not the money price of labour only. Several officers of great experience have assured me. however. It seems even to be favourable to generation. become a good deal dearer. should have such a share of the produce of their own labour as to be themselves tolerably well fed. clothed.The Wealth of Nations the manufactories of the coarser metals. and is generally exhausted by two or three. Servants. they have never been able to supply it with drums and fifes. the passion for enjoyment. But poverty. But what improves the circumstances of the greater part. and fermented liquors. seems always to weaken. salt. have. The tender plant is produced. is very rare among those of inferior station. marriage. soon withers and dies. that luxury extends itself even to the lowest ranks of the people. The common complaint. is extremely unfavourable to the rearing of children. with cheaper and better instruments of trade. No society can surely be flourishing and happy. labourers. leather. and frequently to destroy altogether. A greater number of fine children. is seldom seen anywhere than about a barrack 76 . while it inflames. that they who feed. in the Highlands of Scotland. is so very small. besides. but its real recompence. and lodging. that the increase in their price does not compensate the diminution in that of so many other things. to the society? The answer seems at first abundantly plain. and that the labouring poor will not now be contented with the same food. which satisfied them in former times. however. or as an inconveniency. A half-starved Highland woman frequently bears more than twenty children. Poverty. and workmen of different kinds.

It is this demand which regulates and determines the state of propagation in all the different countries of the world. in North America. like that for any other commodity. quickens it when it goes on too slowly. But in civilized society. as would soon force back its price to that proper rate which the circumstances of the society required. and it can do so in no other way than by destroying a great part of the children which their fruitful marriages produce. however. The liberal reward of labour. The wear and tear of a slave. necessarily regulates the production of men. It deserves to be remarked. and consequently to bring up a greater number. it seems. The market would be so much understocked with labour in the one case. Though their marriages are generally more fruitful than those of people of fashion.Adam Smith of soldiers. and no species can ever multiply be yond it. If the reward should at any time be less than what was requisite for this purpose. a smaller proportion of their children arrive at maturity. which renders it rapidly progressive in the first. Every species of animals naturally multiplies in proportion to the means of their subsistence. that it necessarily does this as nearly as possible in the proportion which the demand for labour requires. too. and so much overstocked in the other. naturally tends to widen and extend those limits. their excessive multiplication would soon lower it to this necessary rate. and if it should at any time be more. Very few of them. but that of a free servant is at his own expense. is at the expense of his master. in Europe. it has been said. In some places. and in China. who cannot afford to tend them with the same care as those of better station. the reward of labour must necessarily encourage in such a manner the marriage and multiplication of labourers. It is in this manner that the demand for men. 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. in reality. arrive at the age of thirteen or fourteen. as may enable them to supply that continually increasing demand by a continually increasing population. in many places before they are seven. by enabling them to provide better for their children. as much at the expense of his master as 77 . and altogether stationary in the last. the deficiency of hands would soon raise it. and stops it when it advances too fast. This great mortality. If this demand is continually increasing. and among the children brought up by parish charities. is. and in almost all places before they are nine or ten. however will everywhere be found chiefly among the children of the common people. In foundling hospitals. The wear and tear of the latter. slow and gradual in the second. the mortality is still greater than among those of the common people. one half the children die before they are four years of age.

and of ending his days. like every other human quality. or stationary demand of the society. Under such different management. one with another to continue the race of journeymen and servants. is commonly managed by a negligent master or careless overseer. That destined for performing the same office with regard to the freeman is managed by the freeman himself. and expeditious. that the condition of the labouring poor. as it is the effect of increasing wealth. and Philadelphia. seems to be the happiest and the most comfortable. accordingly. according as the increasing. Where wages are high.The Wealth of Nations that of the former. may happen to require. the cheerful and the hearty state to all the different orders of the society. animates him to exert that strength to the utmost. The disorders which generally prevail in the economy of the rich. the wear and tear of the slave. perhaps. diminishing. rather than when it has acquired its full complement of riches. The liberal reward of labour. that it is in the progressive state. To complain of it. But though the wear and tear of a free servant be equally at the expense of his master. of the great body of the people. that the work done by freemen comes cheaper in the end than that performed by slaves. while the society is advancing to the further acquisition. the strict frugality and parsimonious attention of the poor as naturally establish themselves in that of the latter. the same purpose must require very different degrees of expense to execute it. and the comfortable hope of bettering his condition. The progressive state is. A plentiful subsistence increases the bodily strength of the labourer. I believe. perhaps. the declining melancholy. The wages of labour are the encouragement of industry. in reality. It appears. improves in proportion to the encouragement it receives. The wages paid to journeymen and servants of every kind must be such as may enable them. New-York. as it encourages the propagation. It is found to do so even at Boston. and miserable in the declining state. the stationary is dull. The fund destined for replacing or repairing. in England. if I may say so. It is hard in the stationary. so it is the cause of increasing population. diligent. it generally costs him much less than that of a slave. accordingly. in ease and plenty. from the experience of all ages and nations. naturally introduce themselves into the management of the former. where the wages of common labour are so very high. therefore. so it increases the industry of the common people. It deserves to be remarked. which. The liberal reward of labour. is to lament over the necessary cause and effect of the greatest public prosperity. for 78 . we shall always find the workmen more active. than where they are low.

but sometimes too of dissipation and diversion. an eminent Italian physician. which. Almost every class of artificers is subject to some peculiar infirmity occasioned by excessive application to their peculiar species of work. In cheap years it is pretended. therefore.Adam Smith example. Workmen. mutual emulation. Ramuzzini. Till this stipulation was made. and even in country labour. if not restrained by force. and to ruin their health and constitution in a few years. and in dear times more industrious than ordinary. will be idle the other three. when they are liberally paid by the piece. wherever wages are higher than ordinary. according to the rate at which they were paid. in which the workmen are paid by the piece. is frequently the real cause of the idleness of the other three. sometimes of ease only. which requires to be relieved by some indulgence. in every sort of trade. that they should not be allowed to earn above a certain sum every day. continued for several days together is. and such as almost always. If masters would always listen to the dictates of reason and humanity. Some workmen. executes the greatest quantity of work. and liberally paid by the piece. This. the consequences are often dangerous and sometimes fatal. and a scanty one quickens their indus- 79 . than in Scotland. bring on the peculiar infirmity of the trade. sooner or later. and in some other places. and to hurt their health by excessive labour. when they can earn in four days what will maintain them through the week. their officers have frequently been obliged to stipulate with the undertaker. however. are very apt to overwork themselves. It will be found. is by no means the case with the greater part. but. A plentiful subsistence. on the contrary. is almost irresistible. they have frequently occasion rather to moderate. during four days of the week. it has been concluded. If it is not complied with. relaxes. in most men. than in remote country places. yet when soldiers have been employed in some particular sorts of work. as to be able to work constantly. or by some strong necessity. in the course of the year. in the neighbourhood of great towns. frequently prompted them to overwork themselves. workmen are generally more idle. so much and so loudly complained of. has written a particular book concerning such diseases. A carpenter in London. Excessive application. not only preserves his health the longest. We do not reckon our soldiers the most industrious set of people among us. indeed. either of mind or body. and the desire of greater gain. than to animate the application of many of their workmen. that the man who works so moderately. It is the call of nature. as they generally are in manufactures. Something of the same kind happens in many other trades. I believe. Great labour. is not supposed to last in his utmost vigour above eight years. naturally followed by a great desire of relaxation.

The Wealth of Nations try. the other shares it with his master. In years of scarcity. when they are disheartened than when they are in good spirits. The price of labour. upon such occasions. therefore. than to imagine that men in general should work less when they work for themselves. The rents of the one. cannot be well doubted. therefore. The demand for servants increases. frequently make better bargains with their servants in dear than in cheap years. poor independent workmen frequently consume the little stock with which they had used to supply themselves with the materials of their work. which cannot fail to diminish the produce of their industry. and find them more humble and dependent in the former than in the latter. The one enjoys the whole produce of his own industry. expect more profit from their corn by maintaining a few more labouring servants. many are willing to take it upon lower terms than ordinary. Years of dearth. That a little more plenty than ordinary may render some workmen idle. servants frequently leave their masters. In years of plenty. it is to be observed. by increasing the fund which is destined for the maintenance of servants. have another reason for being pleased with dear years. Farmers. Nothing can be more absurd. seems not very probable. the difficulty and uncertainty of subsistence make all such people eager to return to service. and the wages of both servants and journeymen frequently sink in dear years. while the number of those who offer to supply that demand diminishes. They naturally. however. Landlords and farmers. In dear years. But the same cheapness of provisions. therefore. frequently rises in cheap years. disposes masters rather to diminish than to increase the number of those they have. two of the largest classes of masters. or that men in general should work better when they are ill fed. commend the former as more favourable to industry. than when they are well fed. by diminishing the funds destined for the maintenance of servants. but that it should have this effect upon the greater part. A poor independent workman will generally be more industrious than even a journeyman who works by the piece. The one. too. But the high price of provisions. than when they work for other people. besides. depend very much upon the price of provisions. in his 80 . encourages masters. and trust their subsistence to what they can make by their own industry. are generally among the common people years of sickness and mortality. and are obliged to become journeymen for subsistence. and the profits of the other. to employ a greater number. when they are frequently sick than when they are generally in good health. More people want employment than easily get it. than by selling it at a low price in the market. farmers especially. Masters of all sorts.

is less liable to the temptations of bad company. though with some variations. both manufactures. are growing manufactures. and dear years to diminish it. In that and the following year. of which the produce is generally. carried on at Elbeuf. declined. indeed. All the three seem to be stationary manufactures. whether they do much or do little. or which. by comparing the quantity and value of the goods made upon those different occasions in three different manufactures. though their produce may vary somewhat from year to year. The produce of all great manufactures for distant sale must necessarily depend. both which extend through the whole generality of Rouen. The manufacture of linen in Scotland. and that it has always been. upon the prosperity or declension of other rival manufactures and upon the good or bad humour of their principal customers. In 1740. in large manufactories. as upon the circumstances which affect the demand in the countries where they are consumed. are. and least in the dearest years. one of linen. endeavours to shew that the poor do more work in cheap than in dear years. a year of great scarcity. it greatly exceeded what it had ever been before. and another of silk. after the repeal of the American stamp act. It appears from his account. neither going backwards nor forwards. indeed. which is copied from the registers of the public offices. the Scotch manufactures made more than ordinary advances. that the quantity and value of the goods made in all those three manufactories has generally been greater in cheap than in dear years. till 1766. greatest in the cheapest. The Yorkshire manufacture. The superiority of the independent workman over those servants who are hired by the month or by the year. But in 1756. and it has continued to advance ever since. and whose wages and maintenance are the same. A great part 81 . and that of coarse woollens in the West Riding of Yorkshire.Adam Smith separate independent state. Mr Messance. A French author of great knowledge and ingenuity. appear to have declined very considerably. upon the whole. upon peace or war. and its produce did not rise to what it had been in 1755. so frequently ruin the morals of the other. however. Cheap years tend to increase the proportion of independent workmen to journeymen and servants of all kinds. I have not been able to observe that its variations have had any sensible connection with the dearness or cheapness of the seasons. receiver of the taillies in the election of St Etienne. increasing both in quantity and value. not so much upon the dearness or cheapness of the seasons in the countries where they are carried on. is likely to be still greater. Upon examining. one of coarse woollens. which. the accounts which have been published of their annual produce. another year or great scarcity.

and from which our merchants and manufacturers would often vainly pretend to announce the prosperity or declension of the greatest empires. Though the money price of labour. frequently makes no figure in those public registers. that the money price of labour sometimes rises in the one. according as it happens to be increasing. stationary. Through the variations in the price of labour not only do not always correspond with those in the price of provisions. therefore. which some- 82 . stationary. imagine that the price of provisions has no influence upon that of labour. or declining. but are employed by some of their neighbours in manufactures for family use. The demand for labour. in order to make clothes for themselves and their families. Those masters. The money price of labour is necessarily regulated by two circumstances. The men-servants. bid against one another. never enters the public registers of manufactures. in order to get it. the demand continuing the same. The women return to their parents. of which the records are sometimes published with so much parade. if the price of provisions was high. The contrary of this happens in a year of sudden and extraordinary scarcity. who bid one against another. there are funds in the hands of many of the employers of industry. and diminishes in those of sudden and extraordinary scarcity. and the price of the necessaries and conveniencies of life. and the money price of labour is determined by what is requisite for purchasing this quantity. and sinks in the other. The funds destined for employing industry are less than they had been the year before. who want more workmen. In a year of sudden and extraordinary plenty. sufficient to maintain and employ a greater number of industrious people than had been employed the year before. is sometimes high where the price of provisions is low. Even the independent workmen do not always. the demand for labour. and commonly spin. in order to get them. who leave their masters. or declining population. become independent labourers. or to require an increasing. upon this account. work for public sale. therefore. A considerable number of people are thrown out of employment. It is because the demand for labour increases in years of sudden and extraordinary plenty. which is probably done in cheap years. The produce of their labour. it would be still higher. which sometimes raises both the real and the money price of their labour. but are frequently quite opposite. determines the quantities of the necessaries and conveniencies of life which must be given to the labourer. besides. and this extraordinary number cannot always be had. we must not.The Wealth of Nations of the extraordinary work. therefore.

on the contrary. more likely to be invented. The plenty of a cheap year. for the same reason. The same cause. In the ordinary variations of the prices of provisions. The owner of the stock which employs a great number of labourers necessarily endeavours. What takes place among the labourers in a particular workhouse. takes place. In 1740. both at home and abroad. that the increase of its price is more than compensated by the diminution of its quantity. For the same reason. those two opposite causes seem to counterbalance one another. to make such a proper division and distribution of employment. by increasing that part of it which resolves itself into wages. many people were willing to work for bare subsistence. There me many commodities. in part. a year of extraordinary scarcity. by diminishing the demand for labour. the more they naturally divide themselves into different classes and subdivisions of employments.Adam Smith times lowers both the real and the money price of labour. however. as the high price of provisions tends to raise it. The scarcity of a dear year. tends to lower its price. among those of a great society. The greater their number. the increase of stock. tends to raise the price of labour. it was more difficult to get labourers and servants. he endeavours to supply them with the best machinery which either he or they can think of. the reason why the wages of labour are everywhere so much more steady and permanent than the price of provisions. that they may be enabled to produce the greatest quantity of work possible. therefore. which raises the wages of labour. and it is. come to be produced by so much less labour than before. which is probably. which. in consequence of these improvements. as the cheapness of provisions tends to lower it. therefore. 83 . and so far tends to diminish their consumption. and to make a smaller quantity of labour produce a greater quantity of work. In the succeeding years of plenty. for his own advantage. by increasing the demand. More heads are occupied in inventing the most proper machinery for executing the work of each. tends to increase its productive powers. The increase in the wages of labour necessarily increases the price of many commodities.

The Wealth of Nations 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. must be much more difficult. and to judge of what it may have been formerly. The increase of stock. must be altogether impossible. the increasing or declining state of the wealth of the society. and almost from hour to hour. cannot always tell you himself what is the average of his annual profit. which raises wages. wherever little can be made by it. what are or were the average profits of stock. it has already been observed. It is affected. We can. but from day to day. But even this can seldom be done with regard to the profits of stock. and by a thousand other accidents. To ascertain what is the average profit of all the different trades carried on in a great kingdom. But though it may be impossible to determine. when carried either by sea or by land. tends to lower profit. and at a particular time. are liable. It is not easy. even in this case. When the stocks of many rich merchants are turned into the same trade. with any degree of precision. and that. It may be laid down as a maxim. but by the good or bad fortune both of his rivals and of his customers. to which goods. either in the present or in ancient times. that the person who carries on a particular trade. with any degree of precision. to ascertain what are the average wages of labour. It varies. not only from year to year. even in a particular place. that wherever a great deal can be made by the use of money. their mutual competition naturally tends to lower its profit. less will commonly he given 84 . or even when stored in a warehouse. but those causes affect the one and the other very differently. a great deal will commonly be given for the use of it. Profit is so very fluctuating. seldom determine more than what are the most usual wages. or in remote periods of time. not only by every variation of price in the commodities which he deals in. 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. therefore. some notion may be formed of them from the interest of money.

there is frequently not stock sufficient to employ all the people. it seems. in order to get as many as they can. and raises the profits of stock. In a thriving town. They seem to have followed. all interest above ten per cent. which raises the wages of labour. Since the time of Queen Anne. is said to have produced no effect. and ten per cent. was revived by the 13th of Elizabeth. must sink as it sinks. at three and a-half. The great stocks employed in every branch of trade. In the reign of Edward VI. religious zeal prohibited all interest. was declared unlawful. They seem not only to have been going on. like all others of the same kind. This prohibition. when it was restricted to eight per cent. four. the market rate of interest. It was reduced to six per cent. and probably rather increased than diminished the evil of usury. therefore. and by the 12th of Queen Anne. cap. and people of good credit in the capital. and. and lowers the profits of stock. In the remote parts of the country. may lead us to form some notion of the progress of profit. continued to be the legal rate of interest till the 21st of James I. or the rate at which people of good credit usually borrowed. 8. to five per cent. and therefore bid against one another.. 85 . The wages of labour have been continually increasing during the same period. Before the late war. soon after the Restoration.Adam Smith for it. their pace seems rather to have been gradually accelerated than retarded. but to have been going on faster and faster. however. and four and a-half per cent. It generally requires a greater stock to carry on any sort of trade in a great town than in a country village. in the greater part of the different branches of trade and manufactures. But the wages of labour are generally higher in a great town than in a country village. five per cent. generally reduce the rate of profit in the former below what it is in the latter. The progress of interest. and in many other parts of the kingdom. had sometimes been taken before that. The statute of Henry VIII. and not to have gone before. By the 37th of Henry VIII. in order to get employment. All these different statutory regulations seem to have been made with great propriety. 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. and the number of rich competitors. frequently cannot get the number of workmen they want. More. the profits of stock have been diminishing. therefore. and in the course of their progress. Accordingly. Since the time of Henry VIII. seems to have been rather above than below the market rate. the wealth and revenue of the country have been continually advancing. the people who have great stocks to employ. the government borrowed at three per cent. who therefore bid against one another. and rise as it rises. which lowers the wages of labour.

or to four per cent. The wages of labour are lower in France than in England.The Wealth of Nations In Scotland. sufficiently indicates the difference in their condition. In 1720. the market rate has generally been higher. France is. There are few trades which cannot be carried on with a smaller stock in Scotland than in England. It is a common and even a popular opinion in the country. The country. In 1766. though no doubt a richer country than Scotland. The wages of labour. they have several very safe and easy methods of evading the law. it was again raised to the twentieth penny. I have been assured by British merchants who had traded in both countries. The contrast is still greater when you return from France. are lower in Scotland than in England. that it is going backwards. therefore. been always regulated by the market rate {See Denisart. tom. In 1725. Private bankers in London give no interest for the money which is deposited with them. are higher in France than in England. or to five per cent. that many British subjects chuse rather to employ their capitals in a country where trade is in disgrace. even with regard to France. must be somewhat greater. When you go from Scotland to England. upon their promissory-notes. it was reduced to the twenty-fifth penny. but which nobody can possibly entertain with regard to 86 . as in other countries. The supposed purpose of many of those violent reductions of interest was to prepare the way for reducing that of the public debts. but the steps by which it advances to a better condition. during the administration of Mr Laverdy. In 1724. People of the best credit there seldom borrow under five per cent. p. Even private bankers in Edinburgh give four per cent. than in one where it is highly respected. or to three and a third per cent. perhaps. an opinion which I apprehend. Article Taux des Interests. seem to be much slower and more tardy. is ill-founded. interest was reduced from the twentieth to the fiftieth penny. for it is evidently advancing. seems not to be going forward so fast. too. the difference which you may remark between the dress and countenance of the common people in the one country and in the other. and it is no doubt upon this account. for there. the market rate is rather higher. and though the legal rate of interest has in France frequently been lower than in England. The common rate of profit. in the present times. The legal rate of interest in France has not during the course of the present century. iii. or from five to two per cent. not so rich a country as England. it has already been observed. of which payment.13}. though the legal rate of interest is the same as in England. a purpose which has sometimes been executed. is not only much poorer. it was raised to the thirtieth penny. France. The Abbé Terray raised it afterwards to the old rate of five per cent. either in whole or in part may be demanded at pleasure. The profits of trade.

and the Dutch. though acquired by a particular trade. the land near the sea-shore. Such land. and consequently the profits of stock. and yet that trade continue to increase too. What they have.Adam Smith Scotland. The wages of labour are said to be higher in Holland than in England. I suspect. merchants are very apt to complain that trade decays. The trade of Holland. both the legal and the market rate of interest run from six to eight percent. but these symptoms seem to indicate sufficiently that there is no general decay. but the interest of money. on the other hand. The government there borrow at two per cent. Stock employed in the purchase and improve- 87 . or that it has increased beyond what they can employ with tolerable profit in the proper business of their own country. or of a greater stock being employed in it than before. The great property which they possess both in French and English funds. They have more land than they have stock to cultivate. but they do not demonstrate that that business has decreased. are things. however. be more understocked in proportion to the extent of its territory. too. it has been pretended by some people. which scarce ever go together. except in the peculiar circumstances of new colonies. perhaps. than the greater part of other countries. High wages of labour and high profits of stock. and private people of good credit at three. The province of Holland. however. who sees the country now. the Dutch gained the whole carrying trade of France. and it may perhaps be true that some particular branches of it are so. the great sums which they lend to private people. As the capital of a private man. it is well known. During the late war. of which they still retain a very large share. is decaying. therefore. When profit diminishes. there is a considerable exaggeration ). are higher than in England. is applied to the cultivation only of what is most fertile and most favourably situated. and along the banks of navigable rivers. In the different colonies. is frequently purchased at a price below the value even of its natural produce. in proportion to the extent of its territory and the number of its people. so may likewise the capital of a great nation. not only the wages of labour. for some time. trade upon lower profits than any people in Europe. A new colony must always. is a richer country than England. and more underpeopled in proportion to the extent of its stock. may increase beyond what he can employ in it. it is said in the latter (in which. though the diminution of profit is the natural effect of its prosperity. in countries where the rate of interest is higher than in their own. and who saw it twenty or thirty years ago. In our North American and West Indian colonies. are circumstances which no doubt demonstrate the redundancy of their stock. about forty millions.

the profits of stock gradually diminish. in treating of the accumulation of stock. When you have got a little. As riches. who are advancing in the acquisition of riches. less profit can be made by the cultivation of what is inferior both in soil and situation. accordingly. but to increase much faster than before. are very liberally rewarded. It is with industrious nations. though with small profits. stock may not only continue to increase. improvement. The stock of the country. whatever be its profits. interest has declined. the competition comes to be Jess than before. The market comes to be less fully supplied with many different sorts of goods. as with industrious individuals. says the proverb. Part of what had before been employed in other trades. The acquisition of new territory. The wages of labour do not sink with the profits of stock. therefore. When the most fertile and best situated lands have been all occupied. is applied to those particular branches only which afford the greatest profit. consequently. therefore. afford to pay a very large interest. both the legal and the market rate of interest have been considerably reduced during the course of the present century. and with them the interest of money. As the colony increases. therefore. For some time after the conclusion of the late war. not only private people of the best credit. The demand for labour increases with the increase of stock. or of the demand for useful labour. even in a country which is fast advancing in the acquisition of riches. In the greater part of our colonies.The Wealth of Nations ment of such lands. who can. Money. and after these are diminished. it is often easy to get more. is necessarily withdrawn from them. and turned into some of the new and more profitable ones. commonly borrowed at five per cent. In all those old trades. may sometimes raise the profits of stock. afford to borrow at a higher interest. or of new branches of trade. who. not being sufficient for the whole accession of business which such acquisitions present to the different people among whom it is divided. and yields a greater profit to those who deal in them. A great stock. The connection between the increase of stock and that of industry. but will be explained more fully hereafter. had not been used to pay more than four. Its rapid accumulation in so profitable an employment enables the planter to increase the number of his hands faster than he can find them in a new settlement. Their price necessarily rises more or less. but some of the greatest companies in London. and less interest can be afforded for the stock which is so employed. before that. and. and four and a half per cent. have increased. generally increases faster than a small stock with great profits. Those whom he can find. The great accession both of territory and trade by our acquisi- 88 . makes money. The great difficulty is to get that little. has partly been explained already. and population. must yield a very large profit.

and consequently the interest of money. and the country being already fully peopled. fifty. under the ruinous administration of their proconsuls. In Bengal. may satisfy us. they can sell them dearer. The great fortunes so suddenly and so easily acquired in Bengal and the other British settlements in the East Indies. or its stock employ. Before the fall of the Roman republic. advance no further. so such enormous usury must in its turn eat up the greater part of those profits. however. therefore. that as the wages of labour are very low. In a country which had acquired that full complement of riches which the nature of its soil and climate. both the wages of labour and the profits of stock would probably be very low. that number could never be augmented. and they get more for them. By the wages of labour being lowered. So great an accession of new business to be carried on by the old stock. and sixty per cent. the owners of what stock remains in the society can bring their goods at less expense to market than before. the competition for employment would necessarily be so great as to reduce the wages of labour to what was barely sufficient to keep up the number of labourers. so it raises the profits of stock. as it lowers the wages of labour. must necessarily have diminished the quantity employed in a great number of particular branches. In a country fully stocked in proportion to all the business it had to transact. without supposing any diminution in the capital stock of the society. and which was not going backwards. can well afford a large interest. which could. As the profits which can afford such an interest must eat up almost the whole rent of the landlord. I shall hereafter have occasion to mention the reasons which dispose me to believe that the capital stock of Great Britain was not diminished. and its situation with respect to other countries. in which the competition being less. being augmented at both ends. The diminution of the capital stock of the society. even by the enormous expense of the late war. so the profits of stock are very high in those ruined countries. and the succeeding crop is mortgaged for the payment. therefore. The virtuous Brutus lent money in Cyprus at eight-and-forty per cent.Adam Smith tions in North America and the West Indies. Their profits. the profits must have been greater. as great a quantity of stock 89 . will sufficiently account for this. as we learn from the letters of Cicero. The interest of money is proportionably so. and less stock being employed in supplying the market than before. In a country fully peopled in proportion to what either its territory could maintain. Their goods cost them less. a usury of the same kind seems to have been common in the provinces. or of the funds destined for the maintenance of industry. allowed it to acquire. money is frequently lent to the farmers at forty.

the poor. with other laws and institutions. and the ordinary profits of stock must be sufficient to afford this large interest. cannot transact the same quantity of business which it might do with different laws and institutions. The high rate of interest among all Mahometan nations is accounted for by M. and. but to the difficulty and danger of evading the law. under the pretence of justice. or the owners of small capitals. Many people must borrow. Among the barbarous nations who overran the western provinces of the Roman empire. it does not prevent it. will be able to make very large profits. enjoy scarce any. But. and nobody will lend without such a consideration for the use of their money as is suitable. and which admits the vessel of foreign nations into one or two of its ports only. enjoy a good deal of security. Twelve per cent. who. to be pillaged and plundered at any time by the inferior mandarins. in better regulated countries. When the law prohibits interest altogether. In every different branch. the performance of contracts was left for many ages to the faith of the contracting parties. The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts. therefore. The courts of justice of their kings seldom intermeddled in it. can never be equal to what the nature and extent of that business might admit. where. would require. the nature of its soil. might admit of. or the owners of large capitals. not only to what can be made by the use of it. would everywhere be as great. perhaps. But this complement may be much inferior to what. it puts all borrowers nearly upon the same footing with bankrupts. as to wealth or poverty. The competition. long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions. though the rich. or people of doubtful credit. and situation. the quantity of stock employed in all the different branches of business transacted within it. the oppression of the poor must establish the monopoly of the rich. by engrossing the whole trade to themselves. climate. 90 . When the law does not enforce the performance of contracts. too. no country has ever yet arrived at this degree of opulence. The high rate of interest which took place in those ancient times. is said to be the common interest of money in China. and had.The Wealth of Nations would be employed in every particular branch as the nature and extent of the trade would admit. A country which neglects or despises foreign commerce. the ordinary profit as low as possible. but are liable. In a country. may. consequently. accordingly. be partly accounted for from this cause. perhaps. A defect in the law may sometimes raise the rate of interest considerably above what the condition of the country. probably. China seems to have been long stationary.

be very far from this rate. The profits of the trade which the servants of the East India Company carry on in Bengal may not. It is this surplus only which is neat or clear profit. in the same manner. in every particular branch of business. according to the lowest rate at which labour can anywhere be paid. so does an idle man among men of business. the bare subsistence of the labourer. Necessity makes it usual for almost every man to be so. The highest ordinary rate of profit may be such as. so the usual market rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upon the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. necessarily varies as profit rises or falls. eats up the whole of what should go to the rent of the land. As it is ridiculous not to dress. mere charity or friendship could be the only motives for lending. there was the greatest quantity of stock that could be employed in it. in some measure. comprehends frequently not only this surplus.Adam Smith Montesquieu. as the ordinary rate of clear profit would be very small. but what is retained for compensating such extraordinary losses. but partly from this. not to be employed like other people. In a country which had acquired its full complement of riches. perhaps. or engage in some sort of trade. What is called gross profit. It is there unfashionable not to be a man of business. As a man of a civil profession seems awkward in a camp or a garrison. Double interest is in Great Britain reckoned what the merchants call a 91 . and custom everywhere regulates fashion. and partly from the difficulty of recovering the money. It would be necessary that almost every man should be a man of business. is exposed. but the landlord may not always have been paid. and is even in some danger of being despised there. not from their poverty. where. The proportion which the usual market rate of interest ought to bear to the ordinary rate of clear profit. The interest which the borrower can afford to pay is in proportion to the clear profit only. in the price of the greater part of commodities. so is it. The lowest ordinary rate of interest must. The lowest ordinary rate of profit must always be something more than what is sufficient to compensate the occasional losses to which every employment of stock is exposed. The workman must always have been fed in some way or other while he was about the work. be something more than sufficient to compensate the occasional losses to which lending. The province of Holland seems to be approaching near to this state. Were it not. and leaves only what is sufficient to pay the labour of preparing and bringing them to market. even with tolerable prudence.

moderate. perhaps. wherever business is carried on with borrowed money. But the proportion between interest and clear profit might not be the same in countries where the ordinary rate of profit was either a good deal lower. If it were a good deal lower. among whom the wages of labour may be lower. upon the whole value of the materials and wages which he advanced to his workmen. in the greater part of trades. The employer of the spinners would require an additional five per cent. would. in selling his flax. But if the profits of all the different employers of those working people should be raised five per cent. The employer of the flax dressers would. I apprehend. and upon the wages of the spinners. require an additional five per cent. who. In countries which are fast advancing to riches. That part of the price of the commodity which resolved itself into the wages. In a country where the ordinary rate of clear profit is eight or ten per cent. may. as it were. or a good deal higher. compensate the high wages of labour. the flax-dressers. In raising the price of commodities. In reality. and upon the wages of the weavers. through all the different stages of the manufacture. etc. one half of it. high profits tend much more to raise the price of work than high wages. the spinners. the weavers. The rise of profit operates like compound interest. should all of them be advanced twopence a-day. mean no more than a common and usual profit. it may be reasonable that one half of it should go to interest. be both a sufficient profit upon the risk of this insurance. it would be necessary to heighten the price of a piece of linen only by a number of twopences equal to the number of people that had been employed about it. the rise of wages operates in the same manner as simple interest does in the accumulation of debt. and four or five per cent. If. in the price of many commodities. the wages of the different working people. and more might be afforded if it were a good deal higher. the low rate of profit may. through all the different stages of the manufacture. Our merchants and master 92 . both upon the advanced price of the linen-yarn. that part of the price of the commodity which resolved itself into profit would. multiplied by the number of days during which they had been so employed. rise only in arithmetical proportion to this rise of wages. and a sufficient recompence for the trouble of employing the stock. in the linen manufacture. And the employer of the weavers would require alike five per cent.The Wealth of Nations good. rise in geometrical proportion to this rise of profit. terms which. reasonable profit. could not be afforded for interest. and enable those countries to sell as cheap as their less thriving neighbours. both upon the advanced price of the flax. for example. insures it to the lender. The stock is at the risk of the borrower.

Adam Smith manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods, both at home and abroad. They say nothing concerning the bad effects of high profits; they are silent with regard to the pernicious effects of their own gains; they complain only of those of other people.

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The Wealth of Nations

CHAPTER X OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK
THE WHOLE OF THE ADVANTAGES and disadvantages of the different employments of labour and stock, must, in the same neighbourhood, be either perfectly equal, or continually tending to equality. If, in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This, at least, would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. Pecuniary wages and profit, indeed, are everywhere in Europe extremely different, according to the different employments of labour and stock. But this difference arises, partly from certain circumstances in the employments themselves, which, either really, or at least in the imagination of men, make up for a small pecuniary gain in some, and counterbalance a great one in others, and partly from the policy of Europe, which nowhere leaves things at perfect liberty. The particular consideration of those circumstances, and of that policy, will divide this Chapter into two parts. PART I. Inequalities arising from the nature of the employments themselves. The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others. First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them;

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Adam Smith thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them. First, the wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness, of the employment. Thus in most places, take the year round, a journeyman tailor earns less than a journeyman weaver. His work is much easier. A journeyman weaver earns less than a journeyman smith. His work is not always easier, but it is much cleanlier. A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours, as a collier, who is only a labourer, does in eight. His work is not quite so dirty, is less dangerous, and is carried on in day-light, and above ground. Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to shew by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever. Hunting and fishing, the most important employments of mankind in the rude state of society, become, in its advanced state, their most agreeable amusements, and they pursue for pleasure what they once followed from necessity. In the advanced state of society, therefore, they are all very poor people who follow as a trade, what other people pursue as a pastime. Fishermen have been so since the time of Theocritus. {See Idyllium xxi.}. A poacher is everywhere a very poor man in Great Britain. In countries where the rigour of the law suffers no poachers, the licensed hunter is not in a much better condition. The natural taste for those employments makes more people follow them, than can live comfortably by them; and the produce of their labour, in proportion to its quantity, comes always too cheap to market, to afford any thing but the most scanty subsistence to the labourers. Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labour. The keeper of an inn or tavern, who is never master of his own house, and who is exposed to the brutality of every drunkard, exercises neither a very agreeable nor a very creditable business. But there is scarce any common trade in which a small stock yields so great a profit. Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and expense, of learning the business.

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The Wealth of Nations When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits. A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skill, may be compared to one of those expensive machines. The work which he learns to perform, it must be expected, over and above the usual wages of common labour, will replace to him the whole expense of his education, with at least the ordinary profits of an equally valuable capital. It must do this too in a reasonable time, regard being had to the very uncertain duration of human life, in the same manner as to the more certain duration of the machine. The difference between the wages of skilled labour and those of common labour, is founded upon this principle. The policy of Europe considers the labour of all mechanics, artificers, and manufacturers, as skilled labour; and that of all country labourers us common labour. It seems to suppose that of the former to be of a more nice and delicate nature than that of the latter. It is so perhaps in some cases; but in the greater part it is quite otherwise, as I shall endeavour to shew by and by. The laws and customs of Europe, therefore, in order to qualify any person for exercising the one species of labour, impose the necessity of an apprenticeship, though with different degrees of rigour in different places. They leave the other free and open to every body. During the continuance of the apprenticeship, the whole labour of the apprentice belongs to his master. In the meantime he must, in many cases, be maintained by his parents or relations, and, in almost all cases, must be clothed by them. Some money, too, is commonly given to the master for teaching him his trade. They who cannot give money, give time, or become bound for more than the usual number of years; a consideration which, though it is not always advantageous to the master, on account of the usual idleness of apprentices, is always disadvantageous to the apprentice. In country labour, on the contrary, the labourer, while he is employed about the easier, learns the more difficult parts of his business, and his own labour maintains him through all the different stages of his employment. It is reasonable, therefore, that in Europe the wages of mechanics, artificers, and manufacturers, should be somewhat higher than those of common labourers. They are so accordingly, and their superior gains make them, in most places, be considered as a superior rank of people. This superiority, however, is generally very small: the daily or weekly earnings of journeymen in the more common sorts of manufactures, such as those of plain linen and woollen cloth, computed at an average, are, in most places, very little

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Adam Smith more than the day-wages of common labourers. Their employment, indeed, is more steady and uniform, and the superiority of their earnings, taking the whole year together, may be somewhat greater. It seems evidently, however, to be no greater than what is sufficient to compensate the superior expense of their education. Education in the ingenious arts, and in the liberal professions, is still more tedious and expensive. The pecuniary recompence, therefore, of painters and sculptors, of lawyers and physicians, ought to be much more liberal; and it is so accordingly. The profits of stock seem to be very little affected by the easiness or difficulty of learning the trade in which it is employed. All the different ways in which stock is commonly employed in great towns seem, in reality, to be almost equally easy and equally difficult to learn. One branch, either of foreign or domestic trade, cannot well be a much more intricate business than another. Thirdly, the wages of labour in different occupations vary with the constancy or inconstancy of employment. Employment is much more constant in some trades than in others. In the greater part of manufactures, a journeyman maybe pretty sure of employment almost every day in the year that he is able to work. A mason or bricklayer, on the contrary, can work neither in hard frost nor in foul weather, and his employment at all other times depends upon the occasional calls of his customers. He is liable, in consequence, to be frequently without any. What he earns, therefore, while he is employed, must not only maintain him while he is idle, but make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. Where the computed earnings of the greater part of manufacturers, accordingly, are nearly upon a level with the day-wages of common labourers, those of masons and bricklayers are generally from one-half more to double those wages. Where common labourers earn four or five shillings a-week, masons and bricklayers frequently earn seven and eight; where the former earn six, the latter often earn nine and ten; and where the former earn nine and ten, as in London, the latter commonly earn fifteen and eighteen. No species of skilled labour, however, seems more easy to learn than that of masons and bricklayers. Chairmen in London, during the summer season, are said sometimes to be employed as bricklayers. The high wages of those workmen, therefore, are not so much the recompence of their skill, as the compensation for the inconstancy of their employment. A house-carpenter seems to exercise rather a nicer and a more ingenious trade than a mason. In most places, however, for it is not universally so,

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The Wealth of Nations his day-wages are somewhat lower. His employment, though it depends much, does not depend so entirely upon the occasional calls of his customers; and it is not liable to be interrupted by the weather. When the trades which generally afford constant employment, happen in a particular place not to do so, the wages of the workmen always rise a good deal above their ordinary proportion to those of common labour. In London, almost all journeymen artificers are liable to be called upon and dismissed by their masters from day to day, and from week to week, in the same manner as day-labourers in other places. The lowest order of artificers, journeymen tailors, accordingly, earn their half-a-crown a-day, though eighteen pence may be reckoned the wages of common labour. In small towns and country villages, the wages of journeymen tailors frequently scarce equal those of common labour; but in London they are often many weeks without employment, particularly during the summer. When the inconstancy of employment is combined with the hardship, disagreeableness, and dirtiness of the work, it sometimes raises the wages of the most common labour above those of the most skilful artificers. A collier working by the piece is supposed, at Newcastle, to earn commonly about double, and, in many parts of Scotland, about three times, the wages of common labour. His high wages arise altogether from the hardship, disagreeableness, and dirtiness of his work. His employment may, upon most occasions, be as constant as he pleases. The coal-heavers in London exercise a trade which, in hardship, dirtiness, and disagreeableness, almost equals that of colliers; and, from the unavoidable irregularity in the arrivals of coal-ships, the employment of the greater part of them is necessarily very inconstant. If colliers, therefore, commonly earn double and triple the wages of common labour, it ought not to seem unreasonable that coalheavers should sometimes earn four and five times those wages. In the inquiry made into their condition a few years ago, it was found that, at the rate at which they were then paid, they could earn from six to ten shillings a-day. Six shillings are about four times the wages of common labour in London; and, in every particular trade, the lowest common earnings may always be considered as those of the far greater number. How extravagant soever those earnings may appear, if they were more than sufficient to compensate all the disagreeable circumstances of the business, there would soon be so great a number of competitors, as, in a trade which has no exclusive privilege, would quickly reduce them to a lower rate. The constancy or inconstancy of employment cannot affect the ordinary profits of stock in any particular trade. Whether the stock is or is not constantly employed, depends, not upon the trade, but the trader.

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Adam Smith Fourthly, the wages of labour vary according to the small or great trust which must be reposed in the workmen. The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen, not only of equal, but of much superior ingenuity, on account of the precious materials with which they are entrusted. We trust our health to the physician, our fortune, and sometimes our life and reputation, to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour. When a person employs only his own stock in trade, there is no trust; and the credit which he may get from other people, depends, not upon the nature of the trade, but upon their opinion of his fortune, probity and prudence. The different rates of profit, therefore, in the different branches of trade, cannot arise from the different degrees of trust reposed in the traders. Fifthly, the wages of labour in different employments vary according to the probability or improbability of success in them. The probability that any particular person shall ever be qualified for the employments to which he is educated, is very different in different occupations. In the greatest part of mechanic trades success is almost certain; but very uncertain in the liberal professions. Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes; but send him to study the law, it as at least twenty to one if he ever makes such proficiency as will enable him to live by the business. In a perfectly fair lottery, those who draw the prizes ought to gain all that is lost by those who draw the blanks. In a profession, where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty. The counsellor at law, who, perhaps, at near forty years of age, begins to make something by his profession, ought to receive the retribution, not only of his own so tedious and expensive education, but of that of more than twenty others, who are never likely to make any thing by it. How extravagant soever the fees of counsellors at law may sometimes appear, their real retribution is never equal to this. Compute, in any particular place, what is likely to be annually gained, and what is likely to be annually spent, by all the different workmen in any common trade, such as that of shoemakers or weavers, and you will find that the former sum will generally exceed the latter. But make the same computation with regard to all the counsellors and students of law, in all the differ-

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The Wealth of Nations ent Inns of Court, and you will find that their annual gains bear but a very small proportion to their annual expense, even though you rate the former as high, and the latter as low, as can well be done. The lottery of the law, therefore, is very far from being a perfectly fair lottery; and that as well as many other liberal and honourable professions, is, in point of pecuniary gain, evidently under-recompensed. Those professions keep their level, however, with other occupations; and, notwithstanding these discouragements, all the most generous and liberal spirits are eager to crowd into them. Two different causes contribute to recommend them. First, the desire of the reputation which attends upon superior excellence in any of them; and, secondly, the natural confidence which every man has, more or less, not only in his own abilities, but in his own good fortune. To excel in any profession, in which but few arrive at mediocrity, it is the most decisive mark of what is called genius, or superior talents. The public admiration which attends upon such distinguished abilities makes always a part of their reward; a greater or smaller, in proportion as it is higher or lower in degree. It makes a considerable part of that reward in the profession of physic; a still greater, perhaps, in that of law; in poetry and philosophy it makes almost the whole. There are some very agreeable and beautiful talents, of which the possession commands a certain sort of admiration, but of which the exercise, for the sake of gain, is considered, whether from reason or prejudice, as a sort of public prostitution. The pecuniary recompence, therefore, of those who exercise them in this manner, must be sufficient, not only to pay for the time, labour, and expense of acquiring the talents, but for the discredit which attends the employment of them as the means of subsistence. The exorbitant rewards of players, opera-singers, opera-dancers, etc. are founded upon those two principles; the rarity and beauty of the talents, and the discredit of employing them in this manner. It seems absurd at first sight, that we should despise their persons, and yet reward their talents with the most profuse liberality. While we do the one, however, we must of necessity do the other, Should the public opinion or prejudice ever alter with regard to such occupations, their pecuniary recompence would quickly diminish. More people would apply to them, and the competition would quickly reduce the price of their labour. Such talents, though far from being common, are by no means so rare as imagined. Many people possess them in great perfection, who disdain to make this use of them; and many more are capable of acquiring them, if any thing could be made honourably by them.

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Adam Smith The over-weening conceit which the greater part of men have of their own abilities, is an ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of. It is, however, if possible, still more universal. There is no man living, who, when in tolerable health and spirits, has not some share of it. The chance of gain is by every man more or less overvalued, and the chance of loss is by most men under-valued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth. That the chance of gain is naturally overvalued, we may learn from the universal success of lotteries. The world neither ever saw, nor ever will see, a perfectly fair lottery, or one in which the whole gain compensated the whole loss; because the undertaker could make nothing by it. In the state lotteries, the tickets are really not worth the price which is paid by the original subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per cent. advance. The vain hopes of gaining some of the great prizes is the sole cause of this demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining ten or twenty thousand pounds, though they know that even that small sum is perhaps twenty or thirty per cent. more than the chance is worth. In a lottery in which no prize exceeded twenty pounds, though in other respects it approached much nearer to a perfectly fair one than the common state lotteries, there would not be the same demand for tickets. In order to have a better chance for some of the great prizes, some people purchase several tickets; and others, small shares in a still greater number. There is not, however, a more certain proposition in mathematics, than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets, the nearer you approach to this certainty. That the chance of loss is frequently undervalued, and scarce ever valued more than it is worth, we may learn from the very moderate profit of insurers. In order to make insurance, either from fire or sea-risk, a trade at all, the common premium must be sufficient to compensate the common losses, to pay the expense of management, and to afford such a profit as might have been drawn from an equal capital employed in any common trade. The person who pays no more than this, evidently pays no more than the real value of the risk, or the lowest price at which he can reasonably expect to insure it. But though many people have made a little money by insurance, very few have made a great fortune; and, from this consider-

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The Wealth of Nations ation alone, it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades, by which so many people make fortunes. Moderate, however, as the premium of insurance commonly is, many people despise the risk too much to care to pay it. Taking the whole kingdom at an average, nineteen houses in twenty, or rather, perhaps, ninety-nine in a hundred, are not insured from fire. Sea-risk is more alarming to the greater part of people; and the proportion of ships insured to those not insured is much greater. Many sail, however, at all seasons, and even in time of war, without any insurance. This may sometimes, perhaps, be done without any imprudence. When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved up on them all may more than compensate such losses as they are likely to meet with in the common course of chances. The neglect of insurance upon shipping, however, in the same manner as upon houses, is, in most cases, the effect of no such nice calculation, but of mere thoughtless rashness, and presumptuous contempt of the risk. The contempt of risk, and the presumptuous hope of success, are in no period of life more active than at the age at which young people choose their professions. How little the fear of misfortune is then capable of balancing the hope of good luck, appears still more evidently in the readiness of the common people to enlist as soldiers, or to go to sea, than in the eagerness of those of better fashion to enter into what are called the liberal professions. What a common soldier may lose is obvious enough. Without regarding the danger, however, young volunteers never enlist so readily as at the beginning of a new war; and though they have scarce any chance of preferment, they figure to themselves, in their youthful fancies, a thousand occasions of acquiring honour and distinction which never occur. These romantic hopes make the whole price of their blood. Their pay is less than that of common labourers, and, in actual service, their fatigues are much greater. The lottery of the sea is not altogether so disadvantageous as that of the army. The son of a creditable labourer or artificer may frequently go to sea with his father’s consent; but if he enlists as a soldier, it is always without it. Other people see some chance of his making something by the one trade; nobody but himself sees any of his making any thing by the other. The great admiral is less the object of public admiration than the great general; and the highest success in the sea service promises a less brilliant fortune and reputation than equal success in the land. The same differ-

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Adam Smith ence runs through all the inferior degrees of preferment in both. By the rules of precedency, a captain in the navy ranks with a colonel in the army; but he does not rank with him in the common estimation. As the great prizes in the lottery are less, the smaller ones must be more numerous. Common sailors, therefore, more frequently get some fortune and preferment than common soldiers; and the hope of those prizes is what principally recommends the trade. Though their skill and dexterity are much superior to that of almost any artificers; and though their whole life is one continual scene of hardship and danger; yet for all this dexterity and skill, for all those hardships and dangers, while they remain in the condition of common sailors, they receive scarce any other recompence but the pleasure of exercising the one and of surmounting the other. Their wages are not greater than those of common labourers at the port which regulates the rate of seamen’s wages. As they are continually going from port to port, the monthly pay of those who sail from all the different ports of Great Britain, is more nearly upon a level than that of any other workmen in those different places; and the rate of the port to and from which the greatest number sail, that is, the port of London, regulates that of all the rest. At London, the wages of the greater part of the different classes of workmen are about double those of the same classes at Edinburgh. But the sailors who sail from the port of London, seldom earn above three or four shillings a month more than those who sail from the port of Leith, and the difference is frequently not so great. In time of peace, and in the merchant-service, the London price is from a guinea to about seven-andtwenty shillings the calendar month. A common labourer in London, at the rate of nine or ten shillings a week, may earn in the calendar month from forty to five-and-forty shillings. The sailor, indeed, over and above his pay, is supplied with provisions. Their value, however, may not perhaps always exceed the difference between his pay and that of the common labourer; and though it sometimes should, the excess will not be clear gain to the sailor, because he cannot share it with his wife and family, whom he must maintain out of his wages at home. The dangers and hair-breadth escapes of a life of adventures, instead of disheartening young people, seem frequently to recommend a trade to them. A tender mother, among the inferior ranks of people, is often afraid to send her son to school at a sea-port town, lest the sight of the ships, and the conversation and adventures of the sailors, should entice him to go to sea. The distant prospect of hazards, from which we can hope to extricate ourselves by courage and address, is not disagreeable to us, and does not raise the wages of labour in any employment. It is otherwise with those in

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The Wealth of Nations which courage and address can be of no avail. In trades which are known to be very unwholesome, the wages of labour are always remarkably high. Unwholesomeness is a species of disagreeableness, and its effects upon the wages of labour are to be ranked under that general head. In all the different employments of stock, the ordinary rate of profit varies more or less with the certainty or uncertainty of the returns. These are, in general, less uncertain in the inland than in the foreign trade, and in some branches of foreign trade than in others; in the trade to North America, for example, than in that to Jamaica. The ordinary rate of profit always rises more or less with the risk. it does not, however, seem to rise in proportion to it, or so as to compensate it completely. Bankruptcies are most frequent in the most hazardous trades. The most hazardous of all trades, that of a smuggler, though, when the adventure succeeds, it is likewise the most profitable, is the infallible road to bankruptcy. The presumptuous hope of success seems to act here as upon all other occasions, and to entice so many adventurers into those hazardous trades, that their competition reduces the profit below what is sufficient to compensate the risk. To compensate it completely, the common returns ought, over and above the ordinary profits of stock, not only to make up for all occasional losses, but to afford a surplus profit to the adventurers, of the same nature with the profit of insurers. But if the common returns were sufficient for all this, bankruptcies would not be more frequent in these than in other trades. Of the five circumstances, therefore, which vary the wages of labour, two only affect the profits of stock; the agreeableness or disagreeableness of the business, and the risk or security with which it is attended. In point of agreeableness or disagreeableness, there is little or no difference in the far greater part of the different employments of stock, but a great deal in those of labour; and the ordinary profit of stock, though it rises with the risk, does not always seem to rise in proportion to it. It should follow from all this, that, in the same society or neighbourhood, the average and ordinary rates of profit in the different employments of stock should be more nearly upon a level than the pecuniary wages of the different sorts of labour. They are so accordingly. The difference between the earnings of a common labourer and those of a well employed lawyer or physician, is evidently much greater than that between the ordinary profits in any two different branches of trade. The apparent difference, besides, in the profits of different trades, is generally a deception arising from our not always distinguishing what ought to be considered as wages, from what ought to be considered as profit.

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Adam Smith Apothecaries’ profit is become a bye-word, denoting something uncommonly extravagant. This great apparent profit, however, is frequently no more than the reasonable wages of labour. The skill of an apothecary is a much nicer and more delicate matter than that of any artificer whatever; and the trust which is reposed in him is of much greater importance. He is the physician of the poor in all cases, and of the rich when the distress or danger is not very great. His reward, therefore, ought to be suitable to his skill and his trust; and it arises generally from the price at which he sells his drugs. But the whole drugs which the best employed apothecary in a large market-town, will sell in a year, may not perhaps cost him above thirty or forty pounds. Though he should sell them, therefore, for three or four hundred, or at a thousand per cent. profit, this may frequently be no more than the reasonable wages of his labour, charged, in the only way in which he can charge them, upon the price of his drugs. The greater part of the apparent profit is real wages disguised in the garb of profit. In a small sea-port town, a little grocer will make forty or fifty per cent. upon a stock of a single hundred pounds, while a considerable wholesale merchant in the same place will scarce make eight or ten per cent. upon a stock of ten thousand. The trade of the grocer may be necessary for the conveniency of the inhabitants, and the narrowness of the market may not admit the employment of a larger capital in the business. The man, however, must not only live by his trade, but live by it suitably to the qualifications which it requires. Besides possessing a little capital, he must be able to read, write, and account and must be a tolerable judge, too, of perhaps fifty or sixty different sorts of goods, their prices, qualities, and the markets where they are to be had cheapest. He must have all the knowledge, in short, that is necessary for a great merchant, which nothing hinders him from becoming but the want of a sufficient capital. Thirty or forty pounds a year cannot be considered as too great a recompence for the labour of a person so accomplished. Deduct this from the seemingly great profits of his capital, and little more will remain, perhaps, than the ordinary profits of stock. The greater part of the apparent profit is, in this case too, real wages. The difference between the apparent profit of the retail and that of the wholesale trade, is much less in the capital than in small towns and country villages. Where ten thousand pounds can be employed in the grocery trade, the wages of the grocer’s labour must be a very trifling addition to the real profits of so great a stock. The apparent profits of the wealthy retailer, therefore, are there more nearly upon a level with those of the wholesale merchant. It is upon this account that goods sold by retail are

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The Wealth of Nations generally as cheap, and frequently much cheaper, in the capital than in small towns and country villages. Grocery goods, for example, are generally much cheaper; bread and butchers’ meat frequently as cheap. It costs no more to bring grocery goods to the great town than to the country village; but it costs a great deal more to bring corn and cattle, as the greater part of them must be brought from a much greater distance. The prime cost of grocery goods, therefore, being the same in both places, they are cheapest where the least profit is charged upon them. The prime cost of bread and butchers’ meat is greater in the great town than in the country village; and though the profit is less, therefore they are not always cheaper there, but often equally cheap. In such articles as bread and butchers’ meat, the same cause which diminishes apparent profit, increases prime cost. The extent of the market, by giving employment to greater stocks, diminishes apparent profit; but by requiring supplies from a greater distance, it increases prime cost. This diminution of the one and increase of the other, seem, in most cases, nearly to counterbalance one another; which is probably the reason that, though the prices of corn and cattle are commonly very different in different parts of the kingdom, those of bread and butchers’ meat are generally very nearly the same through the greater part of it. Though the profits of stock, both in the wholesale and retail trade, are generally less in the capital than in small towns and country villages, yet great fortunes are frequently acquired from small beginnings in the former, and scarce ever in the latter. In small towns and country villages, on account of the narrowness of the market, trade cannot always be extended as stock extends. In such places, therefore, though the rate of a particular person’s profits may be very high, the sum or amount of them can never be very great, nor consequently that of his annual accumulation. In great towns, on the contrary, trade can be extended as stock increases, and the credit of a frugal and thriving man increases much faster than his stock. His trade is extended in proportion to the amount of both; and the sum or amount of his profits is in proportion to the extent of his trade, and his annual accumulation in proportion to the amount of his profits. It seldom happens, however, that great fortunes are made, even in great towns, by any one regular, established, and well-known branch of business, but in consequence of a long life of industry, frugality, and attention. Sudden fortunes, indeed, are sometimes made in such places, by what is called the trade of speculation. The speculative merchant exercises no one regular, established, or well-known branch of business. He is a corn merchant this year, and a wine merchant the next, and a sugar, tobacco, or tea merchant

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Adam Smith the year after. He enters into every trade, when he foresees that it is likely to lie more than commonly profitable, and he quits it when he foresees that its profits are likely to return to the level of other trades. His profits and losses, therefore, can bear no regular proportion to those of any one established and well-known branch of business. A bold adventurer may sometimes acquire a considerable fortune by two or three successful speculations, but is just as likely to lose one by two or three unsuccessful ones. This trade can be carried on nowhere but in great towns. It is only in places of the most extensive commerce and correspondence that the intelligence requisite for it can be had. The five circumstances above mentioned, though they occasion considerable inequalities in the wages of labour and profits of stock, occasion none in the whole of the advantages and disadvantages, real or imaginary, of the different employments of either. The nature of those circumstances is such, that they make up for a small pecuniary gain in some, and counterbalance a great one in others. In order, however, that this equality may take place in the whole of their advantages or disadvantages, three things are requisite, even where there is the most perfect freedom. First the employments must be well known and long established in the neighbourhood; secondly, they must be in their ordinary, or what may be called their natural state; and, thirdly, they must be the sole or principal employments of those who occupy them. First, This equality can take place only in those employments which are well known, and have been long established in the neighbourhood. Where all other circumstances are equal, wages are generally higher in new than in old trades. When a projector attempts to establish a new manufacture, he must at first entice his workmen from other employments, by higher wages than they can either earn in their own trades, or than the nature of his work would otherwise require; and a considerable time must pass away before he can venture to reduce them to the common level. Manufactures for which the demand arises altogether from fashion and fancy, are continually changing, and seldom last long enough to be considered as old established manufactures. Those, on the contrary, for which the demand arises chiefly from use or necessity, are less liable to change, and the same form or fabric may continue in demand for whole centuries together. The wages of labour, therefore, are likely to be higher in manufactures of the former, than in those of the latter kind. Birmingham deals chiefly in manufactures of the former kind; Sheffield in those of the latter; and the wages of labour in those two different places are said to be suitable to this difference in the nature of their manufactures.

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The Wealth of Nations The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture, is always a speculation from which the projector promises himself extraordinary profits. These profits sometimes are very great, and sometimes, more frequently, perhaps, they are quite otherwise; but, in general, they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition reduces them to the level of other trades. Secondly, this equality in the whole of the advantages and disadvantages of the different employments of labour and stock, can take place only in the ordinary, or what may be called the natural state of those employments. The demand for almost every different species of labour is sometimes greater, and sometimes less than usual. In the one case, the advantages of the employment rise above, in the other they fall below the common level. The demand for country labour is greater at hay-time and harvest than during the greater part of the year; and wages rise with the demand. In time of war, when forty or fifty thousand sailors are forced from the merchant service into that of the king, the demand for sailors to merchant ships necessarily rises with their scarcity; and their wages, upon such occasions, commonly rise from a guinea and seven-and-twenty shillings to forty shilling’s and three pounds a-month. In a decaying manufacture, on the contrary, many workmen, rather than quit their own trade, are contented with smaller wages than would otherwise be suitable to the nature of their employment. The profits of stock vary with the price of the commodities in which it is employed. As the price of any commodity rises above the ordinary or average rate, the profits of at least some part of the stock that is employed in bringing it to market, rise above their proper level, and as it falls they sink below it. All commodities are more or less liable to variations of price, but some are much more so than others. In all commodities which are produced by human industry, the quantity of industry annually employed is necessarily regulated by the annual demand, in such a manner that the average annual produce may, as nearly as possible, be equal to the average annual consumption. In some employments, it has already been observed, the same quantity of industry will always produce the same, or very nearly the same quantity of commodities. In the linen or woollen manufactures, for example, the same number of hands will annually work up very nearly the same quantity of linen and woollen cloth. The variations in the mar-

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When a person derives his subsistence from one employment. and is consequently extremely fluctuating. A public mourning raises the price of black cloth. therefore. The operations of the speculative merchant are principally employed about such commodities. wine. in many parts of Scotland. therefore. a small garden for pot-herbs. which does not occupy the greater part of his time. and to have wrought for less wages than other labourers. When such occupiers were more numerous than they are at present. in different years. in the intervals of his leisure he is often willing to work at another for less wages than would otherwise suit the nature of the employment. as much grass as will feed a cow. besides. During a great part of the year. But there are other employments in which the same quantity of industry will not always produce the same quantity of commodities. and worse inhabited. The usual reward which they receive from their master is a house. The same quantity of industry. this equality in the whole of the advantages and disadvantages of the different employments of labour and stock. but with the much greater and more frequent variations of quantity. so is likewise the price. two pecks of oatmeal a-week. and to sell them when it is likely to fall. worth about sixteen pence sterling. Thirdly. perhaps. They are a sort of out-servants of the landlords and farmers.Adam Smith ket price of such commodities. There still subsists. etc. will. an acre or two of bad arable land. He endeavours to buy them up when he foresees that their price is likely to rise. In ancient times. In countries ill cultivated. and the cultivation of their own little possession is not sufficient to occupy the time which is left at their own disposal. When their master has occasion for their labour. he gives them. though they were more frequent some years ago than they are now. can arise only from some accidental variation in the demand. But as the demand for most sorts of plain linen and woollen cloth is pretty uniform. a set of people called cottars or cottagers. they seem to have been common all over Europe. they are said to have been willing to give their spare time for a very small recompence to any body. he has little or no occasion for their labour. hops. produce very different quantities of corn. sugar tobacco. varies not only with the variations of demand. but the profit of some of the dealers must necessarily fluctuate with the price of the commodities. the greater part of landlords and farmers could not otherwise provide themselves with the extraordinary number of hands which country labour requires at certain seasons. The price of such commodities. The daily or weekly recompence which such labourers occasion- 109 . for example. can take place only in such as are the sole or principal employments of those who occupy them. and.

tenpence a-day. but it arises in part from the peculiar manners and customs of the people. the dearness of house-rent is the cause of the cheapness of lodging. and. This daily or weekly recompence. every landlord acting the part of a monopolist. More than a thousand pair of Shetland stockings are annually imported into Leith. In opulent countries. In the same islands. not only from those causes which render it dear in all great capitals. of the same degree of goodness. are knit much cheaper than they can anywhere be wrought upon the loom. deriving some little advantage from another. what may seem extraordinary. The spinning of linen yarn is carried on in Scotland nearly in the same way as the knitting of stockings. they knit worsted stockings to the value of a guinea a pair and upwards. They earn but a very scanty subsistence. the dearness of all the materials of building. is a common price of common labour. that any one trade is sufficient to employ the whole labour and stock of those who occupy it. above all. in which house-rent is dearer than in London. who are chiefly hired for other purposes. and frequently exacting a higher rent for a single acre of bad land in a town. and who have taken pleasure in representing both as wonderfully low. it is much cheaper than in Edinburgh. the small capital of the Shetland islands. They are the work of servants and labourers who derive the principal part of their subsistence from some other employment. of something of the same kind. the market is generally so extensive. seems to have been considered as the whole of it. occur chiefly in pour countries. Instances of people living by one employment. which must generally be brought from a great distance. was evidently not the whole price of their labour. is to be found in the capital of a very rich one. of which the price is from fivepence to seven-pence a pair. The dearness of house-rent in London arises. which oblige every master of a family to hire a 110 . and. by servants. At Lerwick. however. Their small tenement made a considerable part of it. who endeavour to get their livelihood by either of those trades. and. however. I have been assured. the dearness of ground-rent. the dearness of labour. by many writers who have collected the prices of labour and provisions in ancient times.The Wealth of Nations ally received from their masters. in many parts of Scotland. The produce of such labour comes frequently cheaper to market than would otherwise be suitable to its nature. There is no city in Europe. than can be had for a hundred of the best in the country. she is a good spinner who can earn twentypence a-week. In most parts of Scotland. Lodging is not only much cheaper in London than in Paris. I believe. The following instance. and yet I know no capital in which a furnished apartment can be hired so cheap. at the same time. Stockings.

It does this chiefly in the three following ways. In France. The policy of Europe occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock. The limita- 111 . and. First. by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them. But the policy of Europe. even where there is the most perfect liberty. His shop is upon the ground floor. He expects to maintain his family by his trade. secondly. The exclusive privilege of an incorporated trade necessarily restrains the competition. under a master properly qualified. and he endeavours to pay a part of his house-rent by letting the two middle storeys to lodgers. and he and his family sleep in the garret. Scotland. and the price of the lodging must pay. Whereas at Paris and Edinburgh. The intention of both regulations is to restrain the competition to a much smaller number than might otherwise be disposed to enter into the trade. which the defect of any of the three requisites above mentioned must occasion. A tradesman in London is obliged to hire a whole house in that part of the town where his customers live. by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. by not leaving things at perfect liberty. but the whole expense of the family. by obstructing the free circulation of labour and stock.Adam Smith whole house from top to bottom. by increasing it in others beyond what it naturally would be. thirdly. not only the rent of the house. in the town where it is established. people who let lodgings have commonly no other means of subsistence. First. The bye-laws of the corporation regulate sometimes the number of apprentices which any master is allowed to have. and not by his lodgers. A dwelling-house in England means every thing that is contained under the same roof. and many other parts of Europe. both from employment to employment. is commonly the necessary requisite for obtaining this freedom. and almost always the number of years which each apprentice is obliged to serve. Such are the inequalities in the whole of the advantages and disadvantages of the different employments of labour and stock. — Inequalities occasioned by the Policy of Europe. and from place to place. it frequently means no more than a single storey. to those who are free of the trade. The exclusive privileges of corporations are the principal means it makes use of for this purpose. occasions other inequalities of much greater importance. PART II. To have served an apprenticeship in the town.

are evidently dictated by the same corporation-spirit which enacted the bye-law of Sheffield. The silk-weavers in London had scarce been incorporated a year. became in England the general and public law of all trades carried on in market towns. teacher. When those particular incorporations. was necessary. is the proper Latin name for any incorporation whatever. in order to entitle my person to become a master. but as effectually. of which the incorporations were much more ancient. that no person should. commonly called the Statute of Apprenticeship. it was enacted. exercise any trade. though they have been confirmed by a public law of the kingdom. indeed. was necessary to entitle him to become a master. no master cutler can have more than one apprentice at a time. the term of years which it was necessary to study. or doctor (words anciently synonymous). and half to him who shall sue in any court of record. the university of tailors. As to have wrought seven years under a master properly qualified. restraining any master from having more than two apprentices at a time. etc. for the future. Seven years seem anciently to have been. and what before had been the bye-law of many particular corporations. so to have studied seven years under a master properly qualified. All such incorporations were anciently called universities. By the 5th of Elizabeth. The university of smiths. half to the king. It required a particular act of parliament to rescind this bye-law. under pain of forfeiting five pounds a-month to the king. by a bye-law of the corporation. or in the English plantations.The Wealth of Nations tion of the number of apprentices restrains it directly. and to have scholars or apprentices (words likewise originally synonymous) to study under him. five pounds a-month. which are now peculiarly called universities. all over Europe. Both these regulations. craft. by increasing the expense of education. in order to obtain the degree of master of arts. In Sheffield. unless he had previously served to it an apprenticeship of seven years at least. the usual term established for the duration of apprenticeships in the greater part of incorporated trades. under pain of forfeiting. or mystery. at that time exercised in England. and seem 112 . no master weaver can have more than two apprentices. are expressions which we commonly meet with in the old charters of ancient towns. when they enacted a bye-law. in the liberal arts. and to have himself apprentices in a common trade. were first established. For though the words of the statute are very general. appears evidently to have been copied from the term of apprenticeship in common trades. A long term of apprenticeship restrains it more indirectly. In Norfolk and Norwich. No master hatter can have more than two apprentices anywhere in England. which.

and the number of people frequently not being sufficient to supply each with a particular set of hands. Birmingham. he is called the companion of his master. too. and Wolverhampton. are many of them. the duration of apprenticeships is different in different towns and in different trades. In Scotland. in country villages. the trade of a coachmaker not being within the statute. though he has never served an apprenticeship to a coachmaker. because not exercised in England at the time when it was made. During this latter term. reel-makers. five years is the term required in a great number. but. and the term itself is called his companionship. In France. It has been adjudged. the operation of this statute has been limited to those trades which were established in England before the 5th of Elizabeth. considered as rules of police. a part of it may generally be redeemed by paying a small fine.Adam Smith plainly to include the whole kingdom. 113 . and. it having been held that. a person may exercise several different trades. in Scotland. and has never been extended to such as have been introduced since that time. though he has not served a seven years apprenticeship to each. serve five years more as a journeyman. there is no general law which regulates universally the duration of apprenticeships. By a strict interpretation of the words. appear as foolish as can well be imagined. upon this account. this latter trade having been exercised in England before the 5th of Elizabeth. he must. all persons are free to sell butchers’ meat upon any lawful day of the week. in general. The manufactures of Manchester. In Paris. before any person can be qualified to exercise the trade as a master. This limitation has given occasion to several distinctions. may either himself make or employ journeymen to make coaches. The weavers of linen and hempen cloth. too. wheel-makers. a common term of apprenticeship. Where it is long. by interpretation its operation has been limited to market towns. Three years is. not having been exercised in England before the 5th of Elizabeth. not within the statute. for example. I know of no country in Europe. but must buy them of a master wheel-wright. in which corporation laws are so little oppressive. In all towns-corporate. they being necessary for the conveniency of the inhabitants. may exercise their trades in any towncorporate without paying any fine. as well as all other artificers subservient to them. even in some very nice trades. The term is different in different corporations. etc. in many of them. the principal manufactures of the country. a very small fine is sufficient to purchase the freedom of any corporation. In most towns. But a wheelwright. that a coach-maker can neither himself make nor employ journeymen to make his coachwheels. which.

and almost always is so. and the longest apprenticeship can give no security against fraud. because he has no immediate interest to be otherwise. is evidently as impertinent as it is oppressive. The institution of long apprenticeships has no tendency to form young people to industry. to assert that there is none) which expresses the idea we now annex to the word apprentice. are likely soonest to conceive a relish for it. They who are soonest in a condition to enjoy the sweets of it. The institution of long apprenticeships can give no security that insufficient workmanship shall not frequently be exposed to public sale. without injury to his neighbour. a servant bound to work at a particular trade for the benefit of a 114 . I know no Greek or Latin word (I might venture. may surely be trusted to the discretion of the employers. It is a manifest encroachment upon the just liberty. whose interest it so much concerns. as it is the original foundation of all other property. In the inferior employments. The boys who are put out apprentices from public charities are generally bound for more than the usual number of years. The reciprocal duties of master and apprentice make a considerable article in every modern code. because he derives a benefit from every exertion of his industry. When this is done. and of those who might be disposed to employ him. both of the workman. the sweets of labour consist altogether in the recompence of labour. when for a long time he receives no benefit from it. A journeyman who works by the piece is likely to be industrious. The affected anxiety of the lawgiver. and to acquire the early habit of industry. lest they should employ an improper person. and not of inability. He generally looks at these. As it hinders the one from working at what he thinks proper. give the purchaser much greater security than any statute of apprenticeship. To judge whether he is fit to be employed. but never thinks it worth while to enquire whether the workman had served a seven years apprenticeship. it is generally the effect of fraud. I believe. and they generally turn out very idle and worthless. so it is the most sacred and inviolable.The Wealth of Nations The property which every man has in his own labour. Apprenticeships were altogether unknown to the ancients. The sterling mark upon plate. so it hinders the others from employing whom they think proper. A young man naturally conceives an aversion to labour. and to hinder him from employing this strength and dexterity in what manner he thinks proper. and the stamps upon linen and woollen cloth. is a plain violation of this most sacred property. The Roman law is perfectly silent with regard to them. An apprentice is likely to be idle. The patrimony of a poor man lies in the strength and dexterity of his hands. Quite different regulations are necessary to prevent this abuse.

The first invention of such beautiful machines. In order to erect a corporation. that all corporations. and are well understood. as well as the wages of workmen. perhaps. But this prerogative of the crown seems to have been reserved rather for extorting money from the subject. by restraining that free competition which would most certainly occasion it.Adam Smith master. He would lose all the wages of the apprentice. In England. The master. to explain to any young man. a charter from the king was likewise necessary. such as those of making clocks and watches. indeed. In the common mechanic trades. if from the beginning he wrought as a journeyman. and how to construct the machines. the crafts. In a trade so easily learnt he would have more competitors. indeed. during a term of years. would all be losers. cannot well require more than the lessons of a few weeks. But a young man would practice with much more diligence and attention. and even that of some of the instruments employed in making them. The arts. The trades. must no doubt have been the work of deep thought and long time. the charter seems generally to 115 . when he came to be a complete workman. how to apply the instruments. and his wages. and may justly be considered as among the happiest efforts of human ingenuity. in many parts of Europe. would be much less than at present. indeed. It is to prevent his reduction of price. cannot be acquired without much practice and experience. but that of the town-corporate in which it was established. In the end. the apprentice himself would be a loser. His education would generally in this way be more effectual. and the greater part of corporation laws have been established. those of a few days might certainly be sufficient. no other authority in ancient times was requisite. the work of all artificers coming in this way much cheaper to market. the mysteries. and consequently of wages and profit. would be a loser. and always less tedious and expensive. being paid in proportion to the little work which he could execute. The dexterity of hand. contain no such mystery as to require a long course of instruction. even in common trades. But the public would be a gainer. for seven years together. and paying in his turn for the materials which he might sometimes spoil through awkwardness and inexperience. Long apprenticeships are altogether unnecessary. than for the defence of the common liberty against such oppressive monopolies. perhaps those of a few days might be sufficient. But when both have been fairly invented. Upon paying a fine to the king. indeed. which are much superior to common trades. The same increase of competition would reduce the profits of the masters. which he now saves. upon condition that the master shall teach him that trade. in the completest manner.

But in their dealings with the country they were all great gainers. the advantage of its inland and foreign trade. in which case. indeed. none of them were losers by these regulations. and by the profits of the merchants who employ them.}. from the: country. Each class was eager to establish regulations proper for this purpose. 26 etc. too. such adulterine guilds. without a charter. and the profits of 116 . and whatever discipline was exercised over them. and in these latter dealings consist the whole trade which supports and enriches every town. which is in reality to keep it always understocked. In consequence of such regulations. secondly. and when any particular class of artificers or traders thought proper to act as a corporation. or of distant parts of the same country. Every town draws its whole subsistence. by sending back to the country a part of those materials wrought up and manufactured. they were enabled to sell their own just as much dearer. provided it was allowed to do so. either of other countries. not from the king. in which case. consists the advantage which the town makes by its manufactures. somewhat dearer than they otherwise might have done. But. imported into the town. were not always disfranchised upon that account. and it was the manifest interest of every particular class of them. and in the dealings of the different classes within the town with one another. so that. their price is augmented by the wages of the workmen.The Wealth of Nations have been readily granted. In what is gained upon the first of those branches of commerce. but from that greater incorporation of which those subordinate ones were only parts or members. as they were called. and all the materials of its industry. It pays for these chiefly in two ways. so far it was as broad as long. to prevent the market from being overstocked. for permission to exercise their usurped privileges {See Madox Firma Burgi p. and the profits of their masters or immediate employers. and. First. as they say. with their own particular species of industry. The government of towns-corporate was altogether in the hands of traders and artificers. was willing to consent that every other class should do the same. by sending to it a part both of the rude and manufactured produce. in what is gained upon the second. as they commonly express it. in recompence. The wages of the workmen. The immediate inspection of all corporations. the original price of those goods is augmented by the wages of the carriers or sailors. and of the bye-laws which they might think proper to enact for their own government. belonged to the town-corporate in which they were established. each class was obliged to buy the goods they had occasion for from every other within the town. but obliged to fine annually to the king. proceeded commonly.

therefore. The most insignificant trades carried on in towns have. therefore. and break down that natural equality which would otherwise take place in the commerce which is carried on between them. By means of those regulations. from small beginnings.Adam Smith their different employers. The price which the town really pays for the provisions and materials annually imported into it. the jealousy of strangers. everywhere in Europe. run most easily into such combinations. we find at least a hundred people who have acquired great fortunes. more advantageous than that which is carried on in the country. the raising of rude produce by the improvement and cultivation of land. They naturally. in the country. must be better rewarded. The dearer the latter are sold. in the one situation than in the other. without entering into any very nice computations. and often teach them. accordingly. in some place or other. In every country of Europe. with a smaller quantity of its labour. That the industry which is carried on in towns is. can easily combine together. to prevent that free competition which they cannot prohibit by bye-laws. by voluntary associations and agreements. and a less to those of ’ the country. Half-adozen wool-combers. perhaps. make up the whole of what is gained upon both. and desert the country. and even where they have never been incorporated. for one who has done so by that which properly belongs to the country. the industry which properly belongs to towns. and that of the country less advantageous. therefore. The inhabitants of a town being collected into one place. The trades which employ but a small number of hands. The whole annual produce of the labour of the society is annually divided between those two different sets of people. are necessary to keep a thousand spinners 117 . a greater share of it is given to the inhabitants of the town than would otherwise fall to them. the aversion to take apprentices. and labourers. They give the traders and artificers in the town an advantage over the landlords. farmers. generally prevail in them. tend to increase those wages and profits beyond what they otherwise: would be. The industry of the town becomes more. tend to enable the town to purchase. But stock and labour naturally seek the most advantageous employment. been incorporated. is the quantity of manufactures and other goods annually exported from it. the produce of a greater quantity of the labour of the country. Whatever regulations. the wages of labour and the profits of stock must evidently be greater. or to communicate the secret of their trade. by trade and manufactures. yet the corporation-spirit. we may satisfy ourselves by one very simple and obvious observation. Industry. resort as much as they can to the town. the cheaper the former are bought.

The direction of operations. however. it has never been regarded as a matter very easily understood. and temper. but reduce the whole manufacture into a sort of slavery to themselves. of which all the operations may not be as completely and distinctly explained in a pamphlet of a very few pages. they can not only engross the employment. After what are called the fine arts. In the history of the arts. cannot easily combine together. works with instruments. now publishing by the French Academy of Sciences. on the contrary. But the man who ploughs the ground with a team of horses or oxen. but the incorporation spirit never has prevailed among them. They have not only never been incorporated. or very nearly the same. dispersed in distant places. His voice and language are more un- 118 . The condition of the materials which he works upon. besides. as well as with many other accidents. and both require to be managed with much judgment and discretion. He is less accustomed. but many inferior branches of country labour require much more skill and experience than the greater part of mechanic trades. to social intercourse. The innumerable volumes which have been written upon it in all languages. Not only the art of the farmer. that among the wisest and most learned nations. indeed. though generally regarded as the pattern of stupidity and ignorance. By combining not to take apprentices. No apprenticeship has ever been thought necessary to qualify for husbandry. requires much more judgment and discretion. and upon materials of which the temper is always the same. works with instruments of which the health. and raise the price of their labour much above what is due to the nature of their work. is as variable as that of the instruments which he works with. than that of those which are always the same. and the liberal professions. The common ploughman. several of them are actually explained in this manner. the general direction of the operations of husbandry. the great trade of the country. are very different upon different occasions. or very nearly the same. strength. The inhabitants of the country. which must be varied with every change of the weather. is seldom defective in this judgment and discretion. may satisfy us. how contemptuously soever the very contemptible authors of some of them may sometimes affect to speak of him. And from all those volumes we shall in vain attempt to collect that knowledge of its various and complicated operations which is commonly possessed even by the common farmer. The man who works upon brass and iron. there is perhaps no trade which requires so great a variety of knowledge and experience. too. as it is possible for words illustrated by figures to explain them. There is scarce any common mechanic trade. than the mechanic who lives in a town.The Wealth of Nations and weavers at work.

is generally much superior to that of the other. is well known to every man whom either business or curiosity has led to converse much with both. His understanding. is not altogether owing to corporations and corporation laws. whose whole attention. the superiority of the industry of the towns over that of the country seems to have been greater formerly than in the present times. In China and Indostan. The stocks accumulated in them come in time to be so great. Those other regulations secure them equally against that of foreigners. and labourers. all tend to the same purpose. The superiority which the industry of the towns has everywhere in Europe over that of the country. if corporation laws and the corporation spirit did not prevent it. and the increase of stock. without fearing to be undersold by the free competition of their own countrymen. accordingly. though very late consequence of the extraordinary encouragement given to the industry of the towns. of the country. that it can no longer be employed with the ancient profit in that species of industry which is peculiar to them. The enhancement of price occasioned by both is everywhere finally paid by the landlords. is the general interest of the whole. being accustomed to consider a greater variety of objects. is commonly occupied in performing one or two very simple operations. farmers. and of a subordinate part. They would probably be so everywhere. where. that the private interest of a part. In Great Britain. That industry has its limits like every other.Adam Smith couth. and the profits of stock employed in agriculture to those of trading and manufacturing stock. by 119 . The wages of country labour approach nearer to those of manufacturing labour. How much the lower ranks of people in the country are really superior to those of the town. and more difficult to be understood by those who are not used to them. and the clamour and sophistry of merchants and manufacturers easily persuade them. It is supported by many other regulations. The lowering of profit in the town forces out stock to the country. by increasing the competition. The high duties upon foreign manufactures. from morning till night. however. or in the beginning of the present. necessarily reduces the profit. both the rank and the wages of country labourers are said to be superior to those of the greater part of artificers and manufacturers. They have commonly neither inclination nor fitness to enter into combinations. and upon all goods imported by alien merchants. Corporation laws enable the inhabitants of towns to raise their prices. than they are said to have none in the last century. of the society. who have seldom opposed the establishment of such monopolies. This change may be regarded as the necessary.

and customs. liable to be disturbed and interrupted by innumerable accidents. renders such assemblies necessary. An incorporation not only renders them necessary. by giving them a common interest to manage. and it cannot last longer than every single trader continues of the same mind. The real and effectual discipline which is exercised over a workman. prejudices. in a great measure. by this course. or in some contrivance to raise prices. which will limit the competition more effectually and more durably than any voluntary combination whatever. I shall endeavour to explain as fully and distinctly as I can in the third and fourth books of this Inquiry. or would be consistent with liberty and justice. in order to provide for their poor. is without any foundation. and at the same time to demonstrate. to prevent such meetings. indeed. facilitates such assemblies. I shall endeavour to shew hereafter. is not that of his corporation. even for merriment and diversion. and. it ought to do nothing to facilitate such assemblies. The pretence that corporations are necessary for the better government of the trade. uncertain. A regulation which enables those of the same trade to tax themselves. contrary to the order of nature and of reason The interests. but that 120 . and. it had originally been accumulated in the town. It connects individuals who might never otherwise be known to one another. It is impossible. over the face of the land. It then spreads itself. by any law which either could be executed. People of the same trade seldom meet together. if I my say so. with proper penalties. that though some countries have. But though the law cannot hinder people of the same trade from sometimes assembling together. In a free trade. their widows and orphans. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register. it is in itself necessarily slow. attained to a considerable degree of opulence. The majority of a corporation can enact a bye-law. it necessarily raises its wages. That everywhere in Europe the greatest improvements of the country have been owing to such over flowings of the stock originally accumulated in the towns. in every respect. but makes the act of the majority binding upon the whole. but the conversation ends in a conspiracy against the public. which have given occasion to it. their sick. by being employed in agriculture. at the expense of which. is in part restored to the country. much less to render them necessary. and gives every man of the trade a direction where to find every other man of it. laws. an effectual combination cannot be established but by the unanimous consent of every single trader.The Wealth of Nations creating a new demand for country labour.

bursaries. by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them. have nothing but their character to depend upon. the education of the greater part of churchmen is paid for in this manner. for this purpose. have established many pensions. The pay of a curate or chaplain. in many large incorporated towns. are willing to accept of a much smaller recompence than what such an education would otherwise have entitled them to. who.Adam Smith of his customers. and in this manner the competition of the poor takes away the reward of the rich. even in some of the most necessary trades. In all Christian countries. It has been considered as of so much importance that a proper number of young people should be educated for certain professions. Very few of them are educated altogether at their own expense. as we find it regulated by the decrees of several 121 . occasions another inequality. it must be done in the suburbs. and sometimes the piety of private founders. five merks. occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock. in order to get employment. no tolerable workmen are to be found. I believe. An exclusive corporation necessarily weakens the force of this discipline. scholarships. Secondly. no doubt. which draw many more people into those trades than could otherwise pretend to follow them. therefore. having no exclusive privilege. let them behave well or ill. It is the fear of losing their employment which restrains his frauds and corrects his negligence. of those who are. was in England the usual pay of a curate or a stipendiary parish priest. A particular set of workmen must then be employed. where the workmen. etc. If you would have your work tolerably executed. may very properly be considered as of the same nature with the wages of a journeyman. exhibitions. will not always procure them a suitable reward. that sometimes the public. containing about as much silver as ten pounds of our present money. It would be indecent. It is in this manner that the policy of Europe. however. The long. and you must then smuggle it into the town as well as you can. of an opposite kind. tedious. It is upon this account that. in the whole of the advantages and disadvantages of the different employments of labour and stock. Till after the middle of the fourteenth century. to compare either a curate or a chaplain with a journeyman in any common trade. by increasing the competition in some employments beyond what it naturally would be. The policy of Europe. the church being crowded with people. and expensive education. They are all three paid for their work according to the contract which they may happen to make with their respective superiors.

were much superior to those of the curate. in several places. 12. does not exceed what frequently earned by common labourers in many country parishes. The respect paid to the profession. would have fully equalled them. was declared to be the pay of a master mason. empowered to appoint.} The wages of both these labourer’s. on account of the contrary competition of those who expected to derive either profit or pleasure from employing them. The great benefices and other ecclesiastical dignities support the honour of the church. “That whereas. it is declared. of Geneva. that of a journeyman mason.The Wealth of Nations different national councils. or to sink those of labourers to the degree that was intended. a sufficient certain stipend or allowance. {See the Statute of Labourers. therefore. attempted to raise the wages of curates. and not less than twenty pounds a-year”. Ed. Whenever the law has attempted to regulate the wages of workmen. and there is scarce an industrious workman of any kind in that metropolis who does not earn more than twenty. But the law has. At the same period. supposing them to have been constantly employed. notwithstanding this act of parliament. indeed. The wages of the master mason. containing the same quantity of silver as a shilling of our present money. the bishop is. for want of sufficient maintenance and encouragement to curates. The example of the churches of Scotland. notwithstanding the mean circumstances of some of its inferior members. makes some compensation even to them for the meanness of their pecuniary recompence. or the other from receiving more. and. on account of the indigence of their situation and the multitude of their competitors. for the dignity of the church. by writing under his hand and seal. This last sum. and threepence a-day. the cures have. upon many occasions. and has never either been able to raise the wages of curates. too. and of several other prot- 122 . therefore. supposing him to have been without employment one-third of the year. And. In England. not exceeding fifty. By the 12th of Queen Anne. 25. equal to ninepence of our present money. Forty pounds a-year is reckoned at present very good pay for a curate. c. the law seems to have been equally ineffectual. III. and in all Roman catholic countries. to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept of. because it has never been able to hinder either the one from being willing to accept of less than the legal allowance. fourpence a-day. been meanly supplied. There are journeymen shoemakers in London who earn forty pounds a-year. there are many curacies under twenty pounds a-year. and. in both cases. it has always been rather to lower them than to raise them. the lottery of the church is in reality much more advantageous than is necessary.

to the entire degradation of the now respectable professions of law and physic. to which the art of printing has given occasion. of public and private teachers. the only employment by which a man of letters could make any thing by his talents. as commonly to reduce the price of their labour to a very paltry recompence. In professions in which there are no benefices. but have been hindered by different reasons from entering into holy orders. knowledge. are at least equal to what is necessary for the greatest practitioners in law and physic. was that of a public or private teacher. Before the invention of the art of printing. a scholar and a beggar seem to have been terms very nearly synonymous. or by communicating to other people the curious and useful knowledge which he had acquired himself. and application requisite to qualify an eminent teacher of the sciences.Adam Smith estant churches. The time and study. commonly called men of letters. whose numbers and necessities would oblige them in general to content themselves with a very miserable recompence. in which education is so easily procured. are pretty much in the situation which lawyers and physicians probably would be in. They have generally. the greater part of them have been educated for the church. therefore. the hopes of much more moderate benefices will draw a sufficient number of learned. It might then not be worth any man’s while to educate his son to either of those professions at his own expense. such as law and physic. even a more profitable employment than that other of writing for a bookseller. and their numbers are everywhere so great. The different governors of the 123 . decent. the competition would soon be so great as to sink very much their pecuniary reward. was not taken out of the market. whereas those of the other two are encumbered with very few who have not been educated at their own. if an equal proportion of people were educated at the public expense. in general. But the usual reward of the eminent teacher bears no proportion to that of the lawyer or physician. however. may satisfy us. and respectable men into holy orders. and. who have been brought up to it at the public expense. upon the foregoing supposition. because the trade of the one is crowded with indigent people. In every part of Europe. That unprosperous race of men. been educated at the public expense. small as it may appear. a more useful. who write for bread. and this is still surely a more honourable. if the competition of those yet more indigent men of letters. The usual recompence. would undoubtedly be less than it is. They would be entirely abandoned to such as had been educated by those public charities. Before the invention of the art of printing. that in so creditable a profession. the genius.

before any charities of this kind had been established for the education of indigent people to the learned professions. in return for so important a service. In ancient times. Teachers of the sciences were probably in those times less common than they came to be in an age or two afterwards. suppose that it was as large as the life. and we may be assured that it was not less than he represents it.” He certainly does not mean here to exaggerate the reward.” continues he. both by him and his father. to be happy. must at that time have been usually paid to the most eminent teachers at Athens. by each course of lectures. or £ 33:6:8 from each scholar. in order to resume the teaching of his school. five minae to sixteen pounds thirteen shillings and fourpence. Isocrates. or £ 3335:6:8. and to be just. the rewards of eminent teachers appear to have been much more considerable. he would be convicted of the most evident folly. When he taught at Athens.” says he. accordingly. I understand this to be the number whom he taught at one time. notwithstanding. as it is universally agreed.” “They who teach wisdom. is represented by Plato as splendid. Isocrates himself demanded ten minae. “ought certainly to be wise themselves. and. to have been his didactron. His way of living. Plato himself is said to have lived with a good deal of magnificence. Something not less than the largest of those two sums. who taught. two other eminent teachers of those times. “They make the most magnificent promises to their scholars. therefore. Four minae were equal to thirteen pounds six shillings and eightpence. what was at that time the most fashionable of all sciences. rhetoric. even to ostentation. Georgias made a present to the temple of Delphi of his own statue in solid gold. before that time. We must not. I presume. is said by Plutarch. to return to Athens. as well as that of Hippias and Protagoras. he is said to have had a hundred scholars. appear to have often granted licences to their scholars to beg. Many other eminent teachers in those times appear to have acquired great fortunes. Philip. in what is called his discourse against the sophists. reproaches the teachers of his own times with inconsistency. but if any man were to sell such a bargain for such a price. or usual price of teaching. therefore. a thousand minae. too. when the competition had probably somewhat reduced both the price of their labour and the admi- 124 . they stipulate the paltry reward of four or five minae. or who attended what we would call one course of lectures. and most munificently rewarded. He must have made. Aristotle. “and undertake to teach them to be wise. in another place. a number which will not appear extraordinary from so great a city to so famous a teacher. after having been tutor to Alexander.The Wealth of Nations universities. A thousand minae. thought it worth while.

and though their city had then declined from its former grandeur. the operations are so much alike. both from employment to employment. Those two manufactures may sometimes be in the same town. by obstructing the free circulation of labour and stock. In many different manufactures. that either a linen or a silk weaver might become a tolerable workman in a very few days. It frequently happens. and as there never was a people more jealous of admitting foreigners to public offices than the Athenians. The statute of apprenticeship may oppose it in the one case. that while high wages are given to the workmen in one manufacture. too. are almost entirely the same. was a Babylonian by birth. their consideration for him must have been very great. The public. in which education is carried on. The one is in an advancing state. and the superabundance of hands is continually increasing. upon the whole. and sometimes in the same neighbourhood. and has therefore a continual demand for new hands. the policy of Europe. without being able to lend the least assistance to one another. even in the same employment. and Diogenes the stoic. but the difference is so insignificant. for example. The statute of apprenticeship obstructs the free circulation of labour from one employment to another. however. in some cases. that the workmen could easily change trades with one another. was more reasonable than it is at present through the greater part of Europe. The exclusive privileges of corporations obstruct it from one place to another. if the constitution of those schools and colleges. Carneades. the other is in a declining state. upon a solemn embassy to Rome. 125 . were decaying. if those absurd laws did not hinder them. might derive still greater benefit from it. it was still an independent and considerable republic. and both that and an exclusive corporation in the other. but the cheapness of literary education is surely an advantage which greatly overbalances this trifling inconveniency. a very inconvenient inequality in the whole of the advantages and disadvantages of their different employments. and from place to place. those in another are obliged to content themselves with bare subsistence.Adam Smith ration for their persons. too. perhaps rather advantageous than hurtful to the public. It may somewhat degrade the profession of a public teacher. appear always to have enjoyed a degree of consideration much superior to any of the like profession in the present times. however. If any of those three capital manufactures. therefore. Thirdly. The most eminent of them. That of weaving plain woollen is somewhat different. even in the same place. occasions. The arts of weaving plain linen and plain silk. This inequality is. The Athenians sent Carneades the academic.

however. It is the labour of artificers and manufacturers only of which the free circulation is obstructed by corporation laws. or even in being allowed to exercise his industry in any parish but that to which he belongs. after some other ineffectual attempts for their relief. the greatest. the quantity of stock which can be employed in any branch of business depending very much upon that of the labour which can be employed in it. give less obstruction to the free circulation of stock from one place to another. The linen manufacture. but as it is not much cultivated through the greater part of the country. the poor had been deprived of the charity of those religious houses. so far as I know. It may be worth while to give some account of the rise. by a parish rate. it was enacted.The Wealth of Nations the workmen might find a resource in one of the other two which was in a more prosperous condition. for which. when it was enacted. progress. and present state of this disorder. that every parish should be bound to provide for its own poor. This question. I believe. open to every body. Corporation laws. 2. nor sink too low in the decaying manufacture. of any in the police of England. That which is given to it by the poor laws is. but dither to come upon the parish. and their wages would neither rise too high in the thriving. When. by a particular statute. Whatever obstructs the free circulation of labour from one employment to another. is in England. They generally. after some variation. by their habits. the necessity of providing for their own poor was indispensably imposed upon every parish. and that overseers of the poor should be annually appointed. or to work as common labourers. The obstruction which corporation laws give to the free circulation of labour is common. The difficulty of obtaining settlements obstructs even that of common labour. It is everywhere much easier for a wealthy merchant to obtain the privilege of trading in a town-corporate. therefore. who. c. than to that of labour. was at last determined by the 13th and 14th of Charles II. competent sums for this purpose. than for a poor artificer to obtain that of working in it. indeed. that forty days undisturbed 126 . who. it can afford no general resource to the work men of other decaying manufactures. by the 43d of Elizabeth. It consists in the difficulty which a poor man finds in obtaining a settlement. By this statute. Who were to be considered as the poor of each parish became. they are much worse qualified than for any sort of manufacture that bears any resemblance to their own. by the destruction of monasteries. a question of some importance. with the churchwardens. therefore. wherever the statute of apprenticeship takes place. peculiar to England. perhaps. to every part of Europe. chuse to come upon the parish. obstructs that of stock likewise. should raise. have no other choice.

and sometimes connived at such intrusions. rendered it almost impracticable for a poor man to gain a new settlement in the old way. to one of the church-wardens or overseers of the parish where he came to dwell. to remove any new inhabitant to the parish where he was last legally settled. therefore. it is said. But parish officers. receiving the notice. by continuing forty days after publication of notice in writing. upon complaint made by the church-wardens or overseers of the poor. It was enacted. that the forty days residence should be accounted only from the publication of such notice in writing on Sunday in the church. “this kind of settlement. he shall. But if a person’s situation is such. As every person in a parish. But that it might not appear to preclude altogether the common people of one’ parish from ever establishing themselves with security in another. in writing. that it is doubtful whether he is actually removable or not. by being taxed to parish 127 . immediately after divine service. to the discharge of that to which they properly belonged. but that within that time it should be lawful for two justices of the peace. parish officers sometime’s bribing their own poor to go clandestinely to another parish. it appointed four other ways by which a settlement might be gained without any notice delivered or published.” says Doctor Burn. and taking no proper steps in consequence of it. for the giving of notice is only putting a force upon the parish to remove. to gain a settlement there. compel the parish either to allow him a settlement uncontested. unless he either rented a tenement of ten pounds a-year. therefore. should be accounted only from the time of his delivering notice. were not always more honest with regard to their own than they had been with regard to other parishes. it was further enacted by the 3rd of William III. by the 1st of James II. by keeping themselves concealed for forty days. “After all. by giving of notice. Some frauds. by suffering him to continue forty days. that the forty days undisturbed residence of any person necessary to gain a settlement. were committed in consequence of this statute. as for the avoiding of them by persons coming into a parish clandestinely. and the design of the acts is not so much for gaining of settlements. therefore. it seems.” This statute. was supposed to have an interest to prevent as much as possible their being burdened by such intruders. or by removing him to try the right. as those justices should judge sufficient. by forty days inhabitancy.Adam Smith residence should gain any person a settlement in any parish. The first was. is very seldom obtained. and. or could give such security for the discharge of the parish where he was then living. of the place of his abode and the number of his family.

whether labourer or artificer. and serving in it a year. who has nothing but his labour to support him. either by taxing him to parish rates. the fourth. the second. because. the habitation of their parents and relations. When such a person. carried his industry to a new parish. subscribed by the church-wardens and 128 . by serving an apprenticeship in the parish. as every last settlement discharges all the foregoing. they might thereby lose their original settlement in the places of their nativity. and it is expressly enacted. But masters are not always willing to give their servants a settlement by hiring them in this manner. by being elected into an annual parish office. the invention of certificates was fallen upon. it was enacted that if any person should bring a certificate from the parish where he was last legally settled. a thing impossible for one who has nothing but his labour to live by. that even at this day. But this is a security which scarce any man who lives by labour can give. and servants are not always willing to be so hired. is likely to gain any new settlement. or by electing him into a parish office. that no married servant shall gain any settlement by being hired for a year.The Wealth of Nations rates and paying them. No independent workman. indeed. how healthy and industrious soever. therefore. is left altogether to their discretion. either by apprenticeship or by service. which before had been so customary in England. The principal effect of introducing settlement by service. What security they shall require. No married man can well gain any settlement in either of the two last ways. In order to restore. in some measure. the third. that the purchase even of a freehold estate of less than thirty pounds value. Nobody can gain a settlement by either of the two first ways. the law intends that every servant is hired for a year. it having been enacted. but they cannot well require less than thirty pounds. by being hired into service there for a year. if no particular term is agreed upon. at the caprice of any churchwarden or overseer. has been to put out in a great measure the old fashion of hiring for a year. or could give such security for the discharge of the parish as two justices of the peace should judge sufficient. and much greater security is frequently demanded. An apprentice is scarce ever married. By the 8th and 9th of William III. who are too well aware of the consequences to adopt any new-comer. that free circulation of labour which those different statutes had almost entirely taken away. unless he either rented a tenement of ten pounds a-year. it is evident. and continuing in the same service during the whole of it. but by the public deed of the whole parish. as not being sufficient for the discharge of the parish. shall not gain any person a settlement. he was liable to be removed.

“by putting it in the power of a parish officer to imprison a man as it were for life. 1. it was further enacted. stat. “It is obvious. and cannot be removed. that every other parish should be obliged to receive him. that if they become chargeable. that they can settle neither apprentices nor servants. Which reasons will hold proportionably for parishes not granting certificates in ordinary cases. that he should not be removable merely upon account of his being likely to become chargeable. “that there are divers good reasons for requiring certificates with persons coming to settle in any place. namely. nor by paying parish rates. and the parish shall be paid for the removal. but that they will have the certificated persons again. and that they ought very seldom to be granted by that which he purposes to leave. for it is far more than an equal chance. or whatever advantage he may propose himself by living elsewhere. that he should gain no settlement there by any means whatever.18. too. none of all which can be without a certificate. and that then the parish which granted the certificate should be obliged to pay the expense both of his maintenance and of his removal. and consequently neither by notice nor by service. that persons residing under them can gain no settlement. And in order to give the most perfect security to the parish where such certificated man should come to reside.” says he. which the preceding statutes had almost entirely taken away. it is certainly known whither to remove them. and that. nor by paying parish rates. except either by renting a tenement of ten pounds a-year. the parish which gave the certificate must maintain them. neither by apprenticeship. How far this invention has restored that free circulation of labour. nor by apprenticeship. we may learn from the following very judicious observation of Doctor Burn. but only upon his becoming actually chargeable. and in a worse condition. c. and allowed by two justices of the peace. and for their maintenance in the mean time. or by serving upon his own account in an annual parish office for one whole year.Adam Smith overseers of the poor.” Though a certificate carries along with it no testimonial of good 129 . in his History of the Poor Laws. “There is somewhat of hardship in this matter of certificates. if they fall sick. it was further enacted by the same statute. nor by service. that neither the servants nor apprentices of such certificated man should gain any settlement in the parish where he resided under such certificate. By the 12th of Queen Anne. nor by giving notice.” says the same very intelligent author. that certificates ought always to be required by the parish where any poor man comes to reside.” The moral of this observation seems to be. however inconvenient it may be for him to continue at that place where he has had the misfortune to acquire what is called a settlement.

where it is often more difficult for a poor man to pass the artificial boundary of a parish. in most parishes. A mandamus was once moved for. and sink gradually as the distance from such places increases. to compel the church-wardens and overseers to sign a certificate. never rightly understanding wherein it consists. have now. The scarcity of hands in one parish. times complained of the law of settlements as a public grievance. if the single man should afterwards marry. says Doctor Burn. too. cannot always be relieved by their superabundance in another. as it is constantly in Scotland. but like the common people of most other countries. natural boundaries which sometimes separate very distinctly different rates of wages in other countries. an abusive practice undoubtedly. Though men of reflection. but such a one as was not likely to occasion any general oppression. A single man. and. have some. but a man with a wife and family who should attempt to do so. or a ridge of high mountains. it is altogether discretionary in the parish officers either to grant or to refuse it. indeed who is healthy and industrious. therefore. but the Court of King’s Bench rejected the motion as a very strange attempt. or wherever else there is an extraordinary demand for labour. of forty years of age. for more than a century together. than an arm of the sea. in places at no great distance from one another. though wages may sometimes rise a little in the neighbourhood of a great town. is probably owing to the obstruction which the law of settlements gives to a poor man who would carry his industry from one parish to another without a certificate. from the parish where he chooses to reside. and certifies nothing but that the person belongs to the parish to which he really does belong. in some part of his life. In such countries. may sometimes reside by sufferance without one. I believe. To remove a man who has committed no misdemeanour.The Wealth of Nations behaviour. The common people of England. however. such as that against general warrants. be sure of being removed. The very unequal price of labour which we frequently find in England. in all other countries where there is no difficulty of settlement. suffered themselves to be exposed to this oppression without a remedy. I will venture to say. who has not. felt himself most cruelly oppressed by this ill-contrived law of settlements. so jealous of their liberty. till they fall back to the common rate of the country. 130 . would. he would generally be removed likewise. and. yet it has never been the object of any general popular clamour. yet we never meet with those sudden and unaccountable differences in the wages of neighbouring places which we sometimes find in England. There is scarce a poor man in England. is an evident violation of natural liberty and justice.

and five miles round it. which they pretended to pay. so far as I know. what in its own nature seems incapable of minute limitation. is in favour of the workmen. in order to reduce the wages of their workmen. enforces by law that very regulation which masters sometimes attempt to establish by such combinations. prohibits. In ancient times. its counsellors are always the masters. more than two shillings and sevenpence halfpenny a-day. Where there is an exclusive corporation. the only remnant of this ancient usage.” Particular acts of parliament. they commonly enter into a private bond or agreement. that though anciently it was usual to rate wages. and their workmen from accepting. and no room left for industry or ingenuity. except in the case of a general mourning. is quite just and equitable. and not in goods. it may. “it seems time to lay aside all endeavours to bring under strict regulations. seems perfectly well founded. Thus the 8th of George III. where there is none. the competition will regulate it much better than any 131 . When masters combine together. under a certain penalty. therefore.” says Doctor Burn. The assize of bread is. it would treat the masters in the same manner. by regulating the price of provisions and ether goods. first by general laws extending over the whole kingdom. and. however. it was usual to attempt to regulate the profits of merchants and other dealers. is in favour of the masters. and in particular places. both these practices have now gone entirely into disuse. the law would punish them very severely.Adam Smith I shall conclude this long chapter with observing. be proper to regulate the price of the first necessary of life. It only obliges them to pay that value in money. Whenever the legislature attempts to regulate the differences between masters and their workmen. This law is in favour of the workmen. It imposes no real hardship upon the masters. in goods. under heavy penalties. and afterwards by particular orders of the justices of peace in every particular county. But the 8th of George III. not to accept of a certain wage. too. but. but did not always really pay. not to give more than a certain wage. The complaint of the workmen. but the 8th of George III. there would be no emulation. Thus the law which obliges the masters in several different trades to pay their workmen in money. under a certain penalty. perhaps. that it puts the ablest and most industrious upon the same footing with an ordinary workman. still attempt sometimes to regulate wages in particular trades. from giving. “By the experience of above four hundred years. When the regulation. Were the workmen to enter into a contrary combination of the same kind. for if all persons in the same kind of work were to receive equal wages. it is always just and equitable. but it is sometimes otherwise when in favour of the masters. all master tailors in London. if it dealt impartially.

The proportion between the different rates. seems not to be much affected. must. who claim exclusive privileges. as has already been observed. This defect was not remedied till the third of George III. The want of an assize occasioned no sensible inconveniency. therefore. the advancing.The Wealth of Nations assize. The proportion between them. could not be put in practice in Scotland. by the riches or poverty. on account of a defect in the law. though they are not very strictly guarded. stationary. affect them equally in all different employments. and cannot well be altered. by any such revolutions. however. established by the 31st of George II. in the end. In the greater part of the towns in Scotland. 132 . which does not exist there. both of wages and profit. at least for any considerable time. its execution depending upon the office of clerk of the market. though they affect the general rates both of wages and profit. and the establishment of one in the few places where it has yet taken place has produced no sensible advantage. in the different employments of labour and stock. or declining state of the society. there is an incorporation of bakers. must remain the same. Such revolutions in the public welfare. The method of fixing the assize of bread.

Adam Smith

CHAPTER XI OF THE RENT OF LAND
RENT, CONSIDERED as the price paid for the use of land, is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. In adjusting the terms of the lease, the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and maintains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighbourhood. This is evidently the smallest share with which the tenant can content himself, without being a loser, and the landlord seldom means to leave him any more. Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, he naturally endeavours to reserve to himself as the rent of his land, which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. Sometimes, indeed, the liberality, more frequently the ignorance, of the landlord, makes him accept of somewhat less than this portion; and sometimes, too, though more rarely, the ignorance of the tenant makes him undertake to pay somewhat more, or to content himself with somewhat less, than the ordinary profits of farming stock in the neighbourhood. This portion, however, may still be considered as the natural rent of land, or the rent at which it is naturally meant that land should, for the most part, be let. The rent of land, it may be thought, is frequently no more than a reasonable profit or interest for the stock laid out by the landlord upon its improvement. This, no doubt, may be partly the case upon some occasions; for it can scarce ever be more than partly the case. The landlord demands a rent even for unimproved land, and the supposed interest or profit upon the expense of improvement is generally an addition to this original rent. Those improvements, besides, are not always made by the stock of the landlord, but sometimes by that of the tenant. When the lease comes to be renewed, however, the landlord commonly demands the same augmentation of rent as if they had been all made by his own.

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The Wealth of Nations He sometimes demands rent for what is altogether incapable of human improvements. Kelp is a species of sea-weed, which, when burnt, yields an alkaline salt, useful for making glass, soap, and for several other purposes. It grows in several parts of Great Britain, particularly in Scotland, upon such rocks only as lie within the high-water mark, which are twice every day covered with the sea, and of which the produce, therefore, was never augmented by human industry. The landlord, however, whose estate is bounded by a kelp shore of this kind, demands a rent for it as much as for his corn-fields. The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which makes a great part of the subsistence of their inhabitants. But, in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what the farmer can make by the land, but to what he can make both by the land and the water. It is partly paid in sea-fish; and one of the very few instances in which rent makes a part of the price of that commodity, is to be found in that country. The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take, but to what the farmer can afford to give. Such parts only of the produce of land can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is, or is not more, depends upon the demand. There are some parts of the produce of land, for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market; and there are others for which it either may or may not be such as to afford this greater price. The former must always afford a rent to the landlord. The latter sometimes may and sometimes may not, according to different circumstances. Rent, it is to be observed, therefore, enters into the composition of the price of commodities in a different way from wages and profit. High or low wages and profit are the causes of high or low price; high or low rent is the effect of it. It is because high or low wages and profit must be paid, in order to bring a particular commodity to market, that its price is high or low. But it is because its price is high or low, a great deal more, or very

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Adam Smith little more, or no more, than what is sufficient to pay those wages and profit, that it affords a high rent, or a low rent, or no rent at all. The particular consideration, first, of those parts of the produce of land which always afford some rent; secondly, of those which sometimes may and sometimes may not afford rent; and, thirdly, of the variations which, in the different periods of improvement, naturally take place in the relative value of those two different sorts of rude produce, when compared both with one another and with manufactured commodities, will divide this chapter into three parts. PART I. — Of the Produce of Land which always affords Rent. As men, like all other animals, naturally multiply in proportion to the means of their subsistence, food is always more or less in demand. It can always purchase or command a greater or smaller quantity of labour, and somebody can always be found who is willing to do something in order to obtain it. The quantity of labour, indeed, which it can purchase, is not always equal to what it could maintain, if managed in the most economical manner, on account of the high wages which are sometimes given to labour; but it can always purchase such a quantity of labour as it can maintain, according to the rate at which that sort of labour is commonly maintained in the neighbourhood. But land, in almost any situation, produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market, in the most liberal way in which that labour is ever maintained. The surplus, too, is always more than sufficient to replace the stock which employed that labour, together with its profits. Something, therefore, always remains for a rent to the landlord. The most desert moors in Norway and Scotland produce some sort of pasture for cattle, of which the milk and the increase are always more than sufficient, not only to maintain all the labour necessary for tending them, and to pay the ordinary profit to the farmer or the owner of the herd or flock, but to afford some small rent to the landlord. The rent increases in proportion to the goodness of the pasture. The same extent of ground not only maintains a greater number of cattle, but as they we brought within a smaller compass, less labour becomes requisite to tend them, and to collect their produce. The landlord gains both ways; by the increase of the produce, and by the diminution of the labour which must be maintained out of it. The rent of land not only varies with its fertility, whatever be its produce, but with its situation, whatever be its fertility. Land in the

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The Wealth of Nations neighbourhood of a town gives a greater rent than land equally fertile in a distant part of the country. Though it may cost no more labour to cultivate the one than the other, it must always cost more to bring the produce of the distant land to market. A greater quantity of labour, therefore, must be maintained out of it; and the surplus, from which are drawn both the profit of the farmer and the rent of the landlord, must be diminished. But in remote parts of the country, the rate of profit, as has already been shewn, is generally higher than in the neighbourhood of a large town. A smaller proportion of this diminished surplus, therefore, must belong to the landlord. Good roads, canals, and navigable rivers, by diminishing the expense of carriage, put the remote parts of the country more nearly upon a level with those in the neighbourhood of the town. They are upon that account the greatest of all improvements. They encourage the cultivation of the remote, which must always be the most extensive circle of the country. They are advantageous to the town by breaking down the monopoly of the country in its neighbourhood. They are advantageous even to that part of the country. Though they introduce some rival commodities into the old market, they open many new markets to its produce. Monopoly, besides, is a great enemy to good management, which can never be universally established, but in consequence of that free and universal competition which forces every body to have recourse to it for the sake of self defence. It is not more than fifty years ago, that some of the counties in the neighbourhood of London petitioned the parliament against the extension of the turnpike roads into the remoter counties. Those remoter counties, they pretended, from the cheapness of labour, would be able to sell their grass and corn cheaper in the London market than themselves, and would thereby reduce their rents, and ruin their cultivation. Their rents, however, have risen, and their cultivation has been improved since that time. A corn field of moderate fertility produces a much greater quantity of food for man, than the best pasture of equal extent. Though its cultivation requires much more labour, yet the surplus which remains after replacing the seed and maintaining all that labour, is likewise much greater. If a pound of butcher’s meat, therefore, was never supposed to be worth more than a pound of bread, this greater surplus would everywhere be of greater value and constitute a greater fund, both for the profit of the farmer and the rent of the landlord. It seems to have done so universally in the rude beginnings of agriculture. But the relative values of those two different species of food, bread and

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Adam Smith butcher’s meat, are very different in the different periods of agriculture. In its rude beginnings, the unimproved wilds, which then occupy the far greater part of the country, are all abandoned to cattle. There is more butcher’s meat than bread; and bread, therefore, is the food for which there is the greatest competition, and which consequently brings the greatest price. At Buenos Ayres, we are told by Ulloa, four reals, one-and-twenty pence halfpenny sterling, was, forty or fifty years ago, the ordinary price of an ox, chosen from a herd of two or three hundred. He says nothing of the price of bread, probably because he found nothing remarkable about it. An ox there, he says, costs little more than the labour of catching him. But corn can nowhere be raised without a great deal of labour; and in a country which lies upon the river Plate, at that time the direct road from Europe to the silver mines of Potosi, the money-price of labour could be very cheap. It is otherwise when cultivation is extended over the greater part of the country. There is then more bread than butcher’s meat. The competition changes its direction, and the price of butcher’s meat becomes greater than the price of bread. By the extension, besides, of cultivation, the unimproved wilds become insufficient to supply the demand for butcher’s meat. A great part of the cultivated lands must be employed in rearing and fattening cattle; of which the price, therefore, must be sufficient to pay, not only the labour necessary for tending them, but the rent which the landlord, and the profit which the farmer, could have drawn from such land employed in tillage. The cattle bred upon the most uncultivated moors, when brought to the same market, are, in proportion to their weight or goodness, sold at the same price as those which are reared upon the most improved land. The proprietors of those moors profit by it, and raise the rent of their land in proportion to the price of their cattle. It is not more than a century ago, that in many parts of the Highlands of Scotland, butcher’s meat was as cheap or cheaper than even bread made of oatmeal The Union opened the market of England to the Highland cattle. Their ordinary price, at present, is about three times greater than at the beginning of the century, and the rents of many Highland estates have been tripled and quadrupled in the same time. In almost every part of Great Britain, a pound of the best butcher’s meat is, in the present times, generally worth more than two pounds of the best white bread; and in plentiful years it is sometimes worth three or four pounds. It is thus that, in the progress of improvement, the rent and profit of unimproved pasture come to be regulated in some measure by the rent and profit of what is improved, and these again by the rent and profit of

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The Wealth of Nations corn. Corn is an annual crop; butcher’s meat, a crop which requires four or five years to grow. As an acre of land, therefore, will produce a much smaller quantity of the one species of food than of the other, the inferiority of the quantity must be compensated by the superiority of the price. If it was more than compensated, more corn-land would be turned into pasture; and if it was not compensated, part of what was in pasture would be brought back into corn. This equality, however, between the rent and profit of grass and those of corn; of the land of which the immediate produce is food for cattle, and of that of which the immediate produce is food for men, must be understood to take place only through the greater part of the improved lands of a great country. In some particular local situations it is quite otherwise, and the rent and profit of grass are much superior to what can be made by corn. Thus, in the neighbourhood of a great town, the demand for milk, and for forage to horses, frequently contribute, together with the high price of butcher’s meat, to raise the value of grass above what may be called its natural proportion to that of corn. This local advantage, it is evident, cannot be communicated to the lands at a distance. Particular circumstances have sometimes rendered some countries so populous, that the whole territory, like the lands in the neighbourhood of a great town, has not been sufficient to produce both the grass and the corn necessary for the subsistence of their inhabitants. Their lands, therefore, have been principally employed in the production of grass, the more bulky commodity, and which cannot be so easily brought from a great distance; and corn, the food of the great body of the people, has been chiefly imported from foreign countries. Holland is at present in this situation; and a considerable part of ancient Italy seems to have been so during the prosperity of the Romans. To feed well, old Cato said, as we are told by Cicero, was the first and most profitable thing in the management of a private estate; to feed tolerably well, the second; and to feed ill, the third. To plough, he ranked only in the fourth place of profit and advantage. Tillage, indeed, in that part of ancient Italy which lay in the neighbour hood of Rome, must have been very much discouraged by the distributions of corn which were frequently made to the people, either gratuitously, or at a very low price. This corn was brought from the conquered provinces, of which several, instead of taxes, were obliged to furnish a tenth part of their produce at a stated price, about sixpence a-peck, to the republic. The low price at which this corn was distributed to the people, must necessarily have sunk the price of what could be brought to the

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Adam Smith Roman market from Latium, or the ancient territory of Rome, and must have discouraged its cultivation in that country. In an open country, too, of which the principal produce is corn, a wellinclosed piece of grass will frequently rent higher than any corn field in its neighbourhood. It is convenient for the maintenance of the cattle employed in the cultivation of the corn; and its high rent is, in this case, not so properly paid from the value of its own produce, as from that of the corn lands which are cultivated by means of it. It is likely to fall, if ever the neighbouring lands are completely inclosed. The present high rent of inclosed land in Scotland seems owing to the scarcity of inclosure, and will probably last no longer than that scarcity. The advantage of inclosure is greater for pasture than for corn. It saves the labour of guarding the cattle, which feed better, too, when they are not liable to be disturbed by their keeper or his dog. But where there is no local advantage of this kind, the rent and profit of corn, or whatever else is the common vegetable food of the people, must naturally regulate upon the land which is fit for producing it, the rent and profit of pasture. The use of the artificial grasses, of turnips, carrots, cabbages, and the other expedients which have been fallen upon to make an equal quantity of land feed a greater number of cattle than when in natural grass, should somewhat reduce, it might be expected, the superiority which, in an improved country, the price of butcher’s meat naturally has over that of bread. It seems accordingly to have done so; and there is some reason for believing that, at least in the London market, the price of butcher’s meat, in proportion to the price of bread, is a good deal lower in the present times than it was in the beginning of the last century. In the Appendix to the life of Prince Henry, Doctor Birch has given us an account of the prices of butcher’s meat as commonly paid by that prince. It is there said, that the four quarters of an ox, weighing six hundred pounds, usually cost him nine pounds ten shillings, or thereabouts; that is thirty-one shillings and eight-pence per hundred pounds weight. Prince Henry died on the 6th of November 1612, in the nineteenth year of his age. In March 1764, there was a parliamentary inquiry into the causes of the high price of provisions at that time. It was then, among other proof to the same purpose, given in evidence by a Virginia merchant, that in March 1763, he had victualled his ships for twentyfour or twenty-five shillings the hundred weight of beef, which he considered as the ordinary price; whereas, in that dear year, he had paid twenty-seven shillings for the same

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The Wealth of Nations weight and sort. This high price in 1764 is, however, four shillings and eight-pence cheaper than the ordinary price paid by Prince Henry; and it is the best beef only, it must be observed, which is fit to be salted for those distant voyages. The price paid by Prince Henry amounts to 3d. 4/5ths per pound weight of the whole carcase, coarse and choice pieces taken together; and at that rate the choice pieces could not have been sold by retail for less than 4½d. or 5d. the pound. In the parliamentary inquiry in 1764, the witnesses stated the price of the choice pieces of the best beef to be to the consumer 4d. and 4½d. the pound; and the coarse pieces in general to be from seven farthings to 2½d. and 2¾d.; and this, they said, was in general one halfpenny dearer than the same sort of pieces had usually been sold in the month of March. But even this high price is still a good deal cheaper than what we can well suppose the ordinary retail price to have been in the time of Prince Henry. During the first twelve years of the last century, the average price of the best wheat at the Windsor market was £ 1:18:3½d. the quarter of nine Winchester bushels. But in the twelve years preceding 1764 including that year, the average price of the same measure of the best wheat at the same market was £ 2:1:9½d. In the first twelve years of the last century, therefore, wheat appears to have been a good deal cheaper, and butcher’s meat a good deal dearer, than in the twelve years preceding 1764, including that year. In all great countries, the greater part of the cultivated lands are employed in producing either food for men or food for cattle. The rent and profit of these regulate the rent and profit of all other cultivated land. If any particular produce afforded less, the land would soon be turned into corn or pasture; and if any afforded more, some part of the lands in corn or pasture would soon be turned to that produce. Those productions, indeed, which require either a greater original expense of improvement, or a greater annual expense of cultivation in order to fit the land for them, appear commonly to afford, the one a greater rent, the other a greater profit, than corn or pasture. This superiority, however, will seldom be found to amount to more than a reasonable interest or compensation for this superior expense. In a hop garden, a fruit garden, a kitchen garden, both the rent of the landlord, and the profit of the farmer, are generally greater than in acorn or grass field. But to bring the ground into this condition requires more expense. Hence a greater rent becomes due to the landlord. It requires,

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Adam Smith too, a more attentive and skilful management. Hence a greater profit becomes due to the farmer. The crop, too, at least in the hop and fruit garden, is more precarious. Its price, therefore, besides compensating all occasional losses, must afford something like the profit of insurance. The circumstances of gardeners, generally mean, and always moderate, may satisfy us that their great ingenuity is not commonly over-recompensed. Their delightful art is practised by so many rich people for amusement, that little advantage is to be made by those who practise it for profit; because the persons who should naturally be their best customers, supply themselves with all their most precious productions. The advantage which the landlord derives from such improvements, seems at no time to have been greater than what was sufficient to compensate the original expense of making them. In the ancient husbandry, after the vineyard, a well-watered kitchen garden seems to have been the part of the farm which was supposed to yield the most valuable produce. But Democritus, who wrote upon husbandry about two thousand years ago, and who was regarded by the ancients as one of the fathers of the art, thought they did not act wisely who inclosed a kitchen garden. The profit, he said, would not compensate the expense of a stone-wall: and bricks (he meant, I suppose, bricks baked in the sun) mouldered with the rain and the winter-storm, and required continual repairs. Columella, who reports this judgment of Democritus, does not controvert it, but proposes a very frugal method of inclosing with a hedge of brambles and briars, which he says he had found by experience to be both a lasting and an impenetrable fence; but which, it seems, was not commonly known in the time of Democritus. Palladius adopts the opinion of Columella, which had before been recommended by Varro. In the judgment of those ancient improvers, the produce of a kitchen garden had, it seems, been little more than sufficient to pay the extraordinary culture and the expense of watering; for in countries so near the sun, it was thought proper, in those times as in the present, to have the command of a stream of water, which could be conducted to every bed in the garden. Through the greater part of Europe, a kitchen garden is not at present supposed to deserve a better inclosure than mat recommended by Columella. In Great Britain, and some other northern countries, the finer fruits cannot Be brought to perfection but by the assistance of a wall. Their price, therefore, in such countries, must be sufficient to pay the expense of building and maintaining what they cannot be had without. The fruit-wall frequently surrounds the kitchen garden, which thus enjoys the benefit of an inclosure which its own produce could seldom pay for.

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The Wealth of Nations That the vineyard, when properly planted and brought to perfection, was the most valuable part of the farm, seems to have been an undoubted maxim in the ancient agriculture, as it is in the modern, through all the wine countries. But whether it was advantageous to plant a new vineyard, was a matter of dispute among the ancient Italian husbandmen, as we learn from Columella. He decides, like a true lover of all curious cultivation, in favour of the vineyard; and endeavours to shew, by a comparison of the profit and expense, that it was a most advantageous improvement. Such comparisons, however, between the profit and expense of new projects are commonly very fallacious; and in nothing more so than in agriculture. Had the gain actually made by such plantations been commonly as great as he imagined it might have been, there could have been no dispute about it. The same point is frequently at this day a matter of controversy in the wine countries. Their writers on agriculture, indeed, the lovers and promoters of high cultivation, seem generally disposed to decide with Columella in favour of the vineyard. In France, the anxiety of the proprietors of the old vineyards to prevent the planting of any new ones, seems to favour their opinion, and to indicate a consciousness in those who must have the experience, that this species of cultivation is at present in that country more profitable than any other. It seems, at the same time, however, to indicate another opinion, that this superior profit can last no longer than the laws which at present restrain the free cultivation of the vine. In 1731, they obtained an order of council, prohibiting both the planting of new vineyards, and the renewal of these old ones, of which the cultivation had been interrupted for two years, without a particular permission from the king, to be granted only in consequence of an information from the intendant of the province, certifying that he had examined the land, and that it was incapable of any other culture. The pretence of this order was the scarcity of corn and pasture, and the superabundance of wine. But had this superabundance been real, it would, without any order of council, have effectually prevented the plantation of new vineyards, by reducing the profits of this species of cultivation below their natural proportion to those of corn and pasture. With regard to the supposed scarcity of corn occasioned by the multiplication of vineyards, corn is nowhere in France more carefully cultivated than in the wine provinces, where the land is fit for producing it: as in Burgundy, Guienne, and the Upper Languedoc. The numerous hands employed in the one species of cultivation necessarily encourage the other, by affording a ready market for its produce. To diminish the number of those who are capable of paying it, is surely a most unpromising expedient for encouraging the cultivation of corn. It is

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Adam Smith like the policy which would promote agriculture, by discouraging manufactures. The rent and profit of those productions, therefore, which require either a greater original expense of improvement in order to fit the land for them, or a greater annual expense of cultivation, though often much superior to those of corn and pasture, yet when they do no more than compensate such extraordinary expense, are in reality regulated by the rent and profit of those common crops. It sometimes happens, indeed, that the quantity of land which can be fitted for some particular produce, is too small to supply the effectual demand. The whole produce can be disposed of to those who are willing to give somewhat more than what is sufficient to pay the whole rent, wages, and profit, necessary for raising and bringing it to market, according to their natural rates, or according to the rates at which they are paid in the greater part of other cultivated land. The surplus part of the price which remains after defraying the whole expense of improvement and cultivation, may commonly, in this case, and in this case only, bear no regular proportion to the like surplus in corn or pasture, but may exceed it in almost any degree; and the greater part of this excess naturally goes to the rent of the landlord. The usual and natural proportion, for example, between the rent and profit of wine, and those of corn and pasture, must be understood to take place only with regard to those vineyards which produce nothing but good common wine, such as can be raised almost anywhere, upon any light, gravelly, or sandy soil, and which has nothing to recommend it but its strength and wholesomeness. It is with such vineyards only, that the common land of the country can be brought into competition; for with those of a peculiar quality it is evident that it cannot. The vine is more affected by the difference of soils than any other fruittree. From some it derives a flavour which no culture or management can equal, it is supposed, upon any other. This flavour, real or imaginary, is sometimes peculiar to the produce of a few vineyards; sometimes it extends through the greater part of a small district, and sometimes through a considerable part of a large province. The whole quantity of such wines that is brought to market falls short of the effectual demand, or the demand of those who would be willing to pay the whole rent, profit, and wages, necessary for preparing and bringing them thither, according to the ordinary rate, or according to the rate at which they are paid in common vineyards. The whole quantity, therefore, can be disposed of to those who are willing to pay more, which necessarily raises their price above that

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The Wealth of Nations of common wine. The difference is greater or less, according as the fashionableness and scarcity of the wine render the competition of the buyers more or less eager. Whatever it be, the greater part of it goes to the rent of the landlord. For though such vineyards are in general more carefully cultivated than most others, the high price of the wine seems to be, not so much the effect, as the cause of this careful cultivation. In so valuable a produce, the loss occasioned by negligence is so great, as to force even the most careless to attention. A small part of this high price, therefore, is sufficient to pay the wages of the extraordinary labour bestowed upon their cultivation, and the profits of the extraordinary stock which puts that labour into motion. The sugar colonies possessed by the European nations in the West Indies may be compared to those precious vineyards. Their whole produce falls short of the effectual demand of Europe, and can be disposed of to those who are willing to give more than what is sufficient to pay the whole rent, profit, and wages, necessary for preparing and bringing it to market, according to the rate at which they are commonly paid by any other produce. In Cochin China, the finest white sugar generally sells for three piastres the quintal, about thirteen shillings and sixpence of our money, as we are told by Mr Poivre {Voyages d’un Philosophe.}, a very careful observer of the agriculture of that country. What is there called the quintal, weighs from a hundred and fifty to two hundred Paris pounds, or a hundred and seventy-five Paris pounds at a medium, which reduces the price of the hundred weight English to about eight shillings sterling; not a fourth part of what is commonly paid for the brown or muscovada sugars imported from our colonies, and not a sixth part of what is paid for the finest white sugar. The greater part of the cultivated lands in Cochin China are employed in producing corn and rice, the food of the great body of the people. The respective prices of corn, rice, and sugar, are there probably in the natural proportion, or in that which naturally takes place in the different crops of the greater part of cultivated land, and which recompenses the landlord and farmer, as nearly as can be computed, according to what is usually the original expense of improvement, and the annual expense of cultivation. But in our sugar colonies, the price of sugar bears no such proportion to that of the produce of a rice or corn field either in Europe or America. It is commonly said that a sugar planter expects that the rum and the molasses should defray the whole expense of his cultivation, and that his sugar should be all clear profit. If this be true, for I pretend not to affirm it, it is as if a corn farmer expected to defray the expense of his cultivation with the chaff and the straw, and that the grain should be all

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Adam Smith clear profit. We see frequently societies of merchants in London, and other trading towns, purchase waste lands in our sugar colonies, which they expect to improve and cultivate with profit, by means of factors and agents, notwithstanding the great distance and the uncertain returns, from the defective administration of justice in those countries. Nobody will attempt to improve and cultivate in the same manner the most fertile lands of Scotland, Ireland, or the corn provinces of North America, though, from the more exact administration of justice in these countries, more regular returns might be expected. In Virginia and Maryland, the cultivation of tobacco is preferred, as most profitable, to that of corn. Tobacco might be cultivated with advantage through the greater part of Europe; but, in almost every part of Europe, it has become a principal subject of taxation; and to collect a tax from every different farm in the country where this plant might happen to be cultivated, would be more difficult, it has been supposed, than to levy one upon its importation at the custom-house. The cultivation of tobacco has, upon this account, been most absurdly prohibited through the greater part of Europe, which necessarily gives a sort of monopoly to the countries where it is allowed; and as Virginia and Maryland produce the greatest quantity of it, they share largely, though with some competitors, in the advantage of this monopoly. The cultivation of tobacco, however, seems not to be so advantageous as that of sugar. I have never even heard of any tobacco plantation that was improved and cultivated by the capital of merchants who resided in Great Britain; and our tobacco colonies send us home no such wealthy planters as we see frequently arrive from our sugar islands. Though, from the preference given in those colonies to the cultivation of tobacco above that of corn, it would appear that the effectual demand of Europe for tobacco is not completely supplied, it probably is more nearly so than that for sugar; and though the present price of tobacco is probably more than sufficient to pay the whole rent, wages, and profit, necessary for preparing and bringing it to market, according to the rate at which they are commonly paid in corn land, it must not be so much more as the present price of sugar. Our tobacco planters, accordingly, have shewn the same fear of the superabundance of tobacco, which the proprietors of the old vineyards in France have of the superabundance of wine. By act of assembly, they have restrained its cultivation to six thousand plants, supposed to yield a thousand weight of tobacco, for every negro between sixteen and sixty years of age. Such a negro, over and above this quantity of tobacco, can manage, they reckon, four acres of Indian corn. To prevent the market from being overstocked, too, they have some-

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The Wealth of Nations times, in plentiful years, we are told by Dr Douglas {Douglas’s Summary,vol. ii. p. 379, 373.} (I suspect he has been ill informed), burnt a certain quantity of tobacco for every negro, in the same manner as the Dutch are said to do of spices. If such violent methods are necessary to keep up the present price of tobacco, the superior advantage of its culture over that of corn, if it still has any, will not probably be of long continuance. It is in this manner that the rent of the cultivated land, of which the produce is human food, regulates the rent of the greater part of other cultivated land. No particular produce can long afford less, because the land would immediately be turned to another use; and if any particular produce commonly affords more, it is because the quantity of land which can be fitted for it is too small to supply the effectual demand. In Europe, corn is the principal produce of land, which serves immediately for human food. Except in particular situations, therefore, the rent of corn land regulates in Europe that of all other cultivated land. Britain need envy neither the vineyards of France, nor the olive plantations of Italy. Except in particular situations, the value of these is regulated by that of corn, in which the fertility of Britain is not much inferior to that of either of those two countries. If, in any country, the common and favourite vegetable food of the people should be drawn from a plant of which the most common land, with the same, or nearly the same culture, produced a much greater quantity than the most fertile does of corn; the rent of the landlord, or the surplus quantity of food which would remain to him, after paying the labour, and replacing the stock of the farmer, together with its ordinary profits, would necessarily be much greater. Whatever was the rate at which labour was commonly maintained in that country, this greater surplus could always maintain a greater quantity of it, and, consequently, enable the landlord to purchase or command a greater quantity of it. The real value of his rent, his real power and authority, his command of the necessaries and conveniencies of life with which the labour of other people could supply him, would necessarily be much greater. A rice field produces a much greater quantity of food than the most fertile corn field. Two crops in the year, from thirty to sixty bushels each, are said to be the ordinary produce of an acre. Though its cultivation, therefore, requires more labour, a much greater surplus remains after maintaining all that labour. In those rice countries, therefore, where rice is the common and favourite vegetable food of the people, and where the cultivators are chiefly maintained with it, a greater share of this greater surplus should belong to the landlord than in corn countries. In Carolina, where the planters, as in

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Adam Smith other British colonies, are generally both farmers and landlords, and where rent, consequently, is confounded with profit, the cultivation of rice is found to be more profitable than that of corn, though their fields produce only one crop in the year, and though, from the prevalence of the customs of Europe, rice is not there the common and favourite vegetable food of the people. A good rice field is a bog at all seasons, and at one season a bog covered with water. It is unfit either for corn, or pasture, or vineyard, or, indeed, for any other vegetable produce that is very useful to men; and the lands which are fit for those purposes are not fit for rice. Even in the rice countries, therefore, the rent of rice lands cannot regulate the rent of the other cuitivated land which can never be turned to that produce. The food produced by a field of potatoes is not inferior in quantity to that produced by a field of rice, and much superior to what is produced by a field of wheat. Twelve thousand weight of potatoes from an acre of land is not a greater produce than two thousand weight of wheat. The food or solid nourishment, indeed, which can be drawn from each of those two plants, is not altogether in proportion to their weight, on account of the watery nature of potatoes. Allowing, however, half the weight of this root to go to water, a very large allowance, such an acre of potatoes will still produce six thousand weight of solid nourishment, three times the quantity produced by the acre of wheat. An acre of potatoes is cultivated with less expense than an acre of wheat; the fallow, which generally precedes the sowing of wheat, more than compensating the hoeing and other extraordinary culture which is always given to potatoes. Should this root ever become in any part of Europe, like rice in some rice countries, the common and favourite vegetable food of the people, so as to occupy the same proportion of the lands in tillage, which wheat and other sorts of grain for human food do at present, the same quantity of cultivated land would maintain a much greater number of people; and the labourers being generally fed with potatoes, a greater surplus would remain after replacing all the stock, and maintaining all the labour employed in cultivation. A greater share of this surplus, too, would belong to the landlord. Population would increase, and rents would rise much beyond what they are at present. The land which is fit for potatoes, is fit for almost every other useful vegetable. If they occupied the same proportion of cultivated land which corn does at present, they would regulate, in the same manner, the rent of the greater part of other cultivated land. In some parts of Lancashire, it is pretended, I have been told, that bread

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The Wealth of Nations of oatmeal is a heartier food for labouring people than wheaten bread, and I have frequently heard the same doctrine held in Scotland. I am, however, somewhat doubtful of the truth of it. The common people in Scotland, who are fed with oatmeal, are in general neither so strong nor so handsome as the same rank of people in England, who are fed with wheaten bread. They neither work so well, nor look so well; and as there is not the same difference between the people of fashion in the two countries, experience would seem to shew, that the food of the common people in Scotland is not so suitable to the human constitution as that of their neighbours of the same rank in England. But it seems to be otherwise with potatoes. The chairmen, porters, and coal-heavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root. No food can afford a more decisive proof of its nourishing quality, or of its being peculiarly suitable to the health of the human constitution. It is difficult to preserve potatoes through the year, and impossible to store them like corn, for two or three years together. The fear of not being able to sell them before they rot, discourages their cultivation, and is, perhaps, the chief obstacle to their ever becoming in any great country, like bread, the principal vegetable food of all the different ranks of the people. PART II. — Of the Produce of Land, which sometimes does, and sometimes does not, afford Rent. Human food seems to be the only produce of land, which always and necessarily affords some rent to the landlord. Other sorts of produce sometimes may, and sometimes may not, according to different circumstances. After food, clothing and lodging are the two great wants of mankind. Land, in its original rude state, can afford the materials of clothing and lodging to a much greater number of people than it can feed. In its improved state, it can sometimes feed a greater number of people than it can supply with those materials; at least in the way in which they require them, and are willing to pay for them. In the one state, therefore, there is always a superabundance of these materials, which are frequently, upon that account, of little or no value. In the other, there is often a scarcity, which necessarily augments their value. In the one state, a great part of them is thrown away as useless and the price of what is used is considered as equal only to the labour and expense of fitting it for use, and can,

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and which had no foreign commerce. When the greater part of the Highland cattle were consumed on their own hills. which in old times. firearms. everyman. Their price. as raises their price above what it costs to send them to those wealthier neighbours. and there is frequently a demand for more than can be had. it frequently happens. In the present commercial state of the known world. It affords. among whom land property is established. could neither be consumed nor wrought up at home. The skins of the larger animals were the original materials of clothing. A good stone quarry in the neighbourhood of London would afford a considerable rent. and no part could afford any rent to the landlord. and 149 . can always afford some rent to the landlord. before their country was discovered by the Europeans. the materials of clothing would evidently be so superabundant. and brandy. than what is sufficient to pay the expense of bringing them to market. some rent to the landlord. and its price afforded something to the rent of the land which produced it. In countries not better cultivated than England was then.Adam Smith therefore. by providing himself with food. Barren timber for building is of great value in a populous and well-cultivated country. In the other. The wool of England. the greater part of them would be thrown away as things of no value. and which can neither be wrought up nor consumed at home. If there was no foreign commerce. for blankets. that a great part of them would be thrown away as useless. have some foreign commerce of this kind. In many parts of Scotland and Wales it affords none. whose food consists chiefly in the flesh of those animals. found a market in the then wealthier and more industrious country of Flanders. or than the Highlands of Scotland are now. and what they were exchanged for afforded some addition to the rent of the Highland estates. they are all made use of. I believe. that they are of no value to the landlord. which gives it some value. This was probably the case among the hunting nations of North America. and find among their wealthier neighbours such a demand for all the materials of clothing. and do not so readily become an object of foreign commerce. therefore. Somebody is always willing to give more for every part of them. the exportation of their hides made the most considerable article of the commerce of that country. afford no rent to the landlord. provides himself with the materials of more clothing than he can wear. Among nations of hunters and shepherds. even in the present commercial state of the world. The materials of lodging cannot always be transported to so great a distance as those of clothing. which their land produces. the most barbarous nations. When they are superabundant in the country which produces them. therefore. therefore. with whom they now exchange their surplus peltry.

for want of roads and water-carriage. with the hovel and the few rags of the other. and you will be sensible that the difference between their cloth- 150 . or in satisfying the other wants and fancies of mankind. which they could not find at home. are the principal objects of the greater part of those wants and fancies. In quality it may be very different. it may often be difficult to find food. require somewhat more labour to dress and prepare them for use. and thereby afford some rent to their proprietors. But though these are at hand. sometimes enables him to get a rent for it. Among savage or barbarous nations. however. All the other ninety-nine parts are frequently no more than enough to provide them with food. When the materials of lodging are so superabundant. the landlord would be much obliged to any body who would carry away the greater part of his large trees. The rich man consumes no more food than his poor neighbour. and what is called equipage. but in proportion to that of those whom it can feed. They do not. the part made use of is worth only the labour and expense of fitting it for that use. The simplest species of clothing. But in many parts of North America. The demand of wealthier nations. and to select and prepare it may require more labour and art. It affords no rent to the landlord. the timber is left to rot upon the ground. who generally grants the use of it to whoever takes the trouble of asking it. it is easy to find the necessary clothing and lodging. but in quantity it is very nearly the same. however. what is called a house may be built by one day’s labour of one man. a hundredth. The other half. But compare the spacious palace and great wardrobe of the one. will be sufficient to provide them with such clothing and lodging as satisfy the greater part of the people. and of the coasts of the Baltic. by the improvement and cultivation of land. In some parts of the British dominions. or at least the greater part of them. the skins of animals. The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before. Clothing and lodging. In some parts of the Highlands of Scotland. therefore.The Wealth of Nations the land which produces it affords a considerable rent. can be employed in providing other things. the bark is the only part of the wood which. not in proportion to the number of people whom their produce can clothe and lodge. The woods of Norway. But when. or little more than a hundredth part of the labour of the whole year. can be sent to market. the labour of one family can provide food for two. household furniture. the labour of half the society becomes sufficient to provide food for the whole. find a market in many parts of Great Britain. Countries are populous. When food is provided. require a great deal.

what is the same thing. depends upon different circumstances. for example.Adam Smith ing. Even in improved and cultivated countries. however. Whether a coal mine. The number of workmen increases with the increasing quantity of food. do not afford it always. by means of the improvement and cultivation of land. is almost as great in quantity as it is in quality. advantageously situated. and household furniture. which afterwards afford rent. dress. Those. and partly upon its situation. dress. for gratifications of this other kind. and household furniture. not only the original source of rent. or with the growing improvement and cultivation of the lands. and as the nature of their business admits of the utmost subdivisions of labour. lodging. 151 . The poor. either usefully or ornamentally. together with its ordinary profits. exert themselves to gratify those fancies of the rich. but the desire of the conveniencies and ornaments of building. therefore. the price of it. the demand for them is not always such as to afford a greater price than what is sufficient to pay the labour. A mine of any kind may be said to be either fertile or barren. are always willing to exchange the surplus. can afford any rent. who have the command of more food than they themselves can consume. Those other parts of the produce of land. according as the quantity of mineral which can be brought from it by a certain quantity of labour. Whether it is or is not such. derives that part of its value from the improvement of the powers of labour in producing food. the precious metals. the stock which must be employed in bringing them to market. but every other part of the produce of land which afterwards affords rent. in this manner. is greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. Some coal mines. but seem to be altogether endless. and replace. and the precious stones. they vie with one another in the cheapness and perfection of their work. The desire of food is limited in every man by the narrow capacity of the human stomach. the quantity of materials which they can work up. and to obtain it more certainly. depends partly upon its fertility. for the fossils and minerals contained in the bowels of the earth. increases in a much greater proportion than their numbers. in order to obtain food. or household furniture. is given for the amusement of those desires which cannot be satisfied. They can afford neither profit nor rent. The produce does not pay the expense. What is over and above satisfying the limited desire. or. Hence arises a demand for every sort of material which human invention can employ. in building. seems to have no limit or certain boundary. equipage. equipage. Food is. cannot be wrought on account of their barrenness.

though they do not destroy the old trees. through the whole year. which is then a mere incumbrance. A quantity of mineral. therefore. and exactly for the same reason. Other coal mines in the same country. and replace. together with its ordinary profits. by destroying and extirpating their enemies. Numerous herds of cattle. this quantity could not be sold. The expense of coals. who would gladly give it to any body for the cutting. which is altogether the acquisition of human industry. must generally be somewhat less than that of wood. in the present times. and nobody can afford to pay any. This seems.The Wealth of Nations There are some. Coals are a less agreeable fuel than wood: they are said too to be less wholesome. the greater part of every country is covered with wood. as the price of cattle. sufficiently fertile. so that. to be nearly the state of things in several parts of Great Britain. of which the greatness of the profit often compensates the lateness of the returns. hinder any young ones from coming up. They can be wrought advantageously by nobody but the landlord. and who. and partly go to decay in consequence of the increased number of cattle. It affords a good rent. In its rude beginnings. thinly inhabited. though they do not increase in the same proportion as corn. and can be wrought in no other. Many coal mines in Scotland are wrought in this manner. The scarcity of wood then raises its price. These. and without either good roads or watercarriage. the whole forest goes to ruin. the stock employed in working them. and the landlord sometimes finds that he can scarce employ his best lands more advantageously than in growing barren timber. nearly in the same manner. sufficient to defray the expense of working. the woods are partly cleared by the progress of tillage. where the profit of planting is 152 . of no value to the landlord. who. of which the produce is barely sufficient to pay the labour. who store up in the season of plenty what may maintain them in that of scarcity. or even less than the ordinary quantity of labour: but in an inland country. when allowed to wander through the woods. who. cannot be wrought on account of their situation. gets the ordinary profit of the capital which he employs in it. varies with the state of agriculture. in the course of a century or two. again. could be brought from the mine by the ordinary. They afford some profit to the undertaker of the work. The price of wood. at the place where they are consumed. being himself the undertaker of the work. As agriculture advances. but no rent to the landlord. The landlord will allow nobody else to work them without paying some rent. furnish them with a greater quantity of food than uncultivated nature provides for them. yet multiply under the care and protection of men. secure them in the free enjoyment of all that she provides.

perhaps. Both the proprietor and the undertaker of the work find. Coals. It seems to be so in some of the inland parts of England. though they cannot so well afford it. and the coal masters and the coal proprietors find it more for their interest to sell a great quantity at a price somewhat above the lowest. the one that he can get a greater rent. the other that he can get a greater profit. The advantage which the landlord derives from planting can nowhere exceed. both their rent and their profit. but. even where coals afford one. Rent. which is highly cuitivated. At a coal mine for which the landlord can get no rent. The most fertile coal mine. In the new town of Edinburgh. and though it always diminishes. which he must either work himself or let it alone altogether. are everywhere much below this highest price. and can be wrought only by the proprietor. like that of all other commodities.Adam Smith found to be equal to that of either corn or pasture. others can afford no rent. in the coal countries. If they were not. and it is generally a rent certain and 153 . and in an inland country. indeed. to mix coals and wood together. commonly amounts to what is supposed to be a third of the gross produce. than a small quantity at the highest. that at that place. it may sometimes be cheaper to bring barren timber for building from less cultivated foreign countries than to raise it at home. they could not bear the expense of a distant carriage. particularly in Oxfordshire. at least for any considerable time. either by land or by water. the rent which these could afford him. Upon the sea-coast of a well-improved country. regulates the price of coals at all the other mines in its neighbourhood. and in these circumstances. there is not. a single stick of Scotch timber. even in the fires of the common people. The lowest price at which coals can be sold for any considerable time. the price of coals is as high as it can be. too. built within these few years. is. A small quantity only could be sold. Some works are abandoned altogether. it will frequently not fall much short of this rent. where it is usual. and sometimes takes away altogether. therefore. if coals can conveniently be had for fuel. the price of coals must generally be nearly about this price. The rent of an estate above ground. by somewhat underselling all their neighbours. together with its ordinary profits. has generally a smaller share in their price than in that of most other parts of the rude produce of land. Whatever may be the price of wood. the stock which must be employed in bringing them to market. the price which is barely sufficient to replace. and where the difference in the expense of those two sorts of fuel cannot. be very great. if that of coals is such that the expense of a coal fire is nearly equal to that of a wood one we may be assured. Their neighbours are soon obliged to sell at the same price.

or the quantity either of labour or of other goods which it will purchase there. lodging. too. must have some influence on its price. it can. and their price in the Lionnois can have none at all. do very little more than pay the expense of working. The coarse. That of a metallic mine depends more upon its fertility. The productions of such distant coal mines can never be brought into competition with one another. of the coarse. that in a country where thirty years purchase is considered as a moderate price for the property of a landed estate.The Wealth of Nations independent of the occasional variations in the crop. or replace. and still more that of the precious metals. clothes. In coal mines. therefore. After the discovery of the mines of Peru. and in fact commonly are. the silver mines of Europe were. at the most fertile mines in the world. and it is seldom a rent certain. The price of coals in Westmoreland or Shropshire can have little effect on their price at Newcastle. and of the most distant sea carriage. but depends upon the occasional variations in the produce. and can seldom afford a very high rent to the landlord. and still more the precious metals. Their market is not confined to the countries in the neighbourhood of the mine. frequently depends as much upon its situation as upon its fertility. This was the case. not only at the silver mines of Europe. therefore. at the greater part of mines. seems at the greater part of mines to 154 . The copper of Japan makes an article of commerce in Europe. that their produce could no longer pay the expense of working them. The value of silver was so much reduced. The silver of Peru finds its way. the greater part of them. after the discovery of those of Potosi. when separated from the ore. These are so great. and other necessaries which were consumed in that operation. The price. a tenth the common rent. the food. The value of a coal mine to the proprietor. The price of every metal. but extends to the whole world. the iron of Spain in that of Chili and Peru. but at those of China. The price of copper in Japan must have some influence upon its price at the copper mines in Europe. not only to Europe. ten years purchase is regarded as a good price for that of a coal mine. and even with the ancient mines of Peru. but from Europe to China. are so valuable. But the productions of the most distant metallic mines frequently may. Rent accordingly. The price of silver in Peru. that they can generally bear the expense of a very long land. and less upon its situation. with a profit. with the mines of Cuba and St. being regulated in some measure by its price at the most fertile mine in the world that is actually wrought. at every mine. Domingo. a fifth of the gross produce is a very great rent. must necessarily more or less affect their price at every other in it. abandoned.

as we are told by the Rev. belong to the proprietor of the mine. Some. Rent. In the silver mines of Peru. it would naturally. gives more temptation to smuggling than the tax of one twentieth upon tin. After replacing the stock employed in working those different mines. is said to be very ill paid. Borlace.Adam Smith have but a small share in the price of the coarse. it is probable. accordingly. and smuggling must be much easier in the precious than in the bulky commodity. A sixth part of the gross produce may be reckoned the average rent of the tin mines of Cornwall. we are told by Frezier and Ulloa. in the coarse. and the tax upon silver was. A sixth part of the gross produce is the rent. or one twentieth part of the value. and whatever may be his proportion. of several very fertile lead mines in Scotland. this fifth would naturally have belonged to the landlord. Labour and profit make up the greater part of both. makes a greater part of the price of tin at the most fertile tin mines than it does of silver at the most fertile silver mines in the world. The tax of the king of Spain. Till 1736. too. but that he will grind the ore at his mill. he says. the richest which have been known in the world. was to the whole average rent of the silver mines of Peru. and some do not afford so much. too. vice-warden of the stannaries. reduced from one fifth to one tenth. because they could not afford this tax. you will find that the whole average rent of the tin mines of Cornwall. the residue which remains to the proprietor is greater. Even this tax upon silver. that when any person undertakes to work a new mine in Peru. the tax of the king of Spain amounted to one fifth of the standard silver. the proprietor frequently exacts no other acknowledgment from the undertaker of the mine. and many mines might have been wrought which could not then be wrought. The same most respectable and well-informed authors acquaint us. he is universally looked upon as a man destined to bankruptcy and 155 . as thirteen to twelve. the most fertile that are known in the world. which till then might be considered as the real rent of the greater part of the silver mines of Peru. Mr. paying him the ordinary multure or price of grinding. if tin was duty free. in 1736. But the silver mines of Peru are not now able to pay even this low rent. too. together with its ordinary profits. and a still smaller in that of the precious metals. and that of the duke of Cornwall very well. it seems. Neither are the profits of the undertakers of silver mines commonly very great in Peru. The tax of the duke of Cornwall upon tin is supposed to amount to more than five per cent. If there had been no tax. afford more. than in the precious metal. But if you add one twentieth to one sixth. therefore. indeed.

a very small acknowledgment must be paid upon working it. without the consent of the owner of the land. any person who discovers a tin mine may mark out its limits to a certain extent. is much more liable to be smuggled than even silver. or give it in lease to another. however. and may either work it himself. which is called bounding a mine. as in silver. In both regulations. to whom. say the same authors. Silver is very seldom found virgin. in which the prizes do not compensate the blanks. which cannot well be carried on but in work-houses erected for the purpose. and. It is sometimes found in pieces of some bulk. but it was found that the work could not bear even the lowest of these two taxes. Whoever discovers a new mine. the law in Peru gives every possible encouragement to the discovery and working of new ones. is entitled to measure off two hundred and forty-six feet in length. and is upon that account shunned and avoided by every body. As the sovereign. It was once a fifth. If it is rare. This twentieth part seems to be the whole rent which is paid by the greater part of the gold mines of Chili and Peru. as a lottery. not only on account of the superior value of the metal in proportion to its bulk. however. and half as much in breadth. The same encouragement is given in Peru to the discovery and working of new gold mines. and in gold the king’s tax amounts only to a twentieth part of the standard rental. but by a very laborious and tedious operation. and. The bounder becomes the real proprietor of the mine. from which it is impossible to separate it in such quantities as will pay for the expense. and can work it without paving any acknowledgment to the landlord. derives a considerable part of his revenue from the produce of silver mines. earth. too. In waste and uninclosed lands. is generally mineralized with some other body. and afterwards a tenth. but. the sacred rights of private property are sacrificed to the supposed interests of public revenue. even when mixed. is almost always found virgin. it seems.The Wealth of Nations ruin. with sand. Gold. Mining. like most other metals. is considered there in the same light as here. on the contrary. He becomes proprietor of this portion of the mine. though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects. therefore. exposed to the inspection of the king’s officers. Gold. in small and almost insensible particles. but on account of the peculiar way in which nature produces it. 156 . Frezier and Ulloa. to find a person who has made his fortune by a silver. it is still much rarer to find one who has done so by a gold mine. however. according to what he supposes to be the direction of the vein. The interest of the duke of Cornwall has given occasion to a regulation nearly of the same kind in that ancient dutchy.

and partly from their beauty. No paint or dye can give so splendid a colour as gilding. It must at least be sufficient to replace that stock. copper. These qualities of utility. Their principal merit. clothes. therefore. which must commonly be consumed in bringing them from the mine to the market. they are more useful than. If the king’s tax. during any considerable time. arises from their beauty. is but ill paid upon silver. it can be separated from them by a very short and simple operation. are often. and lodging. they can more easily be kept clean. or tin one. and the smallest bit of it may become more precious than a diamond. beauty. The stock which must commonly be employed. with the ordinary profits. is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves. beyond which no scarcity can ever raise it. which can be carried on in any private house by any body who is possessed of a small quantity of mercury. It is not determined by that of any other commodity. or the smallest quantity of other goods for which they can be exchanged. which. are the original foundation of the 157 . and exchange for a greater quantity of other goods. either of the table or the kitchen. which renders them peculiarly fit for the ornaments of dress and furniture. upon that account. however. and the utensils. in their eye. In their eyes. Their highest price. more agreeable when made of them. which is in any degree either useful or beautiful. any other metal. is regulated by the same principles which fix the lowest ordinary price of all other goods. in the same manner as the price of coals is by that of wood. the merit of an object. If you except iron. and scarcity. however.Adam Smith and other extraneous bodies. Such objects they are willing to purchase at a higher price than things much more beautiful and useful. but more common. the chief enjoyment of riches consists in the parade of riches. determine it. perhaps. it is likely to be much worse paid upon gold. With the greater part of rich people. a labour which nobody can afford to pay but themselves. and the same quality would render a gold boiler still better than a silver one. or by the great labour which it requires to collect any considerable quantity of it. and rent must make a much smaller part of the price of gold than that of silver. seems not to be necessarily determined by any thing but the actual scarcity or plenty of these metals themselves. Increase the scarcity of gold to a certain degree. The lowest price at which the precious metals can be sold. The merit of their beauty is greatly enhanced by their scarcity. A silver boiler is more cleanly than a lead. As they are less liable to rust and impurity. is greatly enhanced by its scarcity. the food. The demand for those metals arises partly from their utility.

were to the proprietor not worth the working. or of the great quantity of other goods for which they can everywhere be exchanged. and was the quality which fitted them for that employment. both to the public and to the proprietor. If new mines were discovered. and independent of their being employed as coin. That employment. but to what may be called its relative fertility. the value of silver might be so much degraded as to render even the mines of Potosi not worth the working.The Wealth of Nations high price of those metals. or by the difficulty and expense of getting them from the mine. Wages and profit accordingly make up. he was informed that the sovereign of the country. of which the value is principally derived from its scarcity. The most abundant mines. and the proprietor’s share might have enabled him to purchase or command an equal quantity either of labour or of commodities. almost the whole of the high price. either of the precious metals. Rent comes in but for a very small share. had ordered all of them to be shut up except those which yielded the largest and finest stones. both of the precious metals and of the precious stones. A service of plate. The demand for the precious stones arises altogether from their beauty. Though the quantity of silver was much less. could add little to the wealth of the world. The value. They are of no use but as ornaments. as much superior to those of Potosi. visited the diamond mines of Golconda and Visiapour. could be purchased for a smaller quantity of 158 . it seems. and the most fertile mines only afford any considerable rent. upon most occasions. or to its superiority over other mines of the same kind. A produce. for whose benefit they were wrought. the most fertile mines in Europe may have afforded as great a rent to their proprietors as the richest mines in Peru do at present. as they were superior to those of Europe. and by diminishing the quantity which could be employed in any other way. The other. Before the discovery of the Spanish West Indies. might have been the same. by occasioning a new demand. however. is regulated all over the world by their price at the most fertile mine in it. the real revenue which they afforded. may have afterwards contributed to keep up or increase their value. This value was antecedent to. and the other frivolous ornaments of dress and furniture. When Tavernier. the rent which a mine of either can afford to its proprietor is in proportion. frequently for no share. or of the precious stones. is necessarily degraded by its abundance. both of the produce and of the rent. it might have exchanged for an equal quantity of other goods. and the merit of their beauty is greatly enhanced by their scarcity. As the prices. not to its absolute. a jeweller.

in consequence of the improvement of land. The poor inhabitants of Cuba and St. and lodging. The great number of people maintained by the fertile lands afford a market to many parts of the produce of the barren. Food not only constitutes the principal part of the riches of the world. They gave them to their new guests at the first request. lodging. On the contrary. used to wear little bits of gold as ornaments in their hair and other parts of their dress. and whatever may be the proportion of the landlord. is the great cause of the demand. Domingo. 159 . both of their produce and of their rent. as well as for every other conveniency and ornament of dress. but contributes likewise to increase that of many other lands. The value of the most barren land is not diminished by the neighbourhood of the most fertile. and not to their relative fertility. That abundance of food. can always feed. and in this would consist the sole advantage which the world could derive from that abundance. and equipage. many people have the disposal beyond what they themselves can consume. it will always give him a proportionable command of the labour of those people. It is otherwise in estates above ground. The land which produces a certain quantity of food. they would willingly give as much as might maintain a whole family for many years. that. is in proportion to their absolute. so scanty always among themselves.Adam Smith commodities. it is generally increased by it. which they could never have found among those whom their own produce could maintain. clothe. both for the precious metals and the precious stones. for a very small quantity of those glittering baubles. and of the commodities with which that labour can supply him. household furniture. by creating a new demand for their produce. and lodge. but not worth the refusing to any body who asked them. They seemed to value them as we would do any little pebbles of somewhat more than ordinary beauty. the passion of the Spaniards would not have surprised them. when they were first discovered by the Spaniards. increases not only the value of the lands upon which the improvement is bestowed. a certain number of people. Could they have been made to understand this. They were astonished to observe the rage of the Spaniards to obtain them. without seeming to think that they had made them any very valuable present. and to consider them as just worth the picking up. of which. clothes. The value. and had no notion that there could anywhere be a country in which many people had the disposal of so great a superfluity of food. Whatever increases the fertility of land in producing food. but it is the abundance of food which gives the principal part of their value to many other sorts of riches.

— Of the variations in the Proportion between the respective Values of that sort of Produce which always affords Rent. and would have been the case with all of them upon all occasions. though the demand for silver would necessarily increase.The Wealth of Nations PART III. The increasing abundance of food. accordingly. increased the supply of some of them in a still greater proportion than the demand. a pound weight of it. and of that which sometimes does. The value of that sort which sometimes does. in consequence of the increasing improvement and cultivation. will not necessarily increase with the improvement of the country in which it is situated. afford Rent. and which can be applied either to use or to ornament. In the whole progress of improvement. be advancing in improvement and population. for example. that the real price of that metal might gradually fall. in the course of its improvements. but the market for the produce of a silver mine may extend over the whole known world. the demand for silver might not be at all increased by the improvement even of a large country in the neighbourhood of the mine. that is. and sometimes does not afford rent. it might. The value of a free-stone quarry. if particular accidents had not. Even though the world in general were improving. yet if. should gradually become dearer and dearer. much more fertile than any which had been known before. and sometimes does not. the materials of clothing and lodging. But the value of a silver mine. for example. new mines should be discovered. upon some occasions. As art and industry advance. must necessarily increase the demand for every part of the produce of land which is not food. Unless the world in general. in other words. and the demand must generally be in proportion to the improvement and population of that small district. The market for the produce of a free-stone quarry can seldom extend more than a few miles round about it. should constantly rise in proportion to that which always affords some rent. yet the supply might increase in so much a greater proportion. will necessarily increase with the increasing improvement and population of the country round about it. has been the case with most of these things upon most occasions. even though there should not be another within a thousand miles of it. should gradually come to be more and more in demand. therefore. might gradually purchase or command a 160 . This. any given quantity. be expected there should be only one variation in the comparative values of those two different sorts of produce. should gradually exchange for a greater and a greater quantity of food. especially if it should be the only one in the neighbourhood. or. therefore. the useful fossils and materials of the earth. the precious metals and the precious stones.

From this price it seems to have fallen gradually to two ounces of silver. in other words. that all servants and labourers should. if we may judge by what has happened both in France and Great Britain. the average money price of corn would gradually become cheaper and cheaper. the average money price of corn would. Digression concerning the Variations in the value of Silver during the Course of the Four last Centuries. was enacted what is called the Statute of Labourers. the price at which we find it estimated in the beginning of the sixteenth century. It therefore ordains. In 1350. while. the supply did not increase in the same proportion. or exchange for a smaller and a smaller quantity of corn. or. by some accident. in spite of all improvements. the average price of the quarter of wheat in England seems not to have been estimated lower than four ounces of silver. or. the supply of that metal should increase nearly in the same proportion as the demand. the supply. the value of silver would gradually rise in proportion to that of corn. The great market for silver is the commercial and civilized part of the world. — In 1350. These three seem to exhaust all the possible combinations of events which can happen in the progress of improvement. If. in which I have here set them down. the demand of this market should increase. be 161 . the principal part of the subsistence of the labourer. it would continue to purchase or exchange for nearly the same quantity of corn. in spite of all improvements. equal to about twenty shillings of our present money. But if. First Period. in a greater proportion than the demand. and the average money price of corn would. Any given quantity of silver would exchange for a greater and a greater quantity of corn. each of those three different combinations seems to have taken place in the European market. equal to about ten shillings of our present money. and during the course of the four centuries preceding the present. and for some time before. If. for many years together. on the contrary. gradually become dearer and dearer. it complains much of the insolence of servants. should increase. continue very nearly the same. on the other hand. Tower weight. being the 25th of Edward III. at the same time. who endeavoured to raise their wages upon their masters. In the preamble. by the general progress of improvement.Adam Smith smaller and a smaller quantity of labour. and nearly in the same order. and at which it seems to have continued to be estimated till about 1570. for the future. that metal would gradually become cheaper and cheaper. too. in other words.

and the four preceding years. had. which cost nineteen pounds.The Wealth of Nations contented with the same wages and liveries (liveries in those times signified not only clothes. or seven shillings. but are mentioned accidentally. equal to about twelve shillings of our present money. equal to about eighteen shillings of our present money. but the prices of many particulars. upon this account. and twopence a-quarter. 3dly. gave a feast upon his installation-day. therefore. it is difficult to form any judgment concerning what may have been the ordinary price. The prices of malt and oats seem here to lie higher than their ordinary proportion to the price of wheat. Four ounces of silver. therefore. equal to six shillings and eightpence of the money of those times. and that of other grain in proportion. prior of St Augustine’s. their livery-wheat should nowhere be estimated higher than tenpence a-bushel. fifty-three quarters of wheat. in the beginning of the fourteenth century. in those times. or in the 16th year of the king. and it had been reckoned a reasonable price ten years before that. Tower weight. other reasons for believing that. twenty quarters of oats. equal to about oneand-twenty shillings and sixpence of our present money. besides. in the 25th of Edward III. on account of their extraordinary dearness or cheapness. and from which. In that feast were consumed. But in the 16th year of Edward III. therefore. that. or four shillings aquarter. as the prices actually 162 . the common price of wheat was not less than four ounces of silver the quarter. and to near twenty shillings of that of the present. which cost four pounds. and that it should always be in the option of the master to deliver them either the wheat or the money. Ralph de Born. not only the bill of fare. on account of their extraordinary dearness or cheapness. the term to which the statute refers. a moderate price of grain. and for some time before. than the prices of some particular years. which have generally been recorded by historians and other writers. or six shillings a-quarter. which cost seventeen pounds ten shillings. 1st. been reckoned a very moderate price of wheat. fifty-eight quarters of malt. but provisions) which they had been accustomed to receive in the 20th year of the king. Canterbury. Tenpence: a-bushel. In 1309. and was nearly equal to half-a-crown of our present money. must have been reckoned a moderate price for the quarter of eight bushels. This statute is surely a better evidence of what was reckoned. These prices are not recorded. since it required a particular statute to oblige servants to accept of it in exchange for their usual livery of provisions. 2dly. There are. of which William Thorn has preserved. Tower weight. tenpence contained about half an ounce of silver.

From these different facts. and for a considerable time before. we seem to have some reason to conclude that. what was reckoned the reasonable and moderate. the fifth earl of Northumberland. some time kings of England. had continued to be considered as what is called the moderate and reasonable. in the other at five shillings and eightpence only. We cannot. six shillings and eightpence. that is. In 1512.Adam Smith paid for large quantities of grain consumed at a feast. Tower weight. Henry II. it appears from several different statutes. Tower weight. But statutes of this kind are generally presumed to provide with equal care for all deviations from the middle price. from one shilling to twenty shillings the quarter of the money of those times. In one of them it is computed at six shilling and eightpence the quarter. It continued to be estimated at this price till about 1570. Tower weight. which. Tower weight. therefore. so as at last to have fallen to about two ounces of silver. for those below it. the ordinary or average 163 . six shillings and eightpence contained only two ounces of silver. therefore. had been made in the times of his progenitors. during the space of more than two hundred years. which was famous for its magnificence. therefore. It is probably. In 1262. to the beginning of the reign of Elizabeth. seems to have sunk gradually to about one half of this price. and equal to about thirty shillings of our present money. Tower weight. containing four ounces of silver. drawn up in 1512 there are two different estimations of wheat. From about the middle of the fourteenth to the beginning of the sixteenth century. called the assize of bread and ale. that is. was revived an ancient statute. equal to about ten shillings of our present money. In the household book of Henry. containing six ounces of silver. therefore. or than six shillings and eightpence of the money of those times. the ordinary or average price of wheat. From the 25th of Edward III. have been reckoned the middle price of the quarter of wheat when this statute was first enacted. as old at least as the time of his grandfather. as well as for those above it. Ten shillings. It regulates the price of bread according as the prices of wheat may happen to be. and must have continued to be so in the 51st of Henry III. about the middle of the fourteenth century. the average or ordinary price of the quarter of wheat was not supposed to be less than four ounces of silver. being the 51st of Henry III. the king says in the preamble. upon this supposition. must. and may have been as old as the Conquest. be very wrong in supposing that the middle price was not less than one-third of the highest price at which this statute regulates the price of bread. and were equal to about ten shillings of our present money.

by the 5th of Elizabeth. in the same manner. so far compensated the diminution of the quantity of it contained in the same nominal sum. in reality. it was enacted. has been observed both by Mr Dupré de St Maur. Thus. in consequence of increasing improvement and cultivation. it became prudent to allow of importation. which did not then contain two penny worth more silver than the same nominal sum does at present. the demand continuing 164 . that no wheat should be imported if the price was not above six shillings and eightpence the quarter: The legislature had imagined. during the same period. In 1562. But the increase of the value of silver had. containing nearly the same quantity of silver as the like nominal sum does at present. however.The Wealth of Nations price of wheat. been considered as what is called the moderate and reasonable price of wheat. it was enacted. continually diminishing in consequence of some alterations which were made in the coin. the exportation of wheat was allowed from certain ports. in 1436. whenever the price of the quarter should not exceed ten shillings. containing about the same quantity of silver as thirteen shillings and fourpence of our present money (one-third part less than the same nominal sum contained in the time of Edward III). than in the two centuries preceding. It agrees nearly with the estimation of the Northumberland book in 1512. there could be no inconveniency in exportation. in those times. This price had at this time. had probably sunk in the same manner through the greater part of Europe. or. therefore. continuing the same as before. That in France the average price of grain was. may either have been owing altogether to the increase of the demand for that metal. therefore. the exportation of wheat was in the same manner prohibited. during the course of this period. had. that the legislature did not think it worth while to attend to this circumstance. the supply. in proportion to that of corn. whenever the price of the quarter should exceed six shillings and eightpence. therefore. that to restrain the exportation of wheat till the price was so very low. In 1554. that wheat might be exported without a licence when the price was so low as six shillings and eightpence: and in 1463. and by the elegant author of the Essay on the Policy of Grain. This rise in the value of silver. Six shillings and eightpence. much lower in the end of the fifteenth and beginning of the sixteenth century. that when the price was so low. by the 1st and 2nd of Philip and Mary. to prohibit it altogether. and in 1558. been considered as what is called the moderate and reasonable price of wheat. The quantity of silver. it seems. But it had soon been found. Its price. by the 1st of Elizabeth. contained in that nominal sum was. was. but that when it rose higher. in the mean time.

that he should be at liberty to demand of the tenant. and the demand for the precious metals. as well as for every other luxury and ornament. accordingly. and. cattle. First. that. A greater annual produce would require a greater quantity of coin to circulate it. the expense of working them much increased. that the greater part of the mines which then supplied the European market with silver might be a good deal exhausted. consequently. This opinion they seem to have been led into. for the safety of the tenant. till the discovery of the mines of America. it is not much above one half of this price. it may have been owing altogether to the gradual diminution of the supply: the greater part of the mines which were then known in the world being much exhausted. They had been wrought. perhaps from the invasion of Julius Caesar. that as the quantity of silver naturally increases in every country with the increase of wealth. either the annual payment in kind or a certain sum of money instead of it. and partly by the popular notion. so its value diminishes as it quantity increases. of the greater part of those who have written upon the prices of commodities in ancient times. In their observations upon the prices of corn. It sometimes happened. in a certain quantity of corn. almost all rents were paid in kind. the value of silver was continually diminishing. The increase of security would naturally increase industry and improvement. would naturally increase with the increase of riches.Adam Smith the same as before. is in Scotland called the conversion price. It is natural to suppose. too. Through the greater part of Scotland this custom still continues with regard to poultry. from the time of the Romans. poultry. it is necessary. As the option is always in the landlord to take either the substance or the price. that the landlord would stipulate. however. The price at which the payment in kind was in this manner exchanged for a certain sum of money. and a greater number of rich people would require a greater quantity of plate and other ornaments of silver. partly by the observations which they had occasion to make upon the prices both of corn and of some other parts of the rude produce of land. and partly to the other of those two circumstances. the greater part of Europe was approaching towards a more settled from of government than it had enjoyed for several ages before. and in some places with regard to cattle. etc. many of them. It might probably have 165 . however. in ancient times. and have become more expensive in the working. that the conversion price should rather be below than above the average market price. In the end of the fifteenth and beginning of the sixteenth centuries. It has been the opinion. from the Conquest. or it may have been owing partly to the one. three different circumstances seem frequently to have misled them. In many places.

rather at what should happen to be the price of the fiars of each year. and much more convenient for the landlord. he does not think proper to make this acknowledgment till after transcribing this conversion price fifteen times. was the ordinary or average price of wheat at that time. But in the manuscripts from which all the different editions of the statutes. had not the institution of the public fiars put an end to it. and of all the different qualities of each. the price of bread was regulated according to the different prices of wheat. very naturally conclude that the middle price. The ancient statutes of assize seem to have begun always with determining what ought to be the price of bread and ale when the price of wheat and barley were at the lowest. or six shillings the quarter. that he had made this mistake. of the average price of all the different sorts of grain. As he wrote his book. and to have proceeded gradually to determine what it ought to be. the corn rent. Fleetwood acknowledges. and sometimes. contained the same quantity of silver as sixteen shillings of our present money. upon one occasion. the year at which he begins with it. Thus. of the 51st of Henry III. the copiers had never transcribed this regulation beyond the price of twelve shillings. with regard to corn. equal to about eighteen shillings of our present money. 166 . they have been misled by the slovenly manner in which some ancient statutes of assize had been sometimes transcribed by lazy copiers. from one shilling to twenty shillings the quarter of the money of those times. being misled by this faulty transcription. too. Secondly. were printed. saving in this manner their own labour. therefore. according to the actual market price in every different county. But in 1562. Several writers. to convert. in the assize of bread and ale. But the transcribers of those statutes seem frequently to have thought it sufficient to copy the regulation as far as the three or four first and lowest prices. But the writers who have collected the prices of corn in ancient times seem frequently to have mistaken what is called in Scotland the conversion price for the actual market price. according as the prices of those two sorts of grain should gradually rise above this lowest price. according to the judgment of an assize. I suppose. This institution rendered it sufficiently safe for the tenant. actually composed by the legislature. for a particular purpose. however. the year at which he ends with it.The Wealth of Nations continued to take place. This sum in 1423. that this was enough to show what proportion ought to be observed in all higher prices. as they call it. it contained no more than the same nominal sum does at present. preceding that of Mr Ruffhead. The price is eight shillings the quarter of wheat. These are annual valuations. and judging. perhaps. than at any certain fixed price.

} to conclude from this. whether higher or lower. were the ordinary prices.” In the composition of this statute. the price of ale is regulated according to every sixpence rise in the price of barley. That four shillings.” Thirdly. from tenpence to three shillings the Scotch boll. as its lowest price was below any thing that had ever been known in later times. Thus. however. it appears evidently. equal to fourteen pounds eight shillings of that of the present. Upon consulting the manuscript. equal to about half an English quarter. we may infer from the last words of the statute: “Et sic deinceps crescetur vel diminuetur per sex denarios. and that tenpence. there is a statute of assize. in which the price of bread is regulated according to all the different prices of wheat. that in those ancient times its highest price was fully as much above. however. In an ancient manuscript of the Regiam Majestatem. enacted nearly about the same time. equal to nineteen pounds four shillings of our present money. by the very low price at which wheat was sometimes sold in very ancient times.Adam Smith In the statute of Tumbrel and Pillory. they seem to have been misled too. The one is four pounds sixteen shillings of the money of those times.” The expression is very slovenly. They might have found. at the time when this assize is supposed to have been enacted. habendo respectum ad pretium bladi. and that these prices were only given as an example of the proportion which ought to be observed in all other prices. Three shillings Scotch. having respect to the price of corn. the other is six pounds eight shillings.” —“You shall judge of the remaining cases. The last words of the statute are “reliqua judicabis secundum praescripta. a shilling. the legislature itself seems to have been as negligent as the copiers were in the transcription of the other. but the meaning is plain enough. that all these prices are only set down as examples of the proportion which ought to be observed between the respective prices of wheat and bread. from two shillings. and to have imagined. Fleetwood gives us two prices of the quarter of wheat. was not considered as the highest price to which barley might frequently rise in those times. an old Scotch law book. were equal to about nine shillings sterling of our present money Mr Ruddiman seems {See his Preface to Anderson’s Diplomata Scotiae. that three shillings was the highest price to which wheat ever rose in those times. that as its lowest price was then much lower than in later times its ordinary price must likewise have been much lower. however. to four shillings the quarter. in 1270. according to what is above written. No price can be found in the end of the fif- 167 . or at most two shillings. “that the price of ale is in this manner to be increased or diminished according to every sixpence rise or fall in the price of barley.

seem to have been those chiefly which were remarkable for extraordinary dearness or cheapness. and 1601. and through the whole of the sixteenth century. to have believed.The Wealth of Nations teenth. the average price of each twelve years grows gradually lower and lower. At the end of each division. that. I have added. the prices of 1598. Bishop Fleetwood and Mr Dupré de St 168 . who governed England during the latter part of the fifteenth. during all this period. might be suffering all the horrors of a famine. in which the interruption of all commerce and communication hinders the plenty of one part of the country from relieving the scarcity of another. one district might be in plenty. the one might not be able to give the least assistance to the other. which he himself has collected. The reader will see. which approaches to the extravagance of these. and I do not pretend that any very certain conclusion can be drawn from them. certainly do not agree with this opinion. from the accounts of Eton college. 1599. with most other writers. 1600. and digested. The prices of corn. by having its crop destroyed. however. and with that which I have been endeavouring to explain. which Fleetwood has been able to collect. and that towards the end of the sixteenth century it begins to rise again. indeed. either by some accident of the seasons. the value of silver. while another. no baron was powerful enough to dare to disturb the public security. he will find the average price of the twelve years of which it consists. The reader will find at the end of this chapter all the prices of wheat which have been collected by Fleetwood. seems. It is the only addition which I have made. at no great distance. So far. They agree perfectly with that of Mr Dupré de St Maur. therefore. from 1202 to 1597. so that four years are wanting to make out the last twelve years. Under the vigorous administration of the Tudors. reduced to the money of the present times. or beginning of the sixteenth century. was continually diminishing. in consequence of its increasing abundance. and yet if the lands of some hostile lord were interposed between them. The price of corn. into seven divisions of twelve years each. or by the incursion of some neighbouring baron. according to the order of time. both inclusive. however. The prices. as they prove any thing at all. In that long period of time. though at all times liable to variation varies most in those turbulent and disorderly societies. Fleetwood has been able to collect the prices of no more than eighty years. they confirm the account which I have been endeavouring to give. Fleetwood himself. that from the beginning of the thirteenth till after the middle of the sixteenth century. too. In the disorderly state of England under the Plantagenets. who governed it from about the middle of the twelfth till towards the end of the fifteenth century.

and an insurance. it has been said. poultry. But this cheapness was not the effect of the high value of silver. should coincide so very exactly. but because such commodities would purchase or represent a much smaller quantity than in times of more opulence and improvement. we are told by Mr Byron. in those rude ages. is undoubtedly true. being a sort of manufacture. such commodities will represent. is the real measure of the value both of silver and of all other commodities. It is some what curious that. or set of commodities. That in those times of poverty and barbarism these were proportionably much cheaper than corn. Labour. such as cattle. etc. as they can be acquired with a very small quantity of labour. to very different quantities of labour. than the greater part of unmanufactured commodities. or but thinly inhabited. the prices of things in ancient times. I suppose. cattle. but that the real value of those commodities is very low. that the most judicious writers have inferred the great value of silver in those very ancient times. of a freight. it is meant. cattle. was. poultry. not many years ago. game of all kinds. but of which the far greater part is altogether uncultivated. In such a state of things. it must always be remembered. than in the country to which it is brought. in the country where it is produced. much dearer in proportion than the greater part of other commodities. as from that of some other parts of the rude produce of land.Adam Smith Maur are the two authors who seem to have collected. therefore. Corn. etc. the price of an ox chosen from a herd of three or four hundred. and not any particular commodity. however. Sixteen shillings sterling. It is not. poultry. however. with the greatest diligence and fidelity. though their opinions are so very different. in different states of improvement. is no proof that the real value of silver is there very high. game of all kinds. It was not because silver would in such times purchase or represent a greater quantity of labour. but of the low value of those commodities. the supply commonly exceeds the demand. In different states of society. so far as they relate to the price of corn at least. so she frequently produces them in much greater quantities than the consumption of the inhabitants requires. etc. so they will purchase or command but a very small quantity. was. The low money price for which they may be sold. their facts. so much from the low price of corn. In a country naturally fertile. at Buenos Ayres. Silver must certainly be cheaper in Spanish America than in Europe. 169 . we are told by Ulloa. One-and-twenty pence halfpenny sterling. as they are the spontaneous productions of Nature. at the expense of a long carriage both by land and by sea. or be equivalent. was the price of a good horse in the capital of Chili. game of all kinds. But in countries almost waste.

corn is the production of human industry. being more or less counterbalanced by the continual increasing price of cattle. or whatever else is the common and favourite vegetable food of the people. the labouring poor seldom eat butcher’s meat. The real value of gold and silver. besides. than by comparing it with any other commodity or set of commodities. than upon that of butcher’s meat. In France. equal quantities of labour. or any other part of the rude produce of land. the raising of equal quantities of corn in the same soil and climate. makes but an insignificant part of his subsistence. is. than equal quantities of any other part of the rude produce of land. and game no part of it. in every stage of improvement. Corn. therefore. except in the most thriving countries. Such slight observations. we can judge better of the real value of silver. therefore. depends much more upon the average money price of corn. in every civilized country. the land of every country produces a much greater quantity of vegetable than of animal food. to the average consumption. the real quantity of labour which they can purchase or command. more or less exactly. than upon that of butcher’s meat. or of any other part of the rude produce of land. But the average produce of every sort of industry is always suited. that equal quantities of corn will. Corn. constitutes. poultry makes a still smaller part of it. the subsistence of the labourer. and the labourer everywhere lives chiefly upon the wholesome food that is cheapest and most abundant. Upon all these accounts. the continual increase of the productive powers of labour. would not probably have misled so many intelligent 170 . in an improved state of cultivation. more nearly represent. we may rest assured. it has already been observed. besides. in every stage of improvement. or where labour is most highly rewarded. In every different stage of improvement. depends much more upon the quantity of corn which they can purchase or command. The money price of labour. at an average. or be equivalent to. in all the different stages of wealth and improvement.The Wealth of Nations In every state of society. Butcher’s meat. the principal part of the subsistence of the labourer. In all those different stages. will. by comparing it with corn. or. the price of nearly equal quantities. therefore. accordingly. therefore. In consequence of the extension of agriculture. where labour is somewhat better rewarded than in France. in every state of society. except upon holidays. a more accurate measure of value than any other commodity or set of commodities. what comes to the same thing. however. the principal instruments of agriculture. and even in Scotland. and other extraordinary occasions. the average supply to the average demand. upon the prices either of corn or of other commodities. require nearly equal quantities of labour.

The first of these causes is no doubt necessarily connected with the diminution of the value of the precious metals. from the increased abundance of the mines which supply it. as they can afford it. it is at all times naturally higher in a rich than in a poor country. The quantity of their coin will increase from necessity. either. from the increased produce of their annual labour. had they not been influenced at the same time by the popular notion. pictures. This notion. therefore. so gold and silver are not likely to be worse paid for. is the ultimate price which is paid for every thing. The quantity of the precious metals may increase in any country from two different causes. it is necessarily connected with some diminution of their value. it must be remembered. a greater quantity of the precious metals is brought to market. whatever be the state of the mines. When. But as statuaries and painters are not likely to be worse rewarded in times of wealth and prosperity. and the quantity of the necessaries and conveniencies of life for which they must be exchanged being the same as before. as the increase of the quantity of the precious metals in any country arises from the increased abundance of the mines. seems to be altogether groundless. the wealth of any country increases. as it naturally rises with the wealth of every country. that as the quantity of silver naturally increases in every country with the increase of wealth. and of every other luxury and curiosity. but the second is not. or from the same reason that the quantity of fine statues. than in times of poverty and depression.Adam Smith authors. so. will naturally purchase a greater and a greater quantity of plate. when the accidental discovery of more abundant mines does not keep it down. however. Labour. secondly. The price of gold and silver. like all other commodities. and in countries where labour is equally well rewarded. first. or. But gold and silver will naturally 171 . from the increased wealth of the people. and the best price is commonly given for every thing in the country which can best afford it. the quantity of their plate from vanity and ostentation. equal quantities of the metals must be exchanged for smaller quantities of commodities. when the annual produce of its labour becomes gradually greater and greater. as they have more commodities to give for it. naturally seek the market where the best price is given for them. a greater quantity of coin becomes necessary in order to circulate a greater quantity of commodities: and the people. so its value diminishes as its quantity increases. is likely to increase among them. So far. Gold and silver. When more abundant mines are discovered. on the contrary. the money price of labour will be in proportion to that of the subsistence of the labourer.

The money price of labour is lower in Scotland than in England. it cannot commonly be sold higher there than the Scotch corn which comes to market in competition with it. Gold and silver. In great towns. is naturally regulated. the greater part of Europe being in an improving state. Rice in China is much cheaper than wheat is any where in Europe. and yet in proportion to its quality. because in this case the transportation will be easy. The difference between the money price of labour in China and in Europe. the difference may be very great. is still greater than that between the money price of subsistence. while China seems to be standing still. If the two countries are at a great distance. the poorest of all nations. it is certainly somewhat dearer. but by their advancing. or to the quantity and goodness of the flour or meal which can be made from it. advances much more slowly than England. corn is always dearer than in remote parts of the coun- 172 . and the rarity of it from England. English corn. because the real recompence of labour is higher in Europe than in China. but. or declining condition. so they are naturally of the least value among the poorest nations. China is a much richer country than any part of Europe. it must be remembered. therefore. yet it may be difficult to transport them in such quantities as to bring their price nearly to a level in both. not by their actual wealth or poverty. the difference will be smaller. in proportion to its quality. Among savages. because the real recompence of labour is much lower: Scotland. as they are naturally of the greatest value among the richest. The proportion between the real recompence of labour in different countries. though the metals naturally fly from the worse to the better market. because. and every commodity must commonly be somewhat dearer in the country to which it is brought than in that from which it comes. in a country which abounds with subsistence. The frequency of emigration from Scotland. If the countries are near. Scotland receives almost every year very large supplies from England. must be dearer in Scotland than in England. though advancing to greater wealth. and the difference between the price of subsistence in China and in Europe is very great. and may sometimes be scarce perceptible.The Wealth of Nations exchange for a greater quantity of subsistence in a rich than in a poor country. sufficiently prove that the demand for labour is very different in the two countries. but the difference between the money price of corn in those two countries is much smaller. In proportion to the quantity or measure. they are scarce of any value. than in one which is but indifferently supplied with it. stationary. England is a much richer country than Scotland. Scotch corn generally appears to be a good deal cheaper than English. and is but just perceptible.

which must necessarily accompany this declension. either as its cause or as its effect. Second Period. therefore. and in all the other instruments and means of carriage and commerce: but they are poor in corn. Corn is a necessary. will rise to the price of a famine. This. as it must be brought to them from distant countries. It does not cost less labour to bring silver to Amsterdam than to Dantzic. either in Great Britain. which. while the number of their inhabitants remains the same. When we are in want of necessaries. In some very rich and commercial countries. however. but it costs a great deal more to bring corn. instead of sinking with that diminution in the quantity of their silver. Whatever. of which the value. It is otherwise with necessaries. The real cost of silver must be nearly the same in both places. during the period between the middle of the fourteenth and that of the sixteenth century. which. but of the real dearness of corn. the quantity of labour which they can purchase or command. or of other commodities. had. or in my other part of Europe.Adam Smith try. arose from the increase of wealth and improvement. by an addition to its price. so it sinks in times of poverty and distress. during this period. silver is only a superfluity. Their real price. rises in times of poverty and distress. corn is dear for the same reason that it is dear in great towns. and sinks in times of opulence and prosperity. They do not produce enough to maintain their inhabitants. not of the real cheapness of silver. is the effect. for they could not otherwise be times of opulence and prosperity. diminish their power of supplying themselves from distant countries. it could have no tendency to diminish their value. pay for the carriage from those countries. they had still less reason to infer it from any supposed increase of wealth and improvement. no reason to infer the diminution of the value of silver from any observations which they had made upon the prices either of corn. in shipping. and the price of corn. but it costs a great deal more to bring corn. as it rises in times of opulence and prosperity. therefore. but that of corn must be very different. — But how various soever may have been the opinions 173 . we must part with all superfluities. in every sort of machinery which can facilitate and abridge labour. It does not cost less labour to bring silver to the great town than to the remote parts of the country. which are always times of great abundance. They are rich in the industry and skill of their artificers and manufacturers. Diminish the real opulence either of Holland or of the territory of Genoa. must. may have been the increase in the quantity of the precious metals. If those who have collected the prices of things in ancient times. such as Holland and the territory of Genoa.

and deducting a ninth. during this period. both inclusive. 174 . it seems. Third Period. and. Silver sunk in its real value.. From 1621 to 1636. to have been £ 2:1:6 9/13. so far exceeded that of the demand. or about 1636. the average price of the quarter of nine bushels of the best wheat. at the same market. or 4s. in reducing the value of silver. From about 1570 to about 1640. from which. or about seven ounces and two-thirds of an ounce of silver. it is to be observed... or 4s. or about thirty and forty shillings of our present money. at Windsor market. The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver. came to be sold for six and eight ounces of silver the quarter. and corn rose in its nominal price. the price of the middle wheat comes out to have been about £ 1:12:8 8/9. the price of the quarter of eight bushels comes out to have been £ 1:16:10 2/3. or about six ounces and one-third of an ounce of silver. does not seem to have had any very sensible effect upon the prices of things in England till after 1570. and there never has been any dispute. from the accounts of Eton college. neglecting the fraction. The greater part of Europe was. neglecting likewise the fraction. either about the fact. but the increase of the supply had. It is accounted for. From 1595 to 1620. for the difference between the price of the best wheat and that of the middle wheat. or about ten shillings of our present money. appears. And from this sum.The Wealth of Nations of the learned concerning the progress of the value of silver during the first period. during a period of about seventy years. instead of being commonly sold for about two ounces of silver the quarter. to have been £ 2:10s. that the value of that metal sunk considerably. The discovery of the mines of America. accordingly. the effect of the discovery of the mines of America. making the like deductions as in the foregoing case. or would exchange for a smaller quantity of labour than before. From which sum. or about the cause of it. and the demand for silver must consequently have been increasing. though even the mines of Potosi had been discovered more than twenty years before. 7 1/3d. they are unanimous concerning it during the second. the variation in the proportion between the value of silver and that of corn held a quite opposite course. both inclusive. the average price of the same measure of the best wheat. and deducting a ninth. in the same manner by every body. —Between 1630 and 1640. from the same accounts. advancing in industry and improvement. the average price of the quarter of eight bushels of middle wheat comes out to have been £ 1:19:6. in proportion to that of corn. appears. 1 1/9d.

in a long course of years. the quarter of nine bushels. which. must have raised the price of corn much above what the course of the seasons would otherwise have occasioned. its only effect must have been. that between 1688 and 1700. however. which. and it had probably begun to do so. accordingly. a greater cheapness of corn in the home market. The excess of those two years above £ 2:10s. are by no means the only high prices which seem to have been occasioned by the civil wars. though the highest. The scarcity 175 . and. at Windsor market. both inclusive. by encouraging the exportation of the surplus produce of every year. in 1649. to have been £ 4. by discouraging tillage and interrupting commerce. dearer than it had been during the sixteen years before.. from the same accounts. will much more than account for this very small enhancement of price. divided among the sixty four last years of the last century. at all the different markets in the kingdom. there happened two events. to have been £ 2:11:0 1/3. the price of the best wheat. During this short period. But. and the value of that metal seems never to have sunk lower in proportion to that of corn than it was about that time. it had not time to produce any such effect. granted in 1688. have occasioned a greater abundance. How far the bounty could produce this effect at any time I shall examine hereafter: I shall only observe at present. without supposing any further reduction in the value of silver. by encouraging tillage. From 1637 to 1700. therefore. which must have produced a much greater scarcity of corn than what the course of the season is would otherwise have occasioned.Adam Smith appears to have been completed. and thereby hindering the abundance of one year from compensating the scarcity of another. consequently. which is only 1s. and which. The second event was the bounty upon the exportation of corn. to have been £ 4:5s. (the average price of the sixteen years preceding 1637 is £ 3:5s. It seems to have risen somewhat in the course of the present century. it has been thought by many people. even some time before the end of the last. The bounty. appears. 0 1/3d. may. In 1648. in the course of these sixty-four years. more or less. being the sixty-four last years of the last century the average price of the quarter of nine bushels of the best wheat. to raise the price in the home market.) These. will alone very nearly account for that small enhancement of price which seems to have taken place in them. and.. It must have had this effect. appears. from the same accounts. at Windsor market. but particularly at those in the neighbourhood of London. The first of these events was the civil war. which require to be supplied from the greatest distance. than what would otherwise have taken place there.

immediately after the great recoinage in King William’s time. as by that which. But in the beginning of the present century. is necessarily higher when the coin is much debased by clipping and wearing. must have been somewhat enhanced by the bounty. But though very much defaced. not so much by the quantity of silver. There was a third event which occurred in the course of the same period. This event was the great debasement of the silver coin. This nominal sum. below that value. In the course of the present century. therefore. the coin. its value has been kept up by that of the gold coin. below its standard value. as we may learn from Mr Lowndes. which is but fivepence above the mint price. on the contrary. the silver coin has not at any time been more below its standard weight than it is at present. But in 1695. therefore. though no doubt principally owing to the badness of the seasons. which. it was less so than the silver. at an average. the value of the silver coin was not kept up by the gold coin. for which it is exchanged. below its standard value. and. and which.} which is fifteen pence above the mint price. ought to be contained in it. extending through a considerable part of Europe. gold and silver together. it is found by experience. This evil had begun in the reign of Charles II. too. {Lowndes’s Essay on the Silver Coin. than when near to its standard value. nor. the further exportation of corn was prohibited for nine months. and had gone on continually increasing till 1695. when compared with silver bullion. according to the standard. though it could not occasion any scarcity of corn. In 1695. Even before the late recoinage of the gold. on the contrary. from 1693 to 1699. before the late recoinage. But the nominal sum which constitutes the market price of every commodity is necessarily regulated. actually is contained in it. at which time. perhaps. a guinea then commonly exchanging for thirty shillings of the worn and clipt silver. by clipping and wearing. In 1695. was not supposed to be more than eight per cent. the greater part of the current silver coin must have been still nearer to its standard weight than it is at present. For though. the current silver coin was. any augmentation in the real quantity of silver which was usually paid for it. both inclusive.The Wealth of Nations which prevailed in England. accordingly. must necessarily have occasioned some augmentation in the nominal sum. that is. the gold coin was a good deal defaced too. the common price of silver bullion was six shillings and fivepence an ounce. 68. In the course of the present century. there has been no great 176 . therefore. Before the late recoinage of the gold. it had been supposed to be near five-and-twenty per cent. near five-and-twenty per cent. the price of silver bullion was seldom higher than five shillings and sevenpence an ounce. In 1699.

which could either discourage tillage. Mr King had judged eight- 177 . In the sixty-four years of the present century. In 1688. as well as to raise it the other. the bounty has had full time to produce all the good effects commonly imputed to it to encourage tillage. Mr Gregory King. was £ 1:5:2. As a contract of this kind saves the farmer the expense and trouble of marketing. and thereby to increase the quantity of corn in the home market. It is by many people supposed to have done more. which is about ten shillings and sixpence. accordingly. a man famous for his knowledge in matters of this kind. seems to have risen somewhat in proportion to that of corn during the course of the present century. as in the course of this century. The grower’s price I understand to be the same with what is sometimes called the contract price. and about one shilling cheaper than it had been in the twenty-six years preceding 1620. during these sixty-four first years of the present century. such as a civil war. upon the principles of a system which I shall explain and examine hereafter. estimated the average price of wheat. In 1687. at Windsor market. at Windsor market. when the discovery of the abundant mines of America may be supposed to have produced its full effect. comes out to have been about thirty-two shillings the quarter of eight bushels. before that discovery can well be supposed to have produced its full effect. therefore. appears. the average price of middle wheat.Adam Smith public calamity. And though the bounty which has taken place through the greater part of this century. be supposed to have done something to lower the price of that commodity the one way. 6d. to be to the grower 3s. and it had probably begun to do so even some time before the end of the last. in years of moderate plenty. by the accounts of Eton college. or more than five-and-twenty percent. the average price of the quarter of nine bushels of the best wheat. it may. the price of the quarter of nine bushels of the best wheat. must always raise the price of corn somewhat higher than it otherwise would be in the actual state of tillage. to have been £ 2:0:6 10/32. or the price at which a farmer contracts for a certain number of years to deliver a certain quantity of corn to a dealer. and about nine shillings and sixpence cheaper than it had been during the sixteen years preceding 1636. the contract price is generally lower than what is supposed to be the average market price. the lowest price at which it had ever been from 1595. According to this account. yet. or interrupt the interior commerce of the country. The value of silver. or eight-and-twenty shillings the quarter. the bushel. cheaper than it had been during the sixty-four last years of the last century.

at that very time. To encourage tillage. soliciting the first establishment of the annual land-tax. It was in no condition to refuse anything to the country gentlemen. If his calculations deserve any part of the reputation which they have obtained very universally. therefore. by keeping up the price of corn. The country gentlemen. necessarily raises the price of corn above what it otherwise would be in those years. the average price has been lower than during the sixty-four last years of the last century. in proportion to that of corn. Before the scarcity occasioned by the late extraordinary course of bad seasons. it must frequently hinder the plenty of one year from compensating the scarcity of another. had probably risen somewhat before the end of the last century. indeed. who then composed a still greater proportion of the legislature than they do at present. could not at that time be expected. had it not been for this operation of the bounty. twenty shillings. or 5-7ths dearer than Mr King had. and it seems to have continued to do so during the course of the greater part of the present. the bounty has generally been suspended. have been much more so. without some such expedient as the bounty. from whom it was. the bounty. had felt that the money price of corn was falling. The value of silver. I have been assured. therefore. therefore. It was to take place. 178 . By the extraordinary exportation which it occasions in years of plenty. it must. was the avowed end of the institution. It must. except in years of extraordinary scarcity. have had some effect upon the prices of many of those years. therefore. and II. the ordinary contract price in all common years. estimated the grower’s price to be in times of moderate plenty. the bounty raises the price of corn above what it naturally would be in the actual state of tillage. that is. Both in years of plenty and in years of scarcity. But the government of King William was not then fully settled. even in the most plentiful years. eight-and-forty shillings the quarter was a price which. The bounty was an expedient to raise it artificially to the high price at which it had frequently been sold in the times of Charles I. If during the sixty-four first years of the present century.The Wealth of Nations and-twenty shillings the quarter to be at that time the ordinary contract price in years of moderate plenty. by occasioning an extraordinary exportation. In 1688 was granted the parliamentary bounty upon the exportation of corn. In plentiful years. In years of great scarcity. it was. in the same state of tillage. till wheat was so high as fortyeight shillings the quarter. though the necessary operation of the bounty must have hindered that rise from being so sensible as it otherwise would have been in the actual state of tillage. however. in that very year.

and laborious collectors of the prices of corn. though not a very common event. without the bounty. should. when I come to treat particularly of bounties. will be at no loss to recollect several 179 . have been unfavourable through the greater part of Europe. notwithstanding this prohibition. I shall only observe at present. after the discovery of the abundant mines of America. corn rose to three and four times its former money price. in the same manner. it has already been observed. But in France. perhaps. however. When. impute this change. that this rise in the value of silver.Adam Smith But. and ought. and it is somewhat difficult to suppose. What may have been the effects of this institution upon the agriculture of the country. that nearly the same diminution of price which took place in one country. in dear years. but to some rise in the real value of silver in the European market. but as a transitory and occasional event. which. I shall endeavour to explain hereafter. in another. but to a fall in the real value of silver. The high price of corn during these ten or twelve years past. not as a permanent. to consider this variation in the average money price of corn as the effect rather of some gradual rise in the real value of silver in the European market. be owing to the extraordinary encouragement given to exportation. in proportion to that of corn. during the sixty-four first years of the present century. is. the exportation of grain was by law prohibited. This high price of corn. and nearly in the same proportion. diligent. used to be supplied from that market. a more accurate measure of value than either silver or. till 1764. to be regarded. the average money price of corn has fallen somewhat below what it had been during the greater part of the last century. we should. has occasioned a suspicion that the real value of silver still continues to fall in the European market. and whoever has inquired much into the history of the prices of corn in former times. for these ten or twelve years past. perhaps. any other commodity. It would be more proper. not to any rise in the real value of corn. is by no means a singular one. and the author of the Essay on the Police of Grain. at distant periods of time. The seasons. If. by three very faithful. Mr Dupré de St Maur. Mr Messance. too. It has been observed to have taken place in France during the same period. not to any fall in the real value of corn. seems evidently to have been the effect of the extraordinary unfavourableness of the seasons. So long a course of bad seasons. Corn. it may be said the state of tillage would not have been the same. this change was universally ascribed. has not been peculiar to England. indeed. than of any fall in the real average value of corn. therefore. therefore. and the disorders of Poland have very much increased the scarcity in all those countries.

The Wealth of Nations other examples of the same kind. the general average of the sixty-four first years of the century. for example. Ten years of extraordinary scarcity.962:17:4 1/2. at that time prime minister. From 1741 to 1750. it appears from the custom-house books. however. which is nearly 6s. to have been. besides. that. In that single year. was only £ 1:13:9 4/5. the quantity of all sorts of grain exported. from 1741 to 1750. a very extraordinary sum had been paid as bounty for the exportation of corn. In 1749. both inclusive. however. amounted to no less than 8. may very well be set in opposition to its high price during these last eight or ten years. the bounty paid amounted to no less than £ 324.029. The low price of corn. The change has evidently been too sudden to be ascribed to any change in the value of silver. we ought probably to impute it to the bounty. observed to the house of commons. during these ten years. one bushel.156 quarters. below the average price of the sixty-four first years of the present century. and in the following year he might have had still better. too. the accidental variations of the seasons. 180 . Mr Pelham. of 1759. The average price of the quarter of eight bushels of middle wheat comes out. Between 1741 and 1750. notwithstanding the intervention of one or two dear years. of which the average is likewise below. are not more wonderful than ten years of extraordinary plenty. At the end of the accounts annexed to this chapter the reader will find the particular account of those ten years separated from the rest. As the former were a good deal below the general average of the century. The suddenness of the effect can be accounted for only by a cause which can operate suddenly. He will find there.3d. only £ 1:6:8. the particular account of the preceding ten years. according to this account. the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. accordingly. it appears from the accounts of Eton college. so the latter have been a good deal above it. These twenty years preceding 1750 may very well be set in opposition to the twenty preceding 1770.514. {See Tracts on the Corn Trade. He had good reason to make this observation. at Windsor market.} It is unnecessary to observe how much this forced exportation must have raised the price of corn above what it otherwise would have been in the home market. The bounty paid for this amounted to £ 1. notwithstanding the intervention of one or two cheap ones. though not so much below. During these ten years.176:10:6. which is always slow and gradual. The year 1740. the average price of the quarter of nine bushels of the best wheat. was a year of extraordinary scarcity. If the former have not been as much below the general average as the latter have been above it. Tract 3. for the three years preceding.

would soon find that the whole annual importation could not be disposed of at this high price. are now as low as they can well be. In the course of ninety years. according to their natural rates. Both in the last century and in the present. since the middle of the last century. or not much below its former price. and much above their natural rate. one-and-forty years before 1545. or to what was just sufficient to pay. arising from the great. it has already been observed. risen during the course of the present century. the date of the discovery of the mines of Potosi. The tax of the king of Spain was reduced to a fifth of the registered silver in 1504 {Solorzano. vol. Silver would gradually exchange for a smaller and a smaller quantity of goods. the day wages of common labour are there said to have been pretty uniformly about the twentieth part of the average price of the septier of wheat. which must be paid in order to bring it from the mine to the market. not of any diminution of the value of silver in the general market of Europe. silver would continue to sell at its former. it has already been shewn. the profits of the stock. eats up. the real recompence of labour. Those who imported that metal into Europe.Adam Smith The money price of labour in Great Britain has. amounting to a tenth of the gross produce. at which late it still continues. In France. however. In Great Britain. it seems. however. not so much of any diminution in the value of silver in the European market. this. This tax was originally a half. and it seems to be universally acknowledged that these profits. In the greater part of the silver mines of Peru. indeed. a measure which contains a little more than four Winchester bushels. seems to be the effect. For some time after the first discovery of America. the money price of labour has. after replacing the stock of the undertaker of the work. The rise in its money price seems to have been the effect. then to a fifth. which were once very high. has increased considerably during the course of the present century. In the greater part of the silver mines of Peru. in the particular market of Great Britain. ii. Its price would sink gradually lower and lower. but of a rise in the real price of labour. owing to the peculiarly happy circumstances of the country. a country not altogether so prosperous. and at last to a tenth. consistently with carrying on the works. and the rent of the land. 181 . is all that remains. been observed to sink gradually with the average money price of corn. This. and almost universal prosperity of the country. as of an increase in the demand for labour in Great Britain. the tax of the king of Spain. together with its ordinary profits. it soon afterwards fell to a third. till it fell to its natural price. the wages of the labour. the whole rent of the land.}. the real quantities of the necessaries and conveniencies of life which are given to the labourer. The profits of mining would for some time be very great.

as in 1736. perhaps. 182 . the most fertile in all America. is but a very small part of Europe. The fall of Italy preceded the conquest of Peru. The increasing produce of the agriculture and manufactures of Europe must necessarily have required a gradual increase in the quantity of silver coin to circulate it. and the increasing number of wealthy individuals must have required the like increase in the quantity of their plate and other ornaments of silver. had time sufficient to produce their full effect. and the declension of Spain is not. but that every thing was wanting in Spain. have all advanced considerably. First. however. America is itself a new market. is probably the cause which has prevented this from happening. who had travelled so frequently through both countries.The Wealth of Nations or before 1636. The gradual increase of the demand for silver. Since that time it seems rather to have recovered a little. to its natural price. France. even in comparison with France. not only to one-tenth. perhaps. and population. which has been so much improved since that time. and Germany. the market for the produce of its silver mines has been growing gradually more and more extensive. the greater part of Europe has been much improved. and as its advances in agriculture. both in agriculture and in manufactures. England. it can continue to be sold for any considerable time together. It was the well known remark of the emperor Charles V. and it might have become necessary either to reduce the tax upon it. indeed. while it continued to pay this tax to the king of Spain. The price of silver in the European market might. but to one twentieth. Italy seems not to have gone backwards. are supposed to have gone backwards. in the same manner as that upon gold. Secondly. of which there is no monopoly. In the beginning of the sixteenth century. the market of Europe has become gradually more and more extensive. industry. Spain and Portugal. Holland. but has perhaps even raised it somewhat higher than it was about the middle of the last century. or to give up working the greater part of the American mines which are now wrought. Since the first discovery of America. or to the lowest price at which. so great as is commonly imagined. or to reduce the value of silver in the European market as low as it could well fall. Ninety years is time sufficient to reduce any commodity. for the produce of its own silver mines. these mines. Denmark. or the gradual enlargement of the market for the produce of the silver mines of America. that every thing abounded in France. Spain was a very poor country. while it pays a particular tax. Portugal. even Sweden. and Russia. Since the discovery of America. have fallen still lower. and which has not only kept up the value of silver in the European market.

and instruments of agriculture. the great abundance and cheapness of land. were obliged to build their own houses. it seems. Frezier. though they made use of gold and silver as ornaments. of the Spanish and Portuguese colonies. improvement. The greater part. shoes. The English colonies are altogether a new market. and commerce. is. Those who cultivated the ground. which at the same time are represented as very populous and well cultivated. with any degree of sober judgment. its demand must increase much more rapidly. though they scarce ever exceeded five hundred men. found almost everywhere great difficulty in procuring subsistence. The few artificers among them are said to have been all maintained by the sovereign. and population. in arts. All the ancient arts of Mexico and Peru have never furnished one single manufacture to Europe. than that of the English colonies. will evidently discern that. inhabited by savage nations. a circumstance common to all new colonies. who had neither arts nor agriculture. After all the wonderful tales which have been published concerning the splendid state of those countries in ancient times. requires a continual augmenting supply of silver through a great continent where there never was any demand before. They seem. the Yucatan. the history of their first discovery and conquest. Even Mexico and Peru. The Spanish armies. Paraguay. had no coined money of any kind. though they cannot be considered as altogether new markets. too. however. their inhabitants were much more ignorant than the Tartars of the Ukraine are at present. and partly for plate. and the priests. agriculture. the nobles. Their whole commerce was carried on by barter. were. to make their own household furniture. the more civilized nation of the two. and there was accordingly scarce any division of labour among them. to be advancing in all those much more rapidly than any country in Europe. represents Lima as containing between twenty-five 183 . New Granada. who visited Peru in 1713. whoever reads. A considerable degree of both has now been introduced into all of them. The Spanish colonies are under a government in many respects less favourable to agriculture. sufficiently demonstrate that the story of this populousness and high cultivation is in a great measure fabulous. and the Brazils. their own clothes. in countries. and frequently did not amount to half that number. Even the Peruvians. which. partly for coin. before discovered by the Europeans. are altogether new markets. and were probably their servants or slaves. are certainly much more extensive ones than they ever were before. so great an advantage. In a fertile soil and happy climate. as to compensate many defects in civil government. too. The famines which they are said to have occasioned almost wherever they went.Adam Smith are much more rapid than those of the most thriving countries in Europe.

who resided in the same country between 1740 and 1746. In the last years of that century. for the use of their own countrymen. which is carried on by means of the Acapulco ships. was a drug very little used in Europe. those two nations divided the most considerable part of the East India trade between them. the Dutch began to encroach upon this monopoly. represents it as containing more than fifty thousand. as to afford a gradual increase of employment to them all. Ulloa. the Portuguese were the only European nation who carried on any regular trade to the East Indies. from the time of the first discovery of those mines. has been continually augmenting. amounts to more than a million and a half a year. and in a few years expelled them from their principal settlements in India. has been almost continually augmenting. and a market which. a great deal more being constantly smuggled into the country from the ports of Holland. the value of the tea annually imported by the English East India company. Even the Muscovites now trade regularly with China. At present. by a sort of caravans which go over land through Siberia and Tartary to Pekin. too. During the greater part of the last century. Tea. 184 . The consumption of the porcelain of China. the East Indies is another market for the produce of the silver mines of America. and the indirect intercourse by the way of Europe has been augmenting in a still greater proportion. the trade of the Dutch continually augmenting in a still greater proportion than that of the Portuguese declined. Since that time. The increasing consumptions of East India goods in Europe is. but it has been greatly augmented in the course of the present. has been continually taking off a greater and a greater quantity of silver. Thirdly. and from the coast of France. and as there seems to be no reason to doubt of the good information of either. of which the demand must increase much more rapidly than that of the most thriving country in Europe. so great. from Gottenburgh in Sweden. therefore. During the sixteenth century. is a new market for the produce of its own silver mines. and even this is not enough. the direct trade between America and the East Indies.The Wealth of Nations and twenty-eight thousand inhabitants. it marks an increase which is scarce inferior to that of the English colonies. for example. America. The East India trade of the Swedes and Danes began in the course of the present century. The difference in their accounts of the populousness of several other principal towns of Chili and Peru is nearly the same. as long as the French East India company was in prosperity. if we except that of the French. before the middle of the last century. The East India trade of all these nations. it seems. which the last war had well nigh annihilated. The English and French carried on some trade with India in the last century.

The tonnage. the rich. had been as abundant as those which supplied the European. was not. Such countries are accordingly much more populous. the value of the precious metals. a great deal lower in the one country than in the other. having a greater superabundance of food to dispose of beyond what they themselves can consume. each of them more plentiful than any common crop of corn. by all accounts. therefore. and those which supplied it with the precious stones a good deal more so. was much higher than in Europe. such as the precious metals and the precious stones. would be somewhat lower. is lower both in China and Indostan. the first of all necessaries. and it still continues to be so. particularly in China and Indostan. upon account both 185 . of all the European shipping employed in the East India trade. than it is through the greater part of Europe. The same superabundance of food. the great objects of the competition of the rich. therefore. than the mines which supplied the European. But in the East Indies. too. of the piece goods of Bengal. But the mines which supplied the Indian market with the precious metals seem to have been a good deal less abundant. The retinue of a grandee in China or Indostan accordingly is. Though the mines. The precious metals. when the Europeans first began to trade to those countries. perhaps. have the means of purchasing a much greater quantity of the labour of other people. such commodities would naturally exchange for a greater quantity of food in India than in Europe. much more numerous and splendid than that of the richest subjects in Europe. the two great markets of India. In them. would naturally exchange in India for a somewhat greater quantity of the precious stones. the real quantity of the necessaries of life which is given to the labourer. sometimes three crops in the year. of which they have the disposal. and of innumerable other articles. The wages of the labourer will there purchase a smaller quantity of food: and as the money price of food is much lower in India than in Europe. at any one time during the last century. and that of food. enables them to give a greater quantity of it for all those singular and rare productions which nature furnishes but in very small quantities. accordingly. the abundance of food must be much greater than in any corn country of equal extent. The money price of diamonds. much greater than that of the English East India company before the late reduction of their shipping. the greatest of all superfluities. has increased very nearly in a like proportion.Adam Smith of the spiceries of the Moluccas. But the real price of labour. which supplied the Indian market. and for a much greater quantity of food than in Europe. which generally yield two. In rice countries. the money price of labour is there lower upon a double account. it has already been observed.

in this manner. and the greater part of the other markets of India. it requires from fourteen to fifteen ounces. in proportion to the quantity of labour and commodities which it costs in Europe. or at most as twelve to one. Through the greater part of Europe. Upon all these accounts. silver has generally been one of the most valuable articles. In order to supply so very widely extended a market. The silver of the new continent seems. or which. and the greater part of the other markets of India. and in manufacturing art and industry. that those distant parts of the world are connected with one another. will purchase or command a greater quantity of labour and commodities in India. and afterwards the complete manufacture to market. or at most twelve ounces of silver. in Europe. will naturally be much lower in those great empires than it is anywhere in Europe. and still continues to be. extremely advantageous to carry from Europe to India. There is scarce any commodity which brings a better price there.The Wealth of Nations of the small quantity of food which it will purchase. because in China. But in countries of equal art and industry. It costs more labour. In the cargoes. to carry silver thither than gold. It is the most valuable article in the Acapulco ships which sail to Manilla. China and Indostan. but to repair that continual waste and consumption of silver which takes place in all countries where that metal is used. the quantity of silver annually brought from the mines must not only be sufficient to support that continued increase. The money price of the greater part of manufactures. ten. 186 . which is required in all thriving countries. and thereby reduce still lower both the real and the nominal price of the greater part of their manufactures. seem not to be much inferior to any part of Europe. will purchase an ounce of gold. and therefore more money. It is more advantageous. the precious metals are a commodity which it always has been. too. the expense of land-carriage increases very much both the real and nominal price of most manufactures. the extent and variety of inland navigations save the greater part of this labour. In China. therefore. and consequently of this money. to bring first the materials. the proportion between fine silver and fine gold is but as ten. in a great measure. and it is by means of it. In China and Indostan. both of coin and of plate. whereas in Europe it is as fourteen or fifteen to one. the money price of the greater part of manufactures will be in proportion to the money price of labour. too. to be one of the principal commodities by which the commerce between the two extremities of the old one is carried on. and of the low price of that food. though inferior. therefore. of the greater part of European ships which sail to India.

the gilding of books. amounts to £ 2. viz. Both together amount to £ 5. furniture. he assures us. and of the particular quantity of each metal. besides. both inclusive. In the manufactures of Birmingham alone. from 1748 to 1753. to be found in few copies.107 pounds weight. amounts to £ 3. which. According to Mr Meggens {Postscript to the Universal Merchant p. viz. sterling. too. therefore. We may from thence form some notion how great must be the annual consumption in all the different parts of the world.413. is very sensible.101.746. according to the best accounts. is said to amount to more than fifty thousand pounds sterling. according to the register. both inclusive. 187 . sterling. The consumption of those metals in some particular manufactures.446:14s. This postscript was not printed till 1756. In the greater part of the governments of Asia. as it is much more rapid. and in plate both by wearing and cleaning. and in commodities of which the use is so very widely extended. is.940 pounds weight. at sixty two shillings the pound troy. The account of what was imported under register. too. He gives us the detail of the particular places from which the gold and silver were brought. to about six millions sterling a-year. must occasion the loss of a still greater quantity. at an average of six years. it corrects several errors in the book.}.Adam Smith The continual consumption of the precious metals in coin by wearing. The quantity of gold and silver imported at both Cadiz and Lisbon (including not only what comes under register. The gold. A considerable quantity. is exact. however. at an average of seven years. amounted in silver to 1. and into Portugal.431:10s. either in manufactures of the same kind with those of Birmingham. much more sensible. three years after the publication of the book. sterling. from 1747 to 1753. the quantity of gold and silver annually employed in gilding and plating. embroideries. or in laces. though it may not perhaps be greater upon the whole than this gradual consumption. The postscript is. the annual importation of the precious metals into Spain. for the quantity of each metal which. would alone require a very great annual supply. each of them afforded. must be annually lost in transporting those metals from one place to another both by sea and by land.333. but what may be supposed to be smuggled) amounts. gold and silver stuffs. of which the knowledge frequently dies with the person who makes the concealment. the almost universal custom of concealing treasures in the bowels of the earth. 15 and 16. and thereby disqualified from ever afterwards appearing in the shape of those metals. etc. which has never had a second edition.878:4s. He makes an allowance. The silver. and in gold to 49. at forty-four guineas and a half the pound troy.

which it seems. According to this account. some part is employed in a contraband trade. I have been assured. however. agree in making this whole annual importation amount. at an average of eleven years. of the particular places from which the gold and silver were brought. at the rate of fifty thousand pounds a-year. amounted to 13. both inclusive. is annually imported into Cadiz and Lisbon. is one-fifth of the standard metal. He informs us. too. the piastre. may have amounted to seventeen millions of piastres. The great experience of this judicious merchant renders his opinion of considerable weight. though manuscript accounts. the whole annual importation of the precious metals into both Spain and Portugal. and the far greater part of their produce. indeed.185 3/5 piastres of ten reals. and some part. Some part is sent annually by the Acapulco ships to Manilla. The 188 . sometimes a little more. But the consumption of Birmingham alone. it is likewise acknowledged. is equal to the hundred-and-twentieth part of this annual importation. The produce of all the other mines which are known is insignificant. or forty-five millions of French livres. in comparison with their’s. are. we may safely. from 1754 to 1764.825. On account of what may have been smuggled. are by no means the only gold and silver mines in the world. Several other very well authenticated. or £ 250. equal to about twenty millions sterling. sometimes a little less. author of the Philosophical and Political History of the Establishment of the Europeans in the two Indies. therefore. The mines of America. The annual importation of the precious metals into Cadiz and Lisbon. add to this sum an eighth more.000 sterling.075. remains in the country. that if we were to judge of the quantity of gold annually imported from the Brazils to Lisbon. and sometimes well-informed. he supposes. viz. too. is equal to £ 3. by far the most abundant. we might value it at eighteen millions of cruzadoes. may have been smuggled. no doubt. which the Spanish colonies carry on with those of other European nations. at 4s.250. at the rate of six millions a-year. so that the whole will amount to £ 2. According to the eloquent. besides. He gives the detail.000 sterling.000 sterling. it is acknowledged. at an average. and of the particular quantities of each metal. each of them afforded. by the amount of the tax paid to the king of Portugal. to about six millions sterling.000 sterling.The Wealth of Nations he supposes. however.984. 6d. however. They. mounts to about £ 6. he says. which according to the register. which. the whole annual importation. the annual importation of registered gold and silver into Spain. On account of what may have been smuggled. is not equal to the whole annual produce of the mines of America.

The price of all metals. however. must supply the consumption of the world. long before the end of this year. consumed. imagine that those coarse metals are likely to multiply beyond the demand. in a great variety of ways. and. The durableness of metals is the foundation of this extraordinary steadiness of price. will be very little affected by any accidental difference in the produce of the iron mines of those two years. Though the produce of the greater part of metallic mines. too. and the proportion between the masses of gold will be still less affected by any such difference in the produce of the gold mines. But the proportion between the different masses of iron which may be in use in two different years. which. therefore. as they are of less value. varies less from year to year than that of almost any other part of the rude produce of land: and the price of the precious metals is even less liable to sudden variations than that of the coarse ones. though harder. to be lost. and consumed. however. perhaps. and. be nearly equal to the whole annual produce. less care is employed in their preservation. We do not. But some part of the iron which was brought from: the mine two or three hundred years ago. are not necessarily immortal any more than they. may be still in use. varies. or to become gradually cheaper and cheaper. in all the different countries of the world where those metals are used. Variations in the Proportion between the respective Values of Gold and Silver. are put to much harder uses. will always be nearly in proportion to the respective produce of those different years. but are liable. perhaps. Why should we imagine that the precious metals are likely to do so? The coarse metals. The remainder may be no more than sufficient to supply the increasing demand of all thriving countries. wasted. perhaps. indeed. some part of the gold which was brought from it two or three thousand years ago. as somewhat to raise the price of those metals in the European market. those variations have not the same effect upon the price of the one species of commodities as upon that of the other. The corn which was brought to market last year will be all. Before the discovery of the mines of America. The precious metals. or almost all. The quantity of brass and iron annually brought from the mine to the market. in different years. the value of fine gold to 189 . is out of all proportion greater than that of gold and silver. though liable to slow and gradual variations. The different masses of corn. It may even have fallen so far short of this demand. still more from year to year than that of the greater part of corn fields. therefore. upon this account. may.Adam Smith whole annual consumption of gold and silver.

the quantities of those metals which remain in Europe to the proportion of one to fourteen or fifteen. but silver sunk more than gold. that there are commonly in the market three score lambs for one ox. that is. it seems. and it would be just as absurd to infer. It is in the mint. or in the quantity of silver which was given for it. must necessarily be the same as that between their quantities. in some of the English settlements. he supposes. an ounce of fine gold came to be supposed worth between fourteen and fifteen ounces of fine silver. is about three score times the price of a lamb. between the proportions of one to fourteen and one to fifteen. an ounce of fine gold was supposed to be worth from ten to twelve ounces of fine silver. the proportion of their values. gradually reduced the value of that metal in proportion to gold. it is said to be as one to eight. because an ounce of gold will commonly purchase from fourteen or fifteen ounces of silver. Gold rose in its nominal value. in the same manner as in Europe. In Japan. The proportion between the quantities of gold and silver annually imported into Europe. however. for one ounce of gold there are imported a little more than twenty-two ounces of silver. according to Mr Meggens’ account. reckoned at 3s. or one to twelve. perhaps. he seems to think. to infer from thence. 190 . 6d. Though both the gold and silver mines of America exceeded in fertility all those which had ever been known before. that is. About the middle of the last century. that is. The great quantity of silver sent annually to the East Indies reduces. reckoned at ten guineas. In the mint of Calcutta. or in the quantity of labour which they could purchase. It would be absurd. But the ordinary proportion between the respective values of two commodities is not necessarily the same as that between the quantities of them which are commonly in the market. that there are commonly in the market only fourteen or fifteen ounces of silver for one ounce of gold. The proportion between their values. the proportion of gold to silver still continues as one to ten. The price of an ox. between the proportions of one to ten and one to twelve. and would therefore be as one to twenty-two. been proportionally still greater than that of the gold ones. rated too high for the value which it bears in the market of Bengal. is as one to twentytwo nearly. Both metals sunk in their real value. have. the fertility of the silver mines had. an ounce of fine gold is supposed to be worth fifteen ounces of fine silver. The great quantities of silver carried annually from Europe to India. were it not for this greater exportation of silver. it came to be regulated. In China.The Wealth of Nations fine silver was regulated in the different mines of Europe.

have a good deal of silver who have no gold plate. In the British coin. than the whole quantity of poultry. than the value of a certain quantity of the dear one. A commodity may be said to be dear or cheap 191 . and such like trinkets. which. in another sense. is not only greater. much cheaper than gold. even with those who have it. but it is not so in that of all countries. the gold preponderated very little. but of greater value. of the silver plate above that of the gold. Though. snuff-boxes. as it appears by the accounts of the mint. therefore. is much greater in proportion to that of gold. not only a greater quantity. than the whole quantity of butcher’s meat. and it is there difficult to get more gold than what is necessary to carry about in your pocket. The superior value. before the union with England. though it did somewhat {See Ruddiman’s Preface to Anderson’s Diplomata. and he will probably find.}. not only a greater quantity of it. Many people. In France. silver is a cheap. There are so many more purchasers for the cheap than for the dear commodity. and gold a dear commodity. in one sense of the word. besides. When we compare the precious metals with one another. but the value of the former. is generally confined to watch-cases. which takes place in all countries. in the present state of the Spanish market. however. greatly exceeds that of the latter. gold may perhaps. than the value of a certain quantity of gold is to that of an equal quantity of silver. silver always has been. who has a little of both. than the whole quantity of wild fowl. will much more than compensate the preponderancy of the gold coin above the silver. but a greater value can commonly be disposed of.Adam Smith The quantity of silver commonly in the market. must commonly be greater in proportion to the whole quantity of the dear one. yet. In the coin of some countries. and the whole quantity of poultry. be said to be somewhat cheaper than silver. the largest sums are commonly paid in that metal. than the whole quantity of a dear one. etc. of which the whole amount is seldom of great value. the value of the two metals is nearly equal. In the Scotch coin. of the cheap commodity. the whole quantity of butcher’s meat. is to the value of an equal quantity of the cheap one. that not only the quantity. The whole quantity. but a greater value of silver than of gold. compare his own silver with his gold plate. The whole quantity of bread annually brought to market. it is probable. Let any man. In the coin of many countries the silver preponderates. Scotiae. indeed. therefore. that. that there should always be in the market. the value of the gold preponderates greatly. and probably always will be. The whole quantity of a cheap commodity brought to market is commonly not only greater. which takes place only in some countries. but of greater value. We ought naturally to expect.

therefore. That the silver mines of Spanish America. it would seem. The tax. perhaps. as they more rarely make a fortune. become gradually more expensive in the 192 . than the price of Spanish silver. as it affords both less rent and less profit. or one-fifth part of the standard metal. This lowest price is that which barely replaces. in the present state of the Spanish market. with a moderate profit. the whole mass of American gold comes at a price nearer to the lowest for which it is possible to bring it thither. of which rent makes not any component part. may in time make it necessary to reduce it still further. in general. in the Spanish market. of the king of Portugal upon the gold of the Brazils. too. which is not only imposed upon one of the most proper subjects of taxation. in 1736. It may therefore be uncertain. must. to the general market of Europe. and that upon gold is still worse paid than that upon silver. consists the whole rent of the greater part of the gold and silver mines of Spanish America. the stock which must be employed in bringing the commodity thither. The profits of the undertakers of gold mines. too. a mere luxury and superfluity.The Wealth of Nations not only according to the absolute greatness or smallness of its usual price. be somewhat nearer to the lowest price for which it is possible to bring it thither. must. made it necessary to reduce it from one-fifth to one-tenth. than even the price of gold. or to ten per cent. in the same manner as it made it necessary to reduce the tax upon gold to one-twentieth. like all other mines. the whole quantity of the one metal. but according as that price is more or less above the lowest for which it is possible to bring it to market for any considerable time together. yet the same impossibility of paying it. is the same with the ancient tax of the king of Spain upon the silver of Mexico and Peru. cannot. or five per cent. Though it is not very probable that any part of a tax. will ever be given up as long as it is possible to pay it. The tax of the king of Spain upon gold is only one-twentieth part of the standard metal. be still nearer to the lowest price at which it is possible to bring them to market. in the Spanish market. than the whole mass of American silver. it has already been observed. indeed. It is the price which affords nothing to the landlord. be still more moderate than those of the undertakers of silver mines. In these taxes. but which affords so very important a revenue as the tax upon silver. but which resolves itself altogether into wages and profit. When all expenses are computed. The price of Spanish gold. be disposed of so advantageously as the whole quantity of the other. whether. gold is certainly somewhat nearer to this lowest price than silver. which.. The price of diamonds and other precious stones may. But. whereas his tax upon silver amounts to one-tenth part of it.

the value of silver in the European market. had the court of Spain continued to exact the old tax. It must be observed. the value of any given quantity somewhat less. during the course of the present century. is acknowledged by everybody who has inquired into the state of those mines. or. This third event is very possible. notwithstanding this reduction. on account of the greater depths at which it is necessary to carry on the works. These causes. and of the greater expense of drawing out the water. perhaps. at least ten per cent. thirdly. the facts and arguments which have been alleged above. that whatever may be the supposed annual importation of gold and silver. be compensated altogether by a proportionable increase in the price of the metal. therefore. and. supposing there has been any. notwithstanding an equal diminution of the tax upon silver. though they may not prevent altogether. dispose me to believe. appear to many people uncertain. which are equivalent to a growing scarcity of silver (for a commodity may be said to grow scarcer when it becomes more difficult and expensive to collect a certain quantity of it). or more properly to suspect and conjecture. lower than it would have been. however. The rise. begun to rise somewhat in the European market. scarce. must certainly retard. so silver might rise in its price in proportion to labour and commodities. the rise of the value of silver in the European market. deserves the name of belief. has hitherto been so very small.Adam Smith working. secondly. it may. indeed. not only whether this event has actually taken place. in time. produce one or other of the three following events: The increase of the expense must either. As gold rose in its price in proportion to silver. it must be compensated partly by the one and partly by the other of those two expedients. perhaps. but whether the contrary may not have taken place. is. probably. that after all that has been said. That. however. because they could not afford to pay the old tax. must always be somewhat greater. first. Such successive reductions of the tax. and of supplying them with fresh air at those depths. or whether the value of silver may not still continue to fall in the European market. there must be a certain period at which the annual consumption of those metals will be equal to that an- 193 . or. the value of silver has. In consequence of the reduction in 1736. and the quantity of silver annually brought to market. it must be compensated altogether by a proportionable diminution of the tax upon silver. for the best opinion which I can form upon this subject. notwithstanding a great diminution of the tax upon gold. In consequence of such reductions. more or less. must. than it otherwise would have been. though it may not at this day be lower than before that reduction. many mines may be wrought which could not be wrought before.

they necessarily cease to go thither. I have endeavoured to shew already. and less cared for. as the society advances in wealth and improvement. Their consumption must increase as their mass increases. and the still gradually increasing price of many parts of the rude produce of land may confirm them still farther in this opinion. and as soon as that superiority ceases. and such other vegetables as are raised altogether by human industry. If you except corn. till the annual importation becoming again stationary. when the annual consumption has become equal to the annual importation. which. The increase of the wealth of Europe. for the same reason that all sorts of luxuries and curiosities resort to it. for some time. It is not their nominal price only. but 194 . dispose many people to believe that their value still continues to fall in the European market. naturally grow dearer.The Wealth of Nations nual importation. therefore. therefore. the annual consumption of those metals must. is not supposed to be the case. may. the annual consumption may. come to exchange for a greater quantity of silver than before. but because they are dearer. not because they are cheaper there than in poorer countries. in the present times. their value diminishes. As their mass increases. and their consumption consequently increases in a greater proportion than their mass. Though such commodities. perhaps. which arises in any country from the increase of wealth. in this manner. That that increase in the quantity of the precious metals. Grounds of the suspicion that the Value of Silver still continues to decrease. provided that importation is not continually increasing. and their value gradually and insensibly rise. and the popular notion. I have endeavoured to shew already. the annual importation should gradually diminish. After a certain period. They are more used. or rather in a much greater proportion. or because a better price is given for them. The mass of those metals may gradually and insensibly diminish. that all other sorts of rude produce. that as the quantity of the precious metals naturally increases with the increase of wealth. but that such commodities have become really dearer. etc. It is the superiority of price which attracts them. or will purchase less labour than before. it will not from thence follow that silver has become really cheaper. become equal to their annual importation. exceed the annual importation. the annual consumption will gradually and insensibly accommodate itself to what that annual importation can maintain. has no tendency to diminish their value. game of all kinds. Gold and silver naturally resort to a rich country. cattle. so their value diminishes as their quantity increases. If. or will purchase more labour than before. the useful fossils and minerals of the earth. poultry.

it is impossible to accumulate together the produce of many different seasons. That of the third. The first comprehends those which it is scarce in the power of human industry to multiply at all. or nearly the same. as well as many other things. When wealth. and sometimes to rise more or less. beyond which it cannot well pass for any considerable time together. though its natural tendency is to rise in the progress of improvement. First Sort. and which being of a very perishable nature. much beyond what it is at present. which rises in the progress of improvement. almost all wild-fowl. while the competition to purchase them is continually increasing. The rise of their nominal price is the effect. of which the price rises in the progress of improvement. Such are the greater part of rare and singular birds and fishes. The quantity of such commodities. in multiplying this sort of rude produce. The high price paid by the Romans. according as different accidents render the efforts of human industry. no effort of human industry could increase the number of those brought to market. and seems not to be limited by any certain boundary. These different sorts of rude produce may be divided into three classes. more or less successful. the demand for these is likely to increase with them. but of the high value of such rarities and 195 . in the time of their greatest grandeur. all birds of passage in particular. a certain boundary. has. therefore. yet in the same degree of improvement it may sometimes happen even to fall. not of any degradation of the value of silver. The second. their price may rise to any degree of extravagance. — The first sort of rude produce. the real price of the first may rise to any degree of extravagance. The third. That of the second. remaining the same. many different sorts of game.Adam Smith their real price. for rare birds and fishes. and no effort of human industry may be able to increase the supply much beyond what it was before this increase of the demand. is that which it is scarce in the power of human industry to multiply at all. It consists in those things which nature produces only in certain quantities. but of the rise in their real price. In the progress of wealth and improvement. however. though it may rise greatly. If woodcocks should become so fashionable as to sell for twenty guineas a-piece. those which it can multiply in proportion to the demand. increase. may in this manner easily be accounted for. those in which the efficacy of industry is either limited or uncertain. Different Effects of the Progress of Improvement upon three different sorts of rude Produce. These prices were not the effects of the low value of silver in those times. sometimes to continue the same. and seems not to be limited by any certain boundary. and the luxury which accompanies it.

in those ancient times. 29. the ordinary contract price of English wheat. which in quality is inferior to the Sicilian. than it is through the greater part of Europe at present. Three sestertii equal to about sixpence sterling. Seius gave for the nightingale the command of a quantity of labour and subsistence. is apt. When we read in Pliny. it is equal to about one-and-twenty shillings the quarter. was a good deal less than what the command of the same quantity of labour and subsistence would have procured to them in the present times. therefore. before the late years of scarcity. of which they had the disposal. the ordinary or average contract price of those times. The real value of silver was higher at Rome. would purchase. notwithstanding. was probably below the average market price. Eight-and-twenty shillings the quarter was. must have been to its value in the present. had occasion to order more corn than the tithe of wheat amounted to. was the price which the republic paid for the modius or peck of the tithe wheat of Sicily. equal to about fifty pounds of our present money. for sometime before. When the Romans. This price. and this had probably been reckoned the moderate and reasonable. the obligation to deliver their wheat at this rate being considered as a tax upon the Sicilian farmers. The value of silver. as three to four inversely. The quantity of silver. at the price of six thousand sestertii. c. 17. as the abundance of labour and subsistence. that Seius {Lib. not so much the abundance of silver.} bought a white nightingale. 196 . X. and that Asinius Celer {Lib. three ounces of silver would then have purchased the same quantity of labour and commodities which four ounces will do at present. however. What occasioned the extravagance of those high prices was. therefore. beyond what was necessary for their own use. equal to about sixty-six pounds thirteen shillings and fourpence of our present money. IX. or eightpence sterling the peck. and generally sells for a lower price in the European market. that is. was about one-third more than their nominal price is apt to express to us in the present times. and Asinius Celer gave for a surmullet the command of a quantity equal to what £ 88:17: 9d. would purchase in the present times. therefore. the extravagance of those prices. equal to what £ 66:13: 4d.} purchased a surmullet at the price of eight thousand sestertii.The Wealth of Nations curiosities as human industry could not multiply at pleasure. to appear to us about one third less than it really was. how much soever it may surprise us. of which those Romans had the disposal. the quantity of labour and subsistence which was given away for them. that is. as a present for the empress Agrippina. c. Their real price. and after the fall of the republic. they were bound by capitulation to pay for the surplus at the rate of four sestertii.

is that which human industry can multiply in proportion to the demand. or. while. When the price of cattle. that it becomes as profitable to employ the most fertile and best cultivated lands in raising food for them as in raising corn. During a long period in the progress of improvement. the quantity of these is continually diminishing. it cannot well go higher. the price of cattle. But it must always be late in the progress of improvement before tillage can be so far extended as to raise the price of cattle to this height. more corn land would soon be turned into pasture. It consists in those useful plants and animals. and. and. If it did. it is scarce possible. of cattle. that it is as profitable to cultivate land in order to raise food for them as in order to raise food for man. till it has got to this height. to 197 . therefore. diminishes the quantity of butcher’s meat. seems. in a country in which the quantity of land. perhaps. some parts of Europe in which the price of cattle has not yet got to this height. If it did. rises so high. and which. of which the price rises in the progress of improvement. perhaps. by diminishing the quantity of wild pasture. which. increases the demand. Had the Scotch cattle been always confined to the market of Scotland. it cannot well go higher. and. —The second sort of rude produce. that their price could ever have risen so high as to render it profitable to cultivate land for the sake of feeding them. it has already been observed. by increasing the number of those who have either corn. at the same time. When it has got so high. that they are of little or no value. Their real value. must gradually rise. There are. their price must be continually rising. which the country naturally produces without labour or cultivation. more land and more industry would soon be employed to increase their quantity. the real quantity of labour which they will purchase or command. till at last it gets so high as to render them as profitable a produce as any thing else which human industry can raise upon the most fertile and best cultivated land.Adam Smith Second sort. to give in exchange for it. The price of butcher’s meat. which can be applied to no other purpose but the feeding of cattle. consequently. nature produces with such profuse abundance. is so great in proportion to what can be applied to other purposes. the demand for them is continually increasing. if the country is advancing at all. what comes to the same thing. gradually rises. The extension of tillage. in the neighbourhood of London. It had not got to this height in any part of Scotland before the Union. in uncultivated countries. are therefore forced to give place to some more profitable produce. for example. as cultivation advances. till it gets so high. the price of corn. therefore. In England.

again. being insufficient for the whole farm. These. just sufficient to keep alive a few straggling. indeed. in some of which. cattle is. therefore. no more cattle can with profit be fed in the stable than what are necessary for tillage. that is. Till the price of cattle. either by pasturing the cattle upon it. rises first to this height. to collect the scanty and scattered produce of waste and unimproved lands. Of all the different substances. and be too expensive. when it must be collected with a good deal of additional labour. the quantity of well cultivated land must be in proportion to the quantity of manure which the farm itself produces. in the progress of improvement. What they afford. it may scarce yet have got to it. after having been pastured in this wretched manner for six or seven years together. It the price of the cattle. the greater part of them. in the far greater part of those of every extensive country. can be completely cultivated. In these circumstances. therefore. be allowed to lie waste. the farmer cannot afford to pasture them upon it. and from thence carrying out their dung to it. though much overstocked in proportion to what would be necessary for its complete cultivation. half-starved cattle. will naturally be reserved for the lands to which it can be most advantageously or conveniently applied. probably. but it was much later. the most fertile. may be 198 . A portion of this waste land. it seems scarce possible that the greater part. however. or by feeding them in the stable. But these can never afford manure enough for keeping constantly in good condition all the lands which they are capable of cultivating.The Wealth of Nations have got to this height about the beginning of the last century. will be kept constantly in good condition. perhaps. and this. The land is manured. would require too much labour. in the neighbourhood of the farmyard. which compose this second sort of rude produce. and brought into the stable to them. because. perhaps. the farm. In all farms too distant from any town to carry manure from it. or those. is not sufficient to pay for the produce of improved and cuitivated land. therefore. perhaps. and he can still less afford to feed them in the stable. has got to this height. producing scarce any thing but some miserable pasture. even of those lands which are capable of the highest cultivation. before it got through the greater part of the remoter counties. must be in proportion to the stock of cattle which are maintained upon it. that of which the price. The rest will. being very frequently overstocked in proportion to its actual produce. It is with the produce of improved and cultivated land only that cattle can be fed in the stable. that price will be still less sufficient to pay for that produce. and fit for tillage. however. when they are allowed to pasture it. But unless the price of the cattle be sufficient to pay both the rent and profit of cultivated land.

being entirely exhausted. and of which the one can nowhere much outrun the other. accordingly. when it will yield. secondly. but a certain portion of them was in its turn. Under this system of management. If. could produce but little in comparison of what it may be capable of producing. perhaps. and half a century or a century more. and sometimes did not amount to a fifth or a sixth part of it. this rise in the price of cattle is. cannot be removed but by a long course of frugality and industry. The lands which were kept constantly well manured and in good condition seldom exceeded a third or fourth part of the whole farm. a poor crop or two of bad oats. 199 . to the unavoidable obstructions which the natural course of things opposes to the immediate or speedy establishment of a better system: first. Without some increase of stock. perhaps. and then. perhaps. but. But how disadvantageous soever this system may appear. to ignorance and attachment to old customs. it is evident. and another portion ploughed up. perhaps. These natural obstructions to the establishment of a better system. It has not only raised the value of all highland estates. it is owing in many places. The rest were never manured. and. or of some other coarse grain. in most places. the low price of cattle seems to have rendered it almost unavoidable. the greatest. The increase of stock and the improvement of land are two events which must go hand in hand.Adam Smith ploughed up. regularly cultivated and exhausted. but in consequence of a considerable improvement of land. to the poverty of the tenants. Such. which is wearing out gradually. which would render it advantageous for them to maintain a greater stock. even that part of the lands of Scotland which is capable of good cultivation. however. but there can be no considerable increase of stock. Of all the commercial advantages. supposing they were capable of acquiring it. but it has. no doubt. to their not having yet had time to put their lands in condition to maintain this greater stock properly. to their not having yet had time to acquire a stock of cattle sufficient to cultivate their lands more completely. was the general system of management all over the low country of Scotland before the Union. notwithstanding. rendering it more difficult for them to acquire it. can be completely abolished through all the different parts of the country. been the principal cause of the improvement of the low country. there can be scarce any improvement of land. it must be rested and pastured again as before. it still continues to prevail through a considerable part of the country. because otherwise the land could not maintain it. notwithstanding a great rise in the price. yet. to be in the same manner exhausted and rested again in its turn. must pass away before the old system. the same rise of price. which Scotland has derived from the Union with England. before the Union.

therefore. though that expedient has been employed in some places. when he wrote. and became of so little value. they clear and cultivate another piece of fresh land. soon renders them extremely abundant. that he can with difficulty discover there the character of the English nation. which can for many years be applied to no other purpose but the feeding of cattle. accordingly. proceed to a third. before it can become profitable to feed cattle upon the produce of cultivated land. {Kalm’s Travels. They were probably not unlike that stunted breed which was common all over Scotland thirty or forty years ago. Though all the cattle of the European colonies in America were originally carried from Europe. without any owner thinking it worth while to claim them. but when one piece of ground has been exhausted by continual cropping. have maintained four. when he gives an account of the husbandry of some of the English colonies in North America. not so much by a change of the breed. It must be a long time after the first establishment of such colonies. would in former times. could not maintain one cow. they soon multiplied so much there. are likely to introduce there a system of husbandry. pp. and in every thing great cheapness is the necessary consequence of great abundance. the Swedish traveller. 343. they used to grow very thick. The poorness of the pasture had. that even horses were allowed to run wild in the woods. Mr Kalm. where they are half-starved. observes. in the progress of improvement. Their cattle are allowed to wander through the woods and other uncultivated grounds. A piece of ground which. and to rise three or four feet high. he was assured. it seems. so well skilled in all the different branches of agriculture. which degenerated sensibly from me generation to another. 344. occasioned the degradation of their cattle. and when that is exhausted. therefore. They make scarce any manure for their corn fields.} The annual grasses were. as he found it in 1749. the best natural grasses in that part of North America. the want of manure. and which is now so much mended through the greater part of the low country. by cropping them too early in the spring. in his opinion. The same causes. and the disproportion between the stock employed in cultivation and the land which it is destined to cultivate. as by a more plentiful method of feeding them. not unlike that which still continues to take place in so many parts of Scotland. Though it is late. before they had time to form their flowers. the great quantity of waste land. before cattle 200 . and when the Europeans first settled there.The Wealth of Nations In all new colonies. vol 1. having long ago extirpated almost all the annual grasses. or to shed their seeds. he says. each of which would have given four times the quantity of milk which that one was capable of giving.

the offals of the barn and stable will maintain a certain number of poultry. In this state of things. as is well known to all those who have had any experience in the feeding of deer. they are perhaps the first which bring this price. are a mere save-all. what is rare. so perhaps venison is among the last parts of this sort of rude produce which bring this price. therefore. is said to be so in some parts of France. These. in every farm. The fattening of ortolans. therefore. that it was a most profitable article. till they bring it. must always be much smaller than the whole quantity of butcher’s meat which is reared upon it. how extravagant soever it may appear. and in times of wealth and luxury. birds of passage which arrive lean in the country. its price may very probably rise still higher than it is at present. Almost all that he gets is pure gain. is not near sufficient to compensate the expense of a deer park. and that which brings to it the price of such a superfluity as venison.Adam Smith can bring such a price as to render it profitable to cultivate land for the sake of feeding them. is always preferred to what is common. The price of venison in Great Britain. the poultry. which brings to its height the price of so necessary an article as cattle. Thus. and therefore but thinly inhabited. they are often as cheap as butcher’s meat. and the wealth and luxury of Great Britain increase as they have done for some time past. it seems impossible that improvement can be brought near even to that degree of perfection to which it has arrived in many parts of Europe. there is a very long interval. with only nearly equal merit. in consequence of improvement and cultivation. as they are fed with what would otherwise be lost. or any other sort of animal food. because. But the whole quantity of poultry which the farm in this manner produces without expense. If venison continues in fashion. called turdi. If it was otherwise. in the course of which many other sorts of rude produce gradually arrive at their highest price. But in countries ill cultivated. Between that period in the progress of improvement. which are thus raised without expense. and their price can scarce be so low as to discourage him from feeding this number. so he can afford to sell them for very little. in the same manner as the feeding of those small birds. As wealth and luxury increase. the price of poultry gradu- 201 . the feeding of deer would soon become an article of common farming. was among the ancient Romans. yet of all the different parts which compose this second sort of rude produce. according to different circumstances. As cattle are among the first. and as they cost the farmer scarce any thing. are often fully sufficient to supply the whole demand. some sooner and some later. Varro and Columella assure us.

In most parts of Great Britain it is at present somewhat higher. like poultry. and the state of its agriculture. which can thus be reared at little or no expense. and sufficiently profitable to encourage the farmer to raise a considerable quantity of Indian corn and buckwheat for this purpose. turnips. the plenty would not be of long continuance. In the progress of improvements. is fully sufficient to supply the demand. As long as the number of such animals. After it has become general. has. that finds his food among ordure. it cannot well go higher. must naturally be that which immediately precedes the general practice of cultivating land for the sake of raising it. according as the nature of the country. according to Mr Buffon. in Great Brit- 202 . is. In France. new methods of feeding are commonly fallen upon. however. The hog. in the same manner as for feeding and fattening other cattle. originally kept as a save-all. When it has got to this height. that it becomes profitable to cultivate land for the sake of feeding them. The plenty not only obliges him to sell cheaper. he can afford to sell cheaper. But when the demand rises beyond what this quantity can supply. in consequence of these improvements. and becomes proportionably either higher or lower than that of other butcher’s meat. the price necessarily rises. the period at which every particular sort of animal food is dearest. as England receives considerable supplies from France. happen to render the feeding of hogs more or less expensive than that of other cattle. dearer in England than in France. the price of pork is nearly equal to that of beef. more land would soon be turned to this purpose. The feeding of poultry seems scarce yet to be generally considered as a matter of so much importance in England. but. A middling farmer will there sometimes have four hundred fowls in his yard. and greedily devours many things rejected by every other useful animal. when it becomes necessary to raise food on purpose for feeding and fattening hogs. If it did. has contributed to sink the common price of butcher’s meat in the London market. somewhat below what it was about the beginning of the last century. For some time before this practice becomes general. carrots. which enable the farmer to raise upon the same quantity of ground a much greater quantity of that particular sort of animal food. till at last it gets so high. They are certainly. The great rise in the price both of hogs and poultry. the feeding of poultry is considered as a very important article in rural economy. for if he could not afford it.The Wealth of Nations ally rises above that of butcher’s meat. etc. It has been probably in this manner that the introduction of clover. this sort of butcher’s meat comes to market at a much lower price than any other. the scarcity must necessarily raise the price. cabbages. In several provinces of France.

it will scarce keep four-and-twenty hours. so the poorest occupiers of land can commonly maintain a few poultry. and they produce most at one particular season. If it is very low indeed. which is thus produced at little or no expense. skimmed milk. for a year. But of all the productions of land. Part of all these is reserved for the use of his own family. The little offals of their own table. but will suffer the business to be carried on amidst the smoke. or to the price which pays the labour and expense of cultivating the land which furnishes them with food. their whey. like the feeding of hogs and poultry. the quantity of this sort of provisions. he stores a much greater part of it for several years. and butter milk. but which at the same time may have contributed to raise the price of those articles. The business of the dairy. and by making it into cheese. he will be likely to manage his dairy in a very slovenly and dirty manner. stores a small part of it for a week. by making it into fresh butter. supply those animals with a part of their food. must certainly have been a good deal diminished. The same causes which gradually raise the price of butcher’s meat. perhaps. filth. In the warm season. in order to find the best price which is to be had. by making it into salt butter. an event which has in every part of Europe been the immediate forerunner of improvement and better cultivation. it must at any rate have risen to the utmost height to which it is capable of rising. and as is the case of many of them still. milk is perhaps the most perishable. and will scarce. when it is most abundant. the rest goes to market.Adam Smith ain. think it worth while to have a particular room or building on purpose for it. both somewhat sooner and somewhat faster than it would otherwise have risen. been frequently imputed to the diminution of the number of cottagers and other small occupiers of land. at very little. As the poorest family can often maintain a cat or a dog without any expense. and which can scarce be so low is to discourage him from sending thither whatever is over and above the use of his own family. is originally carried on as a save-all. and they find the rest in the neighbouring fields. The farmer. and their price must consequently have been raised both sooner and faster than it would otherwise have risen. as well as these are paid upon the greater part of other cultivated land. or a sow and a few pigs. By diminishing the number of those small occupiers. without doing any sensible damage to any body. and nastiness of his own kitchen. as was the case of almost all the farmers’ dairies in Scotland thirty or forty years ago. however. The cattle necessarily kept upon the farm produce more milk than either the rearing of their own young. Sooner or later. therefore. or the consumption of the farmer’s family requires. 203 . the increase of the demand. in the progress of improvement.

has got so high as to pay for the expense of complete improvement and cultivation. of which the price naturally connects with that of butcher’s meat. where much good land is commonly employed in this manner. The inferiority of the quality. to pay the labour and expense of the farmer.The Wealth of Nations and. Through the greater part of England. must evidently be previous to the improvement and cultivation of the land which is des- 204 . It seems to have got to this height through the greater part of England. is probably still too low to admit of it. in the same manner. Though the quality was much better. till once the price of every produce. to pay the rent of good corn land. first. than the cause of it. it cannot yet be even so profitable. compared with that of the produce of English dairies. the dairy is not reckoned a more profitable employment of land than the raising of corn. the two great objects of agriculture. The price of the produce. and when it has got to this height. secondly. which human industry is obliged to raise upon them. indeed. be disposed of at a much better price. can ever be completely cultivated and improved. the greater part of what is brought to market could not. as it is that which regulates the rent of the greater part of other cultivated land. it seems not yet to have got to this height anywhere in Scotland. The dairy becomes more worthy of the farmer’s attention. notwithstanding the superiority of price. the price of each particular produce must be sufficient. The increase of price pays for more labour. If you except the neighbourhood of a few considerable towns. I apprehend. is fully equal to that of the price. more land would soon be turned to this purpose. where common farmers seldom employ much good land in raising food for cattle. it is probable. perhaps. in consequence of the improvement of the country. rather the effect of this lowness of price. and cleanliness. or with the expense of feeding cattle. and the quality of its produce gradually improves. or the fattening of cattle. The lands of no country. though it has risen very considerably within these few years. care. that it becomes worth while to employ some of the most fertile and best cultivated lands in feeding cattle merely for the purpose of the dairy. merely for the purpose of the dairy. and. and the present price. it is evident. Through the greater part of Scotland. But this inferiority of quality is. This rise in the price of each particular produce. in the present circumstances of the country. it cannot well go higher. therefore. in other words. the diminution of the quantity which can be fed at little or no expense. or. raise. In order to do this. would not pay the expense of the land and labour necessary for producing a much better quality. as well as they are commonly paid upon good corn land. If it did. to replace with the ordinary profits the stock which he employs about it. that of the produce of the dairy. The price at last gets so high.

instead of being considered as a public calamity. if. The quantity of wool or of raw hides.Adam Smith tined for raising it. the greatest of all public advantages. for example. is necessarily limited by that of the other. the market for the latter commodities was confined within as narrow bounds as that for the former. but of a rise in their real price. in augmenting the quantity. There are some sorts of rude produce which nature has rendered a kind of appendages to other sorts. gradually raise the price of butcher’s meat. is that in which the efficacy of human industry. is necessarily limited by the number of great and small cattle that are kept in it. naturally tends to rise in the progress of improvement. yet. in the nominal or money price of all those different sorts of rude produce. and nothing could deserve that name. The state of its improvement. when they are brought thither they represent. — The third and last sort of rude produce. But loss must be the necessary consequence of improving land for the sake of a produce of which the price could never bring back the expense. The same causes which. too. should have the same effect. nearly in the same proportion. If the complete improvement and cultivation of the country be. according as different accidents happen to render the efforts of human industry more or less successful in augmenting the quantity. as it most certainly is. in the rude beginnings of improvement. which any country can afford. They have become worth. so that the quantity of the one which any country can afford. too. and sometimes to rise more or less in the same period. it may happen sometimes even to fall. so. of which the price naturally rises in the progress of improvement. Though the real price of this sort of rude produce. Third Sort. again necessarily determine this number. or are equivalent to a greater quantity. it may be thought. and raise them. upon the prices of wool and raw hides. It probably would be so. not of any degradation in the value of silver. not only a greater quantity of silver. This rise. but a greater quantity of labour and subsistence than before. therefore. 205 . is either limited or uncertain. this rise in the price of all those different sorts of rude produce. As it costs a greater quantity of labour and subsistence to bring them to market. ought to be regarded as the necessary forerunner and attendant of the greatest of all public advantages. and the nature of its agriculture. has been the effect. in the progress of improvement. in very different periods of improvement. But the extent of their respective markets is commonly extremely different. of which loss was to be the necessary consequence. sometimes to continue the same. Gain is the end of all improvement.

the price of the whole beast necessarily rises. and raw hides with very little. on the contrary. I have been assured. improvement and population being further advanced. too. very seldom confined to the country which produces them. and therefore but thinly inhabited. at Buenos Ayres. who still continue to possess. In countries ill cultivated. and populousness of the French plantations ( which now extend round the coast of almost the whole western half of the island) had given some value to the cattle of the Spaniards. but the whole inland mountainous part of the country. where the horned cattle are almost constantly killed merely for the sake of the hide and the tallow. though that of the country which produces them might not occasion any. and as they are the materials of many manufactures. often extending to the whole commercial world. even of a barbarous country. yet the price of the carcase is likely to be much more affected by this rise than that of the wool and the hide. but they are. The market for wool and raw hides. But the market for the wool and the hides. carry on a considerable trade in salt provisions. improvement. If this sometimes happens even in Spain. while it was infested by the buccaneers. In some provinces of Spain. the only countries in the commercial world which do so. Mr Hume observes. or which export to other countries any considerable part of their butcher’s meat. the fleece was estimated at twofifths of the value of the whole sheep and that this was much above the proportion of its present estimation. and before the settlement.The Wealth of Nations The market for butcher’s meat is almost everywhere confined to the country which produces it. wool without any preparation. and some part of British America. not only the eastern part of the coast. the price of the wool and the hide bears always a much greater proportion to that of the whole beast. indeed. the sheep is frequently killed merely for the sake of the fleece and the tallow. in the progress of improvement and population. The state of the whole commercial world can seldom be 206 . it can very seldom be enlarged in the same proportion. Though. than in countries where. there is more demand for butcher’s meat. is. must necessarily be extended in proportion to the improvement and population of that country. The market for the carcase being in the rude state of society confined always to the country which produces it. and in many other parts of Spanish America. the industry of other countries may occasion a demand for them. or to be devoured by beasts and birds of prey. The carcase is often left to rot upon the ground. in the rude beginnings of improvement. used to happen almost constantly in Hispaniola. that in the Saxon times. it happens almost constantly in Chili. Ireland. This. I believe. They can easily be transported to distant countries.

of the prohibition of exporting it from Ireland to another country but England. and the market for such commodities may remain the same. was to its money price in the present times as ten to seven. Tower weight. upon the whole. In England. the price of English wool has fallen very considerably since the time of Edward III. duty free: thirdly. was not less than ten shillings of the money of those times {See Smith’s Memoirs of Wool. or very nearly the same. be somewhat extended in consequence of them. ii. however. This degradation. 7. should ever come to flourish in the country. or as two to one. during the reign of that prince (towards the middle of the fourteenth century. containing. In those ancient times. or about 1339). If the manufactures. 6. at the rate of twentypence the ounce. At the rate of twenty-eight shillings the quarter. Though it might not rise. In consequence 207 . 5. and the price of those materials might at least be increased by what had usually been the expense of transporting them to distant countries. one-and-twenty shillings the tod may be reckoned a good price for very good English wool. after such improvements.}. or twenty-eight pounds of English wool. therefore. of the permission of importing it from Spain. The superiority of its real price was still greater. i c. as before.Adam Smith much affected by the improvement of any particular country. vol. and it ought certainly not to fall. First. it ought naturally to rise somewhat. therefore. what was reckoned the moderate and reasonable price of the tod. of which those commodities are the materials. could never have happened in consequence of the natural course of things. There are many authentic records which demonstrate that. equal to about thirty shillings of our present money. of the absolute prohibition of exporting wool from England: secondly. It has accordingly been the effect of violence and artifice. is as twelve to six. The money price of wool. ten shillings was in those ancient times the price of twelve bushels of wheat. however. six ounces of silver. in the natural course of things. the market. one-and-twenty shillings is in the present times the price of six bushels only. and consequently twice the quantity of labour. also vol. rather. if the real recompence of labour had been the same in both periods. therefore. The proportion between the real price of ancient and modern times. notwithstanding the flourishing state of its woollen manufacture. It should. both in the real and nominal value of wool. would at least be brought much nearer to the place of growth than before. in the same proportion as that of butcher’s meat. At the rate of six shillings and eightpence the quarter. a tod of wool would have purchased twice the quantity of subsistence which it will purchase at present. especially. in the time of Edward III. In the present times. though it might not be much enlarged.

between the prior of Burcester Oxford and one of his canons. when the cattle were half starved during the greater part of the winter.The Wealth of Nations of these regulations. An ox hide. where the wool of several other countries is allowed to come into competition with it. Its nominal price was a good deal lower than at present. five cow hides at seven shillings and threepence. from an account in 1425. In 1425. An ox hide which weighs four stone of sixteen pounds of avoirdupois. therefore. would in the present times cost 51s. In those ancient times. I have not been able to find any such authentic records concerning the price of raw hides in ancient times. the real quantity of subsistence which it will purchase or command. twelve shillings contained about the same quantity of silver as four-and-twenty shillings of our present money. the Irish can work up but a smaller part of their own wool at home. at three and sixpence the bushel. what was its ordinary price. is nearly in the common proportion to that of ox hides. however. twelve shillings would in those times have purchased fourteen bushels and fourfifths of a bushel of wheat. The price of cow hides. is higher in the present than it was in those ancient times. in consequence of the improvement of England. sixteen calf skins at two shillings. Its real value was equal to ten shillings and threepence of our present money. That of sheep skins is a good 208 . we cannot suppose that they were of a very large size. are fully as much discouraged as is consistent with justice and fair dealing. therefore. has been confined to the home market. and where that of Ireland is forced into competition with it. and are therefore obliged to send a greater proportion of it to Great Britain. Through its nominal price. too. the market for English wool. and its valuation in that subsidy ascertains. was in this account valued at the same quantity of silver as 4s. which at this moment (February 1773) I understand to be the common price. and in those ancient times would probably have been reckoned a very good one. instead of being somewhat extended. at least as it was stated upon that particular occasion. the only market they are allowed. gives us their price. which. As the woollen manufactures. viz. such a hide would at present cost only ten shillings. 4/ 5ths of our present money. Wool was commonly paid as a subsidy to the king. its real price. But this seems not to have been the case with raw hides. 4d. is rather somewhat lower. thirtysix sheep skins of two years old at nine shillings. is not in the present times reckoned a bad one. as stated in the above account. would in those times have purchased as much corn as ten shillings and threepence would purchase at present. Fleetwood. But at half-a-crown the stone. An ox hide. five ox hides at twelve shillings. at least in some degree. But at the rate of six shillings and eightpence the quarter. therefore. of Ireland.

but their importation from foreign countries has been subjected to a duty. yet Ireland has not been confined to the market of Great Britain for the sale of its surplus hides.Adam Smith deal above it. besides. It must have some tendency to sink their price in a barbarous. are commonly good for little. which their price would not pay for. that the safety of the commonwealth depends upon the prosperity of their particular manufacture. This circumstance must necessarily have some tendency to sink the price of raw hides produced in a country which does not manufacture them. therefore. and to raise it in an improved and manufacturing country. and comparatively to raise that of those produced in a country which does manufacture them. and though this duty has been taken off from those of Ireland and the plantations (for the limited time of five years only). or of those which are not manufactured at home. The exportation of raw hides has. but within these few years. in convincing the wisdom of the nation. It suffers more by keeping. neither has the commerce of Ireland been in this case oppressed hitherto. but is obliged to export them. are generally killed very young. Our tanners. indeed. have not been quite so successful as our clothiers. either of wool or of raw hides. therefore. That of calves skins. which are fed on improved and 209 . They had probably been sold with the wool. which was done in 1769. Take the whole of the present century at an average. and to the allowing. The price of raw hides is a good deal lower at present than it was a few years ago. owing probably to the taking off the duty upon seal skins. and to raise it in modern times. A salted hide is reckoned inferior to a fresh one. below what it naturally would he. The price both of the great and small cattle. Their skins. to sink it in ancient. It must have had some tendency. The nature of the commodity renders it not quite so proper for being transported to distant markets as wool. in an improved and cultivated country. and sells for a lower price. must. They have accordingly been much less favoured. The hides of common cattle have. for a limited time. on the contrary. In countries where the price of cattle is very low. Whatever regulations tend to sink the price. have some tendency to raise the price of butcher’s meat. duty free. been put among the enumerated commodities which the plantations can send nowhere but to the mother country. been prohibited. in order to support the manufactures of Great Britain. It saves the milk. their real price has probably been somewhat higher than it was in those ancient times. is greatly below it. and declared a nuisance. as was the case in Scotland twenty or thirty years ago. the importation of raw hides from Ireland. which are not intended to be reared in order to keep up the stock. and from the plantations. the calves.

The less there is paid for the one. in increasing the quantity either of wool or of raw hides. provided it is all paid to them. therefore. The perpetual prohibition of the exportation of wool. In an improved and cultivated country. The demand for it would be no greater than before. which is commonly. that is. would. Its price. and along with it both the rent and the profit of all those lands of which cattle was the principal produce. is limited. The wool of Scotland fell very considerably in its price in consequence of the union with England. therefore. however. is not paid by the wool and the hide. has reason to expect from improved and cultivated land. by which it was excluded from the great market of Europe. but very falsely. but by reducing the price of the most important species of small cattle. The whole price of cattle would fall. is indifferent to the landlords and farmers. by the rise in the price of provisions. and the profit which the farmer. of the greater part of the lands of the country. It would not only have reduced the actual value of the greater part of the lands in the kingdom. ascribed to Edward III. though their interest as consumers may. it would have retarded very much its subsequent improvement. The value of the greater part of the lands in the southern counties of Scotland. would have been very deeply affected by this event. In what manner this price is to be divided upon the different parts of the beast. because the greater part of the lands of the country being applicable to no other purpose but the feeding of cattle. and where the wool and the hide made the principal part of the value of those cattle. have been the most destructive regulation which could well have been thought of. they will soon cease to feed them. Their interest as landlords and farmers would in this case be very deeply affected by such regulations. which are chiefly a sheep country. It would be quite otherwise. must be paid by the carcase. in an unimproved and uncultivated country. therefore. in the then circumstances of the country. and confined to the narrow one of Great Britain. and their interest as consumers very little. would be the same as before. where the greater part of the lands could be applied to no other purpose but the feeding of cattle. so far as it depends upon the produce of 210 . The same quantity of butcher’s meat would still come to market.. The fall in the price of the wool and the hide would not in this case raise the price of the carcase. As the efficacy of human industry. their interest as landlords and farmers cannot be much affected by such regulations. If it is not.The Wealth of Nations cultivated land. the more must be paid for the other. the same number would still continue to be fed. had not the rise in the price of butcher’s meat fully compensated the fall in the price of wool. Whatever part of this price. must be sufficient to pay the rent which the landlord.

as they are altogether independent of domestic industry. it is likewise both limited and uncertain. In multiplying another very important sort of rude produce. the efficacy of human industry is not only limited. to buy with. can seldom be supplied. As population increases. or of several years together. and by what may be called the fertility or barrenness of those seas. In multiplying this sort of rude produce. It so far depends not so much upon the quantity which they produce. from requiring only one thousand. its connection with the state of improvement is uncertain. the price of a greater quantity and variety of other goods. the general efficacy of industry in bringing a certain quantity of fish to market. so they necessarily render the efficacy of its efforts more or less uncertain. as upon that which they do not manufacture. and it is of this sort of uncertainty that I am here speaking. too. lakes. Though the success of a particular day’s fishing maybe a very uncertain matter. upon the local situation of the country. I believe. by the number of its lakes and rivers. It has accordingly done so. the quantity of fish that is brought to market. taking the course of a year. A market which. is so. so it is uncertain so far as it depends upon the produce of other countries. by the proximity or distance of its different provinces from the sea. as to this sort of rude produce. but uncertain. therefore. as the annual produce of the land and labour of the country grows greater and greater. as upon this account it may in different countries be the same in very different periods of improvement. As it depends more. and very different in the same period. without employing more than ten times the quantity of labour which had before been sufficient to supply it. or. therefore. and upon the restraints which they may or may not think proper to impose upon the exportation of this sort of rude produce. and it. naturally rises in the progress of improvement. have a greater quantity and variety of other goods. It is limited by the local situation of the country. But it will generally be impossible to supply the great and extended market. comes to require annually ten thousand ton of fish. no doubt. however. perhaps.Adam Smith the country where it is exerted. yet the local situation of the country being supposed. The fish must generally be sought for at a greater distance. more or less in every country. and those buyers. than upon the state of its wealth and industry. be thought is certain enough. there come to be more buyers of fish. The real price of this commodity. 211 . These circumstances. it may. larger vessels must be employed. without employing a quantity of labour greater than in proportion to what had been requisite for supplying the narrow and confined one. and rivers. and more expensive machinery of every kind made use of. what is the same thing.

and to fall with its poverty and depression. must be more or less affected by this fertility or barrenness. As arts and commerce. in bringing or purchasing such superfluities as gold and silver. than countries which have less to spare. Those metals frequently abound in countries which possess no mines. upon the annual produce of its land and labour. their real price. sink more or less in proportion to the fertility. in consequence of which it can afford to employ a greater or a smaller quantity of labour and subsistence. Their quantity in China and Indostan must have been more or less affected by the abundance of the mines of America. their real price. will. It seems even to have no very necessary connection with that of the world in general. which may happen at any particular time to supply the commercial world. and. that of the more precious ones particularly. The quantity of the precious metals which is to be found in any country. The quantity of those metals in the countries most remote from the mines. upon its power of purchasing. of their small bulk and great value. such as the fertility or barrenness of its own mines. but to be altogether uncertain. no doubt. Their quantity. on account of the easy and cheap transportation of those metals. first. is a circumstance which. So far as their quantity in any particular country depends upon the latter of those two circumstances (the fertility or barrenness of the mines which happen to supply the commercial world). and rise in proportion to the barrenness of those mines. upon the fertility or barrenness of the mines which may happen at any particular time to supply the commercial world with those metals. either from its own mines. the efficacy of human industry seems not to be limited. in every particular country. however. Countries which have a great quantity of labour and subsistence to spare. is likely to rise with the wealth and improvement of the country. secondly. The fertility or barrenness of the mines. So far as their quantity in any particular country depends upon the former of those two circumstances (the power of purchasing). or from those of other countries. like that of all other luxuries and superfluities. seems to depend upon two different circumstances. is not limited by any thing in its local situation. may have no sort of connection with the state of industry in a particular country. it is evident. in- 212 . can afford to purchase any particular quantity of those metals at the expense of a greater quantity of labour and subsistence. the real quantity of labour and subsistence which they will purchase or exchange for.The Wealth of Nations In increasing the quantity of the different minerals and metals which are drawn from the bowels of the earth. upon the state of its industry.

and in the other. as a proof. are doubtful. seem to have considered the low money price of corn. more fertile than any that have ever yet been known. Its nominal value. not only of the scarcity of those metals. is a matter of the greatest uncertainty. but its real value. A shilling might. represent no more labour than a penny does at present. is of very little importance to the real wealth and prosperity of the world. This notion is connected with the system of political economy. or. and the dearness and scarcity of those trifling superfluities. as the old ones come to be gradually exhausted. the search for new mines. he who had a penny would be just as rich as he who has a shilling now. it is possible that new mines may be discovered. gradually spread themselves over a greater and a greater part of the earth.Adam Smith deed. The discovery of new mines. to the real value of the annual produce of the land and labour of mankind. it is acknowledged. In this search there seem to be no certain limits. All indications. and the actual discovery and successful working of a new mine can alone ascertain the reality of its value. or even of its existence. but of the poverty and barbarism of the country at the time when it took place. The greater part of the writers who have collected the money price of things in ancient times. in the one case. But in the one case. In the course of a century or two. he who had a shilling in his pocket would be no richer than he who has a penny at present. and it is just equally possible. might represent as much as a shilling does now. the only inconveniency it could suffer from the other. being extended over a wider surface. Whether the one or the other of those two events may happen to take place. in the other. and such as no human skill or industry can insure. that the most fertile mine then known may be more barren than any that was wrought before the discovery of the mines of America. The cheapness and abundance of gold and silver plate would be the sole advantage which the world could derive from the one event. Conclusion of the Digression concerning the Variations in the Value of Silver. may have somewhat a better chance for being successful than when confined within narrower bounds. or to the possible disappointment of human industry. and of goods in general. the quantity of gold and silver by which this annual produce could be expressed or represented. would. however. which represents national wealth as consisting in the abundance and national poverty 213 . the real quantity of labour which it could purchase or command. either to the possible success. and a penny. in other words. would be precisely the same. be very different. no doubt. the high value of gold and silver.

of gold and silver. This increase of the quantity of those metals. the other. some tolerable security that it shall enjoy the fruits of its own labour. Their quantity. however. after Poland. though they have happened nearly about the same time. It is a proof only of the barrenness of the mines which happened at that time to supply the commercial world. their exportation being either prohibited 214 . nor mended the circumstances of its inhabitants. yet have arisen from very different causes. has increased greatly since the discovery of the mines of America. the value of the precious metals is much higher than in any part of Europe. it seems. from the fall of the feudal system. has risen. however. has not. therefore. and the increase of its manufactures and agriculture. has not been owing to the increase of the real wealth of Europe. that the high value of the precious metals can be no proof of the poverty or barbarism of any particular country at the time when it took place. however. the countries which possess the mines. are. The money price of corn. A poor country. therefore. and nearly in the same proportion to the annual produce of its land and labour. Poland. a system which I shall endeavour to explain and examine at great length in the fourth book of this Inquiry. but to the accidental discovery of more abundant mines than any that were known before. I shall only observe at present. is at this day as beggarly a country as it was before the discovery of America. as they come from those countries to all other parts of Europe. The increase of the quantity of gold and silver in Europe. and the value of those metals. has neither improved the manufactures and agriculture of the country. Spain and Portugal. however. so it can as little afford to pay dearer for gold and silver than a rich one.The Wealth of Nations in the scarcity. but with the expense of smuggling. a country much richer than any part of Europe. is not likely to be higher in the former than in the latter. The value of the precious metals. must have increased there as in other places. The one has arisen from a mere accident. so the value of gold and silver has gradually diminished. perhaps the two most beggarly countries in Europe. This diminution of their value. the real value of the precious metals has fallen in Poland. and from the establishment of a government which afforded to industry the only encouragement which it requires. as it cannot afford to buy more. indeed. loaded. in the same manner as in other parts of Europe. must be lower in Spain and Portugal than in any other part of Europe. increased that annual produce. where the feudal system still continues to take place. are two events which. As the wealth of Europe. of the annual produce of its land and labour. not only with a freight and an insurance. and have scarce any natural connection with one another. In China. in which neither prudence nor policy either had or could have any share.

their great abundance in proportion to that of corn. any proof of its poverty and barbarism. those countries. does not affect all sorts of provisions equally. is a most decisive one.Adam Smith or subjected to a duty. a third. or a fourth. we can infer. it has not been succeeded by a much better. or in a more or less civilized one. would affect all sorts of goods equally. it is acknowledged. or a fourth. But though the low money price. the low value of this land in proportion to that of corn land. in proportion to that of corn. with a degree of probability that approaches almost to certainty. is no proof of the wealth and flourishing state of the country where it takes place. the great extent of the land which they occupied in proportion to what was occupied by corn. or of corn in particular. which they commonly do in civilized countries. or of corn in particular. but in its infancy. were fertile or barren. therefore. their quantity must be greater in those countries than in any other part of Europe. or a fifth part of its former value. and that society was at that time. that the mines. has risen much less than that 215 . therefore. and in that country. As the low value of gold and silver. that it was rich or poor. poultry. either of goods in general. that the greater part of its lands were improved or unimproved. consequently. and. consequently. which has been the subject of so much reasoning and conversation. such as cattle. From the high or low money price. But the rise in the price of provisions. It clearly demonstrates. It clearly demonstrates. etc. that the stock and population of the country did not bear the same proportion to the extent of its territory. Taking the course of the present century at an average. however. be no proof of the poverty or barbarism of the times. secondly. we can infer only. In proportion to the annual produce of the land and labour. and. or the low money price either of goods in general. even by those who account for this rise by the degradation of the value of silver. and that it was either in a more or less barbarous state. Though the feudal system has been abolished in Spain and Portugal. either of goods in general. Any rise in the money price of goods which proceeded altogether from the degradation of the value of silver. are poorer than the greater part of Europe. according as silver happened to lose a third. But from the high or low money price of some sorts of goods in proportion to that of others. not that the country was rich or poor. and. and raise their price universally. game of all kinds. or of corn in particular. or a fifth part higher. the low money price of some particular sorts of goods. the price of corn. first. the uncultivated and unimproved state of the far greater part of the lands of the country. which at that time happened to supply the commercial world with gold and silver. so neither is their high value.

it may perhaps be said. be either gradually declining. but by the public fiars of all the different counties of Scotland. If the rise in the price of some sorts of provisions be owing altogether to a fall in the value of silver. notwithstanding this circumstance. the annual produce of its land and labour. will. it can be sufficiently accounted for from the badness of the seasons. however. or upon those of other provisions. it has. as in Portugal and Poland. upon that account be altogether useless. It may not. or a certain fixed revenue in money. The real wealth of the country. or to a fall in the value of silver. and those which have been above assigned. is only to establish a vain and useless distinction. been somewhat lower than it was during the sixty-four last years of the preceding century. which have been collected with great diligence and fidelity by Mr Messance. The opinion. sufficiently explain this rise in those particular sorts of provisions. not only by the accounts of Windsor market. and to ascertain whether this change be owing to a rise in the value of those goods. perhaps. that silver is continually sinking in its value. may. in the present times. will. purchase a much smaller quantity of several sorts of provisions than it would have done during some part of the last century. as 216 . or gradually advancing. by affording an easy proof of the prosperous condition of the country. The same quantity of silver. during the sixty-four first years of the present century. The evidence is more complete than could well have been expected in a matter which is naturally so very difficult to be ascertained. It may be of some use to the public. and by the accounts of several different markets in France. As to the high price of corn during these last ten or twelve years. therefore. This fact is attested. cannot be owing altogether to the degradation of the value of silver. As to the price of corn itself. seems not to be founded upon any good observations. The rise in the price of those other sorts of provisions. and by Mr Dupré de St Maur. I certainly do not pretend that the knowledge of this distinction will enable him to buy cheaper. therefore. and before the late extraordinary course of bad seasons. which can be of no sort of service to the man who has only a certain quantity of silver to go to market with. Some other causes must be taken into the account. either upon the prices of corn.The Wealth of Nations of some other sorts of provisions. from which nothing can be inferred but the fertility of the American mines. without supposing any degradation in the value of silver. even according to the account which has been here given. it is owing to a circumstance. of which the price has actually risen in proportion to that of corn. without having recourse to the supposed degradation of the value of silver.

has received from the great extension of its commerce and navigation. The extension of improvement and cultivation. to its having been rendered fit for producing corn. It raises the price of animal food. or whether it ought to be augmented at all. It may surely be of some use. But if this rise of price is owing to the increased value. it is owing to a circumstance which indicates. must afford to the landlord anti farmer the rent and profit of corn land. besides. If it is not augmented. which in the rude state of agriculture are confined to the kitchen-garden. and not more labour than corn. and to be raised by the plough. the two most important improvements which the agriculture of Europe. But if this rise in the price of some sorts of provisions be owing to a rise in the real value of the land which produces them. too. ought certainly to be augmented in proportion to the extent of this fall. in consequence of more extended improvement and good cultivation. the most important. or. Many sorts of vegetable food. or what is called Indian corn. in its improved state. It may. that of every sort of animal food. either in what proportion any pecuniary reward ought to be augmented. in regulating the pecuniary reward of some of its inferior servants. If. and raised only by the spade. Such are potatoes and maize. in the progress of improvement. to have so decisive a proof of the increasing value of by far the greatest. because. The improvements of agriculture. come much cheaper to market. I believe. therefore. which requiring less land. perhaps. in consequence of the improved fertility of the land which produces such provisions. and the most durable part of its wealth. as it necessarily raises more or less. etc. so it as necessarily lowers that of. be of some use to the public. at least. The land constitutes by far the greatest. in proportion to the price of corn. cabbages. carrots. it may give some satisfaction to the public.Adam Smith in most other parts of Europe. by increasing the fertility of the land. provided it was not too large before. introduce many sorts of vegetable food. the real price of one species of food necessarily rises. too. and it becomes a matter of more 217 . it increases its abundance. because a great part of the land which produces it. or. in the clearest manner. that of another as necessarily falls. being rendered fit for producing corn. their real recompence will evidently be so much diminished. every sort of vegetable food. to its increased fertility. such as turnips. it becomes a much nicer matter to judge. It lowers the price of vegetable food. to be introduced into common fields. and the most durable part of the wealth of every extensive country. the most important. If this rise in the price of some sorts of provisions be owing to a fall in the value of silver. which Europe itself. the prosperous and advancing state of the country. their pecuniary reward. come.

in consequence of the improvement of land. or venison. beer. That of the manufacturing workmanship diminishes. in which the necessary rise in the real price of the rude materials will more than compensate all the advantages which improvement can introduce into the execution of the work In carpenters’ and joiners’ work. malt. wild-fowl. There are. in all of them without exception. however. candles. The circumstances of the poor. 218 . It is the natural effect of improvement. cannot surely be so much distressed by any rise in the price of poultry. But in all cases in which the real price of the rude material either does not rise at all. in consequence of the flourishing circumstances of the society. In the present season of scarcity. by the artificial rise which has been occasioned by taxes in the price of some manufactured commodities. the natural rise in the price of any other sort of rude produce cannot much affect them. cannot much affect the circumstances of the inferior ranks of people. indeed. When the real price of butcher’s meat has once got to its height (which. through a great part of England. the high price of corn no doubt distresses the poor. the real price of labour should rise very considerably. ale. with regard to every sort. all of which are the natural effects of improvement. perhaps. any rise which can afterwards happen in that of any other sort of animal food. it seems to have done through a great part of England more than a century ago). a few manufactures. soap. as of salt. a much smaller quantity of labour becomes requisite for executing any particular piece of work. fish. They suffer more. yet the great diminution of the quantity will generally much more than compensate the greatest rise which can happen in the price. the greatest dexterity. as they must be relieved by the fall in that of potatoes. etc. when corn is at its ordinary or average price. or does not rise very much. and though. and in the coarser sort of cabinet work.The Wealth of Nations nicety to judge how far the rise in the one may be compensated by the fall in the other. of greater dexterity. leather. In consequence of better machinery. and the most proper division and distribution of work. But in times of moderate plenty. Effects of the Progress of Improvement upon the real Price of Manufactures. and of a more proper division and distribution of work. will more than compensate all the advantages which can be derived from the best machinery. to diminish gradually the real price of almost all manufactures. except perhaps that of hogs flesh. the necessary rise in the real price of barren timber. perhaps. that of the manufactured commodity sinks very considerably.

is said. shall forfeit forty shillings for every yard so sold. a very great reduction of price. when the labour was probably much less subdivided. has. may now perhaps be had for twenty shillings. than those of which the materials are the coarser metals. being the 4th of Henry VII. to have fallen a good deal in proportion to its quality. in all the toys which are made of the coarser metals. It has.. and the machinery employed much more imperfect. it was said. that “whosoever shall sell by retail a broad yard of the finest scarlet grained. In 1487. however. is so very disputable a matter. during the same period. and in all those goods which are commonly known by the name of Birmingham and Sheffield ware. who in many cases acknowledge that they can produce no work of equal goodness for double or even for triple the price. But the reduction will appear much more sensible and undeniable. which may have occasioned some reduction of price. was. I have been assured. In the work of cutlers and locksmiths. it was enacted. That of the Yorkshire cloth. A better movement of a watch. been most remarkable in those manufactures of which the materials are the coarser metals. There are perhaps no manufactures. containing about the same quantity of silver as four-and-twenty shillings of our present money. which is made altogether of English wool. which consists altogether of Spanish wool. during the course of the present century.Adam Smith This diminution of price has. There may. than about the middle of the last century could have been bought for twenty pounds.” Sixteen shillings. however. owing. or in which the machinery employed admits of ’ a greater variety of improvements. In the clothing manufacture there has. if we compare the price of this manufacture in the present times with what it was in a much remoter period. in which the division of labour can be carried further. therefore. been no such sensible reduction of price. or of other grained cloth of the finest making. In the clothing manufacture. in the course of the present and preceding century. risen somewhat in proportion to its quality. been sufficient to astonish the workmen of every other part of Europe. reckoned not an unreasonable price for 219 . that I look upon all information of this kind as somewhat uncertain. on the contrary. however. during the same period. and the machinery employed is not very different. towards the end of the fifteenth century. Quality. have been some small improvements in both. though not altogether so great as in watch-work. than it is at present. there has been. indeed. above sixteen shillings. to a considerable rise in the price of the material. at that time. The price of superfine cloth. the division of labour is nearly the same now as it was a century ago. within these five-and-twenty or thirty years.

it is probable. Tenpence was then reckoned what is called the moderate and reasonable price of a bushel of wheat. restraining the luxury and extravagance of the poor. The reduction in the real price of the coarse manufacture. But the Yorkshire cloth which is now sold at four shillings the yard. such cloth. in those times. would be worth eight shillings and ninepence. has not been so great as in that of the fine. and as this is a sumptuary law. too. have been equal to at least three pounds six shillings and sixpence of our present money. This is a sumptuary law. was the price of two quarters and more than three bushels of wheat. The man who bought it must have parted with the command of a quantity of labour and subsistence equal to what that sum would purchase in the present times. may. In 1463. therefore. therefore. the real price of a yard of fine cloth must. Their clothing. at three shillings and sixpence the bushel. was the price of two bushels and near two pecks of wheat. therefore. For a yard of this cloth the poor servant must have parted with the power of purchasing a quantity of subsistence equal to what eight shillings and ninepence would purchase in the present times. shall use or wear in their clothing any cloth above two shillings the broad yard. by the same law. reckoned the average price of a quarter of wheat. being the 3rd of Edward IV. in proportion to the quality. Even the money price of their clothing. therefore. though considerable. and that of the present times is most probably much superior. Six shillings and eightpence was then. is probably much superior to any that was then made for the wearing of the very poorest order of common servants. even upon this supposition. which in the present times. nor servant to any artificer inhabiting out of a city or burgh. The real price is certainly a good deal cheaper. Sixteen shillings.The Wealth of Nations a yard of the finest cloth. equal to 220 . two shillings contained very nearly the same quantity of silver as four of our present money. had commonly been much more expensive. Valuing a quarter of wheat in the present times at eight-and-twenty shillings.” In the 3rd of Edward IV. should be supposed equal. the money price of the finest cloth appears to have been considerably reduced since the end of the fifteenth century. A guinea may be reckoned the highest price in the present times. yet. therefore. of which the price should exceed fourteen-pence the pair. and long afterwards. it was enacted. that “no servant in husbandry nor common labourer. But its real price has been much more reduced. The same order of people are. be somewhat cheaper in the present than it was in those ancient times. Even though the quality of the cloths. had usually been sold somewhat dearer.. Two shillings. prohibited from wearing hose.

The three capital improvements are. which may have been one of the causes of their dearness. will perform more than double the quantity of work. in those ancient times. at three and sixpence the bushel. explain to us why the real price both of the coarse and of the fine manufacture was so much higher in those ancient than it is in the present times. in any other part of Europe north of the Alps. have paid what was really equivalent to this price for them. Neither wind nor water mills of any kind were known in England so early as the beginning of the sixteenth century. a greater quantity. Their hose were made of common cloth. It has since received three very capital improvements. The coarse manufacture probably was. She received them as a present from the Spanish ambassador. probably. many smaller ones. When they were brought thither. or exchanged for the price of. must have been extremely tedious and troublesome. of which it may be difficult to ascertain either the number or the importance. first. an operation which. Both in the coarse and in the fine woollen manufacture. in a still greater proportion. the winding of the worsted and woollen yarn. the art of knitting stockings was probably not known in any part of Europe. therefore. It was probably a household manufacture. nor. perhaps. the exchange of the rock and spindle for the spinningwheel. instead of treading it in water. The consideration of these circumstances may. they must have purchased. the use of several very ingenious machines. 221 . He must however. which facilitate and abridge. The first person that wore stockings in England is said to have been Queen Elizabeth. than it is in the present times. which. Secondly. in which every different part of the work was occasionally performed by all the different members of almost every private family. the machinery employed was much more imperfect in those ancient. so far as I know. the employment of the fulling-mill for thickening the cloth. besides. which in the present times. In the time of Edward IV. or the proper arrangement of the warp and woof before they are put into the loom. They had been introduced into Italy some time before. Thirdly. previous to the invention of those machines. We should in the present times consider this as a very high price for a pair of stockings to a servant of the poorest and lowest order. with the same quantity of labour. would cost five shillings and threepence. But fourteen-pence was in those times the price of a bushel and near two pecks of wheat. carried on in England in the same manner as it always has been in countries where arts and manufactures are in their infancy. in some measure. It cost a greater quantity of labour to bring the goods to market. in those times.Adam Smith about eight-and-twenty pence of our present money.

in those ancient times. This duty. on the other hand. or the produce of the labour of other people. too. besides. but rather to encourage it. or the principal part of their subsistence from it. to raise the real rent of land to increase the real wealth of the landlord. I shall conclude this very long chapter with observing. The real value of the landlord’s share. by people who derived the whole. either directly or indirectly. and must have paid some duty. the real price of the coarse manufacture was. to raise the rent of land directly. which is first the effect of the extended improvement and cultivation. in order that merchants might be enabled to supply. The consideration of these circumstances may. in the same manner as now. that every improvement in the circumstances of the society tends. The work which is performed in this manner. the great men with the conveniencies and luxuries which they wanted. the ancient custom of tonnage and poundage at least. in proportion to that of the fine. indeed. The landlord’s share of the produce necessarily increases with the increase of the produce. the rise in the price of cattle. perhaps. to the king. it has already been observed. The fine manufacture. would not probably be very great. That rise in the real price of those parts of the rude produce of land. and not to be the principal business from which any of them derived the greater part of their subsistence. and in a still greater proportion. but the proportion of his share to the whole produce 222 . comes always much cheaper to market than that which is the principal or sole fund of the workman’s subsistence. for example. It was not then the policy of Europe to restrain. but in the rich and commercial country of Flanders. Conclusion of the Chapter. It was. and it was probably conducted then. was not. in those times. at as easy a rate as possible. his real command of the labour of other people. The extension of improvement and cultivation tends to raise it directly.The Wealth of Nations but so as to be their work only when they had nothing else to do. tends. the importation of foreign manufactures. a foreign manufacture. not only rises with the real value of the produce. and which the industry of their own country could not afford them. in some measure explain to us why. by high duties. so much lower than in the present times. carried on in England. and afterwards the cause of their being still further extended. his power of purchasing the labour.

it appears from what has been just now said. These are the three great. the stock which employs that labour. the price of that part of it. every increase in the quantity of useful labour employed within it.Adam Smith rises with it. what comes to the same thing. the neglect of cultivation and improvement. necessarily promotes or obstructs the other. The interest of the first of those three great orders. it has already been observed. The whole annual produce of the land and labour of every country. all tend. which is over and above his own consumption. to those who live by rent. All those improvements in the productive powers of labour. naturally divides itself. what comes to the same thing. and the rent increases with the produce. An equal quantity of the former becomes thereby equivalent to a greater quantity of the latter. ornaments. to diminish his power of purchasing either the labour. after the rise in its real price. Whatever either promotes or obstructs the one. or. and the profits of stock. or luxuries which he has occasion for. Every increase in the real wealth of the society. the rise in the real price of manufactures from the decay of manufacturing art and industry. from whose revenue that of every other order is ultimately derived. or. tend indirectly to raise the real rent of land. is strictly and inseparably connected with the general interest of the society. for manufactured produce. the wages of labour. or the produce of the labour. the rent of land. and constituent. the produce increases with the increase of the stock which is thus employed in raising it. Whatever reduces the real price of the latter. to those who live by wages. which tend directly to reduce the rent price of manufactures. raises that of the former. the whole price of that annual produce. with the ordinary profit. A greater number of men and cattle are employed in its cultivation. the fall in the real price of any part of the rude produce of land. tends indirectly to raise the real rent of land. original. the declension of the real wealth of the society. A greater proportion of it must consequently belong to the landlord. orders of every civilized society. on the other hand. When the public deliberates 223 . The contrary circumstances. of other people. That produce. and constitutes a revenue to three different orders of people. The landlord exchanges that part of his rude produce. A smaller proportion of it will. and the landlord is enabled to purchase a greater quantity of the conveniencies. A certain proportion of this labour naturally goes to the land. requires no more labour to collect it than before. to lower the real rent of land. into three parts. and to those who live by profit. be sufficient to replace. to reduce the real wealth of the landlord. therefore.

but their own particular purposes. renders them too often. that of those who live by profit. The interest of the second order. if they have any tolerable knowledge of that interest. but comes to them.The Wealth of Nations concerning any regulation of commerce or police. or when the quantity employed is every year increasing considerably. or of understanding its connexion with his own. has not the same connexion with the 224 . they fall even below this. which is necessary in order to foresee and understand the consequence of any public regulation. or to continue the race of labourers. His condition leaves him no time to receive the necessary information. therefore. except upon particular occasions. The order of proprietors may perhaps gain more by the prosperity of the society than that of labourers. When the society declines. is as strictly connected with the interest of the society as that of the first. even though he was fully informed. That indolence which is the natural effect of the ease and security of their situation. In the public deliberations. set on. therefore. he is incapable either of comprehending that interest. but incapable of that application of mind. are never so high as when the demand for labour is continually rising. It is the stock that is employed for the sake of profit. The plans and projects of the employers of stock regulate and direct all the most important operation of labour. when his clamour is animated. and independent of any plan or project of their own. not for his. indeed. which puts into motion the greater part of the useful labour of every society. rise with the prosperity. But though the interest of the labourer is strictly connected with that of the society. his voice is little heard. His employers constitute the third order. but there is no order that suffers so cruelly from its decline. as it were. and less regarded. On the contrary. that of those who live by wages. too often defective in this tolerable knowledge. the proprietors of land never can mislead it. like rent and wages. it has already been shewn. and high in poor countries. and fall with the declension of the society. The interest of this third order. They are the only one of the three orders whose revenue costs them neither labour nor care. at least. and his education and habits are commonly such as to render him unfit to judge. with a view to promote the interest of their own particular order. and it is always highest in the countries which are going fastest to ruin. The wages of the labourer. his wages are soon reduced to what is barely enough to enable him to bring up a family. But the rate of profit does not. They are. When this real wealth of the society becomes stationary. of its own accord. and supported by his employers. and profit is the end proposed by all those plans and projects. not only ignorant. it is naturally low in rich.

and to narrow the competition. As during their whole lives they are engaged in plans and projects. than with regard to the latter. in any particular branch of trade or manufactures. as in their having a better knowledge of their own interest than he has of his. To widen the market may frequently be agreeable enough to the interest of the public. Their superiority over the country gentleman is. 225 . however. As their thoughts. The proposal of any new law or regulation of commerce which comes from this order. To widen the market. from a very simple but honest conviction. whose interest is never exactly the same with that of the public. is always the interest of the dealers. both deceived and oppressed it. is much more to be depended upon with regard to the former of those two objects. their judgment. and not his. in this order. The interest of the dealers. and can only serve to enable the dealers. was the interest of the public. the two classes of people who commonly employ the largest capitals. than about that of the society. however. upon many occasions. is always in some respects different from. that their interest. for their own benefit. by raising their profits above what they naturally would be. even when given with the greatest candour (which it has not been upon every occasion).Adam Smith general interest of the society. but with the most suspicious attention. and who accordingly have. and even opposite to. not only with the most scrupulous. an absurd tax upon the rest of their fellow-citizens. to levy. they have frequently more acuteness of understanding than the greater part of country gentlemen. are commonly exercised rather about the interest of their own particular branch of business. and persuaded him to give up both his own interest and that of the public. that of the public. and ought never to be adopted till after having been long and carefully examined. who have generally an interest to deceive and even to oppress the public. ought always to be listened to with great precaution. but to narrow the competition must always be against it. It comes from an order of men. as that of the other two. and who by their wealth draw to themselves the greatest share of the public consideration. not so much in their knowledge of the public interest. Merchants and master manufacturers are. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity.

The Wealth of Nations # PRICES OF WHEAT Year Prices/Quarter in each year £ 0 0 0 0 0 0 0 0 0 0 1 1 0 0 4 6 0 0 s d 12 0 12 0 13 4 15 0 12 0 3 4 2 0 2 0 16 0 13 5 4 0 0 0 15 0 16 0 16 0 8 0 2 8 16 0 Average of different prices in one year £ s d 1 16 0 0 13 5 1 16 0 10 0 6 0 6 2 8 2 0 3 12 0 0 0 0 0 0 0 2 11 0 Average prices of each year in money of 1776 £ s d 1202 1205 2 0 3 1223 1237 1243 1244 1246 1247 1257 1258 0 17 0 1270 1286 5 12 0 16 16 0 0 9 4 1 8 0 Total 35 9 3 Average 2 19 1¼ 0 10 0 1287 1288 1289 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 1 1 1 1 2 3 9 12 6 2 10 4 8 0 4 6 8 0 4 4 0 0 0 8 0 3 0¼ 0 9 1¾ 0 10 1½ 1 10 4½ 226 .

Adam Smith 1 0 0 0 0 1 1 1 1 2 2 0 2 4 0 0 0 0 16 16 4 7 0 0 10 12 0 4 14 13 0 6 2 3 0 0 0 0 2 0 0 0 0 0 0 0 0 0 8 0 4 1290 1294 1302 1309 1315 1316 2 2 0 1 3 1 10 6 8 8 12 1 0 0 0 0 6 0 4 11 6 1317 1 19 6 5 18 6 1336 1338 Total Average 1339 1349 1359 1361 1363 1369 1379 1387 1390 0 9 0 0 2 0 1 6 8 0 2 0 0 15 0 1 0 0 1 4 0 0 4 0 0 2 0 0 13 4 0 14 0 0 16 0 0 16 0 0 4 4¾ 0 3 4 0 16 0 0 0 23 1 6 10 4 18 0 0 11¼ 8 0 3 0 1 1 2 0 1 7 0 5 2 2 2 4 8 15 0 2 9 4 0 9 4 0 4 8 1 13 7 1 17 6 0 14 5 1401 1407 1416 0 3 10 Total Average 0 8 10 1 12 0 15 9 4 1 5 9½ 227 .

The Wealth of Nations 1423 1425 1434 1435 1439 1440 1444 1445 1447 1448 1449 1451 0 0 1 0 1 1 1 0 0 0 0 0 0 0 8 4 6 5 0 6 4 4 4 4 8 6 5 8 0 0 8 4 0 8 0 4 0 6 0 8 0 0 0 0 4 8 1 3 4 0 4 2 2 6 8 2 8 0 0 4 8 0 0 0 0 0 12 1 0 0 1 0 0 0 9 16 13 10 16 15 1 10 2 15 10 16 3 0 0 4 0 0 4 3¹/³ 8 4 4 0 0 8 Total Average 1453 1455 1457 1459 1460 1463 1464 1486 1491 1494 1495 1497 0 0 0 0 0 0 0 0 1 0 0 0 1 5 4 1 2 7 8 5 0 8 0 2 0 1 8 6 8 4 0 14 8 4 0 3 4 0 0 0 1 10 Total Average 1499 1504 1521 1551 1553 1554 1555 0 0 1 0 0 0 0 4 5 0 8 8 8 8 0 8 0 0 0 0 0 0 10 0 1 17 0 1 2 0 0 6 0 0 5 0 1 11 0 8 9 0 0 14 1 0 0 1 0 0 0 0 6 8 10 8 8 8 8 0 6 0 0 0 0 0 228 .

Adam Smith 1556 1557 0 8 0 8 0 4 0 5 2 13 0 8 0 8 0 8 0 0 0 0 4 0 0 0 0 8 0 0 17 8½ 0 17 8½ 1558 1559 1560 Total Average 1561 1562 1574 1587 1594 1595 1596 1597 1598 1599 1600 1601 0 8 0 0 8 0 2 16 0 1 4 0 3 4 0 2 16 0 2 13 0 4 0 0 5 4 0 4 0 0 2 16 8 1 19 2 1 17 8 1 14 10 0 0 0 6 0 8 8 8 0 10 0 0 0 2½ 0½ 0 8 0 0 8 0 2 0 0 2 3 2 2 4 0 4 16 13 0 0 0 0 0 0 4 12 0 Total Average 4 12 0 2 16 8 1 19 8 1 17 8 1 14 10 28 9 4 2 7 5½ 229 .

The Wealth of Nations PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST PRICED WHEAT AT WINDSOR MARKET. £ s d 2 0 0 2 8 0 3 9 6 2 16 8 1 19 2 1 17 8 1 14 10 1 9 4 1 15 4 1 10 8 1 15 10 1 13 0 1 16 8 2 16 8 2 10 0 1 15 10 1 18 8 2 2 4 2 8 8 2 1 8½ 1 18 8 2 0 4 2 8 8 2 6 8 1 15 4 1 10 4 26)54 0 6½ Average 2 1 6¾ 1595 1596 1597 1598 1599 1600 1601 1602 1603 1604 1605 1606 1607 1608 1609 1610 1611 1612 1613 1614 1615 1616 1617 1618 1619 1620 1621 1622 1623 1 10 2 18 2 12 4 8 0 230 . THE PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THESE TWO MARKET DAYS. ON LADY DAY AND MICHAELMAS. FROM 1595 TO 1764 BOTH INCLUSIVE.

Adam Smith 1624 1625 1626 1627 1628 1629 1630 1631 1632 1633 1634 1635 1636 2 8 2 12 2 9 1 16 1 8 2 2 2 15 3 8 2 13 2 18 2 16 2 16 2 16 16)40 Average 2 10 1637 1638 1639 1640 1641 1646 1647 1648 1649 1650 1651 1652 1653 1654 1655 1656 1657 1658 1659 1660 1661 1662 1663 1664 2 2 2 2 2 2 3 4 4 3 3 2 1 1 1 2 2 3 3 2 3 3 2 2 13 17 4 4 8 8 13 5 0 16 13 9 15 6 13 3 6 5 6 16 10 14 17 0 0 0 4 0 0 0 8 0 4 0 0 0 8 0 0 0 4 10 8 0 0 0 0 0 8 4 6 6 0 4 0 8 0 0 6 0 0 0 6 0 231 .

The Wealth of Nations 1665 1666 1667 1668 1669 1670 1671 1672 1673 1674 1675 1676 1677 1678 1679 1680 1681 1682 1683 1684 1685 1686 1687 1688 1689 1690 1691 1692 1693 1694 1695 1696 1697 1698 1699 1700 2 9 4 1 16 0 1 16 0 2 0 0 2 4 4 2 1 8 2 2 0 2 1 0 2 6 8 3 8 8 3 4 8 1 18 0 2 2 0 2 19 0 3 0 0 2 5 0 2 6 8 2 4 0 2 0 0 2 4 0 2 6 8 1 14 0 1 5 2 2 6 0 1 10 0 1 14 8 1 14 0 2 6 8 3 7 8 3 4 0 2 13 0 3 11 0 3 0 0 3 8 4 3 4 0 2 0 0 60) 153 1 8 Average 2 11 0¹/³ 1701 1 17 8 232 .

Adam Smith 1702 1703 1704 1705 1706 1707 1708 1709 1710 1711 1712 1713 1714 1715 1716 1717 1718 1719 1720 1721 1722 1723 1724 1725 1726 1727 1728 1729 1730 1731 1732 1733 1734 1735 1736 1737 1738 1739 1740 1 1 2 1 1 1 2 3 3 2 2 2 2 2 2 2 1 1 1 1 1 1 1 2 2 2 2 2 1 1 1 1 1 2 2 1 1 1 2 9 16 6 10 6 8 1 18 18 14 6 11 10 3 8 5 18 15 17 17 16 14 17 8 6 2 14 6 16 12 6 8 18 3 0 18 15 18 10 6 0 6 0 0 6 6 6 0 0 4 0 4 0 0 8 10 0 0 6 0 8 0 6 0 0 6 10 6 10 8 4 10 0 4 0 6 6 8 1 12 10 1 6 8 1 8 4 1 18 10 2 3 0 2 0 4 1 18 0 1 15 6 1 18 6 2 10 8 10) 18 12 8 233 .

The Wealth of Nations 1 17 3½ 2 6 8 1 14 0 1 4 10 1 4 10 1 7 6 1 19 0 1 14 10 1 17 0 1 17 0 1 12 6 10) 16 18 2 1 13 9¾ 1741 1742 1743 1744 1745 1746 1747 1748 1749 1750 2 1 1 1 1 1 1 1 1 1 6 14 4 4 7 19 14 17 17 12 8 0 10 10 6 0 10 0 0 6 1751 1752 1753 1754 1755 1756 1757 1758 1759 1760 1761 1762 1763 1764 1 18 6 2 1 10 2 4 8 1 13 8 1 14 10 2 5 3 3 0 0 2 10 0 1 19 10 1 16 6 1 10 3 1 19 0 2 0 9 2 6 9 64) 129 13 Average 2 0 6¾ 6 234 .

till he has not only completed. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business. but sold. But this purchase cannot be made till such time as the produce of his own labour has not only been completed. sufficient to maintain him. A weaver cannot apply himself entirely to his peculiar business. till such time at least as both these events can be brought about. a stock sufficient to maintain him. and to supply him with the materials and tools of his work. which he purchases with the produce. what is the same thing. unless there is before-hand stored up somewhere. and to supply him with the materials and tools of his work. in which exchanges are seldom made. as they occur. But when the division of labour has once been thoroughly introduced. A stock of goods of different kinds. in order to carry on the business of the society. by his own industry. with the trees and the turf that are nearest it. he repairs it. either in his own possession. when his coat is worn out. the produce of a man’s own labour can supply but a very small part of his occasional wants. it is not necessary that any stock should be accumulated. The far greater part of them are supplied by the produce of other men’s labour. 235 . of his own.Adam Smith BOOK II OF THE NATURE. must be stored up somewhere. Every man endeavours to supply. his own occasional wants. When he is hungry. he goes to the forest to hunt. therefore. he clothes himself with the skin of the first large animal he kills: and when his hut begins to go to ruin. or in that of some other person. AND EMPLOYMENT OF STOCK INTRODUCTION IN THAT RUDE STATE OF SOCIETY. in which there is no division of labour. with the price of the produce. or. and in which every man provides every thing for himself. as well as he can. or stored up before-hand. ACCUMULATION. but sold his web.

must be accumulated before-hand. and as the operations of each workman are gradually reduced to a greater degree of simplicity. and a greater stock of materials and tools than what would have been necessary in a ruder state of things. This book is divided into five chapters. in the nature of things. As the division of labour advances. a variety of new machines come to be invented for facilitating and abridging those operations. In the following book.The Wealth of Nations As the accumulation of stock must. but. therefore. therefore. The person who employs his stock in maintaining labour. both to make among his workmen the most proper distribution of employment. I have endeavoured to shew what are the different parts or branches into which the stock. But the number of workmen in every branch of business generally increases with the division of labour in that branch. in consequence of that increase. and to furnish them with the best machines which he can either invent or afford to purchase. As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour. or it may be lent to some other person. may either be employed by the person to whom it belongs. or to the number of people whom it can employ. be previous to the division of labour. or rather it is the increase of their number which enables them to class and subdivide themselves in this manner. naturally divides itself. I have endeavoured to explain the nature and operation of money. and the effects of the different employments of those capitals. in order to give constant employment to an equal number of workmen. not only increases in every country with the increase of the stock which employs it. In the first chapter. are generally in proportion to the extent of his stock. In the third and fourth 236 . In the second. I have endeavoured to explain the nature of stock. Such are in general the effects of the increase of stock upon industry and its productive powers. the same quantity of industry produces a much greater quantity of work. The quantity of materials which the same number of people can work up. either of an individual. necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. considered as a particular branch of the general stock of the society. The stock which is accumulated into a capital. His abilities. therefore. or of a great society. The quantity of industry. in both these respects. He endeavours. increases in a great proportion as labour comes to be more and more subdivided. the effects of its accumulation into capital of different kinds. an equal stock of provisions. so that accumulation naturally leads to this improvement. so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated.

237 . both of national industry. I have endeavoured to examine the manner in which it operates in both these situations.Adam Smith chapters. and of the annual produce of land and labour. The fifth and last chapter treats of the different effects which the different employments of capital immediately produce upon the quantity.

and the like. His whole stock. First. derived from his labour only. as it gradually comes in. and which are not yet entirely consumed. such as a stock of clothes. in this case. and selling them again with a profit. and which consists either. to acquire something which may supply its place before it be consumed altogether. That part which he expects is to afford him this revenue is called his capital. or all of these three articles. and it is only by means of such circulation. first. In one or other. consists the stock which men commonly reserve for their own immediate consumption. and the money yields him as little till it is again exchanged for goods. he seldom thinks of deriving any revenue from it. household furniture. while it either remains in his possession. There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer. or successive changes. thirdly. by his labour. This is the state of the greater part of the labouring poor in all countries. But when he possesses stock sufficient to maintain him for months or years. or purchasing goods. he naturally endeavours to derive a revenue from the greater part of it. therefore. reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. and returning to him in another. His revenue is. or. in that portion of his whole stock which was originally reserved for this purpose. The capital employed in this manner yields no revenue or profit to its employer. that it 238 . from whatever source derived. is distinguished into two parts.The Wealth of Nations CHAPTER I OF THE DIVISION OF STOCK WHEN THE STOCK which a man possesses is no more than sufficient to maintain him for a few days or a few weeks. secondly. and endeavours. The other is that which supplies his immediate consumption. His capital is continually going from him in one shape. it maybe employed in raising. manufacturing. or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money. He consumes it as sparingly as he can. in his revenue. or. in such things as had been purchased by either of these in former years.

is brought in neither for labour nor for sale. are a circulating capital. it may be employed in the improvement of land. and very great in others. the slit-mill. and by parting with their maintenance. that which is employed in the wages and maintenance of his labouring servants is a circulating capital. The farmer makes his profit by parting with them. A master tailor requires no other instruments of trade but a parcel of needles. A flock of sheep or a herd of cattle. both for drawing out the water. and of the other by parting with it. in a breeding country. Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. Those of the master shoemaker are a little. In coal works. The far greater part of the capital of all such master artificers. Such capitals. is very small in some. is frequently still more expensive. therefore. may very properly be called circulating capitals. He makes a profit of the one by keeping it in his own possession. the machinery necessary. may very properly be called fixed capitals. though but a very little. Both the price and the maintenance of the cattle which are bought in and fattened. Those of the weaver rise a good deal above those of the shoemaker. He has occasion for no machines or instruments of trade. or circulating any further. The price or value of his labouring cattle is a fixed capital. the furnace for melting the ore. This part. That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed. or in such like things as yield a revenue or profit without changing masters. not for labour. in the same manner as that of the instruments of husbandry. their maintenance is a circulating capital. and repaid. however. that. by the price of the work. The capital of a merchant. therefore. is altogether a circulating capital. the forge. but in order to make a profit by their 239 . unless his shop or warehouse be considered as such. in the purchase of useful machines and instruments of trade. are instruments of trade which cannot be erected without a very great expense. more expensive. The farmer makes his profit by keeping the labouring cattle. or in the price of their materials. for example. however. Such capitals. is circulated either in the wages of their workmen.Adam Smith can yield him any profit. Different occupations require very different proportions between the fixed and circulating capitals employed in them. In other works a much greater fixed capital is required. and mines of every kind. and for other purposes. with a profit. in the same manner as that of the labouring servants. but for sale. In a great ironwork. Secondly. for example.

make a part of this first portion. it cannot yield any to the public. it is a trade to let out masquerade dresses for a night. therefore. In countries where masquerades are common. and therefore does not properly circulate. in the same manner. if it is to be the dwelling-house of the proprietor. The general stock of any country or society is the same with that of all its inhabitants or members. must always be ultimately drawn from some other source of revenue. The stock that is laid out in a house. either of an indi- 240 . and. The revenue. A dwelling-house. Many people let furnished houses. however. by their milk. therefore. contributes nothing to the revenue of its inhabitant.The Wealth of Nations wool. Undertakers let the furniture of funerals by the day and by the week. may yield a revenue to its proprietor. The whole value of the seed. Upholsterers frequently let furniture by the month or by the year. each of which has a distinct function or office. If it is to be let to a tenant for rent. and thereby serve in the function of a capital to particular persons. nor serve in the function of a capital to it. and thereby serve in the function of a capital to him. either from labour. but by its increase. which he derives. make a part of his expense. and though it is. household furniture. as the house itself can produce nothing. in the price of the wool. it never changes masters. Their maintenance is a circulating capital. subsisting at anyone time in the country. The first is that portion which is reserved for immediate consumption. as such. The whole stock of mere dwelling-houses. the tenant must always pay the rent out of some other revenue. and the revenue of the whole body of the people can never be in the smallest degree increased by it. and get a rent. too. which. no doubt. Clothes and household furniture. Of all parts of the stock. but for that of the furniture. however. is properly a fixed capital. and it comes back with both its own profit and the profit upon the whole price of the cattle. the milk. It consists in the stock of food. extremely useful to him. and not of his revenue. or to afford any revenue to its owner. and the increase. not only for the use of the house. or land. The profit is made by parting with it. not by its sale. it is as his clothes and household furniture are useful to him. Though it goes backwards and forwards between the ground and the granary. naturally divides itself into the same three portions. ceases from that moment to serve in the function of a capital. etc. Though a house. The farmer makes his profit. which is derived from such things. but which are not yet entirely consumed. that it affords no revenue or profit. too. clothes. or stock. sometimes yield a revenue. and by their increase. which have been purchased by their proper consumers. and of which the characteristic is. The profit is made by keeping them. is a fixed capital.

An improved farm may very justly be regarded in the same light as those useful machines which facilitate and abridge labour. a stock of furniture half a century or a century. always costs a real expense. The second of the three portions into which the general stock of the society divides itself. They are a sort of instruments of trade. which is a capital fixed and realized. Those talents. of the improvements of land. manuring. study. Though the period of their total consumption. is more distant. as it were. First. These are very different from mere dwelling-houses. The acquisition of such talents. The third and last of the three portions into which the general stock of the society naturally divides itself. of the acquired and useful abilities of all the inhabitants and members of the society. Fourthly. etc. stables. or apprenticeship. though it costs a certain expense. is the fixed capital. that it affords a revenue or profit without circulating or changing masters. is the circulating capital. It consists chiefly of the four following articles. and which. of which the 241 . of all those profitable buildings which are the means of procuring a revenue. in his person. of which the characteristic is. repays that expense with a profit. and reducing it into the condition most proper for tillage and culture. they are still as really a stock reserved for immediate consumption as either clothes or household furniture. which facilitate and abridge labour. but to the person who possesses them. however. and pays that rent for them. so do they likewise that of the society to which he belongs.Adam Smith vidual or of a society. warehouses. of what has been profitably laid out in clearing. Thirdly. frequently requiring no other repairs than the most profitable application of the farmer’s capital employed in cultivating it. but a stock of houses. by the maintenance of the acquirer during his education. of all useful machines and instruments of trade. A stock of clothes may last several years. with all their necessary buildings. Secondly. inclosing. as they make a part of his fortune. may last many centuries. and may be considered in the same light. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour. draining. granaries. and by means of which an equal circulating capital can afford a much greater revenue to its employer. such as shops. reserved for immediate consumption. work-houses. what is laid out in houses is most slowly consumed. not only to the proprietor who lets them for a rent. farm-houses. An improved farm is equally advantageous and more durable than any of those machines. well built and properly taken care of.

the grazier. They require. Fourthly. and lastly. however improved. of the money. and building which are not yet made up into any of those three shapes. but which remain in the hands of the growers. three—provisions. To maintain and augment the stock which maybe reserved for immediate consumption. the carpenters and joiners. materials. the corn-merchant. of the provisions. in this manner. without the circulating capital. regularly withdrawn from it. and not yet disposed of or distributed to the proper consumers. too. First. the timber-merchants. a capital of the same kind to keep them in constant repair. the brewer. The circulating capital consists. the mercers. or more or less manufactured. and from the sale of which they expect to derive a profit. of the stock of provisions which are in the possession of the butcher. the farmer. the jeweller. Thirdly. or in the stock reserved for immediate consumption. of the materials. and finished work of all kinds that are in the hands of their respective dealers. the brick-makers. which affords the materials they are employed upon. of clothes. furniture. and placed either in the fixed capital. the cabinet-maker. It is composed likewise of four parts. the goldsmith. etc. Land. the manufacturers. etc. Secondly. and of the money that is necessary for circulating and distributing them to those who are finally to use or to consume them. whether altogether rude. which furnishes the materials of which they are made. and finished work. No fixed capital can yield any revenue but by means of a circulating capital The most useful machines and instruments of trade will produce nothing. but which is still in the hands of the merchant and manufacturer. are either annually or in a longer or shorter period. materials. and drapers. Every fixed capital is both originally derived from. which maintains the labourers who cultivate and collect its produce. All useful machines and instruments of trade are originally derived from a circulating capital. of the work which is made up and completed. and the maintenance of the workmen who employ them. will yield no revenue without a circulating capital. by means of which all the other three are circulated and distributed to their proper consumers. Of these four parts. and the maintenance of the workmen who make them. is the sole end and purpose both of the fixed and circu- 242 . a circulating capital. such as the finished work which we frequently find ready made in the shops of the smith. that it affords a revenue only by circulating or changing masters. the china-merchant. etc. and requires to be continually supported by.The Wealth of Nations characteristic is.

is drawn what is necessary for maintaining and augmenting that part of it which consists in money. Thus the farmer annually replaces to the manufacturer the provisions which he had consumed. This is the real exchange that is annually made between those two orders of people. require continual. mines. and it is the produce of the surface of the earth which extracts the minerals from its bowels. though no doubt much smaller supplies. it must in its turn require continual supplies without which it would soon cease to exist. For though. furniture. in order to be placed in the other two branches of the general stock of the society. it must. These supplies are principally drawn from three sources. Lands. materials. These afford continual supplies of provisions and materials. too. in the ordinary course of business. because it seldom happens that the farmer sells his corn and his cattle. of mines. which he wants. From mines. Land even replaces. and sometimes. It is the produce of land which draws the fish from the waters. in part at least. continually withdrawn from the circulating capital. and finished work. are directly bartered for one another. to the very same person of whom he chuses to purchase the clothes. The produce of land. though it seldom happens that the rude produce of the one. therefore. So great a part of the circulating capital being continually withdrawn from it. is in proportion to the extent and proper application of the 243 . and lodges the people. with a profit not only those capitals. be either lost or sent abroad. and of fisheries. and fisheries. and their produce replaces. the produce of land. his rude produce for money. but all the others in the society. and fisheries. when their natural fertility is equal. necessarily withdrawn from it. with which he can purchase. too. and must. be wasted and worn out at last. in order to be placed in the other two branches of the general stock of the society. clothes. and the manufacturer replaces to the farmer the finished work which he had wasted and worn out in the same time.Adam Smith lating capitals. wherever it is to be had. and instruments of trade. and the manufactured produce of the other. the capitals with which fisheries and mines are cultivated. mines. He sells. the manufactured produce he has occasion for. It is this stock which feeds. like all other things. like the other three. however. Their riches or poverty depend upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. of which part is afterwards wrought up into finished work and by which are replaced the provisions. and the materials which he had wrought up the year before. therefore. require all both a fixed and circulating capital to cultivate them. this part is not. his flax and his wool.

copper. who. It consisted in such treasure as was found concealed in the earth. it is a stock reserved for immediate consumption. in order to have it always at hand to carry with them to some place of safety. they frequently bury or conceal a great part of their stock. in most other governments of Asia. 244 . whether it be his own. and equally well applied. It was put upon the same footing with gold and silver mines. and neither to the finder nor to the proprietor of the land. and coal were. does not employ all the stock which he commands. in case of their being threatened with any of those disasters to which they consider themselves at all times exposed. in procuring either present enjoyment or future profit. I believe. that it was always considered as belonging to the sovereign. If it is employed in procuring present enjoyment. as so important an object. If it is employed in procuring future profit. indeed. where men are continually afraid of the violence of their superiors.The Wealth of Nations capitals employed about them. or borrowed of other people. were never supposed to be comprehended in the general grant of the lands. unless the right to it had been conveyed to the latter by an express clause in his charter. It seems to have been a common practice among our ancestors during the violence of the feudal government. in those times. tin. though mines of lead. In those unfortunate countries. In all countries where there is a tolerable security. A man must be perfectly crazy. This is said to be a common practice in Turkey. and. it must procure this profit either by staying with him. or by going from him. Treasure-trove was. without a special clause in the charter. where there is a tolerable security. This was regarded. in the other it is a circulating capital. every man of common understanding will endeavour to employ whatever stock he can command. as things of smaller consequence. and to which no particular person could prove any right. in these times. it is in proportion to their natural fertility. in Indostan. which. considered as no contemptible part of the revenue of the greatest sovereigns in Europe. in some one or other of those three ways. In the one case it is a fixed. When the capitals are equal.

after deducting the expense of management. and a third the rent of the land which had been employed in producing and bringing them to market: that there are. or the rent of their land. the wages of labour. is thus divided among. The whole price or exchangeable value of that annual produce must resolve itself into the same three parts. and all other necessary charges. OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL IT HAS BEEN SHOWN in the First Book. that the price of the greater part of commodities resolves itself into three parts. yet. so may we likewise in the revenue of all the inhabitants of a great country. the wages of labour. without hurting his estate. as in the rent of a private estate. either as the wages of their labour. some commodities of which the price is made up of two of those parts only. he can afford to place in his stock re- 245 . taken separately. but that the price of every commodity necessarily resolves itself into some one or other. But though the whole value of the annual produce of the land and labour of every country. and a very few in which it consists altogether in one. of repairs. CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY. it must be so with regard to all the commodities which compose the whole annual produce of the land and labour of every country. every part of it which goes neither to rent nor to wages. and constitutes a revenue to. and be parcelled out among the different inhabitants of the country. of which one pays the wages of the labour. indeed. another the profits of the stock. or what. the profits of their stock. the neat rent. its different inhabitants. being necessarily profit to some body. it has been observed. with regard to every particular commodity.Adam Smith CHAPTER II OF MONEY. and the profits of stock. The gross rent of a private estate comprehends whatever is paid by the farmer. what remains free to the landlord. taken complexly. we distinguish between the gross rent and the neat rent. Since this is the case. or all. of those three parts.

This support. and the labour of a certain number of workmen. or to spend upon his table. In a farm where all the necessary buildings. not to their gross. In manufactures. without encroaching upon their capital. the same number of labourers and labouring cattle will raise a much greater produce. too. and amusements. the price to that of the workmen. and amusements. and lodging. fences. A certain quantity of materials. and increases the annual produce by a much greater value than that of the support which such improvements require. assisted with the best machinery. is in proportion. the same number of hands. can ever make any part of it. highly advantageous 246 . Their real wealth. their circulating capital. but not furnished with equal conveniencies. or spend upon their subsistence. drains. still requires a certain portion of that produce. than in one of equal extent and equally good ground. their profitable buildings. are in the most perfect good order. however. But in other sorts of labour. conveniencies.The Wealth of Nations served for immediate consumption. The expense which is properly laid out upon a fixed capital of any kind. the ornaments of his house and furniture. The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour. nor the produce of the labour necessary for fashioning those materials into the proper form. they can place in their stock reserved for immediate consumption. but to his neat rent. or to enable the same number of labourers to perform a much greater quantity of work. are thus diverted to another employment. etc. The intention of the fixed capital is to increase the productive powers of labour. communications. will work up a much greater quantity of goods than with more imperfect instruments of trade. The whole expense of maintaining the fixed capital must evidently be excluded from the neat revenue of the society. both the price and the produce go to this stock. is always repaid with great profit. His real wealth is in proportion. or what. Neither the materials necessary for supporting their useful machines and instruments of trade. conveniencies. The price of that labour may indeed make a part of it. the subsistence and conveniencies of the society. their fixed. whose subsistence. his private enjoyments and amusements. secondly. not to his gross. are augmented by the labour of those workmen. the produce to that of other people. the neat revenue. but to their neat revenue. what remains free to them. equipage. as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption. and. clothing. after deducting the expense of maintaining first. etc. both of which might have been immediately employed to augment the food.

besides what is necessary for maintaining the fixed capital. A certain quantity of materials. provisions. The expense of maintaining the fixed capital in a great country. and the neat rent is necessarily augmented. The circulating capital of a society is in this respect different from that of an individual. It is upon this account that all such improvements in mechanics. and the labour of a certain number of workmen. are always regarded as advantageous to every society. The maintenance of those three parts of the circulating capital. it is not upon that account totally 247 . who employs a thousand a-year in the maintenance of his machinery. and makes a part of the neat revenue of the society. will naturally be augmented. but still different from this one. can afterwards be applied to augment the quantity of work which that or any other machinery is useful only for performing. therefore. which his machinery was useful only for performing. But though the whole expense of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society. and placed either in the fixed capital of the society. are regularly withdrawn from it. or in their stock reserved for immediate consumption. if he can reduce this expense to five hundred. and consequently both the gross and the neat rent of the landlord. it has already been observed. to be wrought up by an additional number of workmen. materials. therefore. and finished work. will naturally employ the other five hundred in purchasing an additional quantity of materials. But though the circulating capital of every individual makes a part of that of the society to which he belongs. and with it all the advantage and conveniency which the society can derive from that work. When by a more proper direction. the three last. as enable the same number of workmen to perform an equal quantity of work with cheaper and simpler machinery than had been usual before. it is not the same case with that of maintaining the circulating capital. Of the four parts of which this latter capital is composed. withdraws no portion of the annual produce from the neat revenue of the society. which had before been employed in supporting a more complex and expensive machinery. The expense of repairs may frequently be necessary for supporting the produce of the estate. That of an individual is totally excluded from making any part of his neat revenue. however.Adam Smith indeed. may very properly be compared to that of repairs in a private estate. goes all to the latter. the gross rent remains at least the same as before. The undertaker of some great manufactory. The quantity of that work. it can be diminished without occasioning any diminution of produce. Whatever portion of those consumable goods is not employed in maintaining the former. money. which must consist altogether in his profits.

In computing either the gross or the neat revenue of any society. the subsistence. as the machines and instruments of trade. make no part either of the gross or of the neat revenue of either. and of very curious labour. in the same manner. so far as they affect the revenue of the society. Money.The Wealth of Nations excluded from making a part likewise of their neat revenue. deductions from the neat revenue of the society. etc. so money. may regularly replace their value to him. and afterwards to support them. The great wheel of circulation is altogether different from the goods which are circulated by means of it. is employed in supporting that great but expensive instrument of commerce. from a revenue derived from other funds. require a certain expense. The fixed capital. Though the whole goods in a merchant’s shop must by no means be placed in his own stock reserved for immediate consumption. and amusements of individuals. When properly explained and understood. The revenue of the society consists altogether in those goods. both which expenses. which compose the fixed capital either of an individual or of a society. conveniencies. who. A certain quantity of very valuable materials. 248 . is the only part of the circulating capital of a society. both which expenses. bear a very great resemblance to one another. conveniencies. and afterwards to support it. though they make a part of the gross. makes itself no part of that revenue. we must always. and that part of the circulating capital which consists in money. etc. instead of augmenting the stock reserved for immediate consumption. by means of which the whole revenue of the society is regularly distributed among all its different members. so the stock of money which circulates in any country must require a certain expense. and amusements. from the whole annual circulation of money and goods. they may in that of other people. of which not a single farthing can ever make any part of either. are. It is the ambiguity of language only which can make this proposition appear either doubtful or paradoxical. therefore. First. though they make a part of the gross. Secondly. as those machines and instruments of trade. and not in the wheel which circulates them. are deductions from the neat revenue of the society. by means of which every individual in the society has his subsistence. without occasioning any diminution either of his capital or of theirs. gold and silver. it is almost self-evident. of which the maintenance can occasion any diminution in their neat revenue. together with its profits. deduct the whole value of the money. first to collect it. regularly distributed to him in their proper proportions. first to erect them.

as in what he can get for it. or the quantity and quality of the necessaries and conveniencies of life in which he can with propriety indulge himself. to circulate in that country. not in gold. which some writers have computed. or to the power of purchasing which the possession of it conveys. we mean commonly to ascertain what is or ought to be his way of living. we mean not only to express the amount of the metal pieces of which it is composed. But when we say that a man is worth fifty or a hundred pounds a-year. like a bill upon a bankrupt. to the guinea’s worth rather than to the guinea. Thus. and amusements. or rather have supposed. by any particular sum of money. and to the latter more properly than to the former. his real weekly revenue. so are his real riches. but in a weekly bill for a guinea. in the same manner. A guinea may be considered as a bill for a certain quantity of necessaries and conveniencies upon all the tradesmen in the neighbourhood The revenue of the person to whom it is paid. may be. If it could be exchanged for nothing. If the pension of such a person was paid to him. but the value of the goods which he can annually purchase or consume. we sometimes mean nothing but the metal pieces of which it is composed. he can in the course of the week purchase with it a certain quantity of subsistence.Adam Smith When we talk of any particular sum of money. does not so properly consist in the piece of gold. it would. is equal only to one of the two values which are thus intimated somewhat ambiguously by the same word. and in reality frequently is. his revenue surely would not so properly consist in the piece of paper. and to the latter more properly than to the former. and sometimes we include in our meaning some obscure reference to the goods which can be had in exchange for it. when we say that the circulating money of England has been computed at eighteen millions. Though the weekly or yearly revenue of all the different inhabitants of any country. we mean commonly to express. When. but to include in its signification some obscure reference to the goods which can be had in exchange for them. In proportion as this quantity is great or small. to the money’s worth more properly than to the money. but only to one or other of those two equal values. we mean only to express the amount of the metal pieces. Thus. as in what he could get for it. not only the amount of the metal pieces which are annually paid to him. the wealth or revenue which it in this case denotes. conveniencies. be of no more value than the most useless piece of paper. or in what he can exchange it for. if a guinea be the weekly pension of a particular person. paid 249 . His weekly revenue is certainly not equal both to the guinea and to what can be purchased with it.

therefore. cannot consist in those metal pieces. which compose the fixed capital. and not in the pieces which convey it. and that of a third the day thereafter. as must likewise be the revenue of the different persons to whom they are paid. is often precisely equal to his revenue. they make themselves no part of that revenue. makes no part of the revenue of the society to which it belongs. and is upon that account the shortest and best expression of its value. however. must always be great or small. must always be of much less value than the whole money pensions annually paid with them. The whole revenue of all of them taken together is evidently not equal to both the money and the consumable goods. But the power of purchasing. in proportion to the quantity of consumable goods which they can all of them purchase with this money. express a person’s revenue by the metal pieces which are annually paid to him. distribute to every man the revenue which properly belongs to him. or the goods which can successively be bought with the whole of those money pensions. the great wheel of circulation. of the capital. therefore. like all other instruments of trade. But if this is sufficiently evident. Though we frequently. in the goods which can successively be bought with them as they circulate from hand to hand. and to the latter more properly than to the former.The Wealth of Nations to them in money. the real weekly or yearly revenue of all of them taken together. The amount of the metal pieces which are annually paid to an individual. but only to one or other of those two values. and lastly. the amount of the metal pieces which annually circulate in any country. As the same guinea which pays the weekly pension of one man to-day. though it makes a part. therefore. We still consider his revenue as consisting in this power of purchasing or consuming. it is still more so with regard to a society. But the amount of the metal pieces which circulate in a society. the great instrument of commerce. but in the power of purchasing. bear this further resemblance to that part of the 250 . and though the metal pieces of which it is composed. even with regard to an individual. as they are successively paid. must always be precisely of the same value with those pensions. That revenue. etc. of which the amount is so much inferior to its value. or the value of the goods which he can annually afford to consume. their real riches. in the course of their annual circulation. Money. Thirdly. can never be equal to the revenue of all its members. it is because the amount of those pieces regulates the extent of his power of purchasing. and a very valuable part. the machines and instruments of trade. may pay that of another tomorrow.

been explained already. in the expense of maintaining the fixed capital. too. as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him.Adam Smith circulating capital which consists in money. The substitution of paper in the room of gold and silver money. his debtors pay him the same interest as if he had lent them so much money. probity and prudence of a particular banker. replaces a very expensive instrument of commerce with one much less costly. and sometimes equally convenient. Circulation comes to be carried on by a new wheel. to the extent. When the people of any particular country have such confidence in the fortune. the real revenue of every society. But in what manner this operation is performed. but the circulating notes of banks and bankers are the species which is best known. the greater must necessarily be the other. in what manner every saving in the expense of supporting the fixed capital is an improvement of the neat revenue of the society. that as every saving in the expense of erecting and supporting those machines. Though some of those notes are continually coming back upon him for payment. and may therefore require some further explication. The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital. the smaller the one part. and in what manner it tends to increase either the gross or the neat revenue of the society. of a hundred thousand pounds. and it has partly. and puts industry into motion. As those notes serve all the purposes of money. is an improvement of the neat revenue of the society. It is the circulating capital which furnishes the materials and wages of labour. This interest is the source of his gain. so every saving in the expense of collecting and supporting that part of the circulating capital which consists in money is an improvement of exactly the same kind. and which seems best adapted for this purpose. Every saving. must increase the fund which puts industry into motion. is not altogether so obvious. There are several different sorts of paper money. from the confidence that such money can at any time be had for them. part of them continue to circulate for months and years 251 . While his whole capital remains the same. we shall suppose. therefore. which does not diminish the introductive powers of labour. which it costs less both to erect and to maintain than the old one. and consequently the annual produce of land and labour. which does not diminish the productive powers of labour. It is sufficiently obvious. those notes come to have the same currency as gold and silver money. A particular banker lends among his customers his own promissory notes.

It will. Eighty thousand pounds of gold and silver. it is too valuable to be allowed to lie idle. Whatever.The Wealth of Nations together. therefore. therefore. and a million of bank notes. to one million sterling. the same quantity of consumable goods may be circulated and distributed to their proper consumers. One million. as by an equal value of gold and silver money. that some time thereafter. by means of his promissory notes. But though this sum cannot be employed at home. to the value of a hundred thousand pounds. that sum being then sufficient for circulating the whole annual produce of their land and labour. and if different operations of the the same kind should. One million we have supposed sufficient to fill that channel. But the annual produce of the land and labour of the country had before required only one million to circulate and distribute it to its proper consumers. let us suppose. therefore. or eighteen hundred thousand pounds of paper and money together. too. cannot run into it. By this operation. twenty thousand pounds in gold and silver perform all the functions which a hundred thousand could otherwise have performed. notes to the extent of a hundred thousand pounds. must overflow. there would remain. Eight hundred thousand pounds. is poured into it beyond this sum. frequently. be carried on by many different banks and bankers. therefore. the same quantity of money will be sufficient for buying and selling them. reserving in their different coffers two hundred thousand pounds for answering occasional demands. be a sufficient provision for answering occasional demands. twenty thousand pounds in gold and silver may. at the same time. be sent abroad. The channel of circulation. therefore. can in this manner be spared from the circulation of the country. Let us suppose. 252 . that sum being over and above what can be employed in the circulation of the country. therefore. but must overflow. will be sufficient to circulate it after them. that the whole circulating money of some particular country amounted. for example. the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite. The goods to be bought and sold being precisely the same as before. Though he has generally in circulation. at a particular time. in circulation. and that annual produce cannot be immediately augmented by those operations of banking. will remain precisely the same as before. therefore. to the extent of one million. The same exchanges may be made. One million eight hundred thousand pounds are poured into it. eight hundred thousand pounds in gold and silver. therefore. in order to seek that profitable employment which it cannot find at home. different banks and bankers issued promissory notes payable to the bearer. if I may be allowed such an expression.

created for carrying on a new trade. because at a distance from the banks which issue it. That the greater part of the gold and silver which being forced abroad by those operations of banking. the annual produce of their land and labour. they may purchase an additional stock of materials. with a profit. it promotes industry. domestic business being now transacted by paper. or of their own. They will exchange it for foreign goods of some kind or another. will be sent abroad. and must be. So far as it is employed in the first way. is. after deducting what is necessary for supporting the tools and instruments of their trade. increases expense and consumption. is increased by the whole value which the labour of those workmen adds to the materials upon which they are employed. But though so great a quantity of gold and silver is thus sent abroad. the value of their annual consumption. we must not imagine that it is sent abroad for nothing. foreign silks. whatever profit they make will be in addition to the neat revenue of their own country. tools. in order to supply the consumption either of some other foreign country. etc. and their neat revenue by what remains of this value. and from the country in which payment of it can be exacted by law. it will not be received in common payments. such as foreign wines. to the amount of eight hundred thousand pounds. and provisions. they may either. or that its proprietors make a present of it to foreign nations. purchase such goods as are likely to be consumed by idle people. It is like a new fund. the whole value of their annual consumption. secondly. If they employ it in purchasing goods in one foreign country. If they employ it in purchasing foreign goods for home consumption. So far as it is employed in the second way. in order to maintain and employ an additional number of industrious people. or in what is called the carrying trade. who reproduce. it promotes prodigality. The gross revenue of the society. the people who consume reproducing. is employed in purchasing foreign goods for home consumption. in order to supply the consumption of another. and though it increases the consumption of the society. therefore. with a profit. without increasing production. who produce nothing. and the channel of home circulation will remain filled with a million of paper instead of a million of those metals which filled it before. or. employed in purchasing those of 253 . Gold and silver. and the gold and silver being converted into a fund for this new trade. it provides a permanent fund for supporting that consumption. first. and is in every respect hurtful to the society.Adam Smith But the paper cannot go abroad.. or establishing any permanent fund for supporting that expense.

but in the money’s worth. but almost unavoidable. but only to one or other of those two values. though the principles of common prudence do not always govern the conduct of every individual. The whole value of 254 . cannot be much increased by them. a very small part of the money which. But the revenue of idle people. must evidently be equal to the number of workmen whom it can supply with materials. for foreign goods. three things are requisite. be increased by those operations of banking. Though some particular men may sometimes increase their expense very considerably. Money may be requisite for purchasing the materials and tools of the work. but in what can be got for them. which the whole circulating capital can supply. which are purchased with it. tools. we must always have regard to those parts of it only which consist in provisions. Their expense in general. The greater part of it will naturally be destined for the employment of industry. tools. and the wages or recompence for the sake of which the work is done. the other. and maintenance. though their revenue does not increase at all. cannot. The demand of idle people. When paper is substituted in the room of gold and silver money. Money is neither a material to work upon. as well as the maintenance of the workmen. therefore. being forced abroad by those operations of banking. therefore. not in the money. we maybe assured that no class or order of men ever does so. is likely to be employed in purchasing those for their use. tools to work with. is certainly not equal both to the money which purchases. and maintenance. consists. In order to put industry into motion. tools. When we compute the quantity of industry which the circulating capital of any society can employ. they always influence that of the majority of every class or order. and to the latter more properly than to the former. though that of a few individuals among them may. his real revenue. and which serves only to circulate those three. like that of all other men. materials to work upon. may be increased by the whole value of gold and silver which used to be employed in purchasing them. and in reality sometimes is. being the same. seems not only probable. or very nearly the same as before. The quantity of industry which any capital can employ. the quantity of the materials. but the quantity of industry which the whole capital can employ. and to the materials. in the smallest degree. which consists in money. and a maintenance suitable to the nature of the work. must always be deducted. not in the metal pieces. because. and finished work.The Wealth of Nations this second kind. is employed in purchasing foreign goods for home consumption. materials. and though the wages of the workman are commonly paid to him in money. and not for the maintenance of idleness. nor a tool to work with. considered as a class or order.

The effects of it have been precisely those above described. has really 255 . and gold still seldomer. and has accordingly required an act of parliament to regulate it. called the Royal Bank. at a twentieth. a fifth part of the former quantity. if the value of only the greater part of the other fourfifths be added to the funds which are destined for the maintenance of industry. of which the one. and even in some country villages. by royal charter in 1727. been performed in Scotland. and the other. When. to the fund from which he furnishes materials and wages to his workmen. by the substitution of paper. The business of the country is almost entirely carried on by means of the paper of those different banking companies. that the trade of the city of Glasgow doubled in about fifteen years after the first erection of the banks there. The operation. and that the trade of Scotland has more than quadrupled since the first erection of the two public banks at Edinburgh. and at a thirtieth. What is the proportion which the circulating money of any country bears to the whole value of the annual produce circulated by means of it. has evidently derived great benefit from their trade. is ever destined for the maintenance of industry. who. with which purchases and payments of all kinds are commonly made. in consequence of some improvement in mechanics. the country. resembles that of the undertaker of some great work. But how small soever the proportion which the circulating money may bear to the whole value of the annual produce. or of the city of Glasgow in particular. it must always bear a very considerable proportion to that part. notwithstanding. and. within these five-and-twenty or thirty years. Whether the trade. I have heard it asserted. was established by act of parliament in 1695. by the erection of new banking companies in almost every considerable town. therefore. of that produce. and frequently but a small part. and adds the difference between its price and that of the new to his circulating capital. it is perhaps impossible to determine. either of Scotland in general. the gold and silver necessary for circulation is reduced to. It has been computed by different authors at a fifth. in some measure. it must make a very considerable addition to the quantity of that industry. consequently.Adam Smith the great wheel of circulation and distribution is added to the goods which are circulated and distributed by means of it. to the value of the annual produce of land and labour. Silver very seldom appears. at a tenth. takes down his old machinery. called the Bank of Scotland. perhaps. except in the change of a twenty shilling bank note. part of that value. But though the conduct of all those different companies has not been unexceptionable. as but a part. An operation of this kind has.

however. did not bring their silver into the Bank of Scotland. They deduct always. I do not pretend to know. in order to be recoined. that the value of the gold annually coined somewhat exceeded that of the silver. No account has been got of the gold coin. but it appears from the ancient accounts of the mint of Scotland. But though the circulating gold and silver of Scotland have suffered so great a diminution during this period. and which. most probably. which he finds. for though the circulation of the Bank of Scotland. the legal interest till the bill shall become due. some English coin. that is. cannot be doubted. that the greater part of banks and bankers issue their promissory notes. too. If either of them has increased in this proportion. does not amount to half a million. when it becomes due. by experience. and trade. The banker. It seems to have constituted almost the whole circulation of that country. upon this occasion. who. upon whatever sum they advance. 256 . have increased very considerably during this period. manufactures. which had then no rival. have evidently been augmented. during so short a period. therefore. and there was. which circulated in Scotland before the Union. it seems to have made but a very small part of the whole. by advancing money upon them before they are due. the whole circulation of Scotland cannot be estimated at less than two millions. amounted to £411. cannot be estimated at less than a million sterling. was considerable. It is chiefly by discounting bills of exchange. was still more inconsiderable when the two first banking companies were established. The commerce of Scotland. That the trade and industry of Scotland. together with a clear profit of the interest. who advances to the merchant whose bill he discounts. immediately after it. The whole value of the gold and silver. are commonly in circulation.117: 10: 9 sterling. replaces to the bank the value of what had been advanced. which was not called in.The Wealth of Nations increased in so great a proportion. but his own promissory notes. There were a good many people. has the advantage of being able to discount to a greater amount by the whole value of his promissory notes. Its agriculture. The payment of the bill. The value of the silver money which circulated in Scotland before the Union in 1707. it seems to be an effect too great to be accounted for by the sole operation of this cause. besides. of which that part which consists in gold and silver. In the present times. on the contrary. from a diffidence of repayment. which at present is not very great. and that the banks have contributed a good deal to this increase. its real riches and prosperity do not appear to have suffered any. was brought into the Bank of Scotland. He is thereby enabled to make his clear gain of interest on so much a larger sum. the annual produce of its land and labour. not gold and silver.

I believe. and the merchants again return them to the banks. find it convenient to keep such cash accounts with them. and give employment to a greater number of people. peculiar to them. by twenty and thirty pounds at a time. But the easy terms upon which the Scotch banking companies accept of repayment are. when their customers apply to them for money. within the sum for which the credit had been given. If there are two merchants. by giving credit. the farmers to their landlords for rent. Credits of this kind are. that whatever money should be advanced to him. till the whole be in this manner repaid.and of the benefit which the country has received from it. to the extent of a certain sum (two or three thousand pounds for example). The London merchant must always keep by him a considerable sum of money. generally advance it to them in their own promissory notes. to any individual who could procure two persons of undoubted credit and good landed estate to become surety for him. for example. by granting what they call cash accounts. Hence the great trade of those companies. from the day on which each of those small sums is paid in. The banks. therefore. the Edinburgh merchant can. that is. They invented. and thus almost the whole money business of the country is transacted by means of them. Whoever has a credit of this kind with one of those companies. another method of issuing their promissory notes. therefore. the manufacturers to the farmers for materials and provisions. and by encouraging all those with whom they have any influence to do the same. than the London merchant. either in his own 257 . carry on a greater trade. should be repaid upon demand. both of the great trade of those companies. without imprudence. every merchant can. and almost all men of business. one in London and the other in Edinburgh.Adam Smith and those companies would have had but little trade. may repay this sum piece-meal. by readily receiving their notes in all payments. These the merchants pay away to the manufacturers for goods. without imprudence. or to replace what they my have borrowed of them. had they confined their business to the discounting of bills of exchange. who employ equal stocks in the same branch of trade. the landlords repay them to the merchants for the conveniencies and luxuries with which they supply them. By means of those cash accounts. in order to balance their cash accounts. the company discounting a proportionable part of the interest of the great sum. together with the legal interest. and borrows a thousand pounds upon it. and have perhaps been the principal cause. and are thereby interested to promote the trade of those companies. so far as I know. carry on a greater trade than he otherwise could do. All merchants. commonly granted by banks and bankers in all different parts of the world.

or which (the commerce being supposed the same) would circulate there. The whole paper money of every kind which can easily circulate in any country. in order to answer the demands continually coming upon him for payment of the goods which he purchases upon credit. When they actually come upon him. of which it supplies the place. Let the ordinary amount of this sum be supposed five hundred pounds. it may be thought. the additional conveniency of their cash accounts. have at all times in his warehouse a larger quantity of goods than the London merchant. keeps no money unemployed for answering such occasional demands. The merchant in Edinburgh. never can exceed the value of the gold and silver. His annual profits must be less by all that he could have made by the sale of five hundred pounds worth more goods. the value of the goods in his warehouse must always be less. if there was no paper money. By being obliged to keep so great a sum unemployed. gives the English merchants a conveniency equivalent to the cash accounts of the Scotch merchants. and have. without imprudence. and give constant employment to a greater number of industrious people who prepare those goods for the market. Let us suppose that he generally disposes of his whole stock upon hand. and can thereby both make a greater profit himself. or in those of his banker. the whole of that currency which can easily circulate there. by five hundred pounds. he must sell in a year five hundred pounds worth less goods than he might otherwise have done. But the Scotch merchants. and gradually replaces the sum borrowed with the money or paper which comes in from the occasional sales of his goods. Hence the great benefit which the country has derived from this trade. on the other hand. as the excess could neither be sent abroad nor be employed in the circulation 258 . indeed. than it would have been. besides. Should the circulating paper at any time exceed that sum. he can. he satisfies them from his cash account with the bank. are the lowest paper money current in Scotland. therefore. With the same stock.The Wealth of Nations coffers. it must be remembered. had he not been obliged to keep such a sum unemployed. can discount their bills of exchange as easily as the English merchants. who gives him no interest for it. The facility of discounting bills of exchange. for example. or of goods to the value of his whole stock upon hand. If twenty shilling notes. cannot exceed the sum of gold and silver which would be necessary for transacting the annual exchanges of twenty shillings value and upwards usually transacted within that country. once in the year. and the number of people employed in preparing his goods for the market must be less by all those that five hundred pounds more stock could have employed.

in the expense of replenishing those coffers as fast as they are emptied by answering such occasional demands. their notes returning upon them much faster than in proportion to the excess of their quantity. be a run upon the banks to the whole extent of this superfluous paper. for answering the occasional demands of the holders of its notes. in order to find that profitable employment which it cannot find at home. Many people would immediately perceive that they had more of this paper than was necessary for transacting their business at home. ought to increase the first article of their expense. to be exchanged for gold and silver. and this continual exportation of gold and silver. in one shape or another. and. of which it loses the interest. and if they showed any difficulty or backwardness in payment. but in a much greater proportion. too. over and above what can be employed in it too. Such a company. to a much greater extent. such as the expense of house-rent. though they ought to be filled much fuller. but they could find none while it remained in the shape of paper. not only in proportion to this excessive increase of their circulation. The coffers of such a company.Adam Smith of the country. it must immediately return upon the banks. it must. but in a much greater proportion. and must require not only a more violent. cannot be employed in the circulation of the country. ought to increase the quantity of gold and silver which they keep at all times in their coffers. therefore. they could easily find a use for it. A banking company which issues more paper than can be employed in the circulation of the country. clerks. be sent abroad. There would immediately. secondly. etc. the expenses peculiar to a bank consist chiefly in two articles: first. too. The coin. but a more constant and uninterrupted exertion of expense. a large sum of money. not only in proportion to this forced increase of their business. they would immediately demand payment for it from the banks. When this superfluous paper was converted into gold and silver. which is thus continually drawn in such large quantities from their coffers. It comes in place of a paper which is over and above what can be employed in that circulation. by enhancing the diffi- 259 . in the expense of keeping at all times in its coffers. therefore. But as that coin will not be allowed to lie idle. Over and above the expenses which are common to every branch of trade. the alarm which this would occasion necessarily increasing the run. and of which the excess is continually returning upon them for payment. accountants. yet must empty themselves much faster than if their business was confined within more reasonable bounds. by sending it abroad. therefore. in order to replenish them. and as they could not send it abroad. and is. the wages of servants.

in order to be exchanged for gold and silver. in finding new gold and silver in order to replenish those coffers. Such a company. which the circulation of the country can easily absorb and employ. therefore. paid no seignorage. therefore. amounts exactly to forty thousand pounds. for answering occasional demands. the Bank of England was for many years together obliged to coin gold to the extent of between eight hundred thousand pounds and a million a-year. this bank ought to keep at all times in its coffers. and that. which it soon after issued in coin at £3:17:10 1/2 an ounce. Though the bank. upon the coinage of so very large a sum. the four thousand pounds which are over and above what the circulation can easily absorb and employ. about eight hundred and fifty thousand pounds. By issuing too great a quantity of paper. therefore. will return upon it almost as fast as they are issued. increase the second article of their expense still more than the first. at an expense which was seldom below one and a half or two per 260 . this liberality of government did not prevent altogether the expense of the bank.The Wealth of Nations culty. though the government was properly at the expense of this coinage. which will be continually going out of its coffers as fast as they are brought into them. The Scotch banks. losing in this manner between two and a half and three per cent. must necessarily enhance still farther the expense of the bank. were all obliged to employ constantly agents at London to collect money for them. the circulation never could have been overstocked with paper money. or. and it will lose the whole expense of continually collecting four thousand pounds in gold and silver. at an average. this bank is obliged to keep at all times in its coffers ten thousand pounds in gold and silver. But every particular banking company has not always understood or attended to its own particular interest. which empty themselves so very rapidly. It will thus gain nothing by the interest of the four thousand pounds excessive circulation. not eleven thousand pounds only. the bank (inconsequence of the worn and degraded state into which the gold coin had fallen a few years ago) was frequently obliged to purchase gold bullion at the high price of four pounds an ounce. must in proportion to this forced increase of their business. in consequence of an excess of the same kind. Let us suppose that all the paper of a particular bank. Should this bank attempt to circulate forty-four thousand pounds. For answering occasional demands. For this great coinage. and the circulation has frequently been overstocked with paper money. Had every particular banking company always understood and attended to its own particular interest. but fourteen thousand pounds. of which the excess was continually returning.

was sometimes sent abroad in the shape of coin. is indirectly obliged to 261 . At home. notwithstanding their great annual coinage. either upon the same. those heavy pieces were of no more value than the light. It was the newest. notwithstanding the great quantity of good and new coin which was every year issued from the bank. and from the continual rise in the price of gold bullion. the state of the coin. and that. The gold coin which was paid out. or when melted down into bullion at home. instead of growing better and better. every year. were sometimes obliged to employ this ruinous resource. being likewise over and above what could be employed in that circulation. The Bank of England. the heaviest. and the same sum. to the extent of the sum which they wanted. the debtor bank paying always the interest and commission upon the whole accumulated sum. but by drawing a second set of bills. from the distress into which their excessive circulation had thrown them. but they were of more value abroad. to their astonishment. together with the interest and commission. it is to be observed. In this case. Those agents were not always able to replenish the coffers of their employers so fast as they were emptied. in consequence of the continual wearing and clipping of the coin. would in this manner make sometimes more than two or three journeys. or rather bills for the same sum. and the best pieces only. which were carefully picked out of the whole coin. and sometimes melted down and sold to the Bank of England at the high price of four pounds an ounce. some of those banks. in exchange for that part of their paper which was over and above what could be employed in the circulation of the country. the resource of the banks was. This money was sent down by the waggon. that there was every year the same scarcity of coin as there had been the year before. or upon some other correspondents in London. and either sent abroad or melted down. or fifteen shillings on the hundred pounds. had sometimes no other means of satisfying this draught. greater and greater. the expense of this great annual coinage became. found. When those correspondents afterwards drew upon them for the payment of this sum. sometimes melted down and sent abroad in the shape of bullion. became every year worse and worse. either by the Bank of England or by the Scotch banks. to draw upon their correspondents in London bills of exchange. Even those Scotch banks which never distinguished themselves by their extreme imprudence. Every year they found themselves under the necessity of coining nearly the same quantity of gold as they had coined the year before. and insured by the carriers at an additional expense of three quarters per cent. and while they remained in the shape of coin. The Bank of England. by supplying its own coffers with coin.Adam Smith cent.

as the money comes in from the occasional sale of his goods. not only for its own imprudence. or very near equally full. was the original cause of this excessive circulation of paper money. upon such occasions. drawn by a real creditor upon a real debtor. the Bank of England was obliged to supply them. yet another is continually running in. may frequently have occasion for a sum of ready money. or even any considerable part of that capital. replaces to the bank the value of what it had advanced. therefore. When a bank discounts to a merchant a real bill of exchange. Whatever coin. so that. paid all of them very dearly for their own imprudence and inattention: but the Bank of England paid very dearly. from which. though a stream is continually running out. and which. The payment of the bill. fully equal to that which runs out. A merchant. for answering occasional demands. for answering occasional demands. If the paper money which the bank advances never exceeds this value. it dispenses him entirely from the necessity of keeping any part of his stock by him unem- 262 . whatever vacuities this excessive circulation occasioned in the necessary coin of the kingdom. The Scotch banks. advances him likewise. Little or no expense can ever be necessary for replenishing the coffers of such a bank. so far as its dealings are confined to such customers. The over-trading of some bold projectors in both parts of the united kingdom. such sums upon his cash account. was wanted to support this excessive circulation both of Scotch and English paper money. resemble a water-pond. but for the much greater imprudence of almost all the Scotch banks. no doubt. What a bank can with propriety advance to a merchant or undertaker of any kind. and accepts of a piece-meal repayment. without over-trading. When a bank. even when he has no bills to discount.The Wealth of Nations supply the whole kingdom. it can never exceed the quantity which the circulation of the country can easily absorb and employ. together with the interest. The coffers of the bank. upon the easy terms of the banking companies of Scotland. when it becomes due. is really paid by that debtor. the pond keeps always equally. but that part of it only which he would otherwise be obliged to keep by him unemployed and in ready money. besides discounting his bills. it can never exceed the value of the gold and silver which would necessarily circulate in the country if there was no paper money. as soon as it becomes due. without any further care or attention. it only advances to him a part of the value which he would otherwise be obliged to keep by him unemployed and in ready money. into which coin is continually flowing from those coffers in a great variety of ways. is not either the whole capital with which he trades.

falls commonly very much short of the advances which it makes to them. But a banking company. they gained two other very considerable advantages. either regular or irregular in their repayments. he can answer them sufficiently from his cash account. besides saving almost entirely the extraordinary expense of replenishing their coffers. is necessarily much larger than that which is continually running in. for the most part. who did not make. and scarce ever to require any extraordinary expense to replenish them. Though the stream which is in this case continually running out from its coffers may be very large. When such demands actually come upon him. ought to observe with great attention. whether. upon most occasions. it may safely continue to deal with such customers. or eight months. By this attention. can have 263 . so that. accordingly. so that. The stream which is in this case continually running out from its coffers. The bank. unless they are replenished by some great and continual effort of expense. fully equal to that of the advances. within the course of such short periods.Adam Smith ployed and in ready money for answering occasional demands. those coffers must soon be exhausted altogether. at least if they continue to deal with it in this manner. which lends money to perhaps five hundred different people. it cannot with any safety continue to deal with such customers. observe and inquire both constantly and carefully into the conduct and situation of each of them. and did not care to deal with any person. six. that which is continually running into them must be at least equally large. The banking companies of Scotland. those coffers are likely to be always equally or very near equally full. may. on the contrary. were for a long time very careful to require frequent and regular repayments from all their customers. the sum of the repayments from certain other customers. If. what they called. frequent and regular operations with them. either by himself or his agents. whatever might be his fortune or credit. by this attention they were enabled to make some tolerable judgment concerning the thriving or declining circumstances of their debtors. If. five. A private man who lends out his money to perhaps half a dozen or a dozen of debtors. men being. in the course of some short period (of four. in dealing with such customers. without any further care or attention. and of which the attention is continually occupied by objects of a very different kind. for example). without being obliged to look out for any other evidence besides what their own books afforded them. the sum of the repayments from certain customers is. however. the sum of the repayments which it commonly receives from them. according as their circumstances are either thriving or declining. fully equal to that of the advances which it commonly makes to them. is. First. or is not.

had there been no such advances. exceeded the quantity of gold and silver which he would otherwise have been obliged to keep by him for answering occasional demands. by exceeding the quantity of gold and silver which. for answering occasional demands. though equally real. had there been no paper money. to exceed the quantity which the circulation of the country could easily absorb and employ. was continually running into the coffers of the bank. perhaps. 264 . the banking companies of Scotland had probably this advantage in view. fully equal to the advances which they had made to him. he would have been obliged to keep by him for answering occasional demands. consequently. and that. This second advantage. might soon come to exceed the whole quantity of gold and silver which ( the commerce being supposed the same ) would have circulated in the country. have equalled the ordinary amount of its advances. The stream which. In requiring frequent and regular repayments from all their customers. within moderate periods of time. would sufficiently demonstrate that the amount of their advances had at no time exceeded that part of his capital which he would otherwise have been obliged to keep by him unemployed. could not have been equal to the stream which. and in ready money. that within moderate periods of time. the paper money. regularity. whether paper or coin. they might be assured that the paper money which they had advanced to him had not. and amount of his repayments. which they had circulated by his means. The advances of the bank paper. beyond what its own books afford it. so well understood by all the different banking companies in Scotland as the first. Secondly. If the advances of the bank had commonly exceeded this part of his capital. upon most occasions. by this attention they secured themselves from the possibility of issuing more paper money than what the circulation of the country could easily absorb and employ. for the purpose of keeping the rest of his capital in constant employment. It is this part of his capital only which. was not. at any time. consequently. in order to be exchanged for gold and silver. within moderate periods of time. that is. and continually going from him in the same shape. had there been no paper money. and the excess of this paper money would immediately have returned upon the bank. had not at any time exceeded the quantity of gold and silver which would have circulated in the country. by means of his dealings.The Wealth of Nations no regular information concerning the conduct and circumstances of the greater part of its debtors. and. the ordinary amount of his repayments could not. is continually returning to every dealer in the shape of money. by means of the same dealings was continually running out. the repayments of a particular customer were. When they observed. The frequency.

they can reasonably expect no farther assistance from hanks and bankers. of the capital which the person who undertakes to improve land employs in clearing.Adam Smith When.. cannot. manuring. carry on a very considerable part of their projects with borrowed money. in erecting engines for drawing out the water. or even the greater part of the circulating capital with which he trades. with all their necessary appendages of stables. when they have gone thus far. who. of the capital which the undertaker of an iron forge. however. of such private people as propose to live upon the interest of their money.. and in ready money. and the sum of his repayments could not equal the sum of his advances within such moderate periods of time as suit the conveniency of a bank. in almost all cases. in building farmhouses. granaries. Traders and other undertakers may. and going from him in the same shape. and which it is meant should not be repaid till after a period of several years. employs in erecting his forge and smelting-houses. and who are. the capital of those creditors. no doubt with great propriety. and warehouses. upon that account. consistently with its own interest. a period by far too distant to suit the conveniency of a bank. advance to a trader the whole. and partly by that of cash accounts. in making roads and waggonways. Still less could a bank afford to advance him any considerable part of his fixed capital. too. ought not to be borrowed of a bank. much slower than those of the circulating capital: and such expenses. In justice to their creditors. very seldom return to the undertaker till after a period of many years. Even with this precaution. if I may say so. even though the success of the project should fall very much short of the expectation of the projectors. consistently with their own interest and safety. or to render it extremely improbable that those creditors should incur any loss. for answering occasional demands. partly by the conveniency of discounting bills. inclosing. but ought to be borrowed upon bond or mortgage. yet the whole of the returns is too distant from the whole of the outgoings. 265 . A bank cannot. The returns of the fixed capital are. even when laid out with the greatest prudence and judgment. their own capital ought in this case to be sufficient to insure. etc. A bank. because. the creditable traders of any country can be dispensed from the necessity of keeping any part of their stock by them unemployed. etc. and ploughing waste and uncultivated fields. go farther. the dwelling-houses of his workmen. the money which is borrowed. though that capital is continually returning to him in the shape of money. for example. his workhouses. of the capital which the undertaker of a mine employs in sinking his shafts. etc. willing to lend that capital to such people of good credit as are likely to keep it for several years. without taking the trouble themselves to employ the capital. draining.

They complained of the contracted views and dastardly spirit of the directors of those banks. is said to have been carried on to a very great extent. some of those traders had recourse to an expedient which. to give. in proportion to the very limited commerce. Those companies. the extension of their own projects beyond what they could carry on either with their own capital. had so long ago given all the assistance to the traders and other undertakers of Scotland which it is possible for banks and bankers. which. could extend their credits to whatever sum might be wanted. which lends its money without the expense of stamped paper. yet as effectually as the utmost extension of bank credits could have done. having got so much assistance from banks and bankers. and to provide them with all the capital which they wanted to trade with. they seem to have thought. and which accepts of repayment upon the easy terms of the banking companies of Scotland. where. meaning. they seem to have thought. be a very convenient creditor to such traders and undertakers. the shift to which unfortunate traders have sometimes recourse. no doubt. for a time. were of a different opinion. The banks. were in honour bound to supply the deficiency. consistently with their own interest. would. during the course of the late war. they said. however. when they are upon the brink of bankruptcy. or with what they had credit to borrow of private people in the usual way of bond or mortgage. They had over-traded a little. This expedient was no other than the well known shift of drawing and redrawing. wished to get still more. never fails to attend the smallest degree of over-trading. or at least that diminution of profit. in this particular business. by the extension of that trade. though at a much greater expense. to what the circulation of the country could easily absorb and employ. and. They had even done somewhat more.The Wealth of Nations indeed. no doubt. or of attorneys’ fees for drawing bonds and mortgages. when the high profits of trade afforded a great temptation to over-trading. The practice of raising money in this manner had been long known in England. But such traders and undertakers would surely be most inconvenient debtors to such a bank. without incurring any other expense besides that of a few reams of paper. From England it was brought into Scotland. and upon their refusing to extend their credits. It is now more than five and twenty years since the paper money issued by the different banking companies of Scotland was fully equal. which did not. and to the very 266 . or rather was somewhat more than fully equal. Those traders and other undertakers. extend their credits in proportion to the extension of the trade of the country. and had brought upon themselves that loss. served their purpose. The banks. therefore. The banks.

and. the acceptor does not pay it as soon as it is presented. before it came to the person who presents it to the acceptor for payment. during the course of the two last centuries. still the shortness of the date gives some security to the owner of the bill. The practice of drawing and redrawing is so well known to all men of business. acceptor. and returns upon the drawer. even by men of business themselves. written their names upon the back of the bill. he becomes from that moment a bankrupt. The customs of merchants. and who. together with the interest and a commission. B accordingly. but it is a chance if it falls to-night. we shall suppose. to sleep in it to-night. draws a bill upon B in London. and I will venture. But as this book may come into the hands of many people who are not men of business. becomes likewise a bankrupt. upon condition. to express that each of them had in his turn received those contents. In reality B in London owes nothing to A in Edinburgh. yet. that money is more readily advanced upon them than upon any other species of obligation. If. payable likewise two months after date. generally understood. redraws this bill upon A in 267 . therefore. from that moment. and will not stand very long. each indorser becomes in his turn liable to the owner of the bill for those contents.Adam Smith moderate capital of the country. The house is crazy. perhaps. have given such extraordinary privileges to bills of exchange. The trader A in Edinburgh. it was soon carried on to a much greater extent than it ever had been in England. says a weary traveller to himself. perhaps. that it may. I shall endeavour to explain it as distinctly as I can. Though the drawer. and indorsers of the bill. should all of them be persons of doubtful credit. it is a chance if they all become so in so short a time. that before the term of payment he shall redraw upon A in Edinburgh for the same sum. but he agrees to accept of A ‘s bill. and as the effects of this practice upon the banking trade are not. who. especially when they are made payable within so short a period as two or three months after their date. Though all of them may be very likely to become bankrupts. it had passed through the hands of several other persons. have been adopted into the laws of all European nations. who had successively advanced to one another the contents of it. payable two months after date. and which. a bankrupt. before the expiration of the first two months. if he does not immediately pay it. he becomes too. either in money or goods. if he fails to pay. another bill. be thought unnecessary to give any account of it. when the bill becomes due. The bill is protested. If. that is. which were established when the barbarous laws of Europe did not enforce the performance of their contracts. had all of them in their order indorsed.

Many vast and extensive projects. The projectors. {The method described in the text was by no means either the most common or the most expensive one in which those adventurers sometimes raised money by circulation. a few days before it became due. payable likewise two months after date. had the good fortune to find it. being repeated at least four times in the year. either at the end of their projects. This practice was called raising money by circulation.The Wealth of Nations Edinburgh. and the commission was never less than one half per cent. that A in Edinburgh would enable B in London to pay the first bill of exchange. Upon their awakening. on each draught. A sold in Edinburgh at par. This bill. were undertaken. and for several years carried on. being payable to his own order. who. whatever money A might raise by this expedient might necessarily have cost him something more than eight per cent. therefore. when either the price of the commission happened to rise. no doubt. in the year and sometimes a great deal more. and with its contents purchased bills upon London. The interest was five per cent. B in London redraws upon A in Edinburgh another bill payable also two months after date. are supposed to run between six and ten per cent. I believe. a second bill at three months date upon the same B in London. without any other fund to support them besides what was raised at this enormous expense. by drawing. they very seldom. it must have been a very fortunate speculation. however. and being loaded with a commission of at least one half per cent. besides. and those bills at sight must frequently have cost A that premium. in the year. Towards the end of the late war. however. and before the expiration of the third two months. the exchange between Edinburgh and London was frequently three per cent. again before the expiration of the second two months. upon each 268 . or when he was obliged to pay compound interest upon the interest and commission of former bills. draws a second bill upon B in London. a good surplus profit to the projector. in the greater part of mercantile projects. This commission being repeated more than six times in the year. had in their golden dreams the most distinct vision of this great profit. or when they were no longer able to carry them on. This transaction. payable at sight to the order of B. but for several years together. It frequently happened. the bill always returning upon A in Edinburgh with the accumulated interest and commission of all the former bills. but afford. In a country where the ordinary profits of stock. against Edinburgh. This practice has sometimes gone on. to whom he sent them by the post. not only for several months. of which the returns could not only repay the enormous expense at which the money was thus borrowed for carrying it on.

Though the bills upon which this paper had been advanced were all of them repaid in their turn as soon as they became due. as soon as it was accepted. C. the exchange between Edinburgh and London. to the whole fund destined for carrying 269 . an advantage which many of these adventurers could not always find it easy to procure. Such operations being repeated at least six times in the year. a few days before it became due. discounted it in the same manner with some banker in London. but then it required an established credit with more houses than one in London. who. had once been made to run out from the coffers of the banks. sometimes upon his first correspondent B. in London. upon its being accepted by C. therefore. this method of raising money. upon many occasions. at least. he as regularly discounted. At other times A would enable to discharge the first bill of exchange. in the same manner as that described in the text. This third bill was made payable to the order of C. and being loaded with a commission of at least one half per cent.} The bills which A in Edinburgh drew upon B in London. The paper which was issued upon those circulating bills of exchange amounted.Adam Smith repetition. not upon B. by means of those circulating bills of exchange. because. in the year. with some bank or banker in Edinburgh. a second bill at two months date. The stream which. This other bill was made payable to the order of B. upon each repetition. either with the Bank of England. was altogether fictitious. fourteen per cent. and A enabled C to discharge it. who. D or E. must at that period have cost A. a third bill likewise at two months date. together with the legal interest of five per cent. a few day’s before it became due. it was less expensive than that mentioned in the foregoing part of this note. Whatever was advanced upon such circulating bills was in Edinburgh advanced in the paper of the Scotch banks. By saving. This payment. however. when they were discounted at the Bank of England in the paper of that bank. must have cost A something more than eight per cent. and sometimes upon some fourth or fifth person. for example. he regularly discounted two months before they were due. was never replaced by any stream which really ran into them. for example. discounted it with some banker in London. by drawing. by drawing. and the bills which B in London redrew upon A in Edinburgh. but upon some third person. yet the value which had been really advanced upon the first bill was never really returned to the banks which advanced it. or with some other banker in London. before each bill became due. another bill was always drawn to somewhat a greater amount than the bill which was soon to be paid: and the discounting of this other bill was essentially necessary towards the payment of that which was soon to be due. and in London.

discount their bills always with the same banker. endeavouring. in order to force these projectors by degrees to have recourse. But this discovery is not altogether so easy when they discount their bills sometimes with one banker. who find it for their interest to assist one another in this method of raising money and to render it. but with the capital which he advances to them. and when the two same persons do not constantly draw and redraw upon one another. immediately returned upon the banks. and sometimes with another. might perhaps ruin himself. or manufactures. commerce. and might find that he had already discounted the bills of those projectors to so great an extent. and thus by ruining them. he might find it necessary. or to other methods of raising money: so as that he himself might. who are continually drawing and redrawing upon one another. by refusing to discount any more.The Wealth of Nations on some vast and extensive project of agriculture. When a banker had even made this discovery. which they were to find as they could. The greater part of this paper was. It was a capital which those projectors had very artfully contrived to draw from those banks. The difficulties. either to other bankers. and. It was over and above. and a bill for which there was properly no real creditor but the bank which discounted it. accordingly. not only without their knowledge or deliberate consent. for answering occasional demands. not with any capital of their own. the projector would have been obliged to keep by him unemployed. to withdraw gradually. and not merely to that part of it which. to go on for some time. get out of the circle. without their having the most distant suspicion that they had really advanced it. over and above the value of the gold and silver which would have circulated in the country. he would necessarily make them all bankrupts. perhaps. but occasionally run the round of a great circle of projectors. consequently. what the circulation of the country could easily absorb and employ. he might sometimes make it too late. upon that account. therefore. which the principal bankers in Lon- 270 . in order to be exchanged for gold and silver. nor any real debtor but the projector who made use of the money. had there been no paper money. that. had there been no paper money. as difficult as possible to distinguish between a real and a fictitious bill of exchange. he must immediately discover what they are about. and see clearly that they are trading. which the Bank of England. and upon that account. between a bill drawn by a real creditor upon a real debtor. When two people. but for some time. For his own interest and safety. making every day greater and greater difficulties about discounting. in this very perilous situation. therefore. as soon as possible. and in ready money. however. upon that account.

in the highest degree. the greater part of them. With regard to the latter. they called the distress of the country. and in discounting bills of exchange. by refusing in this manner to give more credit to those to whom they had already given a great deal too much. and bad conduct of the banks. The design was generous. over and above what the circulation of the country could easily absorb and employ. In the midst of this clamour and distress. both in granting cash-accounts. no doubt. however. they seemed to think. it. but to have discounted all equally. when they paid in their first instalment. It was the avowed principle of this bank to advance upon any reasonable security. and enrich the country. improve. took the only method by which it was now possible to save either their own credit. as fast as they were issued. but enraged. Their own distress. This bank was more liberal than any other had ever been. The banks. those projectors. of which eighty per cent. and the nature and causes of the distress which it meant to relieve. pusillanimity. not only alarmed. for the express purpose of relieving the distress of the country. and in discounting bills of exchange. A great part of the proprietors. opened a cash-account with the bank. the immediate occasion. returned upon it. well understood. and this distress of the country. By its liberality in granting cash-accounts. in order to be exchanged for gold and silver. The capital which had been subscribed to this bank. such as the improvements of land. were not. at two different subscriptions. and the directors. after a certain time. amounted to one hundred and sixty thousand pounds. perhaps. only was paid up. to lend for as long a time. a new bank was established in Scotland.Adam Smith don. it seems to have made scarce any distinction between real and circulating bills. to make about discounting. as they might wish to borrow. Its coffers were never well filled. which did not give a sufficiently liberal aid to the spirited undertakings of those who exerted themselves in order to beautify. But those bank notes being. no doubt. and to as great an extent. To promote such improvements was even said to be the chief of the public-spirited purposes for which it was instituted. It was the duty of the banks. but the execution was imprudent. or the public credit of the country. issued great quantities of its bank notes. they said. of which this prudent and necessary reserve of the banks was. the whole capital which was to be employed in those improvements of which the returns are the most slow and distant. and which even the more prudent Scotch banks began. thinking themselves obliged to treat their own proprietors with the same liberality with which they treated 271 . was altogether owing to the ignorance. and when all of them had already gone too far. This sum ought to have been paid in at several different instalments.

allowed many of them to borrow upon this cash-account what they paid in upon all their subsequent instalments. by another draught upon the same place. no doubt. at the same time. and when the bill became due. it had been constantly in the practice of drawing bills of exchange upon London. and. whose backwardness in discounting bills of exchange had given some offence. Such payments. its excessive circulation must have emptied them faster than they could have been replenished by any other expedient but the ruinous one of drawing upon London. This bank. in little more than the course of two years. by drawing the whole banking business to themselves. it had in the circulation about two hundred thousand pounds in bank notes. enabled to carry on business for more than two years. advanced to different people upwards of eight hundred thousand pounds at five per cent. upwards of eight per cent. In order to support the circulation of those notes. without any other deduction besides the expense of management. which were at that time carrying on in different parts of the country. by their subscription to the original bond or contract of the bank. The operations of this bank seem to have produced effects quite opposite to those which were intended by the particular persons who planned and directed it. But upon upwards of six hundred thousand pounds. upon more than three fourths of all its dealings. and enabled them 272 . therefore. gave some temporary relief to those projectors. for as such they considered them. it was. it is said to have been driven to this resource within a very few months after it began to do business. and. only put into one coffer what had the moment before been taken out of another. to supplant all the other Scotch banks. might perhaps be considered as a clear gain. When it was obliged to stop. But had the coffers of this bank been filled ever so well. particularly those established at Edinburgh. notwithstanding its too liberal conduct. in the way of interest and commission. which were continually returning upon it as fast as they were issued. They seem to have intended to support the spirited undertakings.The Wealth of Nations all other men. and. this five per cent. of which the number and value were continually increasing. amounted to upwards of six hundred thousand pounds. Upon the two hundred thousand pounds which it circulated in bank notes. together with interest and commission. therefore. paying it. for which it was continually drawing bills of exchange upon London. had. when it stopt. it was paying. and was consequently losing more than three per cent. were really pledged for answering all its engagements. Its coffers having been filled so very ill. This bank. By means of the great credit which so great a pledge necessarily gave it. The estates of the proprietors of this bank were worth several millions.

which those other banks had become so backward in discounting. and that coffers which originally were so ill filled. it might easily replenish them. In the long-run. it was the opinion of some people. and their country. those rivals whom it meant to supplant. On the contrary. All the dealers in circulating bills of exchange. too. it fell so much the heavier both upon them and upon their creditors. of employing agents to look out for people who had money to lend. which. and of 273 . were enabled to get very easily out of that fatal circle. being over and above what the circulation of the country could absorb and employ. It would have been much better for themselves. had the greater part of them been obliged to stop two years sooner than they actually did. and perhaps. had recourse to this new bank. even some degree of discredit. They could still have made nothing by the interest of the paper. paying them by other draughts on the same place. and effectually relieved. when ruin came. and when they became due. they must have suffered a loss of every such operation. soon convinced them that this method of raising money was by much too slow to answer their purpose. which this bank afforded to those projectors. where they were received with open arms. of negotiating with those people. instead of making a profit. as fast as they issued it. But it thereby only enabled them to get so much deeper into debt. that how fast soever its coffers might be emptied. yet. The temporary relief. the whole expense of this borrowing. returned upon them in order to be exchanged for gold and silver. therefore. so that. proved a real and permanent relief to the other Scotch banks. their creditors. The operations of this bank. by raising money upon the securities of those to whom it had advanced its paper.Adam Smith to carry on their projects for about two years longer than they could otherwise have done. so that in the longrun they must have ruined themselves as a mercantile company. from which they could not otherwise have disengaged themselves without incurring a considerable loss. and which emptied themselves so very fast. could be replenished by no other expedient but the ruinous one of drawing bills upon London. in reality aggravated in the long-run the distress which those projectors had brought both upon themselves and upon their country. instead of relieving. therefore. with accumulated interest and commission. Experience. which it meant to relieve. therefore. however. But though they had been able by this method to raise money as fast as they wanted it. Those other banks. At the first setting out of this bank. from a very great distress. though perhaps not so soon as by the more expensive practice of drawing and redrawing. I believe. and for the payment of which they were themselves continually obliged to borrow money. the operations of this bank increased the real distress of the country.

without increasing in the smallest degree the capital of the country. who would employ the money in extravagant undertakings. though they might have less of the grand and the marvellous. But a bank which lends money. as a mercantile company. But though this operation had proved not only practicable. The debtors of such a bank as that whose conduct I have been giving some account of were likely. must have suffered a very considerable loss by it. The sober and frugal debtors of private persons. must have fallen upon them. they would probably never be able to complete. and into which no stream was continually running. which would repay with a large profit whatever had been laid out upon them. The success of this operation.The Wealth of Nations drawing the proper bond or assignment. but. is not likely to be more judicious in the choice of its debtors than a private person who lends out his money among a few people whom he knows. in order to bring water to replenish it. The project of replenishing their coffers in this manner may be compared to that of a man who had a water-pond from which a stream was continually running out. but who proposed to keep it always equally full. by employing a number of people to go continually with buckets to a well at some miles distance. would be more likely to employ the money borrowed in sober undertakings which were proportioned to their capitals. and which would thus afford a fund capable of maintaining a much greater quantity of labour than that which had been employed about them. would never repay the expense which they had really cost. yet the country could have derived no benefit front it. on the contrary. and have been so much clear loss upon the balance of their accounts. on the contrary. but profitable to the bank. would have more of the solid and the profitable. with all the assistance that could be given them. in the smallest degree. would never afford a fund capable of maintaining a quantity of labour equal to that which had been employed about them. 274 . to be chimerical projectors. instead of applying to the private persons who had lent it their money. if they should be completed. which. the greater part of them. the quantity of money to be lent. This operation could not augment. therefore. and which. and in whose sober and frugal conduct he thinks he has good reason to confide. perhaps to five hundred different people. and which. the greater part of whom its directors can know very little about. would only have transferred a great part of it from prudent and profitable to imprudent and unprofitable undertakings. It could only have erected this bank into a sort of general loan office for the whole country. the drawers and redrawers of circulating bills of exchange. Those who wanted to borrow must have applied to this bank.

that I shall not give any account of them. he proposed to remedy this want of money. 275 .000. and fifty. The principles upon which it was founded are explained by Mr Law himself. dated the 27th of July 1694. or for £ 96. when it was obliged to borrow at so high an interest. so clearly. both in Scotland and in other places. in his Examination of the Political Reflections upon commerce and finances of Mr Du Tot. when he first proposed his project. tallies had been at forty. by the Duke of Orleans. The idea of the possibility of multiplying paper money to almost any extent was the real foundation of what is called the Mississippi scheme. In 1697. the most extravagant project. in pursuance of an act of parliament.301. It was afterwards adopted. which he published in Scotland when he first proposed his project. with some variations.600. must have been very low. and have. and bank notes at twenty per cent. {James Postlethwaite’s History of the Public Revenue. The parliament of Scotland. contributed to that excess of banking. we may believe.000 for an annuity of £100. In 1696.001. and sixty. did not think proper to adopt it.000 year for the expense of management. which has of late been complained of.Adam Smith That the industry of Scotland languished for want of money to employ it. and £4.171:10s. c. the bank advanced and paid into the exchequer the sum of £400. was the opinion of the famous Mr Law. therefore. The splendid but visionary ideas which are set forth in that and some other works upon the same principles. and with so much order and distinctness. 7.201. In pursuance of the 7th Anne. interest at the rate of eight per cent. It at that time advanced to government the sum of £1. per cent. amounted at this time to £2. still continue to make an impression upon many people. the bank had thought proper to discontinue the payment of its notes. in part. at that time regent of France. discount. The different operations of this scheme are explained so fully. p. The Bank of England is the greatest bank of circulation in Europe. This ingraftment is said to have been for the support of public credit. The credit of the new government. which necessarily occasioned their discredit.000 a-year.000.000. established by the Revolution. by a charter under the great seal. Its whole capital stock. in a discourse concerning money and trade. making in all the sum of £1. by Mr Du Verney.200.171: 10s. perhaps. by an ingraftment of £1. By establishing a bank of a particular kind. which was going on at this time.} During the great re-coinage of the silver. It was incorporated. both of banking and stock-jobbing. the bank was allowed to enlarge its capital stock. which he seems to have imagined might issue paper to the amount of the whole value of all the lands in the country. that perhaps the world ever saw.

therefore.995:14:8d.800.775. upon different occasions.000. therefore did not increase either of those two other sums. in consequence of the subscriptions which it had taken in for enabling it to make this purchase. stock to the amount of £4.8.995:14:8d. the bank capital amounted to £ 5. without interest or re-payment. the common legal and market rate of those times. the bank purchased of the South-sea company.000: and in 1722. that the bank began to have an undivided capital. and £4. and it had advanced to government the sum of £3. The state of those two sums has continued to be the same ever since.375. or.559. therefore. the bank dividend has been at five and a half per cent. and for which it received interest. In 1703. advanced to the public £11. in other words. since it could borrow at six per cent. This rate of interest has gradually been reduced from eight to three per cent. the credit of government was as good as that of private persons.000. It has continued to have an undivided capital of the same kind ever since.000.686. in 1710. c.448:12:11d.25. and made stock. began first to exceed its capital stock. In pursuance of the same act. therefore. there was paid in. It had at this time. In consequence of those two calls. the capital of the bank amounted to £4.000 for expense of management. At this time. therefore.027: 17s: 10½d. In pursuance of the 3rd George I. the bank had. 276 . £ 656. the bank delivered up two millions of exchequer Bills to be cancelled. In 1708.000 interest. its capital stock was increased by £ 3. at different times. c. the bank had advanced to the public £ 9. £501. in 1709. interest. over and above its divided one.959. In pursuance of the 8th George I.027:17:10½d. This sum.027 17s.000. In 1746.The Wealth of Nations which it had advanced upon its original annuity of £96. and its divided capital had been raised by different calls and subscriptions to £ 10.21.027:17 10d.204:1:9d. the bank agreed to pay to government for the renewal of its charter £110. 10½d. and by another of ten per cent. It was upon this occasion that the sum which the bank had advanced to the public.400.. and was at the same time allowed to take in subscriptions for doubling its capital. c. as well as according to other circumstances. received for the money it had advanced to the public. interest. advanced to government £5. In pursuance of the 4th of George III. The dividend of the bank has varied according to the variations in the rate of the interest which it has. at six per cent. the bank cancelled exchequer bills to the amount of £ 1. or the sum for which it paid a dividend to the proprietors of bank stock.402. By a call of fifteen per cent.375. For some years past. and its capital stock amounted only to £ 8..343.375. therefore.780.

produces nothing.000. The judicious operations of banking. which. It acts. however. I do not. upon several different occasions. The gold and silver money which circulates in any country. to overstock the circulation with paper money. but of Hamburgh and Holland. pretend to warrant either the greatness of the sum. The judicious operations of banking enable him to convert this dead stock into active and productive stock. all dead stock.600. into stock which produces something both to himself and to his country. this great company has been reduced to the necessity of paying in sixpences. but as a great engine of state. or the shortness of the time. All that it has advanced to the public must be lost before its creditors can sustain any loss. in the same manner as the ready money of the dealer. or can consist of more than six members. it circulates exchequer bills. and by means of which. It receives and pays the greater part of the annuities which are due to the creditors of the public. by substituting paper in the room of a great part of this gold and silver. in 1763. so long as it remains in this situation. Upon other occasions. but by rendering a greater part of that capital active and productive than would otherwise be so. which. It likewise discounts merchants’ bills. which are frequently not paid up till some years thereafter. it is said to have advanced for this purpose. while it circulates and 277 . The gold and silver money which circulates in any country may very properly be compared to a highway. into stock which produces something to the country. its duty to the public may sometimes have obliged it. It is a very valuable part of the capital of the country. supported the credit of the principal houses. without any fault of its directors. not only as an ordinary bank. about £1. In these different operations. a great part of it in bullion. in one week. into tools to work with. which produces nothing to the country. and it advances to government the annual amount of the land and malt taxes. either to him or to his country. and into provisions and subsistence to work for. No other banking company in England can be established by act of parliament. is so much dead stock. and has. enable the country to convert a great part of this dead stock into active and productive stock. the produce of its land and labour is annually circulated and distributed to the proper consumers. not only of England. It is not by augmenting the capital of the country. into materials to work upon. is. Upon one occasion. for answering occasional demands. that the most judicious operations of banking can increase the industry of the country. That part of his capital which a dealer is obliged to keep by him unemployed and in ready money.Adam Smith The stability of the bank of England is equal to that of the British government.

a great part of its highways into good pastures. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money. enable the country to convert. by providing. may be employed sometimes in the one circulation and sometimes in the other. anxious to maintain his dominions at all times in the state in which he can most easily defend them. as when they travel about upon the solid ground of gold and silver. The usual instrument of commerce having lost its value. A prince. if I may be allowed so violent a metaphor. whatever is bought by the dealers being ultimately destined to be sold to the consumers. the annual produce of its land and labour. and consequently of that treasure which supported the credit of the paper money. when they are thus. ought upon this account to guard not only against that excessive multiplication of paper money which ruins the very banks which issue it. The circulation between the dealers.The Wealth of Nations carries to market all the grass and corn of the country. produces itself not a single pile of either. Though the same pieces of money. or to furnish his magazines. would occasion a much greater confusion in a country where the whole circulation was carried on by paper. as it is carried on by wholesale. and the state of the country would be much more irretrievable than if the greater part of its circulation had consisted in gold and silver. very considerably. and the circulation between the dealers and the consumers. suspended upon the Daedalian wings of paper money. the prince would not have wherewithal either to pay his troops. the circulation of the dealers with one another. as it were. and thereby to increase. The judicious operations of banking. but even against that multiplication of it which enables them to fill the greater part of the circulation of the country with it. each requires a certain stock of money. for example. The value of the goods circulated between the different dealers never can exceed the value of those circulated between the dealers and the consumers. in which the enemy got possession of the capital. of one kind or another. from which no prudence or skill of those conductors can guard them. no exchanges could be made but either by barter or upon credit. a sort of waggon-way through the air. than in one where the greater part of it was carried on by gold and silver. it must be acknowledged. yet as both are constantly going on at the same time. though they may be somewhat augmented. and corn fields. requires generally a 278 . The circulation of every country may be considered as divided into two different branches. as it were. All taxes having been usually paid in paper money. The commerce and industry of the country. they are liable to several others. to carry it on. cannot be altogether so secure. however. whether paper or metal. An unsuccessful war.

Paper money may be so regulated as either to confine itself very much to the circulation between the different dealers. are at least equal in value to those of all the dealers. therefore. as in Scotland. being often sufficient. In some paper currencies of Yorkshire. or to extend itself likewise to a great part of that between the dealers and the consumers. a shilling. the same pieces. 279 . or even a halfpenny. confine itself. or even for 20s. where no bank notes are issued under £10 value. he is generally obliged to change it at the first shop where he has occasion to purchase five shillings worth of goods. they can generally be transacted with a much smaller quantity of money. it was issued even for so small a sum as a sixpence. Paper money would then. A shilling changes masters more frequently than a guinea. That between the dealers and the consumers. paper money extends itself to a considerable part of the circulation between dealers and consumers. would be rejected by every body. as much as it does at present in London. by a more rapid circulation. Before the Act of parliament which put a stop to the circulation of ten and five shilling notes. In the currencies of North America. will get it to be received without scruple when it is issued for so small a sum as a sixpence. and sometimes even a very great calamity. probably. in most part of the kingdom. it filled a still greater part of that circulation. paper money confines itself very much to the circulation between the dealers. But the frequent bankruptcies to which such beggarly bankers must be liable. and filled almost the whole of that circulation. Where the issuing of bank notes for such very small sums is allowed. frequently requires but very small ones. that no bank notes were issued in any part of the kingdom for a smaller sum than £5. and a halfpenny more frequently than a shilling. When a ten pound bank note comes into the hands of a consumer. so that it often returns into the hands of a dealer before the consumer has spent the fortieth part of the money. Where bank notes are issued for so small sums as 20s. to many poor people who had received their notes in payment. A person whose promissory note for £5. £5 being. as in London. Though the annual purchases of all the consumers. and commonly practised. serving as the instrument of many more purchases of the one kind than of the other. But small sums circulate much faster than large ones. paper was commonly issued for so small a sum as a shilling. in every part of the kingdom.Adam Smith pretty large sum for every particular transaction. to the circulation between the different dealers. It were better. may occasion a very considerable inconveniency. many mean people are both enabled and encouraged to become bankers. on the contrary. Where no bank notes are circulated under £10 value. as it is generally carried on by retail. perhaps.

is destined altogether for the circulation between himself and other dealers of whom he buys goods. They are said. who are his customers. and who bring ready money to him. and the suppression of twenty shilling notes will probably relieve it still more. and partly by lending upon cash-accounts. To restrain private people. They might still be able to give the utmost assistance which banks and bankers can with propriety give to traders of every kind. but to support. banks and bankers might still be able to relieve the greater part of those dealers from the necessity of keeping any considerable part of their stock by them unemployed. Though paper money should be pretty much confined to the circulation between dealers and dealers. The ready money which a dealer is obliged to keep by him. little more than half the quantity of goods. and in ready money. and is as seldom spent all at once. yet partly by discounting real bills of exchange. it is to be observed. He has no occasion to keep any by him for the circulation between himself and the consumers. instead of taking any from him. it banishes gold and silver almost entirely from the country. almost all the ordinary transactions of its interior commerce being thus carried on by paper. whether great or small. when all his neighbours are willing to accept of them. to have been more abundant before the institution of those currencies. somewhat relieved the scarcity of gold and silver in Scotland. Where paper money. as in Scotland. is a manifest violation of that natural liberty. when they themselves are willing to receive them. Where it extends itself to a considerable part of the circulation between dealers and consumers. which it is the proper business of law not to infringe. since the suppression of some of their paper currencies. as £10 are amidst the profuse expense of London. be considered as in some respect a violation of natural liberty. as at London. it may be said. yet banks and bankers might still be able to give nearly the same assistance to the industry and commerce of the country. as they had done when paper money filled almost the whole circulation. to restrain a banker from issuing such notes. Those metals are said to have become more abundant in America. Though no paper money. for answering occasional demands. but for such sums as would confine it pretty much to the circulation between dealers and dealers. Such regulations may. for answering occasional demands. But those 280 . and still more in North America. was allowed to be issued. from receiving in payment the promissory notes of a banker for any sum. is as much considered. or.The Wealth of Nations a sum which. there is always plenty of gold and silver. perhaps. likewise. is pretty much confined to the circulation between dealers and dealers. The suppression of ten and five shilling bank notes. no doubt. therefore. though it will purchase.

which is taken from the currency. fall more or less below the value of gold and silver. which might endanger the security of the whole society. consisting in promissory notes. of the most free. From the beginning of the last century to the present time. issued by people of undoubted credit. The increase of paper money. though there is a great deal of paper money in England. and consequently diminishing the value. or upon a condition which the holder of the notes might not always have it in his power to fulfil. of which the immediate payment depended. to the badness of the seasons. equal in value to gold and silver money. and which. and scarce any in France. consisting in bank notes. is. exactly of the same kind with the regulations of the banking trade which are here proposed. since gold and silver money can at anytime be had for it. upon most occasions. and. In 1751 and 1752. The obligation of building party walls. no doubt. either upon the good will of those who issued them. and not to the multiplication of paper money. paper money does not necessarily increase the quantity of the whole currency. bore no interest. and soon after the great multiplication of paper money in Scotland. in order to prevent the communication of fire. there was a very sensible rise in the price of provisions. of the whole currency. in the mean time.Adam Smith exertions of the natural liberty of a few individuals. must necessarily be bought or sold as cheap as it could have been for gold and silver. necessarily augments the money price of commodities. is always equal to the quantity of paper which is added to it. provisions never were cheaper in Scotland than in 1759. But as the quantity of gold and silver. when Mr Hume published his Political Discourses. or according to the greater or less distance of time at which payment was exigible. as well as or the most despotical. in fact. probably. Such a paper money would. payable upon demand. in any respect. The proportion between the price of provisions in Scotland and that in England is the same now as before the great multiplication of banking companies in Scotland. without any condition. indeed. by augmenting the quantity. in every respect. there was then more paper money in the country than at present. always readily paid as soon as presented. fully as cheap in England as in France. restrained by the laws of all governments. are. 281 . Whatever is either bought or sold for such paper. Corn is. according as the difficulty or uncertainty of obtaining immediate payment was supposed to be greater or less. it has been said. is a violation of natural liberty. It would be otherwise. from the circulation of ten and five shilling bank notes. and ought to be. or of which the payment was not exigible till after a certain number of years. owing. with a paper money. though. A paper money.

and suppressed. 1763. and the uncertainty of getting these bank notes exchanged for gold and silver coin. and which must have degraded this currency below the value of gold and silver money. but in a government paper. is worth little more than £40 ready 282 .. what they called an optional clause. or to what the course of trade and remittances might happen to make it. During the continuance of this abuse (which prevailed chiefly in 1762. whereas at Dumfries they were paid in Scotch bank notes. the far greater part of the currency of Scotland. that the holder of the note should bring the change of a guinea to the person who issued it. and 1764). sometimes depended upon the condition. But allowing the colony security to be perfectly good. The directors of some of those banks sometimes took advantage of this optional clause. had thus degraded them four per cent. together with the legal interest for the said six months. the payment of so small a sum as 6d.The Wealth of Nations Some years ago the different banking companies of Scotland were in the practice of inserting into their bank notes. The paper currencies of North America consisted. under 20s. But at Carlisle. and in fact rendered it. In the paper currencies of Yorkshire. and though the colony governments paid no interest to the holders of this paper. unless such demanders would content themselves with a part of what they demanded. in the option of the directors. The same act of parliament which suppressed ten and five shilling bank notes. suppressed likewise this optional clause. a legal tender of payment for the full value for which it was issued. six months after such presentment. accordingly. that between London and Dumfries would sometimes be four per cent. payable to the bearer. and sometimes threatened those who demanded gold and silver in exchange for a considerable number of their notes. in the same manner as in Scotland. which this uncertainty of payment necessarily degraded below value of gold and silver money. and thereby restored the exchange between England and Scotland to its natural rate. at that time. against Dumfries. that they would take advantage of it. by which they promised payment to the bearer. An act of parliament. all promissory notes. value. they declared it to be. either as soon as the note should be presented. or. not in bank notes payable to the bearer on demand. for example. though this town is not thirty miles distant from Carlisle. The promissory notes of those banking companies constituted. payable fifteen years hence. bills were paid in gold and silver. below the value of that coin. while the exchange between London and Carlisle was at par. a condition which the holders of such notes might frequently find it very difficult to fulfil. in a country where interest is at six per cent. declared all such clauses unlawful. of which the payment was not exigible till several years after it was issued. £100.

should be a legal tender of payment. to £130. by the course of exchange with Great Britain. and who is at liberty to sell or not to sell as he pleases. to accept of this as full payment for a debt of £100. and afterwards for 6s:8d. that no paper currency to be emitted there in time coming. accordingly. was more than thirty per cent. is said never to have sunk below the value of the gold and silver which was current in the colony before the first emission of its paper money. by act of assembly. therefore. as has scarce. sterling to pass in the colonies for 6s:3d. and in others to so great a sum as £1100 currency. actually paid down in ready money. by enacting penalties against all those who made any difference in the price of their goods when they sold them for a colony paper. but no positive law can oblige a person who sells goods. a regulation equally tyrannical. but much less. A positive law may render a shilling a legal tender for a guinea. upon their first emission of paper money. A pound. what the honest and downright Doctor Douglas assures us it was. the colony had raised the denomination of its coin. than that which it was meant to support. a scheme of fraudulent debtors to cheat their creditors. The government of Pennsylvania. No law. been attempted by the government of any other country which pretended to be free. which declared. below the value of £1 sterling. because it may direct the courts of justice to discharge the debtor who has made that tender. to accept of a shilling as equivalent to a guinea in the price of them. It bears the evident marks of having originally been. could be more equitable than the act of parliament. Its paper currency. therefore. ordered 5s.Adam Smith money. To oblige a creditor. by making equal quantities of those metals pass for greater sums in the colony than they did in the mother country. in 1722. pretended. The pretence for raising the denomination of the coin was to prevent the exportation of gold and silver. even when that currency was gold and silver. indeed. so unjustly complained of in the colonies. this difference in the value arising from the difference in the quantity of paper emitted in the different colonies. Pennsylvania was always more moderate in its emissions of paper money than any other of our colonies. it was seldom much more than thirty per cent. Notwithstanding any regulation of this kind. and when that currency was turned into paper. Before that emission. it appeared. below that value. and had. colony currency. in some of the colonies.. and when they sold them for gold and silver. therefore. 283 . to render their paper of equal value with gold and silver. perhaps. effectual. that £100 sterling was occasionally considered as equivalent. was an act of such violent injustice. and in the distance and probability of the term of its final discharge and redemption. It was found.

not upon the nature and quantity of any particular paper money.The Wealth of Nations however. which may be current in any particular country. from the real or supposed distance of the term of its final discharge and redemption. but upon the richness or poverty of the mines. It is upon this account. even though the term of its final discharge and redemption should depend altogether upon the will of the prince. it will appear hereafter. or sell for somewhat more in the market than the quantity of gold or silver currency for which it was issued. for the full value for which it had been issued. are careful to keep the whole quantity of bank money always below what this use occasions a demand for. it necessarily derived from this use some additional value. depends in all cases. This account of the bank of Amsterdam. that is. according as the quantity of paper issued was more or less above what could be employed in the payment of the taxes of the particular colony which issued it. the bank money sells for a premium. the demand for it might be such as to make it even bear a premium. might thereby give a certain value to this paper money. they allege. however. is in a great measure chimerical. The proportion between the value of gold and silver and that of goods of any other kind. It was in all the colonies very much above what could be employed in this manner. A paper currency which falls below the value of gold and silver coin. so that their gold and silver were exported as fast as ever. cannot be taken out of the bank at the will of the owner. as they pretend. or bears an agio of four or five per cent. The greater part of foreign bills of exchange must be paid in bank money. which happen at any particular time to supply the great market of the commercial world with 284 . by a transfer in the books of the bank. or for the superiority of bank money over current money. over and above what it would have had. If the bank which issued this paper was careful to keep the quantity of it always somewhat below what could easily be employed in this manner. that the price of all goods from the mother country rose exactly in proportion as they raised the denomination of their coin. above the same nominal sum of the gold and silver currency of the country. The paper of each colony being received in the payment of the provincial taxes. A prince. does not thereby sink the value of those metals. This additional value was greater or less. they say. Some people account in this manner for what is called the agio of the bank of Amsterdam. and the directors of the bank. though this bank money. who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind. or occasion equal quantities of them to exchange for a smaller quantity of goods of any other kind.

or any division of labour. for less than a certain sum. increases the security of the public. In general. If bankers are restrained from issuing any circulating bank notes.Adam Smith those metals. be rendered in all other respects perfectly free. to guard themselves against those malicious runs. in the course of things. It obliges all of them to be more circumspect in their conduct. their trade may. This free competition. becomes of less consequence to the public. 285 . obliges all bankers to be more liberal in their dealings with their customers. be advantageous to the public. it will always be the more so. with safety to the public. and reduces their circulating notes to a smaller number. It depends upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market. must sometimes happen. instead of diminishing. It restrains the circulation of each particular company within a narrower circle. an accident which. by not extending their currency beyond its due proportion to their cash. and if they are subjected to the obligation of an immediate and unconditional payment of such bank notes as soon as presented. or notes payable to the bearer. The late multiplication of banking companies in both parts of the united kingdom. By dividing the whole circulation into a greater number of parts. and. lest their rivals should carry them away. if any branch of trade. the freer and more general the competition. which the rivalship of so many competitors is always ready to bring upon them. and that which is necessary in order to bring thither a certain quantity of any other sort of goods. too. an event by which many people have been much alarmed. the failure of any one company.

which lasts for some time at least after that labour is past. and deserves its reward as well as that of the former. His services generally perish in the very instant of their performance. The labour of the latter. can afterwards. for which an equal quantity of service could afterwards be procured. OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR THERE IS ONE SORT OF LABOUR which adds to the value of the subject upon which it is bestowed. adds to the value of nothing. the price of that subject. It is. to be employed. unproductive labour. what is the same thing. I shall endeavour to shew that their sense is an improper one. however. together with a profit. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity. put into motion a quantity of labour equal to that which had originally produced it. there is another which has no such effect. The labour of a menial servant. and seldom leave any trace of value behind them. and of his master’s profit.} Thus the labour of a manufacturer adds generally to the value of the materials which he works upon. if necessary. the value of those wages being generally restored. The labour of some of the most respectable orders in the society is. in the improved value of the subject upon which his labour is bestowed. that of his own maintenance. the latter. A man grows rich by employing a multitude of manufacturers. he in reality costs him no expense. But the maintenance of a menial servant never is restored. he grows poor by maintaining a multitude or menial servants. has its value. The former as it produces a value. if necessary. a certain quantity of labour stocked and stored up. as it were.The Wealth of Nations CHAPTER III OF THE ACCUMULATION OF CAPITAL. That subject. on the contrary. In the last chapter of the fourth book. like 286 . The labour of the menial servant. may be called productive. upon some other occasion. or. {Some French authors of great learning and ingenuity have used those words in a different sense. does not fix or realize itself in any particular subject or vendible commodity. Though the manufacturer has his wages advanced to him by his master. on the contrary.

which had been withdrawn from a capital. unproductive of any value. The protection. Like the declamation of the actor. how useful. are unproductive labourers. and does not fix or realize itself in any permanent subject. musicians. the effect of their labour this year. produces nothing which could afterwards purchase or procure an equal quantity of labour. opera-dancers. will remain for the productive. the work of all of them perishes in the very instant of its production. The labour of the meanest of these has a certain value. They are the servants of the public. The sovereign. and for procuring a revenue to them. or from the hands of the productive labourers. According. some both of the gravest and most important. destined for replacing a capital. the 287 . security. with all the officers both of justice and war who serve under him. and those who do not labour at all. etc. and the next year’s produce will be greater or smaller accordingly. This produce. is. and finished work. and are maintained by a part of the annual produce of the industry of other people. opera-singers. how great soever. or to some other person. physicians. and that of the noblest and most useful. being the effect of productive labour. as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands. players. how honourable. and frequently the largest. produces nothing for which an equal quantity of service can afterwards be procured. or how necessary soever. Thus. lawyers. will not purchase its protection. and the less in the other. regulated by the very same principles which regulate that of every other sort of labour. and defence. In the same class must be ranked. the whole army and navy. Though the whole annual produce of the land and labour of every country is no doubt ultimately destined for supplying the consumption of its inhabitants.Adam Smith that of menial servants. buffoons. or for renewing the provisions. Their service. can never be infinite. the harangue of the orator. security. for the year to come. one part replaces the capital of the farmer. which endures after that labour is past. if we except the spontaneous productions of the earth. in the first place. or the tune of the musician. materials. churchmen. as the profit of his stock. for example. therefore. and for which an equal quantity of labour could afterwards be procured. but must have certain limits. men of letters of all kinds. of the commonwealth. and defence. it naturally divides itself into two parts. yet when it first comes either from the ground. are all equally maintained by the annual produce of the land and labour of the country. Both productive and unproductive labourers. One of them. and some of the most frivolous professions. the other for constituting a revenue either to the owner of this capital. as the rent of his land. of the produce of land. the whole annual produce. or vendible commodity. the more in the one case.

one part. he always expects it to be replaced to him with a profit. or he may pay some taxes. of which productive 288 . and thus constitutes a revenue both to the owner of this capital. That part of the annual produce of the land and labour of any country which replaces a capital. by that part which. and thus help to maintain another set. is ever directed towards maintaining unproductive hands. replaces the capital of the undertaker of the work. and so contribute his share towards maintaining one set of unproductive labourers. if his wages are considerable. Whatever part of his stock a man employs as a capital. may be employed in maintaining indifferently either productive or unproductive hands. It pays the wages of productive labour only. but equally unproductive. not only the great landlord or the rich merchant. whatever part of it is over and above their necessary subsistence. The workman must have earned his wages by work done. Unproductive labourers. That part. either. and after having served in the function of a capital to him. Of the produce of a great manufactory.The Wealth of Nations other pays his profit and the rent of the landlord. but even the common workman. in maintaining productive hands only. however. indeed. and for maintaining productive labourers only. Whenever he employs any part of it in maintaining unproductive hands of any kind. and thus constitutes a revenue to the owner of this capital. or. or as the profits of stock. too. may maintain a menial servant. in the same manner. yet when it comes into their hands. He employs it. and placed in his stock reserved for immediate consumption. either as the rent of land. That which is immediately destined for constituting a revenue. and that always the largest. and those who do not labour at all. never is immediately employed to maintain any but productive hands. more honourable and useful. either as profit or as rent. by that part of the annual produce which is originally destined for constituting a revenue to some particular persons. therefore. first. till after it has put into motion its full complement of productive labour. which had been originally destined to replace a capital. may maintain indifferently either productive or unproductive hands. though originally destined for replacing a capital. is generally but a small one. or all that it could put into motion in the way in which it was employed. that part is from that moment withdrawn from his capital. or he may sometimes go to a play or a puppet-show. It is his spare revenue only. before he can employ any part of them in this manner. as the profits of his stock. secondly. No part of the annual produce. Thus. it constitutes a revenue to them. the other pays his profit. and to some other person as the rent of his land. are all maintained by revenue.

Those who were not bond-men were tenants at will. between the productive and unproductive hands. The rent of land and the profits of stock are everywhere. They seem. and though the rent which they paid was often nominally little more than a quit-rent. and in the payment of taxes. maintained altogether by the spontaneous produce of uncultivated land. at present. the smallness of their contribution. that is. Though they lived at a distance from his house. to have some predilection for the latter. The expense of a great lord feeds generally more idle than industrious people The rich merchant. and that which is destined for constituting a revenue.Adam Smith labourers have seldom a great deal. depends very much in every country upon the proportion between that part of the annual produce. is destined for replacing a capital. and which might. In the present state of Europe. too. These are the two sorts of revenue of which the owners have generally most to spare. the share of the 289 . is destined for replacing the capital of the rich and independent farmer. It generally. The proportion. as soon as it comes either from the ground. the other for paying his profits. be considered as a part of that spontaneous produce. however. It consisted commonly in a few wretched cattle. a very large. by the employment of his revenue. or as profit upon this paltry capital. belonged to the landlord. who can dispose of the labour and service of all those whom it maintains. But anciently. Their lord could at all times command their labour in peace and their service in war. They generally have some. the greatness of their number may compensate. a very small portion of the produce was sufficient to replace the capital employed in cultivation. either as rent or as profit. either productive or unproductive hands. whose persons and effects were equally his property. he feeds commonly the very same sort as the great lord. however. This proportion is very different in rich from what it is in poor countries. which. therefore. They might both maintain indifferently. therefore. All the rest of the produce properly belonged to him too. frequently the largest. either as rent for his land. The occupiers of land were generally bond-men. during the prevalency of the feudal government. or from the hands of the productive labourers. yet by his expense. in the opulent countries of Europe. in some measure. the principal sources from which unproductive hands derive their subsistence. portion of the produce of the land. it really amounted to the whole produce of the land. though with his capital he maintains industrious people only. therefore. and the rent of the landlord. and was by him advanced to the occupiers of the land. But the whole produce of the land undoubtedly belongs to him. they were equally dependent upon him as his retainers who lived in it. Thus.

have generally a predilection for the latter. the profits are generally much less. sometimes not a fourth part of the whole produce of the land. but bears a much greater proportion to that which is immediately destined for constituting a revenue either as rent or as profit. is not only much greater in rich than in poor countries. and this third or fourth part of the annual produce is. the rate of interest. than to work for nothing. The rate of interest was nowhere less than ten per cent. than they were two or three centuries ago. the funds destined for the maintenance of industry are much greater in proportion to those which are likely to be employed in the maintenance of idleness. as soon as it comes either from the ground. three or four times greater than the whole had been before. because. rent. In the opulent countries of Europe. These. three. they are in general industrious. in all the improved parts of the country. Our ancestors were idle for want of a sufficient encouragement to industry. and the few homely and coarse manufactures that were carried on. The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. it seems. as in many English. in the improved parts of Europe. The funds destined for the maintenance of productive labour are not only much greater in the former than in the latter. It is better. the little trade that was stirring. or from the hands of the productive labourers. In mercantile and manufacturing towns. required but very small capitals. says the proverb. and in most Dutch 290 . must have yielded very large profits. is destined for replacing a capital. in the present times. it is so low as four. The rent of land. but bear a much greater proportion to those which. That part of the annual produce. in proportion to the stock. though they may be employed to maintain either productive or unproductive hands. We are more industrious than our forefathers. therefore. and two per cent. is nowhere higher than six per cent.. At present. In the ancient state. and thriving. and their profits must have been sufficient to afford this great interest. though it increases in proportion to the extent. In the progress of improvement. Though that part of the revenue of the inhabitants which is derived from the profits of stock. however. is always much greater in rich than in poor countries. diminishes in proportion to the produce of the land. great capitals are at present employed in trade and manufactures. which. sober. where the inferior ranks of people are chiefly maintained by the employment of capital.The Wealth of Nations landlord seldom exceeds a third. and in some of the most improved. to play for nothing. however. has been tripled and quadrupled since those ancient times. it is because the stock is much greater.

to employ with advantage a capital for any other purpose than for supplying the consumption of that city. Madrid. If you except Rouen and Bourdeaux. and the employment of this capital is the cause of the industry of those two cities. and Vienna. and Copenhagen. for the consumption of the great city of Paris. The great trade of Rouen and Bourdeaux seems to be altogether the effect of their situation.Adam Smith towns. The same thing may be said of Paris. or from the maritime provinces of France. 291 . and Fontainbleau. In those towns which are principally supported by the constant or occasional residence of a court. In a city where a great revenue is spent. very little more capital seems to be employed than what is necessary for supplying their own consumption. the entrepot of the wines which grow upon the banks of the Garronne. and poor. or best suited to the taste of foreign nations. but Paris itself is the principal market of all the manufactures established at Paris. they are in general idle. In the other parliament towns of France. Rouen is necessarily the entrepot of almost all the goods which are brought either from foreign countries. and which seems to produce the wine fittest for exportation. corrupts. and of those who come to plead before them. is probably more difficult than in one in which the inferior ranks of people have no other maintenance but what they derive from the employment of such a capital. dissolute. as at Rome. The idleness of the greater part of the people who are maintained by the expense of revenue. The situation of all the three is extremely advantageous. perhaps. little more than the smallest capital which can be employed in them. and its own consumption is the principal object of all the trade which it carries on. the industry of those who ought to be maintained by the employment of capital. and of the rivers which run into it. that is. Bourdeaux is. Lisbon. and naturally fits them to be the entrepots of a great part of the goods destined for the consumption of distant places. and the inferior ranks of people. Versailles. but for that of other cities and countries. the only three cities in Europe. being chiefly maintained by the expense of the members of the courts of justice. Compeigne. are in general idle and poor. one of the richest wine countries in the world. and renders it less advantageous to employ a capital there than in other places. there is little trade or industry in any of the parliament towns of France. or as cities which trade not only for their own consumption. and can at the same time be considered as trading cities. it is probable. Of those three cities. in the same manner. London. which are both the constant residence of a court. and in which the inferior ranks of people are chiefly maintained by the spending of revenue. Such advantageous situations necessarily attract a great capital by the great employment which they afford it. Paris is by far the most industrious. are.

therefore. it became a city of some trade and industry. so the capital of a society. The proportion between capital and revenue. When the Scotch parliament was no longer to be assembled in it. therefore. indeed. have become idle and poor. the number of productive hands. naturally tends to increase or diminish the real quantity of industry. to increase the exchangeable value of the annual produce of the land and labour of the country. in consequence of a great lord’s having taken up his residence in their neighbourhood. It still continues. It tends. it is much inferior to Glasgow. when it ceased to be the necessary residence of the principal nobility and gentry of Scotland. idleness. Parsimony. is the immediate cause of the increase of capital. Every increase or diminution of capital. Capitals are increased by parsimony. and diminished by prodigality and misconduct. A considerable revenue. In trade and industry. the real wealth and revenue of all its inhabitants. can be increased only in the same manner. seems everywhere to regulate the proportion between industry and idleness Wherever capital predominates. Industry. that is. if parsimony did not save and store up. but whatever industry might acquire. of the boards of customs and excise. and not industry. It puts into motion an additional quantity of industry.The Wealth of Nations There was little trade or industry in Edinburgh before the Union. The inhabitants of a large village. 292 . provides the subject which parsimony accumulates. it has sometimes been observed. Parsimony. wherever revenue. therefore. after having made considerable progress in manufactures. etc. and consequently the exchangeable value of the annual produce of the land and labour of the country. the capital would never be the greater. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains. however. or enables some other person to do so. tends to increase the number of those hands whose labour adds to the value of the subject upon winch it is bestowed. industry prevails. Whatever a person saves from his revenue he adds to his capital. to be the residence of the principal courts of justice in Scotland. which gives an additional value to the annual produce. by lending it to him for an interest. of which the inhabitants are chiefly maintained by the employment of capital. by increasing the fund which is destined for the maintenance of productive hands. which is the same with that of all the individuals who compose it. therefore. and either employs it himself in maintaining an additional number of productive hands. for a share of the profits. still continues to be spent in it.

Had he spent the whole. consequently. are necessarily reserved for the latter. the plain and evident interest of every individual to whom any share of it shall ever belong. That portion which he annually saves. the value of their annual consumption. and artificers. as that part is. it is immediately employed as a capital. and lodging. By diminishing the funds destined for the employment of productive labour. he encroaches upon his capital. the value of the annual produce of the land and labour of the whole country. the food. for the sake of the profit. The perpetual allotment and destination of this fund. is paid him in money. By saving a part of it. for that of the ensuing year. which the whole could have purchased. the food. for the sake of the profit. The consumption is the same. No part of it can ever afterwards be employed to maintain any but productive hands. is. would have been distributed among the former set of people. and nearly in the same time too. which may be purchased with it. Like him who perverts the revenues of some pious foundation to profane purposes.Adam Smith What is annually saved. and nearly in the same time too: but it is consumed by a different set of people. and lodging. manufacturers. he not only affords maintenance to an additional number of productive hands. as it were. and. as. consecrated to the maintenance of industry. without an evident loss to the person who thus perverts it from its proper destination. immediately employed as a capital. a perpetual fund for the maintenance of an equal number in all times to come. By what a frugal man annually saves. he necessarily diminishes. by feeding the idle with the bread of the indus- 293 . That portion of his revenue which a rich man annually spends. is as regularly consumed as what is annually spent. with a profit. the quantity of that labour which adds a value to the subject upon which it is bestowed. we shall suppose. consumed by idle guests and menial servants. however. If the prodigality of some were not compensated by the frugality of others. in most cases. It is always guarded. he pays the wages of idleness with those funds which the frugality of his forefathers had. indeed. as it were. either by himself or by some other person. is consumed in the same manner. clothing. by a very powerful principle. is not always guarded by any positive law. but like the founder of a public work-house he establishes. clothing. the conduct of every prodigal. by any trust-right or deed of mortmain. the real wealth and revenue of its inhabitants. who leave nothing behind them in return for their consumption. who reproduce. but by a different set of people: by labourers. so far as it depends upon him. His revenue. The prodigal perverts it in this manner: By not confining his expense within his income. but the consumers are different.

be sent abroad. have been a reproduction of an equal value of consumable goods. must diminish as the value of that produce diminishes. it will. These must consist. which ought to have maintained productive. But the money which. and there would. employed in maintaining unproductive hands. but having no employment at home. or in something which had been purchased with some part of that produce. besides. and no part of it in foreign commodities. Every year there would still be a certain quantity of food and clothing. and employed in purchasing gold and silver. and employed in purchasing consumable goods. in this manner. there would still be some diminution in what would otherwise have been the value of the annual produce of the land and labour of the country. The sole use of money is to circulate consumable goods. provisions. not being in foreign goods. the full value of their consumption. which may be of some use at home. But if the quantity of food and clothing which were thus consumed by unproductive. together with a profit. The same quantity of money. the same quantity of money would remain in the country as before. are bought and sold. either in the immediate produce of the land and labour of the country itself. continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. its effect upon the productive funds of the society would still be the same. materials. it may be said. The interest of whoever possesses it requires that it should be employed. by this annual diminution of produce. must be determined by the value of the consumable goods annually circulated within it. is annually thrown out of domestic circulation. This expense. indeed. therefore. would tend not only to beggar himself. besides. and distributed to their proper consumers. but to impoverish his country. equally have remained in the country. The same quantity of money would. will con- 294 . in spite of all laws and prohibitions. By means of it. will not be allowed to lie idle. Every year. Its annual exportation will. There would have been two values instead of one. Their value. can not long remain in any country in which the value of the annual produce diminishes. Though the expense of the prodigal should be altogether in home made. and finished work. and not occasioning any exportation of gold and silver. therefore. and along with it the quantity of money which can be employed in circulating them.The Wealth of Nations trious. The quantity of money. therefore. they would have reproduced. What in the days of its prosperity had been saved from that annual produce. in this case. which can be annually employed in any country. had been distributed among productive hands.

but the effect of its declension. is the price paid for them in Peru as well as in England. there must always be some diminution in what would otherwise have been the productive funds of the society. clothing. whether in the value of the annual produce of its land and labour. or in the quantity of the precious metals which circulate within it. The food. fisheries. that the circumstances of a great nation can be much affected either by the prodigality or misconduct of individuals. on the contrary. the additional quantity of gold and silver necessary for circulating the rest. the principle which prompts to expense is the passion for present enjoyment. Every injudicious and unsuccessful project in agriculture. for some little time. they do not reproduce the full value of their consumption. The exportation of gold and silver is. for some little time. The increase of those metals will. of all those whose labour or stock is employed in bringing them from the mine to the market. will never belong without the quantity of those metals which it has occasion for. and no country will ever long retain a quantity which it has no occasion for. as vulgar prejudices suppose. in this case. therefore. or manufactures. The effects of misconduct are often the same as those of prodigality. It can seldom happen. will naturally be employed in purchasing. to support its consumption in adversity. trade. though the capital is consumed by productive hands only. will require a greater quantity of money to circulate them. though sometimes violent and very 295 . A part of the increased produce. wherever it is to be had. in this case. every prodigal appears to be a public enemy. and every frugal man a public benefactor. be the effect. not the cause. yet as. must in every country naturally increase as the value of the annual produce increases.Adam Smith tribute. The quantity of money. the revenue and maintenance. The value of the consumable goods annually circulated within the society being greater. by the injudicious manner in which they are employed. the profusion or imprudence of some being always more than compensated by the frugality and good conduct of others. therefore. Whatever. in either view of the matter. and may even. alleviate the misery of that declension. we may imagine the real wealth and revenue of a country to consist in. With regard to profusion. and lodging. which. mines. tends in the same manner to diminish the funds destined for the maintenance of productive labour. of the public prosperity. indeed. In every such project. not the cause. Gold and silver are purchased everywhere in the same manner. The country which has this price to pay. as plain reason seems to dictate.

is the desire of bettering our condition. though generally calm and dispassionate. prevails in almost all men upon some occasions. Such are the people who compose a numerous and splendid court. as some do not avoid the gallows. in which any man is so perfectly and completely satisfied with his situation. the unhappy men who fall into this misfortune. in most countries. there is scarce. therefore. With regard to misconduct. even while the war lasts. perhaps. that of the third year will be still less than 296 . do not avoid it. Such people. as to be without any wish of alteration or improvement of any kind. who should reproduce it next year. though they sometimes are by public prodigality and misconduct. they may in a particular year consume so great a share of this produce. It is the means the most vulgar and the most obvious. and in time of war acquire nothing which can compensate the expense of maintaining them. are sufficiently careful to avoid it. In the whole interval which separates those two moments. a desire which. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. and all other sorts of business. make but a very small part of the whole number engaged in trade. either regularly and annually. and if the same disorder should continue. is to save and accumulate some part of what they acquire. Bankruptcy is. comes with us from the womb. employed in maintaining unproductive hands. and the most likely way of augmenting their fortune. who in time of peace produce nothing. the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. or almost the whole public revenue is. and never leaves us till we go into the grave. The next year’s produce. and in some men upon almost all occasions. to an unnecessary number. yet in the greater part of men. therefore. taking the whole course of their life at an average. a great ecclesiastical establishment. After all our complaints of the frequency of bankruptcies. than one in a thousand.The Wealth of Nations difficult to be restrained. indeed. Though the principle of expense. Some. the principle of frugality seems not only to predominate. or upon some extraordinary occasion. but to predominate very greatly. is in general only momentary and occasional. Great nations are never impoverished by private. When multiplied. perhaps. are all maintained by the produce of other men’s labour. therefore. But the principle which prompts to save. great fleets and armies. perhaps. as they themselves produce nothing. a single instance. therefore. the greatest and most humiliating calamity which can befal an innocent man. as not to leave a sufficiency for maintaining the productive labourers. will be less than that of the foregoing. not much more. The whole. The greater part of men.

may consume so great a share of their whole revenue. not only the private prodigality and misconduct of individuals. and its trade more extensive. therefore. In either case. but the public extravagance of government. When we compare. that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment. requires a much greater capital than where every man is occasionally employed in every different part of the work. and uninterrupted effort of every man to better his condition. The number of its productive labourers. sufficient to compensate. but in consequence of an increase of capital. that the undertaker of any work can either provide his workmen with better machinery. in spite not only of the disease. an additional capital is almost always required. Those unproductive hands who should be maintained by a part only of the spare revenue of the people. The productive powers of the same number of labourers cannot be increased. or make a more proper distribution of employment among them. but by increasing either the number of its productive labourers. and thereby oblige so great a number to encroach upon their capitals. but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour. upon most occasions. and of the greatest errors of administration. the state of a nation at two different periods. or of the funds destined for maintaining them. or of more proper division and distribution of employment. It is by means of an additional capital only. This frugality and good conduct. we may be assured that its capital must have increased during the interval between those two periods. it is evident.Adam Smith that of the second. however. is. The uniform.is frequently powerful enough to maintain the natural progress of things towards improvement. 297 . upon the funds destined for the maintenance of productive labour. it appears from experience. in spite both of the extravagance of government. that its lands are better cultivated. Like the unknown principle of animal life. its manufactures more numerous and more flourishing. can never be much increased. The annual produce of the land and labour of any nation can be increased in its value by no other means. it frequently restores health and vigour to the constitution. the principle from which public and national. When the work to be done consists of a number of parts. or the productive powers of those labourers who had before been employed. to keep every man constantly employed in one way. constant. as well as private opulence is originally derived. but of the absurd prescriptions of the doctor. and find that the annual produce of its land and labour is evidently greater at the latter than at the former.

than it had been about a century before. the improvement is not only not sensible. The progress is frequently so gradual. The annual produce of the land and labour of England. again. Even at this early period. and pretending to demonstrate that the wealth of the nation was fast declining. who wrote nothing but what they believed. however. we have all reason to believe. Though at present few people. was certainly much greater at the Restoration than we can suppose it to have been about a hundred years before. and trade undone. the country was much more advanced in improvement. that the riches and industry of the whole are decaying. towards the close of the dissensions between the houses of York and Lancaster. probably. but sometimes. yet during this period five years have seldom passed away. than had been taken from it either by the private misconduct of others. but. in a better condition than it had been at the Norman conquest: and at the Norman conquest. things which sometimes happen.The Wealth of Nations and that more must have been added to it by the good conduct of some. great perversion of the annual produce from maintaining productive to maintain unproductive hands. than during the confusion of the Saxon heptarchy. in which some book or pamphlet has not been published. at the accession of Elizabeth. manufactures decaying. at near periods. from the declension either of certain branches of industry. and for no other reason but because they believed it. is certainly much greater than it was a little more than a century ago. Nor have these publications been all party pamphlets. such ab- 298 . many expensive and unnecessary wars. doubt of this. too. I believe. The annual produce of the land and labour of England. indeed. or by the public extravagance of government. it was certainly a more improved country than at the invasion of Julius Caesar. at the restoration of Charles II. Even then it was. In each of those periods. At this period. or of certain districts of the country. agriculture neglected. that. But we shall find this to have been the case of almost all nations. we must compare the state of the country at periods somewhat distant from one another. even of those who have not enjoyed the most prudent and parsimonious governments. To form a right judgment of it. for example. there frequently arises a suspicion. Many of them have been written by very candid and very intelligent people. when its inhabitants were nearly in the same state with the savages in North America. there was not only much private and public profusion. with such abilities as to gain some authority with the public. too. in the confusion of civil discord. written. the wretched offspring of falsehood and venality. that the country was depopulated. in all tolerably quiet and peaceable times. though the country in general is in great prosperity.

not only the impoverishment. poorer than at the beginning. whose labour would have replaced. more lands would have been improved. and those which had been established before would have been more extended. could they have been foreseen. as it certainly did. So great a share of the annual produce of the land and labour of the country. since the Revolution. but the total ruin of the country would have been expected from them? The fire and the plague of London. the four expensive French wars of 1688. but to have left the country. more manufactures would have been established. the two Dutch wars. how many disorders and misfortunes have occurred. the whole value of their consumption. together with the two rebellions of 1715 and 1745. continual. the natural accumulation of riches. therefore. which. and allowed by liberty to exert itself in the manner that is most ad- 299 .000. so that the whole cannot be computed at less than £200. The capital. 1701. and in maintaining this labour. at the end of the period. not only to retard. this capital has been silently and gradually accumulated by the private frugality and good conduct of individuals. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year. and 1756. that which has passed since the Restoration. But had not those wars given this particular direction to so large a capital. Thus. and to what height the real wealth and revenue of the country might by this time have been raised. and every years increase would have augmented still more that of the following year. the disorders of the revolution. 1742. the war in Ireland. as might be supposed. More houses would have been built. over and above all the other extraordinary annual expense which they occasioned.000 of debt. by their universal. and those which had been improved before would have been better cultivated. But though the profusion of government must undoubtedly have retarded the natural progress of England towards wealth and improvement. In the course of the four French wars. annually employed in cultivating this land.000.Adam Smith solute waste and destruction of stock. been employed upon different occasions. protected by law. must likewise be much greater. with a profit.000. It is this effort. the nation has contracted more than £145. The annual produce of its land and labour is undoubtedly much greater at present than it was either at the Restoration or at the Revolution. it is not perhaps very easy even to imagine. has. in maintaining an extraordinary number of unproductive hands. In the midst of all the exactions of government. and uninterrupted effort to better their own condition. it has not been able to stop it. in the happiest and most fortunate period of them all. the greater part of it would naturally have been employed in maintaining productive hands.

will do so in all future times. therefore. so parsimony has at no time been the characteristic virtue of its inhabitants. either alleviate. and few attendants. statues. England. and in maintaining a great number of menial servants. would be continually increasing. he may lay out the greater part of it in adorning his house or his country villa. like the favourite and minister of a great prince who died a few years ago. in kings and ministers to pretend to watch over the economy of private people. which has maintained the progress of England towards opulence and improvement in almost all former times. what is most trifling of all. would be no greater at the end of the period than at the beginning. or. and a multitude of dogs and horses. A man of fortune. in amassing a great wardrobe of fine clothes. Some modes of expense. or in things more frivolous. the other in the other. either by sumptuary laws. or by prohibiting the importation of foreign luxuries. the greatest spendthrifts in the society. the one chiefly in the one way. in useful or ornamental furniture. The revenue of an individual may be spent. that of the subject never will. pictures. as he chooses. and in which every day’s expense may. the magnificence of the person whose expense had been chiefly in durable commodities. and prodigality diminishes. seem to contribute more to the growth of public opulence than others. which. the effect of that of the following day. it is to be hoped. though it might not be worth all that 300 .The Wealth of Nations vantageous. or it may be spent in things mere durable. or support and heighten. either in things which are consumed immediately. Let them look well after their own expense. for example. however. and which. as it has never been blessed with a very parsimonious government. baubles. be the richer man of the two. in collecting books. every day’s expense contributing something to support and heighten the effect of that of the following day. As frugality increases. that of the other. neither increases nor diminishes it. at the end of the period. which can therefore be accumulated. Were two men of equal fortune to spend their revenue. The former too would. on the contrary. so the conduct of those whose expense just equals their revenue. It is the highest impertinence and presumption. the public capital. without either accumulating or encroaching. ingenious trinkets of different kinds. and in which one day’s expense can neither alleviate nor support that of another. jewels. may either spend his revenue in a profuse and sumptuous table. and they may safely trust private people with theirs. and to restrain their expense. If their own extravagance does not ruin the state. however. and without any exception. contenting himself with a frugal table. They are themselves always. or. in useful or ornamental buildings. He would have a stock of goods of some kind or other.

become useful to the inferior and middling ranks of people. to lay down his equipage after he has once set it up. which either have been long stationary. but to the whole country to which they belong. To reduce very much the number of his servants. was. of Great Britain. Few. but of which neither the one could have been built. by the number of monuments of this kind which it possesses. which are still very fit for use. pictures. so is it likewise to that of a nation. which his queen brought with her from Denmark. What was formerly a seat of the family of Seymour. which is laid out in durable commodities. when this mode of expense becomes universal among men of fortune. and which could as little have been made for them. would always be worth something. you will frequently find the inferior ranks of people in possession both of houses and furniture perfectly good and entire. No trace or vestige of the expense of the latter would remain. nor the other have been made for their use. Stowe and Wilton to England. and other curiosities. you will frequently find many excellent. They are able to purchase them when their superiors grow weary of them. and the effects of ten or twenty years’ profusion would be as completely annihilated as if they had never existed. you will sometimes scarce find a single house which could have been built for its present inhabitants. are changes which cannot escape the observation of his neighbours. and which are supposed to imply some acknowledgment of preceding bad conduct. the ornament of an alehouse at Dunfermline. though antiquated pieces of furniture. the furniture. as a present fit for a sovereign to make to a sovereign. statues. In some ancient cities. great collections of books. though the wealth which produced them has decayed. magnificent villas. the clothing of the rich. perhaps from not having the same employment. If a person should at any time exceed in it. Versailles is an ornament and an honour to France. and the general accommodation of the whole people is thus gradually improved. of those who have 301 . and though the genius which planned them seems to be extinguished. a few years ago. The marriage-bed of James I. or have gone somewhat to decay. The expense. in a little time. is favourable not only to accumulation. to reform his table from great profusion to great frugality. As the one mode of expense is more favourable than the other to the opulence of an individual. are frequently both an ornament and an honour. Noble palaces. he can easily reform without exposing himself to the censure of the public. but to frugality. The houses.Adam Smith it cost. therefore. is now an inn upon the Bath road. too. not only to the neighbourhood. too. If you go into those houses. In countries which have long been rich. Italy still continues to command some sort of veneration.

jewels. a quantity of provisions of equal value would have been distributed among a still greater number of people.The Wealth of Nations once been so unfortunate as to launch out too far into this sort of expense. therefore. and there is always a great deal wasted and abused. till ruin and bankruptcy oblige them. therefore. gew-gaws. he appears to do so. he often spends the whole upon his own person. by all this. that the one species of expense always betokens a more liberal or generous spirit than the other. besides. and. in the other it does not increase the exchangeable value of the annual produce of the land and labour of the country. In the one way. 302 . carpenters. In the one way. I would not. this expense maintains productive. especially when directed towards frivolous objects. who would have bought them in pennyworths and pound weights. been at too great an expense in building. at any time. These are things in which further expense is frequently rendered unnecessary by former expense. is thrown to the dunghill. upholsterers. consequently. to the increase of the public capital. in books. it increases. mechanics. trinkets. and gives nothing to any body without an equivalent. however. besides. the little ornaments of dress and furniture. as it is more favourable to private frugality. and not have lost or thrown away a single ounce of them. perhaps. When a man of fortune spends his revenue chiefly in hospitality. he shares the greater part of it with his friends and companions. that the one sort of expense. All that I mean is. to a greater number of people than that which is employed in the most profuse hospitality. no imprudence can be inferred from his changing his conduct. Of two or three hundred weight of provisions. commonly. have afterwards the courage to reform. as it always occasions some accumulation of valuable commodities. etc. but because he has satisfied his fancy. but a base and selfish disposition. one half. and when a person stops short. gives maintenance. that is laid out in durable commodities. But if the expense of this entertainment had been employed in setting to work masons. The latter species of expense. or pictures. be understood to mean. not only a trifling. frequently indicates. But if a person has. The expense. but when he employs it in purchasing such durable commodities. conduces more than the other to the growth of public opulence. in the other unproductive hands. not because he has exceeded his fortune. in furniture. which may sometimes be served up at a great festival. and as it maintains productive rather than unproductive hands.

such as the property or the rent of land. the number of the frugal and industrious surpasses considerably that of the prodigal and idle. The only people to whom stock is commonly lent. that it cannot happen so very frequently as we are sometimes apt to imagine. The borrower may use it either as a capital. To borrow or to lend for such a purpose. occasionally employed in both these ways. yet. that people do both the one and the other. and he who lends to him will generally have occasion to repent of his folly. he acts the part of a prodigal. what was destined for the support of the industrious. where gross usury is out of the question. in this case. contrary to the interest of both parties. in the mean time. in the maintenance of the idle. and though it no doubt happens sometimes. is. He can.Adam Smith CHAPTER IV OF STOCK LENT AT INTEREST THE STOCK which is lent at interest is always considered as a capital by the lender. without their being 303 . The stock which is lent at interest is. If he uses it as a capital. Ask any rich man of common prudence. the borrower is to pay him a certain annual rent for the use of it. and he will laugh at you for proposing the question. The man who borrows in order to spend will soon be ruined. to those who he thinks will employ it profitably. or as a stock reserved for immediate consumption. Even among borrowers. If he uses it as a stock reserved for immediate consumption. and dissipates. not the people in the world most famous for frugality. He expects that in due time it is to be restored to him. he employs it in the maintenance of productive labourers. we may be assured. therefore. with a profit. without either alienating or encroaching upon some other source of revenue. who reproduce the value. and pay the interest. or to those who will spend it idly. both restore the capital. but in the former much more frequently than in the latter. He can. in all cases. therefore. and that. without alienating or encroaching upon any other source of revenue. no doubt. to which of the two sorts of people he has lent the greater part of his stock. in this case. from the regard that all men have for their own interest. neither restore the capital nor pay the interest.

whether paper or coin. of money. What they borrow. for example. or of gold and silver. The quantity of stock. and maintenance necessary for carrying on their work. as it were. It is not properly borrowed in order to be spent. than the amount of the money which serves as the instrument of their conveyance. but what the borrower really wants. one may say.The Wealth of Nations expected to make any very profitable use of it. as well as for many different purchases. but from the trading and manufacturing interests. either of paper. Even in the monied interest. not only for replacing a capital. but in order to replace a capital which had been spent before. is commonly spent before they borrow it. in almost any proportion. As such capitals are commonly lent out and paid back in money. they constitute what is called the monied interest. is not regulated by the value of the money. assigns to the borrower his right to a certain portion of the annual produce of the land and labour of the country. in order to pay the debt. the money is. which serves as the instrument of the different loans made in that country. Those capitals may be greater. it is those goods only which he can place in that stock. or. lends to W £1000. If he wants it as a stock for immediate consumption. but by the value of that part of the annual produce. They have generally consumed so great a quantity of goods. The capital borrowed replaces the capitals of those shop-keepers and tradesmen which the country gentlemen could not have replaced from the rents of their estates. is not the money. but the deed of assignment. the lender. therefore. who borrow upon mortgage. not only from the landed. and what the lender readily supplies him with. If he wants it as a capital for employing industry. B having no occasion 304 . are country gentlemen. as it is commonly expressed. A. which can be lent at interest in any country. which. it is from those goods only that the industrious can be furnished with the tools. to be employed as the borrower pleases. that they find it necessary to borrow at interest. or the goods which it can purchase. advanced to them upon credit by shop-keepers and tradesmen. materials. but such a capital as the owner does not care to be at the trouble of employing himself. as it were. By means of the loan. the same pieces of money successively serving for many different loans. however. with which W immediately purchases of B £1000 worth of goods. as soon as it comes either from the ground. is destined. but the money’s worth. as in these last the owners themselves employ their own capitals. or from the hands of the productive labourers. Even they scarce ever borrow merely to spend. which conveys from one hand to another those capitals which the owners do not care to employ themselves. Almost all loans at interest are made in money. It is distinct.

but from other 305 . with which X immediately purchases of C another £1000 worth of goods. annually assign to the lender a small portion. may be all perfectly well secured. not only from those general causes which make the market price of things commonly diminish as their quantity increases. either coin or paper. in other words. who again purchases goods with them of D. What the three monied men. for the same reason. In proportion as that share of the annual produce which. in due time. however. Though money. is the power of making those purchases. in the same manner. so they may likewise successively serve as the instrument of repayment. be considered as an assignment. upon condition that the burrower in return shall. as stock increases. as soon as it comes either from the ground. an equal value either of coin or of paper. lends them to Y. of a certain considerable portion of the annual produce. and is three times greater than that of the money with which the purchases are made. in the course of a few days. what is called the monied interest naturally increases with it. and for the same reason. from the lender to the borrower. at the end of it. the interest. A. X. necessarily diminishes. to thirty times their value. and C. As the quantity of stock to be lent at interest increases. Those loans. The increase of those particular capitals from which the owners wish to derive a revenue. B. either of coin or of paper. or the price which must be paid for the use of that stock. The stock lent by the three monied men is equal to the value of the goods which can be purchased with it. equal to the whole amount of those pieces. increases in any country. is destined for replacing a capital. C. the goods purchased by the different debtors being so employed as. W. or. or. naturally accompanies the general increase of capitals. a portion equally considerable with that which had originally been assigned to him. called the interest. it is itself altogether different from what is assigned by it. serves generally as the deed of assignment. or from the hands of the productive labourers. with a profit. A capital lent at interest may. In this power consist both the value and the use of the loans. And as the same pieces of money can thus serve as the instrument of different loans to three. to bring back. called the repayment. lends the identical pieces to X. in this manner. both to the smaller and to the more considerable portion. in value. assigned to the three borrowers. and. the quantity of stock to be lent at interest grows gradually greater and greater. the same pieces. and of three different purchases. and Y. In this manner. without being at the trouble of employing them themselves. during the continuance of the loan. each of which is.Adam Smith for the money himself. may. serve as the Instrument of three different loans.

but. upon most occasions. But when the profits which can be made by the use of a capital are in this manner diminished. five. The following very short and plain argument. and that in those countries. too. and. must necessarily be diminished with them. it is utterly impossible that the low- 306 . that is. four. He must not only sell what he deals in somewhat cheaper. and Mr Montesquieu. ten per cent. seems to have been the common rate of interest through the greater part of Europe. may serve to explain more distinctly the fallacy which seems to have misled those gentlemen. in consequence. the profits which can be made by employing them necessarily diminish.The Wealth of Nations causes which are peculiar to this particular case. the rate of interest. where interest has been reduced from ten to five per cent. and three per cent. that it is. but. he must sometimes. buy it dearer. the price which can be paid for the use of it. Mr Lawe. grows every day greater and greater. which at first sight seems so plausible. the owner of one endeavouring to get possession of that employment which is occupied by another. at both ends. the same quantity of silver can now purchase just half the quantity of goods which it could have purchased before. for example. the price which could be paid for it. having become of less value themselves. As capitals increase in any country. in consequence of the discovery of the Spanish West Indies. however. he can hope to justle that other out of this employment by no other means but by dealing upon more reasonable terms. Their competition raises the wages of labour. The demand for productive labour. the use of any particular portion of them necessarily became of less value too. by the increase of the funds which are destined for maintaining it. as well as many other writers. but it is the most favourable to the opinion which we are going to examine. I believe. and sinks the profits of stock. they say. Labourers easily find employment. has been so fully exposed by Mr Hume. a competition between different capitals. Before the discovery of the Spanish West Indies. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. sunk to six. It has since that time. be found anywhere agreeable to the truth. There arises. unnecessary to say any thing more about it. that in every particular country the value of silver has sunk precisely in the same proportion as the rate of interest. consequently. but the owners of capitals find it difficult to get labourers to employ. was the real cause of the lowering of the rate of interest through the greater part of Europe. Those metals. perhaps. Let us suppose. Mr Locke. as it were. This notion. This supposition will not. even upon this supposition. seem to have imagined that the increase of the quantity of gold and silver. in different countries. in order to get it to sell. and.

The funds for maintaining productive labour being the same. the number of people whom they could maintain and employ. we give for the use of a capital. £10 must now be of no more value than £5 were then. By reducing the rate of interest. but their real value would be precisely the same as before. which is supposed to be equal to one half of its former value. a-week are said to be the common wages of labour. the same must necessarily have lowered that of the interest. on the contrary. though they may sometimes be no greater than before. If £100 are in those countries now of no more value than £50 were then. £5 now can be worth no more than £2:10s. The profits of stock would be the same. therefore. would be precisely the same. but the quantity of labour which they could command. while that of the commodities circulated by means of it remained the same. in a particular country. The nominal value of all sorts of goods would be greater. 5s. Whatever were the causes which lowered the value of the capital. the competition between the differ- 307 . They would be paid in a greater number of pieces of silver. and exactly in the same proportion. and ten per cent. Its price or wages. but the thing assigned would be precisely the same as before. the demand for it would be the same.Adam Smith ering of the value of silver could have the smallest tendency to lower the rate of interest. but by the proportion which those pieces bear to the whole capital employed. But the profits of stock are not computed by the number of pieces of silver with which they are paid. but the whole capital of the country being the same as before. therefore. an interest which is equal to one fourth only of the value of the former interest. The deeds of assignment. could have no other effect than to diminish the value of that metal. his wages appear to be increased. though the rate had never been altered. Thus. both nominally and really. The capital of the country would be the same. When that is increased. the common profits of stock. By altering the rate. The wages of labour are commonly computed by the quantity of silver which is paid to the labourer. the proportion between those two values is necessarily altered. would be more cumbersome. The proportion between the value of the capital and that of the interest must have remained the same. and could produce only the same effects. but they would purchase only the same quantity of goods. An increase in the quantity of silver. If £100 now are worth no more than £50 were then. like the conveyances of a verbose attorney. though nominally greater. were then. would really be the same. They would be exchanged for a greater number of pieces of silver. from ten to five per cent. though a greater number of pieces might be requisite for conveying any equal portion of it from one hand to another. therefore.

would be the same. The owners of those particular capitals would be obliged to content themselves with a smaller proportion of the produce of that labour which their respective capitals employed. The interest of money. instead of preventing. be greatly diminished. keeping pace always with the profits of stock. on the contrary. This rate ought always to be somewhat above the lowest market price. The profits of stock would be diminished. the competition between the different capitals of which it was composed would naturally be augmented along with it. generally fixes the highest rate which can be taken without incurring a penalty. The whole capital of the country being augmented. besides that of raising the value of the money. or the price which is commonly paid for the use of money by those who can give the most undoubted security. and consequently the common interest of money. to insure his creditor from the penalties of usury. Any increase in the quantity of commodities annually circulated within the country. In some countries the interest of money has been prohibited by law. if one may say so. would. the law in order to prevent the extortion of usury. They would all trade with the same advantages and disadvantages. They might be paid with a smaller quantity of money. The capital of the country. was greatly augmented. Its wages would naturally rise with the demand. The common proportion between capital and profit. though the value of money. what can commonly be given for the use of money being necessarily regulated by what can commonly be made by the use of it.The Wealth of Nations ent capitals of individuals into which it was divided would likewise be the same. but for the risk which his creditor runs by accepting a compensation for that use. and consequently the demand for that labour. The debtor being obliged to pay. In countries where interest is permitted. would really be augmented. while that of the money which circulated them remained the same. might. both really and in appearance. therefore. If this legal 308 . not only for the use of the money. though it might nominally be the same. but it would command a greater quantity of labour. has been found from experience to increase the evil of usury. The quantity of productive labour which it could maintain and employ would be increased. But as something can everywhere be made by the use of money. produce many other important effects. in this manner. It might continue to be expressed by the same quantity of money. he is obliged. but that smaller quantity might purchase a greater quantity of goods than a greater had done before. This regulation. something ought everywhere to be paid for the use of it. and yet might appear to sink. or the quantity of goods which any particular sum could purchase.

The person who has a capital from which he wishes to derive a revenue. as borrowers. and thrown into those which were most likely to waste and destroy it.Adam Smith rate should be fixed below the lowest market rate. or lend it out at interest. the greater part of the money which was to be lent. five per cent. The superior security of land. on the contrary. The ordinary market price of land. at four and four and a-half. Where the legal rate of interest. the law being evaded in several different ways. with honest people who respect the laws of their country. together with some other advantages which almost everywhere attend upon this species of 309 . though it ought to be somewhat above. the effects of this fixation must be nearly the same as those of a total prohibition of interest. who alone would be willing to give this high interest. The person who lends money gets nearly as much interest from the former as he dares to take from the latter. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it. If the legal rate of interest in Great Britain. it is to be observed. it is to be observed. deliberates whether he should buy land with it. The legal rate. it ruins. by which the French king attempted to reduce the rate of interest from five to four per cent. money continued to be lent in France at five per cent. upon good security. and to private people. without taking the trouble to employ it himself. would be lent to prodigals and projectors. was fixed so high as eight or ten per cent. is fixed but a very little above the lowest market rate. In a country such as Great Britain. and obliges them to have recourse to exorbitant usurers. If it is fixed precisely at the lowest market price. depends everywhere upon the ordinary market rate of interest. The creditor will not lend his money for less than the use of it is worth. the credit of all those who cannot give the very best security. the present legal rate. sober people are universally preferred. and the debtor must pay him for the risk which he runs by accepting the full value of that use. who will give for the use of money no more than a part of what they are likely to make by the use of it. ought not to be much above the lowest market rate. No law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law is made. and his money is much safer in the hands of the one set of people than in those of the other. for example. where money is lent to government at three per cent. would not venture into the competition. is perhaps as proper as any. Sober people. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage. Notwithstanding the edict of 1766. to prodigals and projectors.

in France at twenty years purchase. nobody would buy land. the price of land rose to twenty. five-and-twenty. everybody would buy land. These advantages are sufficient to compensate a certain difference of revenue. and the common price of land is lower. than what he might have by lending out his money at interest. and thirty years purchase. if the advantages should much more than compensate the difference. but they will compensate a certain difference only. and if the rent of land should fall short of the interest of money by a greater difference. When interest was at ten per cent. will generally dispose him to content himself with a smaller revenue from land. which again would soon raise its ordinary price. As interest sunk to six. which would soon reduce its ordinary price.The Wealth of Nations property. land was commonly sold for ten or twelve years purchase. The market rate of interest is higher in France than in England. and four per cent. five. In England it commonly sells at thirty. 310 . On the contrary.

Each of those four methods of employing a capital is essentially necessary. first. in manufacturing and preparing that rude produce for immediate use and consumption. as does likewise the value which that employment adds to the annual produce of the land and labour of the country. varies extremely according to the diversity of their employment. those of all wholesale merchants. Unless a capital was employed in manufacturing that part of the rude produce which requires a good deal of preparation before it can be fit for use and consumption. or. or if it was produced spontaneously. It is difficult to conceive that a capital should be employed in any way which may not be classed under some one or other of those four. those of all retailers. either to the existence or extension of the other three. thirdly in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted. or to the general conveniency of the society.Adam Smith CHAPTER V OF THE DIFFERENT EMPLOYMENTS OF CAPITALS THOUGH ALL CAPITALS are destined for the maintenance of productive labour only. Unless a capital was employed in transporting either the rude or manu- 311 . in the second. or. Unless a capital was employed in furnishing rude produce to a certain degree of abundance. and in the fourth. in procuring the rude produce annually required for the use and consumption of the society. in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. or. yet the quantity of that labour which equal capitals are capable of putting into motion. mines. those of all master manufacturers. it either would never be produced. it would be of no value in exchange. or fisheries. either. because there could be no demand for it. in the third. In the first way are employed the capitals of all those who undertake improvement or cultivation of lands. A capital may be employed in four different ways. neither manufactures nor trade of any kind could exist. and could add nothing to the wealth of the society. lastly. secondly.

in order to raise the price. The capital. and if it were divided among twenty. or even from hour to hour. is the business of the parties concerned. It can never hurt either the consumer or the producer. and the profit which he makes by it in this way much more than compensates the additional price which the profit of the retailer imposes upon the goods. it must tend to make the retailers both sell 312 . Unless a capital was employed in breaking and dividing certain portions either of the rude or manufactured produce into such small parcels as suit the occasional demands of those who want them. He is thus enabled to furnish work to a greater value. a great part of the stock which he employs as a capital in the instruments of his trade.The Wealth of Nations factured produce from the places where it abounds to those where it is wanted. for example. and it may safely be trusted to their discretion. and increases the enjoyments of both. but to take care of this. or to restrict their numbers. and which yields him a revenue. If a poor workman was obliged to purchase a month’s or six months’ provisions at a time. The prejudices of some political writers against shopkeepers and tradesmen are altogether without foundation. that they can never be multiplied so as to hurt the public. no more of either could be produced than was necessary for the consumption of the neighbourhood. therefore. This would generally be inconvenient to the rich. If there was no such trade as a butcher. The capital of the merchant exchanges the surplus produce of one place for that of another. Their competition might. and thus encourages the industry. and the chance of their combining together. So far is it from being necessary either to tax them. or in the furniture of his shop. which can be employed in the grocery trade. every man would be obliged to purchase a whole ox or a whole sheep at a time. every man would be obliged to purchase a greater quantity of the goods he wanted than his immediate occasions required. ruin some of themselves. If this capital is divided between two different grocers. their competition will tend to make both of them sell cheaper than if it were in the hands of one only. for example. though they may so as to hurt one another. He is thereby enabled to employ almost his whole stock as a capital. as he wants it. perhaps. cannot exceed what is sufficient to purchase that quantity. their competition would be just so much the greater. just so much the less. is limited by the demand of that town and its neighbourhood. The quantity of grocery goods. he would be forced to place in that part of his stock which is reserved for immediate consumption. on the contrary. and much more so to the poor. Nothing can be more convenient for such a person than to be able to purchase his subsistence from day to day. and which yields him no revenue. which can be sold in a particular town.

however. and generally adds to its price the value at least of their own maintenance and consumption. will immediately put into motion very different quantities of productive labour. and retailer. together with its profits. Equal capitals. Their labour. when properly directed. arising from other causes. The profits of the farmer. Its operation in both these respects is a good deal superior to that of the capital of the retailer. are all drawn from the price of the goods which the two first produce. perhaps. fixes and realizes itself in the subject or vendible commodity upon which it is bestowed. not only of his profits. and to increase the value of its annual produce. of the merchant. but that disposition. and replaces. It is by this service chiefly that he contributes indirectly to support the productive labour of the society. too. This is all the productive labour which it immediately puts into motion. employed in each of those four different ways. Some of them. The capital of the retailer replaces. but of their wages. Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade. that of the merchant of whom he purchases goods. may sometimes decoy a weak customer to buy what he has no occasion for. In his profit consists the whole value which its employment adds to the annual produce of the land and labour of the society. however. of the manufacturer. is of too little importance to deserve the public attention. are themselves productive labourers. and all the value which it immediately adds to the annual produce. and thereby enables them to continue their respective trades. It is not the multitude of alehouses. nor would it necessarily be prevented by restricting their numbers. together with their profits. together with its prof- 313 . and thereby enables him to continue his business. His capital employs. the sailors and carriers who transport his goods from one place to another.Adam Smith cheaper and buy dearer. This evil. the capital’s of the farmers and manufacturers of whom he purchases the rude and manufactured produce which he deals in. the value of the annual produce of the land and labour of the society to which they belong. and augment. too. The persons whose capitals are employed in any of those four ways. The retailer himself is the only productive labourer whom it immediately employs. necessarily gives employment to a multitude of alehouses. than if the whole trade was monopolized by one or two persons. and the two last buy and sell. that occasions a general disposition to drunkenness among the common people. to give the must suspicious example. The capital of the wholesale merchant replaces. and it augments the price of those goods by the value. in very different proportions.

Nature labours along with man. the reproduction of a value equal to their own consumption. that of some other artificer of whom he purchases them. and all its profits. This rent may be considered as the produce of those powers of Nature. in other words. a much greater quantity of productive labour. and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture. It puts immediately into motion. therefore. like the workmen in manufactures. Planting and tillage frequently regulate more than they animate the active fertility of Nature. Part of his circulating capital is employed in purchasing materials. A field overgrown with briars and brambles. the use of which the landlord lends to the farmer. or to the capital which employs them. Not only his labouring servants. they regularly occasion the reproduction of the rent of the landlord. the capitals of the farmers and miners of whom he purchases them. It is greater or smaller. materials. It is the work of Nature which remains. or in a much shorter period. The labourers and labouring cattle.The Wealth of Nations its. therefore. and adds a much greater value to the annual produce of the land and labour of the society. and by their masters’ profits upon the whole stock of wages. No equal capital puts into motion a greater quantity of productive labour than that of the farmer. than an equal capital in the hands of any wholesale merchant. but of a much greater value. man does all. It augments the value of those materials by their wages. and replaces. not only occasion. therefore. employed in agriculture. according to the supposed natural or improved fertility of the land. of the whole produce. its produce has its value. and though her labour costs no expense. It is seldom less than a fourth. as well as that of the most expensive workmen. according to the supposed extent of those powers. can ever occasion so great reproduction. No equal quantity of productive labour employed in manufactures. not only puts 314 . and instruments of trade employed in the business. distributed among the different workmen whom he employs. after deducting or compensating every thing which can be regarded as the work of man. In them Nature does nothing. a great part of the work always remains to be done by her. But a great part of it is always. and after all their labour. are productive labourers. though they do that too. or. and frequently more than a third. The most important operations of agriculture seem intended. with their profits. Over and above the capital of the farmer. not so much to increase. either annually. but his labouring cattle. In agriculture. may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field. as to direct the fertility of Nature towards the production of the plants most profitable to man. together with its owner’s profits. too.

belong to resident members of the society. Lyons is very distant. be a native or a foreigner. must always reside within that society. on the contrary. and from that where the complete manufacture is consumed. too. or to their country. both from the place where the materials grow. and the value of their annual produce. too. to the farm. Of all the ways in which a capital can be employed. but may wander about from place to place. though there are some exceptions to this. and as effectually enables him to continue his business. Part of the wool of Spain is manufactured in Great Britain. the number of their productive labourers is necessarily less than if he had been a native. by one man only. reside where the manufacture is carried on. in the same manner as if he had been a native. and to the shop of the retailer. They must generally. It may frequently be at a great distance. but where this shall be. no doubt. is not always necessarily determined. It is of more consequence that the capital of the manufacturer should reside within the country.Adam Smith into motion a greater quantity of productive labour than any equal capital employed in manufactures. and to augment the value of the annual produce of the society to which he belongs. and from those which consume them. the service by which the capital of a wholesale merchant chiefly contributes to support the productive labour. it adds a much greater value to the annual produce of the land and labour of the country. If he is a foreigner. seems to have no fixed or necessary residence anywhere. It necessarily puts into motion a greater quan- 315 . may still belong indifferently either to his country. by exchanging it for something for which there is a demand at home. It as effectually replaces the capital of the person who produces that surplus. it is by far the most advantageous to society. to the quantity of productive labour which it employs. The capital of a foreigner gives a value to their surplus produce equally with that of a native. The capitals employed in the agriculture and in the retail trade of any society. The capital of a wholesale merchant. by the profits of that one man. The capital of the manufacturer must. both from the places which afford the materials of its manufactures. and some part of that cloth is afterwards sent back to Spain. according as it can either buy cheap or sell dear. from the materials which their own produces. The people of fashion in Sicily are clothed in silks made in other countries. to the real wealth and revenue of its inhabitants. Whether the merchant whose capital exports the surplus produce of any society. The sailors or carriers whom he employs. is of very little importance. or to some third country. Their employment is confined almost to a precise spot. but in proportion.

however. for want of a capital to manufacture it at home. The wool of the southern counties of Scotland is. has not arrived at that degree of opulence for which it seems naturally destined. are surely very useful to the countries which produce them. where it can be exchanged for something for which there is a demand at home. It may. may frequently not have capital sufficient both to improve and cultivate all its lands. would be of no value. to manufacture and prepare their whole rude produce for immediate use and consumption. is certainly not the shortest way for a 316 . There are many little manufacturing towns in Great Britain. in proportion as a greater share of it is employed in agriculture. prematurely. The merchants who export it. the greater will be the quantity of productive labour which it puts into motion within the country. After agriculture. only the agents of wealthier merchants who reside in some of the great commercial cities. to do all the three. after a long land carriage through very bad roads. To attempt. be very useful to the country. properly. of which the inhabitants have not capital sufficient to transport the produce of their own industry to those distant markets where there is demand and consumption for it. a great part of it. unless it was annually exchanged for something which is in demand here. which. and to transport the surplus part either of the rude or manufactured produce to those distant markets. If there are any merchants among them. A particular country. and adds the greatest value to the annual produce. Those materials are a part of the surplus produce of those countries. they are. indeed. The capitals of the British manufacturers who work up the flax and hemp annually imported from the coasts of the Baltic. though it should not reside within it. manufactured in Yorkshire. however. That which is employed in the trade of exportation has the least effect of any of the three. The country. in the same manner as a particular person. and would soon cease to be produced. and adds a greater value to the annual produce of the land and labour of the society. replace the capitals of the people who produce it. which has not capital sufficient for all those three purposes. When the capital of any country is not sufficient for all those three purposes.The Wealth of Nations tity of productive labour. as will likewise be the value which its employment adds to the annual produce of the land and labour of the society. The inhabitants of many different parts of Great Britain have not capital sufficient to improve and cultivate all their lands. and the British manufacturers replace the capitals of those merchants. the capital employed in manufactures puts into motion the greatest quantity of productive labour. and with an insufficient capital. and thereby encourage them to continue the production.

according to all accounts. perhaps. The capital of all the individuals of a nation has its limits. the wealthiest. Even the stores and warehouses from which goods are retailed in some provinces. in the same manner. instead of accelerating. divert any considerable part of their capital into this employment. indeed. and afford one of the few instances of the retail trade of a society being carried on by the capitals of those who are not resident members of it. and. that almost their whole capitals have hitherto been employed in agriculture. is carried on by the capitals of merchants who reside in Great Britain. either by combination. Even those three countries. to monopolize to themselves their whole exportation trade. It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness. The 317 . those household and coarser manufactures excepted. that ever were in the world. we give credit to the wonderful accounts of the wealth and cultivation of China. by their continually accumulating and adding to it whatever they save out of their revenue. The course of human prosperity. therefore. and of the ancient state of Indostan. to stop the importation of European manufactures.Adam Smith society. particularly in Virginia and Maryland. seems scarce ever to have been of so long continuance as to unable any great country to acquire capital sufficient for all those three purposes. They have no manufactures. by thus giving a monopoly to such of their own countrymen as could manufacture the like goods. and is capable of executing only certain purposes. instead of promoting. Were the Americans. of those of ancient Egypt. It is likely to increase the fastest. they would retard. were they to attempt. no more than it would be for an individual. unless. the further increase in the value of their annual produce. and which are the work of the women and children in every private family. They do not appear to have been eminent for foreign trade. But the revenue of all the inhabitants of the country is necessarily in proportion to the value of the annual produce of their land and labour. This would be still more the case. the progress of their country towards real wealth and greatness. as they will thus be enabled to make the greatest savings. or by any other sort of violence. belong many of them to merchants who reside in the mother country. The greater part. and would obstruct. to acquire a sufficient one. The capital of all the individuals of a nation is increased in the same manner as that of a single individual. which necessarily accompany the progress of agriculture. are chiefly renowned for their superiority in agriculture and manufactures. both of the exportation and coasting trade of America. when it is employed in the way that affords the greatest revenue to all the inhabitants or the country. in the same manner as that of a single individual.

two distinct capitals. and brings back English corn and manufactures to Edinburgh. by every such operation. manufactures. necessarily replaces. The carrying trade is employed in transacting the commerce of foreign countries. the produce of the industry of that country. when this purchase is made with the produce of domestic industry. by every such operation. and the Chinese have never excelled in foreign commerce. it necessarily replaces. replaces. all buying in order to sell again by wholesale. too. two British capitals. a superstition nearly of the same kind prevails among the Indians. it generally brings hack in return at least an equal value of other commodities. The capital employed in purchasing foreign goods for home consumption. The difference. and thereby enables them to continue that employment. frequently gold and silver. and the carrying trade. by every such operation.The Wealth of Nations ancient Egyptians had a superstitious antipathy to the sea. It comprehends both the inland and the coasting trade. which had both been employed in Supporting productive labour. that had both been employed in the agriculture or manufactures of that country. The capital which 318 . All wholesale trade. according to the different proportions in which it is employed in agriculture. who gave in exchange for it something else. and thereby enables them to continue that support. two distinct capitals. The foreign trade of consumption is employed in purchasing foreign goods for home consumption. according to the different sorts of wholesale trade in which any part of it is employed. by every such operation. The capital which is employed in purchasing in one part of the country. When both are the produce of domestic industry. The capital which sends Scotch manufactures to London. is very great. The home trade is employed in purchasing in one part of the same country. two distinct capitals. When it sends out from the residence of the merchant a certain value of commodities. for which they found a demand there. but one of them only is employed in supporting domestic industry. and selling in another. and add a greater or smaller value to the annual produce of its land and labour. the foreign trade of consumption. too. maybe reduced to three different sorts: the home trade. or in carrying the surplus produce of one to another. generally replaces. The greater part of the surplus produce of all those three countries seems to have been always exported by foreigners. and wholesale trade. the produce of the industry of that country. in order to sell in another. It is thus that the same capital will in any country put into motion a greater or smaller quantity of productive labour. which had both been employed in the agriculture or manufactures of Great Britain.

only one British capital. before a capital employed in the foreign trade of consumption has made one. either immediately with the produce of domestic industry. in order to export them again. will sometimes make twelve operations. But the returns of the foreign trade of consumption are very seldom so quick as those of the home trade. must have been purchased. employed in the home trade. but the final returns of the whole capital 319 . foreign goods can never be acquired. the capital employed in it will give but one half of the encouragement to the industry or productive labour of the country. therefore. the one will give four-and-twenty times more encouragement and support to the industry of the country than the other. not with British manufactures. A capital. If the capitals are equal. indeed. are. or with something else that had been purchased with it. should be as quick as those of the home trade. which had been purchased with those manufactures. If the hemp and flax of Riga are purchased with the tobacco of Virginia. however. The other is a Portuguese one. of the foreign trade of consumption. therefore. replaces. will. for. and sometimes three or four times in the year. The effects. in every respect. or be sent out and returned twelve times. each merchant. he must wait for the returns of three. but with the sugar and rum of Jamaica. These last. except that the final returns are likely to be still more distant. The foreign goods for home consumption may sometimes be purchased. which had been purchased with British manufactures. in this case.Adam Smith sends British goods to Portugal. as they must depend upon the returns of two or three distinct foreign trades. therefore. by every such operation. either immediately. Though the returns. If the tobacco of Virginia had been purchased. the merchant must wait for the returns of two distinct foreign trades. The returns of the home trade generally come in before the end of the year. of whom the second buys the goods imported by the first. The returns of the foreign trade of consumption seldom come in before the end of the year. and sometimes not till after two or three years. therefore. the case of war and conquest excepted. not with the produce of domestic industry but with some other foreign goods. receive the returns of his own capital more quickly. of a capital employed in such a round-about foreign trade of consumption. but in exchange for something that had been produced at home. and brings back Portuguese goods to Great Britain. or after two or more different exchanges. before he can employ the same capital in repurchasing a like quantity of British manufactures. If those two or three distinct foreign trades should happen to be carried on by two or three distinct merchants. and the third buys those imported by the second. the same as those of one employed in the most direct trade of the same kind.

though it may with regard to the particular merchants. just as fast. by the intervention of gold and silver. Whether. had the manufactures and the flax and hemp been directly exchanged for one another. Whatever be the foreign commodity with which the foreign goods for home consumption are purchased. this gold and silver. like the tobacco of Virginia. than an equal capital employed in a more direct trade of the same kind. I shall have occasion to examine at great length hereafter. may frequently be purchased with a smaller quantity of the produce of domestic industry. it can occasion no essential difference. It seems even to have one advantage over any other equally round-about foreign trade. or that had been purchased with something else that was so. is less expensive than that of almost any other foreign goods of equal value. and will replace. in such a round-about foreign trade of consumption. on account of their small bulk and great value.The Wealth of Nations employed in the trade will be just as slow as ever. or with the silver of Peru. be supplied more completely. and at a smaller expense. than in any other. can make no difference with regard to the country. therefore. in this manner. So far. which is carried on by means of gold and silver. must have been purchased with something that either was the produce of the industry of the country. The whole capital employed. besides. The transportation of those metals from one place to another. either in the nature of the trade. An equal quantity of foreign goods. will generally give less encouragement and support to the productive labour of the country. or just as slow. than would have been necessary. a trade of this kind is likely to impoverish the country from which it is carried on in any other way. Their freight is much less. for example. If they are purchased with the gold of Brazil. or in the encouragement and support which it can give to the productive labour of the country from which it is carried on. has all the advantages and all the inconveniencies of any other equally round-about foreign trade of consumption. and their insurance not greater. in order to exchange a certain value of British manufactures for a certain quantity of flax and hemp. therefore. is altogether withdrawn from supporting the productive labour 320 . Whether the whole capital employed in such a round about trade belong to one merchant or to three. the foreign trade of consumption. the capital which is immediately employed in supporting that productive labour. Three times a greater capital must in both cases be employed. as the productive labour of the country is concerned. therefore. The demand of the country may frequently. That part of the capital of any country which is employed in the carrying trade. than by that of any other foreign goods. are less liable to suffer by the carriage. by the continual exportation of those metals. and no goods.

It maybe presumed. by extraordinary encouragements. But the same capital may employ as many sailors and shipping. but one of them in supporting that of Poland. does not depend upon the nature of the trade. and brings back the fruits and wines of Portugal to Poland. as it could in the carrying trade. and the other that of Portugal. than what would naturally go to it. of which the defence and security depend upon the number of its sailors and shipping. but in British bottoms. indeed. It is upon this account. The coal trade from Newcastle to London. chiefly upon the former of those two circumstances. in fact. for example. The trade itself has probably derived its name from it. the carrying trade of any particular country is carried on with the ships and sailors of that country. that part of the capital employed in it which pays the freight is distributed among. When. seem essential to the nature of the trade that it should be so. therefore. two distinct capitals. It does not. and constitute the whole addition which this trade necessarily makes to the annual produce of the land and labour of that country. neither of which had been employed in supporting the productive labour of Holland. a certain number of productive labourers of that country. employed in the home trade of any country. in proportion to their value. The capital of the Dutch merchant. when carried on by coasting vessels. The capital. replaces by every such operation two capitals. therefore. by every operation. The number of sailors and shipping which any particular capital can employ. will generally give encouragement and support to a greater quantity of pro- 321 . yet neither of them belongs to that particular country. by carrying part of the surplus produce of the one to the other. A Dutch merchant may. but partly upon the bulk of the goods. a larger share of the capital of any country into the carrying trade. to support that of some foreign countries. not in Dutch. will not always necessarily increase the shipping of that country. carried it on in this manner. Almost all nations that have had any considerable share of the carrying trade have. however. which carries the corn of Poland to Portugal. that the carrying trade has been supposed peculiarly advantageous to such a country as Great Britain. Though it may replace. To force. for example. employ his capital in transacting the commerce of Poland and Portugal. The profits only return regularly to Holland. however. and puts into motion. that he actually does so upon some particular occasions. either in the foreign trade of consumption. or even in the home trade. though the ports are at no great distance.Adam Smith of that particular country. and partly upon the distance of the ports between which they are to be carried. the people of such countries being the carriers to other countries. employs more shipping than all the carrying trade of England.

are advantageous situations for industry. and exchanged for something more in demand at home. The riches. and increase the value of its annual produce. The surplus part of them.000. therefore. is not only advantageous. woollens. The neighbourhood of the sea-coast. but necessary and unavoidable. only because they facilitate the exportation and exchange of such surplus produce for something else which is more in demand there. when the course of things. is to increase the riches and power of that country. It is only by means of such exportation. than the demand of the home market requires. Without such exportation. and the value of its annual produce diminish. therefore. When the produce of any particular branch of industry exceeds what the demand of the country requires. that this surplus can acquired value sufficient to compensate the labour and expense of producing it. the fund from which all taxes must ultimately be paid. If the remaining 82. the surplus must be sent abroad. the importation of them must cease immediately. in both these respects. a still greater advantage over an equal capital employed in the carrying trade. the surplus part of them must be sent abroad again. nor to the carrying trade above either of the other two. could not be sent abroad. a part of the productive labour of the country must cease.000 hogsheads of tobacco are annually purchased in Virginia and Maryland with a part of the surplus produce of British industry. perhaps. and so far as power depends upon riches. The land and labour of Great Britain produce generally more corn. than what would naturally flow into them of its own accord. however.000. and with it the 322 . therefore. the power of every country must always be in proportion to the value of its annual produce. But the great object of the political economy of every country. without any constraint or violence. and exchanged for something for which there is a demand at home. When the foreign goods which are thus purchased with the surplus produce of domestic industry exceed the demand of the home market. to give no preference nor superior encouragement to the foreign trade of consumption above the home trade. It ought neither to force nor to allure into either of those two channels a greater share of the capital of the country. and the banks of all navigable rivers. and the capital employed in this latter trade has.The Wealth of Nations ductive labour in that country. naturally introduces it. must be sent abroad. and hardware. more than an equal capital employed in the foreign trade of consumption. It ought. more than 14. Each of those different branches of trade. and exchanged for something more in demand at home. and exchanged for something for which there is a demand at home. But the demand of Great Britain does not require. About 96.

perhaps. the trades which carry the goods of the East and West Indies and of America to the different European markets. is likewise supposed to have a considerable share in it. that of the foreign trade of consumption. which are part of the produce of the land and labour of Great Britain. perhaps the second richest country of Europe. Those goods are generally purchased. and of the capital which can be employed in it. and the final returns of those trades are generally used or consumed in Great Britain. The trade which is carried on in British bottoms between the different ports of the Mediterranean. and being deprived of that which they had abroad. England. either immediately with the produce of British industry. must cease to be produced. is necessarily limited by the value of the surplus produce of all those distant places within the country which have occasion to exchange their respective productions with one another. Those goods. in proportion to the extent of the land and the number of it’s inhabitants. The extent of the home trade. though what commonly passes for the carrying trade of England will frequently. make. may.Adam Smith productive labour of all those inhabitants of Great Britain who are at present employed in preparing the goods with which these 82. Those statesmen who have been disposed to favour it with particular encouragement. and supporting the productive labour of that particular country. the principal branches of what is properly the carrying trade of Great Britain. and the value of its annual produce. When the capital stock of any country is increased to such a degree that it cannot be all employed in supplying the consumption. be found to be no more than a round-about foreign trade of consumption. as the most direct. The most round-about foreign trade of consumption. Such are. the surplus part of it naturally disgorges itself into the carrying trade. by the value of the surplus produce of all the different countries in the world. or with something else which had been purchased with that produce. by far the richest country in Europe. The carrying trade is the natural effect and symptom of great national wealth. and of what can be purchased with it. Holland. be as necessary for supporting the productive labour of the country. upon some occasions. and is employed in performing the same offices to other countries. in a great measure. having no market at home. therefore. perhaps. but it does not seem to be the natural cause of it. seem to have mistaken the effect and symptom for the cause. and some trade of the same kind carried on by British merchants between the different ports of India. by the value of the surplus produce of the whole country. that of the carrying trade.000 hogsheads are annually purchased. has accordingly the greatest share of the carrying trade of Europe. Its possible ex- 323 .

and the different values which it may add to the annual produce of the land and labour of the society. much good land still remains uncultivated. that have been acquired in the course of a single life. and farming and improving the most direct roads to a splendid fortune. indeed. The different quantities of productive labour which it may put into motion. therefore. within these few years. seem to have no superiority over those of other employments in any part of Europe. therefore. a very simple observation may satisfy us that the result of them must be false. perhaps. however. the most splendid fortunes. frequently from a very small capital. acquired by agriculture in the same time. never enter into his thoughts. We see. in every corner of it. Without entering into any particular discussion of their calculations. In all the great countries of Europe. that private persons frequently find it more for their advantage to employ their capitals in the most distant carrying trades of Asia and America than in the improvement and cultivation of the most fertile fields in their own neighbourhood. The profits of agriculture. during the course of the present century. according as it is employed in one or other of those different ways. or in some particular branch of the wholesale or retail trade.The Wealth of Nations tent. by trade and manufactures. What circumstances in the policy of Europe have given the trades which are carried on in towns so great an advantage over that which is carried on in the country. occurred in Europe. Agriculture. I shall endeavour to explain at full length in the two following books. the capitals of individuals will naturally be employed in the manner most advantageous to the whole society. is in a manner infinite in comparison of that of the other two. is almost everywhere capable of absorbing a much greater capital than has ever yet been employed in it. Projectors. every day. and the greater part of what is cultivated. therefore. 324 . is far from being improved to the degree of which it is capable. and from such a capital. have. amused the public with most magnificent accounts of the profits to be made by the cultivation and improvement of land. A single instance of such a fortune. has not. where agriculture is the most profitable of all employments. and is capable of absorbing the greatest capitals. In countries. sometimes from no capital. The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture. in manufactures. however.

either immediately.Adam Smith BOOK III OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS CHAPTER I OF THE NATURAL PROGRESS OF OPULENCE THE GREAT COMMERCE of every civilized society is that carried on between the inhabitants of the town and those of the country. The corn which grows within a mile of the town. advantageous to all the different persons employed in the various occupations into which it is subdivided. however. The country supplies the town with the means of subsistence and the materials of manufacture. The town. the more extensive is the market which it affords to those of the country. The greater the number and revenue of the inhabitants of the town. The town affords a market for the surplus produce of the country. It consists in the exchange of rude for manufactured produce. it is always the more advantageous to a great number. and the division of labour is in this. The town repays this supply. may very properly be said to gain its whole wealth and subsistence from the country. We must not. by sending back a part of the manufactured produce to the inhabitants of the country. and the more extensive that market. The gains of both are mutual and reciprocal. The inhabitants of the country purchase of the town a greater quantity of manufactured goods with the produce of a much smaller quantity of their own labour. or what is over and above the maintenance of the cultivators. or of some sort of paper which represents money. or by the intervention of money. imagine that the gain of the town is the loss of the country. sells 325 . than they must have employed had they attempted to prepare them themselves. and it is there that the inhabitants of the country exchange it for something else which is in demand among them. as in all other cases. upon this account. in which there neither is nor can be any reproduction of substances.

most men will choose to employ their capitals. The town. But the price of the latter must. gain. As subsistence is. that constitutes the subsistence of the town. with that of those which lie at some distance from it. in the nature of things. at least. besides. The man who employs his capital in land. indeed. which can therefore increase only with the increase of the surplus produce. That order of things which necessity imposes. and this. Among all the absurd speculations that have been propagated concerning the balance of trade. has occasioned considerable variations in the progress of opulence in different ages and nations. Compare the cultivation of the lands in the neighbourhood of any considerable town. though not in every particular country. and they save. necessarily. The proprietors and cultivators of the country. in general. in the price of what they sell. but afford. as the whole of that territory was completely cultivated and improved. prior to conveniency and luxury. rather in the improvement and cultivation of land. the whole value of this carriage in the price of what they buy. which lies in the neighbourhood of the town. or nearly equal profits. the whole value of the carriage of the like produce that is brought from more distant parts. the ordinary profits of agriculture to the farmer. which furnishes only the means of conveniency and luxury. has it more under his view and command. must necessarily be prior to that which ministers to the latter. over and above the ordinary profits of agriculture. not only to 326 .The Wealth of Nations there for the same price with that which comes from twenty miles distance. till such time. the towns could nowhere have increased beyond what the improvement and cultivation of the territory in which they were situated could support. and his fortune is much less liable to accidents than that of the trader. therefore. or even from the territory to which it belongs. too. Upon equal. which affords subsistence. than either in manufactures or in foreign trade. so the industry which procures the former. it has never been pretended that either the country loses by its commerce with the town. therefore. If human institutions had never thwarted those natural inclinations. who is obliged frequently to commit it. but from very distant countries. and you will easily satisfy yourself bow much the country is benefited by the commerce of the town. is in every particular country promoted by the natural inclinations of man. may not always derive its whole subsistence from the country in its neighbourhood. or the town by that with the country which maintains it. or what is over and above the maintenance of the cultivators. not only pay the expense of raising it and bringing it to market. though it forms no exception from the general rule. must. It is the surplus produce of the country only. be prior to the increase of the town. generally. The cultivation and improvement of the country.

stand occasionally in need of the assistance of one another. necessarily regulates the quantity of the materials and provisions which they buy. in every stage of his existence. necessarily tied down to a precise spot. are mutually the servants of one another. therefore. and the baker. Had human institutions. and thus form a small town or village. and tailors. so. are people whose service the farmer has frequent occasion for. and who contribute still further to augment the town. where uncultivated land is still to be had upon easy terms. seems to be as well secured as the nature of human affairs can admit of. can augment. the tranquillity of mind which it promises. therefore. The inhabitants of the town. the pleasure of a country life. by giving great credits. and this demand can augment only in proportion to the extension of improvement and cultivation. shoemakers. besides. be consequential. they naturally settle in the neighbourhood of one another. the cultivation of land cannot be carried on. like that of the farmer. in order to exchange their rude for manufactured produce. he seems to retain a predilection for this primitive employment. and as their residence is not. but to the more uncertain elements of human folly and injustice. wheelwrights and ploughwrights. on the contrary. the progressive wealth and increase of the towns would. and the means of their subsistence. carpenters. tanners. more or less. The beauty of the country. to men with whose character and situation he can seldom be thoroughly acquainted. attract everybody. the brewer. the independency which it really affords. necessary or useful for supplying their occasional wants. and in proportion to the improvement and cultivation of the territory of country. The butcher.Adam Smith the winds and the waves. and as to cultivate the ground was the original destination of man. In our North American colonies. in every political society. masons and bricklayers. in distant countries. but in proportion to the augmentation of the demand from the country for finished work. Smiths. together with many other artificers and retailers. too. soon join them. and. Neither their employment nor subsistence. to which the inhabitants of the country resort. The quantity of the finished work which they sell to the inhabitants of the country. Without the assistance of some artificers. have charms that. Such artificers. no manufactures for distant sale have ever yet been 327 . both with the materials of their work. The capital of the landlord. indeed. but with great inconveniency and continual interruption. wherever the injustice of human laws does not disturb it. The town is a continual fair or market. never disturbed the natural course of things. which is fixed in the improvement of his land. It is this commerce which supplies the inhabitants of the town. and those of the country.

and which it is therefore unnecessary to explain any farther. is more secure than that of the foreign merchant. can bribe him rather to work for other people than for himself. or none that can be had upon easy terms.The Wealth of Nations established in any of their towns. to be gradually subdivided. must be sent abroad. in process of time. In seeking for employment to a capital. manufactures are. but that a planter who cultivates his own land. and neither the large wages nor the easy subsistence which that country affords to artificers. indeed. in North America. so the capital of the manufacturer. and derives his necessary subsistence from the labour of his own family. there is even a considerable advantage that the rude produce should be exported by a foreign capital. In countries. in order to be exchanged for something for which there is some demand at home. and independent of all the world. and to manufacture in the completest manner the whole of its rude produce. of every society. where there is either no uncultivated land. both to cultivate all its lands. Those different manufactures come. which may easily be conceived. though the greater part of its exportation trade be carried on by foreigners. attempt to establish with it a manufacture for more distant sale. in order that the whole stock of the society may be employed in more useful purposes. The: wealth of ancient Egypt. every artificer who has acquired more stock than he can employ in the occasional jobs of the neighbourhood. But whether the capital which carries this surplus produce abroad be a foreign or a domestic one. endeavours to prepare work for more distant sale. He feels that an artificer is the servant of his customers. or that for which there is no demand at home. on the contrary. he does not. but employs it in the purchase and improvement of uncultivated land. naturally preferred to foreign commerce. sufficiently demonstrate that a nation may attain a very high degree of opulence. is of very little importance. the surplus part both of the rude and manufactured produce. and thereby improved and refined in a great variety of ways. is really a master. The progress of 328 . When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country. If the society has not acquired sufficient capital. From artificer he becomes planter. that of China and Indostan. In every period. from whom he derives his subsistence. for the same reason that agriculture is naturally preferred to manufactures. the weaver some sort of linen or woollen manufactory. being at all times more within his view and command. The smith erects some sort of iron. As the capital of the landlord or farmer is more secure than that of the manufacturer. upon equal or nearly equal profits.

or such as were fit for distant sale. therefore. in all the modern states of Europe. According to the natural course of things. But though this natural order of things must have taken place in some degree in every such society. The manners and customs which the nature of their original government introduced. necessarily forced them into this unnatural and retrograde order. been in many respects entirely inverted. Some of their lands must have been cultivated before any considerable towns could be established. that in every society that had any territory. been in some degree observed. had no capital but what belonged to themselves been employed in exporting their surplus produce. would have been much less rapid. it has. 329 . I believe. it has always. before they could well think of employing themselves in foreign commerce. and. first. directed to agriculture. and some sort of coarse industry of the manufacturing kind must have been carried on in those towns. afterwards to manufactures.Adam Smith our North American and West Indian colonies. and which remained after that government was greatly altered. The foreign commerce of some of their cities has introduced all their finer manufactures. and manufactures and foreign commerce together have given birth to the principal improvements of agriculture. to foreign commerce. the greater part of the capital of every growing society is. last of all. This order of things is so very natural.

than we do in the distribution of moveables. might have been but a transitory evil. either by succession or by alienation. The rapine and violence which the barbarians exercised against the ancient inhabitants. but no part of them. This original engrossing of uncultivated lands. among all the children of the family. in the inheritance of lands. but of 330 . interrupted the commerce between the towns and the country. All of them were engrossed. But when land was considered as the means. This natural law of succession. accordingly. The law of primogeniture hindered them from being divided by succession. like them. During the continuance of those confusions. though a great. whether cultivated or uncultivated. like moveables. and the greater part by a few great proprietors. which had enjoyed a considerable degree of opulence under the Roman empire. and the country was left uncultivated. and the western provinces of Europe. not of subsistence merely.The Wealth of Nations CHAPTER II OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE. They might soon have been divided again. between male and female. is considered as the means only of subsistence and enjoyment. the confusions which followed so great a revolution lasted for several centuries. A great part of them was uncultivated. of all of whom the subsistence and enjoyment may be supposed equally dear to the father. the introduction of entails prevented their being broke into small parcels by alienation. the greater part of the lands of those countries. or usurped to themselves. sunk into the lowest state of poverty and barbarism. was left without a proprietor. AFTER THE FALL OF THE ROMAN EMPIRE WHEN THE GERMAN and Scythian nations overran the western provinces of the Roman empire. The towns were deserted. and broke into small parcels. When land. the chiefs and principal leaders of those nations acquired. took place among the Romans who made no more distinction between elder and younger. the natural law of succession divides it.

bear any resemblance to entails. The law of primogeniture. founded not upon the doubtful distinctions of personal merit. nothing can be more contrary to the real interest of a numerous family. They were altogether unknown to the Romans. however. or alienation. but upon some plain and evident difference which can admit of no dispute. it was thought better that it should descend undivided to one. Laws frequently continue in force long after the circumstances which first gave occasion to them. must be determined by some general rule. Entails are the natural consequences of the law of primogeniture. depended upon its greatness. not immediately indeed. His tenants were his subjects. of which the law of primogeniture first gave the idea. The right of primogeniture. therefore. The male sex is universally preferred to the female. To divide it was to ruin it. and as of all institutions it is the fittest to support the pride of family distinctions. it is still likely to endure for many centuries. nor fidei commisses. That the power. and when all other things are equal. Among the children of the same family there can be no indisputable difference but that of sex. Hence the origin of the right of primogeniture. In the present state of Europe. or by the misfortune of any of its successive owners. beggars all the rest of the children. for the same reason that it has generally taken place in that of monarchies. the proprietor of a single acre of land is as perfectly secure in his possession as the proprietor of 100. therefore. and that of age.Adam Smith power and protection. are no more. and which could alone render them reasonable. though not always at their first institution. and to expose every part of it to be oppressed and swallowed up by the incursions of its neighbours. In those disorderly times. or device. the protection which its owner could afford to those who dwelt on it. In every other respect. either by the folly. either by gift. in the succession of landed estates. than a right which. and to hinder any part of the original estate from being carried out of the proposed line. every great landlord was a sort of petty prince. came to take place. but in process of time. still continues to be respected. though 331 . frequently against his neighbours. To which of them so important a preference shall be given. He was their judge. Neither their substitutions. it must descend entire to one of the children. the elder everywhere takes place of the younger. and in some respects their legislator in peace and their leader in war. may not be weakened by division.000. and consequently the security of the monarchy. and sometimes against his sovereign. He made war according to his own discretion. and of what is called lineal succession. in order to enrich one. The security of a landed estate. They were introduced to preserve a certain lineal succession.

the supposition that every successive generation of men have not an equal right to the earth. are still respected. though even England is not altogether without them. Entails. but that the property of the present generation should be restrained and regulated according to the fancy of those who died. the great proprietor was sufficiently employed in defending his own territories. however. If he was an economist. however. entails might not be unreasonable. he generally found it more profitable to employ his annual savings in new purchases than in the improvement of his old estate. They are founded upon the most absurd of all suppositions. If the expense of his house and person either equalled or exceeded his revenue. perhaps more than one third part of the whole lands in the country. nothing can be more completely absurd. they might frequently hinder the security of thousands from being endangered by the caprice or extravagance of one man. In those countries. or in extending his jurisdiction and authority over those of his neighbours. particularly. Like what are called the fundamental laws of some monarchies. is said to abhor perpetuities. Entails are thought necessary for maintaining this exclusive privilege of the nobility to the great offices and honours of their country. and almost always the requisite abilities. perhaps five hundred years ago. When great landed estates were a sort of principalities. like all other commercial projects.The Wealth of Nations some French lawyers have thought proper to dress the modern institution in the language and garb of those ancient ones. The common law of England. requires an exact attention to small 332 . Great tracts of uncultivated land were in this manner not only engrossed by particular families. He had no leisure to attend to the cultivation and improvement of land. are at present supposed to be under strict entail. indeed. To improve land with profit. But in the present state of Europe. through the greater part of Europe. but the possibility of their being divided again was as much as possible precluded for ever. it is thought reasonable that they should have another. In the disorderly times which gave birth to those barbarous institutions. that a great proprietor is a great improver. and they are accordingly more restricted there than in any other European monarchy. in which noble birth is a necessary qualification for the enjoyment either of civil or military honours. When the establishment of law and order afforded him this leisure. as it did very frequently. It seldom happens. when small as well as great estates derive their security from the laws of their country. he had no stock to employ in this manner. and that order having usurped one unjust advantage over the rest of their fellow-citizens. lest their poverty should render it ridiculous. he often wanted the inclination. In Scotland. more than one fifth. and to all that it possesses.

He embellishes. he has been accustomed to have some anxiety about. They could marry. Compare the present condition of those estates with the possessions of the small proprietors in their neighbourhood. in the hands of the same family since the times of feudal anarchy. Hungary. If little improvement was to be expected from such great proprietors. at ten times the expense which the land is worth after all his improvements. The turn of mind which this habit naturally forms. or almost all. without interruption. They were all. that if he was to improve his whole estate in the same manner. They were supposed to belong more directly to the land than to their master. he was liable to some penalty. and you will require no other argument to convince you how unfavourable such extensive property is to improvement. or even in our West Indian colonies. therefore. They were not. It was for his benefit. perhaps. of his equipage. he would be a bankrupt before he had finished the tenth part of it. are objects which. however. It was at his expense. Such slaves could acquire nothing but their daily maintenance. This species of slavery still subsists in Russia. and he has little taste for any other. It was properly the proprietor himself. which pleases his fancy.Adam Smith savings and small gains. If he maimed or murdered any of them. from his infancy. were all his. Bohemia. follows him when he comes to think of the improvement of land. of which a man born to a great fortune. It is only in the western 333 . still less was to be hoped for from those who occupied the land under them. They could. The elegance of his dress. In the ancient state of Europe. be sold with it. slaves. and cultivated them by his own bondmen. for which he has so little occasion. and he could take it from them at pleasure. the cattle. four or five hundred acres in the neighbourhood of his house. and other parts of Germany. The seed. and he could not afterwards dissolve the marriage by selling the man and wife to different persons. than to profit. of his house and household furniture. Whatever they acquired was acquired to their master. some great estates which have continued. Moravia. capable of acquiring property. that in this case occupied his own lands. provided it was with the consent of their master. in both parts of the united kingdom. is very seldom capable. though generally but to a small one. but not separately. therefore. Poland. There still remain. but their slavery was of a milder kind than that known among the ancient Greeks and Romans. even though naturally frugal. and the instruments of husbandry. was properly carried on by their master. The situation of such a person naturally disposes him to attend rather to ornament. Whatever cultivation and improvement could be carried on by means of such slaves. the occupiers of land were all tenants at will. and finds.

may satisfy us that their number cannot be very great. To the slave cultivators of ancient times gradually succeeded a species of 334 . The number of negroes. and the nature of the work can afford it..The Wealth of Nations and south-western provinces of Europe that it has gradually been abolished altogether. I believe. when it fell under the management of slaves. in our sugar than in our tobacco colonies. Wherever the law allows it. together with their women and servants. though it appears to cost only their maintenance. The late resolution of the Quakers in Pennsylvania. on the contrary. it had not been much better in ancient Greece. In the time of Aristotle. cannot. though inferior to those of sugar. The planting of sugar and tobacco can afford the expense of slave cultivation. such a resolution could never have been agreed to. The profits of a sugar plantation in any of our West Indian colonies. how unprofitable it became to the master. in proportion to that of whites. A person who can acquire no property can have no other interest but to eat as much and to labour as little as possible. and in our tobacco colonies a very great part of it. and not by any interest of his own. would require. Both can afford the expense of slave cultivation but sugar can afford it still better than tobacco. it seems. of which the principal produce is corn. like the plains of Babylon. is much greater. In our sugar colonies. are superior to those of corn. can be squeezed out of him by violence only. The experience of all ages and nations. But if great improvements are seldom to be expected from great proprietors. he will generally prefer the service of slaves to that of freemen. In the English colonies. therefore. Speaking of the ideal republic described in the laws of Plato. Had they made any considerable part of their property. a territory of boundless extent and fertility. in the present times. they are least of all to be expected when they employ slaves for their workmen. the whole work is done by slaves. the far greater part of the work is done by freemen. Whatever work he does beyond what is sufficient to purchase his own maintenance. The pride of man makes him love to domineer. to maintain 5000 idle men (the number of warriors supposed necessary for its defence). demonstrates that the work done by slaves. is remarked both by Pliny and Columella. The raising of corn. are generally much greater than those of any other cultivation that is known either in Europe or America. he says. In ancient Italy. accordingly. is in the end the dearest of any. to set at liberty all their negro slaves. and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors. and the profits of a tobacco plantation. as has already been observed. how much the cultivation of corn degenerated.

They are called in Latin Coloni Partiarii. however. to have been such as rendered this species of servitude altogether inconvenient. Alexander III. when the farmer either quitted or was turned out of the farm. are capable of acquiring property. in which so important a revolution was brought about. on the contrary. in short. The proprietor furnished them with the seed. the whole stock. after setting aside what was judged necessary for keeping up the stock. to have been rather a pious exhortation. The time and manner. Such tenants. and instruments of husbandry. than a law to which exact obedience was required from the faithful. however. which was restored to the proprietor. necessary for cultivating the farm. and partly upon account of the encroachments which the sovereigns. to lay out. Land occupied by such tenants is properly cultivated at the expense of the proprietors. having no stock of his own. and having a certain proportion of the produce of the land. The produce was divided equally between the proprietor and the farmer. gradually encouraged their villains to make upon their authority. enfranchised. be the interest even of this last species of cultivators. being freemen. 335 . known at present in France by the name of metayers. published a bull for the general emancipation of slaves. It seems. could cultivate it only by means of what the landlord advanced to him. and it is certain. and at the same time allowed to continue in possession of the land. is one of the most obscure points in modern history. who can acquire nothing but his maintenance. they have a plain interest that the whole produce should be as great as possible. that tenure in villanage gradually wore out through the greater part of Europe. that so early as the twelfth century. one very essential difference between them. in the further improvement of the land. till it was gradually abolished by the joint operation of the two interests above mentioned. consults his own ease. and which seem. however. that at present I know no English name for them. any part of the little stock which they might save from their own share of the produce. A villain. Slavery continued to take place almost universally for several centuries afterwards. The church of Rome claims great merit in it. by making the land produce as little as possible over and above that maintenance. however. that of the proprietor on the one hand. A slave.Adam Smith farmers. at least. cattle. and that of the sovereign on the other. in order that their own proportion may be so. It could never. They have been so long in disuse in England. There is. It is probable that it was partly upon account of this advantage. always jealous of the great lords. and must therefore have been what the French call a metayer. as much as that occupied by slaves.

In France. was to get one half of whatever it produced. that. is found to be a very great hindrance to improvement. who cultivated the land with their own stock. even. and in which his claim is not necessarily concluded by the uncertain decision of a single assize. therefore. in the one case. therefore the security of the tenant is equal to that of 336 . in the other they share them with their landlord. in England. who laid out nothing. perhaps of Europe. were probably of the same kind. which is but a tenth of the produce. must have been an effectual bar to it. If they were turned out illegally by the violence of their master. but sues in the name of his tenant. The possession. which amounted to one half. the action by which they obtained redress was extremely imperfect. though by very slow degrees. was long extremely precarious. farmers. A tax. but it could never be his interest to mix any part of his own with it. To this species of tenantry succeeded. properly so called. because they may sometimes expect to recover it. paying a rent certain to the landlord. before the expiration of the lease. by the fictitious action of a common recovery. it was not till about the 14th of Henry VII. before the expiration of their term. which never amounted to a real loss. even of such farmers. where five parts out of six of the whole kingdom are said to be still occupied by this species of cultivators. they get the whole profits to themselves. Those ancient English tenants. however. and still is so in many parts of Europe. the country. It did not always reinstate them in the possession of the land. When such farmers have a lease for a term of years. because. where the yeomanry has always been most respected. the writ of right or the writ of entry. in the modern practice. not damages only. they may sometimes find it for their interest to lay out part of their capital in the further improvement of the farm. when the landlord has occasion to sue for the possession of the land. by which the tenant recovers. This species of tenants still subsists in some parts of Scotland. who are said by Chief-Baron Gilbert and Dr Blackstone to have been rather bailiffs of the landlord than farmers. with a large profit. This action has been found so effectual a remedy. They are called steel-bow tenants. the proprietors complain. be legally ousted of their leases by a new purchaser.The Wealth of Nations because the landlord. It might be the interest of a metayer to make the land produce as much as could be brought out of it by means of the stock furnished by the proprietor. but possession. he seldom makes use of the actions which properly belong to him as a landlord. that their metayers take every opportunity of employing their master’s cattle rather in carriage than in cultivation. but gave them damages. that the action of ejectment was invented. In England. properly so called. The tithe. Even in England. They could. by the writ of ejectment.

on account of the political consideration which this gives them. however. for example. than all their boasted regulations of commerce taken together. they had imagined. were all calculated for what they supposed the interest of the proprietor. It has in that country. and they did not foresee how much this regulation must obstruct improvement. I believe. besides paying the rent. A late act of parliament has. the term of their security was still limited to a very short period. in this respect. has been much obstructed by entails.Adam Smith the proprietor. in France. bound to perform a great number of services to the landlord. that no lease granted by any of his predecessors should hinder him from enjoying. Avarice and injustice are always short-sighted. It was for his interest. as no leasehold gives a vote for a member of parliament. were anciently. The proprietors of land were anciently the legislators of every part of Europe. the real interest of the landlord. so favourable to the yeomanry. in the long-run. been lately extended to twentyseven. In England. too. frequently for more than one year. These services. Its beneficial influence. therefore. besides. except in England. being almost entirely arbitrary. a lease for life of forty shillings a-year value is a freehold. the full value of his land. The laws relating to land. therefore. or regulated by any precise rule. In other parts of Europe. The farmers. Those laws and customs. besides. subjected the tenant to many vexations. which were seldom either specified in the lease. the yeomanry are upon this account less respectable to their landlords than in England. it was supposed. indeed. nowhere in Europe. the heirs of entail being generally restrained from letting leases for any long term of years. is. but by the use and wont of the manor or barony. somewhat slackened their fetters. In 337 . It was introduced into Scotland so early as 1449. and as a great part of the yeomanry have freeholds of this kind. and thereby hurt. the whole order becomes respectable to their landlords. a period still too short to encourage the tenant to make the most important improvements. after it was found convenient to secure tenants both against heirs and purchasers. have perhaps contributed more to the present grandeur of England. and entitles the lessee to a vote for a member of parliament. any instance of the tenant building upon the land of which he had no lease. though they are still by much too strait. to nine years from the commencement of the lease. by a law of James II. and trusting that the honour of his landlord would take no advantage of so important an improvement. peculiar to Great Britain. There is. The law which secures the longest leases against successors of every kind. In Scotland. during a long term of years. so far as I know.

were as irregular and oppressive as the services The ancient lords. besides. though extremely unwilling to grant. any pecuniary aid to their sovereign. 338 . Under all these discouragements. The stock of both may improve. The taille. the only monarchy in Europe where the oppression of purveyance has been entirely abolished. who has stock. were not less arbitrary than the private ones. That order of people. a servitude which still subsists. Great Britain is. as it still subsists in France. but that of a burgher. nor even any burgher. I believe. seem. which they estimate by the stock that he has upon the farm. very much altered for the better the condition of the yeomanry of that country. easily allowed him to tallage. not only hinders the stock which accumulates upon the land from being employed in its improvement. The farmer. or his officers of any kind. and whoever rents the lands of another becomes subject to it. in the end. must always improve under great disadvantage. not only the rank of a gentleman. The public taxes. This tax. is as a merchant who trades with burrowed money. I believe. compared with the proprietor. and none in its improvement. with all the liberty and security which law can give. and provisions. has. though with different degrees of oppression in different countries. the yeomanry were bound to provide them with horses.The Wealth of Nations Scotland the abolition of all services not precisely stipulated in the lease. in the course of a few years. Should any stock happen to accumulate in the hands of a French farmer. and consequently to employ as little as possible in its cultivation. No gentleman. everywhere. It is his interest. when his household. and to degrade him below. so usual in England in former times. as they called it. but drives away all other stock from it. It is a tax upon the supposed profits of the farmer. affect their own revenue. To make and maintain the high roads. was not the only one. to appear to have as little as possible. therefore. This tax. to which they were subject. The public services to which the yeomanry were bound. is supposed to dishonour whoever is subject to it. will submit to this degradation. The ancient tenths and fifteenths. at a price regulated by the purveyor. compared with one who trades with his own. may serve as an example of those ancient tallages. their tenants. passed through any part of the country. themselves. It still subsists in France and Germany. therefore. to have been taxes of the same nature with the taille. with only equal good conduct. When the king’s troops. little improvement could be expected from the occupiers of land. and had not knowledge enough to foresee how much this must. but that of the one. so far as they affected the land. the taille is almost equal to a prohibition of its ever being employed upon the land. carriages.

must have discouraged the cultivation of countries less fertile. To what degree such restraints upon the inland commerce of this commodity. had the farmer been proprietor. not only of corn. in order to place himself in an inferior station. the yeomanry are regarded as an inferior rank of people. on account of the large share of the profits which is consumed by the interest of the loan. and. It can seldom happen.Adam Smith must always improve more slowly than that of the other. little stock is likely to go from any other profession to the improvement of land in the way of farming. though even there the great stocks which are in some places employed in farming. whether carried on by the proprietor or by the farmer. unfavourable to the improvement and cultivation of land. even to the better sort of tradesmen and mechanics. besides. inferior to that of a proprietor. from the nature of things. naturally the most fertile country in Europe. which seems to have been a very universal regulation. The station of a farmer. without a special licence. in which. have generally been acquired by fanning. perhaps. After small proprietors. More does. the farmers are said to be not inferior to those of England. but of almost every other part of the produce of the farm. Even in the present state of Europe. and by the privileges of fairs and markets. by the restraints which were laid upon the inland commerce. joined to the general prohibition of exportation. and of Berne in Switzerland. it is not. in England than in any other European monarchy. and in all parts of Europe to the great merchants and master manufacturers. with only equal good conduct. by the absurd laws against engrossers. therefore. 339 . perhaps. Through the greater part of Europe. by the general prohibition of the exportation of corn. obstructed the cultivation of ancient Italy. and forestallers. in Great Britain than in any other country. very easy to imagine. over and above all this. and which. that a man of any considerable stock should quit the superior. The lands cultivated by the farmer must. in the same manner. There are more such. the trade. together with some encouragement given to the importation of foreign corn. The ancient policy of Europe was. be improved more slowly than those cultivated by the proprietor. first. secondly. of all others. rich and great farmers are in every country the principal improvers. is. In the republican governments of Holland. stock is commonly acquired most slowly. perhaps. however. and less favourably circumstanced. It has already been observed in what manner the prohibition of the exportation of corn. he might have employed in the further improvement of the land. perhaps. on account of the large share of the produce which is consumed in the rent. therefore. and at that time the seat of the greatest empire in the world. regraters.

to have been of servile. before those grants. among whom the public territory was originally divided. The towns were chiefly inhabited by tradesmen and mechanics. that they might give away their own daughters in marriage without the consent of their lord. the proprietors of land seem generally to have lived in fortified castles on their own estates. and from fair to fair. on the contrary. in those days. In all the different countries of Europe then. These last were composed chiefly of the proprietors of lands. The privileges which we find granted by ancient charters to the inhabitants of some of the principal towns in Europe. mean set of people. They consisted. After the fall of the Roman empire. and in the midst of their own tenants and dependants. of a very different order of people from the first inhabitants of the ancient republics of Greece and Italy. indeed. taxes used to be levied upon the persons and goods of travellers. for the sake of common defence. when they went over certain bridges. have been either altogether. and to surround them with a wall. after the fall of the Roman empire. that upon their death their own children. in the same state of villanage with the occupiers of land in the country. and not their lord. in the same manner as in several of the Tartar governments of Asia at present. or very nearly. They seem. indeed. not more favoured than those of the country. should succeed to their goods. AFTER THE FALL OF THE ROMAN EMPIRE THE INHABITANTS of cities and towns were. like the hawkers and pedlars of the present times. who seem. when they passed through certain manors. to have been a very poor. The people to whom it is granted as a privilege. sufficiently show what they were before those grants. must. and who found it convenient to build their houses in the neighbourhood of one another.The Wealth of Nations CHAPTER III OF THE RISE AND PROGRESS OF CITIES AND TOWNS. and that they might dispose of their own effects by will. or very nearly of servile condition. who seemed to travel about with their goods from place to place. when they carried about their 340 .

the sovereigns of all the different countries of Europe. That part of the king’s revenue which arose from such poll-taxes in any particular town.} To let a farm in this manner. during a term of years.Adam Smith goods from place to place in a fair. or to some other great lord. a circumstance in those days regarded as of the greatest importance. each of them. used commonly to be let in farm. to such particularly as lived in their own demesnes. These different taxes were known in England by the names of passage. They. sometimes of the tax which particular burghers paid. during either their lives. p. or the pleasure of their protectors. Firma Burgi. of several of the towns of England. At first. they becoming jointly and severally answerable for the whole rent. in return. and sometimes to other persons. and to have affected only particular individuals. p. p. and stallage. when they erected in it a booth or stall to sell them in. 10. who had. was quite agreeable to the usual economy of. In the very imperfect accounts which have been published from Doomsday-book. 18. and this tax might perhaps be considered as compensation for what their patrons might lose by their exemption from other taxes. first edition. either to the king. would grant to particular traders. it seems. lastage. who used frequently to let whole manors to all the tenants of those manors. or very nearly of servile condition. I believe. in the 341 . Such traders. sometimes to the sheriff of the county. etc. {see Brady’s Historical Treatise of Cities and Boroughs. pontage. for a rent certain. and sometimes of the general amount only of all those taxes. the farm of the town was probably let to the burghers.} But how servile soever may have been originally the condition of the inhabitants of the towns. Sometimes the king. they becoming jointly and severally answerable for the whole rent. sometimes a great lord. v. usually paid to their protector a sort of annual poll-tax. it appears evidently. for this sort of protection. upon some occasions. 3. {See Madox. 223. and being thus altogether freed from the insolence of the king’s officers. both those poll-taxes and those exemptions seem to have been altogether personal. In those days protection was seldom granted without a valuable consideration. The burghers themselves frequently got credit enough to be admitted to farm the revenues of this sort winch arose out of their own town. but in return being allowed to collect it in their own way. also History of the Exchequer. though in other respects of servile. that they arrived at liberty and independency much earlier than the occupiers of land in the country. sect. chap. authority to do this. a general exemption from such taxes. were upon this account called free traders. and to pay it into the king’s exchequer by the hands of their own bailiff. At first. mention is frequently made.

Firma Burgi. some sort of compulsive jurisdiction to oblige their own citizens to make payment. it might have been extremely inconvenient to have left them to seek this sort of justice from any other tribunal. with the privilege of having magistrates and a town-council of their own. I reckon it not improbable that they were. which. never afterwards to be augmented.} It might. by night as well as by day. the pleas of the crown excepted. In other countries. that is. though I cannot produce any direct evidence of it. and could not afterwards be considered as belonging to individuals. Along with this grant. In England they were generally exempted from suit to the hundred and county courts: and all such pleas as should arise among them. reserving a rent certain. and of reducing all their inhabitants under a sort of military discipline. probably. along with the freedom of trade. it seems to have become the general practice to grant it to them in fee. by obliging them to watch and ward. above mentioned. for a term of years only. {See Madox.The Wealth of Nations same manner as it had been to other farmers. and that they might dispose of their own effects by will. to particular burghers. to guard and defend those walls against all attacks and surprises. in our present sense of the word freedom. as individuals. of building walls for their own defence. for the same reason that they had been called free burghers or free traders. but as burghers of a particular burgh. they now at least became really free. as individuals. for which it was made. that their children should succeed to them. In those disorderly times. Those exemptions. be necessary to grant to such towns as were admitted to farm their own revenues. were left to the decision of their own magistrates. naturally became perpetual too. that they might give away their own daughters in marriage. was called a free burgh. But however this may have been. of making bye-laws for their own government. See also Pfeffel in the Remarkable events under Frederick II. as anciently understood. were generally bestowed upon the burghers of the town to whom it was given. the exemptions. I know not. They were generally at the same time erected into a commonalty or corporation. in return. ceased to be personal. In process of time. The payment having thus become perpetual. But it must seem extraordinary. that the 342 . Whether such privileges had before been usually granted. however. and his Successors of the House of Suabia. therefore. the important privileges. upon this account. the principal attributes of villanage and slavery being thus taken away from them. Nor was this all. that is for ever. much greater and more extensive jurisdictions were frequently granted to them.

have in this manner voluntarily erected a sort of independent republics in the heart of their own dominions. the sovereign of perhaps no country in Europe was able to protect. were obliged either to have recourse to the protection of some great lord. and that they should. and they plundered them upon every occasion without mercy or remorse. he took away from those whom he wished to have for his friends. The lords despised the burghers. in those days. They were the enemies of his enemies. they were capable of making no contemptible resistance. almost of a different species from themselves. the most likely to be improved by the natural course of things. if one may say so. for his allies. besides. considered as single individuals. By granting them the farm of their own town in fee. but as a parcel of emancipated slaves. Without the establishment of some regular government of this kind. but though. he had no reason either to hate or fear the burghers. and.Adam Smith sovereigns of all the different countries of Europe should have exchanged in this manner for a rent certain. The inhabitants of cities and burghs. perhaps. The wealth of the burghers never failed to provoke their envy and indignation. of all others. whom they considered not only as a different order. never more to be augmented. In order to understand this. without either expense or attention of their own. The king hated and feared them too. to become either his slaves or vassals. but by entering into a league of mutual defence with their neighbours. through the whole extent of his dominions. he gave them all the means of security and independency of the barons which it was in his power to bestow. and who were not strong enough to defend themselves. Those whom the law could not protect. Mutual interest. that branch of their revenue. and in order to obtain it. no voluntary league of mutual defence could either have afforded them any permanent security. he might despise. it must be remembered. without some authority to compel their inhabitants to act according to some certain plan or system. all ground of 343 . the weaker part of his subjects from the oppression of the great lords. or to enter into a league of mutual defence for the common protection of one another. or have enabled them to give the king any considerable support. and the king to support them against the lords. and that of reducing all their inhabitants under a sort of military discipline. the privilege of making bye-laws for their own government. disposed them to support the king. had no power to defend themselves. perhaps. that. therefore. and it was his interest to render them as secure and independent of those enemies as he could. By granting them magistrates of their own. which was. that of building walls for their own defence. The burghers naturally hated and feared the lords.

on account either of their distance from the principal seat of government. Towards the end of his reign. and as they could be more readily assembled upon any sudden occasion. or by granting it to some other farmer. as well as of several other cities in Switzerland. his son Lewis. This is the short history of the republic of Berne.} Philip I. or of some other reason. of the natural strength of the country itself. where the authority of the sovereign. the cities generally became independent republics. King John of England. known afterwards by the name of Lewis the Fat. It was during the unprosperous reigns of the princes of the house of Suabia. for example. The other was to form a new militia. according to the French antiquarians. for of that city the history is somewhat different. The princes who lived upon the worst terms with their barons. like other peaceable inhabitants. Their advice consisted of two different proposals. In countries such as France and England. obliging them to pull down their castles in the country.The Wealth of Nations jealousy and suspicion. the cities had no opportunity of becoming entirely independent. consulted. that the greater part of the free towns of Germany received the first grants of their privileges. seem accordingly to have been the most liberal in grants of this kind to their burghs.} The militia of the cities seems. the sovereign came to lose the whole of his authority. in the city. by making the inhabitants of those towns. They be- 344 . either by raising the farm-rent of their town. and conquered all the nobility in their neighbourhood. it is the history of all the considerable Italian republics. {See Madox. by establishing magistrates and a town-council in every considerable town of his demesnes. concerning the most proper means of restraining the violence of the great lords. though frequently very low. march out upon proper occasions to the assistance of the king. {See Pfeffel. never was destroyed altogether. It is from this period. under the command of their own magistrates. in those times. of which so great a number arose and perished between the end of the twelfth and the beginning of the sixteenth century. with the bishops of the royal demesnes. according to Father Daniel. appears to have been a most munificent benefactor to his towns. in which. that he was ever afterwards to oppress them. One was to erect a new order of jurisdiction. they frequently had the advantage in their disputes with the neighbouring lords. In countries such as Italy or Switzerland. of France lost all authority over his barons. not to have been inferior to that of the country. that we are to date the institution of the magistrates and councils of cities in France. and to live. If you except Venice. and that the famous Hanseatic league first became formidable.

Being generally. Whatever stock. they naturally exert it to better their condition. because. as the only sanctuaries in which it could be secure to the person that acquired it. too. The law was at that time so indulgent to the inhabitants of towns. besides the stated farm-rent of the town. however. Hence the origin of the representation of burghs in the states-general of all great monarchies in Europe. which aims at something more than necessary subsistence. were exposed to every sort of violence. to whom it would otherwise have belonged. But those of a city. If. therefore. that the sovereign could impose no tax upon them. The inhabitants of a city. naturally took refuge in cities. so considerable. and the whole materials and means of their industry. from the country. and along with them the liberty and security of individuals. but the conveniencies and elegancies of life. some little stock should accumulate. at a time when the occupiers of land in the country. it is true. therefore. their deputies seem sometimes to have been employed by him as a counterbalance in those assemblies to the authority of the great lords. either in exchange for the manufactured produce of their own industry. where they might join with the clergy and the barons in granting. are not necessarily confined to derive them from the country in their neighbourhood. he would naturally conceal it with great care from his master. upon urgent occasions. Order and good government. that if he could conceal himself there from the pursuit of his lord for a year. But men in this defenceless state naturally content themselves with their necessary subsistence. oppressed with the servitude of villanage. in the hands of a poor cultivator. was established in cities long before it was commonly practised by the occupiers of land in the country. more favourable to his power.Adam Smith came. They have a much wider range. situated near either the sea-coast or the banks of a navigable river. some extraordinary aid to the king. without their own consent. and take the first opportunity of running away to a town. and to acquire not only the necessaries. and may draw them from the most remote corners of the world. That industry. or by performing the office of carriers between distant countries. he was free for ever. therefore. might only tempt the injustice of their oppressors. accumulated in the hands of the industrious part of the inhabitants of the country. must always ultimately derive their subsistence. They were. called upon to send deputies to the general assembly of the states of the kingdom. and so desirous of diminishing the authority of the lords over those of the country. On the contrary. were in this manner established in cities. and exchanging 345 . to acquire more. when they are secure of enjoying the fruits of their industry.

who eagerly purchased them with great quantities of the rude produce of their own lands. Thus the wool of England used to be exchanged for the wines of France. afforded some food to the vanity of the great proprietors.The Wealth of Nations the produce of one for that of another. Such. too. Italy lay in the centre of what was at that time the improved and civilized part of the world. in the same manner as the corn in Poland is at this day. in this manner. in order to save the expense of carriage. But when this taste became so general as to occasion a considerable demand. A city might. some countries that were opulent and industrious. while not only the country in its neighbourhood. by the great waste of stock and destruction of inhabitants which they occasioned. naturally endeavoured to establish some manufactures of the same 346 . was a source of opulence to those republics. A taste for the finer and more improved manufactures was. The inhabitants of trading cities. The great armies which marched from all parts to the conquest of the Holy Land. in this manner. perhaps. gave extraordinary encouragement to the shipping of Venice. and the fine cloths of Flanders. sometimes in transporting them thither. but all those to which it traded. accordingly. but all of them taken together. taken singly. Genoa. the merchants. and the most destructive frenzy that ever befel the European nations. of those armies. and that of the Saracens during the reigns of the Abassides. either of its subsistence or of its employment. Each of those countries. if one may say so. and for the silks and velvets of France and Italy. could afford it both a great subsistence and a great employment. some part of the coast of Barbary. and always in supplying them with provisions. There were. for the manufactured produce of more civilized nations. They were the commissaries. introduced by foreign commerce into countries where no such works were carried on. Such was the Greek empire as long as it subsisted. however. were extremely favourable to that of some Italian cities. though. they must necessarily have retarded the progress of the greater part of Europe. and Pisa. and all those provinces of Spain which were under the government of the Moors. The crusades. The cities of Italy seem to have been the first in Europe which were raised by commerce to any considerable degree of opulence. too. were in poverty and wretchedness. The commerce of a great part of Europe in those times. could afford it but a small part. consisted chiefly in the exchange of their own rude. exchanged for the wines and brandies of France. within the narrow circle of the commerce of those times. grow up to great wealth and splendour. was Egypt till it was conquered by the Turks. by importing the improved manufactures and expensive luxuries of richer countries.

being imitations of foreign manufactures. i. When the Venetian manufacture was first established. Sometimes they have been introduced in the manner above mentioned. seem to have been introduced into different countries in two different ways.} Their offer was accepted. are the offspring of foreign commerce. In every large country both the clothing and household furniture or the far greater part of the people. seem not to have been common in the northern parts of Italy before the sixteenth century. which flourished in Lucca during the thirteenth century. who established them in imitation of some foreign manufactures of the same kind. or of such as are fit for distant sale. Manufactures introduced in this manner are generally employed upon foreign materials. and such seem to have been the ancient manufactures of silks. Castruccio Castracani. Such manufactures. it must be observed. if one may say so. The more ancient manufacture of Lucca was likewise carried on with foreign materials. that seem to have been established in the western provinces of Europe. of whom thirty-one retired to Venice. both in the clothes and household furniture of the lowest rank of people. In 1310. too. No large country. after the fall of the Roman empire. and offered to introduce there the silk manufacture. part 2 vol. and when it is said of any such country that it has no manufactures. seem to have been the manufactures of fine cloths that anciently flourished in Flanders. and the breeding of silk-worms. are the produce of their own industry. Such. Those manufactures which are fit for distant sale. In the latter you will generally find. therefore. by the violent operation. {See Sandi Istoria civile de Vinezia. Hence the origin of the first manufactures for distant sale. than in those rich ones that are said to abound in them. a much greater proportion of foreign productions than in the former. velvets. the materials were all brought from Sicily and the Levant. it must always be understood of the finer and more improved. This is even more universally the case in those poor countries which are commonly said to have no manufactures. ever did or could subsist without some sort of manufactures being carried on in it. and which were introduced into England in the beginning of the reign of Elizabeth. The cultivation of mulberry trees. The 347 . and they began the manufacture with three hundred workmen. page 247 and 256. and brocades.Adam Smith kind in their own country. and such are the present silk manufactures of Lyons and Spitalfields. nine hundred families were driven out of Lucca. Those arts were not introduced into France till the reign of Charles IX. of the stocks of particular merchants and undertakers. many privileges were conferred upon them. They were banished from thence by the tyranny of one of Machiavel’s heroes.

the whole. not of the first woollen manufacture of England. naturally fertile and easily cultivated. They are thus both encouraged and enabled to increase this surplus produce by a further improvement and better cultivation of the land. An inland country. or caprice. Such manufactures are generally employed upon the materials which the country produces. or very nearly the whole.The Wealth of Nations manufactures of Flanders were carried on chiefly with Spanish and English wool. was so. and as it were of their own accord. as their work improves and refines. produces a great surplus of provisions beyond what is necessary for maintaining the cultivators. and sometimes even from all water carriage. and they furnish the cultivators with something in exchange for it that is either useful or agreeable to them. for more materials and provisions. so the progress of the manufacture reacts upon the land. and sometimes in an inland town. Abundance. and increases still further it’s fertility. as they are generally introduced by the scheme and project of a few individuals. They work up the materials of manufacture which the land produces. when it was first established. The manufacturers first supply the neighbourhood. and as the fertility of she land had given birth to the manufacture. but of the first that was fit for distant sale. is sometimes established in a maritime city. and inconveniency of river navigation. the price of it. by saving the expense of carrying it to the water-side. and can purchase cheaper other conveniencies which they have occasion for. but at a considerable distance from the sea-coast. renders provisions cheap. what is the same thing. therefore. at a very great. according as their interest. or to some distant market. indeed. They give a new value to the surplus part of the rude produce. More than one half the materials of the Lyons manufacture is at this day foreign silk. more distant markets. manufactures for distant sale grow up naturally. 348 . Spanish wool was the material. and exchange their finished work. by the gradual refinement of those household and coarser manufactures which must at all times be carried on even in the poorest and rudest countries. and afterwards. it may frequently be difficult to send this surplus abroad. No part of the materials of the Spitalfields manufacture is ever likely to be the produce of England. judgment. or. happen to determine. and on account of the expense of land carriage. who find that their industry can there procure them more of the necessaries and conveniencies of life than in other places. The seat of such manufactures. and they seem frequently to have been first refined and improved In such inland countries as were not. upon easier terms than they could have obtained it before. The cultivators get a better price for their surplus produce. and encourages a great number of workmen to settle in the neighbourhood. At other times.

and which I shall now proceed to explain. more than a century before any of those which now flourish in the places above mentioned were fit for foreign sale. and may easily be sent to the remotest corners of the world. the manufactures of Leeds.Adam Smith For though neither the rude produce. nor even the coarse manufacture. Sheffield. contains in it the price. England was noted for the manufacture of fine cloths made of Spanish wool. 349 . and of the manufactures immediately introduced by it. A piece of fine cloth. and. could. not only of eighty pounds weight of wool. the maintenance of the different working people. Such manufactures are the offspring of agriculture. In the modern history of Europe. In a small bulk it frequently contains the price of a great quantity of rude produce. The extension and improvement of these last could not take place but in consequence of the extension and improvement of agriculture. Halifax. their extension and improvement have generally been posterior to those which were the offspring of foreign commerce. The corn which could with difficulty have been carried abroad in its own shape. Birmingham. and of their immediate employers. without the greatest difficulty. but sometimes of several thousand weight of corn. the refined and improved manufacture easily may. support the expense of a considerable land-carriage. is in this manner virtually exported in that of the complete manufacture. and Wolverhampton. In this manner have grown up naturally. the last and greatest effect of foreign commerce. for example which weighs only eighty pounds. of their own accord. as it were.

they gave encouragement to its cultivation and further improvement. Their own country. and return to him again with a profit. by affording a great and ready market for the rude produce of the country. on account of its neighbourhood. The merchant is commonly a bold. The one is not afraid to lay out at once a large capital upon the improvement of his land. Its rude produce being charged with less carriage. The one often sees his money go from him. the wealth acquired by the inhabitants of cities was frequently employed in purchasing such lands as were to be sold. the traders could pay the growers a better price for it. and. This benefit was not even confined to the countries in which they were situated. a country gentleman a timid undertaker. when they do. Merchants are commonly ambitious of becoming country gentlemen. very seldom expects to see any more of it.The Wealth of Nations CHAPTER IV HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY THE INCREASE AND RICHES of commercial and manufacturing towns contributed to the improvement and cultivation of the countries to which they belonged. and. Those different habits naturally affect their temper and disposition in every sort of business. when once he parts with it. A merchant is accustomed to employ his money chiefly in profitable projects. they are generally the best of all improvers. Secondly. and yet afford it as cheap to the consumers as that of more distant countries. the other. To all of them they afforded a market for some part either of their rude or manufactured produce. but extended more or less to all those with which they had any dealings. of which a great part would frequently be uncultivated. whereas a mere country gentleman is accustomed to employ it chiefly in expense. however. when he has a probable prospect of raising 350 . gave some encouragement to the industry and improvement of all. necessarily derived the greatest benefit from this market. consequently. in three different ways: First.

might not spoil their fine clothes when they sat down on the floor to eat their dinner. seldom ventures to employ it in this manner. having no equivalent to give in return for their maintenance. who could not get seats. we can easily form a notion of Westminster-hall was the dining-room of William Rufus. The great Earl of Warwick is said to have entertained every day. but with what he can save out or his annual revenue. commerce and manufactures gradually introduced order and good government. however. A hospitality nearly of the same kind was exercised not many 351 . Whoever has had the fortune to live in a mercantile town. having nothing for which he can exchange the greater part of the produce of his lands which is over and above the maintenance of the cultivators. Thirdly. Before the extension of commerce and manufactures in Europe. any project of improvement. with profit and success. and lastly. in the present times. and though the number here may have been exaggerated. consumes the whole in rustic hospitality at home.Adam Smith the value of it in proportion to the expense. 30. of order. it is commonly not with a capital. and of servile dependency upon their superiors. and might frequently. for the same reason that soldiers must obey the prince who pays them. This. he can make use of it in no other way than by maintaining a hundred or a thousand men. besides. though it has been the least observed. The habits. which is not always the case. in order that the knights and squires. and with them the liberty and security of individuals. is by far the most important of all their effects. and attention. In a country which has neither foreign commerce nor any of the finer manufactures. but being fed entirely by his bounty. that he strewed the floor of his hall with clean hay or rushes in the season. Mr Hume is the only writer who. situated in an unimproved country. at his different manors. not be too large for his company. economy. who. has hitherto taken notice of it. from the sovereign down to the smallest baron. have been very great to admit of such exaggeration. perhaps. to which mercantile business naturally forms a merchant. who had before lived almost in a continual state of war with their neighbours. than those of mere country gentlemen. it must. among the inhabitants of the country. must obey him. surrounded with a multitude of retainers and dependants. If this surplus produce is sufficient to maintain a hundred or a thousand men. the hospitality of the rich and the great. if he has any capital. therefore. must have frequently observed how much more spirited the operations of merchants were in this way. He is at all times. If he improves at all. It was reckoned a piece of magnificence in Thomas Becket. render him much fitter to execute. so far as I know.000 people. the other. exceeded every thing which. a great proprietor.

Even such of them as were not in a state of villanage. that part of it be consumed at a distance from his own house. a sheep. They could maintain order. of all who dwelt upon their estates. it will frequently be more convenient for the proprietor. and invite all passengers. He is thereby saved from the embarrassment of either too large a company. In some places it is so at this day. They necessarily became the judges in peace. over their tenants and retainers. was some years ago. the other great proprietors paid certain respects. The subsistence of both is derived from his bounty. were tenants at will. and accustomed to stand by one another. would have cost the king.The Wealth of Nations years ago in many different parts of the Highlands of Scotland. a lamb. Such a proprietor. for the sake of common defence against their common enemies. A tenant at will. The king. and execute the law. in the Highlands of Scotland. half a crown. and its continuance depends upon his good pleasure. as he feeds his servants and retainers at his own house. provided they who consume it are as dependent upon him as either his retainers or his menial servants. he was little more than the greatest proprietor in his dominions. I have seen. almost the same effort as to extin- 352 . says Doctor Pocock. It seems to be common in all nations to whom commerce and manufactures are little known. had he attempted it by his own authority. to whom. even common beggars. where all the inhabitants were armed. The occupiers of land were in every respect as dependent upon the great proprietor as his retainers. was founded the power of the ancient barons. A crown. because each of them could there turn the whole force of all the inhabitants against the injustice of anyone. is as dependent upon the proprietor as any servant or retainer whatever. To have enforced payment of a small debt within the lands of a great proprietor. a common rent for lands which maintained a family. had not. so he feeds his tenants at their houses. In a country where the surplus produce of a large estate must be consumed upon the estate itself. and the leaders in war. to sit down with him and partake of his banquet. nor will money at present purchase a greater quantity of commodities there than in other places. who possesses land sufficient to maintain his family for little more than a quit-rent. within their respective demesnes. an Arabian chief dine in the streets of a town where he had come to sell his cattle. who paid a rent in no respect equivalent to the subsistence which the land afforded them. or too large a family. Upon the authority which the great proprietors necessarily had. No other person had sufficient authority to do this. in particular. and must obey him with as little reserve. In those ancient times. in such a state of things.

those of all great proprietors into the hands of the king. used. both civil and criminal. That the most extensive authority and jurisdictions were possessed by the great lords in France allodially. accompanied with a long train of services and duties. and even that of making bye-laws for the government of their own people. may be regarded as an attempt to moderate. all necessarily flowed from the state of property and manners just now described. to those who were capable of administering it. and. the authority of the great allodial lords. The introduction of the feudal law. though without any of the formalities of justice. and 353 . many proofs that such effects must always flow from such causes. in order to maintain the public peace. That gentleman. but the power of levying troops. we may find. and it is not improbable that the state of that part of the country at that time made it necessary for him to assume this authority. to leave the command of the country militia to those whom that militia would obey. therefore.Adam Smith guish a civil war. and. so far from extending. who was charged with the maintenance and education of the pupil. He is said to have done so with great equity. of coining money. and those jurisdictions. obliged to abandon the administration of justice. nor even a tenant in chief. Without remounting to the remote antiquities of either the French or English monarchies. to exercise the highest criminal jurisdictions over his own people. from the king down to the smallest proprietor. in 1745. without any legal warrant whatever. a gentleman of Lochaber in Scotland. During the minority of the proprietor. several centuries before even the name of the feudal law was known in Europe. is a matter of fact that admits of no doubt. notwithstanding. He was. fell into the hands of his immediate superior. That authority. and with out being so much as a justice of peace. in much later times. carried. 800 of his own people into the rebellion with him. the rent. but a vassal of the Duke of Argyll. consequently. But the feudal law is not supposed to have become the common law of England till after the Conquest. long before the feudal law was introduced into that country. together with the management of his lands. not being what was then called a lord of regality. It is a mistake to imagine that those territorial jurisdictions took their origin from the feudal law. were all rights possessed allodially by the great proprietors of land. The authority and jurisdiction of the Saxon lords in England appear to have been as great before the Conquest as that of any of the Norman lords after it. It is not thirty years ago since Mr Cameron of Lochiel. through the greater part of the country. for the same reason. Not only the highest jurisdictions. It established a regular subordination. whose rent never exceeded £500 a-year.

1000 families. and the excessive strength of the inferior members was the cause of the weakness of the head. and thus. as they could find a method of consuming the whole value of their rents themselves. and too strong in the inferior members. After the institution of feudal subordination. and no other human creature was to have any share of them. or. it could not do either sufficiently for establishing order and good government among the inhabitants of the country. to have been the vile maxim of the masters of mankind. seems. in every age of the world. was supposed to have a right of disposing of him in marriage. In a country where there is no foreign commerce. All for ourselves. and with it the whole weight and authority which it could give them.000 a-year cannot well employ his revenue in any other way than in maintaining. whereas. As soon. The buckles. the king was as incapable of restraining the violence of the great lords as before. because it could not alter sufficiently that state of property and manners from which the disorders arose. With the judges that were to determine the preference. and nothing for other people.The Wealth of Nations who. But though this institution necessarily tended to strengthen the authority of the king. and very frequently upon the king. In the present state of Europe. rapine. this difference was perfectly decisive. from his authority as guardian. the meanest. the price of the maintenance of 1000 men for a year. and the most sordid of all vanities they gradually bartered their whole power and authority. For a pair of diamond buckles. they must have shared with at least 1000 people. a man of 354 . and which they could consume themselves. nor any of the finer manufactures. however. and the open country still continued to be a scene of violence. the silent and insensible operation of foreign commerce and manufactures gradually brought about. they had no disposition to share them with any other persons. in the more ancient method of expense. without sharing it either with tenants or retainers. They still continued to make war according to their own discretion. and to weaken that of the great proprietors. or for something as frivolous and useless. and disorder. they exchanged the maintenance. The authority of government still continued to be. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands. perhaps. too weak in the head. were to be all their own. But what all the violence of the feudal institutions could never have effected. as before. who are all of them necessarily at his command. provided it was in a manner not unsuitable to his rank. what is the same thing. therefore. perhaps. almost continually upon one another. for the gratification of the most childish. a man of £10.

to many not a hundredth. notwithstanding the complaints of depopulation. he is not absolutely dependent upon any one of them. Each tradesman or artificer derives his subsistence from the employment. Though in some measure obliged to them all. or. taken singly. because generally they can all be maintained without him. therefore. to the maintenance of them all. or. The same cause gradually led them to dismiss the unnecessary part of their tenants. perhaps. on account of the waste which attends rustic hospitality. he indirectly pays all those wages and profits. Each of them. the price of a greater surplus. not of one. and to some not a thousandth. and the occupiers of land. When the great proprietors of land spend their rents in maintaining their tenants and retainers. and by exacting from the farmer the full value of the farm. By the removal of the unnecessary mouths. they may. not a tenth. they are all more or less independent of him. however.000 a-year can spend his whole revenue. He generally contributes. than he could have done by the ancient method of expense. therefore. or even a greater number of people. Though he contributes. Farms were enlarged. For though the quantity of precious productions for which he exchanges his whole revenue be very small. and he generally does so. he maintains as great. but a very small proportion to that of each. or even a ten thousandth part of their whole annual maintenance. a greater surplus. according to the imperfect state of cultivation and improvement in those times. perhaps. a greater number of people than before. till they were at last dismissed altogether. and thus indirectly contributes to the maintenance of all the workmen and their employers. in the 355 .Adam Smith £10. reduced to the number necessary for cultivating it. contributes often but a very small share to the maintenance of any individual of this greater number. or being able to command more than ten footmen. what is the same thing. perhaps maintain as great. which the merchants and manufacturers soon furnished him with a method of spending upon his own person. to a very few. each of them maintains entirely all his own tenants and all his own retainers. Indirectly. it was impossible that the number of their retainers should not as gradually diminish. without directly maintaining twenty people. all of them taken together. But when they spend them in maintaining tradesmen and artificers. the number of workmen employed in collecting and preparing it must necessarily have been very great. however. By paying that price. but of a hundred or a thousand different customers. Its great price generally arises from the wages of their labour. and the profits of all their immediate employers. was obtained for the proprietor. The personal expense of the great proprietors having in this manner gradually increased. not worth the commanding.

such as Wales. and the retainers being dismissed. But if he has a lease for along term of years. Having sold their birth-right. but. relate to the present subject. on the contrary. but I cannot help remarking it. A regular government was established in the country as well as in the city. not like Esau. could afford. is not altogether dependent upon the landlord. or of disturbing the peace of the country. in the wantonness of plenty. that they should be secured in their possession for such a term of years as might give them time to recover. or imposed upon him by the common and known law of the country. which has been translated into several European languages. are very rare in commercial countries. Even a tenant at will. and which contains scarce any thing else. any more than in the other. for a mess of pottage in time of hunger and necessity. for trinkets and baubles. and hence the origin of long leases. they became as insignificant as any substantial burgher or tradesmen in a city. in the actual state of their improvement. beyond what is either expressly stipulated in the lease. whatever they should lay not in the further improvement of the land. a proof that ancient families are very common among those nations. It does not. In countries where a rich man can spend his revenue in no other way than by maintaining as many people as it can maintain. The tenants having in this manner become independent. perhaps. or the Highlands of Scotland. who pays the full value of the land. he frequently has no bounds to his expense. they are very common. and his landlord must not expect from him even the most trifling service. The Arabian histories seem to be all full of genealogies. and such a tenant will expose neither his life nor his fortune in the service of the proprietor.The Wealth of Nations same manner as he had done the rest. the great proprietors were no longer capable of interrupting the regular execution of justice. But where he can spend the greatest revenue upon his own person. fitter to be the playthings of children than the serious pursuits of men. that very old families. is seldom so violent as to attempt to maintain more than he can afford. and there is a history written by a Tartar Khan. it seems. and his benevolence. The expensive vanity of the landlord made him willing to accept of this condition. such as have possessed some considerable estate from father to son for many successive generations. he is altogether independent. His tenants could agree to this upon one condition only. nobody having sufficient power to disturb its operations in the one. The cause continuing to operate. because he fre- 356 . he is apt to run out. he was desirous to raise his rents above what his lands. In countries which have little commerce. The pecuniary advantages which they receive from one another are mutual and equal. with profit.

and the industry of the other. was gradually bringing about. and is. to which the interest of money is not liable. was in this manner brought about by two different orders of people. for among nations of shepherds. therefore. the number of inhabitants is not supposed to double in less than five hundred years. however. that there are always more capitals to buy than there is land to sell. who had not the least intention to serve the public. such as the Tartars and Arabs. It was thus. naturally inspires. In several of our North American colonies. in spite of the most violent regulations of law to prevent their dissipation. A revolution of the greatest importance to the public happiness. being contrary to the natural course of things. the consumable nature of their property necessarily renders all such regulations impossible. and the most successful. everywhere in Europe. and who upon that account takes pleasure. Compare the slow progress of those European countries of which the wealth depends very much upon their commerce and manufactures. riches. views it with all the affection which property. it is found to double in twenty or five-and-twenty years. that. and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. the commerce and manufactures of cities. To purchase land. In Europe. however. they frequently do. not only in cultivating. keep so much land out of the market. Among simple nations. without any regulations of law. This order. so that what is sold always sells at a monopoly price. acted merely from a view to their own interest. with the rapid advances of our North American colonies. and perpetuities of different kinds. instead of being the effect. have been the cause and occasion of the improvement and cultivation of the country. The merchants and artificers. The rent never pays the interest of the purchase-money. of which the wealth is founded altogether in agriculture. The same regulations. Through the greater part of Europe. A small proprietor. the law of primogeniture. on the contrary. or to his affection for his own person. especially small property. is generally of all improvers the most industrious. the most intelligent. through the greater part of Europe.Adam Smith quently has no bounds to his vanity. but in adorning it. burdened with repairs and other occasional charges. and thereby hinder the multiplication of small proprietors. who knows every part of his little territory. In commercial countries. prevent the division of great estates. To gratify the most childish vanity was the sole motive of the great proprietors. besides. a most unprofitable 357 . is necessarily both slow and uncertain. is. Neither of them had either knowledge or foresight of that great revolution which the folly of the one. very seldom remain long in the same family. much less ridiculous. besides.

So much land would come to market. however. the estate would generally be sold. which. A man of profession. indeed. on the contrary. will often disdain to be a farmer. or at a price much below the value of the natural produce. and afford the conveniency of water carriage to some of the most inland parts of it. The free rent of the land would go no nearer to pay the interest of the purchase-money. indeed. and of all the improvements which these can occasion. Such a person. and a small capital might be employed in purchasing land as profitable as in any other way. too. which would otherwise have taken that direction.The Wealth of Nations employment of a small capital. Such land. but must bid adieu for ever to all hope of either great fortune or great illustration. might indeed expect to live very happily and very independently. Holland itself not excepted. upon the death of any proprietor who left a numerous family. and the most direct road to all the fortune and illustration which can be required in that country. instead of applying to trade or to some profession. prevents a great number of capitals from being employed in its cultivation and improvement. on account of the natural fertility of the soil. is in North America to be had almost for nothing. will sometimes choose to lay out his little capital in land. too whose revenue is derived from another source often loves to secure his savings in the same way. For the sake of the superior security. should employ a capital of two or three thousand pounds in the purchase and cultivation of a small piece of land. of manufactures for distant sale. too. and of the many navigable rivers which run through it. In North America. But a young man. by a different employment of his stock. a thing impossible in Europe. of the great extent of the sea-coast in proportion to that of the whole country. who. From the beginning of the reign of Elizabeth. or indeed in any country where all lands have long been private property. that it could no longer sell at a monopoly price. of which the law is. though he cannot aspire at being a proprietor. The purchase and improvement of uncultivated land is there the most profitable employment of the smallest as well as of the greatest capitals. a man of moderate circumstances. when he retires from business. more 358 . and the high price of what is brought thither. and in reality there is no country in Europe. which is brought to market. is perhaps as well fitted by nature as any large country in Europe to be the seat of foreign commerce. were divided equally among all the children. he might have had the same chance of acquiring with other people. the English legislature has been peculiarly attentive to the interest of commerce and manufactures. If landed estates. fifty or sixty pounds is often found a sufficient stock to begin a plantation with. The small quantity of land. therefore. upon the whole. England.

inferior to that of England. therefore. as law can make them. however. The law of the country has never given the same direct encouragement to agriculture. though contrary to the spirit of the law. by the protection of commerce. and where perpetuities. been gradually advancing too. but it seems to have followed slowly. as I shall endeavour to show hereafter. and as respectable. favours agriculture. and it is but of late that it was permitted from thence. and at a distance. except from Ireland. No country. the yeomanry of England are rendered as secure. Except in times of scarcity. The greater part of the country must probably have been cultivated before the reign of Elizabeth. have a monopoly against their countrymen for the two greatest and most important articles of land produce. is. can give more encouragement to agriculture than England. a period as long as the course of human prosperity usually endures. as independent. What would it have been. are admitted in some cases. which the right of primogeniture takes place. The importation of live cattle. however. no doubt. Such. near a century before England was distinguished as a commercial country.Adam Smith favourable to this sort of industry. The marine of France was considerable. Commerce and manufactures have accordingly been continually advancing during all this period. therefore. The cultivation and improvement of the country has. and a very great part of it still remains uncultivated. altogether illusory. notwithstanding. and the cultivation of the far greater part much inferior to what it might be. and had left the yeomanry in the same condition as in most other countries of Europe? It is now more than two hundred years since the beginning of the reign of Elizabeth. had the law given no direct encouragement to agriculture besides what arises indirectly from the progress of commerce. according to the notions of the times. the exportation of corn is not only free. France seems to have had a considerable share of foreign commerce. is the state of its cultivation. the importation of foreign corn is loaded with duties that amount to a prohibition. but by several direct encouragements. although at bottom. the more rapid progress of commerce and manufactures. however. before the expedition of Charles VIII. to Naples. is prohibited at all times. In times of moderate plenty. Those who cultivate the land. The foreign commerce of Spain and Portual to the other parts of Eu- 359 . bread and butcher’s meat. But what is of much more importance than all of them. which pays tithes. but encouraged by a bounty. The cultivation and improvement of France. sufficiently demonstrate at least the good intention of the legislature to favour agriculture. The law of England. perhaps. not only indirectly. These encouragements. upon the whole.

it has been said very properly. notwithstanding this general expression of one of the most judicious and reserved of modern historians. The foreign commerce of Portugal is of older standing than that of any great country in Europe. by means of foreign commerce and manufactures for distant sale. except in the obscure histories of the thirteenth and fourteenth centuries. The advantageous situation of the country. It is even uncertain where some of them were situated. It is not impossible. those countries still continue to be among the most populous and best cultivated in Europe. A merchant. that is acquired to any country by commerce and manufactures. too. till it has been spread.. together with it. however. It is in a great measure indifferent to him from what place he carries on his trade. though chiefly carried on in foreign ships. till some part of it has been secured and realized in the cultivation and improvement of its lands. and a very trifling disgust will make him remove his capital. and Bruges. Italy is the only great country of Europe which seems to have been cultivated and improved in every part. over the face of that country. and most populous provinces of 360 . is very considerable. best cultivated. and the great number of independent status which at that time subsisted in it.The Wealth of Nations rope. is not necessarily the citizen of any particular country. was cultivated not less in the most mountainous and barren parts of the country. on account of the great riches and extent of those colonies. and. in the end of the fifteenth and beginning of the sixteenth centuries. except Italy. Italy. or in the lasting improvement of lands. probably contributed not a little to this general cultivation. as it were. is always a very precarious and uncertain possession. all the industry which it supports. chased away the great commerce of Antwerp. or to what towns in Europe the Latin names given to some of them belong. that Italy was not at that time better cultivated than England is at present. But Flanders still continues to be one of the richest. from one country to another. That to their colonies is carried on in their own. according to Guicciardini. The civil wars of Flanders. and the greater part of both still remains uncultivated. But it has never introduced any considerable manufactures for distant sale into either of those countries. No part of it can be said to belong to any particular country. either in buildings. No vestige now remains of the great wealth said to have been possessed by the greater part of the Hanse Towns. But though the misfortunes of Italy. and the Spanish government which succeeded them. greatly diminished the commerce and manufactures of the cities of Lombardy and Tuscany. Before the invasion of Charles VIII. and is much greater. Ghent. than in the plainest and most fertile. The capital.

and cannot be destroyed but by those more violent convulsions occasioned by the depredations of hostile and barbarous nations continued for a century or two together. such as those that happened for some time before and after the fall of the Roman empire in the western provinces of Europe. The ordinary revolutions of war and government easily dry up the sources of that wealth which arises from commerce only. 361 . That which arises from the more solid improvements of agriculture is much more durable.Adam Smith Europe.

has given occasion to two different systems of political economy. to provide a plentiful revenue or subsistence for the people. to enable them to provide such a revenue or subsistence for themselves. or. The one may be called the system of commerce. the other that of agriculture. and. first. I shall endeavour to explain both as fully and distinctly as I can. to supply the state or commonwealth with a revenue sufficient for the public services. 362 . and is best understood in our own country and in our own times. secondly. The different progress of opulence in different ages and nations. considered as a branch of the science of a statesman or legislator. It is the modern system. more properly. proposes two distinct objects.The Wealth of Nations BOOK IV OF SYSTEMS OF POLITICAL ECONOMY POLITICAL ECONOMY. and shall begin with the system of commerce. with regard to enriching the people. It proposes to enrich both the people and the sovereign.

and wealth and money. as the instrument of commerce. as among all other nations of shepherds. is said to be indifferent about it. The great affair. in short. there is no difficulty in making any subsequent purchase. and to heap up gold and silver in any country is supposed to be the readiest way to enrich it. Among the Tartars. if there was any gold or silver to be found in the neighbourhood? By the information which they received. is supposed to be a country abounding in money. is a popular notion which naturally arises from the double function of money. a generous. if there was plenty of sheep and oxen in the kingdom of France? Their inquiry had the same object with that of the Spaniards. In consequence of its being the instrument of commerce. a monk sent ambassador from the king of France to one of the sons of the famous Gengis Khan. or in gold and silver. in common language. or a man eager to be rich. They wanted to know if the country was rich enough to be worth the conquering. used to be. When that is obtained. when they arrived upon any unknown coast. For some time after the discovery of America. when we have money we can more readily obtain whatever else we have occasion for. is said to love money. that the Tartars used frequently to ask him. To grow rich is to get money. or if the country was worth the conquering.Adam Smith CHAPTER I OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM THAT WEALTH consists in money. that he is worth very little money. considered as in every respect synonymous. A rich country. in the same manner as a rich man. and as the measure of value. that he is worth a great deal. 363 . or a profuse man. than by means of any other commodity. they judged whether it was worth while to make a settlement there. and a careless. is to get money. We say of a rich man. A frugal man. the first inquiry of the Spaniards. says. we estimate that of all other commodities by the quantity of money which they will exchange for. are. Plano Carpino. we always find. and of a poor man. who are generally ignorant of the use of money. In consequence of its being the measure of value.

This. upon that account. The consumable goods. consisted in cattle. Spain and Portugal. in some old Scotch acts of Parliament. was the nearest to the truth. therefore. but merely by their own waste and extravagance. All other moveable goods. which forbid. though it may travel about from hand to hand. but by sending abroad money to pay them with. though to little purpose. that the wealth which consists in them cannot be much depended on. have either prohibited their exportation under the severest penalties. is not very liable to be wasted and consumed. are. and a nation which abounds in them one year may. The like prohibition seems anciently to have made a part of the policy of most other European nations. according to him. It is even to be found. he says. In consequence of those popular notions. 364 . and which are obliged to carry on foreign wars. must endeavour. without any exportation. would depend altogether upon the abundance or scarcity of those consumable goods. Every such nation. are of so consumable a nature. Others admit. and to multiply those metals ought. that if a nation could be separated from all the world. Wealth. he thinks. the Tartar notion. unless it has a good deal at home. therefore. all the different nations of Europe have studied. they allow.The Wealth of Nations cattle are the instruments of commerce and the measures of value. where we should least of all expect to find it. that when occasion requires. as. Money. Of the two. to accumulate gold and silver. they say. be in great want of them the next. therefore. in time of peace. Mr Locke remarks a distinction between money and other moveable goods. the proprietors of the principal mines which supply Europe with those metals. The like policy anciently took place both in France and England. but the real wealth or poverty of the country. with countries which have connections with foreign nations. it would be of no consequence how much or how little money circulated in it. or subjected it to a considerable duty. yet if it can be kept from going out of the country. cannot be done. is a steady friend. to be the great object of its political economy. perhaps. on the contrary. which. But it is otherwise. it may have wherewithal to carry on foreign wars. every possible means of accumulating gold and silver in their respective countries. would only be exchanged for a greater or a smaller number of pieces. according to them. Gold and silver. and a nation cannot send much money abroad. which were circulated by means of this money. under heavy penalties. according to the Spaniards. the carrying gold or silver forth of the kingdom. they think. and to maintain fleets and armies in distant countries. the must solid and substantial part of the moveable wealth of a nation. it consisted in gold and silver.

and expense of sending the money thither. and thereby diminished that quantity: that in this case. a balance became due to it from foreign nations. than with any other commodity. in order to purchase foreign goods. which is the end of his endeavours. but only. that. a contrary balance became due to foreign nations. and being there sold for a large profit. That when the country exported to a greater value than it imported. the more the balance of trade became necessarily against it. on the contrary. but that the more the exchange was against any country. the merchants found this prohibition. the merchant who purchased a bill upon the foreign country being obliged to pay the banker who sold it. could easily be smuggled abroad. which. against this prohibition as hurtful to trade. we shall find the worth and plentiful increase of his actions. first. did not always diminish the quantity of those metals in the kingdom. those goods might be re-exported to foreign countries. They remonstrated. in comparison with that of the country to 365 . than it otherwise might have been. if the consumption of foreign goods was not thereby increased in the country. either to import into their own. or to carry to some other foreign country. the money of that country becoming necessarily of so much less value. secondly.” says he. and thereby increased the quantity of those metals in the kingdom. render it more expensive: that the exchange was thereby turned more against the country which owed the balance.Adam Smith When those countries became commercial. by making it more dangerous. which was necessarily paid to them in the same manner. it might frequently increase the quantity.” They represented. They could frequently buy more advantageously with gold and silver. when he casteth away much good corn into the ground. might bring back much more treasure than was originally sent out to purchase them. They represented. could not prevent it. But when we consider his labours in the harvest. on account of the smallness of their bulk in proportion to their value. “If we only behold. trouble. that this prohibition could not hinder the exportation of gold and silver. But that when it imported to a greater value than it exported. extremely inconvenient. we shall account him rather a madman than a husbandman. therefore. “the actions of the husbandman in the seed time. because. not only for the natural risk. That this exportation could only be prevented by a proper attention to what they called the balance of trade. which was necessarily paid to it in gold and silver. to prohibit the exportation of those metals. but for the extraordinary risk arising from the prohibition. the foreign goods which they wanted. upon many occasions. that the exportation of gold and silver. Mr Mun compares this operation of foreign trade to the seed-time and harvest of agriculture.

in smuggling the money out of it. and would require a greater balance of gold and silver to be exported to Holland. would naturally dispose the merchants to endeavour to make their exports nearly balance their imports. therefore. too. would be worth only 100 ounces of silver in Holland. perhaps. was five per cent. that either to preserve or to augment the quantity of those metals required more the attention of government. They paid so much dearer for the bills which their bankers granted them upon those countries. But they were sophistical. was extremely disadvantageous to the merchants who had any money to pay in foreign countries. by the difference of the exchange: that the one would draw so much less Dutch money to England. would necessarily be so much more against England. The high price of exchange. never fails to supply in the proper quantity. too. in order that they might have this high exchange to pay upon as small a sum as possible. They were sophistical. This expense would generally be all laid out in the country. it would require 105 ounces of silver in England to purchase a bill for 100 ounces of silver in Holland: that 105 ounces of silver in England. so far as they asserted that the exportation of gold and silver in trade might frequently be advantageous to the country. and could seldom occasion the exportation of a single sixpence beyond the precise sum drawn for. and the other so much more English money to Holland. They were solid. it would not necessarily carry any more money out of the country. too. must necessarily have operated as a tax. for example. against England. Those arguments were partly solid and partly sophistical. that the English goods which were sold to Holland would be sold so much cheaper. and the Dutch goods which were sold to England so much dearer. would be worth 105 ounces in England. in asserting that the high price of exchange necessarily increased what they called the unfavourable balance of trade. or occasioned the exportation of a greater quantity of gold and silver. But though the risk arising from the prohibition might occasion some extraordinary expense to the bankers. That high price. as this difference amounted to: and that the balance of trade. and would purchase only a proportionable quantity of Dutch goods. on the contrary. The high price of exchange. which the freedom of trade. in raising the price of foreign 366 . without any such attention. in supposing. but that 100 ounces of silver in Holland. besides. indeed. and would purchase a proportionable quantity of English goods.The Wealth of Nations which the balance was due. in asserting that no prohibition could prevent their exportation. They were solid. when private people found any advantage in exporting them. than to preserve or to augment the quantity of any other useful commodities. That if the exchange between England and Holland. therefore.

but to diminish. Those arguments. It then became necessary to say something about the beneficial effects of foreign trade. produced the wished-for effect. The country. It would tend. was considered as subsidiary only to foreign trade. and to country gentlemen. and just equally fruitless. but when they had occasion to apply to their country for some change in the laws relating to foreign trade. as well as to the merchants. and in some other places. but how. the trade in which an equal capital affords the greatest revenue. to those who were conscious to them selves that they knew nothing about the matter. But to know in what manner it enriched the country. therefore. it was their business to know it.Adam Smith goods. The subject never came into their consideration. From one fruitless care. it was turned away to another care much more intricate. what they called the unfavourable balance of trade. could never become either richer or poorer by means of it. A country that has no mines of its own. The exportation of foreign coin and of bullion was made free. therefore. They were addressed by merchants to parliaments and to the councils of princes. none of them well knew. and creates the greatest employment to the people of the country. and consequently the exportation of gold and silver. In Holland. however. but of all other commercial countries. but that the laws in question hindered it from bringing so much as it otherwise would do. it was said. and the manner in which those effects were obstructed by the laws as they then stood. not of England only. when they were told that foreign trade brought money into the country. to watch over the balance of trade. The prohibition of exporting gold and silver was. The title of Mun’s book. much more embarrassing. became a fundamental maxim in the political economy. must undoubtedly draw its 367 . To the judges who were to decide the business. nor carried any out of it. England’s Treasure in Foreign Trade. this liberty was extended even to the coin of the country. in France and England. experience demonstrated to the nobles and country gentlemen. not to increase. those arguments convinced the people to whom they were addressed. The inland or home trade. except so far as its prosperity or decay might indirectly influence the state of foreign trade. to nobles. That foreign trade enriched the country. the most important of all. and thereby diminishing their consumption. confined to the coin of those respective countries. was no part of their business. It neither brought money into the country. it appeared a most satisfactory account of the matter. or in what manner. Such as they were. The merchants knew perfectly in what manner it enriched themselves. therefore. The attention of government was turned away from guarding against the exportation of gold and silver. as the only cause which could occasion any augmentation or diminution of those metals. by those who were supposed to understand trade.

in the same manner as one that has no vineyards of its own must draw its wines. without any attention of government. like all other commodities. which must be paid in order to prepare and bring it to market. with perfect security. an effectual demand for an additional quantity of gold. which could be coined into more than five millions of guineas. will always supply us with the wine which we have occasion for. or from wherever else it was to be had. for example. with equal security. on the contrary. naturally regulates itself in every country according to the effectual demand. no vigilance of government can prevent their exportation.The Wealth of Nations gold and silver from foreign countries. at five guineas a-ton. in any particular country. so all other commodities are the price of those metals. because. a packet-boat could bring from Lisbon. from the places where they are cheap. a million of tons of shipping. will never be in want of those metals. When the quantity of gold and silver imported into any country exceeds the effectual demand. however. on account of the small bulk and great value of those metals. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home. that it will always supply us with all the gold and silver which we can afford to purchase or to employ. no commodities can be more easily transported from one place to another. or a thousand ships of a thousand tons each. from the places where they exceed. It does not seem necessary. A country that has wherewithal to buy wine. We trust. and we may trust. But if there were an effectual demand for grain to the same value. The navy of England would not be sufficient. They are to be bought for a certain price. and sink the price of those metals there below that in the neighbouring countries. labour. that the attention of government should be more turned towards the one than towards the other object. to those where they fall short of this effectual demand. The continual importations from Peru and Brazil exceed the effectual demand of those countries. and a country that has wherewithal to buy gold and silver. If there were in England. that the freedom of trade. and as they are the price of all other commodities. If. their quantity fell short of the effectual demand. so as to raise their price above that of the neighbouring 368 . according to this effectual demand. fifty tons of gold. and profits. The quantity of every commodity which human industry can either purchase or produce. either in circulating our commodities or in other uses. will always get the wine which it has occasion for. to those where they are dear. But no commodities regulate themselves more easily or more exactly. or according to the demand of those who are willing to pay the whole rent. to import it would require. than gold and silver.

requires such a revolution in commerce as that occasioned by the discovery of America. there are more expedients for supplying their place. All the sanguinary laws of the customs are not able to prevent the importation of the teas of the Dutch and Gottenburg East India companies. perhaps. the people must starve. therefore. than that of almost any other commodity. Buying and selling upon credit. when the market happens to be either over or under-stocked with them. gold and silver should at any time fall short in a country which has wherewithal to purchase them. just so many times more difficult to smuggle. consequently. and uniform. is not altogether exempted from variation. so as to raise or lower at once. which are hindered by their bulk from shifting their situation. that during the course of the present and preceding century. If it were even to take pains to prevent their importation. A pound of tea. that the price of those metals does not fluctuate continually. and the different dealers compensating their credits with one another. for example. A well-regulated paper-money will supply it not only without any inconveniency. 369 . sensibly and remarkably. because somewhat cheaper than those of the British company. or once a-year. they have been constantly. industry must stop. sixteen shillings. but gradually. barter will supply its place. not withstanding all this. but the changes to which it is liable are generally slow. But to make any sudden change in the price of gold and silver. once a-month. from the places where they abound to those where they are wanted. the money price of all other commodities. the attention of government never was so unnecessarily employed. and. like that of the greater part of other commodities. indeed. with some advantages. gradual. It is partly owing to the easy transportation of gold and silver. in some cases. on account of the continual importations from the Spanish West Indies. But if money is wanted. sinking in their value. however. though with a good deal of inconveniency.Adam Smith countries. If provisions are wanted. when the Spartans had got wherewithal to purchase them. is about a hundred times the bulk of one of the highest prices. it would not be able to effectuate it. broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedaemon. it is supposed. Upon every account. the government would have no occasion to take any pains to import them. In Europe. without much foundation. Those metals. If the materials of manufacture are wanted. and more than two thousand times the bulk of the same price in gold. will supply it with less inconveniency. but. that is commonly paid for it in silver. The price of those metals. If. as when directed to watch over the preservation or increase of the quantity of money in any country.

their stock is gone. that the merchant finds it generally more easy to buy goods with money. and he may frequently sustain a much greater loss 370 . and they have nothing at hand with which they can either purchase money or give solid security for borrowing. It is not because wealth consists more essentially in money than in goods. or of the wine which they have occasion for. however. that wealth does not consist in money. for which every thing is readily given in exchange. and is valuable only for purchasing. nor credit to borrow it. and always the most unprofitable part of it. Sober men. of the scarcity of money. than to buy money with goods. but in what money purchases. Money. Before their projects can be brought to bear. like wine. but because money is the known and established instrument of commerce. nor credit to borrow it. Money. which they send to some distant market.The Wealth of Nations No complaint. or in gold and silver. but which is not always with equal readiness to be got in exchange for every thing. and their credit with it. as prodigals. but it has already been shown that it generally makes but a small part. both at home and abroad. are more perishable than money. It would be too ridiculous to go about seriously to prove. but that many people want those pieces who have nothing to give for them. This complaint. Those who have either. an unusual quantity of goods. It is not any scarcity of gold and silver. that occasions the general complaint of the scarcity of money. whose expense has been disproportioned to their revenue. and which their creditor find in getting payment. must always be scarce with those who have neither wherewithal to buy it. besides. however. Even such general complaints of the scarcity of money do not always prove that the usual number of gold and silver pieces are not circulating in the country. no doubt. It is sometimes general through a whole mercantile town and the country in its neighbourhood. will seldom be in want either of the money. When the profits of trade happen to be greater than ordinary over-trading becomes a general error. They do not always send more money abroad than usual. makes always a part of the national capital. The greater part of goods. but they buy upon credit. in hopes that the returns will come in before the demand for payment. whose projects have been disproportioned to their capitals. is not always confined to improvident spendthrifts. but the difficulty which such people find in borrowing. They run about everywhere to borrow money. and everybody tells them that they have none to lend. both among great and small dealers. Over-trading is the common cause of it. The demand comes before the returns. are as likely to have neither wherewithal to buy money. is more common than that of a scarcity of money.

are soon destroyed. Though gold and silver. Nothing. indeed. however.Adam Smith by keeping them. with abundance of goods in his warehouse. When his goods are upon hand. can be more disadvantageous to any country. the greater part is generally destined for the purchase of other foreign goods. which can ever be destined for purchasing gold and silver from their neighbours. his profit arises more directly from selling than from buying. therefore. The far greater part is circulated and consumed among themselves. but money can serve no other purpose besides purchasing goods. but goods do not always or necessarily run after money. in the long-run they draw it more necessarily than even it draws them. whereas gold and silver are of a more durable nature. and be forced upon some of those expedients which are necessary for supplying the place of money. the nation would not be ruined. Consumable commodities. and he is. or very nearly the same as usual. than when he has got their price in his coffers. It is not for its own sake that men desire money. But though a particular merchant. But it is but a very small part of the annual produce of the land and labour of a country. but frequently to use or to consume. upon all these accounts. because the same. to the incredible augmentation of the real wealth of the country. may sometimes be ruined by not being able to sell them in time. does not always mean to sell again. Over and above all this. therefore. Goods can serve many other purposes besides purchasing money. he is more liable to such demands for money as he may not be able to answer. We do not. would be the same. The one may frequently have done the whole. but for the sake of what they can purchase with it. which consists in the exchange of the hardware of England for the wines of France. Money. however. The whole capital of a merchant frequently consists in perishable goods destined for purchasing money. reckon that trade disadvantageous. And though goods do not always draw money so readily as money draws goods. It might. The man who buys. therefore. it is said. than the trade which consists in the exchange of such lasting for such perishable commodities. whereas he who sells always means to buy again. and were it not for this continual exportation. it is pretended. 371 . could not be had in exchange for the goods destined to purchase them. might be accumulated for ages together. or very nearly the same consumable capital would be employed in maintaining it. necessarily runs after goods. too. and even of the surplus which is sent abroad. The annual produce of its land and labour. suffer some loss and inconveniency. but the other can never have done more than the one half of his business. a nation or country is not liable to the same accident. generally much more anxious to exchange his goods for money than his money for goods.

and the loss which attends their lying idle and 372 . in every country. as coin. as much as the furniture of the kitchen. the number of pots and pans would readily increase along with it. their transportation is so easy. It should as readily occur. and you will infallibly increase the quantity. by obliging them to keep an unnecessary number of kitchen utensils. and prepared by means of them. as plate. and a part of this increased wealth will most probably be employed in purchasing. whether in the shape of coin or of plate. an additional quantity of plate. and lodges. but if you attempt by extraordinary means to increase the quantity. as necessarily diminish the wealth which feeds. Increase the use of them. it must be remembered. wherever it is to be had. managed. and immediately a part of it will be sent abroad to purchase. that the quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it. limited by the use which there is for those metals. a part of the increased quantity of victuals being employed in purchasing them. that the quantity of gold and silver is. the additional quantity of coin requisite for circulating them: that the quantity of plate is regulated by the number and wealth of those private families who choose to indulge themselves in that sort of magnificence. instead of increasing. As the expense of purchasing those unnecessary utensils would diminish. you will as infallibly diminish the use. increase the number and wealth of such families. which in those metals can never be greater than what the use requires. clothes. that their use consists in circulating commodities. or in maintaining an additional number of workmen whose business it was to make them. wherever it is to be found. that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there. and even the quantity too. and were it not for this continual exportation. to the incredible augmentation of the pots and pans of the country. so the expense of purchasing an unnecessary quantity of gold and silver must. either by introducing or by detaining in it an unnecessary quantity of gold and silver. and in affording a species of household furniture. that to attempt to increase the wealth of any country.The Wealth of Nations and yet hardware is a very durable commodity. increase the consumable commodities which are to be circulated. that the number of such utensils is in every country necessarily limited by the use which there is for them. is as absurd as it would be to attempt to increase the good cheer of private families. if the quantity of victuals were to increase. Gold and silver. But it readily occurs. increase that value. in every country. Were they ever to be accumulated beyond this quantity. either the quantity or goodness of the family provisions. might too be accumulated for ages together. and that. are utensils. which maintains and employs the people.

The melting down of the plate of private families has. first. in the beginning of the last war. secondly. and. gives an opportunity of sending a greater quantity of it abroad. in order to enable a country to carry on foreign wars. It is not always necessary to accumulate gold and silver. the circulating money. and consumable stock. can maintain foreign wars there. and. from the annual revenue arising out of its lands. some part of its accumulated gold and silver. however. It can seldom happen that much can be spared from the circulating money of the country. that no law could prevent their being immediately sent out of the country. too. last of all. The gold and silver which can properly be considered as accumulated. By the great number of people who are maintained abroad. or. of great expense. because in that there can seldom be much redundancy. The channel of circulation necessarily draws to itself a sum sufficient to fill it. fewer are maintained at home. and laid up in the treasury of the prince. and bank bills. The nation which. or. and never admits any more. but with consumable goods. 373 . and labour. the plate of private families. from the annual produce of its domestic industry. first. may be distinguished into three parts. some part of its annual rude produce. Fewer goods are circulated there. is generally issued upon such occasions. such as exchequer notes. by supplying the place of circulating gold and silver. navy bills. Something. An extraordinary quantity of paper money of some sort or other. last of all. not with gold and silver. All this. has wherewithal to purchase those consumable goods in distant countries. been found a still more insignificant one. and to maintain fleets and armies in distant countries. Fleets and armies are maintained. some part of the annual produce of its manufactures. The value of goods annually bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers. however. the money which may have been collected by many years parsimony. upon every occasion. and several years duration. or stored up in any country. is generally withdrawn from this channel in the case of foreign war. could afford but a poor resource for maintaining a foreign war.Adam Smith unemployed so great. did not derive so much advantage from this expedient as to compensate the loss of the fashion. The French. A nation may purchase the pay and provisions of an army in a distant country three different ways. in England. and less money becomes necessary to circulate them. and can give employment to no more. secondly. by sending abroad either.

by those who had that value to give for them. nor credit to borrow it. if you except the king of Prussia.000. therefore. including not only the £75. what it always occasions. two different times in so short a period. Few people wanted money who had wherewithal to pay for it. to accumulate treasure seems to be no part of the policy of European princes. and because the debtors found it difficult to borrow. in the East and West Indies. The kings of England had no accumulated treasure. We never heard of any extraordinary quantity of plate being melted down. at least twice in a period of between six and seven years. in Germany. indeed. who had neither wherewithal to buy it.000. were greater than usual during the whole war. and this again occasioned the usual complaint of the scarcity of money. or of the plate of private families. and what was annually borrowed of the sinking fund.000.000. a general over-trading in all the ports of Great Britain. Many people wanted it. 374 . The channel of circulation. the whole of it must. however. never appeared more empty than usual during any part of this period. Should this be supposed.The Wealth of Nations The accumulated treasures of the prince have in former times afforded a much greater and more lasting resource. that. were generally to be had for their value. however. gold and silver together. Gold and silver. The last French war cost Great Britain upwards of £90. it would afford the most decisive argument. but the additional 2s. In the present times. since. This occasioned. upon this supposition. it amounted to £30. but especially towards the end of it. in the ports of the Mediterranean. Since the late recoinage of the gold. seem to have had little dependency upon the exportation either of the circulating money. the creditors found it difficult to get payment. Portugal. The funds which maintained the foreign wars of the present century. without any body’s knowing any thing of the matter. according to the most exaggerated computation which I remember to have either seen or heard of. even according to this computation. the most expensive perhaps which history records. and returned to it again. The profits of foreign trade. which always follows over-trading. to demonstrate how unnecessary it is for government to watch over the preservation of money. however.000. have been sent out and returned again.000. it is believed to have been a good deal under-rated. More than two-thirds of this expense were laid out in distant countries.000. or of the treasure of the prince. Let us suppose. the whole money of the country must have gone from it. Had the war been carried on by means of our money. The circulating gold and silver of the country had not been supposed to exceed £18.000 of new debt that was contracted. in the pound land-tax. America.

or with something else that 375 . either with British commodities. he would endeavour to send them to some other country in which he could purchase a bill upon that country. in the same manner as the national coin circulates in every country. but by that of British commodities of some kind or other. from those circulated between different countries. when properly suited to the market. by sending abroad rather commodities than gold and silver. but from the sale of the returns. it must have been annually purchased. Besides the three sorts of gold and silver above mentioned. and probably was. therefore. rather by the exportation of commodities. is always attended with a considerable profit. for the purposes of foreign trade. not from the purchase. If the commodities of Great Britain were not in demand in that country. different from what it usually follows in profound peace. is accordingly remarked by the author of the Present State of the Nation. employed in carrying on the late war. must have been chiefly defrayed. it is natural to suppose that a movement and direction should be impressed upon it. or those who acted under them. without bringing back any returns. The national coin receives its movement and direction from the commodities circulated within the precincts of each particular country. he gets no returns. In time of a general war. When the government. But when they are sent abroad merely to pay a debt. The transportation of commodities. This bullion. he would naturally endeavour to pay his foreign correspondent. the pay and provisions of the different armies.Adam Smith The enormous expense of the late war. may be considered as the money of the great mercantile republic. not by the exportation of gold and silver. therefore. the one between different individuals of the same. When those metals are sent abroad in order to purchase foreign commodities. He naturally. upon whom he granted a bill. contracted with a merchant for a remittance to some foreign country. the money in the mercantile republic. The great quantity of British goods. But whatever part of this money of the mercantile republic Great Britain may have annually employed in this manner. that it should circulate more about the seat of the war. Both are employed in facilitating exchanges. than by that of gold and silver. the other between those of different nations. and consequently no profit. and be more employed in purchasing there. Part of this money of the great mercantile republic may have been. whereas that of gold and silver is scarce ever attended with any. exported during the course of the late war. as it circulates among different commercial countries. the merchant’s profit arises. exerts his invention to find out a way of paying his foreign debts. there is in all great commercial countries a good deal of bullion alternately imported and exported. and in the neighbouring countries.

The whole gold and silver annually imported into both Spain and Portugal. The manufacturers during. would scarce have paid four months expense of the late war. which still brings us back to commodities. They may flourish amidst the ruin of their country. in order to purchase there the pay and provisions of an army. for paying the bills drawn upon foreign countries for the pay and provisions of the army: and. and be called upon first to work up goods to be sent abroad. which are usually exported to foreign countries. be exported without bringing back any returns to the country. A considerable part of the annual surplus of its manufactures must. which could have supported it.000. The different state of many different branches of the British manufactures during the late war. which. indeed. or some part of the money of the mercantile republic to be employed in purchasing them. that so great an annual expense must have been defrayed from a great annual produce.The Wealth of Nations had been purchased with them. such as contain a great value in a small bulk. may carry on for many years a very expensive foreign war. No accumulation could have supported so great an annual profusion. and for some time after the peace. and. and can therefore be exported to a great distance at little expense. as the ultimate resources which enabled us to carry on the war. does not commonly much exceed £6. though it does to the merchant. Some part of this surplus. could conveniently be 376 . for example. on the contrary. or even having any such quantity to export.000. indeed. In the midst of the most destructive foreign war. There is no annual produce. according to the best accounts. The expense of 1761. may still continue to bring back a return. It is natural. in order to purchase there either the pay and provisions of an army. amounted to more than £19. to the annual produce of the land and labour of the country. to suppose. A country whose industry produces a great annual surplus of such manufactures.000. therefore. however. without either exporting any considerable quantity of gold and silver. the war will have a double demand upon them. even of gold and silver.000 sterling. to work up such as are necessary for purchasing the common returns that had usually been consumed in the country. of great expense or duration. and begin to decay upon the return of its prosperity. in this case. secondly. seem to be the finer and more improved manufactures. may serve as an illustration of what has been just now said. the greater part of manufactures may frequently flourish greatly. The commodities most proper for being transported to distant countries. the government purchasing of the merchant his bills upon foreign countries. in some years. they may decline on the return of peace. No foreign war.

The Saxon princes. rather. chief of the Cossacks in the Ukraine. Buying and selling was transacted by means of money in England then as well as now. therefore. Independent of this necessity. and hospitality to his retainers. and only the surplus part of their work is exported. It is in such countries. would be to send abroad a part of the necessary subsistence of the people. But bounty and hospitality very seldom lead to extravagance. he is. too.Adam Smith carried on by the exportation of the rude produce of the soil. When they divided their kingdom among their different children. It is otherwise with the exportation of manufactures. it must have borne a greater proportion. To send abroad any great quantity of it. as the only resource against such emergencies. without interruption. This inability did not arise from the want of money. upon extraordinary occasions. seem likewise to have accumulated treasures. but of the finer and more improved manufactures. to the number and value of purchases and sales usually transacted at that time. are said to have been very great. of which. the sovereign. because there was then no paper. but either the rude produce of the soil. which now occupies a great part of the employment of gold and silver. has a treasure. and the first kings after the Conquest. can seldom draw any considerable aid from his subjects. The quantity of circulating money must have borne the same proportion. The French kings of the Merovingian race had all treasures. Mr Hume frequently takes notice of the inability of the ancient kings of England to carry on. Every Tartar chief. The expense of sending such a quantity of it into a foreign country as might purchase the pay and provisions of an army would be too great. The treasures of Mazepa. for reasons which shall be explained hereafter. or a few manufactures of the coarsest kind. that he generally endeavours to accumulate a treasure.. they divided their treasures too. the famous ally of Charles XII. naturally disposed to the parsimony requisite for accumulation. any foreign war of long duration. The first exploit of 377 . accordingly. Among nations to whom commerce and manufactures are little known. in such a situation. as well as of the rude produce. The maintenance of the people employed in them is kept at home. the expense even of a sovereign is not directed by the vanity which delights in the gaudy finery of a court. Few countries. though vanity almost always does. but is employed in bounty to his tenants. which it does to those transacted at present. produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. In that simple state. The English in those days had nothing wherewithal to purchase the pay and provisions of their armies in foreign countries. or. of which no considerable part could be spared from the home consumption. the transportation was too expensive. therefore.

which may satisfy a part of their wants and increase their enjoyments. It carries out that surplus part of the produce of their land and labour for which there is no demand among them. than of any other particular country. The importation of gold and silver is not the principal. It is. the narrowness of the home market does not hinder the division of labour in any particular branch of art or manufacture from being carried to the highest perfection. as he is generally more employed in supplying the wants. no doubt a part of the business of foreign commerce. is. The sovereigns of improved and commercial countries are not under the same necessity of accumulating treasures. A country which carried on foreign trade merely upon this account. and to augment its annual produce to the utmost. but frequently encroaches upon the funds destined for more necessary expenses. could scarce have occasion to freight a ship in a century. that he saw there much splendour. because they can generally draw from their subjects extraordinary aids upon extraordinary occasions. What Dercyllidas said of the court of Persia. perhaps necessarily. by exchanging them for something else. follow the mode of the times. a most insignificant part of it. as the most essential measure for securing the succession. and many servants. however. though that in which the merchant resides generally derives the greatest. By opening a more extensive market for whatever part of the produce of their labour may exceed the home consumption. but few soldiers. They are likewise less disposed to do so. Between whatever places foreign trade is carried on. To import the gold and silver which may be wanted into the countries which have no mines. The insignificant pageantry of their court becomes every day more brilliant. It is not by the importation of gold and silver that the discovery of 378 . and carrying out the superfluities of his own. and thereby to increase the real revenue and wealth of the society. These great and important services foreign trade is continually occupied in performing to all the different countries between which it is carried on. may be applied to that of several European princes. much less the sole benefit. but little strength. it encourages them to improve its productive power. and brings back in return for it something else for which there is a demand. and the expense of it not only prevents accumulation. and their expense comes to be regulated by the same extravagant vanity which directs that of all the other great proprietors in their dominions. They naturally.The Wealth of Nations every new reign was commonly to seize the treasure of the preceding king. they all of them derive two distinct benefits from it. They all derive great benefit from it. By means of it. It gives a value to their superfluities. which a nation derives from its foreign trade.

for want of a market to take off the greater part of their produce. A service of plate can now be purchased for about a third part of the corn. The productive powers of labour were improved. which in the narrow circle of the ancient commerce could never have taken place. no doubt. or the opposite conveniency. but more than twenty or thirty times the quantity of plate which would have been in it. The savage injustice of the Europeans rendered an event. we must load ourselves with a greater quantity of them. notwith- 379 . which ought to have been beneficial to all. which happened much about the same time.Adam Smith America has enriched Europe. A new set of exchanges. though surely a very trifling one. this inconveniency. not only those who purchased it before can purchase three times their former quantity. With the same annual expense of labour and commodities. than even that of America. which had never been thought of before. Europe can annually purchase about three times the quantity of plate which it could have purchased at that time. even in its present state of improvement. The discovery of a passage to the East Indies by the Cape of Good Hope. gained a real conveniency. perhaps to more than ten. In order to make the same purchases. therefore. or a third part of the labour. where a groat would have done before. Neither the one nor the other could have made any very essential change in the state of Europe. and many of those of America were new to Europe. ruinous and destructive to several of those unfortunate countries. had the discovery of the American mines never been made. which it would have cost in the fifteenth century. as it certainly did to the old continent. and together with it the real revenue and wealth of the inhabitants. not only more than three times. and which should naturally have proved as advantageous to the new. So far Europe has. So that there may be in Europe at present. it gave occasion to new divisions of labour and improvements of art. began to take place. and its produce increased in all the different countries of Europe. The discovery of America. those metals have become cheaper. certainly made a most essential one. perhaps to more than twenty times the former number. But when a commodity comes to be sold for a third part of what bad been its usual price. however. opened perhaps a still more extensive range to foreign commerce. but it is brought down to the level of a much greater number of purchasers. It is difficult to say which is most trifling. By opening a new and inexhaustible market to all the commodities of Europe. The cheapness of gold and silver renders those metals rather less fit for the purposes of money than they were before. and carry about a shilling in our pocket. By the abundance of the American mines. The commodities of Europe were almost all new to America.

in any respect. Swedes. is free to all its subjects. began to encroach upon them. The trade to the East 380 . Indostan. When the Dutch. on account of the great quantities of silver which it every year exports from the countries from which it is carried on. have all followed their example.The Wealth of Nations standing the greater distance. Both the objection and the reply are founded in the popular notion which I have been just now examining. than either Mexico or Peru. in the beginning of the last century. because. The rest were mere savages. but not the particular country from which it was carried on. But the empires of China. The English. No other reason need be assigned why it has never been so advantageous as the trade to America. as well as several others in the East Indies. might indeed tend to impoverish Europe in general. superior to the savages. the exaggerated accounts of the Spanish writers concerning the ancient state of those empires. But rich and civilized nations can always exchange to a much greater value with one another. than with savages and barbarians. between almost every nation of Europe and its own colonies. has hitherto derived much less advantage from its commerce with the East Indies. even though we should credit. There were but two nations in America. by the exportation of a part of the returns to other European countries. plate is probably somewhat dearer in Europe than it otherwise might have been. have excited much envy against them. and Danes. The parties concerned have replied. that the other nations of Europe could either send out or receive any goods from that country. both too insignificant to deserve any part of the public attention. and coined silver probably purchases a larger quantity both of labour and commodities. It is therefore unnecessary to say any thing further about either. however. much richer. what plainly deserves no credit. By the annual exportation of silver to the East Indies. The Portuguese monopolized the East India trade to themselves for about a century. it annually brought home a much greater quantity of that metal than it carried out. so that no great nation of Europe has ever yet had the benefit of a free commerce to the East Indies. the great favour and protection which these have procured them from their respective governments. and through them. they vested their whole East India commerce in an exclusive company. Europe. and more advanced in all arts and manufactures. and it was only indirectly. the latter a very small advantage. their great riches. The former of these two effects is a very small loss. French. which. and these were destroyed almost as soon as discovered. without having richer mines of gold or silver. This envy has frequently represented their trade as altogether pernicious. than from that with America. better cultivated. Japan. that their trade by this continual exportation of silver. in every other respect. The exclusive privileges of those East India companies. were.

The two principles being established. though at the hazard of being tedious. that wealth consisted in gold and silver. Exportation was encouraged sometimes by drawbacks. restraints upon the importation of such foreign goods for home consumption as could be produced at home. must necessarily tend to increase the annual production of European commodities. Money. as I have already observed. in the course of their reasonings. First. that the wealth of a country consists. and sometimes in absolute prohibitions. to take it for granted as a certain and undeniable truth. and consumable goods. it necessarily became the great object of political economy to diminish as much as possible the importation of foreign goods for home consumption. is probably owing to the restraints which it everywhere labours under. and that to multiply those metals is the great object of national industry and commerce. therefore. what comes nearly to the same thing. by opening a market to the commodities of Europe. That it has hitherto increased them so little. and that those metals could be brought into a country which had no mines. frequently signifies wealth.Adam Smith Indies. In the course of their reasonings. Its two great engines for enriching the country. were restraints upon importation. and consumable goods of all different kinds. and. or. from those particular countries with which the balance of trade was supposed to be disadvantageous. seem to slip out of their memory. I thought it necessary. not in its gold and silver only. sometimes by 381 . Those different restraints consisted sometimes in high duties. that even they who are convinced of its absurdity. are very apt to forget their own principles. and consequently the real wealth and revenue of Europe. and this ambiguity of expression has rendered this popular notion so familiar to us. the lands. but in its lands. to examine at full length this popular notion. only by the balance of trade. however. and the strain of their argument frequently supposes that all wealth consists in gold and silver. houses. Secondly. Some of the best English writers upon commerce set out with observing. however. to the gold and silver which is purchased with those commodities. and to increase as much as possible the exportation of the produce of domestic industry. and encouragement to exportation. or by exporting to a greater value than it imported. from whatever country they were imported. restraints upon the importation of goods of almost all kinds. houses. The restraints upon importation were of two kinds. in common language. that wealth consists in money or in gold and silver.

but a monopoly was frequently procured for the goods and merchants of the country which established them. not only particular privileges. and. by turning the balance of trade in its favour.The Wealth of Nations bounties. By advantageous treaties of commerce. When the home manufactures were subject to any duty or excise. in order to be exported again. they must evidently tend either to increase or diminish the real wealth and revenue of the country. The two sorts of restraints upon importation above mentioned. Bounties were given for the encouragement. beyond what were granted to those of other countries. or of such sorts of industry of other kinds as were supposed to deserve particular favour. By the establishment of colonies in distant countries. and sometimes by the establishment of colonies in distant countries. together with these four encouragements to exportation. either the whole or a part of it was frequently drawn back upon their exportation. I shall examine chiefly what are likely to be the effects of each of them upon the annual produce of its industry. 382 . and when foreign goods liable to a duty were imported. particular privileges were procured in some foreign state for the goods and merchants of the country. sometimes by advantageous treaties of commerce with foreign states. without taking much farther notice of their supposed tendency to bring money into the country. I shall consider each of them in a particular chapter. constitute the six principal means by which the commercial system proposes to increase the quantity of gold and silver in any country. either of some beginning manufactures. According as they tend either to increase or diminish the value of this annual produce. either the whole or a part of this duty was sometimes given back upon such exportation. Drawbacks were given upon two different occasions.

or to give it the most advantageous direction. and frequently turns towards that employment a greater share of both the labour and stock of the society than would otherwise have gone to it. The linen manufacture has not yet obtained it. As the number of workmen that can be kept in 383 . either by high duties. has lately obtained the same advantage. either absolutely. greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs. in the same manner obtained in Great Britain. the importation of such goods from foreign countries as can be produced at home. a monopoly against their countrymen. Many other sorts of manufactures have. is not. give a like advantage to the growers of that commodity.Adam Smith CHAPTER II OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME BY RESTRAINING. or under certain circumstances. The variety of goods. or by absolute prohibitions. Thus the prohibition of importing either live cattle or salt prov