AN INQUIRY INTO THE NATURE AND CAUSES OF

THE WEALTH OF NATIONS
by

Adam Smith
A PENN STATE ELECTRONIC CLASSICS SERIES PUBLICATION

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Contents
INTRODUCTION AND PLAN OF THE WORK .......................................................................... 8 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. .......... 10 CHAPTER I OF THE DIVISION OF LABOUR ......................................................................... 10 CHAPTER II OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR ..................................................................................................................................... 18 CHAPTER III THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET ........................................................................................................................... 21 CHAPTER IV OF THE ORIGIN AND USE OF MONEY .......................................................... 25 CHAPTER V OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY ....................................................... 31 CHAPTER VI OF THE COMPONENT PART OF THE PRICE OF COMMODITIES ......... 45 CHAPTER VII OF THE NATURAL AND MARKET PRICE OF COMMODITIES.............. 51 CHAPTER VIII OF THE WAGES OF LABOUR ........................................................................ 58 CHAPTER IX OF THE PROFITS OF STOCK ........................................................................... 77 CHAPTER X OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK ............................................................................................................. 86 CHAPTER XI OF THE RENT OF LAND .................................................................................. 124

BOOK II OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK ... 222
INTRODUCTION ......................................................................................................................... 222 CHAPTER I OF THE DIVISION OF STOCK .......................................................................... 224 CHAPTER II OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL ............................................................................................................ 230 CHAPTER III OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR ................................................................................................. 270 CHAPTER IV OF STOCK LENT AT INTEREST .................................................................... 286 CHAPTER V OF THE DIFFERENT EMPLOYMENTS OF CAPITALS .............................. 293 BOOK III OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS ........................................................................................................................................ 307 CHAPTER I OF THE NATURAL PROGRESS OF OPULENCE ........................................... 307 CHAPTER II OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE............................311 CHAPTER III OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE ......................................................................................... 321 CHAPTER IV HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY ..................................................................................... 330 BOOK IV OF SYSTEMS OF POLITICAL ECONOMY ...................................................... 341 CHAPTER I OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM 342

CHAPTER II OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME .................................................. 361 CHAPTER III 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 ....................................... 378
Part I — Of the Unreasonableness of those Restraints, even upon the-Principles of the Commercial System. ............... 378 PART II. — Of the Unreasonableness of those extraordinary Restraints, upon other Principles. ................................... 391

CHAPTER IV OF DRAWBACKS ............................................................................................... 400 CHAPTER V OF BOUNTIES ...................................................................................................... 405 CHAPTER VI OF TREATIES OF COMMERCE ..................................................................... 437 CHAPTER VII OF COLONIES .................................................................................................. 447 CHAPTER VIII CONCLUSION OF THE MERCANTILE SYSTEM ................................... 522 CHAPTER IX 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 ................................................................................................................. 539 APPENDIX TO BOOK IV .................................................................,.........................................562 BOOK V OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH ............... 564 CHAPTER I OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH ........ 564
PART I Of the Expense of Defence .......................................................................................................................................... 564 PART II Of the Expense of Justice ......................................................................................................................................... 579 PART III Of the Expense of public Works and public Institutions....................................................................................... 590 PART IV Of the Expense of supporting the Dignity of the Sovereign .................................................................................. 666 CONCLUSION .......................................................................................................................................................................... 667

CHAPTER II OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY .................................................................................................................................. 668
PART I Of the Funds, or Sources, of Revenue, which may peculiarly belong to the Sovereign or Commonwealth ....... 668 PART II Of Taxes ...................................................................................................................................................................... 676

CHAPTER III OF PUBLIC DEBTS ........................................................................................... 749

The Wealth of Nations

AN INQUIRY INTO THE NATURE AND CAUSES OF

According, therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion. But this proportion must in every nation be regulated by two different circumstances: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances. The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life, for himself, and such of his family or tribe as are either too old, or too young, or too infirm, to go ahunting 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,

THE WEALTH OF NATIONS
by

Adam Smith
INTRODUCTION PLAN INTRODUCTION AND PLAN OF THE WORK

T

of every nation is the fund which originally supplies it with all the necessaries and
HE ANNUAL LABOUR

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.

8

Adam Smith
and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire. The causes of this improvement in the productive powers of labour, and the order according to which its produce is naturally distributed among the different ranks and conditions of men in the society, make the subject of the first book of this Inquiry. Whatever be the actual state of the skill, dexterity, and judgment, with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed. Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed very different plans in the general conduct or direction of it; and those plans have not all been equally favourable to the greatness of its produce. The policy of some nations has given extraordinary encouragement to the industry of the country; that of others to the industry of towns. Scarce any nation has dealt equally and impartially with every sort of industry. Since the down-fall of the Roman empire, the policy of Europe has been more favourable to arts, manufactures, and commerce, the industry of towns, than to agriculture, the Industry of the country. The circumstances which seem to have introduced and established this policy are explained in the third book. Though those different plans were, perhaps, first introduced by the private interests and prejudices of particular orders of men, without any regard to, or foresight of, their consequences upon the general welfare of the society; yet they have given occasion to very different theories of political economy; of which some magnify the importance of that industry which is carried on in towns, others of that which is carried on in the country. Those theories have had a

9

The Wealth of Nations
considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states. I have endeavoured, in the fourth book, to explain as fully and distinctly as I can those different theories, and the principal effects which they have produced in different ages and nations. To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds, which, in different ages and nations, have supplied their annual consumption, is the object of these four first books. The fifth and last book treats of the revenue of the sovereign, or commonwealth. In this book I have endeavoured to shew, first, what are the necessary expenses of the sovereign, or commonwealth; which of those expenses ought to be defrayed by the general contribution of the whole society, and which of them, by that of some particular part only, or of some particular members of it: secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society, and what are the principal advantages and inconveniencies of each of those methods; and, thirdly and lastly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts; and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society.

BOOK I
CAUSES IMPRO OF THE CAUSES OF IMPROVEMENT IN PRODUCTIVE POWERS THE PRODUCTIVE POWERS OF ACL ABOUR, AND OF THE ORDER ACITS PRODUCE CORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG NATURALL DISTRIBUTED TURALLY THE DIFFERENT RANKS OF THE PEOPLE. CHAPTER I LABOUR OF THE DIVISION OF LABOUR

plied, 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

T

HE 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 ap-

10

Adam Smith
importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator. In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts, than in those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed. To take an example, therefore, from a very trifling manufacture, but one in which the division of labour has been very often taken notice of, the trade of a pin-maker: a workman not educated to this business (which the division of labour has rendered a distinct trade, nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind, where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all

11

The Wealth of Nations
wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth, part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations. In every other art and manufacture, the effects of the division of labour are similar to what they are in this very trifling one, though, in many of them, the labour can neither be so much subdivided, nor reduced to so great a simplicity of operation. The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. The separation of different trades and employments from one another, seems to have taken place in consequence of this advantage. This separation, too, is generally carried furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man, in a rude state of society, being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labour, too, which is necessary to produce any one complete manufacture, is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the, weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour, in this art, does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expense bestowed

12

Adam Smith
upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive, as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn-provinces, fully as good, and in most years nearly about the same price with the corn of England, though, in opulence and improvement, France is perhaps inferior to England. The cornlands 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

13

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

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Adam Smith
fore, that the invention of all those machines by which labour is so much facilitated and abridged, seems to have been originally owing to the division of labour. Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things. But, in consequence of the division of labour, the whole of every man’s attention comes naturally to be directed towards some one very simple object. It is naturally to be expected, therefore, that some one or other of those who are employed in each particular branch of labour should soon find out easier and readier methods of performing their own particular work, whenever the nature of it admits of such improvement. A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the invention of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, must frequently have been shewn very pretty machines, which were the inventions of such workmen, in order to facilitate and quicken their own particular part of the work. In the first fire engines {this was the current designation for steam engines}, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour. All the improvements in machinery, however, have by no means been the inventions of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade; and some by that of those who are called philosophers, or men of speculation, whose trade it is not to do any thing, but to observe every thing, and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects in the progress of society, philosophy or speculation becomes, like every other employment, the principal or sole trade and occupation of a particular class of citizens. Like every other employment, too, it is subdivided into a great number of different branches, each of which affords occupa-

15

which occasions. the bricklayer. The miner. and a general plenty diffuses itself through all the different ranks of the society. though but a small part. Observe the accommodation of the most common artificer or daylabourer in a civilized and thriving country. which often come from the remotest corners of the world? What a variety of labour. must all join their different arts in order to complete even this homely production. what comes to the same thing. has been employed in procuring him this accommodation. and every other workman being exactly in the same situation. too. the forger. the sorter of the wool. the spinner. 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 dyer. the brickmaker. as well as in every other business. or even the loom of the weaver. sail-makers. he is enabled to exchange a great quantity of his own goods for a great quantity or. the burner of the charcoal to be made use of in the smeltinghouse. the builder of the furnace for smelting the ore the feller of the timber. how many ship-builders. improve dexterity. The woollen coat. the millwright. is the produce of the joint labour of a great multitude of workmen. in a well-governed society. and this subdivision of employment in philosophy. He supplies them abundantly with what they have occasion for. the smith. the workmen who attend the furnace. of whose industry a part. as coarse and rough as it may appear. must all of them join their different arts in order to produce them. Each individual becomes more expert in his own peculiar branch. and you will perceive that the number of people. rope-makers. 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 saves time. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for. for the price of a great quantity of theirs. must have been employed in order to bring together the different drugs made use of by the dyer. the wool-comber or carder. the fuller. The shepherd. exceeds all computation. the mill of the fuller. the scribbler. and the quantity of science is considerably increased by it. the dresser. let us consider only what a variety of labour is requisite in order to form that very simple machine. in consequence of the division of labour. sailors. It is the great multiplication of the productions of all the different arts. the shears with which the shepherd clips the wool. which covers the day-labourer. and they accommodate him as amply with what he has occasion for. more work is done upon the whole. the weaver. besides. Were we to 16 . for example. that universal opulence which extends itself to the lowest ranks of the people. How many merchants and carriers.The Wealth of Nations tion to a peculiar tribe or class of philosophers. with many others.

and yet it may be true. the absolute masters of the lives and liberties of ten thousand naked savages. the kitchen-grate at which he prepares his victuals. indeed. the coarse linen shirt which he wears next his skin. what we very falsely imagine. the earthen or pewter plates upon which he serves up and divides his victuals. the glass window which lets in the heat and the light. if we examine. 17 . the different hands employed in preparing his bread and his beer. and brought to him. as the accommodation of the latter exceeds that of many an African king. I say. by a long sea and a long land-carriage. in the same manner. and consider what a variety of labour is employed about each of them. dug from the bowels of the earth. perhaps. without which these northern parts of the world could scarce have afforded a very comfortable habitation. that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant. the very meanest person in a civilized country could not be provided. the bed which he lies on. perhaps. all the furniture of his table. his accommodation must no doubt appear extremely simple and easy. and all the different parts which compose it. the knives and forks. together with the tools of all the different workmen employed in producing those different conveniencies. without the assistance and co-operation of many thousands.Adam Smith examine. the easy and simple manner in which he is commonly accommodated. we shall be sensible that. with all the knowledge and art requisite for preparing that beautiful and happy invention. Compared. the coals which he makes use of for that purpose. even according to. all the other utensils of his kitchen. all the different parts of his dress and household furniture. with the more extravagant luxury of the great. all these things. the shoes which cover his feet. and keeps out the wind and the rain.

it be the necessary consequence of the faculties of reason and speech. It is the necessary. which has in view no such extensive utility. endeavours by every servile and fawning attention to obtain their good will. have sometimes the appearance of acting in some sort of concert. however. that yours. is entirely independent. Whether this propensity be one of those original principles in human nature. as seems more probable. Nobody ever saw one animal. the propensity to truck. each individual. though very slow and gradual. I am willing to give this for that. in running down the same hare. A puppy fawns upon its dam. He will be more likely to prevail if he can 18 . This. but to gain the favour of those whose service it requires. is not the effect of any contract. but of the acci- dental concurrence of their passions in the same object at that particular time. and it is in vain for him to expect it from their benevolence only. or whether. and a spaniel endeavours. barter. In civilized society he stands at all times in need of the co-operation and assistance of great multitudes. and to be found in no other race of animals. Each turns her towards his companion. however. and when he has no other means of engaging them to act according to his inclinations. it has no other means of persuasion. or of another animal. to do this upon every occasion. when it wants to be fed by him. this is mine. consequence of a certain propensity in human nature.The Wealth of Nations CHAPTER II OF THE PRINCIPLE WHICH GIVES OCLABOUR CASION TO THE DIVISION OF LABOUR THIS DIVISION OF LABOUR. Two greyhounds. It is common to all men. or endeavours to intercept her when his companion turns her towards himself. Man sometimes uses the same arts with his brethren. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. to engage the attention of its master who is at dinner. which seem to know neither this nor any other species of contracts. by its gestures and natural cries signify to another. and exchange one thing for another. it belongs not to our present subject to inquire. when it is grown up to maturity. of which no further account can be given. from which so many advantages are derived. In almost every other race of animals. is not originally the effect of any human wisdom. and in its natural state has occasion for the assistance of no other living creature. When an animal wants to obtain something either of a man. But man has almost constant occasion for the help of his brethren. by a thousand attractions. while his whole life is scarce sufficient to gain the friendship of a few persons. He has not time. which foresees and intends that general opulence to which it gives occasion.

for such parts of the produce of other 19 . the making of bows and arrows grows to be his chief business. for example. but from their regard to their own interest. and by purchase. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. The old clothes which another bestows upon him he exchanges for other clothes which suit him better. He frequently exchanges them for cattle or for venison. so it is this same trucking disposition which originally gives occasion to the division of labour. and never talk to them of our own necessities. a particular person makes bows and arrows. and shew them that it is for their own advantage to do for him what he requires of them. that we obtain from one another the greater part of those mutual good offices which we stand in need of. But though this principle ultimately provides him with all the necessaries of life which he has occasion for. or for food. get more cattle and venison.Adam Smith interest their self-love in his favour. clothes. as he has occasion. In a tribe of hunters or shepherds. indeed. it neither does nor can provide him with them as he has occasion for them. by barter. The charity of well-disposed people. supplies him with the whole fund of his subsistence. or lodging. 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. We address ourselves. It is not from the benevolence of the butcher the brewer. by barter. by treaty. but to their self-love. or for money. Whoever offers to another a bargain of any kind. but of their advantages. with more readiness and dexterity than any other. Give me that which I want. or for lodging. who reward him in the same manner with cattle and with venison. with which he can buy either food. in this manner. and to become a sort of house-carpenter. And thus the certainty of being able to exchange all that surplus part of the produce of his own labour. As it is by treaty. proposes to do this. which is over and above his own consumption. till at last he finds it his interest to dedicate himself entirely to this employment. With the money which one man gives him he purchases food. is the meaning of every such offer. a tanner or dresser of hides or skins. and by purchase. the principal part of the clothing of savages. From a regard to his own interest. Another excels in making the frames and covers of their little huts or moveable houses. Even a beggar does not depend upon it entirely. than if he himself went to the field to catch them. The greater part of his occasional wants are supplied in the same manner as those of other people. and he finds at last that he can. with his companions. He is accustomed to be of use in this way to his neighbours. a fourth. and you shall have this which you want. and he becomes a sort of armourer. not to their humanity. or the baker that we expect our dinner. therefore. In the same manner a third becomes a smith or a brazier.

acknowledged to be all of the same species. or a grey-hound from a spaniel. very much alike. is not upon many occasions so much the cause. and education. encourages every man to apply himself to a particular occupation. custom. Among men.The Wealth of Nations men’s labour as he may have occasion for. seems to arise not so much from nature. much less than we are aware of. as a mastiff is from a grey-hound. By nature a philosopher is not in genius and disposition half so different from a street porter. The difference of natural talents in different men. and the same work to do. The difference between the most dissimilar characters. on the contrary. The strength of the mastiff is not in the least supported either by the swiftness of the greyhound. and to cultivate and bring to perfection whatever talent of genius he may possess for that particular species of business. for want of the power or disposition to barter and exchange. than what. or soon after. barter. when grown up to maturity. derive from nature a much more remarkable distinction of genius. and there could have been no such difference of employment as could alone give occasion to any great difference of talents. is. as the effect of the division of labour. perhaps. they come to be employed in very different occupations. till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. and widens by degrees. Those different tribes of animals. Each animal is still obliged to support and defend itself. and derives no sort of advantage from that variety of talents with which nature has distinguished its fellows. cannot be brought into a common stock. But without the disposition to truck. and exchange. for example. and for the first six or eight years of their existence. between a philosopher and a common street porter. About that age. or by the docility of the shepherd’s dog. every man must have procured to himself every necessary and conveniency of life which he wanted. as from habit. and neither their parents nor playfellows could perceive any remarkable difference. The effects of those different geniuses and talents. The difference of talents comes then to be taken notice of. though all of the same species are of scarce any use to one another. When they came in to the world. As it is this disposition which forms that difference of talents. antecedent to custom and education. so it is this same disposition which renders that difference useful. or by the sagacity of the spaniel. or this last from a shepherd’s dog. they were. Many tribes of animals. and do not in the least contribute to the better accommodation and conveniency of the species. All must have had the same duties to perform. separately and independently. so remarkable among men of different professions. the most dissimilar ge- 20 . and the very different genius which appears to distinguish men of different professions. appears to take place among men. however. in reality.

baker. When the market is very small. and exchange. There are some sorts of industry. A porter. being brought. even an ordinary market-town is scarce large enough to afford him constant occupation.Adam Smith niuses are of use to one another. where every man may purchase whatever part of the produce of other men’s talents he has occasion for. no person can have any encouragement to dedicate himself entirely to one employment. AS IT IS THE POWER of exchanging that gives occasion to the division of labour. for want of the power to exchange all that surplus part of the produce of his own labour. can find employment and subsistence in no other place. In the lone houses and very small villages which are scattered about in so desert a country as the highlands of Scotland. so the extent of this division must always be limited by the extent of that power. barter. for his own family. by the general disposition to truck. by the extent of the market. a CHAPTER III THAT LABOUR THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET 21 . and brewer. as it were. for example. In such situations we can scarce expect to find even a smith. every farmer must be butcher. the different produces of their respective talents. or. A village is by much too narrow a sphere for him. which can be carried on nowhere but in a great town. into a common stock. for such parts of the produce of other men’s labour as he has occasion for. even of the lowest kind. in other words. which is over and above his own consumption.

The employments of the latter are still more various. As by means of water-carriage. and three hundred working days in the year. of one day’s work in the year. attended by two men. In about the same time a ship navigated by six or eight men. as well as of fifty great waggons. in more populous countries. that industry of every kind naturally begins to subdivide and improve itself. and drawn by eight horses. the same quantity of goods between London and Edinburgh as fifty broad-wheeled waggons. Were there no other communication between those two 22 . a more extensive market is opened to every sort of industry than what land-carriage alone can afford it. a cabinet-maker. for which. Upon two hundred tons of goods. that is. The scattered families that live at eight or ten miles distance from the nearest of them. upon the same quantity of goods carried by water. as well as a wheel-wright. in about six weeks time. It is impossible there should be such a trade as even that of a nailer in the remote and inland parts of the highlands of Scotland. therefore. carried by the cheapest land-carriage from London to Edinburgh. A country carpenter deals in every sort of work that is made of wood. and even a carver in wood. therefore. a plough-wright. within less than twenty miles of another of the same trade. must learn to perform themselves a great number of little pieces of work. a cart and waggon-maker. so it is upon the sea-coast. Such a workman at the rate of a thousand nails a-day. frequently carries and brings back two hundred ton weight of goods. or a mason. there is to be charged only the maintenance of six or eight men. attended by a hundred men. by the help of water-carriage. a country smith in every sort of work that is made of iron. but a joiner. A broad-wheeled waggon.The Wealth of Nations carpenter. can carry and bring back. will make three hundred thousand nails in the year. But in such a situation it would be impossible to dispose of one thousand. and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. carries and brings back between London and Edinburgh near four ton weight of goods. and the wear and tear of a ship of two hundred tons burthen. and along the banks of navigable rivers. in the same time. The former is not only a carpenter. and sailing between the ports of London and Leith. they would call in the assistance of those workmen. Whereas. 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. together with the value of the superior risk. and both the maintenance and what is nearly equal to maintenance the wear and tear of four hundred horses. and drawn by four hundred horses. Six or eight men. or the difference of the insurance between land and watercarriage. there must be charged the maintenance of a hundred men for three weeks.

and from the imperfection of the art of ship-building. having no tides. give a good deal of encouragement to each other’s industry. in the ancient world. That sea. the most skilful navigators and 23 . and by mutually affording a market. therefore. long considered as a most wonderful and dangerous exploit of navigation. to sail out of the straits of Gibraltar. and the proximity of its neighbouring shores. 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. 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. but the country which lies round about them. The inland parts of the country can for a long time have no other market for the greater part of their goods. nor consequently any waves. they could carry on but a small part of that commerce which at present subsists between them. except such as are caused by the wind only. according to the best authenticated history. when. and the great navigable rivers. men were afraid to quit the view of the coast. In our North American colonies. to abandon themselves to the boisterous waves of the ocean. was. was. There could be little or no commerce of any kind between the distant parts of the world. by far the greatest inlet that is known in the world. It was late before even the Phoenicians and Carthaginians. therefore. and have scarce anywhere extended themselves to any considerable distance from both. however. as no goods could be transported from the one to the other. extremely favourable to the infant navigation of the world. appear to have been first civilized. with what safety could they be transported through the territories of so many barbarous nations? Those two cities. To pass beyond the pillars of Hercules. and separates them from the sea-coast. but by land-carriage. and consequently their improvement must always be posterior to the improvement of that country. at present carry on a very considerable commerce with each other. are the advantages of water-carriage. the plantations have constantly followed either the sea-coast or the banks of the navigable rivers.Adam Smith places. must for a long time be in proportion to the riches and populousness of that country. and consequently could give but a small part of that encouragement which they at present mutually afford to each other’s industry. that is. by the smoothness of its surface. from their ignorance of the compass. and that they should always be much later in extending themselves into the inland parts of the country. The extent of the market. therefore. The nations that. as well as by the multitude of its islands. were those that dwelt round the coast of the Mediterranean sea. except such whose price was very considerable in proportion to their weight.

perhaps. and they were. the Mediterranean and Euxine seas in both Europe and Asia. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt. to have been in the same barbarous and uncivilized state in which we find them at present. and the gulfs of Arabia. than both of them put together. too. The commerce. which admits of no navigation. for a long time. a multitude of canals. and in some of the eastern provinces of China. and Siam.The Wealth of Nations ship-builders of those old times. are well assured. and. In Bengal. they are at too great a distance from one another to carry commerce and communication through the greater part of it. The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal. It is remarkable. India. with the assistance of a little art. in all ages of the world. in this part of the world. Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. seem. though the great extent of this antiquity is not authenticated by any histories of whose authority we. but seem all to have derived their great opulence from this inland navigation. and several other great rivers. not only between all the great towns. in Asia. Bengal. and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. the ancient Scythia. and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas. afford an inland navigation much more extensive than that either of the Nile or the Ganges. All the inland parts of Africa. which. by communicating with one another. that great river breaks itself into many different canals. such as the Baltic and Adriatic seas in Europe. In the eastern provinces of China. the modern Tartary and Siberia. to carry maritime commerce into the interior parts of that great continent. attempted it. or. There are in Africa none of those great inlets. the only nations that did attempt it. and even to many farm-houses in the country. several great rivers form. that neither the ancient Egyptians. Of all the countries on the coast of the Mediterranean sea. the Ganges. Upper Egypt extends itself nowhere above a few miles from the Nile. nearly in the same manner as the Rhine and the Maese do in Holland at present. in the same manner as the Nile does in Egypt. nor the Indians. and though some of the greatest rivers in the world run through that country. which any nation can carry on by means of a river which does not break itself into any 24 . form a great number of navigable canals. nor the Chinese. in the East Indies. but between all the considerable villages. encouraged foreign commerce. The sea of Tartary is the frozen ocean. by their different branches. seem to have afforded a communication by water-carriage. besides. and in Lower Egypt. Persia.

till it falls into the Black sea. and the brewer and the baker would each of them be willing to 25 .Adam Smith great number of branches or canals. this power of exchanging must frequently have been very much clogged and embarrassed in its operations. if any of them possessed the whole of its course. for such parts of the produce of other men’s labour as he has occasion for. and the latter to purchase. and which runs into another territory before it reaches the sea. One man. has more of a certain commodity than he himself has occasion for. consequently. But when the division of labour first began to take place. would be glad to dispose of. and Hungary. CHAPTER IV MONEY OF THE ORIGIN AND USE OF MONEY WHEN THE DIVISION OF LABOUR has been once thoroughly established. Austria. and the society itself grows to be what is properly a commercial society. it is but a very small part of a man’s wants which the produce of his own labour can supply. can never be very considerable. The navigation of the Danube is of very little use to the different states of Bavaria. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour. or becomes. no exchange can be made between them. The butcher has more meat in his shop than he himself can consume. in comparison of what it would be. we shall suppose. 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. a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of. The former. while another has less. a merchant. in some measure. Every man thus lives by exchanging. which is over and above his own consumption.

of two or three oxen. in old times. he had metals to give in 26 . as by fusion those parts can easily be re-united again. besides the peculiar produce of his own industry. Salt is said to be the common instrument of commerce and exchanges in Abyssinia. scarce any thing being less perishable than they are. a quality which no other equally durable commodities possess. except the different productions of their respective trades. though they must have been a most inconvenient one. men seem at last to have been determined by irresistible reasons to give the preference. for a workman to carry nails instead of money to the baker’s shop or the ale-house. but that of Glaucus cost a hundred oxen. for this employment. he must. But they have nothing to offer in exchange. at a time. He cannot be their merchant. must naturally have endeavoured to manage his affairs in such a manner. for the same reasons. and they are all of them thus mutually less serviceable to one another. a certain quantity of some one commodity or other. renders them fit to be the instruments of commerce and circulation. were successively both thought of and employed for this purpose. and which. to metals above every other commodity. we find things were frequently valued according to the number of cattle which had been given in exchange for them. more than any other quality. I am told. or of two or three sheep. Many different commodities. to wit. The man who wanted to buy salt. instead of sheep or oxen. Metals can not only be kept with as little loss as any other commodity. In the rude ages of society. because what he was to give for it could seldom be divided without loss. tobacco in Virginia. a species of shells in some parts of the coast of India. says Homer. If. must have been obliged to buy salt to the value of a whole ox. be divided into any number of parts. and there is at this day a village In Scotland. yet. cattle are said to have been the common instrument of commerce. hides or dressed leather in some other countries. and if he had a mind to buy more. and the butcher is already provided with all the bread and beer which he has immediate occasion for. every prudent man in every period of society. on the contrary. be made between them. in this case. however. where it is not uncommon. cost only nine oxen. after the first establishment of the division of labour. such as he imagined few people would be likely to refuse in exchange for the produce of their industry. In order to avoid the inconveniency of such situations. sugar in some of our West India colonies. as to have at all times by him. but they can likewise. have been obliged to buy double or triple the quantity. and had nothing but cattle to give in exchange for it. dried cod at Newfoundland. In all countries. The armour of Diomede. or a whole sheep. it is probable. the value. and. He could seldom buy less than this. without any loss. No exchange can.The Wealth of Nations purchase a part of it. nor they his customers. for example.

To prevent such abuses. even the business of weighing. in exchange for their goods. Hence the origin of coined money. 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. and of those public offices called mints. 33. These rude bars. however. without any stamp or coinage. 3). in particular. might receive. however. The operation of assaying is still more difficult. he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for. performed at this time the function of money. with that of assaying them. an adulterated composition of the coarsest and cheapest materials. in their outward appearance. or pure copper. no doubt. with proper exactness. he was obliged to weigh the farthing. Those metals seem originally to have been made use of for this purpose in rude bars. Thus we are told by Pliny (Plin. lib. Hist Nat. the Romans had no coined money. which had. The use of metals in this rude state was attended with two very considerable inconveniences. requires at least very accurate weights and scales. still more tedious. with the trouble of weighing. by means of a 27 . Iron was the common instrument of commerce among the ancient Spartans. copper among the ancient Romans. therefore. unless a part of the metal is fairly melted in the crucible. to affix a public stamp upon certain quantities of such particular metals. indeed. with proper dissolvents. that. as were in those countries commonly made use of to purchase goods. institutions exactly of the same nature with those of the aulnagers and stamp-masters of woollen and linen cloth. and. cap. unless they went through this tedious and difficult operation. Different metals have been made use of by different nations for this purpose. and gold and silver among all rich and commercial nations. till the time of Servius Tullius. Before the institution of coined money. any conclusion that can be drawn from it is extremely uncertain. it has been found necessary. and instead of a pound weight of pure silver. but made use of unstamped bars of copper. and thereby to encourage all sorts of industry and commerce. upon the authority of Timaeus. is an operation of some nicety In the coarser metals. an ancient historian. In the precious metals. less accuracy would. been made to resemble those metals. where a small difference in the quantity makes a great difference in the value. first. All of them are equally meant to ascertain. be necessary. to purchase whatever they had occasion for. in all countries that have made any considerable advances towards improvement. and secondly. The weighing of gold. where a small error would be of little consequence. people must always have been liable to the grossest frauds and impositions. to facilitate exchanges.Adam Smith exchange for it.

in the time of Charlemagne. who first coined money at Rome. from the time of Alexander the First to that of Robert Bruce. or the Spanish mark which is sometimes affixed to ingots of gold. Abraham weighs to Ephron the four hundred shekels of silver which he had agreed to pay for the field of Machpelah. that is. in the same manner as our Troyes pound. however. of silver of a known fineness. It was divided. seem in many cases to have been intended to ascertain. The English pound sterling. contained a pound. in the same manner as ingots of gold and bars of silver are at present. of which the stamp. received at the exchequer. was for a long time. gave occasion to the institution of coins. however. contained all of them originally a real penny-weight of silver. by weight. in victuals and provisions of all sorts. too. what it was both most difficult and most important to ascertain. The fair of Troyes in Champaign was at that time frequented by all the nations of Europe. This money. the quantity and uniform goodness of those different commodities when brought to market. and yet are received by weight. The French livre contained. The Scots money pound contained. but the weight of the metal. therefore. The revenues of the ancient Saxon kings of England are said to have been paid. but in kind. into twelve ounces. the Roman as or pondo contained a Roman pound of good copper. and which. The denominations of those coins seem originally to have expressed the weight or quantity of metal contained in them. to be the current money of the merchant. ascertains the fineness. but not the weight of the metal. each of which contained a real ounce of good copper. This last was not introduced into the mint of England till the 18th of Henry the VIII. and something less than the Troyes pound. covering entirely both sides of the piece. and not by tale. and the weights and measures of so famous a market were generally known and esteemed. Troyes weight. being struck only upon one side of the piece.The Wealth of Nations public stamp. as at present. and to have resembled the sterling mark which is at present affixed to plate and bars of silver. William the Conqueror introduced the custom of paying them in money. a pound. the goodness or fineness of the metal. The inconveniency and difficulty of weighing those metals with exactness. a pound of silver of the same weight and fineness with the English pound sterling. The first public stamps of this kind that were affixed to the current metals. were received by tale. not in money. They are said. Tower weight. the twentieth 28 . in the time of Edward I. without the trouble of weighing. Such coins. and sometimes the edges too. English. In the time of Servius Tullius. of silver of a known fineness. and not covering the whole surface. was supposed to ascertain not only the fineness. and not by tale. French. The Tower pound seems to have been something more than the Roman pound. and Scots pennies.

and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old. The shilling. the Scots pound and penny about a thirty-sixth. the universal instrument of commerce. By means of those operations. though the value of each has been very different. by the intervention of which goods of all kinds are bought and sold. a shilling appears at one time to have contained only five pennies. The proportion. and. and forty pennies. too. which had been originally contained in their coins. in the latter ages of the republic. and have sometimes produced a greater and more universal revolution in the fortunes of private persons. and the two hundred-and-fortieth part of a pound. the ancient Franks. “then wastel bread of a farthing shall weigh eleven shillings and fourpence”. than could have been occasioned by a very great public calamity. in all civilized nations. seems originally to have been the denomination of a weight. The Roman as. and the penny. have by degrees diminished the real quantity of metal. or for one another. have always proved favourable to the debtor. and either the penny on the one hand. between the shilling. I believe. and it is not improbable that it may have been as variable among them as among their neighbours. in appearance. however. From the time of Charlemagne among the French. twelve. What are the rules which men naturally observe. I shall now proceed to 29 . It is in this manner that money has become. The English pound and penny contain at present about a third only. It was indeed in appearance only. the proportion between the pound. and ruinous to the creditor. for their creditors were really defrauded of a part of what was due to them. therefore. seems not to have been so constant and uniform as that between the penny and the pound. During the first race of the kings of France. the avarice and injustice of princes and sovereign states. the French sou or shilling appears upon different occasions to have contained five. was reduced to the twenty-fourth part of its original value. abusing the confidence of their subjects. Among the ancient Saxons. instead of weighing a pound.” says an ancient statute of Henry III. “When wheat is at twelve shillings the quarter. twenty. All other debtors in the state were allowed the same privilege. seems to have been uniformly the same as at present. for in every country of the world. came to weigh only half an ounce.Adam Smith part of an ounce. in exchanging them either for money. or the pound on the other. or exchanged for one another. and from that of William the Conqueror among the English. to pay their debts and fulfil their engagements with a smaller quantity of silver than would otherwise have been requisite. Such operations. the princes and sovereign states which performed them were enabled. and the French pound and penny about a sixty-sixth part of their original value. the shilling.

their natural or ordinary rate. from coinciding exactly with what may be called their natural price. perhaps. and. These rules determine what may be called the relative or exchangeable value of goods. has scarce any value in use. but it will purchase scarce any thing. In order to investigate the principles which regulate the exchangeable value of commodities. I shall endeavour to shew. in its own nature extremely abstracted. after taking the utmost pains that I can to be perspicuous. some obscurity may still appear to remain upon a subject. those three subjects in the three following chapters. 30 . The one may be called ‘value in use. has two different meanings. ‘value in exchange. and sometimes sink them below. I am always willing to run some hazard of being tedious. I shall endeavour to explain.’ the other. those which have the greatest value in exchange have frequently little or no value in use. what is the real measure of this exchangeable value. as fully and distinctly as I can. after the fullest explication which I am capable of giving it. First. Secondly. on the contrary. and sometimes the power of purchasing other goods which the possession of that object conveys. And. or. for which I must very earnestly entreat both the patience and attention of the reader: his patience. lastly. in order to examine a detail which may. in some places. what are the different parts of which this real price is composed or made up. scarce any thing can be had in exchange for it.’ The things which have the greatest value in use have frequently little or no value in exchange. appear still in some degree obscure. the actual price of commodities. that is. appear unnecessarily tedious. what are the causes which sometimes hinder the market price. and sometimes expresses the utility of some particular object. but a very great quantity of other goods may frequently be had in exchange for it. in order to understand what may perhaps. it is to be observed.The Wealth of Nations examine. in order to be sure that I am perspicuous. what are the different circumstances which sometimes raise some or all of these different parts of price above. A diamond. on the contrary. or wherein consists the real price of all commodities. and. and his attention. The word VALUE. Nothing is more useful than water.

conveniencies. is equal to the quantity of labour which it enables him to purchase or command. and he must be rich or poor according to the quantity of that labour which he can command. it is but a very small part of these with which a man’s own labour can supply him. That money. OR OF THEIR PRICE IN MONEY L ABOUR. His fortune may. It was not by gold or by silver. What every thing is really worth to the man who has acquired it and who wants to dispose of it. is power. or which he can afford to purchase. as much as what we acquire by the toil of our own body. Wealth. that all the wealth of the world was originally purchased. The far greater part of them he must derive from the labour of other people. but to exchange it for other commodities. or with goods. The value of any commodity. perhaps. to those who possess it. the original purchase money that was paid for all things. what every thing really costs to the man who wants to acquire it. is the toil and trouble of acquiring it. save us this toil. is purchased by labour. What is bought with money. His fortune is greater or less. and which it can impose upon other people. is the toil and trouble which it can save to himself. or those goods. Labour was the first price. Labour therefore. The real price of every thing. as Mr Hobbes says. either civil or military. The power which that possession immediately and directly conveys to him. But after the division of labour has once thoroughly taken place. but the mere possession of that fortune does not necessarily convey to him either. They contain the value of a certain quantity of labour. indeed. or exchange it for something else. AND THEIR PRICE IN MONEY EVERY MAN IS RICH OR POOR according to the degree in which he can afford to enjoy the necessaries. which we exchange for what is supposed at the time to contain the value of an equal quantity. and who means not to use or consume it himself. precisely in proportion to the extent of this power. is the power of purchasing a certain command over all the labour. or succeeds to a great fortune. is the real measure of the exchangeable value of all commodities. or to the quantity either 31 .Adam Smith CHAPTER V OF THE REAL AND NOMINAL PRICE OF COMMODITIES. or over all the produce of labour which is then in the market. does not necessarily acquire or succeed to any political power. afford him the means of acquiring both. therefore. and amusements of human life. is precisely equal to the quantity of’ labour which it can enable them to purchase or command. to the person who possesses it. and its value. and who want to exchange it for some new productions. but by labour. But the person who either acquires.

and afterwards exchanges that money for bread and for beer. and money has become the common instrument of commerce. the commodity for which he immediately exchanges them.The Wealth of Nations of other men’s labour. The butcher seldom carries his beef or his mutton to the baker or the brewer. or. Every commodity. therefore. But it is not easy to find any accurate measure either of hardship or ingenuity. Is more frequently exchanged for. The greater part of people. It is more natural and obvious to him. than in two hours easy business. It is more natural. besides. The different degrees of hardship endured. not by any accurate measure. and of ingenuity exercised. than with labour. too. There may be more labour in an hour’s hard work. the different productions of different sorts of labour for one another. which though it can be made sufficiently intelligible. of the produce of other men’s labour. the other an abstract notion. But when barter ceases. which it enables him to purchase or command. indeed. The time spent in two different sorts of work will not always alone determine this proportion. or in an hour’s application to a trade which it cost ten years labour to learn. is sufficient for carrying on the business of common life. some allowance is commonly made for both. and thereby compared with. In exchanging. than by that of the labour which it can produce. The one is a plain palpable object. It is adjusted. and rather to say that his butcher’s meat is worth three-pence or fourpence a-pound. though not exact. too. the commodities for which he can exchange them only by the intervention of another commodity. understand better what is meant by a quantity of a particular commodity. what is the same thing. The quantity of money which he gets for them regulates. but he carries them to the market. however. in order to exchange them for bread or for beer. The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner. to estimate their value by the quantity of money. is not altogether so natural and obvious. therefore. according to that sort of rough equality which. than by a quantity of labour. but by the higgling and bargaining of the market. at an ordinary and obvious employment. it is not that by which their value is commonly estimated. other commodities. must likewise be taken into account. than in a month’s industry. the quantity of bread and beer which he can afterwards purchase. where he exchanges them for money. to estimate its exchangeable value by the quantity of some other commodity. every particular commodity is more frequently exchanged for money than for any other commodity. than by that of bread and beer. than that it is worth three or 32 . It is often difficult to ascertain the proportion between two different quantities of labour. But though labour be the real measure of the exchangeable value of all commodities.

and his happiness. though perhaps the greatest. but it is their value which varies. depends always upon the fertility or barrenness of the mines which happen to be known about the time when such exchanges are made. he must always lay down the same portion of his ease. indeed. fathom. such as the natural foot. than by the quantity either of labour or of any other commodity which can be had in exchange for it. or handful. can never be an accurate measure of the quantity of other things. But as a measure of quantity. that the exchangeable value of every commodity is more frequently estimated by the quantity of money. Hence it comes to pass. like every other commodity. or three or four quarts of small beer. and this revolution in their value. the value of gold and silver in Europe to about a third of what it had been before. however.Adam Smith four pounds of bread. in the sixteenth century. can never be an accurate measure of the value of other commodities. or which it costs much labour to acquire. whatever may be the quantity of goods which he receives in return for it. so a commodity which is itself continually varying in its own value. It is their real price. therefore. may be said to be of equal value to the labourer. It appears to him dear in the one 33 . and sometimes with a smaller quantity of goods. Labour alone. that is dear which it is difficult to come at. In his ordinary state of health. when they were brought thither. yet to the person who employs him they appear sometimes to be of greater. his liberty. so. strength. and sometimes of smaller value. Gold and silver. it may sometimes purchase a greater and sometimes a smaller quantity. and spirits. Of these. The quantity of labour which any particular quantity of them can purchase or command. sometimes of easier and sometimes of more difficult purchase. and that cheap which is to be had easily. vary in their value. The discovery of the abundant mines of America. and to him the price of labour seems to vary like that of all other things. is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. at all times and places. As it cost less labour to bring those metals from the mine to the market. never varying in its own value. He purchases them sometimes with a greater. But though equal quantities of labour are always of equal value to the labourer. or the quantity of other goods which it will exchange for. Equal quantities of labour. they could purchase or command less labour. is by no means the only one of which history gives some account. in the ordinary degree of his skill and dexterity. At all times and places. money is their nominal price only. which is continually varying in its own quantity. reduced. or with very little labour. not that of the labour which purchases them. The price which he pays must always be the same. are sometimes cheaper and sometimes dearer.

or of silver of a certain standard. and. therefore. When a landed estate. In reality. even though it should be stipulated to be paid. and is likely to continue to do so for a long time. or according to the current prices at the nearest public market. therefore. The same real price is always of the same value. secondly. Upon this supposition. may be said to have a real and a nominal price. I believe of all nations. is sold with a reservation of a perpetual rent. to be paid either in kind. By the 18th of Elizabeth. This diminution. like commodities. it was enacted. not in such a quantity of coined money of such a denomination (in so many pounds sterling. but on account of the variations in the value of gold and silver. that it should not consist in a particular sum of money. either of pure silver. The rents which have been reserved in corn. The discovery of the mines of America diminished the value of gold and silver in Europe. not to the nominal price of his labour. it is the goods which are cheap in the one case. such variations are more likely to diminish than to augment the value of a money rent. in the quantity of money. Such variations. tend almost always to diminish the value of a money rent. therefore. In this popular sense. if it is intended that this rent should always be of the same value. its nominal price. is well or ill rewarded.The Wealth of Nations case. Its real price may be said to consist in the quantity of the necessaries and conveniencies of life which are given for it. The labourer is rich or poor. is still going on gradually. Princes and sovereign states have frequently fancied that they had a temporary interest to diminish the quantity of pure metal contained in their coins. but may sometimes be of considerable use in practice. for example). in proportion to the real. to those which arise from the different values of equal quantities of gold and silver at different times. 34 . but they seldom have fancied that they had any to augment it. the same nominal price is sometimes of very different values. even where the denomination of the coin has not been altered. and hardly ever augmenting. it is commonly supposed. have preserved their value much better than those which have been reserved in money. but in so many ounces. and cheap in the other. however. it is of importance to the family in whose favour it is reserved. has accordingly been almost continually diminishing. The distinction between the real and the nominal price of commodities and labour is not a matter of mere speculation. to those which arise from the different quantities of gold and silver which are contained at different times in coin of the same denomination. that a third of the rent of all college leases should be reserved in corn. The quantity of metal contained in the coins. and dear in the other. though I apprehend without any certain proof. therefore. Its value would in this case be liable to variations of two different kinds: first. labour.

has arisen altogether from the degradation in the price of silver. will. shillings. varies much less from century to century than that of a money rent. This degradation. 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. and the same number of pounds. the subsistence of the labourer. in the present times. of any other commodity. therefore. for even equal quantities of corn will not do it exactly. it is to be observed. where the denomination of the coin has undergone much greater alterations than it ever did in England. The money price of 35 . or are worth little more than a fourth part of the corn which they were formerly worth. or enable the possessor to purchase or command more nearly the same quantity of the labour of other people. and in France. have. more liberal in a society advancing to opulence. been reduced almost to nothing. in the value of the money rents of colleges. The old money rents of colleges must. In Scotland. reserved in corn. as I shall endeavour to shew hereafter. not only to the variations in the quantity of labour which any particular quantity of corn can purchase. be purchased more nearly with equal quantities of corn. have sunk almost to a fourth part of their ancient value. purchase a greater or smaller quantity of labour. some ancient rents. Equal quantities of labour will. at distant times. though originally but a third of the whole. than in one that is standing still. and in one that is standing still. Though the real value of a corn rent. Equal quantities of corn. the loss is frequently still greater. Every other commodity. and pence. however. The subsistence of the labourer. more nearly than equal quantities of almost any other commodity. have contained very nearly the same quantity of pure silver.Adam Smith The money arising from this corn rent. than in one that is going backwards. or the real price of labour. A rent. at any particular time. will. in this manner. it varies much more from year to year. however. in proportion to the quantity of subsistence which it can purchase at that time. is liable only to the variations in the quantity of labour which a certain quantity of corn can purchase. the denomination of the English coin has undergone little or no alteration. Blackstone. than with equal quantities of gold and silver. They will do this. according to Dr. is. is very different upon different occasions. therefore. or. But since the reign of Philip and Mary. But a rent reserved in any other commodity is liable. originally of considerable value. commonly near double of what arises from the other two-thirds. therefore. according to this account. I say. where it has undergone still greater than it ever did in Scotland. perhaps. be more nearly of the same real value. but to the variations in the quantity of corn which can be purchased by any particular quantity of that commodity. at distant times.

again is regulated. though it sometimes varies greatly from century to century. but to the average or ordinary price of that necessary of life. From century to century. not to the temporary or occasional. but the real value of a corn rent. estimate it. measure of value. both from century to century. for half a century or a century together. in order to bring any particular quantity of silver from the mine to the market. therefore. But the value of silver. during so long a period. and from year to year. too. or by the quantity of labour which must be employed. In the mean time. as I shall likewise endeavour to shew hereafter. we can. not only the nominal. the money price of labour. By the quantities of labour. 36 . at all times. in other respects. in the same. but seems to be everywhere accommodated. it appears evidently. provided. or very nearly the same. with the greatest accuracy. or of the greater part of other commodities. condition. as well as the only accurate. and consequently of corn which must be consumed. From year to year. Labour. does not fluctuate from year to year with the money price of corn. But though. because equal quantities of it will more nearly command the same quantity of labour. by the value of silver. and along with it that of most other things. the real value of different commodities from century to century by the quantities of silver which were given for them. equal quantities of corn will command the same quantity of labour more nearly than equal quantities of silver. on the contrary. it is of none in buying and selling. will be double of what it is when at the former. the more common and ordinary transactions of human life. because. continue the same. therefore. but frequently continues the same. as I shall endeavour to shew hereafter. The average or ordinary price of corn. it may be of use to distinguish between real and nominal price. The ordinary or average money price of corn. and along with it the money price of labour.The Wealth of Nations labour. at least. and at all places. may. or even in letting very long leases. the temporary and occasional price of corn may frequently be double one year of what it had been the year before. the society continues. or the only standard by which we can compare the values of different commodities. corn is a better measure than silver. from century to century. or fluctuate. We cannot estimate it from year to year by the quantities of corn. seldom varies much from year to year. or very nearly the same. silver is a better measure than corn. or nearly in the same. is the only universal. for example. or will command double the quantity either of labour. But when corn is at the latter price. from five-and-twenty to fifty shillings the quarter. in establishing perpetual rents. by the richness or barrenness of the mines which supply the market with that metal. it is allowed. We cannot estimate. continuing the same during all these fluctuations.

As it is the nominal or money price of goods. as the different quantities or labour which those different quantities of silver could have purchased. in the London market. Those of corn. at the same time and place only. and that for which he is likely to sell them. A commodity. by the bargain. therefore. which half an ounce could have done there. can buy at Canton. have given to those who possessed it. We must in this case compare. therefore. however. and this is precisely what he wants.Adam Smith At the same time and place. An ounce at London will always give him the command of double the quantity of all these. It is of no importance to him that half an ounce of silver at Canton would have given him the command of more labour. yet the merchant who carries goods from the one to the other. which sells for half an ounce of silver at Canton. which finally determines the prudence or imprudence of all purchases and sales. But the current prices of labour. for example. In such a work as this. the more or less labour it will at that time and place enable you to purchase or command. upon different occasions. though 37 . It is so. however. may there be really dearer. has nothing to consider but the money price. a commodity which he can afterwards sell at London for an ounce. or the difference between the quantity of silver for which he buys them. than a commodity which sells for an ounce at London is to the man who possesses it at London. not so much the different quantities of silver for which it was commonly sold. can scarce ever be known with any degree of exactness. therefore. money is the exact measure of the real exchangeable value of all commodities. he gains a hundred per cent. for half an ounce of silver. just as much as if an ounce of silver was at London exactly of the same value as at Canton. than an ounce at London. At the same time and place. however. and thereby regulates almost the whole business of common life in which price is concerned. the real and the nominal price of all commodities are exactly in proportion to one another. 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. If a London merchant. at distant times and places. and of a greater quantity of the necessaries and conveniencies of life than an ounce can do at London. or the different degrees of power over the labour of other people which it may. we cannot wonder that it should have been so much more attended to than the real price. Though at distant places there is no regular proportion between the real and the money price of commodities. it may sometimes be of use to compare the different real values of a particular commodity at different times and places. of more real importance to the man who possesses it there. The more or less money you get for any commodity.

they have generally continued to do so even when the necessity was not the same. or some other coarse metal. therefore. of Great Britain. therefore. and copper. content ourselves with them. in all countries. gold for larger payments. The as was always the denomination of a copper coin. In the progress of industry. we seldom mention the number of guineas. Copper. in all other modern nations of Europe. xxxiii. therefore. At Rome. and have been more frequently taken notice of by historians and other writers. commercial nations have found it convenient to coin several different metals into money. lib. and not to have known either gold or copper coins for several ages thereafter. its value was estimated in copper. gold was not considered as a legal tender for a long time after it was 38 . but as being the nearest approximation which can commonly be had to that proportion. At Rome all accounts appear to have been kept. Originally. therefore. are in general better known. 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. was originally a silver coin. In England. however. They have always. The word sestertius signifies two asses and a half. seem to have had silver money from the first beginning of their settlements. We must generally. I believe. and the value of all goods and of all estates is generally computed. I believe. The northern nations who established themselves upon the ruins of the Roman empire.The Wealth of Nations they have in few places been regularly recorded. Having once begun to use it as their standard. cap. which they must have done when they had no other money. and the value of all estates to have been computed. 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. all accounts are kept. not as being always exactly in the same proportion as the current prices of labour. appears to have continued always the measure of value in that republic. when they first began to coin silver. but there was little gold coined till the time of Edward III nor any copper till that of James I. either in asses or in sestertii. 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. one who owed a great deal of money was said to have a great deal of other people’s copper. There were silver coins in England in the time of the Saxons. considered one of those metals as more peculiarly the measure of value than any of the other two. for those of still smaller consideration. In England. Though the sestertius. in silver: and when we mean to express the amount of a person’s fortune. The Romans are said to have had nothing but copper money till within five years before the first Punic war (Pliny. silver for purchases of moderate value. and for the same reason. 3).

the creditor might either reject such payment altogether. for example. for example. of such a weight and fineness. after an alteration of this kind. becomes little more than a nominal distinction. and almost all obligations for debt being expressed. If a debtor offered payment in gold. be still payable with five-and-twenty or fifty guineas. it has. should exchange for one-and-twenty shillings. and to declare by a public law. but would require very different quantities of gold money. or be a legal tender for a debt of that amount. I believe. which is the standard. the distinction between the metal which was the standard. This difference. and silver 39 . If the regulated value of a guinea. except in the change of the smaller silver coins. and during the continuance of any one regulated proportion of this kind. however. but was left to be settled by the market. and the value of silver would not seem to depend upon the quantity of gold which it would exchange for. was either reduced to twenty. and a smaller in the other. The proportion between the values of gold and silver money was not fixed by any public law or proclamation. however. or raised to two-and-twenty shillings. In consequence of any change. and that which was not the standard. It would. the greater part of payments could in either case be made with the same quantity of silver money as before. that a guinea. would be altogether owing to the custom of keeping accounts. been found convenient to ascertain this proportion. In the payment of such a note. 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. in silver money. this distinction becomes. In this state of things. In this state of things. and consequently better acquainted with the proportion between their respective values. in the same manner as before. and of expressing the amount of all great and small sums rather in silver than in gold money. something more than nominal again. and that which is not the standard. and as people became gradually more familiar with the use of the different metals in coin. Silver would appear to measure the value of gold. The value of gold would seem to depend upon the quantity of silver which it would exchange for. in most countries. gold would appear to be more invariable in its value than silver. and gold would not appear to measure the value of silver. after such an alteration.Adam Smith coined into money. but with very different quantities of silver. in this regulated proportion. all accounts being kept. Gold would appear to measure the value of silver. Copper is not at present a legal tender. a greater in the one case. was something more than a nominal distinction. be payable with the same quantity of gold as before. the distinction between the metal. or accept of it at such a valuation of the gold as he and his debtor could agree upon. or at least seems to become. In process of time.

The Wealth of Nations would not appear to measure the value of gold. which at one-and-twenty shillings the guinea. for many years. as long as that order is enforced. perhaps. gold. Twelve copper pence contain half a pound avoirdupois of copper. however. and a shilling can at any time be had for them. which. is seldom worth seven-pence in silver. in this manner should ever become general. Three pounds seventeen shillings and tenpence halfpenny an ounce. of not the best quality. the value of the most precious metal regulates the value of the whole coin. twelve such pence are ordered to exchange for a shilling. and of expressing promissory-notes and other obligations for money. In the English mint. One-and-twenty worn and defaced shillings. a pound weight of gold is coined into fortyfour guineas and a half. in the worn and degraded gold coin. they are in the market considered as worth a shilling. If the custom of keeping accounts. gets back a pound weight or an ounce weight of gold in coin. which. Before the reformation of the gold coin. In England. Even before the late reformation of the gold coin of Great Britain. would be considered as the metal which was peculiarly the standard or measure of value. is said to be the mint price of gold in England. is equal to forty-six pounds fourteen shillings and sixpence. is worth £ 3:17:10½ in silver. or the quantity of gold coin which the mint gives in return for standard gold bullion. the gold. seldom containing more than an ounce of standard gold. the price of standard gold bullion in the market had. and not silver. is likely to preserve it so. however. but seldom so much so. were considered as equivalent to a guinea. therefore. that part of it at least which circulated in London and its neighbourhood. without any deduction. was worn and defaced too. But as. before it is coined. and very frequently £4 an ounce. no duty or seignorage is paid upon the coinage. been upwards of £3:18s. sometimes £ 3:19s. The reformation of the gold coin has evidently raised the value of the silver coin which can be exchanged for it. during the continuance of any one regulated proportion between the respective values of the different metals in coin. to its standard weight as it is possible to bring the current coin of any nation. therefore. An ounce of such gold coin. The late regulations have brought the gold coin as near. The silver coin still continues in the same worn and degraded state as before the reformation of the cold coin. In reality. was in general less degraded below its standard weight than the greater part of the silver. In the market. and he who carries a pound weight or an ounce weight of standard gold bullion to the mint. perhaps. by the regulation. that sum. indeed. oneand-twenty shillings of this degraded silver coin are still considered as worth a guinea of this excellent gold coin. it is probable. and the order to receive no gold at the public offices but by weight. Since the refor- 40 .

so the price of silver in bullion is not sunk by the low rate of silver in English coin. Since that reformation. In the English coin. that is. it exchanges for about fifteen ounces. five shillings and fivepence. the market price of standard gold bullion seldom exceeds £ 3:17:7 an ounce. Since the reformation of the gold coin. Mr Locke imputed this high price to the permis- 41 . But that market price is the same whether it is paid in gold or in silver coin. In the proportion between the different metals in the English coin. and five shillings and fivepence an ounce. the market price was always more or less above the mint price. for the same reason that copper in bars preserves its proper proportion to silver. according to the common estimation of Europe. even in England. Five shillings and sevenpence. The late reformation of the gold coin. upon different occasions. for more silver than it is worth. as copper is rated very much above its real value. too. in the French coin and in the Dutch coin. In the market of Europe. Five shillings and twopence an ounce. the market price of standard silver bullion has fallen occasionally to five shillings and threepence. five shillings and fourpence. in the same manner. though the price of the greater part of other commodities being influenced by so many other causes. raised by the high price of copper in English coin. in the reign of William III. Before the reformation of the gold coin. In the English mint. five shillings and sevenpence. therefore. containing. the market price of standard silver bullion was. But as the price of copper in bars is not. and very often five shillings and eightpence an ounce. a pound weight of standard silver. Upon the reformation of the silver coin. therefore. but likewise that of the silver coin in proportion to gold bullion. however. it has not fallen so low as the mint price. the market price has been constantly below the mint price. five shillings and sixpence. five shillings and fourpence. in proportion to all other commodities. Before the reformation of the gold coin. and probably. has raised not only the value of the gold coin. a pound weight of standard silver bullion is coined into sixty-two shillings. the price of silver bullion still continued to be somewhat above the mint price. the rise in the value of either gold or silver coin in proportion to them may not be so distinct and sensible. Silver in bullion still preserves its proper proportion to gold. so silver is rated somewhat below it..Adam Smith mation of the gold coin. seems to have been the most common price. Though the market price of silver bullion has fallen considerably since the reformation of the gold coin. which last price it has scarce ever exceeded. is said to be the mint price of silver in England. or the quantity of silver coin which the mint gives in return for standard silver bullion. an ounce of fine gold exchanges for about fourteen ounces of fine silver.

and though this might. he said. the real value of the whole coin. But the number of people who want silver coin for the common uses of buying and selling at home. to keep at all times in their coffers a greater quantity of cash than at present. No creditor could. in consequence. a guinea. They would be obliged. they sometimes endeavour to gain time. and afterwards to exchange this gold coin for silver coin. it is probable. too. under-rated in proportion to gold. be a considerable inconveniency to them. in order. to be melted down in the same manner. first to sell the bullion for gold coin. it is not very probable that a like reformation will do so now. When a run comes upon them. As the reformation of the silver coin did not then reduce the price of silver bullion to the mint price. There subsists at present a like permission of exporting gold bullion. rendered the demand for silver bullion greater than the demand for silver coin. and they would be precluded by this regulation from this discreditable method of evading immediate payment. The silver coin containing its full standard weight. This permission of exporting. Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly does not contain. if silver was rated in the coin as much above its proper proportion to gold as it is at present rated below it. Were the silver coin brought back as near to its standard weight as the gold. in the same manner as copper is not a legal tender for more than the change of a shilling. it would. and yet the price of gold bullion has fallen below the mint price. there would in this case. in this case. be a considerable security to their creditors. no doubt. be cheated in consequence of the high valuation of silver in coin. should not purchase more standard 42 . The bankers only would suffer by this regulation. according to the present proportion. would be less. as well as now. The inconveniency. provided it was at the same time enacted. by paying in sixpences. even in our present excellent gold coin. exchange for more silver in coin than it would purchase in bullion. is surely much greater than that of those who want silver bullion either for the use of exportation or for any other use. in the same manner as now. therefore. as no creditor can at present be cheated in consequence of the high valuation of copper. Some alteration in the present proportion seems to be the only method of preventing this inconveniency. was not supposed to require any reformation) regulated then. that silver should not be a legal tender for more than the change of a guinea. at the same time. be a profit in melting it down. silver was then. and to the prohibition of exporting silver coin. would.The Wealth of Nations sion of exporting silver bullion. perhaps. and it may be thought. But in the English coin. and the gold coin (which at that time. and a like prohibition of exporting gold coin. more than an ounce of standard gold.

in lace and embroidery. they import less than is wanted. a continual importation. The frequent loss of those metals from various accidents by sea and by land. would probably increase still more the superiority of those metals in coin above an equal quantity of either of them in bullion. Abroad. they are sometimes willing to sell a part of it for something less than the ordinary or average price. of its own accord. can seldom be returned in coin to the owner till after a delay of several weeks. When. 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. upon any public exigency. and in that of plate. In the present hurry of the mint. require. it would buy more than that weight. we may believe. and the French coin. and renders gold in coin somewhat more valuable than an equal quantity of gold in bullion. But when. on the other hand. like all other merchants. is imposed upon the coinage. and would discourage its exportation. however. in England. silver was rated according to its proper proportion to gold. In France. to suit their occasional importations to what they judge is likely to be the immediate demand. This delay is equivalent to a small duty. The superiority of coin above bullion would prevent the melting down of the coin. therefore. they sometimes overdo the business. At home. If. The merchant importers. in bringing it home again. in the wear and tear of coin. the price of silver bullion would probably fall below the mint price. in the English coin. in this case.Adam Smith bullion. when exported. is said to return home again. they get something more than this price. and though. a seignorage of about eight per cent. it could not be returned till after a delay of several months. even without any reformation of the silver coin. the continual waste of them in gilding and plating. With all their attention. yet the gold which is carried in bullion to the mint. The coinage would. as well as they can. and sometimes underdo it. it should become necessary to export the coin. There would be a profit. in order to repair this loss and this waste. 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. 43 . in all countries which possess no mines of their own. A small seignorage or duty upon the coinage of both gold and silver. for the same reason that the fashion increases the value of plate in proportion to the price of that fashion. endeavour. the coinage is free. it could sell only for its weight in bullion. But gold in coin is more convenient than gold in bullion. increase the value of the metal coined in proportion to the extent of this small duty. rather than incur the risk and trouble of exporting it again. of its own accord. the greater part of it would soon return again. When they import more bullion than is wanted. If.

in the time of Edward I. which. the measure of value comes to be liable to the same sort of uncertainty to which all other weights and measures are commonly exposed. 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. 44 .The Wealth of Nations under all those occasional fluctuations. in the same manner. the merchant adjusts the price of his goods as well as he can. by experience. or more or less below the mint price. as nearly as we can judge. The constancy and steadiness of the effect supposes a proportionable constancy and steadiness in the cause. the market price either of gold or silver bullion continues for several years together steadily and constantly. it is found. the price of goods comes. forty-four guineas and a half contained exactly a pound weight of standard gold. the diminution. either superiority or inferiority of price. is the effect of something in the state of the coin. according as the current coin is more or less exactly agreeable to its standard. he finds. for example. it is to be observed. upon an average. because it contained. at any particular time and place. by rubbing and wearing. and one ounce of alloy. If in England. by experience. but to that which. to be adjusted. more or less an accurate measure or value. however. for example. I understand always the quantity of pure gold or silver for which they are sold. In consequence of a like disorder in the coin. upon an average. But if. As it rarely happens that these are exactly agreeable to their standard. it actually does contain. we may be assured that this steady and constant. but to what. forty-four guineas and a half generally contain less than a pound weight of standard gold. at that time. or eleven ounces of fine gold. By the money price of goods. the same quantity of pure silver. 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. I consider as the same money price with a pound sterling in the present times. they actually are. Six shillings and eight pence. being greater in some pieces than in others. or contains more or less exactly the precise quantity of pure gold or pure silver which it ought to contain. either more or less above.. The money of any particular country is. without any regard to the denomination of the coin. not to what those weights and measures ought to be. not to the quantity of pure gold or silver which the coin ought to contain.

should be worth double of what is usually the produce of one day’s or one hour’s labour. or by what their labour adds to the value of the materials. or for other goods. superior to what would be due to the time employed about it. the esteem which men have for such talents. 45 . the whole produce of labour belongs to the labourer. and the quantity of labour commonly employed in acquiring or producing any commodity.Adam Smith CHAPTER VI PAR ART 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. allowances of this kind. over and above what may be sufficient to pay the price of the materials. for labour. If the one species of labour should be more severe than the other. for superior hardship and superior skill. will naturally give a value to their produce. In the advanced state of society. are commonly made in the wages of labour. or exchange for. one beaver should naturally exchange for or be worth two deer. As soon as stock has accumulated in the hands of particular persons. 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. If among a nation of hunters. and something of the same kind must probably have taken place in its earliest and rudest period. seems to be the only circumstance which can afford any rule for exchanging them for one another. some allowance will naturally be made for this superior hardship. Or if the one species of labour requires an uncommon degree of dexterity and ingenuity. In this state of things. some of them will naturally employ it in setting to work industrious people. it usually costs twice the labour to kill a beaver which it does to kill a deer. for example. whom they will supply with materials and subsistence. 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. is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase. in order to make a profit by the sale of their work. Such talents can seldom be acquired but in consequence of long application. the proportion between the quantities of labour necessary for acquiring different objects. command. In exchanging the complete manufacture either for money. and the wages of the workmen. It is natural that what is usually the produce of two days or two hours labour. something must be given for the profits of the undertaker of the work.

but to the trust which is reposed in him. At the rate of ten per cent. unless he expected from the sale of their work something more than what was sufficient to replace his stock to him. at the rate of fifteen pounds a year each. In this state of things. The value which the workmen add to the materials. and the owner of this capital. where the common annual profits of manufacturing stock are ten per cent. or the ingenuity of this supposed labour of inspection and direction. the labour of inspection and direction. But though their profits are so very different. in this case. not only to his labour and skill. altogether different. however. unless his profits were to bear some proportion to the extent of his stock. The profits of stock. their labour of inspection and direction may be either altogether or very nearly the same. still expects that his profit should bear a regular proportion to his capital. that the coarse materials annually wrought up in the one cost only seven hundred pounds. while that of the other will expect about seven hundred and thirty pounds. in each of which twenty workmen are employed. the profits of stock constitute a component part altogether different from the wages of labour. the undertaker of the one will expect a yearly profit of about one hundred pounds only. the hardship. that in some particular place.The Wealth of Nations who hazards his stock in this adventure. the whole produce of labour does not always belong to the labourer. of which the one pays their wages. In many great works. They are. while the finer materials in the other cost seven thousand. and are greater or smaller in proportion to the extent of this stock. the other the profits of their employer upon the whole stock of materials and wages which he advanced. for example. are only a different name for the wages of a particular sort of labour. are regulated by quite different principles. and he could have no interest to employ a great stock rather than a small one. They are regulated altogether by the value of the stock employed. Let us suppose. therefore. and regulated by quite different principles. He must in most cases share it with 46 . it may perhaps be thought. He could have no interest to employ them. Though in settling them some regard is had commonly. almost the whole labour of this kind is committed to some principal clerk. His wages properly express the value of this labour of inspection and direction. there are two different manufactures. In the price of commodities. Let us suppose. whereas that employed in the other will amount to seven thousand three hundred pounds. too. or at the expense of three hundred a-year in each manufactory. resolves itself in this case into two parts. therefore. and bear no proportion to the quantity. The capital annually employed in the one will. amount only to one thousand pounds. though he is thus discharged of almost all labour. therefore. yet they never bear any regular proportion to the capital of which he oversees the management.

and must give up to the landlord a portion of what his labour either collects or produces. or. the only circumstance which can regulate the quantity which it ought commonly to purchase. love to reap where they never sowed. and other instruments of husbandry. which. He must then pay for the licence to gather them. and the third pays the profit of the farmer. such as a labouring horse. we must add to the price of the 47 . the grass of the field. the whole price still resolves itself. and in every improved society. the price of every commodity finally resolves itself into some one or other. The real value of all the different component parts of price. therefore. it is evident. another pays the wages or maintenance of the labourers and labouring cattle employed in producing it. who advances both the rent of this land. more or less. and all the natural fruits of the earth. is measured by the quantity of labour which they can. not only of that part of price which resolves itself into labour. and of that which resolves itself into profit. but of that which resolves itself into rent. for example. either immediately or ultimately. The wood of the forest. constitutes the rent of land. that the price of any instrument of husbandry. As soon as the land of any country has all become private property. the rent of the land upon which he is reared. and the profits of the farmer. command or exchange for. An additional quantity. to have an additional price fixed upon them. it must be observed. the labour of tending and rearing him. it may perhaps be thought is necessary for replacing the stock of the farmer. But it must be considered. In the price of flour or meal. makes a third component part. and in the price of the greater part of commodities. is itself made up of the same time parts. must be due for the profits of the stock which advanced the wages and furnished the materials of that labour. A fourth part. the price of this portion. into the price of the far greater part of commodities. may pay the price as well as the maintenance of the horse. and demand a rent even for its natural produce. all the three enter. when land was in common. labour. This portion. Labour measures the value. In every society. Though the price of the corn. even to him. what comes to the same thing. come. one part pays the rent of the landlord. each of them. as component parts. In the price of corn. These three parts seem either immediately or ultimately to make up the whole price of corn. and the wages of this labour. Neither is the quantity of labour commonly employed in acquiring or producing any commodity. purchase or command. like all other men. or all of those three parts. and profit.Adam Smith the owner of the stock which employs him. or for compensating the wear and tear of his labouring cattle. the landlords. into the same three parts of rent. cost the labourer only the trouble of gathering them.

at least through the greater part of Europe. and the wages of his servants. together with the profits of those who advance the wages of that labour. and the wages of his servants. resolves itself into some one or other. not only the number of profits increase. and the profits of stock. etc. one part pays the labour of the fisherman. as well as wares and profit. and a still smaller number. taken separately. Rent very seldom makes any part of it. though it does sometimes. though it cannot well be called the rent of land. in which it consists altogether in the wages of labour. of the spinner. The price of flax resolves itself into the same three parts as that of corn. along the sea-shore. but every subsequent profit is greater than the foregoing. comes to be greater in proportion to that which resolves itself into rent. The price which is paid to them by the stone-cutter. and the other the profits of the capital employed in the fishery. the wages of the weavers: and the profits must always bear some proportion to the capital. in river fisheries. that part of the price which resolves itself into wages and profit. and in the price of both. or all of those three parts. As any particular commodity comes to be more manufactured. In the progress of the manufacture. for example. of the bleacher. as whatever part of it remains after paying the rent of the land. The capital which employs the weavers. manufacturing. But the whole price of any commodity must still finally resolve itself into some one or other or all of those three parts. so that of all the commodities which compose the whole annual produce of the labour of every country. and rent. is altogether the wages of their labour. makes a part of the price of a salmon. because it not only replaces that capital with its profits. In the price of linen we must add to this price the wages of the flax-dresser. because the capital from which it is derived must always be greater. In the most improved societies. and from that of the miller to that of the baker. those little variegated stones commonly known by the name of Scotch pebbles. It is otherwise. and bringing it to market. besides. but pays. a few poor people make a trade of gathering. in the price of bread. In some parts of Scotland. for example. however. neither rent nor profit makes an part of it. and the price of the whole labour employed in raising. must be greater than that which employs the spinners. of the weaver. there are always a few commodities of which the price resolves itself into two parts only the wages of labour. taken 48 . the labour of transporting the corn from the house of the farmer to that of the miller.The Wealth of Nations corn. must necessarily be profit to somebody. A salmon fishery pays a rent. the profits of the baker. together with the profits of their respective employers. As the price or exchangeable value of every particular commodity. In the price of sea-fish. as I shall shew hereafter. the profits of the miller.

The whole of what is annually either collected or produced by the labour of every society. profit. are the three original sources of all revenue. When those three different sorts of revenue belong to different persons. who runs the risk and takes the trouble of employing it. and be parcelled out among different inhabitants of the country. The interest of money is always a derivative revenue. unless perhaps the borrower is a spendthrift. or from his land. and rent. or the rent of their land. and annuities of every kind. The revenue derived from labour is called wages. they are readily distinguished. his whole gain. The revenue which proceeds altogether from land. profit. should gain both the rent of the landlord and the profit of the farmer. land is only the instrument which enables him to earn the wages of this labour. as well as of all exchangeable value. by the person who manages or employs it. they are sometimes confounded with one another. the profits of stock. who affords him the opportunity of making this profit. is called the interest or the use of money. the whole price of it. is called rent. and part to the lender. and all the revenue which is founded upon them. Whoever derives his revenue from a fund which is his own. from his stock. either as the wages of their labour. Wages. and are paid either immediately or mediately from the wages of labour. however. after paying the expense of cultivation. but lends it to another. They farm. at least in common language. which. All taxes. and to make the profits of this stock. the profits of their stock. pensions. the 49 . must be paid from some other source of revenue. that derived from stock. A gentleman who farms a part of his own estate. and thus confounds rent with profit. if it is not paid from the profit which is made by the use of the money. all salaries. To him. He is apt to denominate. is in this manner originally distributed among some of its different members. who contracts a second debt in order to pay the interest of the first. what comes to the same thing. The greater part of our North American and West Indian planters are in this situation.Adam Smith complexly. or the rent of land. at least in common language. but when they belong to the same. and belongs to the landlord. is called profit. The revenue of the farmer is derived partly from his labour. that derived from it by the person who does not employ it himself. and partly from his stock. for the profit which he has an opportunity of making by the use of the money. or. It is the compensation which the borrower pays to the lender. must resolve itself into the same three parts. are ultimately derived from some one or other of those three original sources of revenue. Part of that profit naturally belongs to the borrower. must draw it either from his labour. All other revenue is ultimately derived from some one or other of these.

their own estates: and accordingly we seldom hear of the rent of a plantation. too. according to the different proportions in which it is annually divided between those two different orders of people. however. confounded with profit. after paying the rent. are commonly called profit. If the society were annually to employ all the labour which it can annually purchase. Whatever remains. must necessarily gain them. therefore. is called profit. and. or continue the same from one year to another. as the quantity of labour would increase greatly every year. preparing. its ordinary or average value must either annually increase or diminish. the profit of the second. But there is no country in which the whole annual produce is employed in maintaining the industrious. but pay them the wages which are due to them. As in a civilized country there are but few commodities of which the exchangeable value arises from labour only. The whole. so the annual produce of its labour will always be sufficient to purchase or command a much greater quantity of labour than what was employed in raising. They generally.The Wealth of Nations greater part of them. too. is commonly considered as the earnings of his labour. both as labourers and overseers. in this case. and wages are. etc. should gain both the wages of a journeyman who works under a master. An independent manufacturer. should not only replace to them their stock employed in cultivation. and the wages of the third. and labourer. Common farmers seldom employ any overseer to direct the general operations of the farm. of landlord. What remains of the crop. work a good deal with their own hands. so the produce of every succeeding year would be of vastly greater value than that of the foregoing. Both rent and profit are. as ploughmen. His whole gains. confounded with wages. But wages evidently make a part of it. A gardener who cultivates his own garden with his own hands. harrowers. however. together with its ordinary profits. however. The farmer. in this case. therefore. after paying the rent and keeping up the stock. by saving these wages. farmer. rent and profit contributing largely to that of the far greater part of them. and the profit which that master makes by the sale of that journeyman’s work. and bringing that produce to market. are in this case confounded with profit. Wages. but frequently of its profit. The idle everywhere consume a great part of it. therefore. should pay him the rent of the first. His produce. who has stock enough both to purchase materials. and to maintain himself till he can carry his work to market. unites in his own person the three different characters. 50 .

profit and rent. As. Unless they yield him this profit. Though the price. the commodity is then sold for what may be called its natural price. preparing. in common language. which is generally suitable to the profit which he may reasonably expect from the sale of his goods. for though. if he sells it at a price which does not allow him the ordinary rate of profit in his neighbourhood. it is the lowest at which he is likely to sell them for any considerable time. therefore. These ordinary or average rates may be called the natural rates of wages. so he advances to himself. as I shall shew hereafter. therefore. stationary. which is regulated. is his revenue. or where he may change his trade as often as he pleases. or below. or declining condition. their advancing. which leaves him this profit. and bringing it to market. in the same manner. what is called the prime cost of any commodity does not comprehend the profit of the person who is to sell it again. There is likewise in every society or neighbourhood an ordinary or average rate of rent. and the profits of the stock employed in raising. at least where there is perfect liberty. they do not repay him what they may very properly be said to have really cost him. at the time and place in which they commonly prevail. while he is preparing and bringing the goods to market. The actual price at which any commodity is commonly sold. as I shall shew hereafter. His profit. besides. their riches or poverty. the proper fund of his subsistence. is not always the lowest at which a dealer may sometimes sell his goods. is called its market price. or their subsistence. The commodity is then sold precisely for what it is worth. his own subsistence. too. since. he advances to his workmen their wages. yet. and partly by the natural or improved fertility of the land. or exactly 51 . partly by the general circumstances of the society or neighbourhood in which the land is situated. or for what it really costs the person who brings it to market. by employing his stock in some other way. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land. the wages of the labour. and partly by the particular nature of each employment. in every different employment of labour and stock. he might have made that profit. both of wages and profit. he is evidently a loser by the trade. according to their natural rates.Adam Smith CHAPTER VII NATURAL OF THE NATURAL AND MARKET PRICE OF COMMODITIES THERE IS IN EVERY SOCIETY or neighbourhood an ordinary or average rate. partly by the general circumstances of the society. This rate is naturally regulated. It may either be above.

but his demand is not an effectual demand. and profit. When the quantity brought to market exceeds the effectual demand. all those who are willing to pay the whole value of the rent. for example. than in that of old iron. and the demand of those who are willing to pay the natural price of the commodity. according as the acquisition of the commodity happens to be of more or less importance to them. labour. which must be paid in order to bring it thither. 52 . in the importation of oranges. will occasion a much greater competition than in that of durable commodities. Among competitors of equal wealth and luxury. or the whole value of the rent. or as nearly as can be judged of. the same with the natural price. The whole quantity upon hand can be disposed of for this price. or in a famine. cannot be supplied with the quantity which they want. some of them will be willing to give more. which must be paid in order to bring it thither. Such people may be called the effectual demanders. The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market. The same excess in the importation of perishable. which must be paid in order to bring it thither. in some sense. A competition will immediately begin among them. Rather than want it altogether. wages. Hence the exorbitant price of the necessaries of life during the blockade of a town. or according as it happens to be more or less important to them to get immediately rid of the commodity. he might like to have it. to have a demand for a coach and six. the same deficiency will generally occasion a more or less eager competition. as the commodity can never be brought to market in order to satisfy it. It is different from the absolute demand. When the quantity of any commodity which is brought to market falls short of the effectual demand. and the market price will rise more or less above the natural price. the market price naturally comes to be either exactly. When the quantity brought to market is just sufficient to supply the effectual demand. The market price will sink more or less below the natural price. and can not be disposed of for more. and profit. and their demand the effectual demand. or the wealth and wanton luxury of the competitors. wages. it cannot be all sold to those who are willing to pay the whole value of the rent. according as the greatness of the excess increases more or less the competition of the sellers.The Wealth of Nations the same with its natural price. since it maybe sufficient to effectuate the bringing of the commodity to market. A very poor man may be said. happen to animate more or less the eagerness of the competition. and the low price which they give for it must reduce the price of the whole. Some part must be sold to those who are willing to pay less. according as either the greatness of the deficiency. and profit. and no more.

or very nearly the same. the quantity brought to market should at any time fall short of the effectual demand. But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance. or stock. in different years. All the different parts of its price will rise to their natural rate. wine. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply. It is the interest of all those who employ their land. produce very different quantities of commodities. If it is rent. But. and the whole price to its natural price. If it is rent. some of the component parts of its price must rise above their natural rate. as it were. All the different parts of its price will soon sink to their natural rate. naturally suits itself in this manner to the effectual demand. if it is wages or profit. the interest of all other landlords will naturally prompt them to prepare more land for the raising of this commodity. the central price. the same quantity of industry will. but does not oblige them to accept of less. and it is the interest of all other people that it never should fall short of that demand. and if it is wages or profit. and no more than supply. 53 . will prompt them to withdraw a part of their labour or stock.Adam Smith The competition of the different dealers obliges them all to accept of this price. produce very different quantities of corn. labour. The quantity brought to market will soon be no more than sufficient to supply the effectual 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 at any time it exceeds the effectual demand. that demand. and the whole price to its natural price. therefore. in bringing any commodity to market. while. The whole quantity of industry annually employed in order to bring any commodity to market. in others. The same number of labourers in husbandry will. in some employments. The quantity of every commodity brought to market naturally suits itself to the effectual demand. If. that the quantity never should exceed the effectual demand. the interest of the labourers in the one case. The natural price. the interest of the landlords will immediately prompt them to withdraw a part of their land. to which the prices of all commodities are continually gravitating. in different years. and sometimes force them down even somewhat below it. The quantity brought thither will soon be sufficient to supply the effectual demand. and of their employers in the other. some of the component parts of its price must be paid below their natural rate. Different accidents may sometimes keep them suspended a good deal above it. is. it will produce always the same. they are constantly tending towards it. on the contrary. from this employment.

the same with the natural price. in order to supply that demand. Even though that demand. the produce of equal quantities of labour being always the same. to the effectual demand.The Wealth of Nations oil. A rent certain in money is not in the least affected by them. and more frequent. with work done. quantity of linen and woollen cloth. hops. That part which resolves itself into rent is less affected by them. will sometimes fall a good deal below. the quantity of the commodities brought to market will sometimes exceed a good deal. While that demand continues the same. the landlord and farmer endeavour. but it is seldom affected by them in its yearly rate. that of the other varies not only with the variations in the demand. every man’s experience will inform him. It is only the average produce of the one species of industry which can be suited. the market price of the commodities is likely to do so too. but to the average and ordinary price of the produce. as the price of corn. therefore. according as the market happens to be either overstocked or understocked with commodities or with labour. and to be either altogether. A rent which consists either in a certain proportion. or very nearly the same. either in its rate or in its value. It has no effect upon the wages of the weavers. 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. and sometimes rise a good deal above. A public mourning raises the price of black cloth ( with which the market is almost always understocked upon such occasions). In settling the terms of the lease. The market is 54 . or with work to be done. in any respect. their natural price. of the rude produce. That the price of linen and woollen cloth is liable neither to such frequent. Such fluctuations affect both the value and the rate. therefore. is no doubt affected in its yearly value by all the occasional and temporary fluctuations in the market price of that rude produce. of the effectual demand. and augments the profits of the merchants who possess any considerable quantity of it. either of wages or of profit. but with the much greater. and sometimes fall short a good deal. according to their best judgment. or very nearly the same. and frequently much less. not to the temporary and occasional. etc. than its average produce. But the same number of spinners or weavers will every year produce the same. variations in the quantity of what is brought to market. to adjust that rate. it can be more exactly suited to the effectual demand. should continue always the same. nor to such great variations. their market price will be liable to great fluctuations. The price of the one species of commodities varies only with the variations in the demand. or as nearly as can be judged of. In the other species of industry. or in a certain quantity. and as its actual produce is frequently much greater.

But though the market price of every particular commodity is in this manner continually gravitating. It sinks the price of coloured silks and cloths. may. and. There is an effectual demand for more labour. may. with work done. Secrets in manufactures are capable of being longer kept than secrets in trade. If the market is at a great distance from the residence of those who supply it. can seldom be long kept. If it was commonly known. than can be had. by an increase in the effectual demand. which is fit for pro- 55 . that all the land in a great country. the market price of some particular commodity happens to rise a good deal above the natural price. The market is here overstocked both with commodities and with labour. for some time even below it. the effectual demand being fully supplied. the market price would soon be reduced to the natural price. When. however. keep up the market price. a regular proportion to it. in many commodities. and as their whole amount bears. They properly consist in the high wages of that labour. for which all demand is stopped for six months. perhaps for a twelvemonth. and may so long enjoy their extraordinary profits without any new rivals. perhaps. not with work to be done. the operation may sometimes last for many years together. not with labour. it must be acknowledged. The market is here understocked with labour. 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. the wages of the workmen employed in preparing such commodities. Such enhancements of the market price are evidently the effects of particular accidents. But as they are repeated upon every part of his stock. for a long time together. of which. His extraordinary gains arise from the high price which is paid for his private labour. and even leave it as a legacy to his posterity. too. It sinks. however. upon that account. those who employ their stocks in supplying that market. with good management. that. their great profit would tempt so many new rivals to employ their stocks in the same way. and the extraordinary profit can last very little longer than they are kept. if one may say so. sometimes natural causes. and thereby reduces the profits of the merchants who have any considerable quantity of them upon hand. are generally careful to conceal this change. towards the natural price. It raises the wages of journeymen tailors. enjoy the advantage of his discovery as long as he lives. a good deal above the natural price. and sometimes particular regulations of policy.Adam Smith understocked with commodities. for more work to be done. they may sometimes be able to keep the secret for several years together. yet sometimes particular accidents. Secrets of this kind. Some natural productions require such a singularity of soil and situation. they are commonly considered as extraordinary profits of stock.

The Wealth of Nations ducing them. and at the same time continue their business. by keeping the market constantly understocked by never fully supplying the effectual demand. though in a less degree. and all those laws which restrain in particular employments. on the contrary. greatly above their natural rate. 56 . They are a sort of enlarged monopolies. The exclusive privileges of corporations. the other is the lowest which the sellers can commonly afford to take. and in whole classes of employments. according to their natural rates. Such commodities may continue for whole centuries together to be sold at this high price. to operate for ever. sell their commodities much above the natural price. The wages of the labour. The one is upon every occasion the highest which can be squeezed out of the buyers. is in this case the part which is generally paid above its natural rate. therefore. may be disposed of to those who are willing to give more than what is sufficient to pay the rent of the land which produced them. Such enhancements of the market price are evidently the effect of natural causes. whether they consist in wages or profit. like the rent of some vineyards in France of a peculiarly happy soil and situation. the competition to a smaller number than might otherwise go into them. may not be sufficient to supply the effectual demand. and may frequently. The monopolists. bears no regular proportion to the rent of other equally fertile and equally well cultivated land in its neighbourhood. together with the wages of the labour and the profits of the stock which were employed in preparing and bringing them to market. and the profits of the stock employed in bringing such commodities to market. The whole quantity brought to market. has the same effect as a secret in trade or manufactures. are seldom out of their natural proportion to those of the other employments of labour and stock in their neighbourhood. and raise their emoluments. or which it is supposed they will consent to give. The rent of the land which affords such singular and esteemed productions. on the contrary. therefore. not upon every occasion indeed. and maintain both the wages of the labour and the profits of the stock employed about them somewhat above their natural rate. which may hinder the effectual demand from ever being fully supplied. and which may continue. for ages together. and that part of it which resolves itself into the rent of land. The price of monopoly is upon every occasion the highest which can be got. or the price of free competition. The natural price. statutes of apprenticeship. is the lowest which can be taken. A monopoly granted either to an individual or to a trading company. but for any considerable time together. keep up the market price of particular commodities above the natural price. have the same tendency.

The effect of such regulations. so in the other they exclude him from many employments. can seldom continue long below. when a manufacture is in prosperity. as in raising them above their natural rate. though it may continue long above. whether occasional or permanent. Whatever part of it was paid below the natural rate. Its market price. in the four following chapters. of wages. however. stationary. enable the workman to raise his wages a good deal above their natural rate. profit. this at least would be the case where there was perfect liberty. 57 . 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. as fully and distinctly as I can. which can in any particular employment. the number of those who are afterwards educated to the trade will naturally suit itself to the effectual demand. of the market price of commodities from the natural price.Adam Smith Such enhancements of the market price may last as long as the regulations of policy which give occasion to them. and rent. to let them down a good deal below it. that the quantity brought to market would soon be no more than sufficient to supply the effectual demand. which. sink either the wages of labour or the profits of stock below their natural rate. The market price of any particular commodity. endeavour to explain. or so much stock. the causes of those different variations. their advancing. When they are gone. and would immediately withdraw either so much land or no much labour. when it decays. from being employed about it. its natural price. indeed. and in every society this rate varies according to their circumstances. and was supposed to commit the most horrid sacrilege if he changed it for another). I shall. according to their riches or poverty. I shall endeavour to explain what are the circumstances which naturally determine the rate of wages. and for several generations together. is not near so durable in sinking the workman’s wages below. This is all that I think necessary to be observed at present concerning the deviations. 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. The natural price itself varies with the natural rate of each of its component parts. or declining state of the society. by the advancing. and in what manner those circumstances are affected by the riches or poverty. sometimes oblige him. First. would soon rise to the natural price. or declining condition. The same statutes of apprenticeship and other corporation laws. therefore. As in the one case they exclude many people from his employment. stationary. the persons whose interest it affected would immediately feel the loss. Their operation in the one way may endure for many centuries.

Had this state continued. I shall endeavour to shew what are the circumstances which regulate the rent of land. or declining condition. in appearance many things might have become dearer. But though in many respects dependent upon the laws and policy. it will appear hereafter. Let us suppose. CHAPTER VIII LABOUR OF THE WAGES OF LABOUR THE PRODUCE OF wages of labour LABOUR constitutes the natural recompence or In that original state of things which precedes both the appropriation of land and the accumulation of stock. depends partly upon the nature of the different employments. but to remain the same. or very nearly the same. that in the greater part of employments the productive powers of labour had been improved to tenfold. too. the whole produce of labour belongs to the labourer. Though pecuniary wages and profit are very different in the different employments of labour and stock. and as the commodities produced by equal quantities of labour would naturally in this state of things be exchanged for one another. the wages of labour would have augmented with all those improvements in its productive powers. and the pecuniary profits in all the different employments of stock.The Wealth of Nations Secondly. This proportion. by its advancing. yet a certain proportion seems commonly to take place between both the pecuniary wages in all the different employments of labour. to which the division of labour gives occasion. they would have been purchased likewise with the produce of a smaller quantity. in all those different states. this proportion seems to be little affected by the riches or poverty of that society. and partly upon the different laws and policy of the society in which they are carried on. He has neither landlord nor master to share with him. All things would gradually have become cheaper. I shall endeavour to shew what are the circumstances which naturally determine the rate of profit. I shall. those circumstances are affected by the like variations in the state of the society. endeavour to explain all the different circumstances which regulate this proportion. But though all things would have become cheaper in reality. and in what manner. or 58 . They would have been produced by a smaller quantity of labour. In the fourth and last place. stationary. for example. or have been exchanged for a greater quantity of other goods. than before. and which either raise or lower the real price of all the different substances which it produces. in the third place.

for example. or unless his stock was to be replaced to him with a profit. In all arts and manufactures. till it be completed. It was at an end. He is both master and workman. Any particular quantity in it. the greater part of the workmen stand in need of a master. It includes what are usually two distinct revenues. be- 59 . however. or that a day’s labour could produce only twice the quantity of work which it had done before. therefore. or in the value which it adds to the materials upon which it is bestowed. He shares in the produce of their labour. But this original state of things. and in this share consists his profit. therefore. In reality. it would be twice as cheap. or the whole value which it adds to the materials upon which it is bestowed. The produce of almost all other labour is liable to the like deduction of profit. but that in a particular employment they had been improved only to double. and to maintain himself till it be completed. it would require only half the quantity of labour either to purchase or to produce it. a pound weight. It sometimes happens. unless he was to share in the produce of his labour. and enjoys the whole produce of his own labour.Adam Smith that a day’s labour could produce ten times the quantity of work which it had done originally. and it would be to no purpose to trace further what might have been its effects upon the recompence or wages of labour. the farmer who employs him. ten times the original quantity of work in them would purchase only twice the original quantity in it. that a single independent workman has stock sufficient both to purchase the materials of his work. As soon as land becomes private property. His maintenance is generally advanced to him from the stock of a master. His rent makes the first deduction from the produce of the labour which is employed upon land. Though it required five times the quantity of other goods to purchase it. This profit makes a second deduction from the produce of the labour which is employed upon land. therefore. and who would have no interest to employ him. would appear to be five times dearer than before. The acquisition. indeed. long before the most considerable improvements were made in the productive powers of labour. the landlord demands a share of almost all the produce which the labourer can either raise or collect from it. in which the labourer enjoyed the whole produce of his own labour. It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. and their wages and maintenance. would be twice as easy as before. In exchanging the produce of a day’s labour in the greater part of employments for that of a day’s labour in this particular one. could not last beyond the first introduction of the appropriation of land and the accumulation of stock. to advance them the materials of their work.

without employment. We have no acts of parliament against combining to lower the price of work. and force the other into a compliance with their terms. too. We rarely hear. that masters rarely combine. upon all ordinary occasions. as they sometimes do without resistance. indeed. one may say. are not very frequent. are frequently resisted by a contrary defensive combination of the 60 . These are always conducted with the utmost silence and secrecy till the moment of execution. and the wages of labour. besides. is as ignorant of the world as of the subject. sometimes enter into particular combinations to sink the wages of labour even below this rate. and the wages of labour are everywhere understood to be. and when the workmen yield. however. In the long run. the wages of labour. as possible. or at least does not prohibit. and the owner of the stock which employs him another. But whoever imagines. when the labourer is one person. could generally live a year or two upon the stocks. but the necessity is not so immediate. few could subsist a month. though frequently of those of workmen. a master manufacturer. being fewer in number. of the combinations of masters. which nobody ever hears of. which they have already acquired. In all such disputes. Masters.The Wealth of Nations longing to two distinct persons. the workman may be as necessary to his master as his master is to him. however. but many against combining to raise it. upon this account. Such combinations. and in every part of Europe twenty workmen serve under a master for one that is independent. but constant and uniform. though severely felt by them. To violate this combination is everywhere a most unpopular action. We seldom. it has been said. It is not. whose interests are by no means the same. while it prohibits those of the workmen. hear of this combination. the profits of stock. The masters. A landlord. authorises. a farmer. or merchant. their combinations. because it is the usual. however. though they did not employ a single workman. The workmen desire to get as much. the natural state of things. depends everywhere upon the contract usually made between those two parties. not to raise the wages of labour above their actual rate. the latter in order to lower. Masters are always and everywhere in a sort of tacit. and. combination. difficult to foresee which of the two parties must. and scarce any a year. what they usually are. What are the common wages of labour. they are never heard of by other people. Such cases. the masters can hold out much longer. have the advantage in the dispute. Many workmen could not subsist a week. and a sort of reproach to a master among his neighbours and equals. can combine much more easily: and the law. the masters to give as little. The former are disposed to combine in order to raise.

they have always recourse to the loudest clamour. masters must generally have the advantage. and his wages must at least be sufficient to maintain him. or frighten their masters into an immediate compliance with their demands. must. But though. and the race of such workmen could not last beyond the first generation. to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance. very seldom derive any advantage from the violence of those tumultuous combinations. below which it seems impossible to reduce. The workmen. one with another. partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence. The masters. die before the age of manhood. upon these occasions. to raise tile price of their labour. accordingly. is computed to be worth double his maintenance. The labour of an able-bodied slave. therefore. of their own accord. sometimes the great profit which their masters make by their work. too. But whether their combinations be offensive or defensive. in order that. But the necessary maintenance of four children. combine. and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants. Mr Cantillon seems. may be nearly equal to that of one man. and sometimes to the most shocking violence and outrage. in order that two may have an equal chance of living to that age. partly from the superior steadiness of the masters. and that of the meanest labourer. They must even upon most occasions be somewhat more. without any provocation of this kind. they are always abundantly heard of. otherwise it would be impossible for him to bring up a family. who must either starve. and never cease to call aloud for the assistance of the civil magistrate. partly from the interposition of the civil magistrate. The poorest labourers. attempt to rear at least four children. for any considerable time. there is. being supposed no more than sufficient to provide for herself: But one half the children born. it is supposed. however. in disputes with their workmen. sometimes the high price of provisions. cannot be worth less than that of an 61 . Their usual pretences are. the ordinary wages even of the lowest species of labour. he thinks. A man must always live by his work. which. one with another. on account of her necessary attendance on the children. according to this account. it is computed. a certain rate. and journeymen. the same author adds. they may be enabled to bring up two children. the labour of the wife. labourers. are just as clamorous upon the other side. who sometimes. generally end in nothing but the punishment or ruin of the ringleaders. They are desperate. upon this account. and act with the folly and extravagance of desperate men. In order to bring the point to a speedy decision.Adam Smith workmen.

even in the lowest species of common labour. evidently the lowest which is consistent with common humanity. the workmen have no occasion to combine in order to raise their wages. the stock which is over and above what is necessary for the employment of their masters. therefore. or monied man. and. first. It is not. or many other. and cannot possibly increase without it. has got more stock than what is sufficient to purchase the materials of his own work. is continually increasing. that. England is certainly. that the wages of labour are highest. and he will naturally increase the number of his journeymen. in order to bring up a family. The increase of revenue and stock is the increase of national wealth. he naturally employs one or more journeymen with the surplus. a 62 . it is evident. and enable them to raise their wages considerably above this rate. however. but in the most thriving. but its continual increase. which sometimes give the labourers an advantage. There are certain circumstances. Thus far at least seems certain. in the present times. The demand for those who live by wages. or in those which are growing rich the fastest. such as a weaver or shoemaker. annuitant. These funds are of two kinds. in order to make a profit by their work.The Wealth of Nations able-bodied slave. I shall not take upon me to determine. has a greater revenue than what he judges sufficient to maintain his own family. and to maintain himself till he can dispose of it. secondly. naturally increases with the increase of national wealth. accordingly. cannot increase but in proportion to the increase of the funds which are destined to the payment of wages. When the landlord. he employs either the whole or a part of the surplus in maintaining one or more menial servants. when every year furnishes employment for a greater number than had been employed the year before. Increase this surplus. be able to earn something more than what is precisely necessary for their own maintenance. and thus voluntarily break through the natural combination of masters not to raise wages. and he will naturally increase the number of those servants. necessarily increases with the increase of the revenue and stock of every country. Increase this surplus. the revenue which is over and above what is necessary for the maintenance. but in what proportion. When in any country the demand for those who live by wages. journeymen. and cannot possibly increase without it. servants of every kind. which occasions a rise in the wages of labour. The scarcity of hands occasions a competition among masters. The demand for those who live by wages. whether in that abovementioned. When an independent workman. therefore. It is not the actual greatness of national wealth. in the richest countries. the labour of the husband and wife together must. who bid against one another in order to get workmen. The demand for those who live by wages. labourers.

In Great Britain. it is much more thriving.Adam Smith much richer country than any part of North America. eight shillings currency. instead of being a burden. The demand for labourers. The wages of labour. before the commencement of the late disturbances. If the money price of labour. the real command of the necessaries and conveniencies of life which it conveys to the labourer. but to the great multiplication of the species. descendants from their own body. are much higher in North America than in any part of England. journeymen tailors. and sometimes many more. it seems. though less for exportation. its real price. Labour is there so well rewarded. In the worst seasons they have always had a sufficiency for themselves. they are not supposed to double in less than five hundred years. with a pint of rum. ship-carpenters. These prices are all above the London price. and most other European countries. there is a continual complaint of the scarcity of hands in North America. ten shillings and sixpence currency. be higher than it is anywhere in the mother-country. In the British colonies in North America. We cannot. that a numerous family of children. The most decisive mark of the prosperity of any country is the increase of the number of its inhabitants. A young widow with four or five young children. common labourers earned in 1773. therefore. among the middling or inferior ranks of people in Europe. equal in all to six shillings and sixpence sterling. A dearth has never been known there. a-day. however. In the province of New York. But though North America is not yet so rich as England. Nor in the present times is this increase principally owing to the continual importation of new inhabitants. The value of children is the greatest of all encouragements to marriage. the funds destined for maintaining them increase. house-carpenters and bricklayers. and advancing with much greater rapidity to the further acquisition of riches. equal to two shillings sterling. wonder that the people in North America should generally marry very young. Notwithstanding the great increase occasioned by such early marriages. equal to about two shillings and tenpence sterling. and wages are said to be as high in the other colonies as in New York. worth sixpence sterling. three shillings and sixpence currency. frequently see there from fifty to a hundred. The price of provisions is everywhere in North America much lower than in England. five shillings currency. it is said. is there frequently courted as a sort of fortune. The labour of each child. it has been found that they double in twenty or five-and-twenty years. who. still faster than 63 . equal to four shillings and sixpence sterling. must be higher in a still greater proportion. Those who live to old age. is computed to be worth a hundred pounds clear gain to them. is a source of opulence and prosperity to the parents. would have so little chance for a second husband. therefore. before it can leave their house.

still worse. The subsistence which they find there is so scanty. There would be a constant scarcity of employment. China has been long one of the richest. Any carrion. they are continually running about the streets with the tools of their respective trades. Marco Polo. we must not expect to find the wages of labour very high in it. for example. naturally multiply beyond their employment. most industrious. Though the wealth of a country should be very great. the number wanted the following year. though half putrid and stinking. it is commonly said. and to enable him to bring up a family. yet if it has been long stationary. and. however. but live constantly in little fishing-boats upon the rivers and canals. one of the most fertile. would. that they are eager to fish up the nastiest garbage thrown overboard from any European ship. The accounts of all travellers. many thousand families have no habitation on the land. agree in the low wages of labour. The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. acquired that full complement of riches which the nature of its laws and institutions permits it to acquire. and even more than supply. describes its cultivation. It seems. even long before his time.The Wealth of Nations they can find labourers to employ. and most populous. many hundred. In the neighbourhood of Canton. The condition of artificers is. and populousness. There could seldom be any scarcity of hands. almost in the same terms in which they are described by travellers in the present times. industry. the number of labourers employed every year could easily supply. 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. perhaps. on the contrary. that is. or very nearly of the same extent. begging employment. as it were. The funds destined for the payment of wages. may be of the greatest extent. It had. as in Europe. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening. but if they have continued for several centuries of the same. The hands. and in the difficulty which a labourer finds in bringing up a family in China. If in such a country the wages off labour had ever been more than sufficient to maintain the labourer. and the labourers would be obliged to bid against one another in order to get it. offering their services. is as welcome to them as the most wholesome food to the people of other coun- 64 . who visited it more than five hundred years ago. best cultivated. countries in the world. in this case. Instead of waiting indolently in their work-houses for the calls of their customers. he is contented. nor could the masters be obliged to bid against one another in order to get them. if possible. the revenue and stock of its inhabitants. to have been long stationary. the carcase of a dead dog or cat. inconsistent in many other respects.

This. however. 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. three or four hundred thousand people die of hunger in one year. and from thence extend themselves to all the superior classes. 65 .Adam Smith tries. Many who had been bred in the superior classes. must some way or another make shift to continue their race so far as to keep up their usual numbers. The performance of this horrid office is even said to be the avowed business by which some people earn their subsistence. but would either starve. perhaps. continue to be performed. are nowhere neglected. In a fertile country. The lowest class being not only overstocked with its own workmen. In all great towns. or be driven to seek a subsistence. annual labour. either by begging. does not seem to go backwards. the competition for employment would be so great in it. notwithstanding. therefore. and mortality. But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. should not be very difficult. be sensibly diminished. but with the overflowings of all the other classes. famine. The difference between the genius of the British constitution. or very nearly the same. China. Marriage is encouraged in China. and which had escaped either the tyranny or calamity which had destroyed the rest. notwithstanding their scanty subsistence. and that of the mercantile company which oppresses and domineers in the East Indies. we maybe assured that the funds destined for the maintenance of the labouring poor are fast decaying. which had before been much depopulated. Every year the demand for servants and labourers would. The same. not by the profitableness of children. though it may. Want. perhaps. or drowned like puppies in the water. would be glad to seek it in the lowest. or by the perpetration perhaps. must. of the greatest enormities. where subsistence. therefore. but by the liberty of destroying them. The lands which had once been cultivated. as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. would immediately prevail in that class. be better illustrated than by the different state of those countries. in all the different classes of employments. consequently. is nearly the present state of Bengal. cannot. Its towns are nowhere deserted by their inhabitants. and of some other of the English settlements in the East Indies. Many would not be able to find employment even upon these hard terms. stand still. and the funds destined for maintaining it must not. not being able to find employment in their own business. and where. consequently. be less than it had been the year before. which protects and governs North America. several are every night exposed in the street. The lowest class of labourers. perhaps.

in these places. His daily subsistence would be proportioned to his daily necessities.The Wealth of Nations The liberal reward of labour. the labouring poor can maintain their families in dear years. the wages of labour do not. sometimes for half a century together. therefore. on the other hand. and their starving condition. even in the lowest species of labour. so. Secondly. on the other hand. that they are going fast backwards. fluctuate with the price of provisions. There are many plain symptoms. than to that of the price of provisions. more to the increase of the demand for labour. owing. so it is the natural symptom of increasing national wealth. it may be said. therefore. the wages of labour vary more from place to place than the price of provisions. in order to defray his winter expense. The scanty maintenance of the labouring poor. as the price of provisions varies more from year to year than the wages of labour. is the natural symptom that things are at a stand. the money price of labour remains uniformly the same. that the wages of labour are nowhere in this country regulated by this lowest rate. The high price of provisions during these ten years past. the maintenance of a family is most expensive in winter. probably. These vary everywhere from year to year. to be evidently more than what is precisely necessary to enable the labourer to bring up a family. ought to save part of his summer wages. but by the quantity and supposed value of the work. and most other things which are sold by retail. or very nearly the same. they must be at their ease in times of moderate plenty. But. on account of the extraordinary expense of fuel. been accompanied with any sensible rise in the money price of labour. A slave. being highest when this expense is lowest. or one absolutely dependent on us for immediate subsistence. In order to satisfy ourselves upon this point. the 66 . between summer and winter wages. indeed. Summer wages are always highest. and in affluence in those of extraordinary cheapness. in Great Britain. the wages of labour seem. First. they do not exceed what is necessary to maintain his family through the whole year. A labourer. and that. in the present times. through the whole year. has not. Thirdly. frequently from month to month. in almost every part of Great Britain there is a distinction. therefore. indeed. But in many places. These. 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. through the greater part of the united kingdom. as it is the necessary effect. however. it seems evident that they are not regulated by what is necessary for this expense. would not be treated in this manner. In Great Britain. in some. Wages. which is consistent with common humanity. The prices of bread and butchers’ meat are generally the same. in many parts of the kingdom. If. It has.

Adam Smith way in which the labouring poor buy all things. whence Scotland receives almost every year very large supplies. it falls to eightpence. Tenpence may be reckoned its price in Edinburgh and its neighbourhood. and. they must be in affluence in the other. Grain. not only from one parish to another. are frequently a fourth or a fifth part. or cheaper. At a few miles distance. almost from one end of the world to the other. is dearer in Scotland than in England. however. as would soon reduce them more nearly to a level. twenty or five-and—twenty per cent. is not always sufficient to transport a man from one parish to another. Fourthly. 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. which. would necessarily occasion so great a transportation of the most bulky commodities. for reasons which I shall have occasion to explain hereafter. on the contrary. The quality of grain depends chiefly upon the quantity of flour or meal which it yields at the mill. it falls to fourteen and fifteen pence. is dearer in England than in Scotland. but from one end of the kingdom. the country to which it is brought. in general. After all that has been said of the levity and inconstancy of human nature. it appears evidently from experience. higher than at a few miles distance. than in England. it is generally cheaper in reality. indeed. they must be in affluence where it is highest. it seems. of all sorts of luggage. Oatmeal. The price of labour. that though often dearer in appearance. with those in the price of provisions. can maintain their families in the one part of the united kingdom. the variations in the price of labour not only do not correspond. This difference. in great towns than in the remoter parts of the country. but they are frequently quite opposite. much inferior to that of their neighbours of the same rank in England. or even to the measure of its weight. the country from which it comes. in the mode of 67 . English grain is so much superior to the Scotch. are generally fully as cheap. the food of the common people. At a few miles distance. the most difficult to be transported. the usual price of common labour through the greater part of the low country of Scotland. therefore. either in place or time. Such a difference of prices. therefore. But the wages of labour in a great town and its neighbourhood. But English corn must be sold dearer in Scotland. where it varies a good deal less than in England. If the labouring poor. which is. Eighteen pence a day may be reckoned the common price of labour in London and its neighbourhood. in this respect. or in proportion to its quality. If the labouring poor. or in proportion to the measure of its bulk. that man is. supplies the common people in Scotland with the greatest and the best part of their food. can maintain their families in those parts of the kingdom where the price of labour is lowest.

annual valuations made upon oath. very nearly still continues to be paid in some parts of the Highlands and Western islands. and probably in most other parts of Europe. It is not because one man keeps a coach. manufactures. If such direct proof could require any collateral evidence to confirm it. therefore. In the last century. probably on account of that neighbourhood. the pay of a foot soldier was the same as in the present times. In 1614. could bring up their families then. Lord-chief-justice Hales. During the course of the last century. They have risen. the most usual wages of common labour are now eight pence a-day. of the difference in their wages. though. I would observe. it is more difficult to ascertain how much. by a strange misapprehension. while his neighbour walks a-foot. the most usual day-wages of common labour through the greater part of Scotland were sixpence in summer. the rank of people from which foot soldiers are commonly drawn. If the labouring poor. and because the other is poor. sometimes a shilling. he walks a-foot. etc.The Wealth of Nations their subsistence. according to the actual state of the markets. it would naturally be regulated by the usual wages of common labourers. of all the different sorts of grain in every different county of Scotland. grain was dearer in both parts of the united kingdom than during that of the present. Ayrshire. they must be much more at their ease now. though. who wrote in the time of Charles II. It is in Scotland supported by the evidence of the public fiars. that the one is rich. In the last century. com- 68 . But though it is certain. must necessarily have increased with those improvements. and the other poor. Through the greater part of the Low country. Three shillings a-week. as well as in the present. Carron. but because the one is rich. about Edinburgh. accordingly. the same price. tenpence. the improvements of agriculture. I have frequently heard it represented as the cause. that in both parts of the united kingdom grain was somewhat dearer in the last century than in the present. taking one year with another. and fivepence in winter. is not the cause. if possible. still more decisive with regard to Scotland than with regard to England. that this has likewise been the case in France. on account of the greater variety of wages paid there in different places. When it was first established. began much earlier than in Scotland. and commerce. he keeps a coach. and the proof of it is. too. there is the clearest proof. considerably since that time. In England. With regard to France. eightpence a-day. This is a matter of fact which cannot now admit of any reasonable doubt. the wages of labour were higher in England than in Scotland. in the counties which border upon England. but the effect. it is equally certain that labour was much cheaper. and consequently its price. about Glasgow. and in a few other places where there has lately been a considerable rise in the demand for labour. The demand for labour.

and even of the onions. Both suppose the weekly expense of such families to be about twenty-pence a-head. one with another. increased perhaps in a still greater proportion than its money price. imported from Flanders. consisting of six persons. through the greater part of the kingdom. has become cheaper. and two not able. but according to the easiness or hardness of the masters. in Burn’s History of the Poor Laws. consumed in Great Britain. for example. The greater part of the apples. things which were formerly never raised but by the spade. 69 . Mr Gregory King. The real recompence of labour. Not only grain has become somewhat cheaper. from which the industrious poor derive an agreeable and wholesome variety of food. different prices being often paid at the same place and for the same sort of labour. Potatoes. in the last century. His calculation. two children able to do something. Where wages are not regulated by law. has. with cheaper and better instruments of trade. Both the pecuniary income and expense of such families have increased considerably since that time through the greater part of the kingdom. or twenty-six pounds a-year. though different in appearance. cabbages. and those in the manufactories of the coarser metals. they must make it up. it must be observed. he supposes. of three and a half persons. during the course of the present century. corresponds very nearly at bottom with that of Judge Hales. all that we can pretend to determine is. but many other things. in some places more. The price of labour. cost half the price which they used to do thirty or forty years ago. have become a great deal cheaper. though perhaps scarce anywhere so much as some exaggerated accounts of the present wages of labour have lately represented them to the public. cannot be ascertained very accurately anywhere. the father and mother. carrots. computed the ordinary income of labourers and out-servants to be fifteen pounds ayear to a family. whose skill in political arithmetic is so much extolled by Dr Davenant. not only according to the different abilities of the workman.}. The great improvements in the coarser manufactories of both linen and woollen cloth furnish the labourers with cheaper and better clothing. but which are now commonly raised by the plough. and in some less. If they cannot earn this by their labour. were. do not at present. at ten shillings a-week. He appears to have enquired very carefully into this subject {See his scheme for the maintenance of the poor.Adam Smith putes the necessary expense of a labourer’s family. too. though it has often pretended to do so. The same thing may be said of turnips. which he supposed to consist. All sort of garden stuff. what are the most usual. the real quantity of the necessaries and conveniencies of life which it can procure to the labourer. and experience seems to shew that law can never regulate them properly. therefore. either by begging or stealing. In 1688.

It is but equity. which satisfied them in former times. perhaps. become a good deal dearer. Servants. labourers. in the Highlands of Scotland. which the labouring poor an under any necessity of consuming. is very rare among those of inferior station. soon withers and dies. Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage. chiefly from the taxes which have been laid upon them. in the fair sex. The quantity of these. it seems. But what improves the circumstances of the greater part. they have never been able to supply it with drums and fifes. Poverty. It seems even to be favourable to generation. and frequently to destroy altogether. In some places. the powers of generation. and workmen of different kinds. while a pampered fine lady is often incapable of bearing any. though it does not prevent the generation. and is generally exhausted by two or three. clothe. besides. The tender plant is produced. does not always prevent. Soap. while it inflames. for a mother who has born twenty children not to have two alive. but its real recompence. and that the labouring poor will not now be contented with the same food. though it no doubt discourages. to the society? The answer seems at first abundantly plain. arrive at the age of thirteen or fourteen. clothed. so far from recruiting their regiment. is seldom seen anywhere than about a barrack of soldiers. and lodged. marriage. should have such a share of the produce of their own labour as to be themselves tolerably well fed. Luxury. is extremely unfavourable to the rearing of children. in many places before they are 70 . have. A half-starved Highland woman frequently bears more than twenty children. Several officers of great experience have assured me. that luxury extends itself even to the lowest ranks of the people. so frequent among women of fashion. the passion for enjoyment. It is not uncommon. that they who feed. or as an inconveniency. may convince us that it is not the money price of labour only. Barrenness. of which the far greater part of the members are poor and miserable. is so very small. that the increase in their price does not compensate the diminution in that of so many other things. that. and fermented liquors. leather. make up the far greater part of every great political society. salt. But poverty. Very few of them. and lodging. one half the children die before they are four years of age. The common complaint. A greater number of fine children. but in so cold a soil. and so severe a climate. and lodge the whole body of the people. seems always to weaken. from all the soldiers’ children that were born in it. No society can surely be flourishing and happy. can never be regarded as any inconveniency to the whole.The Wealth of Nations as well as with many agreeable and convenient pieces of household furniture. which has augmented. I have been frequently told. however. candles. however. clothing. indeed.

If the reward should at any time be less than what was requisite for this purpose. by enabling them to provide better for their children. the deficiency of hands would soon raise it. The liberal reward of labour. one with another to continue the race of journeymen 71 . and it can do so in no other way than by destroying a great part of the children which their fruitful marriages produce. and among the children brought up by parish charities. in Europe. necessarily regulates the production of men. and consequently to bring up a greater number.Adam Smith seven. is. The wear and tear of a slave. in North America. and if it should at any time be more. that it necessarily does this as nearly as possible in the proportion which the demand for labour requires. and so much overstocked in the other. the reward of labour must necessarily encourage in such a manner the marriage and multiplication of labourers. 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. as may enable them to supply that continually increasing demand by a continually increasing population. like that for any other commodity. is at the expense of his master. naturally tends to widen and extend those limits. and in China. In foundling hospitals. The market would be so much understocked with labour in the one case. and altogether stationary in the last. their excessive multiplication would soon lower it to this necessary rate. But in civilized society. and stops it when it advances too fast. as would soon force back its price to that proper rate which the circumstances of the society required. a smaller proportion of their children arrive at maturity. slow and gradual in the second. however. however will everywhere be found chiefly among the children of the common people. which renders it rapidly progressive in the first. and no species can ever multiply be yond it. too. This great mortality. It is in this manner that the demand for men. and in almost all places before they are nine or ten. The wear and tear of the latter. but that of a free servant is at his own expense. as much at the expense of his master as that of the former. it has been said. The wages paid to journeymen and servants of every kind must be such as may enable them. It is this demand which regulates and determines the state of propagation in all the different countries of the world. the mortality is still greater than among those of the common people. who cannot afford to tend them with the same care as those of better station. If this demand is continually increasing. quickens it when it goes on too slowly. Every species of animals naturally multiplies in proportion to the means of their subsistence. Though their marriages are generally more fruitful than those of people of fashion. It deserves to be remarked.

is by no means the case with the greater part. Where wages are high. it generally costs him much less than that of a slave. so it increases the industry of the common people. from the experience of all ages and nations. indeed. when they are 72 . as it is the effect of increasing wealth. according as the increasing. may happen to require. where the wages of common labour are so very high. the declining melancholy. naturally introduce themselves into the management of the former. Workmen. The progressive state is. as it encourages the propagation. than where they are low. New-York. diminishing. in England. But though the wear and tear of a free servant be equally at the expense of his master. animates him to exert that strength to the utmost. is to lament over the necessary cause and effect of the greatest public prosperity. if I may say so. while the society is advancing to the further acquisition. This. that the work done by freemen comes cheaper in the end than that performed by slaves. That destined for performing the same office with regard to the freeman is managed by the freeman himself. The fund destined for replacing or repairing. in ease and plenty. perhaps. is commonly managed by a negligent master or careless overseer. for example. that it is in the progressive state. accordingly. which. The liberal reward of labour. perhaps. and expeditious. It is found to do so even at Boston. A plentiful subsistence increases the bodily strength of the labourer. on the contrary. The wages of labour are the encouragement of industry. and Philadelphia. rather than when it has acquired its full complement of riches. the strict frugality and parsimonious attention of the poor as naturally establish themselves in that of the latter. and the comfortable hope of bettering his condition. the wear and tear of the slave. in the neighbourhood of great towns. will be idle the other three. It appears. accordingly. than in Scotland. To complain of it. seems to be the happiest and the most comfortable. Under such different management. however. that the condition of the labouring poor.The Wealth of Nations and servants. The disorders which generally prevail in the economy of the rich. therefore. It deserves to be remarked. Some workmen. in reality. we shall always find the workmen more active. improves in proportion to the encouragement it receives. It is hard in the stationary. I believe. the same purpose must require very different degrees of expense to execute it. like every other human quality. when they can earn in four days what will maintain them through the week. the cheerful and the hearty state to all the different orders of the society. the stationary is dull. so it is the cause of increasing population. or stationary demand of the society. and miserable in the declining state. of the great body of the people. The liberal reward of labour. than in remote country places. and of ending his days. diligent.

sometimes of ease only. Ramuzzini. wherever wages are higher than ordinary. continued for several days together is. Years of dearth. yet when soldiers have been employed in some particular sorts of work. and a scanty one quickens their industry. mutual emulation. when they are frequently sick than when they are generally in good health. is not supposed to last in his utmost vigour above eight years. relaxes. but that it should have this effect upon the greater part. Till this stipulation was made. but sometimes too of dissipation and diversion. and such as almost always. which. therefore. and even in country labour. not only preserves his health the longest. Something of the same kind happens in many other trades. and to hurt their health by excessive labour. their officers have frequently been obliged to stipulate with the undertaker. an eminent Italian physician. so much and so loudly complained of. if not restrained by force. are very apt to overwork themselves. either of mind or body. that the man who works so moderately. than when they are well fed. Great labour. which requires to be relieved by some indulgence. seems not very probable. is almost irresistible. Almost every class of artificers is subject to some peculiar infirmity occasioned by excessive application to their peculiar species of work. A plentiful subsistence. A carpenter in London. and the desire of greater gain. We do not reckon our soldiers the most industrious set of people among us. the consequences are often dangerous and sometimes fatal. and to ruin their health and constitution in a few years. cannot be well doubted. it has been concluded. as to be able to work constantly. in most men. in every sort of trade. workmen are generally more idle. 73 . If it is not complied with. as they generally are in manufactures. and liberally paid by the piece. and in dear times more industrious than ordinary. bring on the peculiar infirmity of the trade. during four days of the week.Adam Smith liberally paid by the piece. in which the workmen are paid by the piece. executes the greatest quantity of work. It will be found. than to animate the application of many of their workmen. is frequently the real cause of the idleness of the other three. If masters would always listen to the dictates of reason and humanity. frequently prompted them to overwork themselves. in the course of the year. or that men in general should work better when they are ill fed. that they should not be allowed to earn above a certain sum every day. when they are disheartened than when they are in good spirits. has written a particular book concerning such diseases. It is the call of nature. In cheap years it is pretended. they have frequently occasion rather to moderate. naturally followed by a great desire of relaxation. Excessive application. or by some strong necessity. I believe. sooner or later. That a little more plenty than ordinary may render some workmen idle. according to the rate at which they were paid. but. and in some other places.

however. by diminishing the funds destined for the maintenance of servants. two of the largest classes of masters. poor independent workmen frequently consume the little stock with which they had used to supply themselves with the materials of their work. and are obliged to become journeymen for subsistence. Landlords and farmers. in his separate independent state. In years of plenty. and trust their subsistence to what they can make by their own industry. In years of scarcity. A poor independent workman will generally be more industrious than even a journeyman who works by the piece. besides. and find them more humble and dependent in the former than in the latter. therefore. The price of labour. whether they do much or do little. Nothing can be more absurd.The Wealth of Nations it is to be observed. The rents of the one. than when they work for other people. and the profits of the other. therefore. which. servants frequently leave their masters. by increasing the fund which is destined for the maintenance of servants. and whose wages and maintenance are the same. 74 . The superiority of the independent workman over those servants who are hired by the month or by the year. is less liable to the temptations of bad company. and the wages of both servants and journeymen frequently sink in dear years. The one enjoys the whole produce of his own industry. disposes masters rather to diminish than to increase the number of those they have. More people want employment than easily get it. The demand for servants increases. The one. than by selling it at a low price in the market. Cheap years tend to increase the proportion of independent workmen to journeymen and servants of all kinds. In dear years. and dear years to diminish it. frequently rises in cheap years. therefore. which cannot fail to diminish the produce of their industry. is likely to be still greater. frequently make better bargains with their servants in dear than in cheap years. Masters of all sorts. expect more profit from their corn by maintaining a few more labouring servants. Farmers. the difficulty and uncertainty of subsistence make all such people eager to return to service. farmers especially. in large manufactories. to employ a greater number. the other shares it with his master. too. They naturally. have another reason for being pleased with dear years. encourages masters. upon such occasions. are generally among the common people years of sickness and mortality. so frequently ruin the morals of the other. depend very much upon the price of provisions. But the high price of provisions. But the same cheapness of provisions. while the number of those who offer to supply that demand diminishes. many are willing to take it upon lower terms than ordinary. than to imagine that men in general should work less when they work for themselves. commend the former as more favourable to industry.

therefore. in order to make clothes for themselves and their families. upon the whole. are growing manufactures. upon the prosperity or declension of other rival manufactures and upon the good or bad humour of their principal customers. declined. and it has continued to advance ever since. A great part of the extraordinary work. The women return to their parents. another year or great scarcity. after the repeal of the American stamp act. frequently makes no figure in those public registers. till 1766. The men-servants. and another of silk. become independent labourers. both manufactures. and least in the dearest years. and commonly spin. endeavours to shew that the poor do more work in cheap than in dear years. that the quantity and value of the goods made in all those three manufactories has generally been greater in cheap than in dear years. work for public sale. neither going backwards nor forwards. however. by comparing the quantity and value of the goods made upon those different occasions in three different manufactures. In that and the following year. which is probably done in cheap years. the Scotch manufactures made more than ordinary advances. I have not been able to observe that its variations have had any sensible connection with the dearness or cheapness of the seasons. but are employed by some of their neighbours in manufactures for family use. and that it has always been. it greatly exceeded what it had ever been before. All the three seem to be stationary manufactures. But in 1756. The produce of their labour. one of linen. and that of coarse woollens in the West Riding of Yorkshire. The produce of all great manufactures for distant sale must necessarily depend. are. Mr Messance. the accounts which have been published of their annual produce. indeed. The Yorkshire manufacture. and its produce did not rise to what it had been in 1755. receiver of the taillies in the election of St Etienne. upon peace or war. both which extend through the whole generality of Rouen. Even the independent workmen do not always. though their produce may vary somewhat from year to year. or which. appear to have declined very considerably. increasing both in quantity and value. It appears from his account. In 1740. which is copied from the registers of the public offices. carried on at Elbeuf. The manufacture of linen in Scotland. a year of great scarcity. of which the produce is generally. who leave their masters. not so much upon the dearness or cheapness of the seasons in the countries where they are carried on. greatest in the cheapest. one of coarse woollens.Adam Smith A French author of great knowledge and ingenuity. besides. Upon examining. never enters the public registers of manufactures. though with some variations. as upon the circumstances which affect the demand in the countries where they are consumed. of which the records are sometimes pub- 75 . indeed.

tends to raise the price of labour. It is because the demand for labour increases in years of sudden and extraordinary plenty. who want more workmen. in order to get them. there are funds in the hands of many of the employers of industry. who bid one against another. that the money price of labour sometimes rises in the one. which sometimes raises both the real and the money price of their labour. in part. we must not. The scarcity of a dear year.The Wealth of Nations lished with so much parade. and the price of the necessaries and conveniencies of life. Though the money price of labour. by diminishing the demand for labour. bid against one another. and diminishes in those of sudden and extraordinary scarcity. therefore. by increasing the demand. or to require an increasing. 76 . imagine that the price of provisions has no influence upon that of labour. a year of extraordinary scarcity. if the price of provisions was high. the demand for labour. In 1740. is sometimes high where the price of provisions is low. The plenty of a cheap year. and the money price of labour is determined by what is requisite for purchasing this quantity. which is probably. The money price of labour is necessarily regulated by two circumstances. and this extraordinary number cannot always be had. sufficient to maintain and employ a greater number of industrious people than had been employed the year before. or declining. as the high price of provisions tends to raise it. in order to get it. upon this account. In the succeeding years of plenty. determines the quantities of the necessaries and conveniencies of life which must be given to the labourer. The contrary of this happens in a year of sudden and extraordinary scarcity. or declining population. and sinks in the other. stationary. In a year of sudden and extraordinary plenty. stationary. the reason why the wages of labour are everywhere so much more steady and permanent than the price of provisions. it was more difficult to get labourers and servants. The demand for labour. according as it happens to be increasing. Those masters. those two opposite causes seem to counterbalance one another. The funds destined for employing industry are less than they had been the year before. tends to lower its price. which sometimes lowers both the real and the money price of labour. the demand continuing the same. In the ordinary variations of the prices of provisions. A considerable number of people are thrown out of employment. as the cheapness of provisions tends to lower it. it would be still higher. many people were willing to work for bare subsistence. and from which our merchants and manufacturers would often vainly pretend to announce the prosperity or declension of the greatest empires. but are frequently quite opposite. Through the variations in the price of labour not only do not always correspond with those in the price of provisions. on the contrary. therefore.

however. to make such a proper division and distribution of employment. The same cause. but by the good or bad fortune both of his 77 . their mutual competition naturally tends to lower its profit. and at a particular time. the increasing or declining state of the wealth of the society. that the increase of its price is more than compensated by the diminution of its quantity. that the person who carries on a particular trade. the same competition must produce the same effect in them all. More heads are occupied in inventing the most proper machinery for executing the work of each. tends to increase its productive powers. even in a particular place. therefore. not only by every variation of price in the commodities which he deals in. Profit is so very fluctuating. for the same reason. takes place. It is affected. The owner of the stock which employs a great number of labourers necessarily endeavours. and to make a smaller quantity of labour produce a greater quantity of work. therefore. the increase of stock. he endeavours to supply them with the best machinery which either he or they can think of. among those of a great society. which raises wages. CHAPTER IX PROFIT OFITS STOCK 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. by increasing that part of it which resolves itself into wages. even in this case. more likely to be invented. We can. cannot always tell you himself what is the average of his annual profit. it has already been observed. which raises the wages of labour. and it is. When the stocks of many rich merchants are turned into the same trade. The greater their number. and when there is a like increase of stock in all the different trades carried on in the same society. The increase of stock. What takes place among the labourers in a particular workhouse. both at home and abroad. For the same reason. but those causes affect the one and the other very differently.Adam Smith The increase in the wages of labour necessarily increases the price of many commodities. seldom determine more than what are the most usual wages. But even this can seldom be done with regard to the profits of stock. in consequence of these improvements. There me many commodities. for his own advantage. and so far tends to diminish their consumption. that they may be enabled to produce the greatest quantity of work possible. to ascertain what are the average wages of labour. come to be produced by so much less labour than before. the more they naturally divide themselves into different classes and subdivisions of employments. It is not easy. tends to lower profit. which.

and ten per cent. and in many other parts of the kingdom. not only from year to year. four. In the reign of Edward VI. to which goods. and by the 12th of Queen Anne.The Wealth of Nations rivals and of his customers. Since the time of Henry VIII. It was reduced to six per cent. like all others of the same kind. with any degree of precision. when it was restricted to eight per cent. with any degree of precision. we may be assured that the ordinary profits of stock must vary with it. The progress of interest. It varies. The statute of Henry VIII. soon after the Restoration. and to judge of what it may have been formerly. 8. five per cent. had sometimes been taken before that. or even when stored in a warehouse. The wages of labour have been continually increasing during the same period. it seems. therefore. the wealth and revenue of the country have been continually advancing. All these different statutory regulations seem to have been made with great propriety. religious zeal prohibited all interest. and people of good credit in the capital. the market rate of interest. and almost from hour to hour. are liable. wherever little can be made by it. must sink as it sinks. less will commonly he given for it. may lead us to form some notion of the progress of profit. but to have been going on faster and faster. that wherever a great deal can be made by the use of money. continued to be the legal rate of interest till the 21st of James I. what are or were the average profits of stock. but from day to day. To ascertain what is the average profit of all the different trades carried on in a great kingdom. a great deal will commonly be given for the use of it. Before the late war. Since the time of Queen Anne. But though it may be impossible to determine. either in the present or in ancient times. and probably rather increased than diminished the evil of usury. They seem not only to have been going on. as the usual market rate of interest varies in any country. They seem to have followed. all interest above ten per cent. or in remote periods of time. It may be laid down as a maxim. to five per cent. was revived by the 13th of Elizabeth. their pace seems rather to have been gradually accelerated than retarded. is said to have produced no effect. therefore. at three and a-half. must be much more difficult.. and. therefore. By the 37th of Henry VIII. was declared unlawful. and that. and rise as it rises. More. and four and a-half per cent. seems to have been rather above than below the market rate. in the greater part of the different branches of trade and manu- 78 . and by a thousand other accidents. Accordingly. and in the course of their progress. This prohibition. the government borrowed at three per cent. must be altogether impossible. cap. however. and not to have gone before. when carried either by sea or by land. or the rate at which people of good credit usually borrowed. some notion may be formed of them from the interest of money.

in order to get as many as they can. which raises the wages of labour. Even private bankers in Edinburgh give four per cent. must be somewhat greater. tom. or to three and a third per cent. Article Taux des Interests. a purpose which has sometimes been executed. the market rate is rather higher. and lowers the profits of stock. the people who have great stocks to employ. and though the legal rate of interest has in France frequently been lower than in England.Adam Smith factures. The profits of trade. are lower in Scotland than in England. it was raised to the thirtieth penny. which lowers the wages of labour. I have been assured by British merchants who had traded 79 . it has already been observed. People of the best credit there seldom borrow under five per cent. they have several very safe and easy methods of evading the law. and therefore bid against one another. is not only much poorer. the market rate has generally been higher. The wages of labour. therefore. but the steps by which it advances to a better condition. iii. though the legal rate of interest is the same as in England. it was again raised to the twentieth penny. during the administration of Mr Laverdy. The country. France is. In 1720. upon their promissory-notes. for there. in the present times. generally reduce the rate of profit in the former below what it is in the latter. or to five per cent. and the number of rich competitors. In 1725. p. The common rate of profit. in order to get employment. either in whole or in part may be demanded at pleasure. perhaps. It generally requires a greater stock to carry on any sort of trade in a great town than in a country village. the profits of stock have been diminishing. interest was reduced from the twentieth to the fiftieth penny. it was reduced to the twenty-fifth penny. The legal rate of interest in France has not during the course of the present century. of which payment. not so rich a country as England. Private bankers in London give no interest for the money which is deposited with them. too. seem to be much slower and more tardy. In 1766. There are few trades which cannot be carried on with a smaller stock in Scotland than in England. or from five to two per cent. and raises the profits of stock. In a thriving town. as in other countries. there is frequently not stock sufficient to employ all the people. In the remote parts of the country. The Abbé Terray raised it afterwards to the old rate of five per cent. The great stocks employed in every branch of trade. In Scotland. or to four per cent. for it is evidently advancing. been always regulated by the market rate {See Denisart. In 1724. who therefore bid against one another. The supposed purpose of many of those violent reductions of interest was to prepare the way for reducing that of the public debts.13}. But the wages of labour are generally higher in a great town than in a country village. frequently cannot get the number of workmen they want.

about forty millions. so may likewise the capital of a great nation. and it is no doubt upon this account. that many British subjects chuse rather to employ their capitals in a country where trade is in disgrace. on the other hand. or that it has increased beyond what they can employ with tolerable profit in the proper business of their own country. of which they still retain a very large share. however. and it may perhaps be true that some particular branches of it are so. that it is going backwards. but which nobody can possibly entertain with regard to Scotland. and yet that trade continue to increase too. is ill-founded. In our North American and West Indian colonies. or of a greater stock being employed in it than before. but these symptoms seem to indicate sufficiently that there is no general decay. is a richer country than England. it has been pretended by some people. The government there borrow at two per cent. and who saw it twenty or thirty years ago. it is said in the latter (in which. During the late war. France. In the different colonies. merchants are very apt to complain that trade decays. The wages of labour are lower in France than in England.The Wealth of Nations in both countries. it is well known. is decaying. though the diminution of profit is the natural effect of its prosperity. As the capital of a private man. though no doubt a richer country than Scotland. I suspect. are higher than in England. even with regard to France. are circumstances which no doubt demonstrate the redundancy of their stock. an opinion which I apprehend. When you go from Scotland to England. The contrast is still greater when you return from France. may increase beyond what he can employ in it. both the legal and the market rate of interest run from six to 80 . not only the wages of labour. and private people of good credit at three. the great sums which they lend to private people. and the Dutch. The wages of labour are said to be higher in Holland than in England. trade upon lower profits than any people in Europe. but they do not demonstrate that that business has decreased. but the interest of money. the Dutch gained the whole carrying trade of France. who sees the country now. in countries where the rate of interest is higher than in their own. there is a considerable exaggeration ). seems not to be going forward so fast. When profit diminishes. though acquired by a particular trade. The province of Holland. and consequently the profits of stock. It is a common and even a popular opinion in the country. are higher in France than in England. in proportion to the extent of its territory and the number of its people. the difference which you may remark between the dress and countenance of the common people in the one country and in the other. sufficiently indicates the difference in their condition. The trade of Holland. than in one where it is highly respected. The great property which they possess both in French and English funds.

except in the peculiar circumstances of new colonies. both the legal and the market rate of interest have been considerably reduced during the course of the present century. The stock of the country. Such land. afford to pay a very large interest. What they have. The great difficulty is to get that little. has partly been explained already. Stock employed in the purchase and improvement of such lands. not being sufficient for the whole accession of business which such acquisitions present to the different people among whom it is divided. but will be explained more fully hereafter. or of new branches of trade. is applied to those particular branches only which afford the greatest profit. too. and population. The acquisition of new territory. improvement. but to increase much faster than before. even in a country which is fast advancing in the acquisition of riches. though with small profits. As the colony increases. A new colony must always. and along the banks of navigable rivers. and after these are diminished. therefore. is frequently purchased at a price below the value even of its natural produce. The connection between the increase of stock and that of industry. the profits of stock gradually diminish. A great stock. consequently. are very liberally rewarded. Money. be more understocked in proportion to the extent of its territory. whatever be its profits. as with industrious individuals. High wages of labour and high profits of stock. and more underpeopled in proportion to the extent of its stock. It is with industrious nations. accordingly. When you have got a little. less profit can be made by the cultivation of what is inferior both in soil and situation. Part of what had before been employed in other trades. The wages of labour do not sink with the profits of stock. and. and less interest can be afforded for the stock which is so employed. it is often easy to get more. In the greater part of our colonies.Adam Smith eight percent. Those whom he can find. or of the demand for useful labour. The demand for labour increases with the increase of stock. who are advancing in the acquisition of riches. is 81 . stock may not only continue to increase. however. They have more land than they have stock to cultivate. have increased. interest has declined. perhaps. must yield a very large profit. 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. the land near the seashore. therefore. When the most fertile and best situated lands have been all occupied. than the greater part of other countries. says the proverb. generally increases faster than a small stock with great profits. is applied to the cultivation only of what is most fertile and most favourably situated. are things. and with them the interest of money. makes money. for some time. As riches. may sometimes raise the profits of stock. which scarce ever go together. in treating of the accumulation of stock.

the competition comes to be Jess than before. must necessarily have diminished the quantity employed in a great number of particular branches. therefore. they can sell them dearer. afford to borrow at a higher interest. that as the wages of labour are very low. and turned into some of the new and more profitable ones. before that. will sufficiently account for this. and the succeeding crop is mortgaged for the payment. By the wages of labour being lowered. Their goods cost them less. so such enormous usury must in its turn eat up the greater part of those profits. so the profits of stock are very high in those ruined countries. and they get more for them. For some time after the conclusion of the late war. or of the funds destined for the maintenance of industry. and four and a half per cent. I shall hereafter have occasion to mention the reasons which dispose me to believe that the capital stock of Great Britain was not diminished. who. fifty.The Wealth of Nations necessarily withdrawn from them. even by the enormous expense of the late war. had not been used to pay more than four. being augmented at both ends. The great accession both of territory and trade by our acquisitions in North America and the West Indies. In a country which had acquired that full complement of riches which the nature of its soil and climate. and its situation with 82 . and yields a greater profit to those who deal in them. can well afford a large interest. the profits must have been greater. who can. under the ruinous administration of their proconsuls. the owners of what stock remains in the society can bring their goods at less expense to market than before. As the profits which can afford such an interest must eat up almost the whole rent of the landlord. without supposing any diminution in the capital stock of the society. may satisfy us. The interest of money is proportionably so. so it raises the profits of stock. and sixty per cent. The market comes to be less fully supplied with many different sorts of goods. as we learn from the letters of Cicero. The virtuous Brutus lent money in Cyprus at eight-and-forty per cent. not only private people of the best credit. Their price necessarily rises more or less. The great fortunes so suddenly and so easily acquired in Bengal and the other British settlements in the East Indies. So great an accession of new business to be carried on by the old stock. but some of the greatest companies in London. commonly borrowed at five per cent. as it lowers the wages of labour. and less stock being employed in supplying the market than before. therefore. a usury of the same kind seems to have been common in the provinces. in which the competition being less. In all those old trades. Their profits. and consequently the interest of money. In Bengal. however. The diminution of the capital stock of the society. therefore. Before the fall of the Roman republic. money is frequently lent to the farmers at forty.

climate. would require. can never be equal to what the nature and extent of that business might admit. A defect in the law may sometimes raise the rate of interest considerably above what the condition of the country. cannot transact the same quantity of business which it might do with different laws and institutions. 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. allowed it to acquire. that number could never be augmented. to be pillaged and plundered at any time by the inferior mandarins. under the pretence of justice. the performance of contracts was left for many ages to the faith of the contracting 83 . enjoy a good deal of security. perhaps. and which admits the vessel of foreign nations into one or two of its ports only. which could. In a country fully stocked in proportion to all the business it had to transact. the oppression of the poor must establish the monopoly of the rich. advance no further. might admit of. though the rich. In every different branch. When the law does not enforce the performance of contracts. the quantity of stock employed in all the different branches of business transacted within it. and. who. A country which neglects or despises foreign commerce.Adam Smith respect to other countries. by engrossing the whole trade to themselves. no country has ever yet arrived at this degree of opulence. But this complement may be much inferior to what. or the owners of small capitals. probably. as to wealth or poverty. therefore. will be able to make very large profits. too. Twelve per cent. and the country being already fully peopled. and the ordinary profits of stock must be sufficient to afford this large interest. the ordinary profit as low as possible. and situation. The competition. would everywhere be as great. and had. but are liable. China seems to have been long stationary. In a country fully peopled in proportion to what either its territory could maintain. In a country. therefore. consequently. the nature of its soil. as great a quantity of stock would be employed in every particular branch as the nature and extent of the trade would admit. and which was not going backwards. is said to be the common interest of money in China. with other laws and institutions. The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts. it puts all borrowers nearly upon the same footing with bankrupts. both the wages of labour and the profits of stock would probably be very low. the poor. or the owners of large capitals. in better regulated countries. accordingly. or people of doubtful credit. Among the barbarous nations who overran the western provinces of the Roman empire. where. enjoy scarce any. or its stock employ. But. long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions.

so is it. perhaps. but partly from this. not only to what can be made by the use of it. 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. is exposed. and is even in some danger of being despised there. As it is ridiculous not to dress. not to be employed like other people. so does an idle man among men of business.The Wealth of Nations parties. as the ordinary rate of clear profit would be very small. The lowest ordinary rate of interest must. The highest ordinary rate of profit may be such as. eats up the whole of what should go to the rent of the land. where. but what is retained for compensating such extraordinary losses. In a country which had acquired its full complement of riches. be something more than sufficient to compensate the occasional losses to which lending. it does not prevent it. As a man of a civil profession seems awkward in a camp or a garrison. Many people must borrow. there was the greatest quantity of stock that could be employed in it. Were it not. may. The high rate of interest which took place in those ancient times. Montesquieu. in every particular branch of business. mere charity or friendship could be the only motives for lending. It is there unfashionable not to be a man of business. in the same manner. and leaves only what is sufficient to pay the labour of preparing and bringing them to market. in some measure. 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. and partly from the difficulty of recovering the money. The interest which the borrower can afford to pay is in proportion to the clear profit only. but to the difficulty and danger of evading the law. even with tolerable prudence. comprehends frequently not only this surplus. What is called gross profit. in the price of the greater part of commodities. and custom everywhere regulates fashion. and nobody will lend without such a consideration for the use of their money as is suitable. When the law prohibits interest altogether. Necessity makes it usual for almost every man to be so. be partly accounted for from this cause. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. not from their poverty. or engage in some sort of trade. 84 . The province of Holland seems to be approaching near to this state. It is this surplus only which is neat or clear profit. The courts of justice of their kings seldom intermeddled in it. according to the lowest rate at which labour can anywhere be paid. The high rate of interest among all Mahometan nations is accounted for by M. It would be necessary that almost every man should be a man of business.

Double interest is in Great Britain reckoned what the merchants call a good. both upon 85 . multiplied by the number of days during which they had been so employed. through all the different stages of the manufacture. That part of the price of the commodity which resolved itself into the wages. The employer of the spinners would require an additional five per cent. In countries which are fast advancing to riches. and more might be afforded if it were a good deal higher. in selling his flax. 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. In reality. moderate. perhaps. reasonable profit. rise only in arithmetical proportion to this rise of wages. In a country where the ordinary rate of clear profit is eight or ten per cent. terms which. necessarily varies as profit rises or falls. who. mean no more than a common and usual profit.Adam Smith the bare subsistence of the labourer. through all the different stages of the manufacture. wherever business is carried on with borrowed money. be very far from this rate. as it were. If. insures it to the lender. The stock is at the risk of the borrower. would. be both a sufficient profit upon the risk of this insurance. etc. in the linen manufacture. the weavers. upon the whole value of the materials and wages which he advanced to his workmen. The workman must always have been fed in some way or other while he was about the work. it may be reasonable that one half of it should go to interest. could not be afforded for interest. But if the profits of all the different employers of those working people should be raised five per cent. the wages of the different working people. compensate the high wages of labour. 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. in the price of many commodities. The employer of the flax dressers would. and a sufficient recompence for the trouble of employing the stock. rise in geometrical proportion to this rise of profit. that part of the price of the commodity which resolved itself into profit would. among whom the wages of labour may be lower. and four or five per cent. I apprehend. The profits of the trade which the servants of the East India Company carry on in Bengal may not. in the greater part of trades. If it were a good deal lower. perhaps. but the landlord may not always have been paid. require an additional five per cent. and enable those countries to sell as cheap as their less thriving neighbours. should all of them be advanced twopence a-day. one half of it. may. The proportion which the usual market rate of interest ought to bear to the ordinary rate of clear profit. the flax-dressers. the spinners. for example. or a good deal higher. the low rate of profit may. high profits tend much more to raise the price of work than high wages.

indeed. In raising the price of commodities. according to the different employments of labour and stock. They say nothing concerning the bad effects of high profits.The Wealth of Nations the advanced price of the flax. are everywhere in Europe extremely different. and where every man was perfectly free both to choose what occupation he thought proper. Every man’s interest would prompt him to seek the advantageous. that its advantages would soon return to the level of other employments. Our merchants and master manufacturers complain much of the bad effects of high wages in raising the price. And the employer of the weavers would require alike five per cent. If. and to shun the disadvantageous employment. there was any employment evidently either more or less advantageous than the rest. must. and thereby lessening the sale of their goods. in the same neighbourhood. would be the case in a society where things were left to follow their natural course. where there was perfect liberty. and upon the wages of the spinners. and to change it as often as he thought proper. at least. The rise of profit operates like compound interest. be either perfectly equal. CHAPTER X PROFIT OF WAGES AND PROFIT IN THE DIFEMPLOYMENTS LABOUR FERENT EMPLOYMENTS OF LABOUR STOCK AND STOCK THE WHOLE OF THE ADVANTAGES and disadvantages of the different employments of labour and stock. and so many would desert it in the other. they are silent with regard to the pernicious effects of their own gains. both upon the advanced price of the linen-yarn. in the same neighbourhood. the rise of wages operates in the same manner as simple interest does in the accumulation of debt. so many people would crowd into it in the one case. Pecuniary wages and profit. and upon the wages of the weavers. both at home and abroad. partly from certain 86 . they complain only of those of other people. or continually tending to equality. But this difference arises. This.

the honourableness or dishonourableness. they are generally under-recompensed. His work is much easier. A poacher is everywhere a very poor man in Great Britain. which nowhere leaves things at perfect liberty. and of that policy. His work is not always easier. the constancy or inconstancy of employment in them. the licensed hunter is 87 . all things considered. the agreeableness or disagreeableness of the employments themselves. does in eight. the cleanliness or dirtiness. is less dangerous. is. either really. and they pursue for pleasure what they once followed from necessity. The particular consideration of those circumstances. and above ground. A journeyman blacksmith.}. will divide this Chapter into two parts. better paid than any common trade whatever. The trade of a butcher is a brutal and an odious business. Thus in most places. but it is in most places more profitable than the greater part of common trades. make up for a small pecuniary gain in some employments. First. take the year round. that of public executioner. their most agreeable amusements. fifthly. Fishermen have been so since the time of Theocritus. who is only a labourer. and counterbalance a great one in others. Hunting and fishing. of the employment. The most detestable of all employments. secondly. The five following are the principal circumstances which. and is carried on in day-light. In the advanced state of society. the small or great trust which must be reposed in those who exercise them. Disgrace has the contrary effect. make up for a small pecuniary gain in some. become. as a collier. and. so far as I have been able to observe. A journeyman weaver earns less than a journeyman smith. fourthly. the easiness and cheapness. {See Idyllium xxi. as I shall endeavour to shew by and by. First. Inequalities arising from the nature of the employments ART themselves. the wages of labour vary with the ease or hardship. they are all very poor people who follow as a trade. In countries where the rigour of the law suffers no poachers. in its advanced state.Adam Smith circumstances in the employments themselves. the most important employments of mankind in the rude state of society. His work is not quite so dirty. or the difficulty and expense of learning them. therefore. which. a journeyman tailor earns less than a journeyman weaver. what other people pursue as a pastime. but it is much cleanlier. in proportion to the quantity of work done. and counterbalance a great one in others. Honour makes a great part of the reward of all honourable professions. and partly from the policy of Europe. PART I. In point of pecuniary gain. thirdly. seldom earns so much in twelve hours. though an artificer. or at least in the imagination of men. the probability or improbability of success in them.

of learning the business. artificers. and the produce of their labour. When any expensive machine is erected. They leave the other free and open to every body. as skilled labour. It is so perhaps in some cases. and who is exposed to the brutality of every drunkard. though with different degrees of rigour in different places. and. impose the necessity of an apprenticeship. over and above the usual wages of common labour. it must be expected. but in the greater part it is quite otherwise. the wages of labour vary with the easiness and cheapness. than can live comfortably by them. But there is scarce any common trade in which a small stock yields so great a profit. will replace the capital laid out upon it. with at least the ordinary profits of an equally valuable capital. comes always too cheap to market. exercises neither a very agreeable nor a very creditable business. regard being had to the very uncertain duration of human life. The keeper of an inn or tavern. be maintained by his parents or relations. in many cases. in the same manner as to the more certain duration of the machine. is founded upon this principle. The difference between the wages of skilled labour and those of common labour. They who cannot give money. Some money. must be clothed by them. Secondly. 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.The Wealth of Nations not in a much better condition. to afford any thing but the most scanty subsistence to the labourers. It must do this too in a reasonable time. on account of the usual 88 . who is never master of his own house. though it is not always advantageous to the master. the extraordinary work to be performed by it before it is worn out. may be compared to one of those expensive machines. is commonly given to the master for teaching him his trade. or become bound for more than the usual number of years. in proportion to its quantity. with at least the ordinary profits. The natural taste for those employments makes more people follow them. a consideration which. will replace to him the whole expense of his education. The policy of Europe considers the labour of all mechanics. in almost all cases. The laws and customs of Europe. A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skill. in order to qualify any person for exercising the one species of labour. The work which he learns to perform. Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labour. and manufacturers. the whole labour of the apprentice belongs to his master. therefore. give time. as I shall endeavour to shew by and by. During the continuance of the apprenticeship. In the meantime he must. it must be expected. or the difficulty and expense. too.

learns the more difficult parts of his business. in consequence. such as those of plain linen and woollen cloth. and his employment at all other times depends upon the occasional calls of his customers. In country labour. is more steady and uniform. and manufacturers. however. In the greater part of manufactures. and it is so accordingly. are nearly upon a level with the day-wages of common labourers. however. therefore. is still more tedious and expensive. He is liable. It seems evidently. to be frequently without any. ought to be much more liberal. and in the liberal professions. must not only maintain him while he is idle.Adam Smith idleness of apprentices. the labourer. should be somewhat higher than those of common labourers. the wages of labour in different occupations vary with the constancy or inconstancy of employment. accordingly. artificers. One branch. to be almost equally easy and equally difficult to learn. and the superiority of their earnings. of painters and sculptors. can work neither in hard frost nor in foul weather. What he earns. to be no greater than what is sufficient to compensate the superior expense of their education. in most places. The profits of stock seem to be very little affected by the easiness or difficulty of learning the trade in which it is employed. is generally very small: the daily or weekly earnings of journeymen in the more common sorts of manufactures. a journeyman maybe pretty sure of employment almost every day in the year that he is able to work. Where common labourers earn four or five shillings a-week. but make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. either of foreign or domestic trade. therefore. in most places. while he is employed. Employment is much more constant in some trades than in others. therefore. is always disadvantageous to the apprentice. computed at an average. Thirdly. The pecuniary recompence. in reality. It is reasonable. those of masons and bricklayers are generally from one-half more to double those wages. This superiority. on the contrary. 89 . masons and bricklayers frequently earn seven and eight. indeed. All the different ways in which stock is commonly employed in great towns seem. may be somewhat greater. A mason or bricklayer. taking the whole year together. Education in the ingenious arts. of lawyers and physicians. while he is employed about the easier. They are so accordingly. be considered as a superior rank of people. Where the computed earnings of the greater part of manufacturers. on the contrary. and his own labour maintains him through all the different stages of his employment. very little more than the day-wages of common labourers. and their superior gains make them. cannot well be a much more intricate business than another. that in Europe the wages of mechanics. Their employment. are.

earn their half-a-crown a-day. therefore. A collier working by the piece is supposed. the wages of journeymen tailors frequently scarce equal those of common labour. His employment. commonly earn double and triple the wages of common labour. they could earn from six to ten shillings a-day. as the compensation for the inconstancy of their employment. No species of skilled labour. in the same manner as day-labourers in other places. and dirtiness of the work. during the summer season. though eighteen pence may be reckoned the wages of common labour. A house-carpenter seems to exercise rather a nicer and a more ingenious trade than a mason. Six shillings are about four times the wages of com- 90 . the employment of the greater part of them is necessarily very inconstant.The Wealth of Nations where the former earn six. If colliers. almost equals that of colliers. and disagreeableness. in many parts of Scotland. When the inconstancy of employment is combined with the hardship. in hardship. and from week to week. be as constant as he pleases. accordingly. In London. His high wages arise altogether from the hardship. His employment may. disagreeableness. In most places. though it depends much. upon most occasions. does not depend so entirely upon the occasional calls of his customers. and. however. seems more easy to learn than that of masons and bricklayers. disagreeableness. but in London they are often many weeks without employment. the latter commonly earn fifteen and eighteen. it was found that. it ought not to seem unreasonable that coal-heavers should sometimes earn four and five times those wages. are not so much the recompence of their skill. from the unavoidable irregularity in the arrivals of coal-ships. the wages of the workmen always rise a good deal above their ordinary proportion to those of common labour. at the rate at which they were then paid. happen in a particular place not to do so. The lowest order of artificers. are said sometimes to be employed as bricklayers. In small towns and country villages. his day-wages are somewhat lower. and. at Newcastle. dirtiness. however. particularly during the summer. the wages of common labour. it sometimes raises the wages of the most common labour above those of the most skilful artificers. as in London. In the inquiry made into their condition a few years ago. and it is not liable to be interrupted by the weather. about three times. When the trades which generally afford constant employment. Chairmen in London. to earn commonly about double. therefore. almost all journeymen artificers are liable to be called upon and dismissed by their masters from day to day. The high wages of those workmen. and where the former earn nine and ten. and dirtiness of his work. The coal-heavers in London exercise a trade which. for it is not universally so. the latter often earn nine and ten. journeymen tailors.

and the credit which he may get from other people. as. therefore. Fifthly. is very different in different occupations. at near forty years of age. therefore. but the trader. but send him to study the law. and. When a person employs only his own stock in trade. those who draw the prizes ought to gain all that is lost by those who draw the blanks. We trust our health to the physician. our fortune. if they were more than sufficient to compensate all the disagreeable circumstances of the business. but of much superior ingenuity. begins to make something by his profession. probity and prudence. there is little doubt of his learning to make a pair of shoes. in the different branches of trade. the wages of labour vary according to the small or great trust which must be reposed in the workmen. on account of the precious materials with which they are entrusted. Fourthly. The different rates of profit. depends. as may give them that rank in the society which so important a trust requires. not only of his 91 . The long time and the great expense which must be laid out in their education. would quickly reduce them to a lower rate. but upon their opinion of his fortune. when combined with this circumstance. The constancy or inconstancy of employment cannot affect the ordinary profits of stock in any particular trade. there would soon be so great a number of competitors. the lowest common earnings may always be considered as those of the far greater number. ought to receive the retribution. it as at least twenty to one if he ever makes such proficiency as will enable him to live by the business. and sometimes our life and reputation. The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen.Adam Smith mon labour in London. In a profession. Their reward must be such. In the greatest part of mechanic trades success is almost certain. the wages of labour in different employments vary according to the probability or improbability of success in them. Put your son apprentice to a shoemaker. not only of equal. there is no trust. in a trade which has no exclusive privilege. The probability that any particular person shall ever be qualified for the employments to which he is educated. depends. necessarily enhance still further the price of their labour. where twenty fail for one that succeeds. to the lawyer and attorney. that one ought to gain all that should have been gained by the unsuccessful twenty. who. The counsellor at law. In a perfectly fair lottery. cannot arise from the different degrees of trust reposed in the traders. Such confidence could not safely be reposed in people of a very mean or low condition. not upon the trade. Whether the stock is or is not constantly employed. but very uncertain in the liberal professions. perhaps. not upon the nature of the trade. How extravagant soever those earnings may appear. in every particular trade.

secondly. and the latter as low. however. their real retribution is never equal to this. not only to pay for the time. notwithstanding these discouragements. but for the discredit which attends the employment of them as the means of subsistence. is. The lottery of the law. in which but few arrive at mediocrity. for the sake of gain. as a sort of public prostitution. what is likely to be annually gained. The pecuniary recompence. labour. in that of law. and you will find that their annual gains bear but a very small proportion to their annual expense. While we do the one. evidently under-recompensed. and what is likely to be annually spent. Those professions keep their level. First. not only in his own abilities. even though you rate the former as high.The Wealth of Nations own so tedious and expensive education. etc. But make the same computation with regard to all the counsellors and students of law. The public admiration which attends upon such distinguished abilities makes always a part of their reward. Should 92 . we must of necessity do the other. that we should despise their persons. by all the different workmen in any common trade. in all the different Inns of Court. such as that of shoemakers or weavers. It makes a considerable part of that reward in the profession of physic. To excel in any profession. with other occupations. and expense of acquiring the talents. whether from reason or prejudice. opera-singers. is considered. Compute. The exorbitant rewards of players. more or less. How extravagant soever the fees of counsellors at law may sometimes appear. however. is very far from being a perfectly fair lottery. the natural confidence which every man has. and that as well as many other liberal and honourable professions. the desire of the reputation which attends upon superior excellence in any of them. as can well be done. of which the possession commands a certain sort of admiration. but of that of more than twenty others. and. of those who exercise them in this manner. but in his own good fortune. opera-dancers. must be sufficient. therefore. a greater or smaller. in any particular place. and. are founded upon those two principles. therefore. in proportion as it is higher or lower in degree. and the discredit of employing them in this manner. in poetry and philosophy it makes almost the whole. but of which the exercise. in point of pecuniary gain. all the most generous and liberal spirits are eager to crowd into them. a still greater. It seems absurd at first sight. perhaps. Two different causes contribute to recommend them. or superior talents. and yet reward their talents with the most profuse liberality. who are never likely to make any thing by it. and you will find that the former sum will generally exceed the latter. There are some very agreeable and beautiful talents. the rarity and beauty of the talents. it is the most decisive mark of what is called genius.

and yet commonly sell in the market for twenty. who disdain to make this use of them. more than the chance is worth.Adam Smith the public opinion or prejudice ever alter with regard to such occupations. Such talents. advance. a trade at all. That the chance of loss is frequently undervalued. and the chance of loss is by most men under-valued. nor ever will see. if any thing could be made honourably by them. a more certain proposition in mathematics. There is no man living. when in tolerable health and spirits. a perfectly fair lottery. we may learn from the very moderate profit of insurers. than that the more tickets you adventure upon. More people would apply to them. the tickets are really not worth the price which is paid by the original subscribers. however. the nearer you approach to this certainty. to pay the expense of management. however. still more universal. valued more than it is worth. and sometimes forty per cent. who is in tolerable health and spirits. In order to have a better chance for some of the great prizes. their pecuniary recompence would quickly diminish. 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. the common premium must be sufficient to compensate the common losses. and you lose for certain. some people purchase several tickets. In a lottery in which no prize exceeded twenty pounds. The chance of gain is by every man more or less over-valued. and by scarce any man. we may learn from the universal success of lotteries. though they know that even that small sum is perhaps twenty or thirty per cent. The world neither ever saw. or one in which the whole gain compensated the whole loss. The over-weening conceit which the greater part of men have of their own abilities. There is not. and others. though in other respects it approached much nearer to a perfectly fair one than the common state lotteries. It is. either from fire or sea-risk. That the chance of gain is naturally overvalued. there would not be the same demand for tickets. In the state lotteries. who. are by no means so rare as imagined. because the undertaker could make nothing by it. Their absurd presumption in their own good fortune has been less taken notice of. Adventure upon all the tickets in the lottery. and the greater the number of your tickets. thirty. and the competition would quickly reduce the price of their labour. and many more are capable of acquiring them. has not some share of it. is an ancient evil remarked by the philosophers and moralists of all ages. and scarce ever valued more than it is worth. if possible. In order to make insurance. Many people possess them in great perfection. and to afford such a profit as might have been 93 . though far from being common. small shares in a still greater number. the more likely you are to be a loser.

Moderate. however. Without regarding the danger. and the proportion of ships insured to those not insured is much greater. evidently pays no more than the real value of the risk. Many sail. perhaps. their fatigues are much greater. and. nobody but himself sees any of his making any thing by the other. The contempt of risk. 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. or rather. be done without any imprudence. When a great company. The lottery of the sea is not altogether so disadvantageous as that of the army. but of mere thoughtless rashness. But though many people have made a little money by insurance. young volunteers never enlist so readily as at the beginning of a new war. perhaps. and the presumptuous hope of success. it is always without it. in most cases. This may sometimes. Their pay is less than that of common labourers. however. as it were. has twenty or thirty ships at sea. The person who pays no more than this. ninety-nine in a hundred. a thousand occasions of acquiring honour and distinction which never occur. however. These romantic hopes make the whole price of their blood. What a common soldier may lose is obvious enough. than in the eagerness of those of better fashion to enter into what are called the liberal professions. are in no period of life more active than at the age at which young people choose their professions. are not insured from fire. at all seasons. without any insurance. but if he enlists as a soldier. in the same manner as upon houses. and presumptuous contempt of the risk. The great admiral is less the object of public admiration than the great general. by which so many people make fortunes. many people despise the risk too much to care to pay it. very few have made a great fortune. they may. Other people see some chance of his making something by the one trade. in their youthful fancies.The Wealth of Nations drawn from an equal capital employed in any common trade. The neglect of insurance upon shipping. from this consideration alone. it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades. appears still more evidently in the readiness of the common people to enlist as soldiers. Taking the whole kingdom at an average. in actual service. or to go to sea. and the 94 . nineteen houses in twenty. however. they figure to themselves. is. or the lowest price at which he can reasonably expect to insure it. as the premium of insurance commonly is. and. or even a great merchant. How little the fear of misfortune is then capable of balancing the hope of good luck. the effect of no such nice calculation. and though they have scarce any chance of preferment. The son of a creditable labourer or artificer may frequently go to sea with his father’s consent. Sea-risk is more alarming to the greater part of people. and even in time of war.

and though it sometimes should. regulates that of all the rest. whom he must maintain out of his wages at home. and in the merchantservice. and though their whole life is one continual scene of hardship and danger. may not perhaps always exceed the difference between his pay and that of the common labourer. A common labourer in London. is supplied with provisions. indeed. seem frequently to recommend a trade to them. The distant prospect of hazards. while they remain in the condition of common sailors. the smaller ones must be more numerous. is more nearly upon a level than that of any other workmen in those different places. that is. the monthly pay of those who sail from all the different ports of Great Britain. should entice him to go to sea. As they are continually going from port to port. over and above his pay. and does 95 . at the rate of nine or ten shillings a week. they receive scarce any other recompence but the pleasure of exercising the one and of surmounting the other. and the rate of the port to and from which the greatest number sail. But the sailors who sail from the port of London. Though their skill and dexterity are much superior to that of almost any artificers. lest the sight of the ships. A tender mother. and the hope of those prizes is what principally recommends the trade. and the conversation and adventures of the sailors. At London. seldom earn above three or four shillings a month more than those who sail from the port of Leith. but he does not rank with him in the common estimation. however. Their wages are not greater than those of common labourers at the port which regulates the rate of seamen’s wages. more frequently get some fortune and preferment than common soldiers. By the rules of precedency. is often afraid to send her son to school at a sea-port town. The dangers and hair-breadth escapes of a life of adventures. the London price is from a guinea to about seven-andtwenty shillings the calendar month. In time of peace. because he cannot share it with his wife and family. Their value. Common sailors. from which we can hope to extricate ourselves by courage and address. The same difference runs through all the inferior degrees of preferment in both. the excess will not be clear gain to the sailor. As the great prizes in the lottery are less. a captain in the navy ranks with a colonel in the army. therefore. is not disagreeable to us.Adam Smith highest success in the sea service promises a less brilliant fortune and reputation than equal success in the land. The sailor. the port of London. yet for all this dexterity and skill. the wages of the greater part of the different classes of workmen are about double those of the same classes at Edinburgh. instead of disheartening young people. and the difference is frequently not so great. among the inferior ranks of people. for all those hardships and dangers. may earn in the calendar month from forty to five-and-forty shillings.

in the trade to North America. therefore. They are so accordingly. though. To compensate it completely. and to entice so many adventurers into those hazardous trades. in the profits of different trades. In point of agreeableness or disagreeableness. bankruptcies would not be more frequent in these than in other trades. and the risk or security with which it is attended. it does not. The difference between the earnings of a common labourer and those of a well employed lawyer or physician. Of the five circumstances. These are. two only affect the profits of stock. In all the different employments of stock. there is little or no difference in the far greater part of the different employments of stock. is the infallible road to bankruptcy. when the adventure succeeds. for example. The presumptuous hope of success seems to act here as upon all other occasions. and the ordinary profit of stock. The ordinary rate of profit always rises more or less with the risk. the wages of labour are always remarkably high. though it rises with the risk. In trades which are known to be very unwholesome. Unwholesomeness is a species of disagreeableness. that. but a great deal in those of labour. is generally a deception arising from our not always distinguishing what ought to be considered as wages. over and above the ordinary profits of stock. it is likewise the most profitable. from what ought to be considered as profit. It should follow from all this. 96 . the common returns ought. and its effects upon the wages of labour are to be ranked under that general head. than in that to Jamaica. It is otherwise with those in which courage and address can be of no avail. The most hazardous of all trades. the agreeableness or disagreeableness of the business. not only to make up for all occasional losses. but to afford a surplus profit to the adventurers. 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. is evidently much greater than that between the ordinary profits in any two different branches of trade. which vary the wages of labour. besides. seem to rise in proportion to it. that of a smuggler. But if the common returns were sufficient for all this. the ordinary rate of profit varies more or less with the certainty or uncertainty of the returns. or so as to compensate it completely. Bankruptcies are most frequent in the most hazardous trades. and in some branches of foreign trade than in others. that their competition reduces the profit below what is sufficient to compensate the risk. in general. less uncertain in the inland than in the foreign trade. in the same society or neighbourhood. does not always seem to rise in proportion to it.The Wealth of Nations not raise the wages of labour in any employment. of the same nature with the profit of insurers. however. The apparent difference.

The difference between the apparent profit of the retail and that of the wholesale trade. Though he should sell them. or at a thousand per cent. write. Thirty or forty pounds a year cannot be considered as too great a recompence for the labour of a person so accomplished. are there more nearly upon a level with those of the wholesale merchant. The man. in the only way in which he can charge them. while a considerable wholesale merchant in the same place will scarce make eight or ten per cent. ought to be suitable to his skill and his trust. upon a stock of ten thousand. and the trust which is reposed in him is of much greater importance. In a small sea-port town. qualities. but live by it suitably to the qualifications which it requires. may not perhaps cost him above thirty or forty pounds. charged. for three or four hundred. must not only live by his trade. 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. profit. which nothing hinders him from becoming but the want of a sufficient capital. and frequently much cheaper. however. a little grocer will make forty or fifty per cent. He is the physician of the poor in all cases. the wages of the grocer’s labour must be a very trifling addition to the real profits of so great a stock. will sell in a year. than the ordinary profits of stock. is much less in the capital than in small towns and country villages. and account and must be a tolerable judge. The greater part of the apparent profit is real wages disguised in the garb of profit. He must have all the knowledge. in the capital than in 97 . therefore. that is necessary for a great merchant. The apparent profits of the wealthy retailer. His reward. This great apparent profit. perhaps. therefore. in short. too. real wages. upon the price of his drugs. denoting something uncommonly extravagant. Where ten thousand pounds can be employed in the grocery trade.Adam Smith Apothecaries’ profit is become a bye-word. The skill of an apothecary is a much nicer and more delicate matter than that of any artificer whatever. Deduct this from the seemingly great profits of his capital. is frequently no more than the reasonable wages of labour. It is upon this account that goods sold by retail are generally as cheap. and it arises generally from the price at which he sells his drugs. and the markets where they are to be had cheapest. therefore. Besides possessing a little capital. of perhaps fifty or sixty different sorts of goods. But the whole drugs which the best employed apothecary in a large market-town. their prices. this may frequently be no more than the reasonable wages of his labour. he must be able to read. The greater part of the apparent profit is. and little more will remain. however. in this case too. upon a stock of a single hundred pounds. and of the rich when the distress or danger is not very great.

In such places. tobacco. and he quits it when he foresees that its profits are 98 . that great fortunes are made. In small towns and country villages. therefore. and the credit of a frugal and thriving man increases much faster than his stock. but in consequence of a long life of industry. diminishes apparent profit. frugality. and though the profit is less. The prime cost of bread and butchers’ meat is greater in the great town than in the country village. or well-known branch of business. therefore they are not always cheaper there. established. are generally less in the capital than in small towns and country villages. bread and butchers’ meat frequently as cheap. indeed. as the greater part of them must be brought from a much greater distance. and the sum or amount of his profits is in proportion to the extent of his trade. This diminution of the one and increase of the other. are generally much cheaper. but often equally cheap. even in great towns. in most cases. on account of the narrowness of the market. on the contrary. It seldom happens. it increases prime cost. when he foresees that it is likely to lie more than commonly profitable. The extent of the market. both in the wholesale and retail trade. yet great fortunes are frequently acquired from small beginnings in the former. by giving employment to greater stocks. by any one regular. they are cheapest where the least profit is charged upon them. established. nearly to counterbalance one another. It costs no more to bring grocery goods to the great town than to the country village.The Wealth of Nations small towns and country villages. trade cannot always be extended as stock extends. and a sugar. though the rate of a particular person’s profits may be very high. being the same in both places. and well-known branch of business. nor consequently that of his annual accumulation. but by requiring supplies from a greater distance. the same cause which diminishes apparent profit. and a wine merchant the next. and his annual accumulation in proportion to the amount of his profits. for example. In great towns. Grocery goods. His trade is extended in proportion to the amount of both. are sometimes made in such places. The speculative merchant exercises no one regular. He is a corn merchant this year. by what is called the trade of speculation. Sudden fortunes. therefore. however. or tea merchant the year after. The prime cost of grocery goods. trade can be extended as stock increases. and scarce ever in the latter. In such articles as bread and butchers’ meat. and attention. the sum or amount of them can never be very great. seem. Though the profits of stock. increases prime cost. which is probably the reason that. those of bread and butchers’ meat are generally very nearly the same through the greater part of it. He enters into every trade. but it costs a great deal more to bring corn and cattle. though the prices of corn and cattle are commonly very different in different parts of the kingdom.

His profits and losses. are continually changing. than in those of the latter kind. real or imaginary. It is only in places of the most extensive commerce and correspondence that the intelligence requisite for it can be had. Sheffield in those of the latter. Where all other circumstances are equal. When a projector attempts to establish a new manufacture. Manufactures for which the demand arises altogether from fashion and fancy. The establishment of any new manufacture. This equality can take place only in those employments which are well known. and the same form or fabric may continue in demand for whole centuries together. on the contrary. The nature of those circumstances is such. In order. but is just as likely to lose one by two or three unsuccessful ones. secondly. they must be the sole or principal employments of those who occupy them. First. therefore. and counterbalance a great one in others. can bear no regular proportion to those of any one established and well-known branch of business. The wages of labour. or what may be called their natural state. and the wages of labour in those two different places are said to be suitable to this difference in the nature of their manufactures. A bold adventurer may sometimes acquire a considerable fortune by two or three successful speculations. Those. and a considerable time must pass away before he can venture to reduce them to the common level. are less liable to change. by higher wages than they can either earn in their own trades. This trade can be carried on nowhere but in great towns. that they make up for a small pecuniary gain in some. The five circumstances above mentioned. or of any new practice in agriculture.Adam Smith likely to return to the level of other trades. even where there is the most perfect freedom. occasion none in the whole of the advantages and disadvantages. Birmingham deals chiefly in manufactures of the former kind. wages are generally higher in new than in old trades. they must be in their ordinary. First the employments must be well known and long established in the neighbourhood. thirdly. he must at first entice his workmen from other employments. or than the nature of his work would otherwise require. however. for which the demand arises chiefly from use or necessity. of the different employments of either. though they occasion considerable inequalities in the wages of labour and profits of stock. that this equality may take place in the whole of their advantages or disadvantages. and have been long established in the neighbourhood. are likely to be higher in manufactures of the former. of any new branch of commerce. therefore. is always a speculation from which the projector promises himself extraordi- 99 . and. and seldom last long enough to be considered as old established manufactures. three things are requisite.

These profits sometimes are very great. The profits of stock vary with the price of the commodities in which it is employed. But as the demand for most sorts of plain linen and woollen cloth is pretty uniform. in general. When the trade or practice becomes thoroughly established and well known. they bear no regular proportion to those of other old trades in the neighbourhood. when forty or fifty thousand sailors are forced from the merchant service into that of the king. therefore. but some are much more so than others. The demand for almost every different species of labour is sometimes greater. rather than quit their own trade. can arise only from some accidental variation in the demand. or what may be called the natural state of those employments. be equal to the average annual consumption. perhaps. and as it falls they sink below it. on the contrary. the quantity of industry annually employed is necessarily regulated by the annual demand. the advantages of the employment rise above. or very nearly the same quantity of commodities. In a decaying manufacture. and sometimes less than usual. in such a manner that the average annual produce may. many workmen. Secondly. and sometimes. The variations in the market price of such commodities. A public mourning raises the price of black cloth. the same number of hands will annually work up very nearly the same quantity of linen and woollen cloth. In time of war. in the other they fall below the common level. In all commodities which are produced by human industry. they are commonly at first very high. for example. commonly rise from a guinea and seven-and-twenty shillings to forty shilling’s and three pounds a-month.The Wealth of Nations nary profits. they are quite otherwise. All commodities are more or less liable to variations of price. and wages rise with the demand. the same quantity of industry will always produce the same. upon such occasions. the profits of at least some part of the stock that is employed in bringing it to market. more frequently. this equality in the whole of the advantages and disadvantages of the different employments of labour and stock. so is likewise the price. In some employments. The demand for country labour is greater at hay-time and harvest than during the greater part of the year. If the project succeeds. the demand for sailors to merchant ships necessarily rises with their scarcity. and their wages. it has already been observed. rise above their proper level. are contented with smaller wages than would otherwise be suitable to the nature of their employment. In the linen or woollen manufactures. As the price of any commodity rises above the ordinary or average rate. In the one case. but. But there are other employments in which the same quantity of industry will not always 100 . can take place only in the ordinary. the competition reduces them to the level of other trades. as nearly as possible.

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. and to sell them when it is likely to fall. The operations of the speculative merchant are principally employed about such commodities. which does not occupy the greater part of his time. produce very different quantities of corn. etc. a small garden for pot-herbs. this equality in the whole of the advantages and disadvantages of the different employments of labour and stock. though they were more frequent some years ago than they are now. an acre or two of bad arable land. and who have taken pleasure in representing both as wonderfully low. The daily or weekly recompence which such labourers occasionally received from their masters. can take place only in such as are the sole or principal employments of those who occupy them. he gives them. When such occupiers were more numerous than they are at present. When their master has occasion for their labour. worth about sixteen pence sterling. in many parts of Scotland. varies not only with the variations of demand. hops. There still subsists. The produce of such labour comes frequently cheaper to mar- 101 . they seem to have been common all over Europe. The price of such commodities. and to have wrought for less wages than other labourers. Their small tenement made a considerable part of it. therefore. When a person derives his subsistence from one employment. This daily or weekly recompence. During a great part of the year. in different years. was evidently not the whole price of their labour. as much grass as will feed a cow. and worse inhabited. The same quantity of industry. The usual reward which they receive from their master is a house. two pecks of oatmeal a-week. however.Adam Smith produce the same quantity of commodities. they are said to have been willing to give their spare time for a very small recompence to any body. wine. In countries ill cultivated. will. They are a sort of out-servants of the landlords and farmers. and. and the cultivation of their own little possession is not sufficient to occupy the time which is left at their own disposal. sugar tobacco. besides. for example. but the profit of some of the dealers must necessarily fluctuate with the price of the commodities. a set of people called cottars or cottagers. Thirdly. 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. perhaps. but with the much greater and more frequent variations of quantity. In ancient times. he has little or no occasion for their labour. seems to have been considered as the whole of it. by many writers who have collected the prices of labour and provisions in ancient times. He endeavours to buy them up when he foresees that their price is likely to rise. and is consequently extremely fluctuating.

At Lerwick. who are chiefly hired for other purposes. In France. Instances of people living by one employment. in which house-rent is dearer than in London. the market is generally so extensive. The spinning of linen yarn is carried on in Scotland nearly in the same way as the knitting of stockings. More than a thousand pair of Shetland stockings are annually imported into Leith. They are the work of servants and labourers who derive the principal part of their subsistence from some other employment. she is a good spinner who can earn twentypence a-week. and yet I know no capital in which a furnished apartment can be hired so cheap. however. is to be found in the capital of a very rich one. A dwelling-house in England means every thing that is contained under the same roof. every landlord acting the part of a monopolist. Stockings. the small capital of the Shetland islands. the dearness of labour. that any one trade is sufficient to employ the whole labour and stock of those who occupy it. In the same islands. In most parts of Scotland. the dearness of all the materials of building. they knit worsted stockings to the value of a guinea a pair and upwards. and many other parts of Europe.The Wealth of Nations ket than would otherwise be suitable to its nature. at the same time. In opulent countries. is a common price of common labour. of which the price is from fivepence to seven-pence a pair. Lodging is not only much cheaper in London than in Paris. The following instance. and. which oblige every master of a family to hire a whole house from top to bottom. deriving some little advantage from another. The dearness of house-rent in London arises. I have been assured. what may seem extraordinary. which must generally be brought from a great distance. above all. but it arises in part from the peculiar manners and customs of the people. who endeavour to get their livelihood by either of those trades. are knit much cheaper than they can anywhere be wrought upon the loom. than can be had for a hundred of the best in the country. A tradesman in London is obliged to hire a whole house in that part of the town where his customers live. in many parts of Scotland. and. His shop is upon the ground floor. I believe. it is much cheaper than in Edinburgh. by servants. not only from those causes which render it dear in all great capitals. and frequently exacting a higher rent for a single acre of bad land in a town. There is no city in Europe. and he and his family sleep in the garret. it frequently means no more than a single storey. occur chiefly in pour countries. the dearness of ground-rent. Scotland. of the same degree of goodness. of something of the same kind. and he endeavours to pay a part of his house-rent by letting the two middle 102 . and. the dearness of house-rent is the cause of the cheapness of lodging. They earn but a very scanty subsistence. tenpence a-day.

and. but as effectually. thirdly. no master weaver can have more than two apprentices. under pain of forfeiting. and half to him who shall 103 . by not leaving things at perfect liberty. people who let lodgings have commonly no other means of subsistence. under a master properly qualified. The bye-laws of the corporation regulate sometimes the number of apprentices which any master is allowed to have. 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. half to the king. and almost always the number of years which each apprentice is obliged to serve. even where there is the most perfect liberty. both from employment to employment. five pounds a-month. The limitation of the number of apprentices restrains it directly. A long term of apprenticeship restrains it more indirectly. by a bye-law of the corporation. by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. in the town where it is established. and from place to place. 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. Whereas at Paris and Edinburgh. The exclusive privileges of corporations are the principal means it makes use of for this purpose. by increasing it in others beyond what it naturally would be. Such are the inequalities in the whole of the advantages and disadvantages of the different employments of labour and stock. by increasing the expense of education. by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them. First. no master cutler can have more than one apprentice at a time. ART PART II. and not by his lodgers.Adam Smith storeys to lodgers. In Norfolk and Norwich. and the price of the lodging must pay. or in the English plantations. secondly. It does this chiefly in the three following ways. The exclusive privilege of an incorporated trade necessarily restrains the competition. but the whole expense of the family. In Sheffield. which the defect of any of the three requisites above mentioned must occasion. — Inequalities occasioned by the Policy of Europe. not only the rent of the house. First. But the policy of Europe. to those who are free of the trade. is commonly the necessary requisite for obtaining this freedom. He expects to maintain his family by his trade. No master hatter can have more than two apprentices anywhere in England. To have served an apprenticeship in the town. by obstructing the free circulation of labour and stock. under pain of forfeiting five pounds a-month to the king. occasions other inequalities of much greater importance.

As to have wrought seven years under a master properly qualified. all over Europe. and to have himself apprentices in a common trade. or doctor (words anciently synonymous). appears evidently to have been copied from the term of apprenticeship in common trades. The silk-weavers in London had scarce been incorporated a year. that no person should. when they enacted a bye-law. the university of tailors. exercise any trade. were first established. is the proper Latin name for any incorporation whatever. unless he had previously served to it an apprenticeship of seven years at least. 104 . The university of smiths. at that time exercised in England. too. and the number of people frequently not being sufficient to supply each with a particular set of hands. By the 5th of Elizabeth. the operation of this statute has been limited to those trades which were established in England before the 5th of Elizabeth. they being necessary for the conveniency of the inhabitants. the usual term established for the duration of apprenticeships in the greater part of incorporated trades. in country villages. It required a particular act of parliament to rescind this bye-law. For though the words of the statute are very general. was necessary to entitle him to become a master. By a strict interpretation of the words. for the future. and to have scholars or apprentices (words likewise originally synonymous) to study under him. which.The Wealth of Nations sue in any court of record. indeed. Seven years seem anciently to have been. and seem plainly to include the whole kingdom. When those particular incorporations. by interpretation its operation has been limited to market towns. in order to entitle my person to become a master. Both these regulations. and has never been extended to such as have been introduced since that time. though they have been confirmed by a public law of the kingdom. was necessary. in order to obtain the degree of master of arts. commonly called the Statute of Apprenticeship. and what before had been the bye-law of many particular corporations. in the liberal arts. All such incorporations were anciently called universities. craft. became in England the general and public law of all trades carried on in market towns. This limitation has given occasion to several distinctions. though he has not served a seven years apprenticeship to each. restraining any master from having more than two apprentices at a time. or mystery. of which the incorporations were much more ancient. so to have studied seven years under a master properly qualified. it was enacted. are evidently dictated by the same corporation-spirit which enacted the bye-law of Sheffield. which are now peculiarly called universities. are expressions which we commonly meet with in the old charters of ancient towns. which. it having been held that. a person may exercise several different trades. teacher. etc. the term of years which it was necessary to study.

so it is the most sacred and inviolable. I know of no country in Europe. he must. both of the workman. not within the statute. To judge whether he is fit to be employed. even in some very nice trades. and Wolverhampton. Three years is. five years is the term required in a great number. as it is the original foundation of all other property. a common term of apprenticeship. there is no general law which regulates universally the duration of apprenticeships. before any person can be qualified to exercise the trade as a master. not having been exercised in England before the 5th of Elizabeth. But a wheel-wright. in general. The affected anxiety of the lawgiver. without injury to his neighbour. that a coach-maker can neither himself make nor employ journeymen to make his coachwheels. etc. The term is different in different corporations. lest they should em- 105 . and of those who might be disposed to employ him. as well as all other artificers subservient to them. Where it is long. a part of it may generally be redeemed by paying a small fine. and to hinder him from employing this strength and dexterity in what manner he thinks proper. all persons are free to sell butchers’ meat upon any lawful day of the week. The manufactures of Manchester. is a plain violation of this most sacred property. During this latter term. too. because not exercised in England at the time when it was made. whose interest it so much concerns. As it hinders the one from working at what he thinks proper. In Scotland. the principal manufactures of the country. In Paris. may either himself make or employ journeymen to make coaches. but must buy them of a master wheel-wright. may surely be trusted to the discretion of the employers. wheelmakers. reel-makers. but. he is called the companion of his master.Adam Smith considered as rules of police. a very small fine is sufficient to purchase the freedom of any corporation. Birmingham. upon this account. The weavers of linen and hempen cloth. though he has never served an apprenticeship to a coachmaker. for example. in which corporation laws are so little oppressive. In all towns-corporate. In France. The property which every man has in his own labour. and. this latter trade having been exercised in England before the 5th of Elizabeth. are many of them. the duration of apprenticeships is different in different towns and in different trades. In most towns. serve five years more as a journeyman. may exercise their trades in any town-corporate without paying any fine. appear as foolish as can well be imagined. so it hinders the others from employing whom they think proper. the trade of a coachmaker not being within the statute. It has been adjudged. It is a manifest encroachment upon the just liberty. in Scotland. in many of them. The patrimony of a poor man lies in the strength and dexterity of his hands. and the term itself is called his companionship.

Long apprenticeships are altogether unnecessary. when for a long time he receives no benefit from it. The first invention of such beautiful machines. how to apply the instruments. When this is done. An apprentice is likely to be idle. during a term of years. and almost always is so. is evidently as impertinent as it is oppressive. and even that of some of the instruments employed in making them. A young man naturally conceives an aversion to labour. I know no Greek or Latin word (I might venture. which are much superior to common trades. the sweets of labour consist altogether in the recompence of labour. The Roman law is perfectly silent with regard to them. The boys who are put out apprentices from public charities are generally bound for more than the usual number of years. The sterling mark upon plate. give the purchaser much greater security than any statute of apprenticeship. and how to construct the machines. perhaps those of a few days might be 106 . He generally looks at these. But when both have been fairly invented. in the completest manner. Quite different regulations are necessary to prevent this abuse. The institution of long apprenticeships has no tendency to form young people to industry. and the stamps upon linen and woollen cloth. but never thinks it worth while to enquire whether the workman had served a seven years apprenticeship. and may justly be considered as among the happiest efforts of human ingenuity.The Wealth of Nations ploy an improper person. it is generally the effect of fraud. They who are soonest in a condition to enjoy the sweets of it. to assert that there is none) which expresses the idea we now annex to the word apprentice. A journeyman who works by the piece is likely to be industrious. a servant bound to work at a particular trade for the benefit of a master. indeed. and they generally turn out very idle and worthless. cannot well require more than the lessons of a few weeks. and are well understood. and not of inability. Apprenticeships were altogether unknown to the ancients. The arts. The institution of long apprenticeships can give no security that insufficient workmanship shall not frequently be exposed to public sale. upon condition that the master shall teach him that trade. and to acquire the early habit of industry. such as those of making clocks and watches. must no doubt have been the work of deep thought and long time. The reciprocal duties of master and apprentice make a considerable article in every modern code. and the longest apprenticeship can give no security against fraud. to explain to any young man. because he has no immediate interest to be otherwise. are likely soonest to conceive a relish for it. In the inferior employments. contain no such mystery as to require a long course of instruction. because he derives a benefit from every exertion of his industry. I believe.

would all be losers. the work of all artificers coming in this way much cheaper to market. that all corporations. and the greater part of corporation laws have been established. if from the beginning he wrought as a journeyman. for seven years together. as they commonly express it. such adulterine guilds.Adam Smith sufficient. and paying in his turn for the materials which he might sometimes spoil through awkwardness and inexperience. would be a loser. perhaps. and consequently of wages and profit. The dexterity of hand. indeed. and whatever discipline was exercised over them. being paid in proportion to the little work which he could execute. with their own particular 107 . a charter from the king was likewise necessary. even in common trades. were not always disfranchised upon that account. 26 etc. but from that greater incorporation of which those subordinate ones were only parts or members. The government of towns-corporate was altogether in the hands of traders and artificers.}. would be much less than at present. His education would generally in this way be more effectual. But this prerogative of the crown seems to have been reserved rather for extorting money from the subject. In order to erect a corporation. in many parts of Europe. those of a few days might certainly be sufficient. and always less tedious and expensive. but obliged to fine annually to the king. and his wages. for permission to exercise their usurped privileges {See Madox Firma Burgi p. which he now saves. by restraining that free competition which would most certainly occasion it. Upon paying a fine to the king. In the common mechanic trades. belonged to the town-corporate in which they were established. no other authority in ancient times was requisite. The master. The immediate inspection of all corporations. not from the king. cannot be acquired without much practice and experience. when he came to be a complete workman. The trades. But a young man would practice with much more diligence and attention. and when any particular class of artificers or traders thought proper to act as a corporation. the charter seems generally to have been readily granted. without a charter. In the end. He would lose all the wages of the apprentice. indeed. the apprentice himself would be a loser. as they were called. to prevent the market from being overstocked. In England. as well as the wages of workmen. but that of the town-corporate in which it was established. proceeded commonly. the mysteries. The same increase of competition would reduce the profits of the masters. and it was the manifest interest of every particular class of them. It is to prevent his reduction of price. than for the defence of the common liberty against such oppressive monopolies. the crafts. and of the bye-laws which they might think proper to enact for their own government. indeed. In a trade so easily learnt he would have more competitors. But the public would be a gainer.

and in the dealings of the different classes within the town with one another. none of them were losers by these regulations. the original price of those goods is augmented by the wages of the carriers or sailors. The whole annual produce of the labour of the society is annually divided between those two different sets of people. indeed. and the profits of their different employers. It pays for these chiefly in two ways. with a smaller quantity of its labour. in which case. But. the cheaper the former are bought. therefore. is the quantity of manufactures and other goods annually exported from it. by sending back to the country a part of those materials wrought up and manufactured. consists the advantage which the town makes by its manufactures. in which case. either of other countries. tend to increase those wages and profits beyond what they otherwise: would be. and labourers. The price which the town really pays for the provisions and materials annually imported into it. The industry of 108 . they were enabled to sell their own just as much dearer. and break down that natural equality which would otherwise take place in the commerce which is carried on between them. in recompence. or of distant parts of the same country. In what is gained upon the first of those branches of commerce. by sending to it a part both of the rude and manufactured produce. each class was obliged to buy the goods they had occasion for from every other within the town. somewhat dearer than they otherwise might have done. provided it was allowed to do so. By means of those regulations. The wages of the workmen. so far it was as broad as long. Every town draws its whole subsistence. In consequence of such regulations. the advantage of its inland and foreign trade. their price is augmented by the wages of the workmen. the produce of a greater quantity of the labour of the country. Each class was eager to establish regulations proper for this purpose.The Wealth of Nations species of industry. They give the traders and artificers in the town an advantage over the landlords. which is in reality to keep it always understocked. and a less to those of ’ the country. in what is gained upon the second. and in these latter dealings consist the whole trade which supports and enriches every town. so that. as they say. from the: country. Whatever regulations. and the profits of their masters or immediate employers. make up the whole of what is gained upon both. But in their dealings with the country they were all great gainers. and all the materials of its industry. tend to enable the town to purchase. a greater share of it is given to the inhabitants of the town than would otherwise fall to them. in the country. The dearer the latter are sold. and. too. was willing to consent that every other class should do the same. First. farmers. secondly. and by the profits of the merchants who employ them. imported into the town.

cannot easily combine together. everywhere in Europe. the aversion to take apprentices. and desert the country. more advantageous than that which is carried on in the country. and raise the price of their labour much above what is due to the nature of their work. without entering into any very nice computations. but reduce the whole manufacture into a sort of slavery to themselves. resort as much as they can to the town. accordingly. it has never been regarded as a matter very easily understood. the raising of rude produce by the improvement and cultivation of land. yet the corporation-spirit. dispersed in distant places. They naturally. run most easily into such combinations. The innumerable volumes which have been written upon it in all languages. but the incorporation spirit never has prevailed among them. there is perhaps no trade which requires so great a variety of knowledge and experience. or to communicate the secret of their trade. In every country of Europe. from small beginnings. therefore. By combining not to take apprentices. may satisfy us. The inhabitants of the country. by voluntary associations and agreements. Industry. are necessary to keep a thousand spinners and weavers at work. and often teach them. the wages of labour and the profits of stock must evidently be greater. After what are called the fine arts. in the one situation than in the other. But stock and labour naturally seek the most advantageous employment. that among the wisest and most learned nations. They have not only never been incorporated. they can not only engross the employment. by trade and manufactures. in some place or other. The trades which employ but a small number of hands. the industry which properly belongs to towns. No apprenticeship has ever been thought necessary to qualify for husbandry. must be better rewarded. generally prevail in them. we may satisfy ourselves by one very simple and obvious observation. how contemptuously soever the very contemptible authors of some 109 . for one who has done so by that which properly belongs to the country. been incorporated. perhaps. can easily combine together. however. the great trade of the country. The inhabitants of a town being collected into one place.Adam Smith the town becomes more. and the liberal professions. 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 most insignificant trades carried on in towns have. Halfa-dozen wool-combers. and even where they have never been incorporated. therefore. and that of the country less advantageous. we find at least a hundred people who have acquired great fortunes. the jealousy of strangers. That the industry which is carried on in towns is. to prevent that free competition which they cannot prohibit by bye-laws.

and upon materials of which the temper is always the same. The common ploughman. on the contrary. is well known to every man whom either business or curiosity has led to converse much with both. They would probably be so everywhere. of which all the operations may not be as completely and distinctly explained in a pamphlet of a very few pages. is commonly occupied in performing one or two very simple operations. Corporation laws enable the inhabitants of towns to raise 110 . too. as well as with many other accidents. however. In China and Indostan. is as variable as that of the instruments which he works with. His understanding.The Wealth of Nations of them may sometimes affect to speak of him. The superiority which the industry of the towns has everywhere in Europe over that of the country. besides. In the history of the arts. to social intercourse. or very nearly the same. requires much more judgment and discretion. It is supported by many other regulations. and more difficult to be understood by those who are not used to them. though generally regarded as the pattern of stupidity and ignorance. The man who works upon brass and iron. The high duties upon foreign manufactures. the general direction of the operations of husbandry. than that of those which are always the same. The condition of the materials which he works upon. whose whole attention. is not altogether owing to corporations and corporation laws. now publishing by the French Academy of Sciences. is generally much superior to that of the other. The direction of operations. But the man who ploughs the ground with a team of horses or oxen. There is scarce any common mechanic trade. are very different upon different occasions. if corporation laws and the corporation spirit did not prevent it. works with instruments of which the health. as it is possible for words illustrated by figures to explain them. and both require to be managed with much judgment and discretion. His voice and language are more uncouth. strength. or very nearly the same. both the rank and the wages of country labourers are said to be superior to those of the greater part of artificers and manufacturers. which must be varied with every change of the weather. being accustomed to consider a greater variety of objects. and temper. than the mechanic who lives in a town. accordingly. from morning till night. Not only the art of the farmer. all tend to the same purpose. indeed. works with instruments. several of them are actually explained in this manner. and upon all goods imported by alien merchants. but many inferior branches of country labour require much more skill and experience than the greater part of mechanic trades. is seldom defective in this judgment and discretion. He is less accustomed. How much the lower ranks of people in the country are really superior to those of the town.

over the face of the land. or in some contrivance to raise prices. The wages of country labour approach nearer to those of manufacturing labour. Those other regulations secure them equally against that of foreigners. without fearing to be undersold by the free competition of their own countrymen. and at the same time to demonstrate. That industry has its limits like every other. by any law which either could be executed. to prevent such meetings. where. It then spreads itself. The stocks accumulated in them come in time to be so great.Adam Smith their prices. at the expense of which. of the country. uncertain. and the clamour and sophistry of merchants and manufacturers easily persuade them. and. It is impossible. in every respect. I shall endeavour to shew hereafter. is in part restored to the country. They have commonly neither inclination nor fitness to enter into combinations. laws. In Great Britain. though very late consequence of the extraordinary encouragement given to the industry of the towns. or in the beginning of the present. who have seldom opposed the establishment of such monopolies. in a great measure. contrary to the order of nature and of reason The interests. The enhancement of price occasioned by both is everywhere finally paid by the landlords. if I my say so. People of the same trade seldom meet together. than they are said to have none in the last century. it necessarily raises its wages. and customs. which have given occasion to it. and the profits of stock employed in agriculture to those of trading and manufacturing stock. but the conversation ends in a conspiracy against the public. even for merriment and diversion. This change may be regarded as the necessary. But though the law cannot hinder people of the same trade 111 . by this course. by increasing the competition. and of a subordinate part. 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. by being employed in agriculture. The lowering of profit in the town forces out stock to the country. that the private interest of a part. indeed. by creating a new demand for country labour. and the increase of stock. is the general interest of the whole. the superiority of the industry of the towns over that of the country seems to have been greater formerly than in the present times. liable to be disturbed and interrupted by innumerable accidents. that though some countries have. it is in itself necessarily slow. I shall endeavour to explain as fully and distinctly as I can in the third and fourth books of this Inquiry. farmers. of the society. or would be consistent with liberty and justice. necessarily reduces the profit. it had originally been accumulated in the town. and labourers. prejudices. and. that it can no longer be employed with the ancient profit in that species of industry which is peculiar to them. attained to a considerable degree of opulence.

The Wealth of Nations from sometimes assembling together. having no exclusive privilege. by increasing the competition in some employments beyond what it naturally would be. facilitates such assemblies. The majority of a corporation can enact a bye-law. An exclusive corporation necessarily weakens the force of this discipline. occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock. renders such assemblies necessary. It is upon this account that. that sometimes the public. their widows and orphans. A regulation which enables those of the same trade to tax themselves. is without any foundation. where the workmen. If you would have your work tolerably executed. It is in this manner that the policy of Europe. 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. in order to provide for their poor. but that of his customers. even in some of the most necessary trades. it ought to do nothing to facilitate such assemblies. A particular set of workmen must then be employed. but makes the act of the majority binding upon the whole. It connects individuals who might never otherwise be known to one another. In a free trade. by giving them a common interest to manage. and you must then smuggle it into the town as well as you can. it must be done in the suburbs. with proper penalties. much less to render them necessary. is not that of his corporation. in the whole of the advantages and disadvantages of the different employments of labour and stock. which will limit the competition more effectually and more durably than any voluntary combination whatever. The pretence that corporations are necessary for the better government of the trade. Secondly. It is the fear of losing their employment which restrains his frauds and corrects his negligence. The policy of Europe. have nothing but their character to depend upon. and sometimes the piety of pri- 112 . let them behave well or ill. by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them. and it cannot last longer than every single trader continues of the same mind. in many large incorporated towns. of an opposite kind. no tolerable workmen are to be found. It has been considered as of so much importance that a proper number of young people should be educated for certain professions. The real and effectual discipline which is exercised over a workman. their sick. and gives every man of the trade a direction where to find every other man of it. An incorporation not only renders them necessary. an effectual combination cannot be established but by the unanimous consent of every single trader. occasions another inequality.

exhibitions. not exceeding fifty. Forty pounds ayear is reckoned at present very good pay for a curate. which draw many more people into those trades than could otherwise pretend to follow them.} The wages of both these labourer’s. and there is scarce an industrious workman of any kind in that metropolis who does not earn more than twenty. was declared to be the pay of a master mason. supposing him to have been without employment one-third of the year. it is declared. III. Very few of them are educated altogether at their own expense. “That whereas. 25. does not exceed what frequently earned by common labourers in many country parishes. In all Christian countries. and not less than twenty pounds a-year”. the church being crowded with people. for this purpose. scholarships. Ed. It would be indecent. the education of the greater part of churchmen is paid for in this manner. and expensive education. in order to get employment. The wages of the master mason. Whenever the law has attempted to regulate the wages of workmen. supposing them to have been constantly employed. would have fully equalled them. will not always procure them a suitable reward. there are many curacies under twenty pounds a-year. have established many pensions. were much superior to those of the curate. The pay of a curate or chaplain.Adam Smith vate founders. containing about as much silver as ten pounds of our present money. was in England the usual pay of a curate or a stipendiary parish priest. etc. c. fourpence a-day. for want of sufficient maintenance and encouragement to curates. The long. tedious. are willing to accept of a much smaller recompence than what such an education would otherwise have entitled them to. no doubt. five merks. therefore. There are journeymen shoemakers in London who earn forty pounds a-year. the bishop is. and in this manner the competition of the poor takes away the reward of the rich. to compare either a curate or a chaplain with a journeyman in any common trade. containing the same quantity of silver as a shilling of our present money. By the 12th of Queen Anne. however. This last sum. who. and threepence a-day. Till after the middle of the fourteenth century. They are all three paid for their work according to the contract which they may happen to make with their respective superiors. by writing under his hand and seal. notwithstanding this act of parliament. it has always been rather to lower them than to raise 113 . may very properly be considered as of the same nature with the wages of a journeyman. the cures have. as we find it regulated by the decrees of several different national councils. empowered to appoint. that of a journeyman mason. and. of those who are. At the same period. therefore. I believe. in several places. been meanly supplied. 12. indeed. equal to ninepence of our present money. therefore. a sufficient certain stipend or allowance. {See the Statute of Labourers. bursaries.

In England. and of several other protestant churches. attempted to raise the wages of curates. commonly called men of letters. because it has never been able to hinder either the one from being willing to accept of less than the legal allowance. to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept of. in both cases. too. been educated at the public expense. upon the foregoing supposition. the competition would soon be so great as to sink very much their pecuniary reward. or the other from receiving more. They would be entirely abandoned to such as had been educated by those public charities. that in so creditable a profession. It might then not be worth any man’s while to educate his son to either of those professions at his own expense. on account of the contrary competition of those who expected to derive either profit or pleasure from employing them. upon many occasions. and respectable men into holy orders. notwithstanding the mean circumstances of some of its inferior members. The example of the churches of Scotland. the hopes of much more moderate benefices will draw a sufficient number of learned. on account of the indigence of their situation and the multitude of their competitors. and has never either been able to raise the wages of curates. the lottery of the church is in reality much more advantageous than is necessary. or to sink those of labourers to the degree that was intended. That unprosperous race of men. and. of Geneva. The great benefices and other ecclesiastical dignities support the honour of the church. as commonly to reduce the price of their labour to a very paltry recompence. are pretty much in the situation which lawyers and physicians probably would be in. the greater part of them have been educated for the church. may satisfy us. the law seems to have been equally ineffectual. makes some compensation even to them for the meanness of their pecuniary recompence. to the entire degradation of the now respectable professions of law and physic. and in all Roman catholic countries. And. decent. whose numbers and necessities would oblige them in general to content themselves with a very miserable recompence. They have generally. but have been hindered by different reasons from entering into holy orders. such as law and physic. for the dignity of the church. In professions in which there are no benefices. In every part of Europe. The respect paid to the profession. if an equal proportion of people were educated at the public expense. But the law has. in which education is so easily procured. and their numbers are everywhere so great. Before the invention of the art of printing.The Wealth of Nations them. the only employment by which a man of letters could make any thing by his tal- 114 . therefore.

however. before that time. are at least equal to what is necessary for the greatest practitioners in law and physic. of public and private teachers. the genius. Isocrates himself demanded ten minae. reproaches the teachers of his own times with inconsistency. knowledge. because the trade of the one is crowded with indigent people. “They make the most magnificent promises to their scholars. and this is still surely a more honourable.” continues he. He must have made. before any charities of this kind had been established for the education of indigent people to the learned professions. would undoubtedly be less than it is. and. the rewards of eminent teachers appear to have been much more considerable.Adam Smith ents. they stipulate the paltry reward of four or five minae. small as it may appear. he is said to have had a hundred scholars. whereas those of the other two are encumbered with very few who have not been educated at their own. and application requisite to qualify an eminent teacher of the sciences. but if any man were to sell such a bargain for such a price.” “They who teach wisdom. or by communicating to other people the curious and useful knowledge which he had acquired himself. a number which will not appear extraordinary from so great a city to so famous a teacher. In ancient times. five minae to sixteen pounds thirteen shillings and fourpence. and to be just. appear to have often granted licences to their scholars to beg. Four minae were equal to thirteen pounds six shillings and eightpence.” He certainly does not mean here to exaggerate the reward. who write for bread. a scholar and a beggar seem to have been terms very nearly synonymous. to be happy. The different governors of the universities. “ought certainly to be wise themselves. if the competition of those yet more indigent men of letters. When he taught at Athens. But the usual reward of the eminent teacher bears no proportion to that of the lawyer or physician. in general. or £ 33:6:8 from each scholar. I understand this to be the number whom he taught at one time. he would be convicted of the most evident folly. must at that time have been usually paid to the most eminent teachers at Athens. in return for so important a service. “and undertake to teach them to be wise. who have been brought up to it at the public expense. to which the art of printing has given occasion. and we may be assured that it was not less than he represents it. or who attended what we would call one course of lectures. and. Isocrates. even a more profitable employment than that other of writing for a bookseller. in what is called his discourse against the sophists. Before the invention of the art of printing. The time and study. rhetoric. a more useful. Something not less than the largest of those two sums. was not taken out of the market. too. therefore. who taught. The usual recompence. was that of a public or private teacher.” says he. what was at that time the most fashionable of all sciences. there- 115 .

was a Babylonian by birth. even to ostentation. A thousand minae. Aristotle. by each course of lectures. Teachers of the sciences were probably in those times less common than they came to be in an age or two afterwards. two other eminent teachers of those times. It frequently happens. upon a solemn embassy to Rome. but the cheapness of literary education is surely an advantage which greatly overbalances this trifling inconveniency. The most eminent of them. perhaps rather advantageous than hurtful to the public. in another place. to return to Athens. in some cases. accordingly. occasions. suppose that it was as large as the life. the policy of Europe. might derive still greater benefit from it. and from place to place. both by him and his father. notwithstanding. and as there never was a people more jealous of admitting foreigners to public offices than the Athenians. I presume. or £ 3335:6:8. by obstructing the free circulation of labour and stock. Carneades. Plato himself is said to have lived with a good deal of magnificence. is said by Plutarch. It may somewhat degrade the profession of a public teacher. too. that while high wages are given to the 116 . Many other eminent teachers in those times appear to have acquired great fortunes. to have been his didactron. The exclusive privileges of corporations obstruct it from one place to another. Philip. as well as that of Hippias and Protagoras. Georgias made a present to the temple of Delphi of his own statue in solid gold. thought it worth while. even in the same place. in order to resume the teaching of his school. when the competition had probably somewhat reduced both the price of their labour and the admiration for their persons. was more reasonable than it is at present through the greater part of Europe. it was still an independent and considerable republic. appear always to have enjoyed a degree of consideration much superior to any of the like profession in the present times. in which education is carried on.The Wealth of Nations fore. and Diogenes the stoic. The statute of apprenticeship obstructs the free circulation of labour from one employment to another. even in the same employment. both from employment to employment. if the constitution of those schools and colleges. We must not. and most munificently rewarded. upon the whole. is represented by Plato as splendid. His way of living. This inequality is. as it is universally agreed. their consideration for him must have been very great. however. or usual price of teaching. after having been tutor to Alexander. a very inconvenient inequality in the whole of the advantages and disadvantages of their different employments. The Athenians sent Carneades the academic. The public. a thousand minae. and though their city had then declined from its former grandeur. Thirdly. too.

The arts of weaving plain linen and plain silk. or even in being allowed to exercise his industry in any parish but that to which he belongs. by a particular statute. to every part of Europe. if those absurd laws did not hinder them. It consists in the difficulty which a poor man finds in obtaining a settlement. the workmen might find a resource in one of the other two which was in a more prosperous condition. the other is in a declining state. I believe. have no other choice. they are much worse qualified than for any sort of manufacture that bears any resemblance to their own. In many different manufactures. it can afford no general resource to the work men of other decaying manufactures. open to every body. for example. who. The obstruction which corporation laws give to the free circulation of labour is common. or to work as common labourers. give less obstruction to the free circulation of stock from one place to another. however. That which is given to it by the poor laws is. for which. those in another are obliged to content themselves with bare subsistence. that either a linen or a silk weaver might become a tolerable workman in a very few days. by their habits. but the difference is so insignificant. that the workmen could easily change trades with one another. That of weaving plain woollen is somewhat different. the operations are so much alike. If any of those three capital manufactures.Adam Smith workmen in one manufacture. are almost entirely the same. so far as I know. It is everywhere much easier for a wealthy merchant to obtain the privilege of trading in a town-corporate. but as it is not much cultivated through the greater part of the country. wherever the statute of apprenticeship takes place. Corporation laws. chuse to come upon the parish. than for a poor artificer to obtain that of working in it. peculiar to England. The statute of apprenticeship may oppose it in the one case. obstructs that of stock likewise. 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. The one is in an advancing state. is in England. The difficulty of obtaining settle- 117 . and their wages would neither rise too high in the thriving. They generally. than to that of labour. and the superabundance of hands is continually increasing. and has therefore a continual demand for new hands. It is the labour of artificers and manufacturers only of which the free circulation is obstructed by corporation laws. therefore. without being able to lend the least assistance to one another. The linen manufacture. and sometimes in the same neighbourhood. indeed. but dither to come upon the parish. Those two manufactures may sometimes be in the same town. and both that and an exclusive corporation in the other. nor sink too low in the decaying manufacture. therefore. however. were decaying. Whatever obstructs the free circulation of labour from one employment to another.

The Wealth of Nations ments obstructs even that of common labour. This question. and the design of the acts is not so much for 118 . upon complaint made by the church-wardens or overseers of the poor. “After all. therefore. progress. a question of some importance. “this kind of settlement. that the forty days undisturbed residence of any person necessary to gain a settlement. immediately after divine service. and that overseers of the poor should be annually appointed. were not always more honest with regard to their own than they had been with regard to other parishes. that forty days undisturbed residence should gain any person a settlement in any parish. who. by keeping themselves concealed for forty days. but that within that time it should be lawful for two justices of the peace. therefore. receiving the notice. were committed in consequence of this statute. and taking no proper steps in consequence of it. after some variation. the necessity of providing for their own poor was indispensably imposed upon every parish. to remove any new inhabitant to the parish where he was last legally settled. by the destruction of monasteries. by the 1st of James II. by a parish rate. to one of the churchwardens or overseers of the parish where he came to dwell. It may be worth while to give some account of the rise. is very seldom obtained. was supposed to have an interest to prevent as much as possible their being burdened by such intruders. was at last determined by the 13th and 14th of Charles II. of any in the police of England. with the church-wardens. it is said. it was enacted. By this statute. c. therefore. after some other ineffectual attempts for their relief. unless he either rented a tenement of ten pounds a-year. and sometimes connived at such intrusions.” says Doctor Burn. that every parish should be bound to provide for its own poor. to the discharge of that to which they properly belonged. should be accounted only from the time of his delivering notice. the greatest. should raise. Who were to be considered as the poor of each parish became. and present state of this disorder. it was further enacted by the 3rd of William III. of the place of his abode and the number of his family. that the forty days residence should be accounted only from the publication of such notice in writing on Sunday in the church. by continuing forty days after publication of notice in writing. perhaps. when it was enacted. or could give such security for the discharge of the parish where he was then living. parish officers sometime’s bribing their own poor to go clandestinely to another parish. It was enacted. to gain a settlement there. Some frauds. as those justices should judge sufficient. But parish officers. the poor had been deprived of the charity of those religious houses. 2. by the 43d of Elizabeth. As every person in a parish. When. it seems. competent sums for this purpose. and. in writing.

a thing impossible for one who has nothing but his labour to live by. who has nothing but his labour to support him. Nobody can gain a settlement by either of the two first ways. or by removing him to try the right. the second. which before had been so customary in England. But if a person’s situation is such.” This statute. has been to put out in a great measure the old fashion of hiring for a year. unless he either rented a tenement of ten pounds a-year. for the giving of notice is only putting a force upon the parish to remove. at the caprice of any churchwarden or overseer. therefore. or by electing him into a parish office. compel the parish either to allow him a settlement uncontested. it appointed four other ways by which a settlement might be gained without any notice delivered or published. by being elected into an annual parish office. whether labourer or artificer. rendered it almost impracticable for a poor man to gain a new settlement in the old way. by serving an apprenticeship in the parish. carried his industry to a new parish. is likely to gain any new settlement. either by taxing him to parish rates. because. therefore. but by the public deed of the whole parish. and continuing in the same service during the whole of it. But that it might not appear to preclude altogether the common people of one’ parish from ever establishing themselves with security in another. An apprentice is scarce ever married. that it is doubtful whether he is actually removable or not. by giving of notice. by suffering him to continue forty days. the fourth. The principal effect of introducing settlement by service. if no particular term is agreed upon. they might thereby lose their original settlement in the places of their nativity. The first was. how healthy and industrious soever. he shall. it is evident. the habitation of their parents and relations. No independent workman. 119 . the third. who are too well aware of the consequences to adopt any new-comer. and serving in it a year. by being taxed to parish rates and paying them. by being hired into service there for a year. When such a person. and servants are not always willing to be so hired. by forty days inhabitancy. But masters are not always willing to give their servants a settlement by hiring them in this manner. that even at this day. he was liable to be removed. that no married servant shall gain any settlement by being hired for a year. as every last settlement discharges all the foregoing.Adam Smith gaining of settlements. No married man can well gain any settlement in either of the two last ways. as for the avoiding of them by persons coming into a parish clandestinely. either by apprenticeship or by service. the law intends that every servant is hired for a year. or could give such security for the discharge of the parish as two justices of the peace should judge sufficient. and it is expressly enacted.

But this is a security which scarce any man who lives by labour can give. except either by renting a tenement of ten pounds a-year. “It is obvious. as not being sufficient for the discharge of the parish. that the purchase even of a freehold estate of less than thirty pounds value. or by serving upon his own account in an annual parish office for one whole year. nor by service.” The moral of this obser- 120 . subscribed by the church-wardens and overseers of the poor. the invention of certificates was fallen upon. nor by paying parish rates. and that.The Wealth of Nations What security they shall require. c. but they cannot well require less than thirty pounds. it was enacted that if any person should bring a certificate from the parish where he was last legally settled. and that then the parish which granted the certificate should be obliged to pay the expense both of his maintenance and of his removal. but only upon his becoming actually chargeable. And in order to give the most perfect security to the parish where such certificated man should come to reside.18. is left altogether to their discretion. namely. it was further enacted by the same statute. it is certainly known whither to remove them. and the parish shall be paid for the removal. indeed. Which reasons will hold proportionably for parishes not granting certificates in ordinary cases. “that there are divers good reasons for requiring certificates with persons coming to settle in any place. it having been enacted. nor by paying parish rates. we may learn from the following very judicious observation of Doctor Burn. nor by giving notice. neither by apprenticeship. for it is far more than an equal chance. shall not gain any person a settlement. that they can settle neither apprentices nor servants. in some measure. and in a worse condition. How far this invention has restored that free circulation of labour. stat. and for their maintenance in the mean time. that if they become chargeable. and allowed by two justices of the peace. too. In order to restore. that he should not be removable merely upon account of his being likely to become chargeable. if they fall sick. 1. it was further enacted. that free circulation of labour which those different statutes had almost entirely taken away. and consequently neither by notice 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. none of all which can be without a certificate.” says he. that he should gain no settlement there by any means whatever. By the 8th and 9th of William III. By the 12th of Queen Anne. that persons residing under them can gain no settlement. which the preceding statutes had almost entirely taken away. the parish which gave the certificate must maintain them. nor by apprenticeship. and cannot be removed. and much greater security is frequently demanded. but that they will have the certificated persons again. that every other parish should be obliged to receive him.

in places at no great distance from one another. 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. but a man with a wife and family who should attempt to do so. or wherever else there is an extraordinary demand for labour. In such countries. as it is constantly in Scotland. have now. than an arm of the sea. never rightly understanding wherein it consists. and. yet we never meet with those sudden and unaccountable differences in the wages of neighbouring places which we sometimes find in England. to compel the church-wardens and overseers to sign a certificate. where it is often more difficult for a poor man to pass the artificial boundary of a parish. may sometimes reside by sufferance without one.” Though a certificate carries along with it no testimonial of good behaviour. and certifies nothing but that the person belongs to the parish to which he really does belong. suffered them- 121 . 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. in all other countries where there is no difficulty of settlement. though wages may sometimes rise a little in the neighbourhood of a great town. be sure of being removed. therefore. says Doctor Burn. but the Court of King’s Bench rejected the motion as a very strange attempt. “by putting it in the power of a parish officer to imprison a man as it were for life. indeed who is healthy and industrious. To remove a man who has committed no misdemeanour. cannot always be relieved by their superabundance in another. that certificates ought always to be required by the parish where any poor man comes to reside. or a ridge of high mountains. till they fall back to the common rate of the country. and sink gradually as the distance from such places increases. so jealous of their liberty.Adam Smith vation seems to be. The scarcity of hands in one parish. he would generally be removed likewise. The very unequal price of labour which we frequently find in England. it is altogether discretionary in the parish officers either to grant or to refuse it. The common people of England. and that they ought very seldom to be granted by that which he purposes to leave. if the single man should afterwards marry.” says the same very intelligent author. A mandamus was once moved for. natural boundaries which sometimes separate very distinctly different rates of wages in other countries. but like the common people of most other countries. however. or whatever advantage he may propose himself by living elsewhere. in most parishes. in his History of the Poor Laws. is an evident violation of natural liberty and justice. from the parish where he chooses to reside. I believe. A single man. for more than a century together. “There is somewhat of hardship in this matter of certificates. would. and.

The Wealth of Nations selves to be exposed to this oppression without a remedy. I will venture to say. not to give more than a certain wage. enforces by law that very regulation which masters sometimes attempt to establish by such combinations. but did not always really pay. and their workmen from accepting. an abusive practice undoubtedly. Whenever the legislature attempts to regulate the differences between masters and their workmen. felt himself most cruelly oppressed by this ill-contrived law of settlements. Were the workmen to enter into a contrary combination of the same kind. first by general laws extending over the whole kingdom. and afterwards by particular orders of the justices of peace in every particular county. Thus the 8th of George III. “By the experience of above four hundred years. however. there would be no emulation. and not in goods. such as that against general warrants. under a certain penalty. yet it has never been the object of any general popular clamour. that it puts the ablest and most industrious upon the 122 . more than two shillings and sevenpence halfpenny a-day. except in the case of a general mourning. But the 8th of George III. This law is in favour of the workmen. its counsellors are always the masters. what in its own nature seems incapable of minute limitation. It imposes no real hardship upon the masters. When the regulation. in order to reduce the wages of their workmen. in some part of his life. still attempt sometimes to regulate wages in particular trades. There is scarce a poor man in England. too. the law would punish them very severely. which they pretended to pay. therefore. and in particular places. “it seems time to lay aside all endeavours to bring under strict regulations. I shall conclude this long chapter with observing.” says Doctor Burn. it is always just and equitable. times complained of the law of settlements as a public grievance. Thus the law which obliges the masters in several different trades to pay their workmen in money. of forty years of age. and. they commonly enter into a private bond or agreement. but such a one as was not likely to occasion any general oppression. is in favour of the workmen. is quite just and equitable. for if all persons in the same kind of work were to receive equal wages. but the 8th of George III. that though anciently it was usual to rate wages. under a certain penalty. and five miles round it. but it is sometimes otherwise when in favour of the masters. and no room left for industry or ingenuity. it would treat the masters in the same manner. if it dealt impartially. It only obliges them to pay that value in money. under heavy penalties. not to accept of a certain wage. prohibits. Though men of reflection. is in favour of the masters. from giving.” Particular acts of parliament. The complaint of the workmen. When masters combine together. have some. both these practices have now gone entirely into disuse. in goods. who has not. all master tailors in London.

be proper to regulate the price of the first necessary of life. seems perfectly well founded. so far as I know. In ancient times. The proportion between them. too. in the different employments of labour and stock. The method of fixing the assize of bread. seems not to be much affected. the competition will regulate it much better than any assize. which does not exist there. who claim exclusive privileges. This defect was not remedied till the third of George III. as has already been observed. its execution depending upon the office of clerk of the market. or declining state of the society. The proportion between the different rates. by the riches or poverty. both of wages and profit. The assize of bread is. and cannot well be altered. established by the 31st of George II. by regulating the price of provisions and ether goods. 123 . Such revolutions in the public welfare. the only remnant of this ancient usage. affect them equally in all different employments. it may. In the greater part of the towns in Scotland. though they are not very strictly guarded. it was usual to attempt to regulate the profits of merchants and other dealers. must. Where there is an exclusive corporation. must remain the same.Adam Smith same footing with an ordinary workman. in the end. stationary. there is an incorporation of bakers. where there is none. at least for any considerable time. but. and the establishment of one in the few places where it has yet taken place has produced no sensible advantage. perhaps. by any such revolutions. The want of an assize occasioned no sensible inconveniency. though they affect the general rates both of wages and profit. the advancing. could not be put in practice in Scotland. on account of a defect in the law. therefore. however.

He sometimes demands rent for what is altogether incapable of human improvements. too. indeed. whatever part of its price. or. however. and the landlord seldom means to leave him any more. Kelp is a species of sea-weed. of the landlord. It grows in several parts of Great Britain. is over and above this share.The Wealth of Nations CHAPTER XI LAND OF THE RENT OF LAND RENT. makes him accept of somewhat less than this portion. upon such rocks only as lie within the high-water mark. for it can scarce ever be more than partly the case. This. the liberality. but sometimes by that of the tenant. he naturally endeavours to reserve to himself as the rent of his land. besides. which. The landlord demands a rent even for unimproved land. was never augmented by human industry. therefore. which are twice every day covered with the sea. and sometimes. together with the ordinary profits of farming stock in the neighbourhood. the landlord commonly demands the same augmentation of rent as if they had been all made by his own. When the lease comes to be renewed. and of which the produce. which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. for the most part. The rent of land. useful for making glass. Sometimes. CONSIDERED as the price paid for the use of land. This portion. Whatever part of the produce. or the rent at which it is naturally meant that land should. are not always made by the stock of the landlord. no doubt. what is the same thing. Those improvements. or to content himself with some- what less. without being a loser. and the supposed interest or profit upon the expense of improvement is generally an addition to this original rent. the ignorance of the tenant makes him undertake to pay somewhat more. though more rarely. 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. yields an alkaline salt. This is evidently the smallest share with which the tenant can content himself. The landlord. when burnt. may still be considered as the natural rent of land. whose estate is bounded 124 . be let. 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. however. however. may be partly the case upon some occasions. is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. pays the labour. more frequently the ignorance. and purchases and maintains the cattle and other instruments of husbandry. than the ordinary profits of farming stock in the neighbourhood. particularly in Scotland. and for several other purposes. soap.

or to what he can afford to take. depends upon the demand. The rent of the landlord is in proportion. but to what he can make both by the land and the water. together with its ordinary profits. is to be found in that country. and there are others for which it either may or may not be such as to afford this greater price. But it is because its price is high or low. It is because high or low wages and profit must be paid. The former must always afford a rent to the landlord. considered as the price paid for the use of the land. they must have a habitation upon the neighbouring land. but to what the farmer can afford to give. is naturally a monopoly price. There are some parts of the produce of land. enters into the composition of the price of commodities in a different way from wages and profit. or very little more. in the different periods of improvement. a great deal more. and one of the very few instances in which rent makes a part of the price of that commodity. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land. not to what the farmer can make by the land. for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market. therefore. 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. thirdly. It is partly paid in sea-fish. The rent of land. of those parts of the produce of land which always afford some rent.Adam Smith by a kelp shore of this kind. demands a rent for it as much as for his corn-fields. it can afford no rent to the landlord. therefore. in order to profit by the produce of the water. or is not more. or a low rent. The particular consideration. the surplus part of it will naturally go to the rent of the land. If the ordinary price is more than this. Rent. High or low wages and profit are the causes of high or low price. or no more. that its price is high or low. though the commodity may be brought to market. which makes a great part of the subsistence of their inhabitants. than what is sufficient to pay those wages and profit. Whether the price is. according to different circumstances. But. The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish. of those which sometimes may and sometimes may not afford rent. The latter sometimes may and sometimes may not. first. and. in order to bring a particular commodity to market. high or low rent is the effect of it. or no rent at all. it is to be observed. of the variations which. that it affords a high rent. when compared both with one another and 125 . naturally take place in the relative value of those two different sorts of rude produce. secondly. If it is not more.

The rent of land not only varies with its fertility. from which are drawn both the profit of the farmer and the rent of the landlord. but it can always purchase such a quantity of labour as it can maintain. too. but as they we brought within a smaller compass. A smaller proportion of this diminished surplus. by the increase of the produce. but to afford some small rent to the landlord. and to pay the ordinary profit to the farmer or the owner of the herd or flock. As men. if managed in the most economical manner. therefore. is always more than sufficient to replace the stock which employed that labour. together with its profits. therefore. It can always purchase or command a greater or smaller quantity of labour. indeed. it must always cost more to bring the produce of the distant land to market. naturally multiply in proportion to the means of their subsistence. will divide this chapter into three parts. is generally higher than in the neighbourhood of a large town. of which the milk and the increase are always more than sufficient. whatever be its produce. therefore. must be maintained out of it. — Of the Produce of Land which always affords Rent. but with its situation. But land. The most desert moors in Norway and Scotland produce some sort of pasture for cattle. in almost any situation. Though it may cost no more labour to cultivate the one than the other. is not always equal to what it could maintain. as has already been shewn. But in remote parts of the country. not only to maintain all the labour necessary for tending them. and somebody can always be found who is willing to do something in order to obtain it. must be diminished. the rate of profit. less labour becomes requisite to tend them. produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market. ART PART I. The quantity of labour. always remains for a rent to the landlord. Land in the neighbourhood of a town gives a greater rent than land equally fertile in a distant part of the country. and the surplus. The landlord gains both ways. and to collect their produce. The same extent of ground not only maintains a greater number of cattle. 126 . food is always more or less in demand. A greater quantity of labour. Something. on account of the high wages which are sometimes given to labour. which it can purchase. like all other animals. The rent increases in proportion to the goodness of the pasture. whatever be its fertility. The surplus. in the most liberal way in which that labour is ever maintained. and by the diminution of the labour which must be maintained out of it. according to the rate at which that sort of labour is commonly maintained in the neighbourhood.The Wealth of Nations with manufactured commodities.

this greater surplus would everywhere be of greater value and constitute a greater fund. the ordinary price of an ox. Though they introduce some rival commodities into the old market. It seems to have done so universally in the rude beginnings of agriculture. which then occupy the far greater part of the country. An ox there. It is not more than fifty years ago. bread and butcher’s meat. They encourage the cultivation of the remote. than the best pasture of equal extent. chosen from a herd of two or three hundred. If a pound of butcher’s meat. they pretended. four reals. which can never be universally established. are all abandoned to cattle. both for the profit of the farmer and the rent of the landlord. he says. which must always be the most extensive circle of the country. In its rude beginnings. They are upon that account the greatest of all improvements. They are advantageous even to that part of the country. and ruin their cultivation. probably because he found nothing remarkable about it. forty or fifty years ago. but in consequence of that free and universal competition which forces every body to have recourse to it for the sake of self defence. There is more butcher’s meat than bread. from the cheapness of labour. besides. are very different in the different periods of agriculture. was never supposed to be worth more than a pound of bread. Their rents. is the food for which there is the greatest competition. and which consequently brings the greatest price. canals. one-and-twenty pence halfpenny sterling. however. A corn field of moderate fertility produces a much greater quantity of food for man. But corn can nowhere be raised with- 127 . At Buenos Ayres. have risen. and would thereby reduce their rents. He says nothing of the price of bread. is likewise much greater.Adam Smith must belong to the landlord. was. by diminishing the expense of carriage. therefore. they open many new markets to its produce. Those remoter counties. put the remote parts of the country more nearly upon a level with those in the neighbourhood of the town. Though its cultivation requires much more labour. the unimproved wilds. But the relative values of those two different species of food. would be able to sell their grass and corn cheaper in the London market than themselves. Monopoly. therefore. yet the surplus which remains after replacing the seed and maintaining all that labour. and their cultivation has been improved since that time. that some of the counties in the neighbourhood of London petitioned the parliament against the extension of the turnpike roads into the remoter counties. Good roads. and bread. is a great enemy to good management. They are advantageous to the town by breaking down the monopoly of the country in its neighbourhood. we are told by Ulloa. and navigable rivers. costs little more than the labour of catching him.

and the price of butcher’s meat becomes greater than the price of bread. of which the price. more corn-land would be turned into pasture. The proprietors of those moors profit by it. therefore. and in a country which lies upon the river Plate. sold at the same price as those which are reared upon the most improved land. the money-price of labour could be very cheap. This equality. In almost every part of Great Britain. must be understood to take place only through the greater part of the improved lands of a great country. and of that of which the immediate produce is food for men. must be sufficient to pay. If it was more than compensated. between the rent and profit of grass and those of corn. 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. It is not more than a century ago. generally worth more than two pounds of the best white bread. in the progress of improvement. a pound of the best butcher’s meat is. of cultivation. therefore. 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. The cattle bred upon the most uncultivated moors. of the land of which the immediate produce is food for cattle. however. and in plentiful years it is sometimes worth three or four pounds. will produce a much smaller quantity of the one species of food than of the other. that in many parts of the Highlands of Scotland. and these again by the rent and profit of corn. besides. and the rent and profit of 128 . when brought to the same market. in the present times. part of what was in pasture would be brought back into corn.The Wealth of Nations out a great deal of labour. at present. the unimproved wilds become insufficient to supply the demand for butcher’s meat. Their ordinary price. and the rents of many Highland estates have been tripled and quadrupled in the same time. and the profit which the farmer. at that time the direct road from Europe to the silver mines of Potosi. butcher’s meat. not only the labour necessary for tending them. but the rent which the landlord. is about three times greater than at the beginning of the century. in proportion to their weight or goodness. As an acre of land. and raise the rent of their land in proportion to the price of their cattle. a crop which requires four or five years to grow. In some particular local situations it is quite otherwise. are. A great part of the cultivated lands must be employed in rearing and fattening cattle. the inferiority of the quantity must be compensated by the superiority of the price. could have drawn from such land employed in tillage. and if it was not compensated. It is thus that. the rent and profit of unimproved pasture come to be regulated in some measure by the rent and profit of what is improved. Corn is an annual crop. By the extension.

in the neighbourhood of a great town. that the whole territory. he ranked only in the fourth place of profit and advantage. if ever the neighbouring lands are completely inclosed. instead of taxes. therefore. Thus. in this case. has been chiefly imported from foreign countries. 129 . Their lands. The present high rent of inclosed land in Scotland seems owing to the scarcity of inclosure. This corn was brought from the conquered provinces. when they are not liable to be disturbed by their keeper or his dog.Adam Smith grass are much superior to what can be made by corn. the second. and will probably last no longer than that scarcity. to feed tolerably well. have been principally employed in the production of grass. together with the high price of butcher’s meat. indeed. or at a very low price. has not been sufficient to produce both the grass and the corn necessary for the subsistence of their inhabitants. To plough. or the ancient territory of Rome. about sixpence a-peck. too. Holland is at present in this situation. It is convenient for the maintenance of the cattle employed in the cultivation of the corn. cannot be communicated to the lands at a distance. the more bulky commodity. and corn. a well-inclosed piece of grass will frequently rent higher than any corn field in its neighbourhood. frequently contribute. In an open country. and must have discouraged its cultivation in that country. It saves the labour of guarding the cattle. to raise the value of grass above what may be called its natural proportion to that of corn. It is likely to fall. and which cannot be so easily brought from a great distance. and its high rent is. Particular circumstances have sometimes rendered some countries so populous. were obliged to furnish a tenth part of their produce at a stated price. The low price at which this corn was distributed to the people. in that part of ancient Italy which lay in the neighbour hood of Rome. and for forage to horses. must necessarily have sunk the price of what could be brought to the Roman market from Latium. not so properly paid from the value of its own produce. it is evident. and a considerable part of ancient Italy seems to have been so during the prosperity of the Romans. like the lands in the neighbourhood of a great town. old Cato said. of which several. the third. was the first and most profitable thing in the management of a private estate. The advantage of inclosure is greater for pasture than for corn. must have been very much discouraged by the distributions of corn which were frequently made to the people. which feed better. as we are told by Cicero. the demand for milk. To feed well. This local advantage. as from that of the corn lands which are cultivated by means of it. the food of the great body of the people. Tillage. of which the principal produce is corn. and to feed ill. too. either gratuitously. to the republic.

it might be expected. of turnips. whereas. the rent and profit of pasture. that is thirty-one shillings and eight-pence per hundred pounds weight. It was then. Prince Henry died on the 6th of November 1612. or thereabouts. the average price of the best wheat at the Windsor market was £ 1:18:3½d. and 2¾d. or 5d. coarse and choice pieces taken together. in proportion to the price of bread. usually cost him nine pounds ten shillings. This high price in 1764 is. however. It is there said. the witnesses stated the price of the choice pieces of the best beef to be to the consumer 4d. During the first twelve years of the last century. and it is the best beef only. cabbages. and the coarse pieces in general to be from seven farthings to 2½d. and there is some reason for believing that. In the parliamentary inquiry in 1764. that the four quarters of an ox. The price paid by Prince Henry amounts to 3d.The Wealth of Nations But where there is no local advantage of this kind. given in evidence by a Virginia merchant. It seems accordingly to have done so. must naturally regulate upon the land which is fit for producing it. was in general one halfpenny dearer than the same sort of pieces had usually been sold in the month of March. should somewhat reduce. the price of butcher’s meat. in that dear year. or whatever else is the common vegetable food of the people. carrots. In March 1764. is a good deal lower in the present times than it was in the beginning of the last century. and this. among other proof to the same purpose. Doctor Birch has given us an account of the prices of butcher’s meat as commonly paid by that prince. in the nineteenth year of his age. 4/5ths per pound weight of the whole carcase. weighing six hundred pounds. and 4½d. 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. four shillings and eightpence cheaper than the ordinary price paid by Prince Henry. they said. it must be observed. which is fit to be salted for those distant voyages. the 130 . at least in the London market. the rent and profit of corn. The use of the artificial grasses. the superiority which. In the Appendix to the life of Prince Henry. there was a parliamentary inquiry into the causes of the high price of provisions at that time. which he considered as the ordinary price. that in March 1763. the pound. and at that rate the choice pieces could not have been sold by retail for less than 4½d. the pound. 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. in an improved country.. the price of butcher’s meat naturally has over that of bread. he had victualled his ships for twentyfour or twenty-five shillings the hundred weight of beef. he had paid twenty-seven shillings for the same weight and sort.

a more attentive and skilful management. the other a greater profit. Hence a greater rent becomes due to the landlord. both the rent of the landlord. therefore. generally mean. besides compensating all occasional losses. Its price. the average price of the same measure of the best wheat at the same market was £ 2:1:9½d. In the ancient husbandry. thought 131 .Adam Smith quarter of nine Winchester bushels. seems at no time to have been greater than what was sufficient to compensate the original expense of making them. than corn or pasture. and if any afforded more. Those productions. and always moderate. is more precarious. that little advantage is to be made by those who practise it for profit. If any particular produce afforded less. too. are generally greater than in acorn or grass field. who wrote upon husbandry about two thousand years ago. But in the twelve years preceding 1764 including that year. which require either a greater original expense of improvement. This superiority. The advantage which the landlord derives from such improvements. Their delightful art is practised by so many rich people for amusement. will seldom be found to amount to more than a reasonable interest or compensation for this superior expense. too. The rent and profit of these regulate the rent and profit of all other cultivated land. because the persons who should naturally be their best customers. than in the twelve years preceding 1764. however. after the vineyard. In the first twelve years of the last century. and butcher’s meat a good deal dearer. including that year. and the profit of the farmer. the greater part of the cultivated lands are employed in producing either food for men or food for cattle. or a greater annual expense of cultivation in order to fit the land for them. must afford something like the profit of insurance. therefore. supply themselves with all their most precious productions. But to bring the ground into this condition requires more expense. wheat appears to have been a good deal cheaper. some part of the lands in corn or pasture would soon be turned to that produce. appear commonly to afford. In a hop garden. In all great countries. The crop. at least in the hop and fruit garden. a kitchen garden. indeed. a well-watered kitchen garden seems to have been the part of the farm which was supposed to yield the most valuable produce. a fruit garden. the one a greater rent. Hence a greater profit becomes due to the farmer. The circumstances of gardeners. may satisfy us that their great ingenuity is not commonly overrecompensed. It requires. But Democritus. the land would soon be turned into corn or pasture. and who was regarded by the ancients as one of the fathers of the art.

it seems. Palladius adopts the opinion of Columella. indeed. was the most valuable part of the farm. Their writers on agriculture. to have the command of a stream of water. by a comparison of the profit and expense. was a matter of dispute among the ancient Italian husbandmen. who reports this judgment of Democritus. The same point is frequently at this day a matter of controversy in the wine countries. must be sufficient to pay the expense of building and maintaining what they cannot be had without. Had the gain actually made by such plantations been commonly as great as he imagined it might have been. The profit. He decides. the anxiety of the proprietors of the old vineyards to prevent the planting of any new ones. in favour of the vineyard. in those times as in the present. was not commonly known in the time of Democritus. between the profit and expense of new projects are commonly very fallacious. Such comparisons. Through the greater part of Europe. that it was a most advantageous improvement. been little more than sufficient to pay the extraordinary culture and the expense of watering. Columella. that this spe- 132 . bricks baked in the sun) mouldered with the rain and the winter-storm. for in countries so near the sun. Their price. which thus enjoys the benefit of an inclosure which its own produce could seldom pay for. The fruit-wall frequently surrounds the kitchen garden. through all the wine countries. there could have been no dispute about it. like a true lover of all curious cultivation. it seems. which could be conducted to every bed in the garden. and in nothing more so than in agriculture. and to indicate a consciousness in those who must have the experience. seems to have been an undoubted maxim in the ancient agriculture. but proposes a very frugal method of inclosing with a hedge of brambles and briars. and endeavours to shew. a kitchen garden is not at present supposed to deserve a better inclosure than mat recommended by Columella. seem generally disposed to decide with Columella in favour of the vineyard. In France. the finer fruits cannot Be brought to perfection but by the assistance of a wall. as we learn from Columella. seems to favour their opinion. in such countries. does not controvert it. the produce of a kitchen garden had. That the vineyard. as it is in the modern. when properly planted and brought to perfection. would not compensate the expense of a stone-wall: and bricks (he meant. the lovers and promoters of high cultivation.The Wealth of Nations they did not act wisely who inclosed a kitchen garden. I suppose. In the judgment of those ancient improvers. it was thought proper. however. which had before been recommended by Varro. and some other northern countries. But whether it was advantageous to plant a new vineyard. and required continual repairs. In Great Britain. which he says he had found by experience to be both a lasting and an impenetrable fence. but which. he said. therefore.

between the 133 . It is like the policy which would promote agriculture. may commonly. is too small to supply the effectual demand. therefore. and profit. are in reality regulated by the rent and profit of those common crops. and the superabundance of wine. by reducing the profits of this species of cultivation below their natural proportion to those of corn and pasture. to be granted only in consequence of an information from the intendant of the province. that the quantity of land which can be fitted for some particular produce. without a particular permission from the king. It sometimes happens. 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. by discouraging manufactures. certifying that he had examined the land. or according to the rates at which they are paid in the greater part of other cultivated land. and the greater part of this excess naturally goes to the rent of the landlord. that this superior profit can last no longer than the laws which at present restrain the free cultivation of the vine. however. corn is nowhere in France more carefully cultivated than in the wine provinces. With regard to the supposed scarcity of corn occasioned by the multiplication of vineyards. Guienne. necessary for raising and bringing it to market. which require either a greater original expense of improvement in order to fit the land for them. by affording a ready market for its produce. of which the cultivation had been interrupted for two years. to indicate another opinion. and the renewal of these old ones. yet when they do no more than compensate such extraordinary expense. have effectually prevented the plantation of new vineyards. but may exceed it in almost any degree. The rent and profit of those productions. it would. prohibiting both the planting of new vineyards. and the Upper Languedoc. for example. though often much superior to those of corn and pasture. and in this case only. The pretence of this order was the scarcity of corn and pasture.Adam Smith cies of cultivation is at present in that country more profitable than any other. where the land is fit for producing it: as in Burgundy. without any order of council. in this case. The surplus part of the price which remains after defraying the whole expense of improvement and cultivation. But had this superabundance been real. or a greater annual expense of cultivation. indeed. The numerous hands employed in the one species of cultivation necessarily encourage the other. The usual and natural proportion. is surely a most unpromising expedient for encouraging the cultivation of corn. they obtained an order of council. according to their natural rates. and that it was incapable of any other culture. wages. In 1731. bear no regular proportion to the like surplus in corn or pasture. at the same time. To diminish the number of those who are capable of paying it. It seems.

it is supposed. which necessarily raises their price above that of common wine. can be disposed of to those who are willing to pay more. necessary for preparing and bringing it to market. the high price of the wine seems to be. according to the rate at which they are commonly paid by any other produce. sometimes it extends through the greater part of a small district. must be understood to take place only with regard to those vineyards which produce nothing but good common wine. as we are told by Mr Poivre {Voyages d’un Philosophe. and those of corn and pasture. and the profits of the extraordinary stock which puts that labour into motion. weighs from a hundred and fifty to two hundred Paris pounds. This flavour. What is there called the quintal. such as can be raised almost anywhere. or the demand of those who would be willing to pay the whole rent. or sandy soil. Their whole produce falls short of the effectual demand of Europe.The Wealth of Nations rent and profit of wine. It is with such vineyards only. The whole quantity. about thirteen shillings and sixpence of our money. and wages. upon any other. 134 . is sometimes peculiar to the produce of a few vineyards. For though such vineyards are in general more carefully cultivated than most others. for with those of a peculiar quality it is evident that it cannot. the finest white sugar generally sells for three piastres the quintal. The sugar colonies possessed by the European nations in the West Indies may be compared to those precious vineyards. or a hundred and seventy-five Paris pounds at a medium. according as the fashionableness and scarcity of the wine render the competition of the buyers more or less eager.}. the loss occasioned by negligence is so great. profit. and which has nothing to recommend it but its strength and wholesomeness. that the common land of the country can be brought into competition. therefore. and wages. the greater part of it goes to the rent of the landlord. gravelly. The whole quantity of such wines that is brought to market falls short of the effectual demand. real or imaginary. not so much the effect. The vine is more affected by the difference of soils than any other fruit-tree. and sometimes through a considerable part of a large province. and can be disposed of to those who are willing to give more than what is sufficient to pay the whole rent. is sufficient to pay the wages of the extraordinary labour bestowed upon their cultivation. upon any light. therefore. as to force even the most careless to attention. profit. From some it derives a flavour which no culture or management can equal. The difference is greater or less. or according to the rate at which they are paid in common vineyards. as the cause of this careful cultivation. A small part of this high price. necessary for preparing and bringing them thither. In Cochin China. In so valuable a produce. a very careful observer of the agriculture of that country. according to the ordinary rate. Whatever it be.

but. though with some competitors. and that his sugar should be all clear profit. in the advantage of this monopoly. The greater part of the cultivated lands in Cochin China are employed in producing corn and rice. which necessarily gives a sort of monopoly to the countries where it is allowed. and other trading towns. to that of corn. rice. and not a sixth part of what is paid for the finest white sugar. in almost every part of Europe. as most profitable. from the more exact administration of justice in these countries. it is as if a corn farmer expected to defray the expense of his cultivation with the chaff and the straw. and sugar. they share largely. or the corn provinces of North America. and as Virginia and Maryland produce the greatest quantity of it. and to collect a tax from every different farm in the country where this plant might happen to be cultivated. from the defective administration of justice in those countries. it has been supposed. notwithstanding the great distance and the uncertain returns. Nobody will attempt to improve and cultivate in the same manner the most fertile lands of Scotland. been most absurdly prohibited through the greater part of Europe. and that the grain should be all clear profit. it has become a principal subject of taxation. We see frequently societies of merchants in London. than to levy one upon its importation at the custom-house. however. I have never even heard of any tobacco plantation that was improved and cultivated by the capital of merchants who resided in Great Britain. If this be true. Ireland.Adam Smith which reduces the price of the hundred weight English to about eight shillings sterling. would be more difficult. the price of sugar bears no such proportion to that of the produce of a rice or corn field either in Europe or America. Tobacco might be cultivated with advantage through the greater part of Europe. the cultivation of tobacco is preferred. according to what is usually the original expense of improvement. and our tobacco colonies send us home 135 . The respective prices of corn. more regular returns might be expected. or in that which naturally takes place in the different crops of the greater part of cultivated land. The cultivation of tobacco. upon this account. The cultivation of tobacco has. not a fourth part of what is commonly paid for the brown or muscovada sugars imported from our colonies. and the annual expense of cultivation. the food of the great body of the people. purchase waste lands in our sugar colonies. by means of factors and agents. though. as nearly as can be computed. In Virginia and Maryland. which they expect to improve and cultivate with profit. are there probably in the natural proportion. But in our sugar colonies. seems not to be so advantageous as that of sugar. It is commonly said that a sugar planter expects that the rum and the molasses should defray the whole expense of his cultivation. and which recompenses the landlord and farmer. for I pretend not to affirm it.

it is because the quantity of land which can be fitted for it is too small to supply the effectual demand. would necessarily be 136 . wages. To prevent the market from being overstocked. from the preference given in those colonies to the cultivation of tobacco above that of corn. By act of assembly. Our tobacco planters. and replacing the stock of the farmer. Except in particular situations. No particular produce can long afford less. ii. too. in which the fertility of Britain is not much inferior to that of either of those two countries. with the same. it would appear that the effectual demand of Europe for tobacco is not completely supplied. for every negro between sixteen and sixty years of age. 373. over and above this quantity of tobacco. the rent of the landlord. the rent of corn land regulates in Europe that of all other cultivated land. Such a negro. in any country. it probably is more nearly so than that for sugar. will not probably be of long continuance. after paying the labour. and if any particular produce commonly affords more. Though. they have restrained its cultivation to six thousand plants. accordingly. and though the present price of tobacco is probably more than sufficient to pay the whole rent. produced a much greater quantity than the most fertile does of corn. burnt a certain quantity of tobacco for every negro. the superior advantage of its culture over that of corn. If such violent methods are necessary to keep up the present price of tobacco. necessary for preparing and bringing it to market. If. which serves immediately for human food. it must not be so much more as the present price of sugar. p. It is in this manner that the rent of the cultivated land. Britain need envy neither the vineyards of France. because the land would immediately be turned to another use.vol. 379. corn is the principal produce of land.The Wealth of Nations no such wealthy planters as we see frequently arrive from our sugar islands. or nearly the same culture. nor the olive plantations of Italy. which the proprietors of the old vineyards in France have of the superabundance of wine. they have sometimes. they reckon. if it still has any. according to the rate at which they are commonly paid in corn land. In Europe. in plentiful years. the common and favourite vegetable food of the people should be drawn from a plant of which the most common land. in the same manner as the Dutch are said to do of spices. four acres of Indian corn. can manage. of which the produce is human food. Except in particular situations. regulates the rent of the greater part of other cultivated land.} (I suspect he has been ill informed). therefore. or the surplus quantity of food which would remain to him. together with its ordinary profits. and profit. the value of these is regulated by that of corn. we are told by Dr Douglas {Douglas’s Summary. supposed to yield a thousand weight of tobacco. have shewn the same fear of the superabundance of tobacco.

from the prevalence of the customs of Europe. Two crops in the year. though their fields produce only one crop in the year. a very large allowance. It is unfit either for corn. the fallow. the rent of rice lands cannot regulate the rent of the other cuitivated land which can never be turned to that produce. this greater surplus could always maintain a greater quantity of it. from thirty to sixty bushels each. therefore. on account of the watery nature of potatoes. his real power and authority. enable the landlord to purchase or command a greater quantity of it. An acre of potatoes is cultivated with less expense than an acre of wheat.Adam Smith much greater. rice is not there the common and favourite vegetable food of the people. The food or solid nourishment. the cultivation of rice is found to be more profitable than that of corn. requires more labour. and. and at one season a bog covered with water. the common and favourite veg- 137 . three times the quantity produced by the acre of wheat. which can be drawn from each of those two plants. his command of the necessaries and conveniencies of life with which the labour of other people could supply him. is not altogether in proportion to their weight. and much superior to what is produced by a field of wheat. or pasture. like rice in some rice countries. indeed. therefore. however. In those rice countries. which generally precedes the sowing of wheat. are said to be the ordinary produce of an acre. and though. The real value of his rent. The food produced by a field of potatoes is not inferior in quantity to that produced by a field of rice. Should this root ever become in any part of Europe. more than compensating the hoeing and other extraordinary culture which is always given to potatoes. A good rice field is a bog at all seasons. Though its cultivation. indeed. Twelve thousand weight of potatoes from an acre of land is not a greater produce than two thousand weight of wheat. In Carolina. is confounded with profit. where rice is the common and favourite vegetable food of the people. and where rent. such an acre of potatoes will still produce six thousand weight of solid nourishment. a much greater surplus remains after maintaining all that labour. are generally both farmers and landlords. therefore. a greater share of this greater surplus should belong to the landlord than in corn countries. Whatever was the rate at which labour was commonly maintained in that country. would necessarily be much greater. or vineyard. half the weight of this root to go to water. Even in the rice countries. consequently. as in other British colonies. consequently. and the lands which are fit for those purposes are not fit for rice. where the planters. for any other vegetable produce that is very useful to men. A rice field produces a much greater quantity of food than the most fertile corn field. Allowing. or. and where the cultivators are chiefly maintained with it.

afford Rent. are in general neither so strong nor so handsome as the same rank of people in England. that bread of oatmeal is a heartier food for labouring people than wheaten bread. and as there is not the same difference between the people of fashion in the two countries. the chief obstacle to their ever becoming in any great country. which wheat and other sorts of grain for human food do at present.The Wealth of Nations etable food of the people. however. Other sorts of produce sometimes may. The chairmen. or of its being peculiarly suitable to the health of the human constitution. perhaps. The common people in Scotland. somewhat doubtful of the truth of it. the rent of the greater part of other cultivated land. and sometimes may not. I am. and coalheavers in London. in the same manner. and maintaining all the labour employed in cultivation. It is difficult to preserve potatoes through the year. who are fed with wheaten bread. who are generally fed with this root. In some parts of Lancashire. and those unfortunate women who live by prostitution. the greater part of them. and I have frequently heard the same doctrine held in Scotland. and is. would belong to the landlord. are said to be. The fear of not being able to sell them before they rot. according to different circumstances. No food can afford a more decisive proof of its nourishing quality. it is pretended. and the labourers being generally fed with potatoes. which sometimes does. 138 . A greater share of this surplus. The land which is fit for potatoes. — Of the Produce of Land. the principal vegetable food of all the different ranks of the people. is fit for almost every other useful vegetable. and sometimes does not. If they occupied the same proportion of cultivated land which corn does at present. the same quantity of cultivated land would maintain a much greater number of people. like bread. who are fed with oatmeal. too. 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. They neither work so well. experience would seem to shew. Population would increase. porters. from the lowest rank of people in Ireland. ART PART II. which always and necessarily affords some rent to the landlord. a greater surplus would remain after replacing all the stock. the strongest men and the most beautiful women perhaps in the British dominions. they would regulate. and rents would rise much beyond what they are at present. discourages their cultivation. But it seems to be otherwise with potatoes. I have been told. and impossible to store them like corn. nor look so well. Human food seems to be the only produce of land. so as to occupy the same proportion of the lands in tillage. for two or three years together.

at least in the way in which they require them. can always afford some rent to the landlord. In the one state. In the present commercial state of the known world. The wool of England. upon that account. or than the Highlands of Scotland are 139 . Somebody is always willing to give more for every part of them. the greater part of them would be thrown away as things of no value. whose food consists chiefly in the flesh of those animals. and brandy. which in old times. in its original rude state. which necessarily augments their value. Land. The skins of the larger animals were the original materials of clothing. and find among their wealthier neighbours such a demand for all the materials of clothing. before their country was discovered by the Europeans. In the other. 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. they are all made use of. than what is sufficient to pay the expense of bringing them to market. there is always a superabundance of these materials. fire-arms. provides himself with the materials of more clothing than he can wear. and which can neither be wrought up nor consumed at home. there is often a scarcity. When the greater part of the Highland cattle were consumed on their own hills. could neither be consumed nor wrought up at home. by providing himself with food. therefore. therefore. which are frequently. therefore. It affords. If there was no foreign commerce. which their land produces. This was probably the case among the hunting nations of North America. In the other. and there is frequently a demand for more than can be had. I believe. Among nations of hunters and shepherds. afford no rent to the landlord. Their price. as raises their price above what it costs to send them to those wealthier neighbours. found a market in the then wealthier and more industrious country of Flanders.Adam Smith After food. therefore. have some foreign commerce of this kind. the exportation of their hides made the most considerable article of the commerce of that country. In the one state. which gives it some value. it can sometimes feed a greater number of people than it can supply with those materials. In its improved state. among whom land property is established. clothing and lodging are the two great wants of mankind. for blankets. and are willing to pay for them. some rent to the landlord. therefore. the most barbarous nations. and its price afforded something to the rent of the land which produced it. In countries not better cultivated than England was then. with whom they now exchange their surplus peltry. can afford the materials of clothing and lodging to a much greater number of people than it can feed. and can. of little or no value. and what they were exchanged for afforded some addition to the rent of the Highland estates. everyman.

When food is provided. can be sent to market. a hundredth. will be sufficient to provide them with such clothing and lodging as satisfy the greater part of the people. In some parts of the Highlands of Scotland. the labour of half 140 . The demand of wealthier nations. The simplest species of clothing. it frequently happens. who generally grants the use of it to whoever takes the trouble of asking it. by the improvement and cultivation of land. But in many parts of North America. A good stone quarry in the neighbourhood of London would afford a considerable rent. that they are of no value to the landlord. it is easy to find the necessary clothing and lodging. it may often be difficult to find food. however. In many parts of Scotland and Wales it affords none. the landlord would be much obliged to any body who would carry away the greater part of his large trees. the timber is left to rot upon the ground. The woods of Norway. the materials of clothing would evidently be so superabundant. however. and do not so readily become an object of foreign commerce. They do not. and thereby afford some rent to their proprietors. the skins of animals. the part made use of is worth only the labour and expense of fitting it for that use. and the land which produces it affords a considerable rent. not in proportion to the number of people whom their produce can clothe and lodge. the bark is the only part of the wood which. But when. the labour of one family can provide food for two. All the other ninety-nine parts are frequently no more than enough to provide them with food. or little more than a hundredth part of the labour of the whole year. Among savage or barbarous nations. Countries are populous. and no part could afford any rent to the landlord. even in the present commercial state of the world. But though these are at hand. what is called a house may be built by one day’s labour of one man. The paving of the streets of London has enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded any before.The Wealth of Nations now. require a great deal. that a great part of them would be thrown away as useless. sometimes enables him to get a rent for it. When the materials of lodging are so superabundant. and which had no foreign commerce. When they are superabundant in the country which produces them. It affords no rent to the landlord. find a market in many parts of Great Britain. The materials of lodging cannot always be transported to so great a distance as those of clothing. but in proportion to that of those whom it can feed. for want of roads and water-carriage. which they could not find at home. In some parts of the British dominions. and of the coasts of the Baltic. Barren timber for building is of great value in a populous and well-cultivated country. require somewhat more labour to dress and prepare them for use.

but in quantity it is very nearly the same. the stock which must be employed in bringing them to market. In quality it may be very different. seems to have no limit or certain boundary. Hence arises a demand for every sort of material which human invention can employ. and household furniture. or. what is the same thing. The desire of food is limited in every man by the narrow capacity of the human stomach. or household furniture. is almost as great in quantity as it is in quality. or in satisfying the other wants and fancies of mankind. The poor. in this manner.Adam Smith the society becomes sufficient to provide food for the whole. but every other part of the produce of land which afterwards affords rent. is given for the amusement of those desires which cannot be satisfied. Those. Clothing and lodging. but seem to be altogether endless. Whether it is or is not 141 . and what is called equipage. or with the growing improvement and cultivation of the lands. by means of the improvement and cultivation of land. not only the original source of rent. The number of workmen increases with the increasing quantity of food. however. can be employed in providing other things. and household furniture. in order to obtain food. equipage. are always willing to exchange the surplus. together with its ordinary profits. dress. Food is. and replace. Those other parts of the produce of land. in building. The rich man consumes no more food than his poor neighbour. exert themselves to gratify those fancies of the rich. equipage. which afterwards afford rent. and you will be sensible that the difference between their clothing. the quantity of materials which they can work up. the price of it. household furniture. therefore. who have the command of more food than they themselves can consume. do not afford it always. Even in improved and cultivated countries. therefore. are the principal objects of the greater part of those wants and fancies. the precious metals. with the hovel and the few rags of the other. and as the nature of their business admits of the utmost subdivisions of labour. What is over and above satisfying the limited desire. The other half. lodging. But compare the spacious palace and great wardrobe of the one. dress. and to select and prepare it may require more labour and art. and to obtain it more certainly. the demand for them is not always such as to afford a greater price than what is sufficient to pay the labour. derives that part of its value from the improvement of the powers of labour in producing food. for gratifications of this other kind. they vie with one another in the cheapness and perfection of their work. increases in a much greater proportion than their numbers. or at least the greater part of them. but the desire of the conveniencies and ornaments of building. and the precious stones. for the fossils and minerals contained in the bowels of the earth. either usefully or ornamentally.

can afford any rent. of no value to the landlord. who would gladly give it to any body for the cutting. depends upon different circumstances. for example. As agriculture advances. who. furnish them with a greater quantity of food than uncultivated nature provides for them. They can be wrought advantageously by nobody but the landlord. and replace. sufficient to defray the expense of working. which is then a mere incumbrance. could be brought from the mine by the ordinary. therefore. the woods are partly cleared by the progress of tillage. and partly go to decay in consequence of the increased number of cattle. which is altogether the acquisition of human industry. sufficiently fertile. thinly inhabited. They can afford neither profit nor rent. who. The landlord will allow nobody else to work them without paying some rent. Some coal mines. Whether a coal mine. gets the ordinary profit of the capital which he employs in it. or even less than the ordinary quantity of labour: but in an inland country. through the whole year. and who. by destroying and extirpating 142 .The Wealth of Nations such. together with its ordinary profits. cannot be wrought on account of their barrenness. but no rent to the landlord. They afford some profit to the undertaker of the work. and can be wrought in no other. and exactly for the same reason. at the place where they are consumed. The expense of coals. again. the stock employed in working them. Many coal mines in Scotland are wrought in this manner. cannot be wrought on account of their situation. as the price of cattle. according as the quantity of mineral which can be brought from it by a certain quantity of labour. A mine of any kind may be said to be either fertile or barren. of which the produce is barely sufficient to pay the labour. and without either good roads or water-carriage. who store up in the season of plenty what may maintain them in that of scarcity. A quantity of mineral. and partly upon its situation. nearly in the same manner. advantageously situated. varies with the state of agriculture. is greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. being himself the undertaker of the work. yet multiply under the care and protection of men. the greater part of every country is covered with wood. The price of wood. and nobody can afford to pay any. In its rude beginnings. Coals are a less agreeable fuel than wood: they are said too to be less wholesome. though they do not increase in the same proportion as corn. There are some. The produce does not pay the expense. this quantity could not be sold. must generally be somewhat less than that of wood. depends partly upon its fertility. These. Other coal mines in the same country.

to mix coals and wood together. and where the difference in the expense of those two sorts of fuel cannot. like that of all other commodities. and sometimes takes away altogether. others can afford no rent. the other that he can get a greater profit. A small quantity only could be sold. The most fertile coal mine. The lowest price at which coals can be sold for any considerable time. are everywhere much below this highest price. which is highly cuitivated. The advantage which the landlord derives from planting can nowhere exceed. when allowed to wander through the woods. It seems to be so in some of the inland parts of England. hinder any young ones from coming up. though they do not destroy the old trees. Both the proprietor and the undertaker of the work find. either by land or by water. there is not. the whole forest goes to ruin. and the landlord sometimes finds that he can scarce employ his best lands more advantageously than in growing barren timber. 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. particularly in Oxfordshire. Coals. in the coal countries. by somewhat underselling all their neighbours. at least for any considerable time. of which the greatness of the profit often compensates the lateness of the returns. and in an inland country. Upon the sea-coast of a wellimproved country. it may sometimes be cheaper to bring barren timber for building from less cultivated foreign countries than to raise it at home. Their neighbours are soon obliged to sell at the same price. and though it always diminishes. and can be wrought only by the proprietor. though they cannot so well afford it. Numerous herds of cattle. both their rent and their profit. in the course of a century or two. so that. if coals can conveniently be had for fuel. therefore. built within these few years. This seems. The scarcity of wood then raises its price. If they were not.Adam Smith their enemies. they could not bear the expense of a distant carriage. even in the fires of the common people. the price which is barely 143 . indeed. than a small quantity at the highest. in the present times. perhaps. where it is usual. where the profit of planting is found to be equal to that of either corn or pasture. is. to be nearly the state of things in several parts of Great Britain. It affords a good rent. be very great. the one that he can get a greater rent. Some works are abandoned altogether. the price of coals is as high as it can be. too. the rent which these could afford him. that at that place. 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. regulates the price of coals at all the other mines in its neighbourhood. secure them in the free enjoyment of all that she provides. a single stick of Scotch timber. and in these circumstances. it will frequently not fall much short of this rent. Whatever may be the price of wood. In the new town of Edinburgh.

The rent of an estate above ground. the food. Rent. clothes. The price of silver in Peru. In coal mines.The Wealth of Nations sufficient to replace. commonly amounts to what is supposed to be a third of the gross produce. together with its ordinary profits. and other neces- 144 . The coarse. not only to Europe. abandoned. the stock which must be employed in bringing them to market. The price. After the discovery of the mines of Peru. and it is seldom a rent certain. the price of coals must generally be nearly about this price. are so valuable. and less upon its situation. but depends upon the occasional variations in the produce. The productions of such distant coal mines can never be brought into competition with one another. a tenth the common rent. has generally a smaller share in their price than in that of most other parts of the rude produce of land. but extends to the whole world. and still more the precious metals. at the most fertile mines in the world. or replace. and their price in the Lionnois can have none at all. but. and it is generally a rent certain and independent of the occasional variations in the crop. therefore. when separated from the ore. The value of silver was so much reduced. a fifth of the gross produce is a very great rent. Their market is not confined to the countries in the neighbourhood of the mine. but at those of China. even where coals afford one. frequently depends as much upon its situation as upon its fertility. At a coal mine for which the landlord can get no rent. that in a country where thirty years purchase is considered as a moderate price for the property of a landed estate. and still more that of the precious metals. that their produce could no longer pay the expense of working them. not only at the silver mines of Europe. lodging. and in fact commonly are. The price of coals in Westmoreland or Shropshire can have little effect on their price at Newcastle. But the productions of the most distant metallic mines frequently may. or the quantity either of labour or of other goods which it will purchase there. of the coarse. and of the most distant sea carriage. ten years purchase is regarded as a good price for that of a coal mine. That of a metallic mine depends more upon its fertility. These are so great. The silver of Peru finds its way. but from Europe to China. the greater part of them. The price of copper in Japan must have some influence upon its price at the copper mines in Europe. The value of a coal mine to the proprietor. must necessarily more or less affect their price at every other in it. the iron of Spain in that of Chili and Peru. the silver mines of Europe were. which he must either work himself or let it alone altogether. that they can generally bear the expense of a very long land. must have some influence on its price. with a profit. The copper of Japan makes an article of commerce in Europe.

being regulated in some measure by its price at the most fertile mine in the world that is actually wrought. therefore. Borlace. and the tax upon silver was. A sixth part of the gross produce is the rent. paying him the ordinary multure or price of grinding. it would naturally. as thirteen to twelve. 145 . Some. Domingo. and many mines might have been wrought which could not then be wrought. too. with the mines of Cuba and St. and that of the duke of Cornwall very well. Rent. After replacing the stock employed in working those different mines. the richest which have been known in the world. too. of several very fertile lead mines in Scotland. indeed. The tax of the king of Spain. A sixth part of the gross produce may be reckoned the average rent of the tin mines of Cornwall. Labour and profit make up the greater part of both. therefore. he says. or one twentieth part of the value. and some do not afford so much. if tin was duty free. seems at the greater part of mines to have but a small share in the price of the coarse. which till then might be considered as the real rent of the greater part of the silver mines of Peru. it can. it is probable. makes a greater part of the price of tin at the most fertile tin mines than it does of silver at the most fertile silver mines in the world. The price of every metal. the residue which remains to the proprietor is greater. and whatever may be his proportion.Adam Smith saries which were consumed in that operation. too. and smuggling must be much easier in the precious than in the bulky commodity. the tax of the king of Spain amounted to one fifth of the standard silver. Rent accordingly. This was the case. But the silver mines of Peru are not now able to pay even this low rent. this fifth would naturally have belonged to the landlord. afford more. vice-warden of the stannaries. In the silver mines of Peru. belong to the proprietor of the mine. after the discovery of those of Potosi. The tax of the duke of Cornwall upon tin is supposed to amount to more than five per cent. Even this tax upon silver. at every mine. Mr. in 1736. accordingly. you will find that the whole average rent of the tin mines of Cornwall. but that he will grind the ore at his mill. But if you add one twentieth to one sixth. at the greater part of mines. gives more temptation to smuggling than the tax of one twentieth upon tin. and a still smaller in that of the precious metals. reduced from one fifth to one tenth. as we are told by the Rev. too. and can seldom afford a very high rent to the landlord. was to the whole average rent of the silver mines of Peru. and even with the ancient mines of Peru. the most fertile that are known in the world. Till 1736. do very little more than pay the expense of working. together with its ordinary profits. is said to be very ill paid. we are told by Frezier and Ulloa. If there had been no tax. because they could not afford this tax. the proprietor frequently exacts no other acknowledgment from the undertaker of the mine.

The same most respectable and wellinformed authors acquaint us. though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects. to find a person who has made his fortune by a silver. Gold. Mining. As the sovereign. as in silver. Silver is very seldom found virgin. to whom. which cannot well be carried on but in 146 . it seems. say the same authors. according to what he supposes to be the direction of the vein. In both regulations.The Wealth of Nations it seems. not only on account of the superior value of the metal in proportion to its bulk. The bounder becomes the real proprietor of the mine. that when any person undertakes to work a new mine in Peru. however. is entitled to measure off two hundred and forty-six feet in length. in which the prizes do not compensate the blanks. Frezier and Ulloa. without the consent of the owner of the land. 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. however. and is upon that account shunned and avoided by every body. too. The interest of the duke of Cornwall has given occasion to a regulation nearly of the same kind in that ancient dutchy. as a lottery. Neither are the profits of the undertakers of silver mines commonly very great in Peru. a very small acknowledgment must be paid upon working it. any person who discovers a tin mine may mark out its limits to a certain extent. but on account of the peculiar way in which nature produces it. but. This twentieth part seems to be the whole rent which is paid by the greater part of the gold mines of Chili and Peru. The same encouragement is given in Peru to the discovery and working of new gold mines. In waste and uninclosed lands. and afterwards a tenth. the sacred rights of private property are sacrificed to the supposed interests of public revenue. is considered there in the same light as here. however. but by a very laborious and tedious operation. is much more liable to be smuggled than even silver. than in the precious metal. or give it in lease to another. it is still much rarer to find one who has done so by a gold mine. and half as much in breadth. which is called bounding a mine. and in gold the king’s tax amounts only to a twentieth part of the standard rental. the law in Peru gives every possible encouragement to the discovery and working of new ones. He becomes proprietor of this portion of the mine. he is universally looked upon as a man destined to bankruptcy and ruin. It was once a fifth. in the coarse. If it is rare. and may either work it himself. like most other metals. but it was found that the work could not bear even the lowest of these two taxes. Whoever discovers a new mine. is generally mineralized with some other body. derives a considerable part of his revenue from the produce of silver mines.

upon that account. it can be separated from them by a very short and simple operation. is almost always found virgin. With the greater part of rich people. It must at least be sufficient to replace that stock. and partly from their beauty. and. seems not to be necessarily determined by any thing but the actual scarcity or plenty of these metals themselves. they can more easily be kept clean. which. is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves. and rent must make a much smaller part of the price of gold than that of silver. with the ordinary profits. earth. determine it. during any considerable time. and the utensils. either of the table or the kitchen. It is not determined by that of any other commodity. It is sometimes found in pieces of some bulk. copper. The merit of their beauty is greatly enhanced by their scarcity. even when mixed. and lodging. therefore. which can be carried on in any private house by any body who is possessed of a small quantity of mercury. therefore.Adam Smith work-houses erected for the purpose. or by the great labour which it requires to collect any considerable quantity of it. in small and almost insensible particles. is but ill paid upon silver. The demand for those metals arises partly from their utility. exposed to the inspection of the king’s officers. they are more useful than. or the smallest quantity of other goods for which they can be exchanged. however. In their eyes. The stock which must commonly be employed. and other extraneous bodies. or tin one. arises from their beauty. and. the food. Their principal merit. the merit of an object. which renders them peculiarly fit for the ornaments of dress and furniture. No paint or dye can give so splendid a colour as gilding. any other metal. If the king’s tax. and the same quality would render a gold boiler still better than a silver one. are often. is greatly enhanced by its scarcity. which must commonly be consumed in bringing them from the mine to the market. in the same manner as the price of coals is by that of wood. Increase the scarcity of gold to a certain degree. and exchange for a greater quantity of other goods. beyond which no scarcity can ever raise it. Their highest price. Gold. in their eye. perhaps. A silver boiler is more cleanly than a lead. If you except iron. with sand. on the contrary. and the smallest bit of it may become more precious than a diamond. it is likely to be much worse paid upon gold. As they are less liable to rust and impurity. however. more agreeable when made of them. which is in any degree either useful or beautiful. The lowest price at which the precious metals can be sold. clothes. a labour which nobody can 147 . is regulated by the same principles which fix the lowest ordinary price of all other goods. the chief enjoyment of riches consists in the parade of riches.

it seems. however. he was informed that the sovereign of the country. beauty. both to the public and to the proprietor. 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. and independent of their being employed as coin. The other. and was the quality which fitted them for that employment. visited the diamond mines of Golconda and Visiapour. Rent comes in but for a very small share. were to the proprietor not worth the working. the rent which a mine of either can afford to its proprietor is in proportion. as much superior to those of Potosi. The value. might have been the same. had ordered all of them to be shut up except those which yielded the largest and finest stones. Though the quantity of silver was much less. or of the great quantity of other goods for which they can everywhere be exchanged. either of the precious metals. These qualities of utility. and by diminishing the quantity which could be employed in any other way. the real revenue which they afforded. it might have exchanged for an equal quantity of other goods. not to its absolute. of which the value is principally derived from its scar- 148 . as they were superior to those of Europe. but to what may be called its relative fertility. and the merit of their beauty is greatly enhanced by their scarcity. by occasioning a new demand. the value of silver might be so much degraded as to render even the mines of Potosi not worth the working. As the prices. frequently for no share. may have afterwards contributed to keep up or increase their value. and the most fertile mines only afford any considerable rent. for whose benefit they were wrought. Wages and profit accordingly make up. is regulated all over the world by their price at the most fertile mine in it. Such objects they are willing to purchase at a higher price than things much more beautiful and useful. both of the produce and of the rent. or of the precious stones. They are of no use but as ornaments. The demand for the precious stones arises altogether from their beauty. could add little to the wealth of the world. both of the precious metals and of the precious stones. almost the whole of the high price. This value was antecedent to. That employment. or by the difficulty and expense of getting them from the mine. and the proprietor’s share might have enabled him to purchase or command an equal quantity either of labour or of commodities. The most abundant mines. If new mines were discovered. a jeweller. and scarcity. but more common. Before the discovery of the Spanish West Indies.The Wealth of Nations afford to pay but themselves. are the original foundation of the high price of those metals. When Tavernier. or to its superiority over other mines of the same kind. upon most occasions. A produce.

the passion 149 . That abundance of food. both for the precious metals and the precious stones. It is otherwise in estates above ground. They were astonished to observe the rage of the Spaniards to obtain them. clothes. They seemed to value them as we would do any little pebbles of somewhat more than ordinary beauty. clothe. is the great cause of the demand. that. can always feed.Adam Smith city. but not worth the refusing to any body who asked them. The poor inhabitants of Cuba and St. and not to their relative fertility. in consequence of the improvement of land. it will always give him a proportionable command of the labour of those people. for a very small quantity of those glittering baubles. Whatever increases the fertility of land in producing food. and lodge. 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. both of their produce and of their rent. when they were first discovered by the Spaniards. On the contrary. of which. many people have the disposal beyond what they themselves can consume. it is generally increased by it. and lodging. could be purchased for a smaller quantity of commodities. so scanty always among themselves. and of the commodities with which that labour can supply him. They gave them to their new guests at the first request. household furniture. which they could never have found among those whom their own produce could maintain. but it is the abundance of food which gives the principal part of their value to many other sorts of riches. and to consider them as just worth the picking up. Food not only constitutes the principal part of the riches of the world. and the other frivolous ornaments of dress and furniture. as well as for every other conveniency and ornament of dress. The land which produces a certain quantity of food. and whatever may be the proportion of the landlord. and in this would consist the sole advantage which the world could derive from that abundance. The value of the most barren land is not diminished by the neighbourhood of the most fertile. Could they have been made to understand this. a certain number of people. is in proportion to their absolute. The great number of people maintained by the fertile lands afford a market to many parts of the produce of the barren. Domingo. A service of plate. The value. used to wear little bits of gold as ornaments in their hair and other parts of their dress. and equipage. they would willingly give as much as might maintain a whole family for many years. lodging. by creating a new demand for their produce. is necessarily degraded by its abundance. but contributes likewise to increase that of many other lands. without seeming to think that they had made them any very valuable present. increases not only the value of the lands upon which the improvement is bestowed.

and the demand must generally be in proportion to the improvement and population of that small district. might gradually pur- 150 . or. The increasing abundance of food. As art and industry advance. that is. should gradually come to be more and more in demand. therefore. has been the case with most of these things upon most occasions. and of that which sometimes does. and sometimes does not afford rent. should gradually exchange for a greater and a greater quantity of food. afford Rent. But the value of a silver mine. The value of a free-stone quarry. for example. accordingly. the demand for silver might not be at all increased by the improvement even of a large country in the neighbourhood of the mine. the materials of clothing and lodging. — Of the variations in the Proportion between the respective Values of that sort of Produce which always affords Rent. be advancing in improvement and population. and would have been the case with all of them upon all occasions. should constantly rise in proportion to that which always affords some rent. even though there should not be another within a thousand miles of it. be expected there should be only one variation in the comparative values of those two different sorts of produce. therefore. the useful fossils and materials of the earth. yet if. ART PART III. The value of that sort which sometimes does. in consequence of the increasing improvement and cultivation. especially if it should be the only one in the neighbourhood. This. in the course of its improvements. and sometimes does not. but the market for the produce of a silver mine may extend over the whole known world. if particular accidents had not. much more fertile than any which had been known before. it might. yet the supply might increase in so much a greater proportion. The market for the produce of a free-stone quarry can seldom extend more than a few miles round about it. must necessarily increase the demand for every part of the produce of land which is not food. for example. and which can be applied either to use or to ornament. a pound weight of it. Even though the world in general were improving. the precious metals and the precious stones. new mines should be discovered. Unless the world in general. that the real price of that metal might gradually fall. will not necessarily increase with the improvement of the country in which it is situated. will necessarily increase with the increasing improvement and population of the country round about it. should gradually become dearer and dearer.The Wealth of Nations of the Spaniards would not have surprised them. In the whole progress of improvement. in other words. though the demand for silver would necessarily increase. increased the supply of some of them in a still greater proportion than the demand. upon some occasions. any given quantity.

in which I have here set them down. on the contrary. or. at the same time. In 1350. the value of silver would gradually rise in proportion to that of corn. or exchange for a smaller and a smaller quantity of corn. First Period. Digression concerning the Variations in the value of Silver during the Course of the Four last Centuries. by the general progress of improvement. the average money price of corn would. who endeavoured to raise their wages upon their masters. In the preamble. It therefore ordains. the average money price of corn would gradually become cheaper and cheaper. equal to about twenty shillings of our present money. and during the course of the four centuries preceding the present. — In 1350. But if. Any given quantity of silver would exchange for a greater and a greater quantity of corn. it complains much of the insolence of servants. the principal part of the subsistence of the labourer. in other words. gradually become dearer and dearer. too. in other words. that metal would gradually become cheaper and cheaper. and at which it seems to have continued to be estimated till about 1570. but provisions) which they had been accustomed to receive in the 20th 151 . Tower weight. The great market for silver is the commercial and civilized part of the world. the supply. while. in spite of all improvements. was enacted what is called the Statute of Labourers. the supply of that metal should increase nearly in the same proportion as the demand. should increase. These three seem to exhaust all the possible combinations of events which can happen in the progress of improvement. in spite of all improvements. and for some time before. From this price it seems to have fallen gradually to two ounces of silver. be contented with the same wages and liveries (liveries in those times signified not only clothes.Adam Smith chase or command a smaller and a smaller quantity of labour. the average price of the quarter of wheat in England seems not to have been estimated lower than four ounces of silver. by some accident. or. the demand of this market should increase. If. equal to about ten shillings of our present money. that all servants and labourers should. for many years together. it would continue to purchase or exchange for nearly the same quantity of corn. the price at which we find it estimated in the beginning of the sixteenth century. in a greater proportion than the demand. for the future. If. the supply did not increase in the same proportion. continue very nearly the same. and the average money price of corn would. being the 25th of Edward III. each of those three different combinations seems to have taken place in the European market. on the other hand. and nearly in the same order. if we may judge by what has happened both in France and Great Britain.

fifty-eight quarters of malt. other reasons for believing that. the common price of wheat was not less than four ounces of silver the quarter. and it had been reckoned a reasonable price ten years before that. being the 51st of Henry III. which cost four pounds. been reckoned a very moderate price of wheat. There are. Canterbury. had been made in the times of his progenitors. therefore. as the prices actually paid for large quantities of grain consumed at a feast. Ralph de Born. In 1309. and for some time before. equal to six shillings and eightpence of the money of those times. not only the bill of fare. gave a feast upon his installation-day. prior of St Augustine’s. and twopence a-quarter. the king says in the preamble. Tower weight. but are mentioned accidentally. had. of which William Thorn has preserved. This statute is surely a better evidence of what was reckoned. called the assize of bread and ale. or six shillings a-quarter. a moderate price of grain. and to near twenty shillings of that of the present. besides. which. upon this account. 2dly. some 152 . equal to about eighteen shillings of our present money. since it required a particular statute to oblige servants to accept of it in exchange for their usual livery of provisions. on account of their extraordinary dearness or cheapness. In that feast were consumed.The Wealth of Nations year of the king. Tenpence: a-bushel. Tower weight. the term to which the statute refers. or seven shillings. and that it should always be in the option of the master to deliver them either the wheat or the money. therefore. These prices are not recorded. or in the 16th year of the king. must have been reckoned a moderate price for the quarter of eight bushels. in the beginning of the fourteenth century. which cost seventeen pounds ten shillings. Four ounces of silver. which was famous for its magnificence. and the four preceding years. on account of their extraordinary dearness or cheapness. and that of other grain in proportion. and was nearly equal to half-a-crown of our present money. or four shillings a-quarter. twenty quarters of oats. fifty-three quarters of wheat. 1st. 3dly. in those times. which cost nineteen pounds. in the 25th of Edward III. In 1262. it is difficult to form any judgment concerning what may have been the ordinary price. equal to about one-and-twenty shillings and sixpence of our present money. was revived an ancient statute. The prices of malt and oats seem here to lie higher than their ordinary proportion to the price of wheat. But in the 16th year of Edward III. tenpence contained about half an ounce of silver. but the prices of many particulars. that. and from which. their livery-wheat should nowhere be estimated higher than tenpence a-bushel. which have generally been recorded by historians and other writers. therefore. equal to about twelve shillings of our present money. than the prices of some particular years.

must. and may have been as old as the Conquest. during the space of more than two hundred years. From the 25th of Edward III. Tower weight. containing four ounces of silver. have been reckoned the middle price of the quarter of wheat when this statute was first enacted. continually diminishing in consequence of some alterations which were made in the coin. drawn up in 1512 there are two different estimations of wheat. But the increase of the value of silver had. during the course of this period. from one shilling to twenty shillings the quarter of the money of those times. In the household book of Henry. it appears from several different statutes. six shillings and eightpence contained only two ounces of silver. the ordinary or average price of wheat. or than six shillings and eightpence of the money of those times. as well as for those above it. therefore. therefore. contained in that nominal sum was. so far compensated the diminution of the quantity of it contained in the same nomi- 153 . the ordinary or average price of wheat. that is. Henry II. so as at last to have fallen to about two ounces of silver.Adam Smith time kings of England. and equal to about thirty shillings of our present money. we seem to have some reason to conclude that. that is. in the other at five shillings and eightpence only. It is probably. what was reckoned the reasonable and moderate. the average or ordinary price of the quarter of wheat was not supposed to be less than four ounces of silver. containing six ounces of silver. The quantity of silver. and for a considerable time before. Tower weight. Tower weight. for those below it. Tower weight. six shillings and eightpence. and were equal to about ten shillings of our present money. it seems. From about the middle of the fourteenth to the beginning of the sixteenth century. We cannot. seems to have sunk gradually to about one half of this price. therefore. about the middle of the fourteenth century. Ten shillings. In one of them it is computed at six shilling and eightpence the quarter. and must have continued to be so in the 51st of Henry III. But statutes of this kind are generally presumed to provide with equal care for all deviations from the middle price. therefore. equal to about ten shillings of our present money. however. to the beginning of the reign of Elizabeth. had continued to be considered as what is called the moderate and reasonable. upon this supposition. It continued to be estimated at this price till about 1570. Tower weight. as old at least as the time of his grandfather. In 1512. From these different facts. the fifth earl of Northumberland. It regulates the price of bread according as the prices of wheat may happen to be. 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.

there could be no inconveniency in exportation. consequently. It agrees nearly with the estimation of the Northumberland book in 1512. or it may have been owing partly to the one. the supply. 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). the expense of working them much increased. that to restrain the exportation of wheat till the price was so very low. than in the two centuries preceding. that no wheat should be imported if the price was not above six shillings and eightpence the quarter: The legislature had imagined. Six shillings and eightpence. In 154 . But it had soon been found. during the same period. much lower in the end of the fifteenth and beginning of the sixteenth century. That in France the average price of grain was. in proportion to that of corn. has been observed both by Mr Dupré de St Maur. which did not then contain two penny worth more silver than the same nominal sum does at present. it became prudent to allow of importation. and by the elegant author of the Essay on the Policy of Grain. in reality. but that when it rose higher. that wheat might be exported without a licence when the price was so low as six shillings and eightpence: and in 1463. it was enacted. whenever the price of the quarter should not exceed ten shillings. in the mean time. and. 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. in the same manner. therefore. been considered as what is called the moderate and reasonable price of wheat. by the 1st and 2nd of Philip and Mary. by the 5th of Elizabeth. had probably sunk in the same manner through the greater part of Europe. was. may either have been owing altogether to the increase of the demand for that metal. therefore. Its price. had. This rise in the value of silver. whenever the price of the quarter should exceed six shillings and eightpence. the exportation of wheat was allowed from certain ports. or. therefore. been considered as what is called the moderate and reasonable price of wheat. In 1562. and partly to the other of those two circumstances. in consequence of increasing improvement and cultivation. in those times. This price had at this time. and in 1558. containing nearly the same quantity of silver as the like nominal sum does at present. the exportation of wheat was in the same manner prohibited. continuing the same as before. that the legislature did not think it worth while to attend to this circumstance. in 1436. it was enacted. that when the price was so low. by the 1st of Elizabeth. In 1554.The Wealth of Nations nal sum. the demand continuing the same as before. to prohibit it altogether. Thus.

that the conversion price should rather be below than above the average market price. till the discovery of the mines of America. and have become more expensive in the working. It sometimes happened. These are annual valuations. etc. from the Conquest. A greater annual produce would require a greater quantity of coin to circulate it. that as the quantity of silver naturally increases in every country with the increase of wealth. however. that. that the landlord would stipulate. in a certain quantity of corn. that the greater part of the mines which then supplied the European market with silver might be a good deal exhausted. that he should be at liberty to demand of the tenant. too. too. The increase of security would naturally increase industry and improvement. It has been the opinion. The price at which the payment in kind was in this manner exchanged for a certain sum of money. however. and partly by the popular notion. 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. In many places. Through the greater part of Scotland this custom still continues with regard to poultry. First. and in some places with regard to cattle. and the demand for the precious metals. and much more conve- 155 . three different circumstances seem frequently to have misled them. This institution rendered it sufficiently safe for the tenant. is in Scotland called the conversion price. it is not much above one half of this price. according to the actual market price in every different county. the value of silver was continually diminishing. many of them. so its value diminishes as it quantity increases. of the average price of all the different sorts of grain. either the annual payment in kind or a certain sum of money instead of it. and a greater number of rich people would require a greater quantity of plate and other ornaments of silver.Adam Smith the end of the fifteenth and beginning of the sixteenth centuries. poultry. and of all the different qualities of each. had not the institution of the public fiars put an end to it. It is natural to suppose. for the safety of the tenant. it is necessary. As the option is always in the landlord to take either the substance or the price. of the greater part of those who have written upon the prices of commodities in ancient times. This opinion they seem to have been led into. They had been wrought. as well as for every other luxury and ornament. the greater part of Europe was approaching towards a more settled from of government than it had enjoyed for several ages before. would naturally increase with the increase of riches. perhaps from the invasion of Julius Caesar. almost all rents were paid in kind. with regard to corn. accordingly. in ancient times. from the time of the Romans. cattle. It might probably have continued to take place. In their observations upon the prices of corn. according to the judgment of an assize.

The Wealth of Nations nient for the landlord. of the 51st of Henry III. for a particular purpose. to four shillings the quarter. contained the same quantity of silver as sixteen shillings of our present money. in the assize of bread and ale. he does not think proper to make this acknowledgment till after transcribing this conversion price fifteen times. as they call it. equal to about eighteen shillings of our present money. enacted nearly about the same time. Secondly. however. from one shilling to twenty shillings the quarter of the money of those times. the copiers had never transcribed this regulation beyond the price of twelve shillings. 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 in the manuscripts from which all the different editions of the statutes. than at any certain fixed price. actually composed by the legislature. In the statute of Tumbrel and Pillory. rather at what should happen to be the price of the fiars of each year. Fleetwood acknowledges. Thus. Several writers. and that these prices were only given as an example of the proportion which ought to be observed in all other prices. I suppose. that this was enough to show what proportion ought to be observed in all higher prices. it contained no more than the same nominal sum does at present. that he had made this mistake. or six shillings the quarter. was the ordinary or average price of wheat at that time. preceding that of Mr Ruffhead. saving in this manner their own labour. were printed. perhaps. they have been misled by the slovenly manner in which some ancient statutes of assize had been sometimes transcribed by lazy copiers. from two shillings. and sometimes. the price of bread was regulated according to the different prices of wheat. and judging. however. The price is eight shillings the quarter of wheat. the price of ale is regulated according to every sixpence rise in the price of barley. and to have proceeded gradually to determine what it ought to be. to convert. according as the prices of those two sorts of grain should gradually rise above this lowest price. was not considered as the highest price to which barley might frequently rise in those times. whether higher 156 . But in 1562. the corn rent. the year at which he ends with it. As he wrote his book. This sum in 1423. 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. therefore. That four shillings. the year at which he begins with it. very naturally conclude that the middle price. being misled by this faulty transcription. 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. upon one occasion.

Thus. that three shillings was the highest price to which wheat ever rose in those times. we may infer from the last words of the statute: “Et sic deinceps crescetur vel diminuetur per sex denarios. however. a shilling. in 1270.” The expression is very slovenly. In an ancient manuscript of the Regiam Majestatem. while another.” Thirdly. or beginning of the sixteenth century.” —“You shall judge of the remaining cases. an old Scotch law book. but the meaning is plain enough. They might have found. which approaches to the extravagance of these. as its lowest price was below any thing that had ever been known in later times. The one is four pounds sixteen shillings of the money of those times. “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. Fleetwood gives us two prices of the quarter of wheat.” In the composition of this statute. by the very low price at which wheat was sometimes sold in very ancient times. equal to nineteen pounds four shillings of our present money. In the disorderly state of England under the Plantagenets. The last words of the statute are “reliqua judicabis secundum praescripta. or at most two shillings. were the ordinary prices. in which the price of bread is regulated according to all the different prices of wheat. equal to about half an English quarter. were equal to about nine shillings sterling of our present money Mr Ruddiman seems {See his Preface to Anderson’s Diplomata Scotiae. Upon consulting the manuscript. habendo respectum ad pretium bladi. at the time when this assize is supposed to have been enacted. from tenpence to three shillings the Scotch boll. No price can be found in the end of the fifteenth. having respect to the price of corn. they seem to have been misled too. one district might be in plenty. the other is six pounds eight shillings. it appears evidently. according to what is above written. equal to fourteen pounds eight shillings of that of the present. the legislature itself seems to have been as negligent as the copiers were in the transcription of the other. and that tenpence. though at all times liable to variation varies most in those turbulent and disorderly societies. however. who governed it from about the middle of the twelfth till towards the end of the fifteenth century. that in those ancient times its highest price was fully as much above.Adam Smith or lower. The price of corn. there is a statute of assize. that as its lowest price was then much lower than in later times its ordinary price must likewise have been much lower. and to have imagined. in which the interruption of all commerce and communication hinders the plenty of one part of the country from relieving the scarcity of another. Three shillings Scotch. at no great dis- 157 . 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.} to conclude from this.

no baron was powerful enough to dare to disturb the public security. as they prove any thing at all. Bishop Fleetwood and Mr Dupré de St Maur are the two authors who seem to have collected. It is not. either by some accident of the seasons. In that long period of time. it has been said. 1599.The Wealth of Nations tance. was. with the greatest diligence and fidelity. and digested. that. in those rude ages. during all this period. therefore. so far as they relate to the price of corn at least. in consequence of its increasing abundance. to have believed. so that four years are wanting to make out the last twelve years. The prices of corn. the value of silver. So far. Corn. which Fleetwood has been able to collect. too. was continually diminishing. he will find the average price of the twelve years of which it consists. reduced to the money of the present times. by having its crop destroyed. seem to have been those chiefly which were remarkable for extraordinary dearness or cheapness. from the accounts of Eton college. much dearer in proportion 158 . both inclusive. so much from the low price of corn. and yet if the lands of some hostile lord were interposed between them. Fleetwood has been able to collect the prices of no more than eighty years. who governed England during the latter part of the fifteenth. being a sort of manufacture. might be suffering all the horrors of a famine. however. however. their facts. They agree perfectly with that of Mr Dupré de St Maur. Fleetwood himself. and I do not pretend that any very certain conclusion can be drawn from them. though their opinions are so very different. The reader will see. I have added. which he himself has collected. however. and through the whole of the sixteenth century. At the end of each division. the prices of things in ancient times. according to the order of time. It is the only addition which I have made. and with that which I have been endeavouring to explain. the prices of 1598. and that towards the end of the sixteenth century it begins to rise again. seems. should coincide so very exactly. It is some what curious that. or by the incursion of some neighbouring baron. that from the beginning of the thirteenth till after the middle of the sixteenth century. into seven divisions of twelve years each. indeed. The prices. The reader will find at the end of this chapter all the prices of wheat which have been collected by Fleetwood. the average price of each twelve years grows gradually lower and lower. 1600. with most other writers. Under the vigorous administration of the Tudors. they confirm the account which I have been endeavouring to give. certainly do not agree with this opinion. the one might not be able to give the least assistance to the other. as from that of some other parts of the rude produce of land. and 1601. that the most judicious writers have inferred the great value of silver in those very ancient times. from 1202 to 1597.

is no proof that the real value of silver is there very high. of a freight. game of all kinds. The low money price for which they may be sold. the average supply to the average demand. in every stage of improvement. etc. In a country naturally fertile. I suppose. or but thinly inhabited. but because such commodities would purchase or represent a much smaller quantity than in times of more opulence and improvement. but of the low value of those commodities. but that the real value of those commodities is very low. than the greater part of unmanufactured commodities. corn is the production of human industry. it must always be remembered. poultry. as they are the spontaneous productions of Nature. as they can be acquired with a very small quantity of labour. in the country where it is produced. the principal instruments of 159 . the price of an ox chosen from a herd of three or four hundred. but of which the far greater part is altogether uncultivated. It was not because silver would in such times purchase or represent a greater quantity of labour. than in the country to which it is brought. poultry. what comes to the same thing. we are told by Ulloa. and an insurance. and not any particular commodity. in different states of improvement. Silver must certainly be cheaper in Spanish America than in Europe. such commodities will represent. In every state of society. was. not many years ago. to very different quantities of labour. That in those times of poverty and barbarism these were proportionably much cheaper than corn. we are told by Mr Byron. But in countries almost waste. In such a state of things. or be equivalent. is undoubtedly true. more or less exactly. the raising of equal quantities of corn in the same soil and climate. or set of commodities. In every different stage of improvement. besides. game of all kinds. One-and-twenty pence halfpenny sterling. cattle. at an average. poultry. to the average consumption. the continual increase of the productive powers of labour. etc. therefore. In different states of society. being more or less counterbalanced by the continual increasing price of cattle. the supply commonly exceeds the demand. such as cattle. game of all kinds. Labour. But the average produce of every sort of industry is always suited. so they will purchase or command but a very small quantity. Sixteen shillings sterling. at the expense of a long carriage both by land and by sea. or. But this cheapness was not the effect of the high value of silver. in an improved state of cultivation. it is meant. etc. cattle. however. will. at Buenos Ayres. so she frequently produces them in much greater quantities than the consumption of the inhabitants requires. require nearly equal quantities of labour.Adam Smith than the greater part of other commodities. the price of nearly equal quantities. is the real measure of the value both of silver and of all other commodities. was the price of a good horse in the capital of Chili.

the real quantity of labour which they can purchase or command. The quantity of the precious metals may increase in any country from two different causes. where labour is somewhat better rewarded than in France. first. Such slight observations. the land of every country produces a much greater quantity of vegetable than of animal food. we may rest assured. but the second is not. from the increased wealth of the people. except upon holidays. and even in Scotland. The first of these causes is no doubt necessarily connected with the diminution of the value of the precious metals. constitutes. however. in every stage of improvement. or any other part of the rude produce of land. depends much more upon the average money price of corn. Corn. from the increased abundance of the mines which supply it. in every state of society. accordingly. This notion. poultry makes a still smaller part of it. depends much more upon the quantity of corn which they can purchase or command. or whatever else is the common and favourite vegetable food of the people.The Wealth of Nations agriculture. In consequence of the extension of agriculture. than upon that of butcher’s meat. either. than upon that of butcher’s meat. had they not been influenced at the same time by the popular notion. it has already been observed. and game no part of it. therefore. more nearly represent. except in the most thriving countries. that equal quantities of corn will. we can judge better of the real value of silver. Butcher’s meat. than equal quantities of any other part of the rude produce of land. Upon all these accounts. however. or of any other part of the rude produce of land. Corn. the subsistence of the labourer. by comparing it with corn. and other extraordinary occasions. equal quantities of labour. or. therefore. and the labourer everywhere lives chiefly upon the wholesome food that is cheapest and most abundant. In all those different stages. that as the quantity of silver naturally increases in every country with the increase of wealth. in all the different stages of wealth and improvement. so its value diminishes as its quantity increases. a more accurate measure of value than any other commodity or set of commodities. the labouring poor seldom eat butcher’s meat. or be equivalent to. 160 . or where labour is most highly rewarded. The real value of gold and silver. in every civilized country. The money price of labour. besides. therefore. would not probably have misled so many intelligent authors. than by comparing it with any other commodity or set of commodities. seems to be altogether groundless. from the increased produce of their annual labour. In France. makes but an insignificant part of his subsistence. upon the prices either of corn or of other commodities. the principal part of the subsistence of the labourer. is. therefore. secondly.

it is at all times naturally higher in a rich than in a poor country. when the accidental discovery of more abundant mines does not keep it down. like all other commodities. it must be remembered. is the ultimate price which is paid for every thing. Labour. the money price of labour will be in proportion to that of the subsistence of the labourer. but the difference between the money 161 . or from the same reason that the quantity of fine statues. as they can afford it. naturally seek the market where the best price is given for them. Rice in China is much cheaper than wheat is any where in Europe. and of every other luxury and curiosity. But as statuaries and painters are not likely to be worse rewarded in times of wealth and prosperity. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country. a greater quantity of the precious metals is brought to market. in a country which abounds with subsistence. though the metals naturally fly from the worse to the better market. the difference will be smaller. is likely to increase among them. so gold and silver are not likely to be worse paid for. and may sometimes be scarce perceptible. than in times of poverty and depression. so. The quantity of their coin will increase from necessity. pictures. because. England is a much richer country than Scotland. as they have more commodities to give for it. as the increase of the quantity of the precious metals in any country arises from the increased abundance of the mines. the difference may be very great. it is necessarily connected with some diminution of their value. When. when the annual produce of its labour becomes gradually greater and greater. will naturally purchase a greater and a greater quantity of plate. equal quantities of the metals must be exchanged for smaller quantities of commodities. than in one which is but indifferently supplied with it. as it naturally rises with the wealth of every country. China is a much richer country than any part of Europe. The price of gold and silver. and the quantity of the necessaries and conveniencies of life for which they must be exchanged being the same as before. So far. If the countries are near. because in this case the transportation will be easy. therefore. yet it may be difficult to transport them in such quantities as to bring their price nearly to a level in both. a greater quantity of coin becomes necessary in order to circulate a greater quantity of commodities: and the people. and in countries where labour is equally well rewarded. Gold and silver.Adam Smith When more abundant mines are discovered. the wealth of any country increases. on the contrary. the quantity of their plate from vanity and ostentation. If the two countries are at a great distance. and the best price is commonly given for every thing in the country which can best afford it. whatever be the state of the mines. and the difference between the price of subsistence in China and in Europe is very great.

is naturally regulated. which. they are scarce of any value. They are rich in the industry and skill of their artificers and manufacturers. in every sort of machinery which can facilitate and abridge labour. because the real recompence of labour is much lower: Scotland. it must be remembered. Scotland receives almost every year very large supplies from England. not of the real cheapness of silver. They do not produce enough to maintain their inhabitants. is the effect. but it costs a great deal more to bring corn. the greater part of Europe being in an improving state. not by their actual wealth or poverty. English corn. The difference between the money price of labour in China and in Europe. The frequency of emigration from Scotland. must. It does not cost less labour to bring silver to the great town than to the remote parts of the country. It does not cost less labour to bring silver to Amsterdam than to Dantzic. This. but. but by their advancing. so they are naturally of the least value among the poorest nations. as it must be brought to them from distant countries. or declining condition. while China seems to be standing still. sufficiently prove that the demand for labour is very different in the two countries. must be dearer in Scotland than in England. it cannot commonly be sold higher there than the Scotch corn which comes to market in competition with it. The proportion between the real recompence of labour in different countries. In some very rich and commercial countries. stationary.The Wealth of Nations price of corn in those two countries is much smaller. In proportion to the quantity or measure. and the rarity of it from England. corn is dear for the same reason that it is dear in great towns. but of the real dearness of corn. though advancing to greater wealth. or to the quantity and goodness of the flour or meal which can be made from it. however. corn is always dearer than in remote parts of the country. in proportion to its quality. it is certainly somewhat dearer. as they are naturally of the greatest value among the richest. is still greater than that between the money price of subsistence. In great towns. Among savages. because the real recompence of labour is higher in Europe than in China. therefore. and in all the other instruments and means of carriage and commerce: but they are poor in corn. The money price of labour is lower in Scotland than in England. by an addition to its price. and is but just perceptible. the poorest of all nations. Gold and silver. but it costs a great deal more to bring 162 . advances much more slowly than England. Scotch corn generally appears to be a good deal cheaper than English. in shipping. and yet in proportion to its quality. and every commodity must commonly be somewhat dearer in the country to which it is brought than in that from which it comes. pay for the carriage from those countries. such as Holland and the territory of Genoa.

had. or about ten shillings of our present money. instead of sinking with that diminution in the quantity of their silver. which must necessarily accompany this declension. or would exchange for a smaller quantity of labour than before. It is accounted for. which are always times of great abundance. and corn rose in its nominal price. or in my other part of Europe. the quantity of labour which they can purchase or command. instead of being commonly sold for about two ounces of silver the quarter. we must part with all superfluities. and. 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. during the period between the middle of the fourteenth and that of the sixteenth century. may have been the increase in the quantity of the precious metals. Whatever. therefore. Second Period. but that of corn must be very different. arose from the increase of wealth and improvement. either in Great Britain. and sinks in times of opulence and prosperity. therefore. they are unanimous concerning it during the second. during a period of about seventy years. during this period. as it rises in times of opulence and prosperity. diminish their power of supplying themselves from distant countries. in the same manner by every body. — But how various soever may have been the opinions of the learned concerning the progress of the value of silver during the first period. which. or about thirty and forty shillings of our present money. and the price of corn. accordingly. either about the fact. of which the value. When we are in want of necessaries. it could have no tendency to diminish their value. in proportion to that of corn. If those who have collected the prices of things in ancient times. either as its cause or as its effect. for they could not otherwise be times of opulence and prosperity. while the number of their inhabitants remains the same. the variation in the proportion between the value of silver and that of corn held a quite opposite course. Their real price. Diminish the real opulence either of Holland or of the territory of Genoa. It is otherwise with necessaries. The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver. From about 1570 to about 1640. The real cost of silver must be nearly the same in both places. Corn is a necessary. or of other commodities. silver is only a superfluity. The greater 163 . came to be sold for six and eight ounces of silver the quarter. rises in times of poverty and distress. will rise to the price of a famine. or about the cause of it. so it sinks in times of poverty and distress. and there never has been any dispute.Adam Smith corn. Silver sunk in its real value.

from the accounts of Eton college. at the same market. or 4s. the average price of the quarter of nine bushels of the best wheat.. the price of the middle wheat comes out to have been about £ 1:12:8 8/9. must have raised the price of corn much above what the course of the seasons would other- 164 . therefore. dearer than it had been during the sixteen years before. in the course of these sixty-four years.. there happened two events. it is to be observed. and deducting a ninth. for the difference between the price of the best wheat and that of the middle wheat. —Between 1630 and 1640. 1 1/ 9d. from which. by discouraging tillage and interrupting commerce. both inclusive. neglecting the fraction. both inclusive.. From 1595 to 1620. From 1621 to 1636. though even the mines of Potosi had been discovered more than twenty years before. will much more than account for this very small enhancement of price. But. at Windsor market. to have been £ 2:10s. and which. it seems. and the value of that metal seems never to have sunk lower in proportion to that of corn than it was about that time. at Windsor market. being the sixty-four last years of the last century the average price of the quarter of nine bushels of the best wheat. from the same accounts. the average price of the same measure of the best wheat. the effect of the discovery of the mines of America. making the like deductions as in the foregoing case. appears. or about six ounces and one-third of an ounce of silver. so far exceeded that of the demand. and the demand for silver must consequently have been increasing. but the increase of the supply had. 7 1/3d. It seems to have risen somewhat in the course of the present century.The Wealth of Nations part of Europe was. 0 1/ 3d. and it had probably begun to do so. appears. to have been £ 2:11:0 1/3. or 4s. even some time before the end of the last. The discovery of the mines of America. during this period. or about seven ounces and two-thirds of an ounce of silver. or about 1636. Third Period. does not seem to have had any very sensible effect upon the prices of things in England till after 1570. advancing in industry and improvement. From 1637 to 1700. which must have produced a much greater scarcity of corn than what the course of the season is would otherwise have occasioned. both inclusive. And from this sum. neglecting likewise the fraction. to have been £ 2:1:6 9/13. appears. without supposing any further reduction in the value of silver. appears to have been completed. which is only 1s. from the same accounts. and deducting a ninth. the price of the quarter of eight bushels comes out to have been £ 1:16:10 2/3. the average price of the quarter of eight bushels of middle wheat comes out to have been £ 1:19:6. in reducing the value of silver. which. that the value of that metal sunk considerably. The first of these events was the civil war. From which sum.

the further exportation of corn was prohibited for nine months. and. The excess of those two years above £ 2:10s. and. will alone very nearly account for that small enhancement of price which seems to have taken place in them. below its standard value. extending through a considerable part of Europe. must necessarily have occasioned some augmentation in the nominal sum. it has been thought by many people.) These. accordingly. though it could not occasion any scarcity of corn. and had gone on continually increasing till 1695. (the average price of the sixteen years preceding 1637 is £ 3:5s. appears. This evil had begun in the reign of Charles II. not so much by the quantity of silver. by encouraging the exportation of the surplus produce of every year. It must have had this effect. But the nominal sum which constitutes the market price of every commodity is necessarily regulated. more or less. as we may learn from Mr Lowndes. This nominal sum. at which time. its only effect must have been. may. In 1699. in 1649. accordingly. a greater cheapness of corn in the home market. the price of the best wheat. though no doubt principally owing to the badness of the seasons. than what would otherwise have taken place there. The second event was the bounty upon the exportation of corn. from 1693 to 1699. both inclusive.. must have been somewhat enhanced by the bounty. which. the current silver coin was. and. During this short period. The scarcity which prevailed in England. near five-and-twenty per cent. any augmentation in the real quantity of silver which was usually paid for it. though the highest. to raise the price in the home market. and thereby hindering the abundance of one year from compensating the scarcity of another. In 1648. the quarter of nine bushels. to have been £ 4. divided among the sixty four last years of the last century. therefore. which require to be supplied from the greatest distance. perhaps. however. nor. to have been £ 4:5s. at an average. This event was the great debasement of the silver coin. by clipping and wearing.. at Windsor market. in a long course of years. and which. is necessarily higher when the coin is much 165 . actually is contained in it. have occasioned a greater abundance. are by no means the only high prices which seem to have been occasioned by the civil wars. but particularly at those in the neighbourhood of London. from the same accounts. consequently. by encouraging tillage. ought to be contained in it. therefore. which. it is found by experience.Adam Smith wise have occasioned. The bounty. as by that which. it had not time to produce any such effect. that between 1688 and 1700. according to the standard. at all the different markets in the kingdom. How far the bounty could produce this effect at any time I shall examine hereafter: I shall only observe at present. granted in 1688. There was a third event which occurred in the course of the same period.

which is about ten shillings and sixpence. below that value. it may. be supposed to have done something to lower the price of that commodity the one way. In 1695. But in the beginning of the present century. 68. when the discovery of the abundant mines of America may be supposed to have produced its full effect. when compared with silver bullion. below its standard value.The Wealth of Nations debased by clipping and wearing. It is by many people supposed to have done more. the coin. And though the bounty which has taken place through the greater part of this century. the greater part of the current silver coin must have been still nearer to its standard weight than it is at present. it was less so than the silver. which is but fivepence above the mint price. yet. for which it is exchanged. upon the principles of a system which I shall explain and examine hereafter. the average price of the quarter of nine bushels of the best wheat. too. was not supposed to be more than eight per cent. there has been no great public calamity. a guinea then commonly exchanging for thirty shillings of the worn and clipt silver. such as a civil war. therefore. For though. must always raise the price of corn somewhat higher than it otherwise would be in the actual state of tillage. But in 1695. as well as to raise it the other. In the sixty-four years of the present century. cheaper than it had been during the sixty-four last years of the last century. to have been £ 2:0:6 10/32. the common price of silver bullion was six shillings and fivepence an ounce. at Windsor market. by the accounts of Eton college. before the late recoinage. accordingly. its value has been kept up by that of the gold coin. the price of silver bullion was seldom higher than five shillings and sevenpence an ounce. which could either discourage tillage. the bounty has had full time to produce all the good effects commonly imputed to it to encourage tillage. as in the course of this century. or more than five-and-twenty percent. than when near to its standard value. But though very much defaced. In the course of the present century. immediately after the great recoinage in King William’s time. and about nine shillings and sixpence cheaper than it had been during the sixteen years preceding 1636. Before the late recoinage of the gold. gold and silver together. on the contrary. that is. on the contrary. {Lowndes’s Essay on the Silver Coin. appears.} which is fifteen pence above the mint price. In the course of the present century. the silver coin has not at any time been more below its standard weight than it is at present. and about one shilling cheaper 166 . and thereby to increase the quantity of corn in the home market. Even before the late recoinage of the gold. it had been supposed to be near five-and-twenty per cent. the gold coin was a good deal defaced too. In 1695. the value of the silver coin was not kept up by the gold coin. or interrupt the interior commerce of the country.

except in years of extraordinary scarcity. and it had probably begun to do so even some time before the end of the last. before that discovery can well be supposed to have produced its full effect. eightand-forty shillings the quarter was a price which. estimated the average price of wheat. at Windsor market. the price of the quarter of nine bushels of the best wheat. 6d. who then composed a still greater proportion of the legislature than they do at present. comes out to have been about thirty-two shillings the quarter of eight bushels. According to this account. therefore. and II. or eight-and-twenty shillings the quarter. could not at that time be expected. the contract price is generally lower than what is supposed to be the average market price. without some such expedient as the bounty. It was in no condition to refuse anything to the country gentlemen. the bushel. As a contract of this kind saves the farmer the expense and trouble of marketing. I have been assured. was £ 1:5:2. during these sixty-four first years of the present century. Mr King had judged eightand-twenty shillings the quarter to be at that time the ordinary contract price in years of moderate plenty. soliciting the first establishment of the annual landtax. had felt that the money price of corn was falling. Mr Gregory King. The value of silver. Before the scarcity occasioned by the late extraordinary course of bad seasons. The country gentlemen. seems to have risen somewhat in proportion to that of corn during the course of the present century. it was. the average price of middle wheat. estimated the grower’s price to be in times of moderate plenty. the lowest price at which it had ever been from 1595. to be to the grower 3s. therefore. In 1687. twenty shillings. at that very time. or the price at which a farmer contracts for a certain number of years to deliver a certain quantity of corn to a dealer. The grower’s price I understand to be the same with what is sometimes called the contract price. in years of moderate plenty. till wheat was so high as fortyeight shillings the quarter. that is. In 1688 was granted the parliamentary bounty upon the exportation of corn.Adam Smith than it had been in the twenty-six years preceding 1620. in that very year. But the government of King William was not then fully settled. from whom it was. the ordinary contract price in all common years. 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. or 5-7ths dearer than Mr King had. In 1688. If his calculations deserve any part of the reputation which they have obtained very universally. 167 . It was to take place. a man famous for his knowledge in matters of this kind.

It has been observed to have taken place in France during the same period. it may be said the state of tillage would not have been the same. When. By the extraordinary exportation which it occasions in years of plenty. the bounty has generally been suspended. therefore. have been much more so. when I come to treat particularly of bounties. it must frequently hinder the plenty of one year from compensating the scarcity of another. therefore. Both in years of plenty and in years of scarcity. Mr Messance. I shall only observe at present. should. by keeping up the price of corn. Corn. that nearly the same diminution of price which took place in one country. that this rise in the value of silver. the bounty. by occasioning an extraordinary exportation. than of any fall in the real average value of corn. in the same state of tillage. in proportion to that of corn. any other commodity. and it seems to have continued to do so during the course of the greater part of the present. however. I shall endeavour to explain hereafter. had probably risen somewhat before the end of the last century. But. In years of great scarcity. and nearly in the same proportion. the exportation of grain was by law prohibited. the average price has been lower than during the sixty-four last years of the last century. perhaps. has not been peculiar to England. diligent. What may have been the effects of this institution upon the agriculture of the country. after the discovery of the abundant mines of America. To encourage tillage. Mr Dupré de St Maur. was the avowed end of the institution. corn rose to 168 . notwithstanding this prohibition. the bounty raises the price of corn above what it naturally would be in the actual state of tillage. and it is somewhat difficult to suppose. it must. It would be more proper. is.The Wealth of Nations The value of silver. even in the most plentiful years. without the bounty. perhaps. by three very faithful. and laborious collectors of the prices of corn. It must. a more accurate measure of value than either silver or. indeed. till 1764. necessarily raises the price of corn above what it otherwise would be in those years. too. at distant periods of time. have had some effect upon the prices of many of those years. in another. therefore. had it not been for this operation of the bounty. 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. and the author of the Essay on the Police of Grain. 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. But in France. it has already been observed. in proportion to that of corn. be owing to the extraordinary encouragement given to exportation. In plentiful years. If during the sixty-four first years of the present century.

but to some rise in the real value of silver in the European market. that. was only £ 1:13:9 4/5. the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. not to any fall in the real value of corn. observed to the house of commons. only £ 1:6:8. amounted to no less than 8. have been unfavourable through the greater part of Europe. Ten years of extraordinary scarcity. besides. This high price of corn. not to any rise in the real value of corn.3d. and in the following year he might have had still better. used to be supplied from that market.Adam Smith three and four times its former money price. If. for the three years preceding. During these ten years.962:17:4 1/2. the quantity of all sorts of grain exported. Tract 3. Between 1741 and 1750. it appears from the accounts of Eton college. to be regarded. in the same manner.514. {See Tracts on the Corn Trade. In that single year. accordingly. from 1741 to 1750. are not more wonderful than ten years of extraordinary plenty. it appears from the custom-house books. and ought. the average money price of corn has fallen somewhat below what it had been during the greater part of the last century. and the disorders of Poland have very much increased the scarcity in all those countries. during these ten years. though not a very common event. So long a course of bad seasons. therefore. at Windsor market. to have been. not as a permanent. may very well be set in opposition to its high price during these last eight or ten years. during the sixty-four first years of the present century. the bounty paid amounted to no less than £ 324. The high price of corn during these ten or twelve years past. The seasons. the average price of the quarter of nine bushels of the best wheat.} It is un- 169 . impute this change. will be at no loss to recollect several other examples of the same kind. The low price of corn. both inclusive. The average price of the quarter of eight bushels of middle wheat comes out. In 1749. is by no means a singular one. below the average price of the sixty-four first years of the present century. however. a very extraordinary sum had been paid as bounty for the exportation of corn. which. has occasioned a suspicion that the real value of silver still continues to fall in the European market. at that time prime minister. From 1741 to 1750.176:10:6. Mr Pelham. The bounty paid for this amounted to £ 1. for these ten or twelve years past. which is nearly 6s. according to this account. however. one bushel. in dear years. seems evidently to have been the effect of the extraordinary unfavourableness of the seasons.029.156 quarters. but to a fall in the real value of silver. therefore. He had good reason to make this observation. we should. indeed. but as a transitory and occasional event. this change was universally ascribed. and whoever has inquired much into the history of the prices of corn in former times.

and much above their natural rate. risen during the course of the present century. The profits of mining would for some time be very great. The year 1740. however. as of an increase in the demand for labour in Great Britain. For some time after the first discovery of America. silver would continue to sell at its former. notwithstanding the intervention of one or two cheap ones. If the former have not been as much below the general average as the latter have been above it. In Great Britain. As the former were a good deal below the general average of the century. the real quantities of the necessaries and conveniencies of life which are given to the labourer. This. the real recompence of labour. seems to be the effect. but of a rise in the real price of labour. which is always slow and gradual. been observed to sink gradually with the average money price of corn. and almost universal prosperity of the country. a country not altogether so prosperous. too. was a year of extraordinary scarcity. owing to the peculiarly happy circumstances of the country. not of any diminution of the value of silver in the general market of Europe. though not so much below. or not much below its former price. of 1759. the money price of labour has. notwithstanding the intervention of one or two dear years. the accidental variations of the seasons. since the middle of the last century. The suddenness of the effect can be accounted for only by a cause which can operate suddenly. 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. Those who imported that metal 170 . The change has evidently been too sudden to be ascribed to any change in the value of silver. it has already been shewn.The Wealth of Nations necessary 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. a measure which contains a little more than four Winchester bushels. however. for example. arising from the great. The money price of labour in Great Britain has. 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. indeed. has increased considerably during the course of the present century. of which the average is likewise below. so the latter have been a good deal above it. in the particular market of Great Britain. not so much of any diminution in the value of silver in the European market. the general average of the sixty-four first years of the century. we ought probably to impute it to the bounty. These twenty years preceding 1750 may very well be set in opposition to the twenty preceding 1770. He will find there. The rise in its money price seems to have been the effect. the particular account of the preceding ten years. In France. Both in the last century and in the present.

This tax was originally a half.Adam Smith into Europe. it has already been observed. one-and-forty years before 1545. but has perhaps even raised it somewhat higher than it was about the middle of the last century. however. in the same manner as that upon gold. the profits of the stock. had time sufficient to produce their full effect. or before 1636. while it pays a particular tax. and it seems to be universally acknowledged that these profits. to its natural price. or to what was just sufficient to pay. have fallen still lower. France. it can continue to be sold for any considerable time together. is all that remains. England.}. the market of Europe has become gradually more and more extensive. The tax of the king of Spain was reduced to a fifth of the registered silver in 1504 {Solorzano. and at last to a tenth. but to one twentieth. or the gradual enlargement of the market for the produce of the silver mines of America. the whole rent of the land. and 171 . and which has not only kept up the value of silver in the European market. the wages of the labour. Ninety years is time sufficient to reduce any commodity. eats up. as in 1736. consistently with carrying on the works. together with its ordinary profits. In the greater part of the silver mines of Peru. Since the discovery of America. these mines. this. after replacing the stock of the undertaker of the work. Silver would gradually exchange for a smaller and a smaller quantity of goods. or to give up working the greater part of the American mines which are now wrought. or to the lowest price at which. or to reduce the value of silver in the European market as low as it could well fall. it seems. the greater part of Europe has been much improved. amounting to a tenth of the gross produce. the most fertile in all America. In the course of ninety years. which must be paid in order to bring it from the mine to the market. not only to one-tenth. according to their natural rates. is probably the cause which has prevented this from happening. and it might have become necessary either to reduce the tax upon it. it soon afterwards fell to a third. of which there is no monopoly. Its price would sink gradually lower and lower. The price of silver in the European market might. the date of the discovery of the mines of Potosi. would soon find that the whole annual importation could not be disposed of at this high price. which were once very high. and the rent of the land. while it continued to pay this tax to the king of Spain. Holland. Since the first discovery of America. are now as low as they can well be. ii. perhaps. vol. the market for the produce of its silver mines has been growing gradually more and more extensive. In the greater part of the silver mines of Peru. till it fell to its natural price. then to a fifth. The gradual increase of the demand for silver. at which late it still continues. First. the tax of the king of Spain.

inhabited by savage nations. before discovered by the Europeans. and Russia. were. were obliged to build their own houses. though they made use of gold and silver as ornaments. In the beginning of the sixteenth century. A considerable degree of both has now been introduced into all of them. are altogether new markets. are certainly much more extensive ones than they ever were before. so great as is commonly imagined. the Yucatan. After all the wonderful tales which have been published concerning the splendid state of those countries in ancient times. even in comparison with France. the more civilized nation of the two. but that every thing was wanting in Spain. who had neither arts nor agriculture. Even Mexico and Peru.The Wealth of Nations Germany. Even the Peruvians. New Granada. whoever reads. partly for coin. their inhabitants were much more ignorant than the Tartars of the Ukraine are at present. Those who cultivated the ground. who had travelled so frequently through both countries. Their whole commerce was carried on by barter. The few artificers among them are said to 172 . in arts. that every thing abounded in France. its demand must increase much more rapidly. Spain and Portugal. Portugal. too. perhaps. indeed. both in agriculture and in manufactures. and the Brazils. Spain was a very poor country. industry. of the Spanish and Portuguese colonies. is but a very small part of Europe. have all advanced considerably. and the declension of Spain is not. It was the well known remark of the emperor Charles V. The fall of Italy preceded the conquest of Peru. are much more rapid than those of the most thriving countries in Europe. and as its advances in agriculture. Denmark. 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 population. Since that time it seems rather to have recovered a little. will evidently discern that. though they cannot be considered as altogether new markets. for the produce of its own silver mines. are supposed to have gone backwards. which. and there was accordingly scarce any division of labour among them. and instruments of agriculture. shoes. to make their own household furniture. which has been so much improved since that time. requires a continual augmenting supply of silver through a great continent where there never was any demand before. even Sweden. agriculture. The English colonies are altogether a new market. had no coined money of any kind. however. and commerce. and partly for plate. Paraguay. The greater part. America is itself a new market. with any degree of sober judgment. their own clothes. and the increasing number of wealthy individuals must have required the like increase in the quantity of their plate and other ornaments of silver. Italy seems not to have gone backwards. Secondly. the history of their first discovery and conquest.

In a fertile soil and happy climate. Thirdly. The famines which they are said to have occasioned almost wherever they went. and as there seems to be no reason to doubt of the good information of either. and in a few years expelled them from their principal settlements in India. has been continually augmenting. the Dutch began to encroach upon this monopoly. and the priests. Since that time. found almost everywhere great difficulty in procuring subsistence. too. All the ancient arts of Mexico and Peru have never furnished one single manufacture to Europe. the great abundance and cheapness of land. it seems. is a new market for the produce of its own silver mines. the nobles. and the indirect intercourse by the way of Europe has been augmenting in a still greater proportion. the direct trade between America and the East Indies. however. Frezier. the East Indies is another market for the produce of the silver mines of America. The difference in their accounts of the populousness of several other principal towns of Chili and Peru is nearly the same. from the time of the first discovery of those mines. which at the same time are represented as very populous and well cultivated. The Spanish armies. They seem. who visited Peru in 1713. to be advancing in all those much more rapidly than any country in Europe. a circumstance common to all new colonies. improvement. those two nations divided the most considerable part of the East India trade between them. and frequently did not amount to half that number. In the last years of that century. and population. America. which is carried on by means of the Acapulco ships. who resided in the same country between 1740 and 1746. Ulloa. represents it as containing more than fifty thousand. of which the demand must increase much more rapidly than that of the most thriving country in Europe. has been continually taking off a greater and a greater quantity of silver. The Spanish colonies are under a government in many respects less favourable to agriculture. in countries. During the greater part of the last century. though they scarce ever exceeded five hundred men. and were probably their servants or slaves. represents Lima as containing between twenty-five and twenty-eight thousand inhabitants. and a market which. than that of the English colonies. the trade of the Dutch continually augmenting in a still greater proportion than that of the Portuguese declined. so great an advantage. During the sixteenth century. The English and French carried on some trade with India in the 173 . as to compensate many defects in civil government. is. it marks an increase which is scarce inferior to that of the English colonies. the Portuguese were the only European nation who carried on any regular trade to the East Indies. therefore. sufficiently demonstrate that the story of this populousness and high cultivation is in a great measure fabulous.Adam Smith have been all maintained by the sovereign.

Tea. but it has been greatly augmented in the course of the present. such commodities would naturally exchange for a greater quantity of food in India than in Europe. having a greater superabundance of food to dispose of beyond what they themselves can consume. the value of the tea annually imported by the English East India company. Such countries are accordingly much more populous. therefore. and even this is not enough. for example. Even the Muscovites now trade regularly with China. much greater than that of the English East India company before the late reduction of their shipping. But the mines which 174 . of the spiceries of the Moluccas. was not. at any one time during the last century. of all the European shipping employed in the East India trade. amounts to more than a million and a half a year. In rice countries. But in the East Indies. particularly in China and Indostan. have the means of purchasing a much greater quantity of the labour of other people. of the piece goods of Bengal. The retinue of a grandee in China or Indostan accordingly is. when the Europeans first began to trade to those countries. from Gottenburgh in Sweden. much more numerous and splendid than that of the richest subjects in Europe. was much higher than in Europe. which generally yield two. of which they have the disposal. a great deal more being constantly smuggled into the country from the ports of Holland. which supplied the Indian market. has increased very nearly in a like proportion. it seems. the great objects of the competition of the rich. The consumption of the porcelain of China. and it still continues to be so. accordingly. and of innumerable other articles. by a sort of caravans which go over land through Siberia and Tartary to Pekin. perhaps. such as the precious metals and the precious stones. and from the coast of France. for the use of their own countrymen. The East India trade of all these nations.The Wealth of Nations last century. the abundance of food must be much greater than in any corn country of equal extent. sometimes three crops in the year. The same superabundance of food. the rich. The tonnage. before the middle of the last century. The East India trade of the Swedes and Danes began in the course of the present century. as long as the French East India company was in prosperity. The increasing consumptions of East India goods in Europe is. if we except that of the French. which the last war had well nigh annihilated. enables them to give a greater quantity of it for all those singular and rare productions which nature furnishes but in very small quantities. so great. had been as abundant as those which supplied the European. too. the value of the precious metals. too. has been almost continually augmenting. was a drug very little used in Europe. Though the mines. At present. each of them more plentiful than any common crop of corn. as to afford a gradual increase of employment to them all. In them. by all accounts.

therefore. and thereby reduce still lower both the real and the nominal price of the greater part of their manufactures. and of the low price of that food. China and Indostan. the extent and variety of inland navigations save the greater part of this labour. will purchase an ounce of gold. the money price of the greater part of manufactures will be in proportion to the money price of labour. will purchase or command a greater quantity of labour and commodities in India. It costs more labour. would naturally exchange in India for a somewhat greater quantity of the precious stones. The precious metals. to bring first the materials. in Europe. it has already been observed. But in countries of equal art and industry. and the greater part of the other markets of India. or which. the greatest of all superfluities. the precious metals are a commodity which it always has been. will naturally be much lower in those great empires than it is anywhere in Europe. and those which supplied it with the precious stones a good deal more so. in proportion to the quantity of labour and commodities which it costs in Europe. to carry silver thither than gold. and in manufacturing art and industry. and consequently of this money. and for a much greater quantity of food than in Europe. or at most as twelve to one. than it is through the greater part of Europe. too. is lower both in China and Indostan. the real quantity of the necessaries of life which is given to the labourer. In the cargoes. upon account both of the small quantity of food which it will purchase. In China. In China and Indostan. a great deal lower in the one country than in the other. though inferior. 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. it requires from fourteen to fifteen ounces. Through the greater part of Europe. Upon all these accounts. It is more advantageous. the money price of labour is there lower upon a double account. or at most twelve ounces of silver. the two great markets of India. and the greater part of the other markets of India. because in China. There is scarce any commodity which brings a better price there. the proportion between fine silver and fine gold is but as ten. and afterwards the complete manufacture to market. ten. and therefore more money. than the mines which supplied the European. too. would be somewhat lower. seem not to be much inferior to any part of Europe. extremely advantageous to carry from Europe to India. The money price of diamonds. therefore. and still continues to be.Adam Smith supplied the Indian market with the precious metals seem to have been a good deal less abundant. the first of all necessaries. The money price of the greater part of manufactures. But the real price of labour. and that of food. the expense of landcarriage increases very much both the real and nominal price of most manufactures. whereas in Europe it is as fourteen or fifteen to one. there- 175 .

to be one of the principal commodities by which the commerce between the two extremities of the old one is carried on. viz. The silver of the new continent seems. which has never had a second edition. though it may not perhaps be greater upon the whole than this gradual consumption. would alone require a very great annual supply. according to the best accounts. the gilding of books. as it is much more rapid. is very sensible. etc. The postscript is. the almost universal custom of concealing treasures in the bowels of the earth. the quantity of silver annually brought from the mines must not only be sufficient to support that continued increase. silver has generally been one of the most valuable articles. According to Mr Meggens {Postscript to the Universal Merchant p. must occasion the loss of a still greater quantity. In order to supply so very widely extended a market. is. besides. too.}. gold and silver stuffs. and it is by means of it. and thereby disqualified from ever afterwards appearing in the shape of those metals. but what may be supposed to be smuggled) amounts. that those distant parts of the world are connected with one another. In the greater part of the governments of Asia. in a great measure. the annual importation of the precious metals into Spain. and in plate both by wearing and cleaning. is said to amount to more than fifty thousand pounds sterling. either in manufactures of the same kind with those of Birmingham. This postscript was not printed till 1756. It is the most valuable article in the Acapulco ships which sail to Manilla. In the manufactures of Birmingham alone. A considerable quantity. 15 and 16. which is required in all thriving countries. however. in this manner.The Wealth of Nations fore. at an average of six years. it corrects several errors in the book. embroideries. must be annually lost in transporting those metals from one place to another both by sea and by land. from 176 . both of coin and of plate. much more sensible. and in commodities of which the use is so very widely extended. We may from thence form some notion how great must be the annual consumption in all the different parts of the world. The quantity of gold and silver imported at both Cadiz and Lisbon (including not only what comes under register. The consumption of those metals in some particular manufactures. to be found in few copies. The continual consumption of the precious metals in coin by wearing. the quantity of gold and silver annually employed in gilding and plating. therefore. of the greater part of European ships which sail to India. furniture. or in laces. of which the knowledge frequently dies with the person who makes the concealment. but to repair that continual waste and consumption of silver which takes place in all countries where that metal is used. to about six millions sterling a-year. three years after the publication of the book.

On account of what may have been smuggled. indeed. sometimes a little more. He makes an allowance. both inclusive. therefore. at sixty two shillings the pound troy. we may safely. He gives us the detail of the particular places from which the gold and silver were brought. the annual importation of registered gold and silver into Spain. which. sterling. each of them afforded. He gives the detail.878:4s. according to the register. both inclusive. Several other very well authenticated.250. at 4s.825. too. and sometimes well-informed. each of them afforded.000 sterling. The gold. so that the whole will amount to £ 2. of the particular places from which the gold and silver were brought. and in gold to 49. The annual importation of the precious metals into Cadiz and Lisbon. and of the particular quantities of each metal.984. from 1754 to 1764. at an average of seven years. at an average. may have amounted to seventeen millions of piastres.101. The silver. Some part is sent annually by the Acapulco ships to Manilla. mounts to about £ 6.000 sterling.000 sterling. or forty-five millions of French livres.107 pounds weight. According to this account. though manuscript accounts. The great experience of this judicious merchant renders his opinion of considerable weight. sometimes a little less. author of the Philosophical and Political History of the Establishment of the Europeans in the two Indies.185 3/5 piastres of ten reals. which it seems. or £ 250. which according to the register. at forty-four guineas and a half the pound troy. he supposes. viz. to about six millions sterling. viz. is exact. and of the particular quantity of each metal. which the Spanish colonies carry on with those of other European 177 .940 pounds weight. which. is equal to £ 3.431:10s. the whole annual importation. amounts to £ 2. by the amount of the tax paid to the king of Portugal. is one-fifth of the standard metal.446:14s. both inclusive. some part is employed in a contraband trade. Both together amount to £ 5.Adam Smith 1748 to 1753. too. however. however. may have been smuggled. He informs us.333.075. sterling. and into Portugal. amounts to £ 3. sterling.746. the whole annual importation of the precious metals into both Spain and Portugal. On account of what may have been smuggled. The account of what was imported under register. too. for the quantity of each metal which.413. amounted to 13. from 1747 to 1753. that if we were to judge of the quantity of gold annually imported from the Brazils to Lisbon. at an average of eleven years. add to this sum an eighth more. is not equal to the whole annual produce of the mines of America. he says. 6d. he supposes. the piastre. I have been assured. agree in making this whole annual importation amount. equal to about twenty millions sterling. According to the eloquent. amounted in silver to 1. we might value it at eighteen millions of cruzadoes. he assures us.000 sterling.

is equal to the hundred-and-twentieth part of this annual importation. however. The quantity of brass and iron annually brought from the mine to the market. must supply the consumption of the world. is annually imported into Cadiz and Lisbon. upon this account. but are liable. are put to much harder uses. or to become gradually cheaper and cheaper. however. The price of all metals. We do not. is out of all proportion greater than that of gold and silver. may. to be lost. some part of the gold which was brought from it two or three thousand years ago. no doubt. and the far greater part of their produce. It may even have fallen so far short of this demand. too. by far the most abundant. will be very little affected by any accidental difference in the produce of the iron mines of those two years. The durableness of metals is the foundation of this extraordinary steadiness of price. though liable to slow and gradual variations. it is acknowledged. less care is employed in their preservation. and consumed. though harder.The Wealth of Nations nations. and. But the proportion between the different masses of iron which may be in use in two different years. in all the different countries of the world where those metals are used. at the rate of fifty thousand pounds a-year. are. be nearly equal to the whole annual produce. and some part. in different years. are by no means the only gold and silver mines in the world. perhaps. The precious metals. The corn which was brought to market last year will be all. and the proportion between the masses of gold will be still less affected by any such difference in 178 . besides. and. long before the end of this year. imagine that those coarse metals are likely to multiply beyond the demand. in a great variety of ways. therefore. But the consumption of Birmingham alone. consumed. will always be nearly in proportion to the respective produce of those different years. The different masses of corn. wasted. at the rate of six millions a-year. however. remains in the country. perhaps. are not necessarily immortal any more than they. The whole annual consumption of gold and silver. The remainder may be no more than sufficient to supply the increasing demand of all thriving countries. as they are of less value. But some part of the iron which was brought from: the mine two or three hundred years ago. indeed. The produce of all the other mines which are known is insignificant. in comparison with their’s. which. or almost all. Why should we imagine that the precious metals are likely to do so? The coarse metals. as somewhat to raise the price of those metals in the European market. They. may be still in use. The mines of America. it is likewise acknowledged. 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.

varies. Variations in the Proportion between the respective Values of Gold and Silver. is about three score times the 179 . Though the produce of the greater part of metallic mines. and would therefore be as one to twenty-two. The price of an ox. The proportion between the quantities of gold and silver annually imported into Europe. still more from year to year than that of the greater part of corn fields. been proportionally still greater than that of the gold ones. it seems. or in the quantity of labour which they could purchase. Both metals sunk in their real value. the fertility of the silver mines had. In Japan. About the middle of the last century. It is in the mint. rated too high for the value which it bears in the market of Bengal. or one to twelve. that is. The proportion between their values. perhaps. therefore. the proportion of gold to silver still continues as one to ten. The great quantities of silver carried annually from Europe to India. the quantities of those metals which remain in Europe to the proportion of one to fourteen or fifteen. it is said to be as one to eight. Gold rose in its nominal value. those variations have not the same effect upon the price of the one species of commodities as upon that of the other. gradually reduced the value of that metal in proportion to gold. an ounce of fine gold came to be supposed worth between fourteen and fifteen ounces of fine silver. The great quantity of silver sent annually to the East Indies reduces. have. between the proportions of one to ten and one to twelve. In the mint of Calcutta. the value of fine gold to fine silver was regulated in the different mines of Europe. must necessarily be the same as that between their quantities. an ounce of fine gold is supposed to be worth fifteen ounces of fine silver. in some of the English settlements. reckoned at ten guineas. but silver sunk more than gold. according to Mr Meggens’ account. for one ounce of gold there are imported a little more than twenty-two ounces of silver. 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.Adam Smith the produce of the gold mines. Though both the gold and silver mines of America exceeded in fertility all those which had ever been known before. Before the discovery of the mines of America. he supposes. that is. it came to be regulated. were it not for this greater exportation of silver. in the same manner as in Europe. 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. he seems to think. In China. is as one to twenty-two nearly. or in the quantity of silver which was given for it. perhaps. that is.

is generally confined to watch-cases. of which the whole amount is seldom of great value. which takes place only in some countries. The quantity of silver commonly in the market. We ought naturally to expect. In France. it is probable. In the coin of many countries the silver preponderates. the value of the gold preponderates greatly. The whole quantity of bread annually brought to market. which. but a greater value of silver than of gold. than the whole quantity of wild fowl. but of greater value. the value of the two metals is nearly equal. of the silver plate above that of the gold. 6d. besides. In the coin of some countries. than the whole quantity of a dear one. before the union with England. The whole quantity. When we compare the precious metals with one another. but it is not so in that of all countries. and the whole quantity of poultry. that there are commonly in the market only fourteen or fifteen ounces of silver for one ounce of gold. that not only the quantity. because an ounce of gold will commonly purchase from fourteen or fifteen ounces of silver. It would be absurd. have a good deal of silver who have no gold plate. is to the value of an equal quantity of the cheap one. In the British coin. but a greater value can commonly be disposed of. is much greater in proportion to that of gold. that there should always be in the market. There are so many more purchasers for the cheap than for the dear commodity. not only a greater quantity of it. who has a little of both. but of greater value. The whole quantity of a cheap commodity brought to market is commonly not only greater. reckoned at 3s. and he will probably find. will much more than compensate the preponderancy of the gold coin above the silver. In the Scotch coin.}. and such like trinkets. the gold preponderated very little. the largest sums are commonly paid in that metal. which takes place in all countries. greatly exceeds that of the latter. snuff-boxes. therefore. though it did somewhat {See Ruddiman’s Preface to Anderson’s Diplomata. that. to infer from thence. as it appears by the accounts of the mint. but the value of the former. than the whole quantity of butcher’s meat. Scotiae. silver is a cheap. not only a greater quantity. than the value of a certain quantity of the dear one.The Wealth of Nations price of a lamb. and gold a dear commodity. than the value of a certain quantity of gold is to that of an equal quantity of silver. that there are commonly in the market three score lambs for one ox. indeed. and it would be just as absurd to infer. Let any man. however. however. of the cheap commodity. than the whole quantity of poultry. even with those who have it. is not only greater. The superior value. Many people. therefore. the whole quantity of butcher’s meat. must commonly be greater in proportion to the whole quantity of the dear one. compare his own silver with his gold plate. 180 . etc. and it is there difficult to get more gold than what is necessary to carry about in your pocket.

yet the same impossibility of paying it. The price of Spanish gold.Adam Smith Though. in one sense of the word. to the general market of Europe. a mere luxury and superfluity. much cheaper than gold. with a moderate profit. The tax. too. as it affords both less rent and less profit. perhaps. A commodity may be said to be dear or cheap not only according to the absolute greatness or smallness of its usual price. made it necessary to reduce it from one-fifth to one-tenth. Though it is not very probable that any part of a tax. be still nearer to the lowest price at which it is possible to bring them to market. therefore. as they more rarely make a fortune. the whole mass of American gold comes at a price nearer to the lowest for which it is possible to bring it thither. and that upon gold is still worse paid than that upon silver. which. gold is certainly somewhat nearer to this lowest price than silver. cannot. It is the price which affords nothing to the landlord. or to ten per cent. and probably always will be. In these taxes. in the Spanish market. it would seem. too. in 1736. This lowest price is that which barely replaces. must. in another sense. in the present state of the Spanish market. 181 . The tax of the king of Spain upon gold is only one-twentieth part of the standard metal. It may therefore be uncertain. it has already been observed. yet. 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. gold may perhaps. or one-fifth part of the standard metal. silver always has been. but which resolves itself altogether into wages and profit. or five per cent. in general. may in time make it necessary to reduce it still further. will ever be given up as long as it is possible to pay it. than the whole mass of American silver. but which affords so very important a revenue as the tax upon silver. is the same with the ancient tax of the king of Spain upon the silver of Mexico and Peru. The price of diamonds and other precious stones may. be disposed of so advantageously as the whole quantity of the other. of which rent makes not any component part. be somewhat nearer to the lowest price for which it is possible to bring it thither. indeed. must. consists the whole rent of the greater part of the gold and silver mines of Spanish America. When all expenses are computed. than even the price of gold.. whereas his tax upon silver amounts to one-tenth part of it. in the present state of the Spanish market. whether. be said to be somewhat cheaper than silver. in the Spanish market. But. the whole quantity of the one metal. be still more moderate than those of the undertakers of silver mines. the stock which must be employed in bringing the commodity thither. The profits of the undertakers of gold mines. of the king of Portugal upon the gold of the Brazils. which is not only imposed upon one of the most proper subjects of taxation. than the price of Spanish silver.

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). must certainly retard. is acknowledged by everybody who has inquired into the state of those mines. supposing there has been any. indeed. the facts and arguments which have been alleged above. but whether the contrary may not have taken place. has hitherto been so very small. become gradually more expensive in the working. begun to rise somewhat in the European market. the rise of the value of silver in the European market. the value of silver in the European market. had the court of Spain continued to exact the old tax. like all other mines. deserves the name of belief. not only whether this event has actually taken place. These causes. the value of any given quantity somewhat less. though it may not at this day be lower than before that reduction. notwithstanding a great diminution of the tax upon gold. because they could not afford to pay the old tax. or more properly to suspect and conjecture. scarce. in time. it must be compensated altogether by a proportionable diminution of the tax upon silver. it may. secondly. during the course of the present century. perhaps. That the silver mines of Spanish America. This third event is very possible. or. the value of silver has. The rise. so silver might rise in its price in proportion to labour and commodities. is. must always be somewhat greater. and the quantity of silver annually brought to market. That. at least ten per cent. perhaps. and of the greater expense of drawing out the water. more or less. first. In consequence of the reduction in 1736. must. however. notwithstanding this reduction. appear to many people uncertain. be compensated altogether by a proportionable increase in the price of the metal. produce one or other of the three following events: The increase of the expense must either. probably. dispose me to believe. though they may not prevent altogether. or whether the value of silver may not still continue to fall in the 182 .The Wealth of Nations in the same manner as it made it necessary to reduce the tax upon gold to one-twentieth. for the best opinion which I can form upon this subject. As gold rose in its price in proportion to silver. that after all that has been said. thirdly. many mines may be wrought which could not be wrought before. than it otherwise would have been. on account of the greater depths at which it is necessary to carry on the works. and. therefore. and of supplying them with fresh air at those depths. notwithstanding an equal diminution of the tax upon silver. Such successive reductions of the tax. In consequence of such reductions. or. lower than it would have been. it must be compensated partly by the one and partly by the other of those two expedients.

their value diminishes. If. in this manner. the useful fossils and minerals of the earth. and less cared for. till the annual importation becoming again stationary. come to exchange for a greater quantity of silver than before. or because a better price is given for them. It must be observed. Gold and silver naturally resort to a rich country. which arises in any country from the increase of wealth. so their value diminishes as their quantity increases. which. and such other vegetables as are raised altogether by human industry. may. As their mass increases. become equal to their annual importation. that whatever may be the supposed annual importation of gold and silver. that as the quantity of the precious metals naturally increases with the increase of wealth. the annual consumption of those metals must. there must be a certain period at which the annual consumption of those metals will be equal to that annual importation. the annual importation should gradually diminish. poultry. The mass of those metals may gradually and insensibly diminish. the annual consumption will gradually and insensibly accommodate itself to what that annual importation can maintain. Grounds of the suspicion that the Value of Silver still continues to decrease. perhaps. I have endeavoured to shew already. I have endeavoured to shew already. game of all kinds. is not supposed to be the case. the annual consumption may. provided that importation is not continually increasing. therefore. naturally grow dearer. has no tendency to diminish their value. it will not from thence fol- 183 . That that increase in the quantity of the precious metals. and the still gradually increasing price of many parts of the rude produce of land may confirm them still farther in this opinion. and the popular notion. and their value gradually and insensibly rise. Though such commodities. Their consumption must increase as their mass increases. and their consumption consequently increases in a greater proportion than their mass. when the annual consumption has become equal to the annual importation. but because they are dearer. It is the superiority of price which attracts them. however. for the same reason that all sorts of luxuries and curiosities resort to it. dispose many people to believe that their value still continues to fall in the European market. If you except corn. The increase of the wealth of Europe. they necessarily cease to go thither. etc. for some time. that all other sorts of rude produce. After a certain period.Adam Smith European market. therefore. They are more used. cattle. or rather in a much greater proportion. in the present times. and as soon as that superiority ceases. as the society advances in wealth and improvement. not because they are cheaper there than in poorer countries. exceed the annual importation.

according as different accidents render the efforts of human industry. Such are the greater part of rare and singular birds and fishes. more or less successful. however. therefore. and sometimes to rise more or less. It consists in those things which nature produces only in certain quantities.The Wealth of Nations low that silver has become really cheaper. much beyond what it is at present. remaining the same. has. The quantity of such commodities. as well as many other things. That of the third. The first comprehends those which it is scarce in the power of human industry to multiply at all. it is impossible to accumulate together the produce of many different seasons. is that which it is scarce in the power of human industry to multiply at all. and seems not to be limited by any certain boundary. for rare birds and fishes. though its natural tendency is to rise in the progress of improvement. those in which the efficacy of industry is either limited or uncertain. though it may rise greatly. yet in the same degree of improvement it may sometimes happen even to fall. no effort of human industry could increase the number of those brought to market. and seems not to be limited by any certain boundary. Different Effects of the Progress of Improvement upon three different sorts of rude Produce. the demand for these is likely to increase with them. the real price of the first may rise to any degree of extravagance. The rise of their nominal price is the effect. The third. but their real price. those which it can multiply in proportion to the demand. In the progress of wealth and improvement. increase. and which being of a very perishable nature. many different sorts of game. of which the price rises in the progress of improvement. When wealth. beyond which it cannot well pass for any considerable time together. almost all wild-fowl. not of any degradation of the value of silver. in the time of their greatest grandeur. may in 184 . sometimes to continue the same. their price may rise to any degree of extravagance. all birds of passage in particular. The high price paid by the Romans. The second. These different sorts of rude produce may be divided into three classes. and no effort of human industry may be able to increase the supply much beyond what it was before this increase of the demand. It is not their nominal price only. but that such commodities have become really dearer. and the luxury which accompanies it. If woodcocks should become so fashionable as to sell for twenty guineas a-piece. First Sort. a certain boundary. or nearly the same. which rises in the progress of improvement. That of the second. or will purchase less labour than before. but of the rise in their real price. — The first sort of rude produce. while the competition to purchase them is continually increasing. in multiplying this sort of rude produce. or will purchase more labour than before.

the extravagance of those prices. What occasioned the extravagance of those high prices was. was the price which the republic paid for the modius or peck of the tithe wheat of Sicily. When we read in Pliny. The quantity of silver. IX. X. equal to about sixty-six pounds thirteen shillings and fourpence of our present money. therefore. notwithstanding.Adam Smith this manner easily be accounted for. and after the fall of the republic. and generally sells for a lower price in the European market. would purchase. that is. to appear to us about one third less than it really was. 17. which in quality is inferior to the Sicilian. Seius gave for the nightingale the command of a quantity of labour and subsistence. was a good deal less than what the command of the same quantity of labour and subsistence would have procured to them 185 . These prices were not the effects of the low value of silver in those times. was about one-third more than their nominal price is apt to express to us in the present times. c. or eightpence sterling the peck. as three to four inversely. The real value of silver was higher at Rome. was probably below the average market price. and Asinius Celer gave for a surmullet the command of a quantity equal to what £ 88:17: 9d. the ordinary contract price of English wheat. beyond what was necessary for their own use. 29. before the late years of scarcity. how much soever it may surprise us. that is.} purchased a surmullet at the price of eight thousand sestertii. as a present for the empress Agrippina. had occasion to order more corn than the tithe of wheat amounted to. of which they had the disposal. of which those Romans had the disposal. at the price of six thousand sestertii. than it is through the greater part of Europe at present. therefore. equal to about fifty pounds of our present money. equal to what £ 66:13: 4d. the ordinary or average contract price of those times. three ounces of silver would then have purchased the same quantity of labour and commodities which four ounces will do at present. Three sestertii equal to about sixpence sterling. c. the obligation to deliver their wheat at this rate being considered as a tax upon the Sicilian farmers. in those ancient times. and this had probably been reckoned the moderate and reasonable. but of the high value of such rarities and curiosities as human industry could not multiply at pleasure. however. must have been to its value in the present. not so much the abundance of silver.} bought a white nightingale. it is equal to about one-and-twenty shillings the quarter. When the Romans. the quantity of labour and subsistence which was given away for them. Their real price. and that Asinius Celer {Lib. would purchase in the present times. as the abundance of labour and subsistence. The value of silver. therefore. Eight-and-twenty shillings the quarter was. is apt. that Seius {Lib. they were bound by capitulation to pay for the surplus at the rate of four sestertii. for sometime before. This price.

which the country naturally produces without labour or cultivation.The Wealth of Nations in the present times. The price of butcher’s meat. increases the demand. in a country in which the quantity of land. and. and which. Second sort. therefore. —The second sort of rude produce. the demand for them is continually increasing. Had the Scotch cattle been always confined to the market of Scotland. as cultivation advances. or. and. The extension of tillage. nature produces with such profuse abundance. that it is as profitable to cultivate land in order to raise food for them as in order to raise food for man. in the neighbourhood of London. till it gets so high. must gradually rise. perhaps. the price of corn. it is scarce possible. it cannot well go higher. and. that it becomes as profitable to employ the most fertile and best cultivated lands in raising food for them as in raising corn. of cattle. When it has got so high. if the country is advancing at all. that they are of little or no value. that their price could ever have risen so high as to render it profitable to cultivate land for the sake of feeding them. what comes to the same thing. therefore. is that which human industry can multiply in proportion to the demand. of which the price rises in the progress of improvement. It had not got to this height in any part of Scotland before the Union. It consists in those useful plants and animals. is so great in proportion to what can be applied to other purposes. the price of cattle. which can be applied to no other purpose but the feeding of cattle. diminishes the quantity of butcher’s meat. 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. it cannot well go higher. sort. in uncultivated countries. Their real value. to have got to this height about the beginning of the last century. at the same time. consequently. gradually rises. perhaps. rises so high. the real quantity of labour which they will purchase or command. to give in exchange for it. some parts of Europe in which the price of cattle has not yet got to this height. seems. 186 . There are. for example. are therefore forced to give place to some more profitable produce. the quantity of these is continually diminishing. it has already been observed. If it did. by diminishing the quantity of wild pasture. by increasing the number of those who have either corn. which. but it was much later. During a long period in the progress of improvement. their price must be continually rising. while. When the price of cattle. till it has got to this height. If it did. more corn land would soon be turned into pasture. more land and more industry would soon be employed to increase their quantity. 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. In England.

producing scarce any thing but some miserable pasture. the farm. may be ploughed up. the most fertile. These. halfstarved cattle. and this. therefore. and brought into the stable to them. The rest will. perhaps. to collect the scanty and scattered produce of waste and unimproved lands. no more cattle can with profit be fed in the stable than what are necessary for tillage. that of which the price. therefore. however. has got to this height. when it will yield. in some of which. But unless the price of the cattle be sufficient to pay both the rent and profit of cultivated land. it seems scarce possible that the greater part. again. must be in proportion to the stock of cattle which are maintained upon it. that price will be still less sufficient to pay for that produce. in the far greater part of those of every extensive country. in the neighbourhood of the farm-yard. rises first to this height. however. or by feeding them in the stable. will be kept constantly in good condition.Adam Smith probably. after having been pastured in this wretched manner for six or seven years together. The land is manured. What they afford. when they are allowed to pasture it. that is. when it must be collected with a good deal of additional labour. perhaps. it may scarce yet have got to it. perhaps. be allowed to lie waste. because. perhaps. and he can still less afford to feed them in the stable. being entirely exhausted. and 187 . can be completely cultivated. 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. which compose this second sort of rude produce. In these circumstances. before it got through the greater part of the remoter counties. and from thence carrying out their dung to it. the farmer cannot afford to pasture them upon it. or those. indeed. and fit for tillage. being insufficient for the whole farm. is not sufficient to pay for the produce of improved and cuitivated land. either by pasturing the cattle upon it. the greater part of them. It is with the produce of improved and cultivated land only that cattle can be fed in the stable. even of those lands which are capable of the highest cultivation. it must be rested and pastured again as before. being very frequently overstocked in proportion to its actual produce. therefore. and be too expensive. and then. a poor crop or two of bad oats. But these can never afford manure enough for keeping constantly in good condition all the lands which they are capable of cultivating. or of some other coarse grain. though much overstocked in proportion to what would be necessary for its complete cultivation. Of all the different substances. will naturally be reserved for the lands to which it can be most advantageously or conveniently applied. just sufficient to keep alive a few straggling. A portion of this waste land. In all farms too distant from any town to carry manure from it. It the price of the cattle. would require too much labour. Till the price of cattle. cattle is.

soon renders them extremely abundant. It has not only raised the value of all highland estates. can be completely abolished through all the different parts of the country. was the general system of management all over the low country of Scotland before the Union. The rest were never manured. but in consequence of a considerable improvement of land. must pass away before the old system. The increase of stock and the improvement of land are two events which must go hand in hand. Of all the commercial advantages. supposing they were capable of acquiring it. Without some increase of stock. but a certain portion of them was in its turn. it is evident. however. it still continues to prevail through a considerable part of the country. rendering it more difficult for them to acquire it. before the Union. the greatest. perhaps. perhaps. could produce but little in comparison of what it may be capable of producing. accordingly. but it has. The lands which were kept constantly well manured and in good condition seldom exceeded a third or fourth part of the whole farm. the low price of cattle seems to have rendered it almost unavoidable. to the poverty of the tenants. the same rise of price. notwithstanding a great rise in the price. in most places. and in every thing great cheapness is the necessary consequence of great abundance. If. In all new colonies. to be in the same manner exhausted and rested again in its turn. but there can be no considerable increase of stock.The Wealth of Nations another portion ploughed up. it is owing in many places. Such. secondly. notwithstanding. there can be scarce any improvement of land. These natural obstructions to the establishment of a better system. to ignorance and attachment to old customs. which would render it advantageous for them to maintain a greater stock. 188 . and of which the one can nowhere much outrun the other. regularly cultivated and exhausted. to their not having yet had time to put their lands in condition to maintain this greater stock properly. which Scotland has derived from the Union with England. and. to the unavoidable obstructions which the natural course of things opposes to the immediate or speedy establishment of a better system: first. but. perhaps. to their not having yet had time to acquire a stock of cattle sufficient to cultivate their lands more completely. even that part of the lands of Scotland which is capable of good cultivation. which can for many years be applied to no other purpose but the feeding of cattle. the great quantity of waste land. cannot be removed but by a long course of frugality and industry. been the principal cause of the improvement of the low country. no doubt. which is wearing out gradually. yet. because otherwise the land could not maintain it. and half a century or a century more. Under this system of management. But how disadvantageous soever this system may appear. this rise in the price of cattle is. and sometimes did not amount to a fifth or a sixth part of it.

and when the Europeans first settled there. the Swedish traveller. occasioned the degradation of their cattle. or to shed their seeds. the want of manure. which degenerated sensibly from me generation to another. therefore. Though it is late. It must be a long time after the first establishment of such colonies. they soon multiplied so much there. pp. they are perhaps the first which bring this price. each of which would have given four times the quantity of milk which that one was capable of giving. when he gives an account of the husbandry of some of the English colonies in North America. 343. having long ago extirpated almost all the annual grasses. though that expedient has been employed in some places. without any owner thinking it worth while to claim them. Mr Kalm. would in former times. before it can become profitable to feed cattle upon the produce of cultivated land.} The annual grasses were. till they bring it. he was assured. he says. by cropping them too early in the spring. 344. They make scarce any manure for their corn fields. that he can with difficulty discover there the character of the English nation. the best natural grasses in that part of North America. and which is now so much mended through the greater part of the low country. and the disproportion between the stock employed in cultivation and the land which it is destined to cultivate. 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. where they are half-starved. before cattle can bring such a price as to render it profitable to cultivate land for the sake of feeding them. and became of so little value. A piece of ground which. they clear and cultivate another piece of fresh land. so well skilled in all the different branches of agriculture. but when one piece of ground has been exhausted by continual cropping. in the progress of improvement. not unlike that which still continues to take place in so many parts of Scotland. when he wrote. {Kalm’s Travels. observes. are likely to introduce there a system of husbandry. they used to grow very thick. not so much by a change of the breed. The same causes. The poorness of the pasture had. accordingly. 189 . it seems. that even horses were allowed to run wild in the woods. in his opinion.Adam Smith Though all the cattle of the European colonies in America were originally carried from Europe. yet of all the different parts which compose this second sort of rude produce. proceed to a third. and to rise three or four feet high. and when that is exhausted. They were probably not unlike that stunted breed which was common all over Scotland thirty or forty years ago. Their cattle are allowed to wander through the woods and other uncultivated grounds. as he found it in 1749. therefore. have maintained four. because. could not maintain one cow. before they had time to form their flowers. vol 1. as by a more plentiful method of feeding them.

with only nearly equal merit. as they are fed with what would otherwise be lost. are a mere save-all. the price of poultry gradually rises above that of butcher’s meat. the poultry.The Wealth of Nations As cattle are among the first. must always be much smaller than the whole quantity of butcher’s meat which is reared upon it. Varro and Columella assure us. its price may very probably rise still higher than it is at present. there is a very long interval. If it did. Between that period in the progress of improvement. are often fully sufficient to supply the whole demand. birds of passage which arrive lean in the country. in consequence of improvement and cultivation. the feeding of poultry is considered as a very important article in rural economy. which brings to its height the price of so necessary an article as cattle. the feeding of deer would soon become an article of common farming. they are often as cheap as butcher’s meat. If it was otherwise. When it has got to this height. till at last it gets so high. what is rare. called turdi. that it was a most profitable article. But the whole quantity of poultry which the farm in this manner produces without expense. or any other sort of animal food. and sufficiently profitable to encourage the farmer to raise a considerable quantity of Indian corn and buckwheat for this purpose. In several provinces of France. and their price can scarce be so low as to discourage him from feeding this number. Thus. and therefore but thinly inhabited. in the same manner as the feeding of those small birds. and that which brings to it the price of such a superfluity as venison. therefore. the offals of the barn and stable will maintain a certain number of poultry. it cannot well go higher. As wealth and luxury increase. If venison continues in fashion. A middling farmer will there sometimes have four hundred fowls in his yard. therefore. and in times of wealth and luxury. more land would soon be turned to this purpose. according to different circumstances. how extravagant soever it may appear. In this state of things. is always preferred to what is common. which are thus raised without expense. The fattening of ortolans. in every farm. The price of venison in Great Britain. in the course of which many other sorts of rude produce gradually arrive at their highest price. Almost all that he gets is pure gain. The feeding of 190 . so perhaps venison is among the last parts of this sort of rude produce which bring this price. and the wealth and luxury of Great Britain increase as they have done for some time past. that it becomes profitable to cultivate land for the sake of feeding them. is said to be so in some parts of France. so he can afford to sell them for very little. some sooner and some later. as is well known to all those who have had any experience in the feeding of deer. These. is not near sufficient to compensate the expense of a deer park. was among the ancient Romans. But in countries ill cultivated. and as they cost the farmer scarce any thing.

Adam Smith poultry seems scarce yet to be generally considered as a matter of so much importance in England. In the progress of improvements. which can thus be reared at little or no expense. originally kept as a save-all. carrots. For some time before this practice becomes general. but. however. according as the nature of the country. which enable the farmer to raise upon the same quantity of ground a much greater quantity of that particular sort of animal food. After it has become general. that finds his food among ordure. 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. he can afford to sell cheaper. in Great Britain. or a sow and a few pigs. in the same manner as for feeding and fattening other cattle. happen to render the feeding of hogs more or less expensive than that of other cattle. must naturally be that which immediately precedes the general practice of cultivating land for the sake of raising it. at very little. The hog. etc. but which at the same time may have contributed to raise the price of those articles. their whey. like poultry. As the poorest family can often maintain a cat or a dog without any expense. the period at which every particular sort of animal food is dearest. and the state of its agriculture. is fully sufficient to supply the demand. dearer in England than in France. As long as the number of such animals. as England receives considerable supplies from France. the price of pork is nearly equal to that of beef. according to Mr Buffon. the price necessarily rises. both somewhat sooner and somewhat faster than it would otherwise have risen. and becomes proportionably either higher or lower than that of other butcher’s meat. the scarcity must necessarily raise the price. cabbages. is. somewhat below what it was about the beginning of the last century. But when the demand rises beyond what this quantity can supply. in consequence of these improvements. been frequently imputed to the diminution of the number of cottagers and other small occupiers of land. when it becomes necessary to raise food on purpose for feeding and fattening hogs. has contributed to sink the common price of butcher’s meat in the London market. has. They are certainly. The plenty not only obliges him to sell cheaper. the plenty would not be of long continuance. In most parts of Great Britain it is at present somewhat higher. turnips. skimmed 191 . new methods of feeding are commonly fallen upon. and greedily devours many things rejected by every other useful animal. The great rise in the price both of hogs and poultry. In France. an event which has in every part of Europe been the immediate forerunner of improvement and better cultivation. The little offals of their own table. for if he could not afford it. so the poorest occupiers of land can commonly maintain a few poultry.

Part of all these is reserved for the use of his own family. it cannot well go 192 . But of all the productions of land. without doing any sensible damage to any body. The cattle necessarily kept upon the farm produce more milk than either the rearing of their own young. by making it into fresh butter. 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. and cleanliness. The increase of price pays for more labour. care. Sooner or later. is originally carried on as a save-all. and when it has got to this height. he will be likely to manage his dairy in a very slovenly and dirty manner. If it is very low indeed. the quantity of this sort of provisions. The farmer. which is thus produced at little or no expense. The business of the dairy. and. as well as these are paid upon the greater part of other cultivated land. filth. The dairy becomes more worthy of the farmer’s attention. and butter milk. The same causes which gradually raise the price of butcher’s meat. must certainly have been a good deal diminished. or to the price which pays the labour and expense of cultivating the land which furnishes them with food. therefore. in consequence of the improvement of the country. however. and they find the rest in the neighbouring fields. and by making it into cheese. in order to find the best price which is to be had. or the consumption of the farmer’s family requires. but will suffer the business to be carried on amidst the smoke. that of the produce of the dairy. like the feeding of hogs and poultry. it will scarce keep fourand-twenty hours. or with the expense of feeding cattle. as was the case of almost all the farmers’ dairies in Scotland thirty or forty years ago. By diminishing the number of those small occupiers. it must at any rate have risen to the utmost height to which it is capable of rising. and their price must consequently have been raised both sooner and faster than it would otherwise have risen. and will scarce. milk is perhaps the most perishable. in the progress of improvement. of which the price naturally connects with that of butcher’s meat. stores a small part of it for a week. and as is the case of many of them still. the diminution of the quantity which can be fed at little or no expense. when it is most abundant. supply those animals with a part of their food. in the same manner. raise. think it worth while to have a particular room or building on purpose for it. for a year. and they produce most at one particular season. the rest goes to market. perhaps. In the warm season.The Wealth of Nations milk. the increase of the demand. and nastiness of his own kitchen. 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. by making it into salt butter. and the quality of its produce gradually improves. he stores a much greater part of it for several years. The price at last gets so high.

The price of the produce. which human industry is obliged to raise upon them. It seems to have got to this height through the greater part of England. where common farmers seldom employ much good land in raising food for cattle. 193 . compared with that of the produce of English dairies. till once the price of every produce. instead of being considered as a public calamity. therefore. merely for the purpose of the dairy. has got so high as to pay for the expense of complete improvement and cultivation. as it is that which regulates the rent of the greater part of other cultivated land.Adam Smith higher. The inferiority of the quality. though it has risen very considerably within these few years. it is probable. can ever be completely cultivated and improved. secondly. ought to be regarded as the necessary forerunner and attendant of the greatest of all public advantages. as it most certainly is. The lands of no country. This rise in the price of each particular produce. is probably still too low to admit of it. perhaps. it cannot yet be even so profitable. But this inferiority of quality is. be disposed of at a much better price. If the complete improvement and cultivation of the country be. than the cause of it. this rise in the price of all those different sorts of rude produce. and. Though the quality was much better. more land would soon be turned to this purpose. of which loss was to be the necessary consequence. or. is fully equal to that of the price. Through the greater part of Scotland. rather the effect of this lowness of price. in the present circumstances of the country. the two great objects of agriculture. to pay the rent of good corn land. 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. it seems not yet to have got to this height anywhere in Scotland. the price of each particular produce must be sufficient. Through the greater part of England. the greater part of what is brought to market could not. or the fattening of cattle. and the present price. If you except the neighbourhood of a few considerable towns. it is evident. would not pay the expense of the land and labour necessary for producing a much better quality. where much good land is commonly employed in this manner. I apprehend. in other words. to pay the labour and expense of the farmer. first. indeed. notwithstanding the superiority of price. to replace with the ordinary profits the stock which he employs about it. as well as they are commonly paid upon good corn land. and nothing could deserve that name. the greatest of all public advantages. must evidently be previous to the improvement and cultivation of the land which is destined for raising it. the dairy is not reckoned a more profitable employment of land than the raising of corn. In order to do this. Gain is the end of all improvement. If it did.

is either limited or uncertain. in augmenting the quantity. wool without any preparation. and some part of British America. on the contrary. of which the price naturally rises in the progress of improvement. They can easily be transported to distant countries. sometimes to continue the same. upon the prices of wool and raw hides. it may happen sometimes even to fall. is necessarily limited by the number of great and small cattle that are kept in it. too. the market for the latter commodities was confined within as narrow bounds as that for the former. Ireland. Though the real price of this sort of rude produce. — The third and last sort of rude produce. and sometimes to rise more or less in the same period. if. It probably would be so. but a greater quantity of labour and subsistence than before. in the progress of improvement.The Wealth of Nations This rise. They have become worth. so. very seldom confined to the country which produces them. so that the quantity of the one which any country can afford. the only countries in the commercial world which do so. The same causes which. too. is that in which the efficacy of human industry. in the rude beginnings of improvement. As it costs a greater quantity of labour and subsistence to bring them to market. is. nearly in the same proportion. but of a rise in their real price. indeed. not only a greater quantity of silver. or which export to other countries any considerable part of their butcher’s meat. in the rude beginnings of improvement. but they are. it may be thought. The market for butcher’s meat is almost everywhere confined to the country which produces it. which any country can afford. for example. not of any degradation in the value of silver. The quantity of wool or of raw hides. Third Sort. and the nature of its agriculture. The state of its improvement. therefore. But the extent of their respective markets is commonly extremely different. yet. The market for wool and raw hides. is necessarily limited by that of the other. in the nominal or money price of all those different sorts of rude produce. naturally tends to rise in the progress of improvement. carry on a considerable trade in salt provisions. in very different periods of improvement. should have the same effect. according as different accidents happen to render the efforts of human industry more or less successful in augmenting the quantity. and raw hides 194 . 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. and raise them. again necessarily determine this number. Third Sor ort. or are equivalent to a greater quantity. when they are brought thither they represent. has been the effect. I believe.

the price of the wool and the hide bears always a much greater proportion to that of the whole beast. The state of the whole commercial world can seldom be much affected by the improvement of any particular country. and before the settlement. especially. it happens almost constantly in Chili. This. Mr Hume observes. after such improvements. be somewhat extended in consequence of them. and as they are the materials of many manufactures. But the market for the wool and the hides. If the manufactures. rather. The market for the carcase being in the rude state of society confined always to the country which produces it. where the horned cattle are almost constantly killed merely for the sake of the hide and the tallow. not only the eastern part of the coast. however. though it might not be much enlarged. the sheep is frequently killed merely for the sake of the fleece and the tallow. who still continue to possess. the price of the whole beast necessarily rises. the market. and the market for such commodities may remain the same. there is more demand for butcher’s meat. improvement. must necessarily be extended in proportion to the improvement and population of that country. used to happen almost constantly in Hispaniola. often extending to the whole commercial world. yet the price of the carcase is likely to be much more affected by this rise than that of the wool and the hide. In countries ill cultivated. and the price of those materials might at least be increased by what had 195 . of which those commodities are the materials. the industry of other countries may occasion a demand for them. that in the Saxon times. should ever come to flourish in the country. though that of the country which produces them might not occasion any. or very nearly the same. as before. would at least be brought much nearer to the place of growth than before. or to be devoured by beasts and birds of prey. Though. and therefore but thinly inhabited. than in countries where. I have been assured. too. the fleece was estimated at two-fifths of the value of the whole sheep and that this was much above the proportion of its present estimation. it can very seldom be enlarged in the same proportion. and in many other parts of Spanish America. If this sometimes happens even in Spain. 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. in the natural course of things. in the progress of improvement and population. improvement and population being further advanced.Adam Smith with very little. In some provinces of Spain. upon the whole. It should. even of a barbarous country. but the whole inland mountainous part of the country. while it was infested by the buccaneers. The carcase is often left to rot upon the ground. at Buenos Ayres.

of the absolute prohibition of exporting wool from England: secondly. if the real recompence of labour had been the same in both periods. in consequence of the improvement of England. of Ireland. 7. In consequence of these regulations. First. There are many authentic records which demonstrate that. ii. The proportion between the real price of ancient and modern times. was to its money price in the present times as ten to seven. In those ancient times. containing. however. of the permission of importing it from Spain. At the rate of six shillings and eightpence the quarter. or about 1339). in the time of Edward III. 5. duty free: thirdly. both in the real and nominal value of wool. where the wool of several other countries is allowed to come into competition with it. At the rate of twenty-eight shillings the quarter. or as two to one. The money price of wool.}. too. and consequently twice the quantity of labour. during the reign of that prince (towards the middle of the fourteenth century. instead of being somewhat extended. It has accordingly been the effect of violence and artifice. is as twelve to six. the only market they are allowed. in the same proportion as that of butcher’s meat. notwithstanding the flourishing state of its woollen manufacture. or twenty-eight pounds of English wool. therefore. Though it might not rise. 6. are fully as much discouraged as is consistent with justice and fair dealing. at the rate of twenty-pence the ounce. This degradation. As the woollen manufactures. equal to about thirty shillings of our present money. the Irish can work up but a smaller part of their own wool at home. and are therefore obliged to send a greater proportion of it to Great Britain. was not less than ten shillings of the money of those times {See Smith’s Memoirs of Wool. and it ought certainly not to fall. of the prohibition of exporting it from Ireland to another country but England. it ought naturally to rise somewhat. the market for English wool. In the present times. and where that of Ireland is forced into competition with it. therefore. could never have happened in consequence of the natural course of things. has been confined to the home market. also vol. In England. one-andtwenty shillings is in the present times the price of six bushels only.The Wealth of Nations 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. vol. the price of English wool has fallen very considerably since the time of Edward III. ten shillings was in those ancient times the price of twelve bushels of wheat. Tower weight. therefore. six ounces of silver. 196 . The superiority of its real price was still greater. a tod of wool would have purchased twice the quantity of subsistence which it will purchase at present. i c. what was reckoned the moderate and reasonable price of the tod.

five cow hides at seven shillings and threepence. what was its ordinary price. the importation of raw hides from Ireland. was in this account valued at the same quantity of silver as 4s. But at half-a-crown the stone. would in the present times cost 51s. and to the allowing. In 1425. therefore. however. such a hide would at present cost only ten shillings. we cannot suppose that they were of a very large size. 4/5ths of our present money. owing probably to the taking off the duty upon seal skins. The price of cow hides. is rather somewhat lower. Their skins. at three and sixpence the bushel. The price of raw hides is a good deal lower at present than it was a few years ago. are generally killed very young. the real quantity of subsistence which it will purchase or command. But at the rate of six shillings and eightpence the quarter. the calves. therefore. sixteen calf skins at two shillings. An ox hide. That of calves skins. as stated in the above account. That of sheep skins is a good deal above it. its real price. viz.Adam Smith I have not been able to find any such authentic records concerning the price of raw hides in ancient times. Fleetwood. for a limited time. at least as it was stated upon that particular occasion. on the contrary. 197 . Wool was commonly paid as a subsidy to the king. duty free. twelve shillings contained about the same quantity of silver as four-and-twenty shillings of our present money. between the prior of Burcester Oxford and one of his canons. gives us their price. 4d. is nearly in the common proportion to that of ox hides. Its real value was equal to ten shillings and threepence of our present money. In countries where the price of cattle is very low. and its valuation in that subsidy ascertains. is not in the present times reckoned a bad one. Its nominal price was a good deal lower than at present. which their price would not pay for. as was the case in Scotland twenty or thirty years ago. An ox hide. would in those times have purchased as much corn as ten shillings and threepence would purchase at present. Through its nominal price. is higher in the present than it was in those ancient times. at least in some degree. when the cattle were half starved during the greater part of the winter. It saves the milk. is greatly below it. In those ancient times. from an account in 1425. and in those ancient times would probably have been reckoned a very good one. five ox hides at twelve shillings. therefore. which. But this seems not to have been the case with raw hides. which at this moment (February 1773) I understand to be the common price. therefore. An ox hide which weighs four stone of sixteen pounds of avoirdupois. are commonly good for little. They had probably been sold with the wool. and from the plantations. which are not intended to be reared in order to keep up the stock. twelve shillings would in those times have purchased fourteen bushels and four-fifths of a bushel of wheat. thirtysix sheep skins of two years old at nine shillings.

which are fed on improved and cultivated land. In an improved and cultivated country. though their interest as consumers may. The less there is paid for the one. in an improved and cultivated country. must be paid by the carcase. provided it is all paid to them. and the profit which the farmer. is not paid by the wool and the hide. yet Ireland has not been confined to the market of Great Britain for the sale of its surplus hides. must. must be sufficient to pay the rent which the landlord. and declared a nuisance.The Wealth of Nations which was done in 1769. therefore. The price both of the great and small cattle. They have accordingly been much less favoured. their interest as landlords and farmers cannot be much affected by such regulations. It suffers more by keeping. but their importation from foreign countries has been subjected to a duty. in convincing the wisdom of the nation. and to raise it in modern times. neither has the commerce of Ireland been in this case oppressed hitherto. It must have some tendency to sink their price in a barbarous. in an unimproved and uncul- 198 . It would be quite otherwise. and to raise it in an improved and manufacturing country. but is obliged to export them. and sells for a lower price. Our tanners. Whatever regulations tend to sink the price. either of wool or of raw hides. Take the whole of the present century at an average. have some tendency to raise the price of butcher’s meat. they will soon cease to feed them. have not been quite so successful as our clothiers. or of those which are not manufactured at home. has reason to expect from improved and cultivated land. however. below what it naturally would he. The nature of the commodity renders it not quite so proper for being transported to distant markets as wool. in order to support the manufactures of Great Britain. If it is not. besides. by the rise in the price of provisions. and though this duty has been taken off from those of Ireland and the plantations (for the limited time of five years only). but within these few years. The hides of common cattle have. been prohibited. been put among the enumerated commodities which the plantations can send nowhere but to the mother country. and comparatively to raise that of those produced in a country which does manufacture them. therefore. The exportation of raw hides has. to sink it in ancient. 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. It must have had some tendency. A salted hide is reckoned inferior to a fresh one. the more must be paid for the other. their real price has probably been somewhat higher than it was in those ancient times. indeed. Whatever part of this price. therefore. In what manner this price is to be divided upon the different parts of the beast. is indifferent to the landlords and farmers.

so they necessarily render the efficacy of its efforts more or less uncertain. In multiplying this sort of rude produce. as upon that which they do not manufacture. which is commonly. Their interest as landlords and farmers would in this case be very deeply affected by such regulations. ascribed to Edward III. It so far depends not so much upon the quantity which they produce. It is limited by the local situation of the 199 . as they are altogether independent of domestic industry. so it is uncertain so far as it depends upon the produce of other countries. and upon the restraints which they may or may not think proper to impose upon the exportation of this sort of rude produce. the same number would still continue to be fed. 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 the country where it is exerted. that is.Adam Smith tivated country. It would not only have reduced the actual value of the greater part of the lands in the kingdom. is limited. In multiplying another very important sort of rude produce. The wool of Scotland fell very considerably in its price in consequence of the union with England. therefore. would have been very deeply affected by this event. The value of the greater part of the lands in the southern counties of Scotland. therefore. The perpetual prohibition of the exportation of wool. the quantity of fish that is brought to market. would be the same as before. The same quantity of butcher’s meat would still come to market. Its price. which are chiefly a sheep country. have been the most destructive regulation which could well have been thought of. it would have retarded very much its subsequent improvement. and along with it both the rent and the profit of all those lands of which cattle was the principal produce. These circumstances. The demand for it would be no greater than before. and their interest as consumers very little. and where the wool and the hide made the principal part of the value of those cattle. As the efficacy of human industry. but very falsely. in the then circumstances of the country. because the greater part of the lands of the country being applicable to no other purpose but the feeding of cattle. but uncertain. but by reducing the price of the most important species of small cattle. by which it was excluded from the great market of Europe. and confined to the narrow one of Great Britain. would. had not the rise in the price of butcher’s meat fully compensated the fall in the price of wool. The fall in the price of the wool and the hide would not in this case raise the price of the carcase. The whole price of cattle would fall.. the efficacy of human industry is not only limited. in increasing the quantity either of wool or of raw hides. it is likewise both limited and uncertain. of the greater part of the lands of the country.

the efficacy of human industry seems not to be limited. the general efficacy of industry in bringing a certain quantity of fish to market. have a greater quantity and variety of other goods. however. naturally rises in the progress of improvement. as the annual produce of the land and labour of the country grows greater and greater. It has accordingly done so. either from its own mines. what is the same thing. upon its power of purchasing. Their quantity. in every particular country. no doubt. and more expensive machinery of every kind made use of. or of several years together. without employing a quantity of labour greater than in proportion to what had been requisite for supplying the narrow and confined one. But it will generally be impossible to supply the great and extended market. therefore. as to this sort of rude produce. too. I believe. without employing more than ten times the quantity of labour which had before been sufficient to supply it. more or less in every country. such as the fertility or barrenness of its own mines. upon the state of its industry. to buy with. in consequence of which it can afford to employ a greater or a smaller quantity of labour and subsistence. As population increases. or from 200 . by the number of its lakes and rivers. and those buyers. The quantity of the precious metals which is to be found in any country. Though the success of a particular day’s fishing maybe a very uncertain matter. first. its connection with the state of improvement is uncertain. and rivers. or. comes to require annually ten thousand ton of fish. and it is of this sort of uncertainty that I am here speaking. seems to depend upon two different circumstances. than upon the state of its wealth and industry. is so. it may.The Wealth of Nations country. A market which. upon the annual produce of its land and labour. the price of a greater quantity and variety of other goods. As it depends more. be thought is certain enough. yet the local situation of the country being supposed. Those metals frequently abound in countries which possess no mines. upon the local situation of the country. The fish must generally be sought for at a greater distance. In increasing the quantity of the different minerals and metals which are drawn from the bowels of the earth. but to be altogether uncertain. larger vessels must be employed. perhaps. is not limited by any thing in its local situation. there come to be more buyers of fish. and it. in bringing or purchasing such superfluities as gold and silver. The real price of this commodity. from requiring only one thousand. that of the more precious ones particularly. and by what may be called the fertility or barrenness of those seas. as upon this account it may in different countries be the same in very different periods of improvement. by the proximity or distance of its different provinces from the sea. taking the course of a year. lakes. can seldom be supplied. and very different in the same period.

and it is just equally possible. are doubtful. either to the possible success. however. secondly. and the actual discovery and successful working of a new mine can alone ascertain the reality of its value. it is possible that new mines may be discovered. As arts and commerce.Adam Smith those of other countries. can afford to purchase any particular quantity of those metals at the expense of a greater quantity of labour and subsistence. it is acknowledged. their real price. is likely to rise with the wealth and improvement of the country. upon the fertility or barrenness of the mines which may happen at any particular time to supply the commercial world with those metals. Their quantity in China and Indostan must have been more or less affected by the abundance of the mines of America. or even of its existence. like that of all other luxuries and superfluities. however. on account of the easy and cheap transportation of those metals. being extended over a wider surface. must be more or less affected by this fertility or barrenness. more fertile than any that have ever yet been known. 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). that the most fertile mine then known may be more barren than any that was wrought before the discovery of 201 . All indications. which may happen at any particular time to supply the commercial world. their real price. sink more or less in proportion to the fertility. than countries which have less to spare. the real quantity of labour and subsistence which they will purchase or exchange for. may have somewhat a better chance for being successful than when confined within narrower bounds. Countries which have a great quantity of labour and subsistence to spare. In this search there seem to be no certain limits. is a matter of the greatest uncertainty. may have no sort of connection with the state of industry in a particular country. or to the possible disappointment of human industry. of their small bulk and great value. no doubt. and rise in proportion to the barrenness of those mines. will. and to fall with its poverty and depression. indeed. The quantity of those metals in the countries most remote from the mines. The fertility or barrenness of the mines. and such as no human skill or industry can insure. as the old ones come to be gradually exhausted. and. The discovery of new mines. So far as their quantity in any particular country depends upon the former of those two circumstances (the power of purchasing). is a circumstance which. gradually spread themselves over a greater and a greater part of the earth. In the course of a century or two. the search for new mines. It seems even to have no very necessary connection with that of the world in general. it is evident.

but of the poverty and barbarism of the country at the time when it took place. might represent as much as a shilling does now. and the dearness and scarcity of those trifling superfluities. and in the other. has increased greatly since the discovery of the mines of America. A shilling might. The cheapness and abundance of gold and silver plate would be the sole advantage which the world could derive from the one event. the only inconveniency it could suffer from the other. the value of the precious metals is much higher than in any part of Europe. indeed. Conclusion of the Digression concerning the Variations in the Value of Silver. as a proof. so the value of gold and silver has gradually diminished. would be precisely the same. be very different. of the annual produce of its land and labour. but its real value. he who had a shilling in his pocket would be no richer than he who has a penny at present. no doubt. or. A poor country. the high value of gold and silver. would. The greater part of the writers who have collected the money price of things in ancient times. has not been owing to the increase of the real wealth of Europe. therefore. and of goods in general. This diminution of their value. In China. the real quantity of labour which it could purchase or command. and a penny. of gold and silver. seem to have considered the low money price of corn. a system which I shall endeavour to explain and examine at great length in the fourth book of this Inquiry. But in the one case. in other words. however. This notion is connected with the system of political economy. as it cannot afford to buy more. is not likely to be higher in the former than in the latter. to the real value of the annual produce of the land and labour of mankind. so it can as little afford to pay dearer for gold and silver than a rich one. 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. he who had a penny would be just as rich as he who has a shilling now. and the value of those metals. in the other. represent no more labour than a penny does at present. It is a proof only of the barrenness of the mines which happened at that time to supply the commercial world. not only of the scarcity of those metals. but to the accidental dis- 202 . Its nominal value. the quantity of gold and silver by which this annual produce could be expressed or represented. As the wealth of Europe. in the one case. I shall only observe at present. which represents national wealth as consisting in the abundance and national poverty in the scarcity. is of very little importance to the real wealth and prosperity of the world. a country much richer than any part of Europe. Whether the one or the other of those two events may happen to take place.The Wealth of Nations the mines of America.

Their quantity. are. however. their quantity must be greater in those countries than in any other part of Europe. 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. either of goods in general. has neither improved the manufactures and agriculture of the country. The value of the precious metals. it has not been succeeded by a much better. must have increased there as in other places. after Poland. it seems. It clearly demonstrates. Though the feudal system has been abolished in Spain and Portugal. This increase of the quantity of those metals. the great extent of the land which they occupied in proportion to 203 . in the same manner as in other parts of Europe. be no proof of the poverty or barbarism of the times. has risen. or of corn in particular. the other. are poorer than the greater part of Europe. however. perhaps the two most beggarly countries in Europe. though they have happened nearly about the same time. increased that annual produce. but with the expense of smuggling. those countries. therefore. must be lower in Spain and Portugal than in any other part of Europe. and nearly in the same proportion to the annual produce of its land and labour. As the low value of gold and silver. has not. such as cattle. is at this day as beggarly a country as it was before the discovery of America. their exportation being either prohibited or subjected to a duty. as they come from those countries to all other parts of Europe. and the increase of its manufactures and agriculture. Spain and Portugal. is no proof of the wealth and flourishing state of the country where it takes place. any proof of its poverty and barbarism. however. not only with a freight and an insurance. is a most decisive one. In proportion to the annual produce of the land and labour. yet have arisen from very different causes. or of corn in particular. in which neither prudence nor policy either had or could have any share. some tolerable security that it shall enjoy the fruits of its own labour. first. so neither is their high value. and. But though the low money price. game of all kinds. the low money price of some particular sorts of goods. from the fall of the feudal system. and have scarce any natural connection with one another. are two events which. The increase of the quantity of gold and silver in Europe. nor mended the circumstances of its inhabitants. where the feudal system still continues to take place. the countries which possess the mines. their great abundance in proportion to that of corn. consequently. therefore. loaded. etc.Adam Smith covery of more abundant mines than any that were known before. however. in proportion to that of corn. therefore. or the low money price either of goods in general. poultry. Poland. The money price of corn. The one has arisen from a mere accident.

or a fifth part higher. or of corn in particular. it is acknowledged. but by the public fiars of all the different counties of Scotland. it has. according as silver happened to lose a third.The Wealth of Nations what was occupied by corn. during the sixty-four first years of the present century. will. has risen much less than that of some other sorts of provisions. not only by the accounts of Windsor market. does not affect all sorts of provisions equally. which have been collected with great diligence and fidelity by Mr Messance. and that it was either in a more or less barbarous state. with a degree of probability that approaches almost to certainty. or a fifth part of its former value. were fertile or barren. or a fourth. and by Mr Dupré de St Maur. or in a more or less civilized one. and. As to the price of corn itself. and those which have been above assigned. of which the price has actually risen in proportion to that of corn. secondly. and in that country. and. but in its infancy. Any rise in the money price of goods which proceeded altogether from the degradation of the value of silver. The evidence is more complete than could well have been expected in a matter which is naturally so very difficult to be ascertained. would affect all sorts of goods equally. and raise their price universally. a third. we can infer only. the low value of this land in proportion to that of corn land. therefore. that the greater part of its lands were improved or unimproved. that the mines. that it was rich or poor. the uncultivated and unimproved state of the far greater part of the lands of the country. It clearly demonstrates. perhaps. sufficiently explain this rise in those particular sorts of provisions. But the rise in the price of provisions. without having recourse to the supposed degradation of the value of silver. 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. But from the high or low money price of some sorts of goods in proportion to that of others. even by those who account for this rise by the degradation of the value of silver. This fact is attested. not that the country was rich or poor. cannot be owing altogether to the degradation of the value of silver. consequently. and by the accounts of several different markets in France. From the high or low money price. and that society was at that time. which they commonly do in civilized countries. Some other causes must be taken into the account. or a fourth. 204 . which has been the subject of so much reasoning and conversation. we can infer. either of goods in general. The rise in the price of those other sorts of provisions. the price of corn. been somewhat lower than it was during the sixtyfour last years of the preceding century. which at that time happened to supply the commercial world with gold and silver. and before the late extraordinary course of bad seasons.

and the most durable part of the wealth of every extensive country. or upon those of other provisions. or. it can be sufficiently accounted for from the badness of the seasons. even according to the account which has been here given. ought certainly to be augmented in proportion to the extent of this fall. to have so decisive a proof of the increasing value of by far the greatest. or gradually advancing. in regulating the pecuniary reward of some of its inferior servants. in the clearest manner. at least. be of some use to the public. their pecuniary reward. or a certain fixed revenue in money. If this rise in the price of some sorts of provisions be owing to a fall in the value of silver. or to a fall in the value of silver. or. purchase a much smaller quantity of several sorts of provisions than it would have done during some part of the last century. which can be of no sort of service to the man who has only a certain quantity of silver to go to market with. as in Portugal and Poland. the most important. by affording an easy proof of the prosperous condition of the country. however. therefore. too. as in most other parts 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. The land constitutes by far the greatest. that silver is continually sinking in its value. it is owing to a circumstance. the most important. I certainly do not pretend that the knowledge of this distinction will enable him to buy cheaper. will. The same quantity of silver. It may. It may surely be of some use. from which nothing can be inferred but the fertility of the American mines. It may be of some use to the public. in consequence of the improved fertility of the land which 205 .Adam Smith As to the high price of corn during these last ten or twelve years. the prosperous and advancing state of the country. provided it was not too large before. If the rise in the price of some sorts of provisions be owing altogether to a fall in the value of silver. may. it may give some satisfaction to the public. But if this rise of price is owing to the increased value. and to ascertain whether this change be owing to a rise in the value of those goods. The opinion. notwithstanding this circumstance. and the most durable part of its wealth. be either gradually declining. in the present times. their real recompence will evidently be so much diminished. it is owing to a circumstance which indicates. seems not to be founded upon any good observations. is only to establish a vain and useless distinction. upon that account be altogether useless. to its increased fertility. the annual produce of its land and labour. If it is not augmented. either upon the prices of corn. without supposing any degradation in the value of silver. it may perhaps be said. It may not. The real wealth of the country. in consequence of more extended improvement and good cultivation. to its having been rendered fit for producing corn.

except perhaps that of hogs flesh. etc. and not more labour than corn. etc. wild-fowl. so it as necessarily lowers that of. by the artificial rise which has been occasioned by taxes in the price of some manufactured commodities. and to be raised by the plough. cannot surely be so much distressed by any rise in the price of poultry. therefore. as they must be relieved by the fall in that of potatoes. the real price of one species of food necessarily rises. cannot much affect the circumstances of the inferior ranks of people. and it becomes a matter of more nicety to judge how far the rise in the one may be compensated by the fall in the other. In the present season of scarcity. the two most important improvements which the agriculture of Europe. candles. come. perhaps. has received from the great extension of its commerce and navigation. which in the rude state of agriculture are confined to the kitchen-garden. beer. through a great part of England. with regard to every sort. to be introduced into common fields. as of salt. it seems to have done through a great part of England more than a century ago). in proportion to the price of corn. introduce many sorts of vegetable food. The improvements of agriculture. any rise which can afterwards happen in that of any other sort of animal food. by increasing the fertility of the land. I believe. either in what proportion any pecuniary reward ought to be augmented. perhaps. Such are potatoes and maize. They suffer more. or whether it ought to be augmented at all. cabbages. that of another as necessarily falls. malt. soap. the high price of corn no doubt distresses the poor.The Wealth of Nations produces such provisions. the natural rise in the price of any other sort of rude produce cannot much affect them. which Europe itself. carrots. in the progress of improvement. it increases its abundance. or what is called Indian corn. when corn is at its ordinary or average price. But in times of moderate plenty. being rendered fit for producing corn. that of every sort of animal food. and raised only by the spade. because. The extension of improvement and cultivation. If. It lowers the price of vegetable food. Many sorts of vegetable food. 206 . in its improved state. it becomes a much nicer matter to judge. as it necessarily raises more or less. too. must afford to the landlord anti farmer the rent and profit of corn land. It raises the price of animal food. which requiring less land. fish. leather. every sort of vegetable food. besides. or venison. come much cheaper to market. ale. When the real price of butcher’s meat has once got to its height (which. because a great part of the land which produces it. The circumstances of the poor. such as turnips.

during the same period. than those of which the materials are the coarser metals. in all of them without exception. and of a more proper division and distribution of work. a few manufactures. of greater dexterity. to diminish gradually the real price of almost all manufactures. there has been. yet the great diminution of the quantity will generally much more than compensate the greatest rise which can happen in the price. in all the toys which are made of the coarser metals. has. that of the manufactured commodity sinks very considerably. and in the coarser sort of cabinet work. in the course of the present and preceding century. or does not rise very much. during the same period. or in which the machinery employed admits of ’ a greater variety of improvements. will more than compensate all the advantages which can be derived from the best machinery. In the clothing manufacture there has. But in all cases in which the real price of the rude material either does not rise at all. who in many cases acknowledge that they can produce no work of equal goodness for double or even for triple the price. may now perhaps be had for twenty shillings. and in all those goods which are commonly known by the name of Birmingham and Sheffield ware. In consequence of better machinery. in consequence of the improvement of land. in which the division of labour can be carried further. within these five- 207 . a much smaller quantity of labour becomes requisite for executing any particular piece of work. though not altogether so great as in watchwork. The price of superfine cloth. I have been assured. That of the manufacturing workmanship diminishes. than about the middle of the last century could have been bought for twenty pounds. in consequence of the flourishing circumstances of the society. however. There are. indeed. 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. the real price of labour should rise very considerably. all of which are the natural effects of improvement. and though. and the most proper division and distribution of work. been most remarkable in those manufactures of which the materials are the coarser metals. the greatest dexterity. This diminution of price has. In the work of cutlers and locksmiths.Adam Smith Effects of the Progress of Improvement upon the real Price of Manufactures. been sufficient to astonish the workmen of every other part of Europe. however. been no such sensible reduction of price. It is the natural effect of improvement. a very great reduction of price. perhaps. It has. A better movement of a watch. the necessary rise in the real price of barren timber. on the contrary. There are perhaps no manufactures.

it was enacted. that I look upon all information of this kind as somewhat uncertain. should be supposed equal. which may have occasioned some reduction of price. But its real price has been much more reduced. shall forfeit forty shillings for every yard so sold. above sixteen shillings. The reduction in the real price of the coarse manufacture. or of other grained cloth of the finest making. Quality. during the course of the present century. however. it was said. the money price of the finest cloth appears to have been considerably reduced since the end of the fifteenth century. is so very disputable a matter. Sixteen shillings. to have fallen a good deal in proportion to its quality. it was enacted. even upon this supposition. than it is at present. that “whosoever shall sell by retail a broad yard of the finest scarlet grained. In 1463. and the machinery employed much more imperfect. being the 4th of Henry VII. owing. Valuing a quarter of wheat in the present times at eight-and-twenty shillings. though considerable. that “no servant in husbandry nor common labourer. A guinea may be reckoned the highest price in the present times. being the 3rd of Edward IV. therefore. however. and the machinery employed is not very different. There may. Six shillings and eightpence was then. such cloth. when the labour was probably much less subdivided. and long afterwards. In 1487. and as this is a sumptuary law. In the clothing manufacture. therefore. That of the Yorkshire cloth. if we compare the price of this manufacture in the present times with what it was in a much remoter period. yet. containing about the same quantity of silver as four-and-twenty shillings of our present money. was. which is made altogether of English wool. Even though the quality of the cloths. which consists altogether of Spanish wool. nor servant to any 208 . the real price of a yard of fine cloth must. therefore. the division of labour is nearly the same now as it was a century ago. towards the end of the fifteenth century. in those times. have been some small improvements in both. has not been so great as in that of the fine. risen somewhat in proportion to its quality. at that time. reckoned not an unreasonable price for a yard of the finest cloth. But the reduction will appear much more sensible and undeniable. it is probable. indeed. is said. have been equal to at least three pounds six shillings and sixpence of our present money. was the price of two quarters and more than three bushels of wheat.” Sixteen shillings.The Wealth of Nations and-twenty or thirty years. and that of the present times is most probably much superior. reckoned the average price of a quarter of wheat. had usually been sold somewhat dearer. 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. to a considerable rise in the price of the material..

many smaller ones. be somewhat cheaper in the present than it was in those ancient times. The same order of people are. Tenpence was then reckoned what is called the moderate and reasonable price of a bushel of wheat. at three and sixpence the bushel. in proportion to the quality. than it is in the present times. which in the present times. It has since received three very capital improvements. with the same quantity of labour. was the price of two bushels and near two pecks of wheat. Secondly. in those times.” In the 3rd of Edward IV. which in the present times. The real price is certainly a good deal cheaper. equal to about eight-and-twenty pence of our present money. which facilitate and abridge. Two shillings. first. prohibited from wearing hose. the machinery employed was much more imperfect in those ancient. would cost five shillings and threepence. by the same law. Even the money price of their clothing. This is a sumptuary law. have paid what was really equivalent to this price for them. The first person that wore stockings in England is said to have been Queen Elizabeth. therefore. would be worth eight shillings and ninepence. restraining the luxury and extravagance of the poor. of which the price should exceed fourteen-pence the pair. Both in the coarse and in the fine woollen manufacture. may. She received them as a present from the Spanish ambassador. at three shillings and sixpence the bushel. shall use or wear in their clothing any cloth above two shillings the broad yard.. probably. the art of knitting stockings was probably not known in any part of Europe. of which it may be difficult to ascertain either the number or the importance. the use of several very ingenious 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. is probably much superior to any that was then made for the wearing of the very poorest order of common servants. will perform more than double the quantity of work. In the time of Edward IV. The three capital improvements are.Adam Smith artificer inhabiting out of a city or burgh. He must however. Their clothing. in a still greater proportion. which may have been one of the causes of their dearness. Their hose were made of common cloth. But the Yorkshire cloth which is now sold at four shillings the yard. the exchange of the rock and spindle for the spinning-wheel. too. therefore. besides. two shillings contained very nearly the same quantity of silver as four of our present money. 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. had commonly been much more expensive. But fourteen-pence was in those times the price of a bushel and near two pecks of wheat. which. therefore. the wind- 209 .

It cost a greater quantity of labour to bring the goods to market. but so as to be their work only when they had nothing else to do. an operation which. in those ancient times. would not probably be very great. and not to be the principal business from which any of them derived the greater part of their subsistence. therefore. It was probably a household manufacture. and which the industry of their own country could not afford them. the importation of foreign manufactures. to the king. instead of treading it in water. on the other hand. so far as I know. in which every different part of the work was occasionally performed by all the different members of almost every private family. 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 the same manner as now. The coarse manufacture probably was. but in the rich and commercial country of Flanders. The consideration of these circumstances may. by people who derived the whole. a greater quantity. at as easy a rate as possible. The fine manufacture. in order that merchants might be enabled to supply. the ancient custom of tonnage and poundage at least. carried on in England in the same manner as it always has been in countries where arts and manufactures are in their infancy.The Wealth of Nations ing of the worsted and woollen yarn. indeed. but rather to encourage it. perhaps. Neither wind nor water mills of any kind were known in England so early as the beginning of the sixteenth century. and must have paid some duty. They had been introduced into Italy some time before. in proportion to that of the fine. a foreign manufacture. It was not then the policy of Europe to restrain. it has already been observed. and it was probably conducted then. previous to the invention of those machines. or exchanged for the price of. This duty. When they were brought thither. Thirdly. by high duties. the real price of the coarse manufacture was. perhaps. in any other part of Europe north of the Alps. or the proper arrangement of the warp and woof before they are put into the loom. the employment of the fulling-mill for thickening the cloth. 210 . in those ancient times. or the principal part of their subsistence from it. The consideration of these circumstances may. must have been extremely tedious and troublesome. nor. in those times. besides. in some measure explain to us why. comes always much cheaper to market than that which is the principal or sole fund of the workman’s subsistence. in some measure. It was. the great men with the conveniencies and luxuries which they wanted. so much lower than in the present times. The work which is performed in this manner. carried on in England. was not. they must have purchased.

the rise in the price of cattle. Whatever reduces the real price of the latter. and afterwards the cause of their being still further extended. which is over and above his own consumption. for example. tends. requires no more labour to collect it than before. for manufactured produce. tends indirectly to raise the real rent of land. The landlord exchanges that part of his rude produce. A smaller proportion of it will. That rise in the real price of those parts of the rude produce of land. the produce increases with the increase of the stock which is thus employed in raising it. the neglect of cultivation and improvement. be sufficient to replace. the fall in the real price of any part of the rude produce of land. his power of purchasing the labour. and the landlord is enabled to purchase a greater quantity of the conveniencies. Chapter. what comes to the same thing. the declension of the real wealth of the society. or the produce of the labour of other people. ornaments. All those improvements in the productive powers of labour. The landlord’s share of the produce necessarily increases with the increase of the produce. the stock which employs that labour. A certain proportion of this labour naturally goes to the land. A greater proportion of it must consequently belong to the landlord. on the other hand. or. which tend directly to reduce the rent price of manufactures. every increase in the quantity of useful labour employed within it. A greater number of men and cattle are employed in its cultivation. The real value of the landlord’s share.Adam Smith Conclusion of the Chapter. to raise the real rent of land to increase the real wealth of the landlord. too. that every improvement in the circumstances of the society tends. the rise in the real price of manufactures from the decay of manufacturing art and industry. tend indirectly to raise the real rent of land. either directly or indirectly. raises that of the former. with the ordinary profit. to raise the rent of land directly. The contrary circumstances. I shall conclude this very long chapter with observing. all tend. to lower the 211 . therefore. the price of that part of it. That produce. after the rise in its real price. and in a still greater proportion. An equal quantity of the former becomes thereby equivalent to a greater quantity of the latter. not only rises with the real value of the produce. and the rent increases with the produce. but the proportion of his share to the whole produce rises with it. The extension of improvement and cultivation tends to raise it directly. which is first the effect of the extended improvement and cultivation. or luxuries which he has occasion for. his real command of the labour of other people. Every increase in the real wealth of the society.

to those who live by rent. When this real wealth of the society becomes stationary. is as strictly connected with the interest of the society as that of the first. and to those who live by profit. of other people. to those who live by wages. not only ignorant. That indolence which is the natural effect of the ease and security of their situation. from whose revenue that of every other order is ultimately derived. or. and constituent. and his education and habits are commonly such as to render him unfit to judge. or to continue the race of labourers. the proprietors of land never can mislead it. of its own accord. he is incapable either of comprehending that interest. the rent of land. naturally divides itself. and the profits of stock. They are the only one of the three orders whose revenue costs them neither labour nor care. and independent of any plan or project of their own. They are. The interest of the second order. 212 . to diminish his power of purchasing either the labour.The Wealth of Nations real rent of land. as it were. or of understanding its connexion with his own. The order of proprietors may perhaps gain more by the prosperity of the society than that of labourers. But though the interest of the labourer is strictly connected with that of the society. if they have any tolerable knowledge of that interest. When the public deliberates concerning any regulation of commerce or police. what comes to the same thing. orders of every civilized society. it has already been shewn. it appears from what has been just now said. necessarily promotes or obstructs the other. The whole annual produce of the land and labour of every country. it has already been observed. or the produce of the labour. or when the quantity employed is every year increasing considerably. the whole price of that annual produce. These are the three great. but incapable of that application of mind. Whatever either promotes or obstructs the one. which is necessary in order to foresee and understand the consequence of any public regulation. they fall even below this. but there is no order that suffers so cruelly from its decline. into three parts. even though he was fully informed. His condition leaves him no time to receive the necessary information. but comes to them. with a view to promote the interest of their own particular order. and constitutes a revenue to three different orders of people. are never so high as when the demand for labour is continually rising. the wages of labour. at least. original. When the society declines. renders them too often. his wages are soon reduced to what is barely enough to enable him to bring up a family. The wages of the labourer. indeed. The interest of the first of those three great orders. is strictly and inseparably connected with the general interest of the society. too often defective in this tolerable knowledge. to reduce the real wealth of the landlord. that of those who live by wages.

for their own benefit. has not the same connexion with the general interest of the society. as in their having a better knowledge of their own interest than he has of his. in any particular branch of trade or manufactures. except upon particular occasions. and to narrow the competition. that of the public. and less regarded. that of those who live by profit. On the contrary. and 213 . and can only serve to enable the dealers. his voice is little heard. To widen the market. Their superiority over the country gentleman is. but their own particular purposes. and high in poor countries. it is naturally low in rich. and fall with the declension of the society. was the interest of the public. is always in some respects different from. as that of the other two. Merchants and master manufacturers are. in this order. As during their whole lives they are engaged in plans and projects. The interest of the dealers. that their interest. The proposal of any new law or regulation of commerce which comes from this order. His employers constitute the third order. an absurd tax upon the rest of their fellow-citizens. however. are commonly exercised rather about the interest of their own particular branch of business. therefore. and who by their wealth draw to themselves the greatest share of the public consideration. To widen the market may frequently be agreeable enough to the interest of the public. rise with the prosperity. The plans and projects of the employers of stock regulate and direct all the most important operation of labour. therefore. like rent and wages. by raising their profits above what they naturally would be. which puts into motion the greater part of the useful labour of every society. is much more to be depended upon with regard to the former of those two objects. set on. than with regard to the latter. and persuaded him to give up both his own interest and that of the public. and profit is the end proposed by all those plans and projects. the two classes of people who commonly employ the largest capitals. their judgment. even when given with the greatest candour (which it has not been upon every occasion). is always the interest of the dealers. they have frequently more acuteness of understanding than the greater part of country gentlemen. It is the stock that is employed for the sake of profit. The interest of this third order. not for his. not so much in their knowledge of the public interest. from a very simple but honest conviction. As their thoughts. ought always to be listened to with great precaution. and even opposite to. and not his. however. and it is always highest in the countries which are going fastest to ruin. and supported by his employers. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity. to levy. but to narrow the competition must always be against it. But the rate of profit does not. when his clamour is animated. than about that of the society.Adam Smith In the public deliberations.

It comes from an order of men. and who accordingly have. whose interest is never exactly the same with that of the public. not only with the most scrupulous.The Wealth of Nations ought never to be adopted till after having been long and carefully examined. but with the most suspicious attention. both deceived and oppressed it. upon many occasions. 1286 # PRICES OF WHEAT Year Prices/Quarter in each year £ s d 1202 1205 0 12 0 0 12 0 0 13 4 0 15 0 1223 1237 1243 1244 1246 0 12 0 0 3 4 0 2 0 0 2 0 0 16 0 Average of different prices in one year £ s d 1 16 0 0 13 5 1 16 0 0 10 0 0 6 0 0 6 0 2 8 0 1289 2 0 3 Average prices of each year in money of 1776 £ s d 1287 1288 0 3 4 0 0 8 0 1 0 0 1 4 0 1 6 0 1 8 0 2 0 0 3 4 0 9 4 0 12 0 0 6 0 0 3 0¼ 0 9 1¾ 1247 1257 1258 0 13 5 1 4 0 1 0 0 0 15 0 0 16 0 4 16 0 6 8 0 0 2 8 0 16 0 5 12 0 0 9 4 Total 35 9 3 Average 2 19 1¼ 0 10 0 16 16 0 1 8 0 2 0 0 3 12 0 0 17 0 2 11 0 1270 214 . who have generally an interest to deceive and even to oppress the public.

Adam Smith 0 2 0 0 10 8 1290 1294 1302 1309 1315 1316 1 0 0 0 16 0 0 16 0 0 4 0 0 7 2 1 0 0 1 0 0 1 10 0 1 12 0 2 0 0 1317 2 4 0 0 14 0 2 13 0 4 0 0 1336 1338 0 6 8 0 2 0 0 3 4 Total Average 1339 0 9 0 1 19 6 5 18 6 1 10 6 0 10 1½ 1 10 4½ 1349 1359 1361 1363 1369 1379 1387 1390 4 11 6 1401 1407 1416 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 Total Average 0 6 0 0 10 0 23 4 11¼ 1 18 8 1 7 0 1423 1425 1434 1435 1439 0 8 0 0 4 0 1 6 8 0 5 4 1 0 0 0 0 4 8 0 3 10 0 14 5 1 2 0 0 5 2 3 2 2 0 4 8 1 15 0 2 9 4 0 9 4 0 4 8 1 13 7 1 17 6 0 8 10 1 12 0 15 9 4 1 5 9½ 2 8 0 2 8 0 0 12 0 1 1 6 3 0 0 215 .

The Wealth of Nations 1440 1444 1445 1447 1448 1449 1451 1 6 8 1 4 0 0 4 4 0 4 0 0 4 6 0 8 0 0 6 8 0 5 0 0 8 0 Total Average 1453 1455 1457 1459 1460 1463 1464 1486 1491 1494 0 5 4 0 1 2 0 7 8 0 5 0 0 8 0 0 2 0 0 1 8 0 6 8 1 4 0 0 14 8 0 4 0 0 1 10 1 3 4 0 4 2 2 6 8 2 8 0 0 4 8 0 9 0 0 16 0 0 13 4 0 10 0 0 16 0 12 15 4 1 1 3¹/³ 0 10 8 0 2 4 1 15 4 0 10 0 0 16 0 0 3 8 0 10 0 1 17 0 1 2 0 0 6 0 1558 1559 1560 1495 1497 0 3 4 1 0 0 Total Average 1499 1504 1521 1551 1553 1554 1555 1556 1557 0 4 0 0 5 8 1 0 0 0 8 0 0 8 0 0 8 0 0 8 0 0 8 0 0 8 0 0 4 0 0 5 0 2 13 4 0 8 0 0 8 0 0 8 0 Total Average 0 17 8½ 0 5 0 1 11 0 8 9 0 0 14 1 0 6 0 0 8 6 1 10 0 0 8 0 0 8 0 0 8 0 0 8 0 0 8 0 0 17 8½ 0 8 0 0 8 0 0 8 0 6 0 2½ 0 10 0½ 216 .

Adam Smith 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 Total Average 4 12 0 2 0 0 0 8 0 0 8 0 2 0 0 3 4 0 2 16 0 2 13 0 4 0 0 4 12 0 2 16 8 1 19 8 1 17 8 1 14 10 28 9 4 2 7 5½ 1595 1596 1597 1598 1599 1600 1601 1602 1603 1604 1605 1606 1607 1608 1609 PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST PRICED WHEAT AT WINDSOR MARKET. THE PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THESE TWO MARKET DAYS. FROM 1595 TO 1764 BOTH INCLUSIVE. ON LADY DAY AND MICHAELMAS. £ 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 0 217 .

The Wealth of Nations
1610 1611 1612 1613 1614 1615 1616 1617 1618 1619 1620 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 1630 1631 1632 1633 1634 1635 1636 2 15 8 3 8 0 2 13 2 18 2 16 2 16 4 0 0 0 0

2 16 8 16)40 0 0 0 4

Average 2 10 1637 1638 1639 1640 1641 1646 1647 1648 1649 1650 1651 1652 1653 2 13 2 17

Average 2 1 6¾ 1621 1622 1623 1624 1625 1626 1627 1628 1629 1 10 2 18 4 8

2 4 10 2 4 8 2 8 2 8 0 0

2 12 0 2 8 0 2 12 0 2 9 4 1 16 0 1 8 0 2 2 0

3 13 0 4 5 0 4 0 0 3 16 8 3 13 4 2 9 6 1 15 6

218

Adam Smith
1654 1655 1656 1657 1658 1659 1660 1661 1662 1663 1664 1665 1666 1667 1668 1669 1670 1671 1672 1673 1674 1675 1676 1 6 0 1 13 4 2 3 2 6 3 5 3 6 2 16 3 10 3 14 2 17 2 0 2 9 1 16 1 16 2 0 2 4 2 1 2 2 2 1 2 6 3 8 3 4 1 18 0 8 0 0 6 0 0 0 6 4 0 0 0 4 8 0 0 8 8 8 0 1677 1678 1679 1680 1681 1682 1683 1684 1685 1686 1687 1688 1689 1690 1691 1692 1693 1694 1695 1696 1697 1698 1699 2 2 0 2 19 0 3 0 2 5 2 6 2 4 2 0 2 4 0 0 8 0 0 0

2 6 8 1 14 0 1 5 2 6 1 10 1 14 2 0 0 8

1 14 0 2 6 8 3 7 3 4 2 13 3 11 3 0 3 8 3 4 8 0 0 0 0 4 0

219

The Wealth of Nations
1700 2 0 0 60) 153 1 0¹/³ 8 1720 1721 1722 1723 1724 1725 1726 1727 1728 1729 1730 1731 1732 1733 1734 1735 1736 1737 1738 1739 1740 1 17 1 17 1 16 1 14 0 6 0 8

Average 2 11 1701 1702 1703 1704 1705 1706 1707 1708 1709 1710 1711 1712 1713 1714 1715 1716 1717 1718 1719

1 17 8 1 9 6 1 16 0 2 6 6 1 10 0 1 6 0 1 8 2 1 3 18 3 18 6 6 6 0

1 17 0 2 8 6 2 6 2 2 0 0

2 14 6 2 6 10 1 16 6 1 12 10 1 6 1 8 8 4 1 12 10 1 6 1 8 8 4

2 14 0 2 6 4 2 11 2 10 2 3 2 8 0 4 0 0

1 18 10 2 3 0 2 0 4 1 18 0 1 15 1 18 2 10 6 6 8

1 18 10 2 3 0 2 0 4 1 18 0 1 15 1 18 6 6 8

2 5 8 1 18 10 1 15 0

2 10 8 10) 18 12 1 17 3½

220

Adam Smith
1741 1742 1743 1744 1745 1746 1747 1748 1749 1750 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 1 12 0 6 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 1 12 0 6 1761 1762 1763 1764 1 10 1 19 2 0 2 6 3 0 9 9 6

64) 129 13 Average 2 0 6¾

10) 16 18 2 1 13 9¾ 1751 1752 1753 1754 1755 1756 1757 1758 1759 1760 1 18 6

2 1 10 2 4 8 1 13 8 1 14 10 2 5 3 0 3 0

2 10 0 1 19 10 1 16 6

221

The Wealth of Nations

BOOK II
NATURE, ACCUMUL CCUMULA OF THE NATURE, ACCUMULATION, EMPLO STOCK AND EMPLOYMENT OF STOCK INTRODUCTION INTRODUCTION

price of the produce, of his own. But this purchase cannot be made till such time as the produce of his own labour has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere, sufficient to maintain him, and to supply him with the materials and tools of his work, till such time at least as both these events can be brought about. A weaver cannot apply himself entirely to his peculiar business, unless there is before-hand stored up somewhere, either in his own possession, or in that of some other person, a stock sufficient to maintain him, and to supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business. As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated. The quantity of materials which the same number of people can work up, increases in a great proportion as labour comes to be more and more subdivided; and as the operations of each workman are gradually reduced to a greater degree of simplicity, a variety of new machines come to be invented for facilitating and abridging those operations. As the division of labour advances, therefore, in order to give constant employment to an

every man provides every thing for himself, it is not necessary that any stock should be accumulated, or stored up beforehand, in order to carry on the business of the society. Every man endeavours to supply, by his own industry, his own occasional wants, as they occur. When he is hungry, he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills: and when his hut begins to go to ruin, he repairs it, as well as he can, with the trees and the turf that are nearest it. But when the division of labour has once been thoroughly introduced, the produce of a man’s own labour can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men’s labour, which he purchases with the produce, or, what is the same thing, with the

I

in which there is no division of labour, in which exchanges are seldom made, and in which

N THAT RUDE STATE OF SOCIETY,

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equal number of workmen, an equal stock of provisions, and a greater stock of materials and tools than what would have been necessary in a ruder state of things, must be accumulated beforehand. But the number of workmen in every branch of business generally increases with the division of labour in that branch; or rather it is the increase of their number which enables them to class and subdivide themselves in this manner. As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour, so that accumulation naturally leads to this improvement. The person who employs his stock in maintaining labour, necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. He endeavours, therefore, both to make among his workmen the most proper distribution of employment, and to furnish them with the best machines which he can either invent or afford to purchase. His abilities, in both these respects, are generally in proportion to the extent of his stock, or to the number of people whom it can employ. The quantity of industry, therefore, not only increases in every country with the increase of the stock which employs it, but, in consequence of that increase, the same quantity of industry produces a much greater quantity of work. Such are in general the effects of the increase of stock upon industry and its productive powers. In the following book, I have endeavoured to explain the nature of stock, the effects of its accumulation into capital of different kinds, and the effects of the different employments of those capitals. This book is divided into five chapters. In the first chapter, I have endeavoured to shew what are the different parts or branches into which the stock, either of an individual, or of a great society, naturally divides itself. In the second, I have endeavoured to explain the nature and operation of money, considered as a particular branch of the general stock of the society. The stock which is accumulated into a capital, may either be employed by the person to whom it belongs, or it may be lent to some other person. In the third and fourth chapters, I have endeavoured to examine the manner in which it operates in both these situations. The fifth and last chapter treats of the different effects which the different employments of capital immediately produce upon the quantity, both of national industry, and of the annual produce of land and labour.

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CHAPTER I STOCK 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, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavours, by his labour, to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. 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, he naturally endeavours to derive a revenue from the greater part of it, reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which he expects is to afford him this revenue is called his capital. The other is that which supplies his immediate consumption, and which consists either, first, in that portion of his whole stock which was originally reserved for this purpose; or, secondly, in his revenue, from whatever source derived, as it gradually comes in; or, thirdly, in such things as had been purchased by either of these in former years, and which are not yet entirely con-

sumed, such as a stock of clothes, household furniture, and the like. In one or other, or all of these three articles, consists the stock which men commonly reserve for their own immediate consumption. There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer. First, it maybe employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession, or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another; and it is only by means of such circulation, or successive changes, that it can yield him any profit. Such capitals, therefore, may very properly be called circulating capitals. Secondly, it may be employed in the improvement of land, in the purchase of useful machines and instruments of trade, or in such like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may very properly be called fixed capitals. Different occupations require very different proportions between

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the fixed and circulating capitals employed in them. The capital of a merchant, for example, is altogether a circulating capital. He has occasion for no machines or instruments of trade, unless his shop or warehouse be considered as such. Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. This part, however, is very small in some, and very great in others, A master tailor requires no other instruments of trade but a parcel of needles. Those of the master shoemaker are a little, though but a very little, more expensive. Those of the weaver rise a good deal above those of the shoemaker. The far greater part of the capital of all such master artificers, however, is circulated either in the wages of their workmen, or in the price of their materials, and repaid, with a profit, by the price of the work. In other works a much greater fixed capital is required. In a great iron-work, for example, the furnace for melting the ore, the forge, the slit-mill, are instruments of trade which cannot be erected without a very great expense. In coal works, and mines of every kind, the machinery necessary, both for drawing out the water, and for other purposes, is frequently still more expensive. That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed, that which is employed in the wages and maintenance of his labouring servants is a circulating capital. He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his labouring cattle is a fixed capital, in the same manner as that of the instruments of husbandry; their maintenance is a circulating capital, in the same manner as that of the labouring servants. The farmer makes his profit by keeping the labouring cattle, and by parting with their maintenance. Both the price and the maintenance of the cattle which are bought in and fattened, not for labour, but for sale, are a circulating capital. The farmer makes his profit by parting with them. A flock of sheep or a herd of cattle, that, in a breeding country, is brought in neither for labour nor for sale, but in order to make a profit by their wool, by their milk, and by their increase, is a fixed capital. The profit is made by keeping them. Their maintenance is a circulating capital. The profit is made by parting with it; and it comes back with both its own profit and the profit upon the whole price of the cattle, in the price of the wool, the milk, and the increase. The whole value of the seed, too, is properly a fixed capital. Though it goes backwards and forwards between the ground and the granary, it never changes masters, and therefore does not properly circulate. The farmer makes his profit, not by its sale, but by its increase. The general stock of any country or society is the same with that of all its inhabitants or members; and, therefore, naturally

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divides itself into the same three portions, each of which has a distinct function or office. The first is that portion which is reserved for immediate consumption, and of which the characteristic is, that it affords no revenue or profit. It consists in the stock of food, clothes, household furniture, etc. which have been purchased by their proper consumers, but which are not yet entirely consumed. The whole stock of mere dwelling-houses, too, subsisting at anyone time in the country, make a part of this first portion. The stock that is laid out in a house, if it is to be the dwelling-house of the proprietor, ceases from that moment to serve in the function of a capital, or to afford any revenue to its owner. A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, make a part of his expense, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue, which he derives, either from labour, or stock, or land. Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it. Clothes and household furniture, in the same manner, sometimes yield a revenue, and thereby serve in the function of a capital to particular persons. In countries where masquerades are common, it is a trade to let out masquerade dresses for a night. Upholsterers frequently let furniture by the month or by the year. Undertakers let the furniture of funerals by the day and by the week. Many people let furnished houses, and get a rent, not only for the use of the house, but for that of the furniture. The revenue, however, which is derived from such things, must always be ultimately drawn from some other source of revenue. Of all parts of the stock, either of an individual or of a society, reserved for immediate consumption, what is laid out in houses is most slowly consumed. A stock of clothes may last several years; a stock of furniture half a century or a century; but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for immediate consumption as either clothes or household furniture. The second of the three portions into which the general stock of the society divides itself, is the fixed capital; of which the characteristic is, that it affords a revenue or profit without circulating or changing masters. It consists chiefly of the four following articles.

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First, of all useful machines and instruments of trade, which facilitate and abridge labour. Secondly, of all those profitable buildings which are the means of procuring a revenue, not only to the proprietor who lets them for a rent, but to the person who possesses them, and pays that rent for them; such as shops, warehouses, work-houses, farmhouses, with all their necessary buildings, stables, granaries, etc. These are very different from mere dwelling-houses. They are a sort of instruments of trade, and may be considered in the same light. Thirdly, of the improvements of land, of what has been profitably laid out in clearing, draining, inclosing, manuring, and reducing it into the condition most proper for tillage and culture. An improved farm may very justly be regarded in the same light as those useful machines which facilitate and abridge labour, and by means of which an equal circulating capital can afford a much greater revenue to its employer. An improved farm is equally advantageous and more durable than any of those machines, frequently requiring no other repairs than the most profitable application of the farmer’s capital employed in cultivating it. Fourthly, of the acquired and useful abilities of all the inhabitants and members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. 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, and which, though it costs a certain expense, repays that expense with a profit. The third and last of the three portions into which the general stock of the society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. It is composed likewise of four parts. First, of the money, by means of which all the other three are circulated and distributed to their proper consumers. Secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer, the corn-merchant, the brewer, etc. and from the sale of which they expect to derive a profit. Thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and building which are not yet made up into any of those three shapes, but which remain in the hands of the growers, the manufacturers, the mercers, and drapers, the timber-merchants, the carpenters and joiners, the brick-makers, etc.

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Fourthly, and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer, and not yet disposed of or distributed to the proper consumers; such as the finished work which we frequently find ready made in the shops of the smith, the cabinet-maker, the goldsmith, the jeweller, the china-merchant, etc. The circulating capital consists, in this manner, of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to those who are finally to use or to consume them. Of these four parts, three—provisions, materials, and finished work, are either annually or in a longer or shorter period, regularly withdrawn from it, and placed either in the fixed capital, or in the stock reserved for immediate consumption. Every fixed capital is both originally derived from, and requires to be continually supported by, a circulating capital. All useful machines and instruments of trade are originally derived from a circulating capital, which furnishes the materials of which they are made, and the maintenance of the workmen who make them. They require, too, a capital of the same kind to keep them in constant repair. 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, without the circulating capital, which affords the materials they are employed upon, and the maintenance of the workmen who employ them. Land, however improved, will yield no revenue without a circulating capital, which maintains the labourers who cultivate and collect its produce. To maintain and augment the stock which maybe reserved for immediate consumption, is the sole end and purpose both of the fixed and circulating capitals. It is this stock which feeds, clothes, and lodges the people. Their riches or poverty depend upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. So great a part of the circulating capital being continually withdrawn from it, in order to be placed in the other two branches of the general stock of the society, it must in its turn require continual supplies without which it would soon cease to exist. These supplies are principally drawn from three sources; the produce of land, of mines, and of fisheries. These afford continual supplies of provisions and materials, of which part is afterwards wrought up into finished work and by which are replaced the provisions, materials, and finished work, continually withdrawn from the circulating capital. From mines, too, is drawn what is necessary for maintaining and augmenting that part of it which consists in money. For though, in the ordinary course of business, this part is

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not, like the other three, necessarily withdrawn from it, in order to be placed in the other two branches of the general stock of the society, it must, however, like all other things, be wasted and worn out at last, and sometimes, too, be either lost or sent abroad, and must, therefore, require continual, though no doubt much smaller supplies. Lands, mines, and fisheries, require all both a fixed and circulating capital to cultivate them; and their produce replaces, with a profit not only those capitals, but all the others in the society. Thus the farmer annually replaces to the manufacturer the provisions which he had consumed, and the materials which he had wrought up the year before; and the manufacturer replaces to the farmer the finished work which he had wasted and worn out in the same time. This is the real exchange that is annually made between those two orders of people, though it seldom happens that the rude produce of the one, and the manufactured produce of the other, are directly bartered for one another; because it seldom happens that the farmer sells his corn and his cattle, his flax and his wool, to the very same person of whom he chuses to purchase the clothes, furniture, and instruments of trade, which he wants. He sells, therefore, his rude produce for money, with which he can purchase, wherever it is to be had, the manufactured produce he has occasion for. Land even replaces, in part at least, the capitals with which fisheries and mines are cultivated. It is the produce of land which draws the fish from the waters; and it is the produce of the surface of the earth which extracts the minerals from its bowels. The produce of land, mines, and fisheries, when their natural fertility is equal, is in proportion to the extent and proper application of the capitals employed about them. When the capitals are equal, and equally well applied, it is in proportion to their natural fertility. In all countries where there is a tolerable security, every man of common understanding will endeavour to employ whatever stock he can command, in procuring either present enjoyment or future profit. If it is employed in procuring present enjoyment, it is a stock reserved for immediate consumption. If it is employed in procuring future profit, it must procure this profit either by staying with him, or by going from him. In the one case it is a fixed, in the other it is a circulating capital. A man must be perfectly crazy, who, where there is a tolerable security, does not employ all the stock which he commands, whether it be his own, or borrowed of other people, in some one or other of those three ways. In those unfortunate countries, indeed, where men are continually afraid of the violence of their superiors, they frequently bury or conceal a great part of their stock, in order to have it always at

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hand to carry with them to some place of safety, in case of their being threatened with any of those disasters to which they consider themselves at all times exposed. This is said to be a common practice in Turkey, in Indostan, and, I believe, in most other governments of Asia. It seems to have been a common practice among our ancestors during the violence of the feudal government. Treasure-trove was, in these times, considered as no contemptible part of the revenue of the greatest sovereigns in Europe. It consisted in such treasure as was found concealed in the earth, and to which no particular person could prove any right. This was regarded, in those times, as so important an object, that it was always considered as belonging to the sovereign, and neither to the finder nor to the proprietor of the land, unless the right to it had been conveyed to the latter by an express clause in his charter. It was put upon the same footing with gold and silver mines, which, without a special clause in the charter, were never supposed to be comprehended in the general grant of the lands, though mines of lead, copper, tin, and coal were, as things of smaller consequence.

CHAPTER II MONEY PAROF MONEY, CONSIDERED AS A PARTICULAR TICULAR BRANCH OF THE GENERAL SOCIETY STOCK STOCK OF THE SOCIETY, OR OF THE EXPENSE MAINTAINING EXPENSE OF MAINTAINING THE NACAPIT ITAL TIONAL CAPITAL
IT HAS BEEN SHOWN in the First Book, that the price of the greater part of commodities resolves itself into three parts, of which one pays the wages of the labour, another the profits of the stock, and a third the rent of the land which had been employed in producing and bringing them to market: that there are, indeed, some commodities of which the price is made up of two of those parts only, the wages of labour, and the profits of stock; and a very few in which it consists altogether in one, the wages of labour; but that the price of every commodity necessarily resolves itself into some one or other, or all, of those three parts; every part of it which goes neither to rent nor to wages, being necessarily profit to some body. Since this is the case, it has been observed, with regard to every particular commodity, taken separately, it must be so with regard to all the commodities which compose the whole annual produce

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of the land and labour of every country, taken complexly. The whole price or exchangeable value of that annual produce must resolve itself into the same three parts, and be parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. But though the whole value of the annual produce of the land and labour of every country, is thus divided among, and constitutes a revenue to, its different inhabitants; yet, as in the rent of a private estate, we distinguish between the gross rent and the neat rent, so may we likewise in the revenue of all the inhabitants of a great country. The gross rent of a private estate comprehends whatever is paid by the farmer; the neat rent, what remains free to the landlord, after deducting the expense of management, of repairs, and all other necessary charges; or what, without hurting his estate, he can afford to place in his stock reserved for immediate consumption, or to spend upon his table, equipage, the ornaments of his house and furniture, his private enjoyments and amusements. His real wealth is in proportion, not to his gross, but to his neat rent. The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them, after deducting the expense of maintaining first, their fixed, and, secondly, their circulating capital, or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniencies, and amusements. Their real wealth, too, is in proportion, not to their gross, but to their neat revenue. The whole expense of maintaining the fixed capital must evidently be excluded from the neat revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade, their profitable buildings, etc. nor the produce of the labour necessary for fashioning those materials into the proper form, can ever make any part of it. The price of that labour may indeed make a part of it; as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption. But in other sorts of labour, both the price and the produce go to this stock; the price to that of the workmen, the produce to that of other people, whose subsistence, conveniencies, and amusements, are augmented by the labour of those workmen. The intention of the fixed capital is to increase the productive powers of labour, or to enable the same number of labourers to perform a much greater quantity of work. In a farm where all the necessary buildings, fences, drains, communications, etc. are in the most perfect good order, the same number of labourers and

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labouring cattle will raise a much greater produce, than in one of equal extent and equally good ground, but not furnished with equal conveniencies. In manufactures, the same number of hands, assisted with the best machinery, will work up a much greater quantity of goods than with more imperfect instruments of trade. The expense which is properly laid out upon a fixed capital of any kind, is always repaid with great profit, and increases the annual produce by a much greater value than that of the support which such improvements require. This support, however, still requires a certain portion of that produce. A certain quantity of materials, and the labour of a certain number of workmen, both of which might have been immediately employed to augment the food, clothing, and lodging, the subsistence and conveniencies of the society, are thus diverted to another employment, highly advantageous indeed, but still different from this one. It is upon this account that all such improvements in mechanics, as enable the same number of workmen to perform an equal quantity of work with cheaper and simpler machinery than had been usual before, are always regarded as advantageous to every society. A certain quantity of materials, and the labour of a certain number of workmen, which had before been employed in supporting a more complex and expensive machinery, can afterwards be applied to augment the quantity of work which that or any other machinery is useful only for performing. The undertaker of some great manufactory, who employs a thousand a-year in the maintenance of his machinery, if he can reduce this expense to five hundred, will naturally employ the other five hundred in purchasing an additional quantity of materials, to be wrought up by an additional number of workmen. The quantity of that work, therefore, which his machinery was useful only for performing, will naturally be augmented, and with it all the advantage and conveniency which the society can derive from that work. The expense of maintaining the fixed capital in a great country, may very properly be compared to that of repairs in a private estate. The expense of repairs may frequently be necessary for supporting the produce of the estate, and consequently both the gross and the neat rent of the landlord. When by a more proper direction, however, it can be diminished without occasioning any diminution of produce, the gross rent remains at least the same as before, and the neat rent is necessarily augmented. But though the whole expense of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society, it is not the same case with that of maintaining the circulating capital. Of the four parts of which this latter capital is composed, money, provisions, materials, and finished work, the three last, it has already been observed, are regularly withdrawn from it, and

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The fixed capital. That of an individual is totally excluded from making any part of his neat revenue. it is not upon that account totally excluded from making a part likewise of their neat revenue. withdraws no portion of the annual produce from the neat revenue of the society. etc. etc. Though the whole goods in a merchant’s shop must by no means be placed in his own stock reserved for immediate consumption. besides what is necessary for maintaining the fixed capital. and amusements of individuals. so the stock of money which circulates in any country must require a certain expense. require a certain expense. gold and silver. are deductions from the neat revenue of the society. and afterwards to support them. or in their stock reserved for immediate consumption. by means of which every individual in the society has his subsistence. conveniencies. makes itself 233 . so money. Money. as those machines and instruments of trade. though they make a part of the gross. make no part either of the gross or of the neat revenue of either. from a revenue derived from other funds. and that part of the circulating capital which consists in money. regularly distributed to him in their proper proportions. of which the maintenance can occasion any diminution in their neat revenue. is employed in supporting that great but expensive instrument of commerce. first to collect it. deductions from the neat revenue of the society. without occasioning any diminution either of his capital or of theirs. as the machines and instruments of trade.Adam Smith placed either in the fixed capital of the society. and makes a part of the neat revenue of the society. The maintenance of those three parts of the circulating capital. bear a very great resemblance to one another. is the only part of the circulating capital of a society. The circulating capital of a society is in this respect different from that of an individual. A certain quantity of very valuable materials. which compose the fixed capital either of an individual or of a society. instead of augmenting the stock reserved for immediate consumption. both which expenses. conveniencies. therefore. therefore. together with its profits. may regularly replace their value to him. Secondly. and afterwards to support it. who. Whatever portion of those consumable goods is not employed in maintaining the former. first to erect them. the subsistence. so far as they affect the revenue of the society. which must consist altogether in his profits. they may in that of other people. both which expenses. by means of which the whole revenue of the society is regularly distributed among all its different members. goes all to the latter. though they make a part of the gross. in the same manner. First. and amusements. and of very curious labour. are. But though the circulating capital of every individual makes a part of that of the society to which he belongs.

but to include in its signification some obscure reference to the goods which can be had in exchange for them. When. or rather have supposed. the wealth or revenue which it in this case denotes. not in gold. The great wheel of circulation is altogether different from the goods which are circulated by means of it. so are his real riches. we sometimes mean nothing but the metal pieces of which it is composed. his real weekly revenue. His weekly revenue is certainly not equal both to the guinea and to what can be purchased with it. but in a weekly bill for a guinea. not only the amount of the metal pieces which are annually paid to him. or to the power of purchasing which the possession of it conveys. we mean commonly to express. is equal only to one of the two values which are thus intimated somewhat ambiguously by the same word. and amusements. to the money’s worth more properly than to the money. as in what he could get for it. he can in the course of the week purchase with it a certain quantity of subsistence. to the guinea’s worth rather than to the guinea. his revenue surely would not so properly consist in the piece of paper. A 234 . In proportion as this quantity is great or small. and to the latter more properly than to the former. to circulate in that country. we must always. If the pension of such a person was paid to him. But when we say that a man is worth fifty or a hundred pounds a-year. Thus. and sometimes we include in our meaning some obscure reference to the goods which can be had in exchange for it. deduct the whole value of the money. conveniencies. of which not a single farthing can ever make any part of either. by any particular sum of money. it is almost self-evident. but the value of the goods which he can annually purchase or consume. if a guinea be the weekly pension of a particular person. when we say that the circulating money of England has been computed at eighteen millions. When we talk of any particular sum of money.The Wealth of Nations no part of that revenue. which some writers have computed. but only to one or other of those two equal values. Thus. In computing either the gross or the neat revenue of any society. When properly explained and understood. and to the latter more properly than to the former. 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. or the quantity and quality of the necessaries and conveniencies of life in which he can with propriety indulge himself. It is the ambiguity of language only which can make this proposition appear either doubtful or paradoxical. from the whole annual circulation of money and goods. and not in the wheel which circulates them. The revenue of the society consists altogether in those goods. we mean only to express the amount of the metal pieces.

may be. The whole revenue of all of them taken together is evidently not equal to both the money and the consumable goods. makes no part 235 . does not so properly consist in the piece of gold. even with regard to an individual. of which the amount is so much inferior to its value. If it could be exchanged for nothing. be of no more value than the most useless piece of paper. as in what he can get for it. or in what he can exchange it for. Money. Though the weekly or yearly revenue of all the different inhabitants of any country. their real riches. express a person’s revenue by the metal pieces which are annually paid to him. must always be precisely of the same value with those pensions. it would. and a very valuable part. is often precisely equal to his revenue. As the same guinea which pays the weekly pension of one man to-day. therefore. But the amount of the metal pieces which circulate in a society. however. like all other instruments of trade. in the same manner. the amount of the metal pieces which annually circulate in any country. as they are successively paid. though it makes a part. therefore. as must likewise be the revenue of the different persons to whom they are paid. like a bill upon a bankrupt. The amount of the metal pieces which are annually paid to an individual. in proportion to the quantity of consumable goods which they can all of them purchase with this money. the real weekly or yearly revenue of all of them taken together. of the capital. We still consider his revenue as consisting in this power of purchasing or consuming. therefore. Though we frequently. it is still more so with regard to a society. or the goods which can successively be bought with the whole of those money pensions. the great wheel of circulation. But the power of purchasing. and is upon that account the shortest and best expression of its value. must always be of much less value than the whole money pensions annually paid with them. cannot consist in those metal pieces. but only to one or other of those two values. must always be great or small. paid to them in money. and not in the pieces which convey it. But if this is sufficiently evident. or the value of the goods which he can annually afford to consume. and in reality frequently is. can never be equal to the revenue of all its members. but in the power of purchasing. the great instrument of commerce. may pay that of another to-morrow. in the goods which can successively be bought with them as they circulate from hand to hand.Adam Smith 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. That revenue. it is because the amount of those pieces regulates the extent of his power of purchasing. and to the latter more properly than to the former. and that of a third the day thereafter.

therefore. which compose the fixed capital. too. the greater must necessarily be the other. A particular banker lends among his customers his own promissory notes. But in what manner this operation is performed. of a hundred thousand 236 . Thirdly. which does not diminish the productive powers of labour. etc. we shall suppose. from the confidence that such money can at any time be had for them. bear this further resemblance to that part of the circulating capital which consists in money. is an improvement of the neat revenue of the society. they make themselves no part of that revenue. It is the circulating capital which furnishes the materials and wages of labour. 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. in what manner every saving in the expense of supporting the fixed capital is an improvement of the neat revenue of the society. must increase the fund which puts industry into motion. and sometimes equally convenient. is not altogether so obvious. Circulation comes to be carried on by a new wheel. While his whole capital remains the same. but the circulating notes of banks and bankers are the species which is best known. and which seems best adapted for this purpose.The Wealth of Nations of the revenue of the society to which it belongs. the machines and instruments of trade. that as every saving in the expense of erecting and supporting those machines. and lastly. probity and prudence of a particular banker. to the extent. and though the metal pieces of which it is composed. and consequently the annual produce of land and labour. and in what manner it tends to increase either the gross or the neat revenue of the society. 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. replaces a very expensive instrument of commerce with one much less costly. been explained already. and it has partly. the real revenue of every society. Every saving. The substitution of paper in the room of gold and silver money. and may therefore require some further explication. which does not diminish the introductive powers of labour. distribute to every man the revenue which properly belongs to him. The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital. those notes come to have the same currency as gold and silver money. There are several different sorts of paper money. It is sufficiently obvious. in the expense of maintaining the fixed capital. the smaller the one part. which it costs less both to erect and to maintain than the old one. and puts industry into motion. in the course of their annual circulation. When the people of any particular country have such confidence in the fortune.

therefore. that some time thereafter. Though he has generally in circulation. cannot run into it. to the extent of one million. but must overflow. By this operation. at a particular time. twenty thousand pounds in gold and silver perform all the functions which a hundred thousand could otherwise have performed. for example.Adam Smith pounds. and a million of bank notes. is poured into it beyond this sum. can in this manner be spared from the circulation of the country. Eight hundred thousand pounds. to the value of a hundred thousand pounds. 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. must overflow. therefore. therefore. or eighteen hundred thousand pounds of paper and money together. Whatever. will remain precisely the same as before. The goods to be bought and sold being precisely the same as before. and if different operations of the the same kind should. the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite. twenty thousand pounds in gold and silver may. therefore. therefore. One million eight hundred thousand pounds are poured into it. be a sufficient provision for answering occasional demands. as by an equal value of gold and silver money. to one million sterling. and that annual produce cannot be immediately augmented by those operations of banking. the same quantity of consumable goods may be circulated and distributed to their proper consumers. reserving in their different coffers two hundred thousand pounds for answering occasional demands. As those notes serve all the purposes of money. if I may be allowed such an expression. be carried on by many different banks and bankers. notes to the extent of a hundred thousand pounds. that the whole circulating money of some particular country amounted. let us suppose. part of them continue to circulate for months and years together. in circulation. One million we have supposed sufficient to fill that channel. that sum being then sufficient for circulating the whole annual produce of their land and labour. therefore. by means of his promissory notes. that sum being over and above what can be employed in the circulation of 237 . the same quantity of money will be sufficient for buying and selling them. The channel of circulation. One million. at the same time. his debtors pay him the same interest as if he had lent them so much money. too. will be sufficient to circulate it after them. Though some of those notes are continually coming back upon him for payment. The same exchanges may be made. Eighty thousand pounds of gold and silver. Let us suppose. frequently. eight hundred thousand pounds in gold and silver. different banks and bankers issued promissory notes payable to the bearer. there would remain. This interest is the source of his gain. therefore.

and their neat revenue by what remains of this value. without increasing production. we must not imagine that it is sent abroad for nothing. it promotes industry. or that its proprietors make a present of it to foreign nations. first. it will not be received in common payments. etc. the whole value of their annual consumption. 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. it provides a permanent fund for supporting that consumption. That the greater part of the gold and silver which being forced abroad by those operations of banking. secondly. and though it increases the consumption of the society. to the amount of eight hundred thousand pounds. after deducting what is necessary for supporting the tools and instruments of their trade. such as foreign wines. But though this sum cannot be employed at home. the people who consume reproducing. increases expense and consumption. will be sent abroad. or in what is called the carrying trade. they may either. the value of their annual consumption. with a profit. be sent abroad. The gross revenue of the society. Gold and silver.The Wealth of Nations the country. and is in every respect hurtful to the society. It is like a new fund. or of their own. with a profit. It will. is employed in purchasing 238 . So far as it is employed in the first way. and from the country in which payment of it can be exacted by law. and the gold and silver being converted into a fund for this new trade. foreign silks. in order to supply the consumption either of some other foreign country. tools. therefore. it promotes prodigality. They will exchange it for foreign goods of some kind or another.. or establishing any permanent fund for supporting that expense. in order to maintain and employ an additional number of industrious people. who produce nothing. But though so great a quantity of gold and silver is thus sent abroad. who reproduce. the annual produce of their land and labour. and provisions. So far as it is employed in the second way. in order to supply the consumption of another. because at a distance from the banks which issue it. If they employ it in purchasing foreign goods for home consumption. domestic business being now transacted by paper. or. purchase such goods as are likely to be consumed by idle people. it is too valuable to be allowed to lie idle. in order to seek that profitable employment which it cannot find at home. created for carrying on a new trade. But the paper cannot go abroad. they may purchase an additional stock of materials. If they employ it in purchasing goods in one foreign country. whatever profit they make will be in addition to the neat revenue of their own country. is increased by the whole value which the labour of those workmen adds to the materials upon which they are employed. therefore.

be increased by those operations of banking. and a maintenance suitable to the nature of the work. and maintenance. must always be deducted. When we compute the quantity of industry which the circulating capital of any society can employ. as well as the maintenance of the workmen.Adam Smith foreign goods for home consumption. but almost unavoidable. and though the wages of the workman are commonly paid to him in money. Their expense in general. considered as a class or order. not in the metal pieces. but only to one or other of those two values. and the wages or recompence for the sake of which the work is done. consists. his real revenue. is likely to be employed in purchasing those for their use. Money may be requisite for purchasing the materials and tools of the work. being the same. is certainly not equal both to the money which purchases. cannot. not in the money. though their revenue does not increase at all. a very small part of the money which. and must be. three things are requisite. therefore. seems not only probable. and in reality sometimes is. cannot be much increased by them. materials. the quantity of the materials. The greater part of it will naturally be destined for the employment of industry. but in what can be got for them. Though some particular men may sometimes increase their expense very considerably. for foreign goods. may be increased by the whole value of gold and silver which used to be employed in purchasing 239 . Money is neither a material to work upon. or very nearly the same as before. tools. and to the materials. tools. nor a tool to work with. we maybe assured that no class or order of men ever does so. is employed in purchasing foreign goods for home consumption. The quantity of industry which any capital can employ. When paper is substituted in the room of gold and silver money. and which serves only to circulate those three. and not for the maintenance of idleness. but in the money’s worth. because. materials to work upon. which are purchased with it. therefore. In order to put industry into motion. employed in purchasing those of this second kind. in the smallest degree. The demand of idle people. which consists in money. which the whole circulating capital can supply. they always influence that of the majority of every class or order. tools to work with. and to the latter more properly than to the former. must evidently be equal to the number of workmen whom it can supply with materials. though that of a few individuals among them may. the other. and finished work. being forced abroad by those operations of banking. like that of all other men. but the quantity of industry which the whole capital can employ. though the principles of common prudence do not always govern the conduct of every individual. and maintenance. is. tools. But the revenue of idle people. we must always have regard to those parts of it only which consist in provisions.

resembles that of the undertaker of some great work. has really increased in so great a proportion. I do not pretend to know. The whole value of the great wheel of circulation and distribution is added to the goods which are circulated and distributed by means of it. it must always bear a very considerable proportion to that part. was established by act of parliament in 1695. in consequence of some improvement in mechanics. and has accordingly required an act of parliament to regulate it. Silver very seldom appears. within these five-and-twenty or thirty years. it must make a very considerable addition to the quantity of that industry. An operation of this kind has. it is perhaps impossible to determine. is ever destined for the maintenance of industry. and that the trade of Scotland has more than quadrupled since the first erection of the two public banks at Edinburgh. and gold still seldomer. If either of them has increased 240 . called the Royal Bank. But though the conduct of all those different companies has not been unexceptionable. to the value of the annual produce of land and labour. part of that value. The business of the country is almost entirely carried on by means of the paper of those different banking companies. the gold and silver necessary for circulation is reduced to. But how small soever the proportion which the circulating money may bear to the whole value of the annual produce. Whether the trade. The effects of it have been precisely those above described. either of Scotland in general. a fifth part of the former quantity. I have heard it asserted. 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. if the value of only the greater part of the other four-fifths be added to the funds which are destined for the maintenance of industry. of that produce. at a tenth. therefore. has evidently derived great benefit from their trade. been performed in Scotland. takes down his old machinery. called the Bank of Scotland. and even in some country villages. and. who. during so short a period. to the fund from which he furnishes materials and wages to his workmen. and frequently but a small part. of which the one. and at a thirtieth. by the substitution of paper.The Wealth of Nations them. When. The operation. the country. perhaps. except in the change of a twenty shilling bank note. at a twentieth. or of the city of Glasgow in particular. by the erection of new banking companies in almost every considerable town. that the trade of the city of Glasgow doubled in about fifteen years after the first erection of the banks there. with which purchases and payments of all kinds are commonly made. by royal charter in 1727. notwithstanding. and adds the difference between its price and that of the new to his circulating capital. in some measure. consequently. as but a part. and the other. It has been computed by different authors at a fifth.

upon whatever sum they advance. which at present is not very great. of which that part which consists in gold and silver. They deduct always. replaces to the bank the value of what had been advanced. not gold and silver.Adam Smith in this proportion. that the value of the gold annually coined somewhat exceeded that of the silver. most probably. which he finds. therefore. cannot be estimated at less than a million sterling. cannot be doubted. It is chiefly by discounting bills of exchange. however. by experience. did not bring their silver into the Bank of Scotland. which circulated in Scotland before the Union. was considerable. manufactures. and trade. who. The payment of the bill. from a diffidence of repayment. by advancing money upon them before they are due. and that the banks have contributed a good deal to this increase. but it appears from the ancient accounts of the mint of Scotland. which had then no rival. The banker. The value of the silver money which circulated in Scotland before the Union in 1707. and those companies would have had but little trade. does not amount to half a million. on the contrary. for though the circulation of the Bank of Scotland. There were a good many people. the whole circulation of Scotland cannot be estimated at less than two millions. It seems to have constituted almost the whole circulation of that country. it seems to be an effect too great to be accounted for by the sole operation of this cause. the legal interest till the bill shall become due. was still more inconsiderable when the two first banking companies were established. who advances to the merchant whose bill he discounts. and there was. the annual produce of its land and labour. some English coin. have increased very considerably during this period. have evidently been augmented. immediately after it. when it becomes due. upon this occasion. besides. it seems to have made but a very small part of the whole. That the trade and industry of Scotland. and which. No account has been got of the gold coin. was brought into the Bank of Scotland. together with a clear profit of the interest.117: 10: 9 sterling. In the present times. are commonly in circulation. The whole value of the gold and silver. But though the circulating gold and silver of Scotland have suffered so great a diminution during this period. He is thereby enabled to make his clear gain of interest on so much a larger sum. which was not called in. too. has the advantage of being able to discount to a greater amount by the whole value of his promissory notes. its real riches and prosperity do not appear to have suffered any. amounted to £411. that the greater part of banks and bankers issue their promissory notes. but his own promissory notes. had they confined their business to the discounting of bills of 241 . The commerce of Scotland. that is. in order to be recoined. Its agriculture.

I believe. If there are two merchants. and by encouraging all those with whom they have any influence to do the same. and almost all men of business. and the merchants again return them to the banks. peculiar to them. and thus almost the whole money business of the country is transacted by means of them. and are thereby interested to promote the trade of those companies.The Wealth of Nations exchange. without imprudence. or in those of his banker. together with the legal interest. the company discounting a proportionable part of the interest of the great sum. that whatever money should be advanced to him. to the extent of a certain sum (two or three thousand pounds for example). than the London merchant. every merchant can. These the merchants pay away to the manufacturers for goods. by readily receiving their notes in all payments. without imprudence. They invented. generally advance it to them in their own promissory notes. But the easy terms upon which the Scotch banking companies accept of repayment are. The banks.and of the benefit which the country has received from it. who gives him no interest for it. By means of those cash accounts. either in his own coffers. commonly granted by banks and bankers in all different parts of the world. in order to answer the demands continually coming upon him for payment of the goods which he purchases upon credit. to any individual who could procure two persons of undoubted credit and good landed estate to become surety for him. both of the great trade of those companies. may repay this sum piece-meal. who employ equal stocks in the same branch of trade. and give employment to a greater number of people. or to replace what they my have borrowed of them. that is. one in London and the other in Edinburgh. therefore. in order to balance their cash accounts. find it convenient to keep such cash accounts with them. carry on a greater trade. Hence the great trade of those companies. when their customers apply to them for money. so far as I know. the manufacturers to the farmers for materials and provisions. and borrows a thousand pounds upon it. within the sum for which the credit had been given. and have perhaps been the principal cause. another method of issuing their promissory notes. Whoever has a credit of this kind with one of those companies. the farmers to their landlords for rent. Let the 242 . Credits of this kind are. by giving credit. The London merchant must always keep by him a considerable sum of money. the Edinburgh merchant can. therefore. till the whole be in this manner repaid. by twenty and thirty pounds at a time. for example. carry on a greater trade than he otherwise could do. All merchants. by granting what they call cash accounts. the landlords repay them to the merchants for the conveniencies and luxuries with which they supply them. should be repaid upon demand. from the day on which each of those small sums is paid in.

by five hundred pounds. therefore. if there was no paper money. once in the year. or of goods to the value of his whole stock upon hand. 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. indeed. and have. Should the circulating paper at any time exceed that sum. can discount their bills of exchange as easily as the English merchants. 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 as they could not send it abroad. besides. His annual profits must be less by all that he could have made by the sale of five hundred pounds worth more goods. Many people would immediately perceive that they had more of this paper than was necessary for transacting their business at home. With the same stock. or which (the commerce being supposed the same) would circulate there. they would immediately demand payment for 243 .Adam Smith ordinary amount of this sum be supposed five hundred pounds. the value of the goods in his warehouse must always be less. 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. on the other hand. of which it supplies the place. keeps no money unemployed for answering such occasional demands. Hence the great benefit which the country has derived from this trade. Let us suppose that he generally disposes of his whole stock upon hand. But the Scotch merchants. he can. to be exchanged for gold and silver. are the lowest paper money current in Scotland. and can thereby both make a greater profit himself. The facility of discounting bills of exchange. than it would have been. the whole of that currency which can easily circulate there. he satisfies them from his cash account with the bank. the additional conveniency of their cash accounts. it must be remembered. for example. had he not been obliged to keep such a sum unemployed. The merchant in Edinburgh. he must sell in a year five hundred pounds worth less goods than he might otherwise have done. it must immediately return upon the banks. without imprudence. never can exceed the value of the gold and silver. When they actually come upon him. and gradually replaces the sum borrowed with the money or paper which comes in from the occasional sales of his goods. and give constant employment to a greater number of industrious people who prepare those goods for the market. as the excess could neither be sent abroad nor be employed in the circulation of the country. The whole paper money of every kind which can easily circulate in any country. have at all times in his warehouse a larger quantity of goods than the London merchant. it may be thought. If twenty shilling notes.

therefore. they could easily find a use for it. Over and above the expenses which are common to every branch of trade. Let us suppose that all the paper of a particular bank.The Wealth of Nations it from the banks. in the expense of keeping at all times in its coffers. A banking company which issues more paper than can be employed in the circulation of the country. but they could find none while it remained in the shape of paper. but in a much greater proportion. and must require not only a more violent. cannot be employed in the circulation of the country. increase the second article of their expense still more than the first. There would immediately. by enhancing the difficulty. which empty themselves so very rapidly. in order to find that profitable employment which it cannot find at home. in finding new gold and silver in order to replenish those coffers. by sending it abroad. When this superfluous paper was converted into gold and silver. ought to increase the first article of their expense. and of which the excess is continually returning upon them for payment. not only in proportion to this excessive increase of their circulation. in the expense of replenishing those coffers as fast as they are emptied by answering such occasional demands. The coin. which the 244 . Such a company. of which it loses the interest. for answering the occasional demands of the holders of its notes. a large sum of money. not only in proportion to this forced increase of their business. etc. such as the expense of house-rent. therefore. yet must empty themselves much faster than if their business was confined within more reasonable bounds. the expenses peculiar to a bank consist chiefly in two articles: first. be sent abroad. But as that coin will not be allowed to lie idle. but in a much greater proportion. must necessarily enhance still farther the expense of the bank. in order to replenish them. which is thus continually drawn in such large quantities from their coffers. must in proportion to this forced increase of their business. to a much greater extent. and if they showed any difficulty or backwardness in payment. It comes in place of a paper which is over and above what can be employed in that circulation. their notes returning upon them much faster than in proportion to the excess of their quantity. The coffers of such a company. therefore. but a more constant and uninterrupted exertion of expense. though they ought to be filled much fuller. the alarm which this would occasion necessarily increasing the run. accountants. too. secondly. the wages of servants. and is. Such a company. too. and this continual exportation of gold and silver. clerks. and. ought to increase the quantity of gold and silver which they keep at all times in their coffers. over and above what can be employed in it too. it must. therefore. in one shape or another. be a run upon the banks to the whole extent of this superfluous paper.

Should this bank attempt to circulate forty-four thousand pounds. The Scotch banks.Adam Smith circulation of the country can easily absorb and employ. But every particular banking company has not always understood or attended to its own particular interest. and the circulation has frequently been overstocked with paper money. In this case. By issuing too great a quantity of paper. the resource of the banks was. It will thus gain nothing by the interest of the four thousand pounds excessive circulation. Those agents were not always able to replenish the coffers of their employers so fast as they were emptied. Had every particular banking company always understood and attended to its own particular interest. about eight hundred and fifty thousand pounds. in order to be exchanged for gold and silver. but fourteen thousand pounds. this bank ought to keep at all times in its coffers. For this great coinage. losing in this manner between two and a half and three per cent. 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. at an expense which was seldom below one and a half or two per cent. or. This money was sent down by the waggon. which will be continually going out of its coffers as fast as they are brought into them. or fifteen shillings on the hundred pounds. and insured by the carriers at an additional expense of three quarters per cent. paid no seignorage. For answering occasional demands. this liberality of government did not prevent altogether the expense of the bank. will return upon it almost as fast as they are issued. the four thousand pounds which are over and above what the circulation can easily absorb and employ. and that. of which the excess was continually returning. the circulation never could have been overstocked with paper money. at an average. 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. were all obliged to employ constantly agents at London to collect money for them. therefore. therefore. in consequence of an excess of the same kind. amounts exactly to forty thousand pounds. this bank is obliged to keep at all times in its coffers ten thousand pounds in gold and silver. which it soon after issued in coin at £3:17:10 1/2 an ounce. to the extent of the sum which they wanted. upon the coinage of so very large a sum. to draw upon their correspondents in London bills of exchange. When those correspondents afterwards drew upon them for the payment 245 . and it will lose the whole expense of continually collecting four thousand pounds in gold and silver. for answering occasional demands. though the government was properly at the expense of this coinage. not eleven thousand pounds only. Though the bank.

would in this manner make sometimes more than two or three journeys. but for the much greater imprudence of 246 . were sometimes obliged to employ this ruinous resource. The Bank of England. it is to be observed. the heaviest. by supplying its own coffers with coin. found. and from the continual rise in the price of gold bullion. the Bank of England was obliged to supply them. The Scotch banks. Even those Scotch banks which never distinguished themselves by their extreme imprudence. but they were of more value abroad. being likewise over and above what could be employed in that circulation. therefore. greater and greater. the debtor bank paying always the interest and commission upon the whole accumulated sum. and while they remained in the shape of coin. sometimes melted down and sent abroad in the shape of bullion. and sometimes melted down and sold to the Bank of England at the high price of four pounds an ounce. into which coin is continually flowing from those coffers in a great variety of ways. or upon some other correspondents in London. The gold coin which was paid out. those heavy pieces were of no more value than the light. no doubt. not only for its own imprudence. which were carefully picked out of the whole coin. Every year they found themselves under the necessity of coining nearly the same quantity of gold as they had coined the year before. or rather bills for the same sum. together with the interest and commission. notwithstanding their great annual coinage. and either sent abroad or melted down. but by drawing a second set of bills. The Bank of England. every year. to their astonishment. had sometimes no other means of satisfying this draught. the expense of this great annual coinage became. in exchange for that part of their paper which was over and above what could be employed in the circulation of the country. is indirectly obliged to supply the whole kingdom. or when melted down into bullion at home.The Wealth of Nations of this sum. and that. either by the Bank of England or by the Scotch banks. paid all of them very dearly for their own imprudence and inattention: but the Bank of England paid very dearly. some of those banks. notwithstanding the great quantity of good and new coin which was every year issued from the bank. It was the newest. was sometimes sent abroad in the shape of coin. and the best pieces only. became every year worse and worse. either upon the same. the state of the coin. whatever vacuities this excessive circulation occasioned in the necessary coin of the kingdom. in consequence of the continual wearing and clipping of the coin. was wanted to support this excessive circulation both of Scotch and English paper money. that there was every year the same scarcity of coin as there had been the year before. Whatever coin. and the same sum. from the distress into which their excessive circulation had thrown them. At home. instead of growing better and better.

fully equal to that which runs out. as soon as it becomes due. is not either the whole capital with which he trades. or very near equally full. and accepts of a piece-meal repayment. it can never exceed the value of the gold and silver which would necessarily circulate in the country if there was no paper money. A merchant. as the money comes in from the occasional sale of his goods. If the paper money which the bank advances never exceeds this value. upon the easy terms of the banking companies of Scotland. it can never exceed the quantity which the circulation of the country can easily absorb and employ. however. When a bank discounts to a merchant a real bill of exchange. the sum of the repayments from certain customers is. 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. ought to observe with great attention. in dealing with such customers. or is not. without any further care or attention. The over-trading of some bold projectors in both parts of the united kingdom. in the course of some short period (of four. for answering occasional demands. the sum of the repayments which it commonly receives from them. The coffers of the bank. When a bank. resemble a water-pond. If.Adam Smith almost all the Scotch banks. or eight months. whether. from which. What a bank can with propriety advance to a merchant or undertaker of any kind. was the original cause of this excessive circulation of paper money. such sums upon his cash account. replaces to the bank the value of what it had advanced. together with the interest. besides discounting his bills. may frequently have occasion for a sum of ready money. The payment of the bill. The bank. within the course of such short periods. is. fully equal to that of the advances which it commonly makes to them. yet another is continually running in. so far as its dealings are confined to such customers. six. so that. is really paid by that debtor. he can answer them sufficiently from his cash account. but that part of it only which he would otherwise be obliged to keep by him unemployed and in ready money. it dispenses him entirely from the necessity of keeping any part of his stock by him unemployed and in ready money for answering occasional demands. advances him likewise. drawn by a real creditor upon a real debtor. when it becomes due. for example). and which. Little or no expense can ever be necessary for replenishing the coffers of such a bank. without over-trading. upon most occasions. or even any considerable part of that capital. the pond keeps always equally. upon such occasions. fully equal to that of 247 . even when he has no bills to discount. though a stream is continually running out. When such demands actually come upon him. for answering occasional demands. five.

those coffers are likely to be always equally or very near equally full. When they observed. besides saving almost entirely the extraordinary expense of replenishing their coffers. accordingly. and did not care to deal with any person. If. so that. frequent and regular operations with them. and scarce ever to require any extraordinary expense to replenish them. were for a long time very careful to require frequent and regular repayments from all their customers. beyond what its own books afford it. In requiring frequent and regular repayments from all their customers.The Wealth of Nations the advances. either by himself or his agents. Though the stream which is in this case continually running out from its coffers may be very large. for the most part. without any further care or attention. which lends money to perhaps five hundred different people. can have no regular information concerning the conduct and circumstances of the greater part of its debtors. so that. it cannot with any safety continue to deal with such customers. without being obliged to look out for any other evidence besides what their own books afforded them. that within moderate periods of time. the sum of the repayments from certain other customers. they gained two other very considerable advantages. on the contrary. Secondly. The banking companies of Scotland. By this attention. falls commonly very much short of the advances which it makes to them. upon most occasions. that which is continually running into them must be at least equally large. at least if they continue to deal with it in this manner. the repayments of a particular customer were. either regular or irregular in their repayments. The stream which is in this case continually running out from its coffers. is necessarily much larger than that which is continually running in. what they called. the banking companies of Scotland had probably this advantage in view. men being. those coffers must soon be exhausted altogether. unless they are replenished by some great and continual effort of expense. whatever might be his fortune or credit. 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. according as their circumstances are either thriving or declining. and of which the attention is continually occupied by objects of a very different kind. fully equal to the advances which they had made to him. it may safely continue to deal with such customers. But a banking company. First. may. who did not make. by this attention they were enabled to make some tolerable judgment concerning the thriving or declining circumstances of their debtors. they might be assured that 248 . observe and inquire both constantly and carefully into the conduct and situation of each of them. A private man who lends out his money to perhaps half a dozen or a dozen of debtors.

for answering occasional demands. they can reasonably expect no farther assistance from hanks and bankers. is continually returning to every dealer in the shape of money. and that. the paper money. and amount of his repayments. This second advantage. consistently with its own interest. which they had circulated by his means. The advances of the bank paper. by means of his dealings. because. A bank cannot. 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. who. consequently. could not have been equal to the stream which. and partly by that of cash accounts. to exceed the quantity which the circulation of the country could easily absorb and employ. and. perhaps. the ordinary amount of his repayments could not. so well understood by all the different banking companies in Scotland as the first. was not. was continually running into the coffers of the bank. or even the greater part of the circulating capital with which he trades. though equally real. by means of the same dealings was continually running out. When. and the excess of this paper money would immediately have returned upon the bank. though that capital is continually returning to him in the shape of money.Adam Smith the paper money which they had advanced to him had not. whether paper or coin. for the purpose of keeping the rest of his capital in constant employment. advance to a trader the whole. by exceeding the quantity of gold and silver which. in order to be exchanged for gold and silver. The frequency. had there been no such advances. within moderate periods of time. and continually going from him in the same shape. consequently. regularity. for answering occasional demands. the creditable traders of any country can be dispensed from the necessity of keeping any part of their stock by them unemployed. had not at any time exceeded the quantity of gold and silver which would have circulated in the country. go farther. when they have gone thus far. cannot. exceeded the quantity of gold and silver which he would otherwise have been obliged to keep by him for answering occasional demands. had there been no paper money. within moderate periods of time. and in ready money. that is. It is this part of his capital only which. he would have been obliged to keep by him for answering occasional demands. If the advances of the bank had commonly exceeded this part of his capital. 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. and going from him in the 249 . at any time. The stream which. and in ready money. had there been no paper money. consistently with their own interest and safety. have equalled the ordinary amount of its advances. partly by the conveniency of discounting bills.

upon that account. willing to lend that capital to such people of good credit as are likely to keep it for several years. would. if I may say so. draining. very seldom return to the undertaker till after a period of many years. be a very convenient creditor to such traders and undertakers. Those companies. of the capital which the undertaker of an iron forge. too. his work-houses. carry on a very considerable part of their projects with borrowed money. indeed. their own capital ought in this case to be sufficient to insure. without taking the trouble themselves to employ the capital. in making roads and waggon-ways. Traders and other undertakers may. ought not to be borrowed of a bank. manuring. or to render it extremely improbable that those creditors should incur any loss. Still less could a bank afford to advance him any considerable part of his fixed capital. even when laid out with the greatest prudence and judgment. and ploughing waste and uncultivated fields. inclosing. no doubt. of such private people as propose to live upon the interest of their money.The Wealth of Nations same shape. in building farmhouses. It is now more than five and twenty years since the paper money issued by the different banking companies of Scotland was fully equal. etc. In justice to their creditors. a period by far too distant to suit the conveniency of a bank. The returns of the fixed capital are. or rather was somewhat more than fully equal. of the capital which the person who undertakes to improve land employs in clearing. yet the whole of the returns is too distant from the whole of the outgoings.. Even with this precaution. 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. however. in almost all cases. the dwelling-houses of his workmen. or of attorneys’ fees for drawing bonds and mortgages. much slower than those of the circulating capital: and such expenses.. etc. even though the success of the project should fall very much short of the expectation of the projectors. but ought to be borrowed upon bond or mortgage. But such traders and undertakers would surely be most inconvenient debtors to such a bank. therefore. A bank. and which it is meant should not be repaid till after a period of several years. had so long ago given all the assistance to the traders and other undertakers of Scotland which it is possible 250 . to what the circulation of the country could easily absorb and employ. for example. and who are. the money which is borrowed. and which accepts of repayment upon the easy terms of the banking companies of Scotland. etc. which lends its money without the expense of stamped paper. in erecting engines for drawing out the water. of the capital which the undertaker of a mine employs in sinking his shafts. employs in erecting his forge and smelting-houses. with all their necessary appendages of stables. granaries. and warehouses. the capital of those creditors. no doubt with great propriety.

perhaps. Those traders and other undertakers. and which. the extension of their own projects beyond what they could carry on either with their own capital. generally understood. yet as effectually as the utmost extension of bank credits could have done. they seem to have thought. to give.Adam Smith for banks and bankers. without incurring any other expense besides that of a few reams of paper. when the high profits of trade afforded a great temptation to overtrading. and to provide them with all the capital which they wanted to trade with. They had over-traded a little. never fails to attend the smallest degree of over-trading. that it may. which did not. however. by the extension of that trade. and had brought upon themselves that loss. the shift to which unfortunate traders have sometimes recourse. But as this book may come into the hands of many people who are not men of business. for a time. From England it was brought into Scotland. The banks. perhaps. and as the effects of this practice upon the banking trade are not. This expedient was no other than the well known shift of drawing and redrawing. have been adopted into the laws of all European nations. consistently with their own interest. that money 251 . even by men of business themselves. no doubt. and to the very moderate capital of the country. which were established when the barbarous laws of Europe did not enforce the performance of their contracts. have given such extraordinary privileges to bills of exchange. in this particular business. which. be thought unnecessary to give any account of it. served their purpose. in proportion to the very limited commerce. they seem to have thought. The banks. I shall endeavour to explain it as distinctly as I can. some of those traders had recourse to an expedient which. The banks. though at a much greater expense. were of a different opinion. having got so much assistance from banks and bankers. or at least that diminution of profit. extend their credits in proportion to the extension of the trade of the country. were in honour bound to supply the deficiency. and. The practice of raising money in this manner had been long known in England. The practice of drawing and redrawing is so well known to all men of business. The customs of merchants. They complained of the contracted views and dastardly spirit of the directors of those banks. or with what they had credit to borrow of private people in the usual way of bond or mortgage. where. it was soon carried on to a much greater extent than it ever had been in England. they said. wished to get still more. when they are upon the brink of bankruptcy. They had even done somewhat more. during the course of the two last centuries. during the course of the late war. could extend their credits to whatever sum might be wanted. meaning. is said to have been carried on to a very great extent. and upon their refusing to extend their credits.

but he agrees to accept of A ‘s bill. each indorser becomes in his turn liable to the owner of the bill for those contents. who. in the year. on each draught. draws a second bill upon B in London. we shall suppose. together with the interest and a commission. again before the expiration of the second two months. acceptor. before it came to the person who presents it to the acceptor for payment. not only for several months. therefore. should all of them be persons of doubtful credit. if he fails to pay. and the commission was never less than one half per cent. The interest was five per cent. draws a bill upon B in London. in the year and sometimes a great deal more. but for several years together. and. payable likewise two months after date. The house is crazy. payable likewise two months after date. he becomes from that moment a bankrupt. before the expiration of the first two months. B accordingly. the bill always returning upon A in Edinburgh with the accumulated interest and commission of all the former bills. to sleep in it to-night. payable two months after date. The bill is protested. had all of them in their order indorsed. B in London redraws upon A in Edinburgh another bill payable also two months after date. and will not stand very long. still the shortness of the date gives some security to the owner of the bill. if he does not immediately pay it. The trader A in Edinburgh. that before the term of payment he shall redraw upon A in Edinburgh for the same sum. This practice has sometimes gone on. from that moment. If. either in money or goods. says a weary traveller to himself. it is a chance if they all become so in so short a time. when the bill becomes due. redraws this bill upon A in Edinburgh. Though the drawer. yet. who. when either the price of the commission happened to rise. a bankrupt. to express that each of them had in his turn received those contents. the acceptor does not pay it as soon as it is presented. and I will venture. and who. upon condition. written their names upon the back of the bill. In reality B in London owes nothing to A in Edinburgh. becomes likewise a bankrupt. This commission being repeated more than six times in the year. and indorsers of the bill. who had successively advanced to one another the contents of it. If. whatever money A might raise by this expedient might necessarily have cost him something more than eight per cent. or when he was obliged to pay compound interest upon the interest and commis- 252 .The Wealth of Nations is more readily advanced upon them than upon any other species of obligation. it had passed through the hands of several other persons. another bill. and before the expiration of the third two months. but it is a chance if it falls to-night. he becomes too. that is. and returns upon the drawer. 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.

who. in the year. had in their golden dreams the most distinct vision of this great profit. therefore. in the greater part of mercantile projects. and A enabled C to discharge it. in London. at least. either at the end of their projects. C. a second bill at two months date. who. discounted it with some banker in London. Towards the end of the late war. and sometimes upon some fourth or fifth person. for example. A sold in Edinburgh at par. without any other fund to support them besides what was raised at this enormous expense. to whom he sent them by the post. At other times A would enable to discharge the first bill of exchange. and being loaded with a commission of at least one half per cent. fourteen per cent. had the good fortune to find it. not upon B. a good surplus profit to the projector. that A in Edinburgh would enable B in London to pay the first bill of exchange. a few days before it became due. This transaction. a few days before it became due. they very seldom. and with its contents purchased bills upon London. This other bill was made payable to the order of B. being payable to his own order. upon each repetition. the exchange between Edinburgh and London was frequently three per cent. but afford. are supposed to run between six and ten per cent. In a country where the ordinary profits of stock. upon its being accepted by C. payable at sight to the order of B. sometimes upon his first correspondent B. I believe. {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. were undertaken. a few day’s before it became due. discounted it in the same manner with some banker in London. It frequently happened. by drawing. a third bill likewise at two months date. Upon their awakening. and being loaded with a commission of at least one half per cent.Adam Smith sion of former bills. as soon as it was accepted. and for several years carried on. The projectors. 253 . and those bills at sight must frequently have cost A that premium. being repeated at least four times in the year. of which the returns could not only repay the enormous expense at which the money was thus borrowed for carrying it on. This bill. upon each repetition. it must have been a very fortunate speculation. besides. together with the legal interest of five per cent. this method of raising money. for example. by drawing. must at that period have cost A. by drawing. D or E. This third bill was made payable to the order of C. against Edinburgh. Many vast and extensive projects. a second bill at three months date upon the same B in London. however. no doubt. This practice was called raising money by circulation. but upon some third person. or when they were no longer able to carry them on. Such operations being repeated at least six times in the year. in the same manner as that described in the text. however.

what the circulation of the country could easily absorb and employ. and the bills which B in London redrew upon A in Edinburgh. because. however. who are continually drawing and redrawing upon one another. had once been made to run out from the coffers of the banks. and upon that account. commerce. Whatever was advanced upon such circulating bills was in Edinburgh advanced in the paper of the Scotch banks. When two people. when they were discounted at the Bank of England in the paper of that bank. The greater part of this paper was. with some bank or banker in Edinburgh. This payment. The paper which was issued upon those circulating bills of exchange amounted. he as regularly discounted. It was over and above. he regularly discounted two months before they were due. it was less expensive than that mentioned in the foregoing part of this note. consequently. or with some other banker in London. by means of those circulating bills of exchange. and in ready money. the projector would have been obliged to keep by him unemployed. without their having the most distant suspicion that they had really advanced it. By saving. but for some time. 254 . an advantage which many of these adventurers could not always find it easy to procure. upon many occasions. either with the Bank of England. Though the bills upon which this paper had been advanced were all of them repaid in their turn as soon as they became due. and not merely to that part of it which. in order to be exchanged for gold and silver. which they were to find as they could. perhaps. therefore. for answering occasional demands. The stream which. over and above the value of the gold and silver which would have circulated in the country. had there been no paper money. immediately returned upon the banks. discount their bills always with the same banker. to the whole fund destined for carrying on some vast and extensive project of agriculture. and in London. not only without their knowledge or deliberate consent.} The bills which A in Edinburgh drew upon B in London. therefore. was altogether fictitious. or manufactures. before each bill became due. It was a capital which those projectors had very artfully contrived to draw from those banks. 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.The Wealth of Nations must have cost A something more than eight per cent. was never replaced by any stream which really ran into them. the exchange between Edinburgh and London. had there been no paper money. yet the value which had been really advanced upon the first bill was never really returned to the banks which advanced it. but then it required an established credit with more houses than one in London.

in this very perilous situation. he would necessarily make them all bankrupts. they said. and a bill for which there was properly no real creditor but the bank which discounted it. and which even the more prudent Scotch banks began. of which this prudent and necessary reserve of the banks was. the immediate occasion. or to other methods of raising money: so as that he himself might. not only alarmed. those projectors. and when the two same persons do not constantly draw and redraw upon one another. improve. not with any capital of their own. might perhaps ruin himself.Adam Smith he must immediately discover what they are about. but with the capital which he advances to them. upon that account. however. to make about discounting. as soon as possible. accordingly. and might find that he had already discounted the bills of those projectors to so great an extent. and when all of them had already gone too far. for the express purpose of relieving the distress 255 . as they might wish to borrow. in the highest degree. and bad conduct of the banks. therefore. and see clearly that they are trading. which the principal bankers in London. upon that account. after a certain time. to withdraw gradually. they called the distress of the country. But this discovery is not altogether so easy when they discount their bills sometimes with one banker. get out of the circle. Their own distress. pusillanimity. to go on for some time. which did not give a sufficiently liberal aid to the spirited undertakings of those who exerted themselves in order to beautify. but occasionally run the round of a great circle of projectors. The difficulties. he might sometimes make it too late. by refusing to discount any more. nor any real debtor but the projector who made use of the money. to lend for as long a time. and sometimes with another. and. It was the duty of the banks. who find it for their interest to assist one another in this method of raising money and to render it. For his own interest and safety. however. When a banker had even made this discovery. or the public credit of the country. they seemed to think. took the only method by which it was now possible to save either their own credit. In the midst of this clamour and distress. and this distress of the country. in order to force these projectors by degrees to have recourse. and thus by ruining them. endeavouring. and enrich the country. The banks. between a bill drawn by a real creditor upon a real debtor. which the Bank of England. by refusing in this manner to give more credit to those to whom they had already given a great deal too much. a new bank was established in Scotland. he might find it necessary. making every day greater and greater difficulties about discounting. was altogether owing to the ignorance. as difficult as possible to distinguish between a real and a fictitious bill of exchange. and to as great an extent. no doubt. that. either to other bankers. but enraged.

notwithstanding its too liberal conduct. The capital which had been subscribed to this bank. allowed many of them to borrow upon this cash-account what they paid in upon all their subsequent instalments. Such payments. In order to support the circulation of those notes. when they paid in their first instalment. at two different subscriptions. opened a cash-account with the bank. thinking themselves obliged to treat their own proprietors with the same liberality with which they treated all other men. This bank was more liberal than any other had ever been. it had in the circulation about two hundred thousand pounds in bank notes. To promote such improvements was even said to be the chief of the public-spirited purposes for which it was instituted. it is said to have been driven to this resource within a very few months after it began to do business. it was. only put into one coffer what had the moment before been taken out of another. The design was generous. only was paid up. therefore. Its coffers were never well filled. but to have discounted all equally. returned upon it. But had the coffers of this bank been filled ever so well. amounted to one hundred and sixty thousand pounds. of which eighty per cent. and the directors. It was the avowed principle of this bank to advance upon any reasonable security. such as the improvements of land. no doubt. which were continually returning upon it as fast as 256 . Its coffers having been filled so very ill. in order to be exchanged for gold and silver. and in discounting bills of exchange. by their subscription to the original bond or contract of the bank. and when the bill became due. as fast as they were issued. and in discounting bills of exchange. When it was obliged to stop. issued great quantities of its bank notes. both in granting cash-accounts.The Wealth of Nations of the country. were really pledged for answering all its engagements. This sum ought to have been paid in at several different instalments. paying it. by another draught upon the same place. and. perhaps. over and above what the circulation of the country could easily absorb and employ. But those bank notes being. enabled to carry on business for more than two years. A great part of the proprietors. the greater part of them. 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. but the execution was imprudent. it seems to have made scarce any distinction between real and circulating bills. it. By means of the great credit which so great a pledge necessarily gave it. and the nature and causes of the distress which it meant to relieve. With regard to the latter. were not. the whole capital which was to be employed in those improvements of which the returns are the most slow and distant. By its liberality in granting cash-accounts. The estates of the proprietors of this bank were worth several millions. well understood. together with interest and commission.

and. Upon the two hundred thousand pounds which it circulated in bank notes. Those other banks. had recourse to this new bank. had the greater part of them been obliged to stop two years sooner than they actually did. therefore. the operations of this bank increased the real distress of the country. advanced to different people upwards of eight hundred thousand pounds at five per cent. In the long-run. no doubt. of which the number and value were continually increasing. They seem to have intended to support the spirited undertakings. had. The temporary relief. which were at that time carrying on in different parts of the country. This bank. in reality aggravated in the long-run the distress which those projectors had brought both upon themselves and upon their country. for which it was continually drawing bills of exchange upon London. instead of relieving. when ruin came. therefore. and enabled them to carry on their projects for about two years longer than they could otherwise have done. too. by drawing the whole banking business to themselves. which those other banks had become so backward in discounting. All the dealers in circulating bills of exchange. gave some temporary relief to those projectors. and. upon more than three fourths of all its dealings. The operations of this bank. particularly those established at Edinburgh. without any other deduction besides the expense of management. might perhaps be considered as a clear gain. where they were received with open arms. and effectually relieved. it was paying. and was consequently losing more than three per cent. even some degree of discredit. and their country. But upon upwards of six hundred thousand pounds. whose backwardness in discounting bills of exchange had given some offence. so that.Adam Smith they were issued. upwards of eight per cent. from a very great distress. It would have been much better for themselves. those rivals whom it meant to supplant. 257 . in little more than the course of two years. were enabled to get very easily out of that fatal circle. when it stopt. which it meant to relieve. to supplant all the other Scotch banks. from which they could not otherwise have disengaged themselves without incurring a considerable loss. which this bank afforded to those projectors. therefore. this five per cent. it had been constantly in the practice of drawing bills of exchange upon London. therefore. But it thereby only enabled them to get so much deeper into debt. 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. their creditors. at the same time. it fell so much the heavier both upon them and upon their creditors. however. in the way of interest and commission. proved a real and permanent relief to the other Scotch banks. This bank. for as such they considered them. and perhaps. amounted to upwards of six hundred thousand pounds.

and have been so much clear loss upon the balance of their accounts. with accumulated interest and commission. Those who wanted to borrow must have applied to this bank. the greater part of whom its directors can know very little about. of negotiating with those people. it might easily replenish them. returned upon them in order to be exchanged for gold and silver. It could only have erected this bank into a sort of general loan office for the whole country. so that in the long-run they must have ruined themselves as a mercantile company. and of drawing the proper bond or assignment. and for the payment of which they were themselves continually obliged to borrow money. and which emptied themselves so very fast. but. by employing a number of people to go continually with buckets to a well at some miles distance. but profitable to the bank. must have suffered a very considerable loss by it. and into which no stream was continually running. They could still have made nothing by the interest of the paper. as a mercantile company. 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. by raising money upon the securities of those to whom it had advanced its paper. yet. Experience. and when they became due. which. but who proposed to keep it always equally full. But though this operation had proved not only practicable. the quantity of money to be lent.The Wealth of Nations At the first setting out of this bank. paying them by other draughts on the same place. 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. could be replenished by no other expedient but the ruinous one of drawing bills upon London. must have fallen upon them. But a bank which lends money. perhaps to five hundred different people. they must have suffered a loss of every such operation. and in whose sober and frugal conduct he thinks he has good 258 . yet the country could have derived no benefit front it. that how fast soever its coffers might be emptied. it was the opinion of some people. This operation could not augment. being over and above what the circulation of the country could absorb and employ. in the smallest degree. and that coffers which originally were so ill filled. of employing agents to look out for people who had money to lend. the whole expense of this borrowing. instead of making a profit. though perhaps not so soon as by the more expensive practice of drawing and redrawing. I believe. as fast as they issued it. On the contrary. in order to bring water to replenish it. soon convinced them that this method of raising money was by much too slow to answer their purpose. instead of applying to the private persons who had lent it their money. on the contrary. But though they had been able by this method to raise money as fast as they wanted it.

with some variations. both in Scotland and in other places. which has of late been complained of. would never afford a fund capable of maintaining a quantity of labour equal to that which had been employed about them. at that time regent of France. The sober and frugal debtors of private persons. would have more of the solid and the profitable. though they might have less of the grand and the marvellous. By establishing a bank of a particular kind. still continue to make an impression upon many people. would be more likely to employ the money borrowed in sober undertakings which were proportioned to their capitals. so clearly. without increasing in the smallest degree the capital of the country. the most extravagant project. and which would thus afford a fund capable of maintaining a much greater quantity of labour than that which had been employed about them. The debtors of such a bank as that whose conduct I have been giving some account of were likely. and have. contributed to that excess of banking. in a discourse concerning money and trade. which he seems to have imagined might issue paper to the amount of the whole value of all the lands in the country. who would employ the money in extravagant undertakings. The splendid but visionary ideas which are set forth in that and some other works upon the same principles. in part. That the industry of Scotland languished for want of money to employ it. both of banking and stock-jobbing. did not think proper to adopt it. The success of this operation. which would repay with a large profit whatever had been laid out upon them. The principles upon which it was founded are explained by Mr Law himself. The idea of the possibility of multiplying paper money to almost any extent was the real foundation of what is called the Mississippi scheme. that perhaps the world ever saw. by Mr Du Verney. with all the assistance that could be given them. therefore. by the Duke of Orleans. if they should be completed. would only have transferred a great part of it from prudent and profitable to imprudent and unprofitable undertakings. they would probably never be able to complete. was the opinion of the famous Mr Law. and which. in his Examination of the Political Reflections upon commerce and finances of Mr Du Tot. the greater part of them. and which. he proposed to remedy this want of money. on the contrary.Adam Smith reason to confide. perhaps. when he first proposed his project. that I shall not give any account of them. The parliament of Scotland. 259 . the drawers and redrawers of circulating bills of exchange. would never repay the expense which they had really cost. It was afterwards adopted. which he published in Scotland when he first proposed his project. which. to be chimerical projectors. and with so much order and distinctness. The different operations of this scheme are explained so fully.

8. and £4. c. in pursuance of an act of parliament.21.000 year for the expense of management. the bank purchased of the Southsea company. per cent. or for £ 96.448:12:11d.. In pursuance of the 3rd George I. when it was obliged to borrow at so high an interest. stock to the amount of £4.000: and in 1722.375. the bank had thought proper to discontinue the payment of its notes. interest. therefore. which was going on at this time.375. £ 656. and was at the same time allowed to take in subscriptions for doubling its capital. the bank was allowed to enlarge its capital stock. and made stock.775. in consequence of the subscriptions which it had taken in for enabling it to make this purchase. This ingraftment is said to have been for the support of public credit. and fifty. the bank capital amounted to £ 5. in 1709. At this time. p.204:1:9d. the bank advanced and paid into the exchequer the sum of £400. and its capital stock amounted only to £ 8. at six per cent. and by another of ten per cent. interest.995:14:8d. therefore. It at that time advanced to government the sum of £1. tallies had been at forty.000 interest.000. established by the Revolution. advanced to government £5. and £4. Its whole capital stock. and it had advanced to government the sum of £3. c. In 1703. interest at the rate of eight per cent. In 1696. dated the 27th of July 1694. In consequence of those two calls. It had at this time. the common legal and market rate of those times.402. and bank notes at twenty per cent. the credit of government was as good as that of private persons.201.959.000 a-year.559. there was paid in. In pursuance of the 8th George I. c.171: 10s.027: 17s: 10½d. the bank delivered up two millions of exchequer Bills to be cancelled. making in all the sum of £1.000. In pursuance of the 7th Anne. which it had advanced upon its original annuity of £96. since it could borrow at six per cent. and sixty. £501. by an ingraftment of £1.027:17:10½d.375. {James Postlethwaite’s History of the Public Revenue.. In 1708.The Wealth of Nations The Bank of England is the greatest bank of circulation in Europe.000 for an annuity of £100. which necessarily occasioned their discredit. we may believe. discount. therefore. In pursuance of the same act. therefore.171:10s. the bank had advanced to the public £ 9.343.027 17s. must have been very low. therefore.027:17 10d. 10½d. 7. amounted at this time to £2. the capital of the bank amounted to £4.400. By a call of fifteen per cent. therefore. In 1697.600.995:14:8d.301.000. It was incorporated.000. by a charter under the great seal. its capital stock was increased by £ 3.200.} During the great re-coinage of the silver.000 for expense of management.000. It was upon this occasion that the 260 . the bank cancelled exchequer bills to the amount of £ 1. The credit of the new government. in 1710.001.

but as a great engine of state. That part of his capital which a dealer is obliged to keep by him unemployed and in ready money. All that it has advanced to the public must be lost before its creditors can sustain any loss. and its divided capital had been raised by different calls and subscriptions to £ 10. pretend to warrant either the greatness of the sum. or can consist of more than six members. therefore did not increase either of those two other sums. The dividend of the bank has varied according to the variations in the rate of the interest which it has. For some years past.000. in other words. not only of England. supported the credit of the principal houses. without any fault of its directors. the bank had. Upon other occasions. This sum. It has continued to have an undivided capital of the same kind ever since. which. this great company has been reduced to the necessity of paying in sixpences.000. No other banking company in England can be established by act of parliament. that the bank began to have an undivided capital. to overstock the circulation with paper money. It is not by augmenting the capital of the country. upon different occasions. produces noth- 261 . it is said to have advanced for this purpose. as well as according to other circumstances.780. Upon one occasion. The stability of the bank of England is equal to that of the British government. so long as it remains in this situation. In 1746. the bank agreed to pay to government for the renewal of its charter £110. not only as an ordinary bank. In pursuance of the 4th of George III. It likewise discounts merchants’ bills. upon several different occasions. and it advances to government the annual amount of the land and malt taxes. received for the money it had advanced to the public. but by rendering a greater part of that capital active and productive than would otherwise be so.Adam Smith sum which the bank had advanced to the public. The state of those two sums has continued to be the same ever since. a great part of it in bullion. In these different operations. for answering occasional demands. about £1.686. or. over and above its divided one. its duty to the public may sometimes have obliged it. which are frequently not paid up till some years thereafter. began first to exceed its capital stock. and for which it received interest. It receives and pays the greater part of the annuities which are due to the creditors of the public.25. or the shortness of the time. however.800. or the sum for which it paid a dividend to the proprietors of bank stock.000. the bank dividend has been at five and a half per cent. I do not. This rate of interest has gradually been reduced from eight to three per cent. at different times. It acts. and has. in one week. c. that the most judicious operations of banking can increase the industry of the country. without interest or re-payment.600. is so much dead stock. in 1763. it circulates exchequer bills. advanced to the public £11. but of Hamburgh and Holland.

however. in which the enemy got possession of the capital. which. than in one where the greater part of it was carried on by gold and silver. produces itself not a single pile of either. it must be acknowledged. as it were. enable the country to convert. the produce of its land and labour is annually circulated and distributed to the proper consumers. and consequently of that treasure which supported the credit of the paper money. into tools to work with. 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. and corn fields. or to furnish his magazines. The gold and silver money which circulates in any country. when they are thus. into stock which produces something to the country. and thereby to increase. into stock which produces something both to himself and to his country. An unsuccessful war. if I may be allowed so violent a metaphor. the prince would not have wherewithal either to pay his troops. ought upon this account to guard not only against that excessive multiplication of paper money which 262 . suspended upon the Daedalian wings of paper money. The gold and silver money which circulates in any country may very properly be compared to a highway. from which no prudence or skill of those conductors can guard them. the annual produce of its land and labour. as when they travel about upon the solid ground of gold and silver. The usual instrument of commerce having lost its value. a sort of waggon-way through the air. either to him or to his country. very considerably. and by means of which. which produces nothing to the country. It is a very valuable part of the capital of the country. The commerce and industry of the country. The judicious operations of banking. by substituting paper in the room of a great part of this gold and silver. though they may be somewhat augmented. The judicious operations of banking. they are liable to several others.The Wealth of Nations ing. no exchanges could be made but either by barter or upon credit. would occasion a much greater confusion in a country where the whole circulation was carried on by paper. and into provisions and subsistence to work for. cannot be altogether so secure. as it were. All taxes having been usually paid in paper money. enable the country to convert a great part of this dead stock into active and productive stock. into materials to work upon. by providing. a great part of its highways into good pastures. in the same manner as the ready money of the dealer. The judicious operations of banking enable him to convert this dead stock into active and productive stock. A prince. anxious to maintain his dominions at all times in the state in which he can most easily defend them. is. while it circulates and carries to market all the grass and corn of the country. for example. all dead stock. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money.

Adam Smith ruins the very banks which issue it. In some paper currencies of Yorkshire. he is generally obliged to change it at the first shop where he has occasion to purchase five shillings worth of goods. and filled almost the whole of that circulation. the circulation of the dealers with one another. A shilling changes masters more frequently than a guinea. as in London. The circulation between the dealers. paper money confines itself very much to the circulation between the dealers. are at least equal in value to those of all the dealers. or even a halfpenny. so that it often returns into the hands of a dealer before the consumer has spent the fortieth part of the money. they can generally be transacted with a much smaller quantity of money. to carry it on. That between the dealers and the consumers. it was issued even for so small a sum as a sixpence. In the currencies of North America. a shilling. frequently requires but very small ones. being often sufficient. or to extend itself likewise to a great part of that between the dealers and the consumers. serving as the instrument of many more purchases of the one kind than of the other. Though the annual purchases of all the consumers. as in Scotland. and the circulation between the dealers and the consumers. But small sums circulate much faster than large ones. paper was commonly issued for so small a sum as a shilling. Where no bank notes are circulated under £10 value. Before the Act of parliament which put a stop to the circulation of ten and five shilling notes. requires generally a pretty large sum for every particular transaction. of one kind or another. When a ten pound bank note comes into the hands of a consumer. Paper money may be so regulated as either to confine itself very much to the circulation between the different dealers. by a more rapid circulation. it filled a still greater part of that circulation. but even against that multiplication of it which enables them to fill the greater part of the circulation of the country with it. the same pieces. paper money extends itself to a considerable part of the circulation between dealers and consumers. therefore. The circulation of every country may be considered as divided into two different branches. on the contrary. may be employed sometimes in the one circulation and sometimes in the other. Though the same pieces of money. The value of the goods circulated between the different dealers never can exceed the value of those circulated between the dealers and the consumers. as it is carried on by wholesale. whatever is bought by the dealers being ultimately destined to be sold to the consumers. 263 . as it is generally carried on by retail. and a halfpenny more frequently than a shilling. Where bank notes are issued for so small sums as 20s. whether paper or metal. yet as both are constantly going on at the same time. each requires a certain stock of money.

They are said. is as much considered. and sometimes even a very great calamity. But the frequent bankruptcies to which such beggarly bankers must be liable. confine itself. for answering occasional demands. Where it extends itself to a considerable part of the circulation between dealers and consumers. there is always plenty of gold and silver. almost all the ordinary transactions of its interior commerce being thus carried on by paper. to the circulation between the different dealers. since the suppression of some of their paper currencies. He has no occasion to keep any by him for the circulation between himself and the consumers. was allowed to be issued. as at London. The ready money which a dealer is obliged to keep by him.The Wealth of Nations Where the issuing of bank notes for such very small sums is allowed. probably. but for such sums as would confine it pretty much to the circulation between dealers and dealers. and commonly practised. little more than half the quantity of goods. and partly by 264 . yet partly by discounting real bills of exchange. may occasion a very considerable inconveniency. a sum which. likewise. though it will purchase. and who bring ready money to him. many mean people are both enabled and encouraged to become bankers. in every part of the kingdom. perhaps. The suppression of ten and five shilling bank notes. Those metals are said to have become more abundant in America. in most part of the kingdom. Though no paper money. or even for 20s. £5 being. perhaps. will get it to be received without scruple when it is issued for so small a sum as a sixpence. instead of taking any from him. and still more in North America. would be rejected by every body. Where paper money. who are his customers. Paper money would then. where no bank notes are issued under £10 value. as £10 are amidst the profuse expense of London. it banishes gold and silver almost entirely from the country. therefore. as much as it does at present in London. and is as seldom spent all at once. is destined altogether for the circulation between himself and other dealers of whom he buys goods. to have been more abundant before the institution of those currencies. is pretty much confined to the circulation between dealers and dealers. to many poor people who had received their notes in payment. somewhat relieved the scarcity of gold and silver in Scotland. yet banks and bankers might still be able to give nearly the same assistance to the industry and commerce of the country. A person whose promissory note for £5. as in Scotland. that no bank notes were issued in any part of the kingdom for a smaller sum than £5. as they had done when paper money filled almost the whole circulation. it is to be observed. Though paper money should be pretty much confined to the circulation between dealers and dealers. It were better. and the suppression of twenty shilling notes will probably relieve it still more.

and scarce any in France. and in ready money. of the whole currency. in order to prevent the communication of fire. The increase of paper money. when Mr Hume published his Political Discourses. payable upon demand. though there is a great deal of paper money in England. to restrain a banker from issuing such notes. In 1751 and 1752. 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. But those exertions of the natural liberty of a few individuals. fully as cheap in England as in France. for answering occasional demands. is a violation of natural liberty. be considered as in some respect a violation of natural liberty. since gold and silver money can at anytime be had for it. paper money does not necessarily increase the quantity of the whole currency. provisions never were cheaper in Scotland than in 1759. but to support. or. which is taken from the currency. is a manifest violation of that natural liberty. and ought to be. A paper money. 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. equal in value to gold and silver money. issued by people of undoubted credit. 265 . Whatever is either bought or sold for such paper. in fact. which might endanger the security of the whole society. Such regulations may. which it is the proper business of law not to infringe. consisting in bank notes. To restrain private people. from receiving in payment the promissory notes of a banker for any sum. no doubt. of the most free. in every respect. are. from the circulation of ten and five shilling bank notes. is. They might still be able to give the utmost assistance which banks and bankers can with propriety give to traders of every kind. exactly of the same kind with the regulations of the banking trade which are here proposed. From the beginning of the last century to the present time. upon most occasions. and. there was then more paper money in the country than at present.Adam Smith lending upon cash-accounts. always readily paid as soon as presented. there was a very sensible rise in the price of provisions. must necessarily be bought or sold as cheap as it could have been for gold and silver. it may be said. when they themselves are willing to receive them. is always equal to the quantity of paper which is added to it. whether great or small. Corn is. and consequently diminishing the value. as well as or the most despotical. restrained by the laws of all governments. though. necessarily augments the money price of commodities. when all his neighbours are willing to accept of them. it has been said. by augmenting the quantity. But as the quantity of gold and silver. and soon after the great multiplication of paper money in Scotland. without any condition. The obligation of building party walls.

and which must 266 . in the mean time. to the badness of the seasons. against Dumfries. The directors of some of those banks sometimes took advantage of this optional clause. which this uncertainty of payment necessarily degraded below value of gold and silver money. and 1764). The same act of parliament which suppressed ten and five shilling bank notes. Some years ago the different banking companies of Scotland were in the practice of inserting into their bank notes. or upon a condition which the holder of the notes might not always have it in his power to fulfil. unless such demanders would content themselves with a part of what they demanded. below the value of that coin. either as soon as the note should be presented. that they would take advantage of it. whereas at Dumfries they were paid in Scotch bank notes. It would be otherwise. During the continuance of this abuse (which prevailed chiefly in 1762. while the exchange between London and Carlisle was at par. bore no interest. with a paper money. indeed.The Wealth of Nations owing. that between London and Dumfries would sometimes be four per cent. a condition which the holders of such notes might frequently find it very difficult to fulfil. of which the immediate payment depended. and which. in the option of the directors. In the paper currencies of Yorkshire. probably. fall more or less below the value of gold and silver. The promissory notes of those banking companies constituted. either upon the good will of those who issued them. or. sometimes depended upon the condition. suppressed likewise this optional clause. But at Carlisle. and the uncertainty of getting these bank notes exchanged for gold and silver coin. and thereby restored the exchange between England and Scotland to its natural rate. and sometimes threatened those who demanded gold and silver in exchange for a considerable number of their notes. had thus degraded them four per cent. or to what the course of trade and remittances might happen to make it. the payment of so small a sum as 6d. though this town is not thirty miles distant from Carlisle. or of which the payment was not exigible till after a certain number of years. bills were paid in gold and silver. at that time. 1763. the far greater part of the currency of Scotland. by which they promised payment to the bearer. according as the difficulty or uncertainty of obtaining immediate payment was supposed to be greater or less. consisting in promissory notes. together with the legal interest for the said six months. six months after such presentment. in any respect. and not to the multiplication of paper money. what they called an optional clause. Such a paper money would. no doubt. or according to the greater or less distance of time at which payment was exigible. that the holder of the note should bring the change of a guinea to the person who issued it.

they declared it to be. perhaps. effectual. as has scarce. and suppressed. accordingly. but in a government paper. not in bank notes payable to the bearer on demand. this difference in the value arising from the difference in the quantity of paper emitted in the different colonies. by enacting penalties against all those who made any difference in the price of their goods when they sold them for a colony paper. that no paper currency to be emitted there in time coming. in the same manner as in Scotland. should be a legal tender of payment. but no positive law can oblige a person who sells goods. which declared. a legal tender of payment for the full value for which it was issued. value. £100. and in others to so great a sum as £1100 currency. is said never to have sunk below the value of the gold 267 . for example.. accordingly. to £130. A positive law may render a shilling a legal tender for a guinea. in some of the colonies. to render their paper of equal value with gold and silver. by the course of exchange with Great Britain. a scheme of fraudulent debtors to cheat their creditors. and in fact rendered it. that £100 sterling was occasionally considered as equivalent. and when they sold them for gold and silver. a regulation equally tyrannical. The government of Pennsylvania. Its paper currency. therefore. and though the colony governments paid no interest to the holders of this paper. it appeared. because it may direct the courts of justice to discharge the debtor who has made that tender. of which the payment was not exigible till several years after it was issued. than that which it was meant to support. under 20s. and in the distance and probability of the term of its final discharge and redemption. and who is at liberty to sell or not to sell as he pleases. indeed. in 1722. declared all such clauses unlawful. No law.Adam Smith have degraded this currency below the value of gold and silver money. was an act of such violent injustice. payable to the bearer. but much less. in a country where interest is at six per cent. It bears the evident marks of having originally been. to accept of a shilling as equivalent to a guinea in the price of them. therefore. what the honest and downright Doctor Douglas assures us it was. To oblige a creditor. payable fifteen years hence. pretended. upon their first emission of paper money. The paper currencies of North America consisted. been attempted by the government of any other country which pretended to be free. actually paid down in ready money. Pennsylvania was always more moderate in its emissions of paper money than any other of our colonies. so unjustly complained of in the colonies. Notwithstanding any regulation of this kind. to accept of this as full payment for a debt of £100. could be more equitable than the act of parliament. is worth little more than £40 ready money. But allowing the colony security to be perfectly good. all promissory notes. An act of parliament.

however. it necessarily derived from this use some additional value. 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. colony currency. or sell for somewhat more in the market than the quantity of gold or silver currency for which it was issued. and had. or bears an agio of four or five per cent. so that their gold and silver were exported as fast as ever. A pound. are careful to keep the whole quantity of bank money always below what this use occasions a demand for. by making equal quantities of those metals pass for greater sums in the colony than they did in the mother country. over and above what it would have had. 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. and the directors of the bank. or for the superiority of bank money over current money. sterling to pass in the colonies for 6s:3d. A prince. below that value. by a transfer in the books of the bank. below the value of £1 sterling. from the real or supposed distance of the term of its final discharge and redemption. therefore. they say. the bank money sells for a premium. however. It is upon this account. the colony had raised the denomination of its coin. it was seldom much more than thirty per cent. cannot be taken out of the bank at the will of the owner. This account of the bank of Amsterdam. though this bank money. might thereby give a certain value to this paper money.The Wealth of Nations and silver which was current in the colony before the first emission of its paper money. and afterwards for 6s:8d. above the same nominal sum of the gold and silver currency of the country. for the full value for which it had been issued. they allege. by act of assembly. even though the term of its final discharge and redemption should depend altogether upon the will of the prince. and when that currency was turned into paper. it will appear 268 . as they pretend. This additional value was greater or less.. Some people account in this manner for what is called the agio of the bank of Amsterdam. It was found. Before that emission. that the price of all goods from the mother country rose exactly in proportion as they raised the denomination of their coin. even when that currency was gold and silver. It was in all the colonies very much above what could be employed in this manner. that is. who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind. The pretence for raising the denomination of the coin was to prevent the exportation of gold and silver. the demand for it might be such as to make it even bear a premium. The greater part of foreign bills of exchange must be paid in bank money. The paper of each colony being received in the payment of the provincial taxes. ordered 5s. was more than thirty per cent.

which the rivalship of so many competitors is always ready to bring upon them. by not extending their currency beyond its due proportion to their cash. The proportion between the value of gold and silver and that of goods of any other kind. This free competition. be advantageous to the public. with safety to the public.Adam Smith hereafter. depends in all cases. an event by which many people have been much alarmed. be rendered in all other respects perfectly free. not upon the nature and quantity of any particular paper money. and that which is necessary in order to bring thither a certain quantity of any other sort of goods. for less than a certain sum. By dividing the whole circulation into a greater number of parts. which may be current in any particular country. or notes payable to the bearer. It restrains the circulation of each particular company within a narrower circle. and. it will always be the more so. an accident which. 269 . and reduces their circulating notes to a smaller number. which happen at any particular time to supply the great market of the commercial world with those metals. is in a great measure chimerical. but upon the richness or poverty of the mines. obliges all bankers to be more liberal in their dealings with their customers. It obliges all of them to be more circumspect in their conduct. or any division of labour. too. the freer and more general the competition. to guard themselves against those malicious runs. instead of diminishing. If bankers are restrained from issuing any circulating bank notes. lest their rivals should carry them away. the failure of any one company. or occasion equal quantities of them to exchange for a smaller quantity of goods of any other kind. increases the security of the public. and if they are subjected to the obligation of an immediate and unconditional payment of such bank notes as soon as presented. 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. in the course of things. their trade may. A paper currency which falls below the value of gold and silver coin. The late multiplication of banking companies in both parts of the united kingdom. if any branch of trade. In general. must sometimes happen. becomes of less consequence to the public. does not thereby sink the value of those metals.

PRODUCTIVE UNPRODUCOR OF PRODUCTIVE AND UNPRODUCLABOUR TIVE LABOUR THERE IS ONE SORT OF LABOUR which adds to the value of the subject upon which it is bestowed. and for which an equal quantity of labour could afterwards be procured. The labour of the menial servant. The labour of some of the most respectable orders in the society is. can afterwards. The sovereign. the value of those wages being generally restored. The labour of a menial servant. His services generally perish in the very instant of their performance. In the last chapter of the fourth book. It is. {Some French authors of great learning and ingenuity have used those words in a different sense. and does not fix or realize itself in any permanent subject. on the contrary. there is another which has no such effect. the whole army and navy. I shall endeavour to shew that their sense is an improper one. and are maintained by a part of the annual produce of the industry of other people. adds to the value of nothing.} Thus the labour of a manufacturer adds generally to the value of the materials which he works upon. OF THE ACCUMULATION OF CAPITAL. like that of menial servants. That subject. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity. They are the servants of the public. a certain quantity of labour stocked and stored up. has its value. or vendible commodity. to be employed. he grows poor by maintaining a multitude or menial servants. in the improved value of the subject upon which his labour is bestowed. with all the officers both of justice and war who serve under him. on the contrary. may be called productive. put into motion a quantity of labour equal to that which had originally produced it. and of his master’s profit. which lasts for some time at least after that labour is past. as it were. But the maintenance of a menial servant never is restored. for example. the latter. are unproductive labourers. however. or. which endures after that labour is past. does not fix or realize itself in any particular subject or vendible commodity.The Wealth of Nations CHAPTER III ACCUMUL CCUMULA CAPIT ITAL. for which an equal quantity of service could afterwards be procured. if necessary. unproductive labour. 270 . upon some other occasion. unproductive of any value. The labour of the latter. together with a profit. that of his own maintenance. if necessary. A man grows rich by employing a multitude of manufacturers. The former as it produces a value. the price of that subject. what is the same thing. Though the manufacturer has his wages advanced to him by his master. and seldom leave any trace of value behind them. he in reality costs him no expense. and deserves its reward as well as that of the former.

and that always the largest. which had been withdrawn from a capital. the work of all of them perishes in the very instant of its production. will not purchase its protection. Of the produce of a great manufactory. as the profits of his stock. and thus constitutes a revenue both to the owner of this capital. and frequently the largest. how great soever. physicians. how honourable. of the commonwealth. and for procuring a revenue to them. and finished work. and those who do not labour at all. and defence. one part replaces the capital of the farmer. never is immediately employed 271 . as the profit of his stock. the whole annual produce. in the same manner. as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands. and the less in the other. it naturally divides itself into two parts. or to some other person. or for renewing the provisions. and to some other person as the rent of his land. is. men of letters of all kinds. are all equally maintained by the annual produce of the land and labour of the country. of the produce of land. In the same class must be ranked. and the next year’s produce will be greater or smaller accordingly. churchmen. the effect of their labour this year. lawyers. one part. the more in the one case. replaces the capital of the undertaker of the work. for the year to come. in the first place. how useful.Adam Smith Their service. The protection. the harangue of the orator. will remain for the productive. produces nothing which could afterwards purchase or procure an equal quantity of labour. the other pays his profit. One of them. the other pays his profit and the rent of the landlord. The labour of the meanest of these has a certain value. Thus. buffoons. That part of the annual produce of the land and labour of any country which replaces a capital. or the tune of the musician. therefore. opera-singers. if we except the spontaneous productions of the earth. etc. musicians. some both of the gravest and most important. and defence. materials. yet when it first comes either from the ground. opera-dancers. players. and that of the noblest and most useful. security. as the rent of his land. According. or from the hands of the productive labourers. Like the declamation of the actor. produces nothing for which an equal quantity of service can afterwards be procured. 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. destined for replacing a capital. This produce. and thus constitutes a revenue to the owner of this capital. regulated by the very same principles which regulate that of every other sort of labour. and some of the most frivolous professions. security. being the effect of productive labour. can never be infinite. but must have certain limits. Both productive and unproductive labourers. the other for constituting a revenue either to the owner of this capital. or how necessary soever.

though 272 . to have some predilection for the latter. but even the common workman. Whatever part of his stock a man employs as a capital. may maintain indifferently either productive or unproductive hands. or as the profits of stock. he always expects it to be replaced to him with a profit. It is his spare revenue only. or he may pay some taxes. before he can employ any part of them in this manner. till after it has put into motion its full complement of productive labour. is generally but a small one. and for maintaining productive labourers only. though originally destined for replacing a capital.The Wealth of Nations to maintain any but productive hands. of which productive labourers have seldom a great deal. which had been originally destined to replace a capital. or all that it could put into motion in the way in which it was employed. the greatness of their number may compensate. however. more honourable and useful. in some measure. it constitutes a revenue to them. if his wages are considerable. These are the two sorts of revenue of which the owners have generally most to spare. They might both maintain indifferently. however. the smallness of their contribution. and after having served in the function of a capital to him. and placed in his stock reserved for immediate consumption. The workman must have earned his wages by work done. however. and in the payment of taxes. by that part which. That which is immediately destined for constituting a revenue. may maintain a menial servant. It pays the wages of productive labour only. that part is from that moment withdrawn from his capital. No part of the annual produce. therefore. Whenever he employs any part of it in maintaining unproductive hands of any kind. and thus help to maintain another set. They generally have some. indeed. too. the principal sources from which unproductive hands derive their subsistence. They seem. Unproductive labourers. and those who do not labour at all. either. may be employed in maintaining indifferently either productive or unproductive hands. but equally unproductive. therefore. are all maintained by revenue. secondly. The rent of land and the profits of stock are everywhere. not only the great landlord or the rich merchant. in maintaining productive hands only. He employs it. either as profit or as rent. The expense of a great lord feeds generally more idle than industrious people The rich merchant. first. Thus. whatever part of it is over and above their necessary subsistence. That part. either as the rent of land. either productive or unproductive hands. and so contribute his share towards maintaining one set of unproductive labourers. by that part of the annual produce which is originally destined for constituting a revenue to some particular persons. is ever directed towards maintaining unproductive hands. yet when it comes into their hands. or he may sometimes go to a play or a puppet-show. or.

and was by him advanced to the occupiers of the land. who can dispose of the labour and service of all those whom it maintains. or as profit upon this paltry capital. depends very much in every country upon the proportion between that part of the annual produce. and which might. In the ancient state. maintained altogether by the spontaneous produce of uncultivated land. too. Thus. it seems. All the rest of the produce properly belonged to him too. It consisted commonly in a few wretched cattle. frequently the largest. the little trade that was stirring. It generally. though it increases in proportion to the extent. Their lord could at all times command their labour in peace and their service in war. is destined for replacing the capital of the rich and independent farmer. In the progress of improvement.Adam Smith with his capital he maintains industrious people only. and the few homely and coarse manufac- 273 . In the opulent countries of Europe. as soon as it comes either from the ground. But anciently. This proportion is very different in rich from what it is in poor countries. has been tripled and quadrupled since those ancient times. yet by his expense. sometimes not a fourth part of the whole produce of the land. therefore. they were equally dependent upon him as his retainers who lived in it. The rent of land. diminishes in proportion to the produce of the land. therefore. that is. great capitals are at present employed in trade and manufactures. be considered as a part of that spontaneous produce. portion of the produce of the land. and this third or fourth part of the annual produce is. by the employment of his revenue. the share of the landlord seldom exceeds a third. a very small portion of the produce was sufficient to replace the capital employed in cultivation. the other for paying his profits. in all the improved parts of the country. three or four times greater than the whole had been before. during the prevalency of the feudal government. Though they lived at a distance from his house. is destined for replacing a capital. either as rent or as profit. and that which is destined for constituting a revenue. at present. he feeds commonly the very same sort as the great lord. But the whole produce of the land undoubtedly belongs to him. In the present state of Europe. The occupiers of land were generally bond-men. between the productive and unproductive hands. it really amounted to the whole produce of the land. however. or from the hands of the productive labourers. and though the rent which they paid was often nominally little more than a quit-rent. whose persons and effects were equally his property. Those who were not bond-men were tenants at will. rent. a very large. belonged to the landlord. in the opulent countries of Europe. which. The proportion. and the rent of the landlord. either as rent for his land.

Compeigne.The Wealth of Nations tures that were carried on. says the proverb. in the improved parts of Europe. dissolute. it is so low as four. Versailles. and of those who come to plead before them.. there is little trade or industry in any of the parliament towns of France. they are in general industrious. or from the hands of the productive labourers. in proportion to the stock. The funds destined for the maintenance of productive labour are not only much greater in the former than in the latter. In those towns which are principally supported by the constant or occasional residence of a court. it is because the stock is much greater. and in which the inferior ranks of people are chiefly maintained by the spending of revenue. and poor. three. At present. Our ancestors were idle for want of a sufficient encouragement to industry. as soon as it comes either from the ground. and the inferior ranks of people. These. If you except Rouen and Bourdeaux. and thriving. have generally a predilection for the latter. than they were two or three centuries ago. however. and Fontainbleau. therefore. but bear a much greater proportion to those which. which. is nowhere higher than six per cent. 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. That part of the annual produce. The great trade of Rouen and Bourdeaux seems to be altogether the effect of their situation. and in most Dutch towns. the rate of interest. the profits are generally much less. is always much greater in rich than in poor countries. to play for nothing. though they may be employed to maintain either productive or unproductive hands. is not only much greater in rich than in poor countries. and in some of the most improved. It is better. In mercantile and manufacturing towns. than to work for nothing. because. as at Rome. where the inferior ranks of people are chiefly maintained by the employment of capital. as in many English. The rate of interest was nowhere less than ten per cent. and their profits must have been sufficient to afford this great interest. Though that part of the revenue of the inhabitants which is derived from the profits of stock. must have yielded very large profits. Rouen is necessarily the entrepot of almost all the goods which are 274 . but bears a much greater proportion to that which is immediately destined for constituting a revenue either as rent or as profit. being chiefly maintained by the expense of the members of the courts of justice. is destined for replacing a capital. they are in general idle. The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. We are more industrious than our forefathers. sober. and two per cent. in the present times. are in general idle and poor. required but very small capitals.

In a city where a great revenue is spent. Lisbon. The inhabitants of a large village. and can at the same time be considered as trading cities. therefore. perhaps. corrupts. The situation of all the three is extremely advantageous. When the Scotch parliament was no longer to be assembled in it. the only three cities in Europe. that is. A considerable revenue. There was little trade or industry in Edinburgh before the Union. to be the residence of the principal courts of justice in Scotland. in consequence of a great lord’s having taken up his residence in 275 . of which the inhabitants are chiefly maintained by the employment of capital. and which seems to produce the wine fittest for exportation. Such advantageous situations necessarily attract a great capital by the great employment which they afford it. and Vienna. it has sometimes been observed. etc. still continues to be spent in it. but for that of other cities and countries. or from the maritime provinces of France. it is much inferior to Glasgow. it is probable. of the boards of customs and excise. or best suited to the taste of foreign nations. and of the rivers which run into it. the industry of those who ought to be maintained by the employment of capital. in the same manner. The same thing may be said of Paris. and renders it less advantageous to employ a capital there than in other places.Adam Smith brought either from foreign countries. after having made considerable progress in manufactures. when it ceased to be the necessary residence of the principal nobility and gentry of Scotland. but Paris itself is the principal market of all the manufactures established at Paris. The idleness of the greater part of the people who are maintained by the expense of revenue. and naturally fits them to be the entrepots of a great part of the goods destined for the consumption of distant places. to employ with advantage a capital for any other purpose than for supplying the consumption of that city. are. have become idle and poor. and the employment of this capital is the cause of the industry of those two cities. very little more capital seems to be employed than what is necessary for supplying their own consumption. one of the richest wine countries in the world. and Copenhagen. little more than the smallest capital which can be employed in them. London. It still continues. or as cities which trade not only for their own consumption. which are both the constant residence of a court. Bourdeaux is. the entrepot of the wines which grow upon the banks of the Garronne. In trade and industry. In the other parliament towns of France. Of those three cities. and its own consumption is the principal object of all the trade which it carries on. it became a city of some trade and industry. for the consumption of the great city of Paris. Paris is by far the most industrious. Madrid. however. 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.

or enables some other person to do so. and diminished by prodigality and misconduct. which the whole could have purchased. for the sake of the profit. it is immediately employed as a capital. which gives an additional value to the annual produce. and either employs it himself in maintaining an additional number of productive hands. Whatever a person saves from his revenue he adds to his capital. By saving a part of it. the food. but by a different set of people: by labourers. the number of productive hands. That portion which he annually saves. so the capital of a society. indeed. which is the same with that of all the individuals who compose it. and consequently the exchangeable value of the annual produce of the land and labour of the country. It tends. but whatever industry might acquire. manufacturers. that is. Every increase or diminution of capital. consumed by idle guests and menial servants. His revenue. the value of their annual consumption. who reproduce. the food. with a profit. and not industry. therefore. as that part is. It puts into motion an additional quantity of industry.The Wealth of Nations their neighbourhood. provides the subject which parsimony accumulates. and nearly in the same time too: but it is consumed by a different set of people. Parsimony. the real wealth and revenue of all its inhabitants. by lending it to him for an interest. and lodging. if parsimony did not save and store up. is the immediate cause of the increase of capital. for a share of the profits. industry prevails. is paid him in money. we shall suppose. Had he spent the whole. who leave nothing behind them in return for their consumption. idleness. as. That portion of his revenue which a rich man annually spends. is. the capital would never be the greater. clothing. would have been distributed among the former set of people. immediately employed as a capital. for the sake of the profit. Parsimony. is as regularly consumed as what is annually spent. and artificers. can be increased only in the same manner. wherever revenue. and nearly in the same time too. to increase the exchangeable value of the annual produce of the land and labour of the country. therefore. by increasing the fund which is destined for the maintenance of productive hands. naturally tends to increase or diminish the real quantity of industry. either by himself or by some other person. What is annually saved. Industry. Capitals are increased by parsimony. in most cases. 276 . tends to increase the number of those hands whose labour adds to the value of the subject upon winch it is bestowed. is consumed in the same manner. seems everywhere to regulate the proportion between industry and idleness Wherever capital predominates. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains. The proportion between capital and revenue. therefore.

however. its effect upon the productive funds of the society would still be the same. he encroaches upon his capital. it may be said. indeed. but the consumers are different. by feeding the idle with the bread of the industrious. No part of it can ever afterwards be employed to maintain any but productive hands. so far as it depends upon him. would tend not only to beggar himself. which ought to have maintained productive. he not only affords maintenance to an additional number of productive hands. Like him who perverts the revenues of some pious foundation to profane purposes. equally have remained in the country. Every year. which may be purchased with it. they would have reproduced. and. in this case. By what a frugal man annually saves. but like the founder of a public work-house he establishes. by any trust-right or deed of mortmain. the real wealth and revenue of its inhabitants. he necessarily diminishes. The perpetual allotment and destination of this fund. be- 277 .Adam Smith clothing. indeed. The consumption is the same. If the prodigality of some were not compensated by the frugality of others. and lodging. he pays the wages of idleness with those funds which the frugality of his forefathers had. not being in foreign goods. is not always guarded by any positive law. and not occasioning any exportation of gold and silver. the conduct of every prodigal. by a very powerful principle. The prodigal perverts it in this manner: By not confining his expense within his income. The same quantity of money would. the value of the annual produce of the land and labour of the whole country. without an evident loss to the person who thus perverts it from its proper destination. together with a profit. Every year there would still be a certain quantity of food and clothing. It is always guarded. employed in maintaining unproductive hands. But if the quantity of food and clothing which were thus consumed by unproductive. consequently. This expense. therefore. had been distributed among productive hands. are necessarily reserved for the latter. the full value of their consumption. for that of the ensuing year. Though the expense of the prodigal should be altogether in home made. as it were. and there would. as it were. consecrated to the maintenance of industry. a perpetual fund for the maintenance of an equal number in all times to come. and no part of it in foreign commodities. By diminishing the funds destined for the employment of productive labour. the quantity of that labour which adds a value to the subject upon which it is bestowed. the same quantity of money would remain in the country as before. the plain and evident interest of every individual to whom any share of it shall ever belong. but to impoverish his country. 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.

By means of it. The same quantity of money. in this case. to support its consumption in adversity. The food. provisions. The interest of whoever possesses it requires that it should be employed. be the effect. and no country will ever long retain a quantity which it has no occasion for. must diminish as the value of that produce diminishes. and finished work. must be determined by the value of the consumable goods annually circulated within it. for some little time. materials. will contribute. it will. and employed in purchasing consumable goods. are bought and sold. must in every country naturally increase as the value of the annual produce increases. Their value. The value of the consumable goods annually circulated within the society being greater. These must consist. 278 . but having no employment at home. which may be of some use at home. Gold and silver are purchased everywhere in the same manner. in spite of all laws and prohibitions. will not be allowed to lie idle. is the price paid for them in Peru as well as in England. and distributed to their proper consumers. in this manner. But the money which. alleviate the misery of that declension. will never belong without the quantity of those metals which it has occasion for. the additional quantity of gold and silver necessary for circulating the rest. Its annual exportation will. therefore. A part of the increased produce. The country which has this price to pay. the revenue and maintenance. The sole use of money is to circulate consumable goods. and may even. The increase of those metals will. clothing. of the public prosperity. There would have been two values instead of one. but the effect of its declension. be sent abroad. of all those whose labour or stock is employed in bringing them from the mine to the market. therefore. by this annual diminution of produce.The Wealth of Nations sides. can not long remain in any country in which the value of the annual produce diminishes. not the cause. in this case. continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. besides. have been a reproduction of an equal value of consumable goods. The quantity of money. therefore. not the cause. and employed in purchasing gold and silver. will require a greater quantity of money to circulate them. for some little time. The quantity of money. either in the immediate produce of the land and labour of the country itself. is annually thrown out of domestic circulation. which can be annually employed in any country. will naturally be employed in purchasing. on the contrary. and lodging. or in something which had been purchased with some part of that produce. wherever it is to be had. and along with it the quantity of money which can be employed in circulating them. What in the days of its prosperity had been saved from that annual produce. The exportation of gold and silver is.

as vulgar prejudices suppose. though sometimes violent and very difficult to be restrained. is in general only momentary and occasional. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. comes with us from the womb. The effects of misconduct are often the same as those of prodigality. therefore. the principle which prompts to expense is the passion for present enjoyment. by the injudicious manner in which they are employed. and never leaves us till we go into the grave. the profusion or imprudence of some being always more than compensated by the frugality and good conduct of others. or upon some extraordinary occasion. After all our complaints of the fre- 279 . and every frugal man a public benefactor. therefore. It can seldom happen. though generally calm and dispassionate. taking the whole course of their life at an average. or in the quantity of the precious metals which circulate within it. With regard to misconduct. that the circumstances of a great nation can be much affected either by the prodigality or misconduct of individuals. there is scarce. whether in the value of the annual produce of its land and labour. and in some men upon almost all occasions. prevails in almost all men upon some occasions. as to be without any wish of alteration or improvement of any kind. yet as. trade. a desire which. is the desire of bettering our condition. as plain reason seems to dictate. the principle of frugality seems not only to predominate. or manufactures. yet in the greater part of men. in which any man is so perfectly and completely satisfied with his situation. But the principle which prompts to save. every prodigal appears to be a public enemy. and the most likely way of augmenting their fortune. but to predominate very greatly. the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. there must always be some diminution in what would otherwise have been the productive funds of the society. perhaps. either regularly and annually. a single instance. Every injudicious and unsuccessful project in agriculture. we may imagine the real wealth and revenue of a country to consist in. indeed. With regard to profusion. though the capital is consumed by productive hands only. In the whole interval which separates those two moments. mines. tends in the same manner to diminish the funds destined for the maintenance of productive labour. which. they do not reproduce the full value of their consumption. Though the principle of expense. is to save and accumulate some part of what they acquire.Adam Smith Whatever. in either view of the matter. fisheries. It is the means the most vulgar and the most obvious. In every such project.

or the productive powers 280 . upon most occasions. as some do not avoid the gallows. The annual produce of the land and labour of any nation can be increased in its value by no other means. The next year’s produce. though they sometimes are by public prodigality and misconduct. they may in a particular year consume so great a share of this produce. The uniform. and uninterrupted effort of every man to better his condition. is.The Wealth of Nations quency of bankruptcies. in most countries. Great nations are never impoverished by private. may consume so great a share of their whole revenue. and if the same disorder should continue. as well as private opulence is originally derived. than one in a thousand. who in time of peace produce nothing. in spite both of the extravagance of government.is frequently powerful enough to maintain the natural progress of things towards improvement. therefore. sufficient to compensate. in spite not only of the disease. but by increasing either the number of its productive labourers. will be less than that of the foregoing. 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. do not avoid it. the principle from which public and national. however. are all maintained by the produce of other men’s labour. that of the third year will be still less than that of the second. great fleets and armies. as not to leave a sufficiency for maintaining the productive labourers. as they themselves produce nothing. and all other sorts of business. employed in maintaining unproductive hands. not much more. not only the private prodigality and misconduct of individuals. Like the unknown principle of animal life. even while the war lasts. The whole. Such people. and thereby oblige so great a number to encroach upon their capitals. The greater part of men. Such are the people who compose a numerous and splendid court. Some. it appears from experience. and of the greatest errors of administration. indeed. Bankruptcy is. a great ecclesiastical establishment. perhaps. This frugality and good conduct. who should reproduce it next year. the greatest and most humiliating calamity which can befal an innocent man. perhaps. to an unnecessary number. are sufficiently careful to avoid it. or almost the whole public revenue is. make but a very small part of the whole number engaged in trade. constant. Those unproductive hands who should be maintained by a part only of the spare revenue of the people. it frequently restores health and vigour to the constitution. and in time of war acquire nothing which can compensate the expense of maintaining them. the unhappy men who fall into this misfortune. therefore. but the public extravagance of government. but of the absurd prescriptions of the doctor. When multiplied. therefore. upon the funds destined for the maintenance of productive labour.

is certainly much greater than it was a little more than a century ago. at the restoration of Charles II. It is by means of an additional capital only. we must compare the state of the country at periods somewhat distant from one another. can never be much increased. The productive powers of the same number of labourers cannot be increased. indeed. that the country was depopulated. requires a much greater capital than where every man is occasionally employed in every different part of the work.Adam Smith of those labourers who had before been employed. that its lands are better cultivated. but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour. or of certain districts of the country. the state of a nation at two different periods. doubt of this. things which sometimes happen. an additional capital is almost always required. The annual produce of the land and labour of England. even of those who have not enjoyed the most prudent and parsimonious governments. Nor have these publications been all party pamphlets. that the riches and industry of the whole are decaying. I believe. therefore. with such abilities as to gain some authority with the public. written. at near periods. for example. that the undertaker of any work can either provide his workmen with better machinery. the improvement is not only not sensible. and trade undone. The number of its productive labourers. in which some book or pamphlet has not been published. to keep every man constantly employed in one way. When we compare. To form a right judgment of it. agriculture neglected. and that more must have been added to it by the good conduct of some. manufactures decaying. Though at present few people. but. When the work to be done consists of a number of parts. we may be assured that its capital must have increased during the interval between those two periods. and its trade more extensive. Many of 281 . though the country in general is in great prosperity. yet during this period five years have seldom passed away. its manufactures more numerous and more flourishing. In either case. or of the funds destined for maintaining them. But we shall find this to have been the case of almost all nations. but in consequence of an increase of capital. from the declension either of certain branches of industry. or of more proper division and distribution of employment. in all tolerably quiet and peaceable times. and pretending to demonstrate that the wealth of the nation was fast declining. or make a more proper distribution of employment among them. or by the public extravagance of government. that. there frequently arises a suspicion. too. and find that the annual produce of its land and labour is evidently greater at the latter than at the former. than had been taken from it either by the private misconduct of others. The progress is frequently so gradual. it is evident. the wretched offspring of falsehood and venality.

as it certainly did. too. in the confusion of civil discord. was certainly much greater at the Restoration than we can suppose it to have been about a hundred years before. At this period. in maintaining an extraordinary number of unproductive hands. who wrote nothing but what they believed. however. again. the war in Ireland. Even at this early period. there was not only much private and public profusion. and for no other reason but because they believed it. the country was much more advanced in improvement. Even then it was. but the total ruin of the country would have been expected from them? The fire and the plague of London. probably. whose labour would have replaced. the whole value of their consumption. So great a share of the annual produce of the land and labour of the country. the nation has contracted more than £145. many expensive and unnecessary wars. poorer than at the beginning. not only the impoverishment. In each of those periods. has. but to have left the country. that which has passed since the Restoration.000. and 1756.000 of debt. together with the two rebellions of 1715 and 1745. The annual produce of the land and labour of England. and every years increase would have augmented still more 282 . the two Dutch wars. But had not those wars given this particular direction to so large a capital. the natural accumulation of riches. In the course of the four French wars. been employed upon different occasions. with a profit. the four expensive French wars of 1688. 1701. not only to retard. could they have been foreseen. so that the whole cannot be computed at less than £200.The Wealth of Nations them have been written by very candid and very intelligent people. how many disorders and misfortunes have occurred. than it had been about a century before. since the Revolution. it was certainly a more improved country than at the invasion of Julius Caesar. such absolute waste and destruction of stock. 1742. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year. but sometimes. in the happiest and most fortunate period of them all.000. in a better condition than it had been at the Norman conquest: and at the Norman conquest. when its inhabitants were nearly in the same state with the savages in North America. over and above all the other extraordinary annual expense which they occasioned. the greater part of it would naturally have been employed in maintaining productive hands.000. which. we have all reason to believe. than during the confusion of the Saxon heptarchy. at the accession of Elizabeth. the disorders of the revolution. as might be supposed. at the end of the period. towards the close of the dissensions between the houses of York and Lancaster. great perversion of the annual produce from maintaining productive to maintain unproductive hands. Thus.

more manufactures would have been established. In the midst of all the exactions of government. that of the subject never will. 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. If their own extravagance does not ruin the state. for example. annually employed in cultivating this land. as it has never been blessed with a very parsimonious government. A man of fortune. and those which had been improved before would have been better cultivated. and prodigality diminishes. It is this effort. and allowed by liberty to exert itself in the manner that is most advantageous. it is to be hoped. Some modes of expense. as he chooses. and which. and those which had been established before would have been more extended. by their universal. however. Let them look well after their own expense. which can therefore be accumulated. must likewise be much greater. which has maintained the progress of England towards opulence and improvement in almost all former times. and in maintaining a great 283 . and in which one day’s expense can neither alleviate nor support that of another. and to restrain their expense. therefore. As frugality increases. But though the profusion of government must undoubtedly have retarded the natural progress of England towards wealth and improvement. will do so in all future times. may either spend his revenue in a profuse and sumptuous table. it is not perhaps very easy even to imagine. England.Adam Smith that of the following year. either in things which are consumed immediately. it has not been able to stop it. and uninterrupted effort to better their own condition. therefore. More houses would have been built. continual. and in which every day’s expense may. The capital. and without any exception. and in maintaining this labour. so parsimony has at no time been the characteristic virtue of its inhabitants. this capital has been silently and gradually accumulated by the private frugality and good conduct of individuals. the effect of that of the following day. the greatest spendthrifts in the society. more lands would have been improved. in kings and ministers to pretend to watch over the economy of private people. It is the highest impertinence and presumption. or support and heighten. The revenue of an individual may be spent. They are themselves always. or by prohibiting the importation of foreign luxuries. or it may be spent in things mere durable. either alleviate. seem to contribute more to the growth of public opulence than others. and to what height the real wealth and revenue of the country might by this time have been raised. and they may safely trust private people with theirs. the public capital. protected by law. so the conduct of those whose expense just equals their revenue. either by sumptuary laws. however. neither increases nor diminishes it. without either accumulating or encroaching.

What was formerly a seat of the family of Seymour. statues. which either have been long stationary. which his queen brought with her from Denmark. the other in the other. like the favourite and minister of a great prince who died a few years ago. you will frequently find many excellent. a few years ago. pictures. would always be worth something. though antiquated pieces of furniture. They are able to purchase them when their superiors grow weary of them. would be continually increasing. If you go into those houses. in collecting books. He would have a stock of goods of some kind or other. so is it likewise to that of a nation. No trace or vestige of the expense of the latter would remain. great collections of books. he may lay out the greater part of it in adorning his house or his country villa. too. or. in a little time. magnificent villas. As the one mode of expense is more favourable than the other to the opulence of an individual. become useful to the inferior and middling ranks of people. baubles. the furniture. was. or have gone somewhat to decay. the magnificence of the person whose expense had been chiefly in durable commodities. or in things more frivolous. contenting himself with a frugal table. and the effects of ten or twenty years’ profusion would be as completely annihilated as if they had never existed. nor the other have been made for their use. and few attendants. In countries which have long been rich. you will sometimes scarce find a single house which could have been built for its present inhabitants. which. and a multitude of dogs and horses. on the contrary. which are still very fit for use. as a present fit for a sovereign to make to a sovereign. what is most trifling of all. The former too would. jewels. The marriage-bed of James I. and the general accommodation of the whole people is thus gradually improved. are frequently both 284 . pictures. In some ancient cities. in useful or ornamental furniture. every day’s expense contributing something to support and heighten the effect of that of the following day. when this mode of expense becomes universal among men of fortune. ingenious trinkets of different kinds.The Wealth of Nations number of menial servants. though it might not be worth all that it cost. but of which neither the one could have been built. of Great Britain. that of the other. the clothing of the rich. would be no greater at the end of the period than at the beginning. and other curiosities. Noble palaces. you will frequently find the inferior ranks of people in possession both of houses and furniture perfectly good and entire. or. is now an inn upon the Bath road. Were two men of equal fortune to spend their revenue. in useful or ornamental buildings. in amassing a great wardrobe of fine clothes. statues. be the richer man of the two. at the end of the period. and which could as little have been made for them. the ornament of an alehouse at Dunfermline. the one chiefly in the one way. The houses.

therefore. but to the whole country to which they belong. a quantity of provisions of equal value would have been distributed among a still greater number of people. it increases. he can easily reform without exposing himself to the censure of the public. this expense maintains productive. is thrown to the dunghill. In the one way. one half. to a greater number of people than that which is employed in the most profuse hospitality. too. besides. and not have lost or thrown away a single ounce of them. commonly. at any time. upholsterers. and which are supposed to imply some acknowledgment of preceding bad conduct. not only to the neighbourhood. which may sometimes be served up at a great festival. The expense. These are things in which further expense is frequently rendered unnecessary by former expense. who would have bought them in pennyworths and pound weights. he appears to do so. and though the genius which planned them seems to be extinguished. in books. Italy still continues to command some sort of veneration. etc. though the wealth which produced them has decayed. but to frugality. Versailles is an ornament and an honour to France. In the one way. in furniture. mechanics. therefore. not because he has exceeded his fortune. in the other unproductive hands. gives maintenance. which is laid out in durable commodities. to reform his table from great profusion to great frugality. or pictures. by the number of monuments of this kind which it possesses. carpenters. besides. however. of those who have once been so unfortunate as to launch out too far into this sort of expense. perhaps. But if a person has. have afterwards the courage to reform. be understood to mean. he shares the greater part of it with 285 .Adam Smith an ornament and an honour. Few. is favourable not only to accumulation. and there is always a great deal wasted and abused. to lay down his equipage after he has once set it up. but because he has satisfied his fancy. perhaps from not having the same employment. Stowe and Wilton to England. are changes which cannot escape the observation of his neighbours. The expense. But if the expense of this entertainment had been employed in setting to work masons. If a person should at any time exceed in it. no imprudence can be inferred from his changing his conduct. Of two or three hundred weight of provisions. and when a person stops short. When a man of fortune spends his revenue chiefly in hospitality. that is laid out in durable commodities. in the other it does not increase the exchangeable value of the annual produce of the land and labour of the country. that the one species of expense always betokens a more liberal or generous spirit than the other. till ruin and bankruptcy oblige them. To reduce very much the number of his servants. I would not. by all this. been at too great an expense in building.

If he uses it as a stock reserved for immediate consumption. both restore the capital. with a profit. and.The Wealth of Nations his friends and companions. occasionally employed in both these ways. gew-gaws. especially when directed towards frivolous objects. CHAPTER IV STOCK AT OF STOCK LENT AT INTEREST THE STOCK which is lent at interest is always considered as a capital by the lender. to the increase of the public capital. as it always occasions some accumulation of valuable commodities. All that I mean is. without either alienating or encroaching upon some other source of revenue. that the one sort of expense. and he who lends to him will generally have 286 . and that. jewels. and gives nothing to any body without an equivalent. The latter species of expense. and as it maintains productive rather than unproductive hands. in the mean time. neither restore the capital nor pay the interest. he acts the part of a prodigal. the little ornaments of dress and furniture. therefore. The stock which is lent at interest is. he often spends the whole upon his own person. but in the former much more frequently than in the latter. the borrower is to pay him a certain annual rent for the use of it. not only a trifling. no doubt. consequently. as it is more favourable to private frugality. trinkets. but when he employs it in purchasing such durable commodities. but a base and selfish disposition. in this case. He expects that in due time it is to be restored to him. and pay the interest. without alienating or encroaching upon any other source of revenue. He can. who reproduce the value. in this case. He can. If he uses it as a capital. frequently indicates. The man who borrows in order to spend will soon be ruined. what was destined for the support of the industrious. and dissipates. conduces more than the other to the growth of public opulence. or as a stock reserved for immediate consumption. in the maintenance of the idle. The borrower may use it either as a capital. he employs it in the maintenance of productive labourers. such as the property or the rent of land.

but in order to replace a capital which had been spent before. assigns to the borrower his right to a certain portion of the annual produce of the land and labour of the country. 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. as it were. materials. advanced to them upon credit by shop-keepers and tradesmen. which can be lent at interest in any country. The only people to whom stock is commonly lent. one may say. It is not properly borrowed in order to be spent. we may be assured. and what the lender readily supplies him with. but the money’s worth. in all cases. who borrow upon mortgage. as soon as it comes either from the ground. Even among borrowers. If he wants it as a stock for immediate consumption. is destined. to which of the two sorts of people he has lent the greater part of his stock. which serves as the instrument of the different loans made in that country. What they borrow. Ask any rich man of common prudence. that it cannot happen so very frequently as we are sometimes apt to imagine. or to those who will spend it idly. which. They have generally consumed so great a quantity of goods. contrary to the interest of both parties. that people do both the one and the other. therefore. but what the borrower really wants. but by the value of that part of the annual produce. The quantity of stock. either of paper. Almost all loans at interest are made in money.Adam Smith occasion to repent of his folly. and maintenance necessary for carrying on their work. the number of the frugal and industrious surpasses considerably that of the prodigal and idle. is commonly spent before they borrow it. Even they scarce ever borrow merely to spend. By means of the loan. but such a capital as the owner does not care to be at the trouble of 287 . from the regard that all men have for their own interest. If he wants it as a capital for employing industry. is not regulated by the value of the money. it is from those goods only that the industrious can be furnished with the tools. is not the money. the lender. or the goods which it can purchase. or from the hands of the productive labourers. therefore. not only for replacing a capital. is. as it is commonly expressed. to be employed as the borrower pleases. or of gold and silver. of money. it is those goods only which he can place in that stock. where gross usury is out of the question. therefore. not the people in the world most famous for frugality. or. whether paper or coin. without their being expected to make any very profitable use of it. in order to pay the debt. that they find it necessary to borrow at interest. are country gentlemen. To borrow or to lend for such a purpose. to those who he thinks will employ it profitably. yet. and he will laugh at you for proposing the question. and though it no doubt happens sometimes.

and Y. than the amount of the money which serves as the instrument of their conveyance. A capital lent at interest may. who again purchases goods with them of D. In proportion as that share of the annual produce which. be considered as an assignment. with which X immediately purchases of C another £1000 worth of goods. and is three times greater than that of the money with which the purchases are made. It is distinct. A. equal to the whole amount of those pieces. at the end of it. Though money.The Wealth of Nations employing himself. in almost any proportion. W. as well as for many different purchases. increases 288 . B having no occasion for the money himself. but the deed of assignment. to thirty times their value. but from the trading and manufacturing interests. lends the identical pieces to X. is destined for replacing a capital. The stock lent by the three monied men is equal to the value of the goods which can be purchased with it. What the three monied men. the same pieces of money successively serving for many different loans. during the continuance of the loan. or. either coin or paper. both to the smaller and to the more considerable portion. an equal value either of coin or of paper. as soon as it comes either from the ground. may be all perfectly well secured. however. however. so they may likewise successively serve as the instrument of repayment. in this manner. in due time. the same pieces. as in these last the owners themselves employ their own capitals. is the power of making those purchases. And as the same pieces of money can thus serve as the instrument of different loans to three. in the same manner. or from the hands of the productive labourers. for the same reason. and. A. they constitute what is called the monied interest. for example. with a profit. either of coin or of paper. each of which is. in the course of a few days. the goods purchased by the different debtors being so employed as. called the interest. serves generally as the deed of assignment. may. called the repayment. in value. In this power consist both the value and the use of the loans. B. lends to W £1000. and for the same reason. and C. from the lender to the borrower. as it were. to bring back. and of three different purchases. which conveys from one hand to another those capitals which the owners do not care to employ themselves. X. with which W immediately purchases of B £1000 worth of goods. assigned to the three borrowers. a portion equally considerable with that which had originally been assigned to him. of a certain considerable portion of the annual produce. serve as the Instrument of three different loans. lends them to Y. the money is. Those capitals may be greater. annually assign to the lender a small portion. Even in the monied interest. it is itself altogether different from what is assigned by it. upon condition that the burrower in return shall. C. As such capitals are commonly lent out and paid back in money. not only from the landed. Those loans. In this manner.

but. has been so fully exposed by Mr Hume. seem to have imagined that the increase of the quantity of gold and silver. necessarily diminishes. the owner of one endeavouring to get possession of that employment which is occupied by another. or. they say. seems to have been the common rate of interest through the greater part of Europe. As capitals increase in any country. a competition between different capitals. But when the profits which can be made by the use of a capital are in this manner diminished. as well as many other writers.Adam Smith in any country. and Mr Montesquieu. upon most occasions. the interest. in consequence. As the quantity of stock to be lent at interest increases. too. that is. the rate of interest. was the real cause of the lowering of the rate of interest through the greater part of Europe. but. in different countries. as stock increases. but from other causes which are peculiar to this particular case. There arises. however. Labourers easily find employment. by the increase of the funds which are destined for maintaining it. This notion. sunk 289 . having become of less value themselves. Mr Lawe. Before the discovery of the Spanish West Indies. naturally accompanies the general increase of capitals. the price which could be paid for it. he must sometimes. Those metals. not only from those general causes which make the market price of things commonly diminish as their quantity increases. Mr Locke. and. the profits which can be made by employing them necessarily diminish. that it is. the quantity of stock to be lent at interest grows gradually greater and greater. The following very short and plain argument. grows every day greater and greater. without being at the trouble of employing them themselves. what is called the monied interest naturally increases with it. or the price which must be paid for the use of that stock. as it were. consequently. may serve to explain more distinctly the fallacy which seems to have misled those gentlemen. Their competition raises the wages of labour. unnecessary to say any thing more about it. in other words. He must not only sell what he deals in somewhat cheaper. must necessarily be diminished with them. he can hope to justle that other out of this employment by no other means but by dealing upon more reasonable terms. the price which can be paid for the use of it. It has since that time. at both ends. The demand for productive labour. buy it dearer. which at first sight seems so plausible. the use of any particular portion of them necessarily became of less value too. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. perhaps. and sinks the profits of stock. The increase of those particular capitals from which the owners wish to derive a revenue. but the owners of capitals find it difficult to get labourers to employ. ten per cent. in consequence of the discovery of the Spanish West Indies. in order to get it to sell.

but it is the most favourable to the opinion which we are going to examine. This supposition will not. and that in those countries. on the contrary. but the thing assigned would be precisely the same as before. from ten to five per cent. the proportion between those two values is necessarily altered. four. were then. though a greater number of pieces might be requisite for conveying any equal portion of it from one hand to another. An increase in the quantity of silver. the number of people whom they could maintain and employ. Its price or wages. both nominally and really. and. If £100 are in those countries now of no more value than £50 were then. could have no other effect than to diminish the value of that metal. When that is in- 290 . therefore.The Wealth of Nations to six. By reducing the rate of interest. an interest which is equal to one fourth only of the value of the former interest. the same quantity of silver can now purchase just half the quantity of goods which it could have purchased before. and exactly in the same proportion. which is supposed to be equal to one half of its former value. five. Whatever were the causes which lowered the value of the capital. though the rate had never been altered. £10 must now be of no more value than £5 were then. The funds for maintaining productive labour being the same. They would be exchanged for a greater number of pieces of silver. would be precisely the same. The proportion between the value of the capital and that of the interest must have remained the same. £5 now can be worth no more than £2:10s. it is utterly impossible that the lowering of the value of silver could have the smallest tendency to lower the rate of interest. like the conveyances of a verbose attorney. we give for the use of a capital. would be more cumbersome. but the quantity of labour which they could command. and could produce only the same effects. By altering the rate. The profits of stock would be the same. while that of the commodities circulated by means of it remained the same. The wages of labour are commonly computed by the quantity of silver which is paid to the labourer. that in every particular country the value of silver has sunk precisely in the same proportion as the rate of interest. I believe. The capital of the country would be the same. where interest has been reduced from ten to five per cent. If £100 now are worth no more than £50 were then. Let us suppose. would really be the same. The deeds of assignment. though nominally greater. and three per cent. even upon this supposition. They would be paid in a greater number of pieces of silver. but they would purchase only the same quantity of goods. therefore. but their real value would be precisely the same as before. for example. the same must necessarily have lowered that of the interest. The nominal value of all sorts of goods would be greater. be found anywhere agreeable to the truth. the demand for it would be the same.

would. Any increase in the quantity of commodities annually circulated within the country. would really be augmented. and consequently the demand for that labour. but that smaller quantity might purchase a greater quantity of goods than a greater had done before. but by the proportion which those pieces bear to the whole capital employed. what can commonly be given for the use of money being necessarily regulated by what can commonly be made by the use of it. while that of the money which circulated them remained the same. might. aweek are said to be the common wages of labour. though the value of money. The quantity of productive labour which it could maintain and employ would be increased. The debtor being obliged to pay. if 291 . though they may sometimes be no greater than before. something ought everywhere to be paid for the use of it. They might be paid with a smaller quantity of money. but for the risk which his creditor runs by accepting a compensation for that use. and consequently the common interest of money. he is obliged. Thus. It might continue to be expressed by the same quantity of money. his wages appear to be increased. would be the same. but it would command a greater quantity of labour. But the profits of stock are not computed by the number of pieces of silver with which they are paid. But as something can everywhere be made by the use of money. though it might nominally be the same. produce many other important effects. has been found from experience to increase the evil of usury. This regulation. 5s. In some countries the interest of money has been prohibited by law. therefore. the competition between the different capitals of individuals into which it was divided would likewise be the same. The profits of stock would be diminished. The capital of the country. The common proportion between capital and profit. instead of preventing. both really and in appearance. the competition between the different capitals of which it was composed would naturally be augmented along with it. and yet might appear to sink. and ten per cent. keeping pace always with the profits of stock. be greatly diminished. besides that of raising the value of the money. the common profits of stock. on the contrary. but the whole capital of the country being the same as before. They would all trade with the same advantages and disadvantages. The interest of money.Adam Smith creased. or the quantity of goods which any particular sum could purchase. was greatly augmented. in this manner. 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 whole capital of the country being augmented. not only for the use of the money. Its wages would naturally rise with the demand. therefore. in a particular country.

If the legal rate of interest in Great Britain. on the contrary. to insure his creditor from the penalties of usury. The creditor will not lend his money for less than the use of it is worth. the law in order to prevent the extortion of usury. In countries where interest is permitted. upon good security. the law being evaded in several different ways. the effects of this fixation must be nearly the same as those of a total prohibition of interest.The Wealth of Nations one may say so. and the debtor must pay him for the risk which he runs by accepting the full value of that use. would not venture into the competition. If it is fixed precisely at the lowest market price. who alone would be willing to give this high interest. 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. five per cent. Sober people. Where the legal rate of interest. In a country such as Great Britain. the present legal rate. the greater part of the money which was to be lent. This rate ought always to be somewhat above the lowest market price. for example. or the price which is commonly paid for the use of money by those who can give the most undoubted security. and thrown into those which were most likely to waste and destroy it. would be lent to prodigals and projectors. as borrowers. the credit of all those who cannot give the very best security. it is to be observed. money continued to be lent in France at five per cent. No law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law is made. it ruins. ought not to be much above the lowest market rate. depends 292 . If this legal rate should be fixed below the lowest market rate. The legal rate. by which the French king attempted to reduce the rate of interest from five to four per cent. was fixed so high as eight or ten per cent. to prodigals and projectors. though it ought to be somewhat above. The ordinary market price of land. and to private people. is perhaps as proper as any. and his money is much safer in the hands of the one set of people than in those of the other. generally fixes the highest rate which can be taken without incurring a penalty. 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. where money is lent to government at three per cent. at four and four and a-half. 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. and obliges them to have recourse to exorbitant usurers. Notwithstanding the edict of 1766. it is to be observed. The person who lends money gets nearly as much interest from the former as he dares to take from the latter. is fixed but a very little above the lowest market rate. with honest people who respect the laws of their country. sober people are universally preferred.

or.Adam Smith everywhere upon the ordinary market rate of interest. without taking the trouble to employ it himself. The person who has a capital from which he wishes to derive a revenue. the price of land rose to twenty. everybody would buy land. mines. thirdly in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted. or. As interest sunk to six. in the third. deliberates whether he should buy land with it. in manufacturing and preparing that rude produce for immediate use and consumption. will generally dispose him to content himself with a smaller revenue from land. those of 293 . and thirty years purchase. In England it commonly sells at thirty. A capital may be employed in four different ways. In the first way are employed the capitals of all those who undertake improvement or cultivation of lands. or lend it out at interest. yet the quantity of that labour which equal capitals are capable of putting into motion. than what he might have by lending out his money at interest. in France at twenty years purchase. and in the fourth. and the common price of land is lower. On the contrary. together with some other advantages which almost everywhere attend upon this species of property. varies extremely according to the diversity of their employment. or fisheries. and if the rent of land should fall short of the interest of money by a greater difference. CHAPTER V EMPLOYMENTS OF THE DIFFERENT EMPLOYMENTS OF CAPIT ITALS CAPITALS THOUGH ALL CAPITALS are destined for the maintenance of productive labour only. but they will compensate a certain difference only. first. and four per cent. When interest was at ten per cent. nobody would buy land. in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. as does likewise the value which that employment adds to the annual produce of the land and labour of the country. in the second. These advantages are sufficient to compensate a certain difference of revenue. lastly. The market rate of interest is higher in France than in England. five-and-twenty. The superior security of land. in procuring the rude produce annually required for the use and consumption of the society. secondly. if the advantages should much more than compensate the difference. those of all master manufacturers. either. land was commonly sold for ten or twelve years purchase. five. which would soon reduce its ordinary price. those of all wholesale merchants. which again would soon raise its ordinary price. or.

every man would be obliged to purchase a whole ox or a whole sheep at a time. Each of those four methods of employing a capital is essentially necessary. If there was no such trade as a butcher. He is thereby enabled to employ almost his whole stock as a capital. and thus encourages the industry. and which yields him a revenue. and much more so to the poor. He is thus enabled to furnish work to a greater value. every man would be obliged to purchase a greater quantity of the goods he wanted than his immediate occasions required. and increases the enjoyments of both. either to the existence or extension of the other three. 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. Nothing can be more convenient for such a person than to be able to purchase his subsistence from day to day. he would be forced to place in that part of his stock which is reserved for immediate consumption. and could add nothing to the wealth of the society. it either would never be produced. as he wants it. So far is it from being necessary either to tax them.The Wealth of Nations all retailers. or to the general conveniency of the society. 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 in the furniture of his shop. or if it was produced spontaneously. it would be of no value in exchange. 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. The prejudices of some political writers against shopkeepers and tradesmen are altogether without foundation. 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. The capital of the merchant exchanges the surplus produce of one place for that of another. or to restrict their numbers. no more of either could be produced than was necessary for the consumption of the neighbourhood. neither manufactures nor trade of any kind could exist. Unless a capital was employed in transporting either the rude or manufactured produce from the places where it abounds to those where it is wanted. for example. because there could be no demand for it. a great part of the stock which he employs as a capital in the instruments of his trade. Unless a capital was employed in furnishing rude produce to a certain degree of abundance. If a poor workman was obliged to purchase a month’s or six months’ provisions at a time. or even from hour to hour. and which yields him no revenue. This would generally be inconvenient to the rich. that they can never be multi- 294 .

together with their profits. that occasions a general disposition to drunkenness among the common people. It is not the multitude of alehouses. perhaps. necessarily gives employment to a multitude of alehouses. This evil. The capital of the retailer replaces. is limited by the demand of that town and its neighbourhood. Equal capitals. than if the whole trade was monopolized by one or two persons. The retailer himself is the only productive labourer whom it immediately employs. will immediately put into motion very different quantities of productive labour. to give the must suspicious example. cannot exceed what is sufficient to purchase that quantity. It can never hurt either the consumer or the producer. In his profit consists the whole value which its employment adds to the annual produce of the land and labour of the society. in order to raise the price. fixes and realizes itself in the subject or vendible commodity upon which it is bestowed. may sometimes decoy a weak customer to buy what he has no occasion for. employed in each of those four different ways. but to take care of this. and it may safely be trusted to their discretion. and retailer. and augment. and generally adds to its price the value at least of their own maintenance and consumption. but that disposition. therefore. for example. on the contrary. and if it were divided among twenty. are all drawn from the price of the goods which the two first produce. and the two last buy and sell. are themselves productive labourers. however. that of the merchant of whom he purchases goods. the value of the annual produce of the land and labour of the society to which they belong. Their competition might. ruin some of themselves. it must tend to make the retailers both sell cheaper and buy dearer. and the chance of their combining together. Their labour. too. however. The persons whose capitals are employed in any of those four ways. together with its profits. The capital.Adam Smith plied so as to hurt the public. just so much the less. is the business of the parties concerned. which can be sold in a particular town. their competition would be just so much the greater. and thereby enables him to continue his business. The quantity of grocery goods. The capital of the wholesale merchant replaces. If this capital is divided between two different grocers. The profits of the farmer. perhaps. their competition will tend to make both of them sell cheaper than if it were in the hands of one only. is of too little importance to deserve the public attention. which can be employed in the grocery trade. Some of them. nor would it necessarily be prevented by restricting their numbers. of the manufacturer. the capital’s of the farmers and manufacturers of whom 295 . though they may so as to hurt one another. in very different proportions. arising from other causes. of the merchant. when properly directed.

together with its owner’s profits. This 296 . that of some other artificer of whom he purchases them. It augments the value of those materials by their wages. Not only his labouring servants. and though her labour costs no expense. than an equal capital in the hands of any wholesale merchant. Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade. It is by this service chiefly that he contributes indirectly to support the productive labour of the society. but of their wages. and thereby enables them to continue their respective trades. and by their masters’ profits upon the whole stock of wages. Part of his circulating capital is employed in purchasing materials. and instruments of trade employed in the business. a great part of the work always remains to be done by her. too. It puts immediately into motion. they regularly occasion the reproduction of the rent of the landlord. and replaces. are productive labourers. not so much to increase. and after all their labour. its produce has its value. not only occasion. as well as that of the most expensive workmen. like the workmen in manufactures. and all the value which it immediately adds to the annual produce. But a great part of it is always. No equal capital puts into motion a greater quantity of productive labour than that of the farmer. with their profits. therefore. together with its profits. The labourers and labouring cattle. Nature labours along with man. or to the capital which employs them. a much greater quantity of productive labour. and replaces. not only of his profits. materials. His capital employs. and it augments the price of those goods by the value. and to increase the value of its annual produce. as to direct the fertility of Nature towards the production of the plants most profitable to man. Over and above the capital of the farmer. though they do that too. In agriculture. either annually. and adds a much greater value to the annual produce of the land and labour of the society. The most important operations of agriculture seem intended. This is all the productive labour which it immediately puts into motion. may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field.The Wealth of Nations he purchases the rude and manufactured produce which he deals in. employed in agriculture. but of a much greater value. the reproduction of a value equal to their own consumption. the capitals of the farmers and miners of whom he purchases them. distributed among the different workmen whom he employs. A field overgrown with briars and brambles. therefore. too. and all its profits. Its operation in both these respects is a good deal superior to that of the capital of the retailer. or in a much shorter period. Planting and tillage frequently regulate more than they animate the active fertility of Nature. but his labouring cattle. the sailors and carriers who transport his goods from one place to another.

Part of the wool of Spain is manufactured in Great Britain. according to the supposed extent of those powers. seems to have no fixed or necessary residence anywhere. and some part of that cloth is afterwards sent back to Spain. It is seldom less than a fourth. to the real wealth and revenue of its inhabitants. but in proportion. both from the place where the materials grow.Adam Smith rent may be considered as the produce of those powers of Nature. and the value of their annual produce. it adds a much greater value to the annual produce of the land and labour of the country. but where this shall be. therefore. both from the places which afford the materials of its manufactures. can ever occasion so great reproduction. The capitals employed in the agriculture and in the retail trade of any society. of the whole produce. though there are some exceptions to this. no doubt. man does all. Their employment is confined almost to a precise spot. to the quantity of productive labour which it employs. according as it can either buy cheap or sell dear. is of very little importance. and frequently more than a third. and the reproduction must always be in proportion to the strength of the agents that occasion it. not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures. They must generally. In them Nature does nothing. The people of fashion in Sicily are clothed in silks made in other countries. too. Lyons is very distant. The capital employed in agriculture. reside where the manufacture is carried on. on the contrary. belong to resident members of the society. the number of their productive labourers is necessarily less than if he had been a native. after deducting or compensating every thing which can be regarded as the work of man. according to the supposed natural or improved fertility of the land. by one man only. or. Of all the ways in which a capital can be employed. too. It may frequently be at a great distance. or to 297 . The capital of the manufacturer must. It is greater or smaller. in other words. and to the shop of the retailer. it is by far the most advantageous to society. and from that where the complete manufacture is consumed. by the profits of that one man. may still belong indifferently either to his country. but may wander about from place to place. to the farm. It is the work of Nature which remains. and from those which consume them. from the materials which their own produces. the use of which the landlord lends to the farmer. If he is a foreigner. must always reside within that society. be a native or a foreigner. Whether the merchant whose capital exports the surplus produce of any society. The sailors or carriers whom he employs. is not always necessarily determined. No equal quantity of productive labour employed in manufactures. The capital of a wholesale merchant. or to their country.

to manufacture and prepare their whole rude produce for immediate use and consumption. Those materials are a part of the surplus produce of those countries. a great part of it. though it should not reside within it. which. There are many little manufacturing towns in Great Britain. in the same manner as if he had been a native. replace the capitals of the people who produce it. The inhabitants of many different parts of Great Britain have not capital sufficient to improve and cultivate all their lands. would be of no value. for want of a capital to manufacture it at home.The Wealth of Nations some third country. It may. in proportion as a greater share of it is employed in agriculture. The wool of the southern counties of Scotland is. where it can be exchanged for something for which there is a demand at home. and would soon cease to be produced. and to transport the surplus part either of the rude or manufactured produce to those distant markets. however. only the agents of wealthier merchants who reside in some of the great commercial cities. they are. as will likewise be 298 . It is of more consequence that the capital of the manufacturer should reside within the country. unless it was annually exchanged for something which is in demand here. the service by which the capital of a wholesale merchant chiefly contributes to support the productive labour. be very useful to the country. properly. If there are any merchants among them. and the British manufacturers replace the capitals of those merchants. A particular country. It necessarily puts into motion a greater quantity of productive labour. after a long land carriage through very bad roads. may frequently not have capital sufficient both to improve and cultivate all its lands. the greater will be the quantity of productive labour which it puts into motion within the country. and as effectually enables him to continue his business. and adds a greater value to the annual produce of the land and labour of the society. The merchants who export it. The capitals of the British manufacturers who work up the flax and hemp annually imported from the coasts of the Baltic. and to augment the value of the annual produce of the society to which he belongs. manufactured in Yorkshire. are surely very useful to the countries which produce them. The capital of a foreigner gives a value to their surplus produce equally with that of a native. by exchanging it for something for which there is a demand at home. When the capital of any country is not sufficient for all those three purposes. and thereby encourage them to continue the production. in the same manner as a particular person. It as effectually replaces the capital of the person who produces that surplus. 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.

were they to attempt. The greater part. and with an insufficient capital. either by combination. therefore. both of the exportation and coasting trade of America. 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. and. and is capable of executing only certain purposes. the further increase in the value of their annual produce. particularly in Virginia and Maryland. divert any considerable part of their capital into this employment. in the same manner as that of a single individual. they would retard. to monopolize to themselves their whole ex- 299 . by their continually accumulating and adding to it whatever they save out of their revenue. is certainly not the shortest way for a society. as they will thus be enabled to make the greatest savings. has not arrived at that degree of opulence for which it seems naturally destined. to acquire a sufficient one. the capital employed in manufactures puts into motion the greatest quantity of productive labour. instead of promoting.Adam Smith the value which its employment adds to the annual produce of the land and labour of the society. however. when it is employed in the way that affords the greatest revenue to all the inhabitants or the country. The country. They have no manufactures. is carried on by the capitals of merchants who reside in Great Britain. or by any other sort of violence. 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. which has not capital sufficient for all those three purposes. which necessarily accompany the progress of agriculture. instead of accelerating. prematurely. to do all the three. This would be still more the case. by thus giving a monopoly to such of their own countrymen as could manufacture the like goods. and would obstruct. It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness. That which is employed in the trade of exportation has the least effect of any of the three. no more than it would be for an individual. to stop the importation of European manufactures. The capital of all the individuals of a nation has its limits. the progress of their country towards real wealth and greatness. belong many of them to merchants who reside in the mother country. and which are the work of the women and children in every private family. The capital of all the individuals of a nation is increased in the same manner as that of a single individual. those household and coarser manufactures excepted. To attempt. that almost their whole capitals have hitherto been employed in agriculture. in the same manner. After agriculture. indeed. Even the stores and warehouses from which goods are retailed in some provinces. Were the Americans. It is likely to increase the fastest. and adds the greatest value to the annual produce.

indeed. according to the different sorts of wholesale trade in which any part of it is employed. When it sends out from the residence of the merchant a certain value of commodities. too. The capital which sends 300 . it generally brings hack in return at least an equal value of other commodities. The home trade is employed in purchasing in one part of the same country. for which they found a demand there. The difference. that ever were in the world. and wholesale trade. that had both been employed in the agriculture or manufactures of that country. and add a greater or smaller value to the annual produce of its land and labour. according to all accounts. according to the different proportions in which it is employed in agriculture. The capital which is employed in purchasing in one part of the country. and thereby enables them to continue that support. The course of human prosperity. the foreign trade of consumption. frequently gold and silver. It comprehends both the inland and the coasting trade. two distinct capitals. When both are the produce of domestic industry. and of the ancient state of Indostan. 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. two distinct capitals. The greater part of the surplus produce of all those three countries seems to have been always exported by foreigners. it necessarily replaces. generally replaces. a superstition nearly of the same kind prevails among the Indians. are chiefly renowned for their superiority in agriculture and manufactures. The carrying trade is employed in transacting the commerce of foreign countries. The foreign trade of consumption is employed in purchasing foreign goods for home consumption. The ancient Egyptians had a superstitious antipathy to the sea.The Wealth of Nations portation trade. and thereby enables them to continue that employment. the produce of the industry of that country. and selling in another. maybe reduced to three different sorts: the home trade. in order to sell in another. perhaps. They do not appear to have been eminent for foreign trade. the produce of the industry of that country. the wealthiest. we give credit to the wonderful accounts of the wealth and cultivation of China. all buying in order to sell again by wholesale. All wholesale trade. manufactures. Even those three countries. by every such operation. It is thus that the same capital will in any country put into motion a greater or smaller quantity of productive labour. of those of ancient Egypt. and the Chinese have never excelled in foreign commerce. unless. or in carrying the surplus produce of one to another. is very great. who gave in exchange for it something else. which had both been employed in Supporting productive labour. by every such operation. and the carrying trade.

and brings back Portuguese goods to Great Britain. either immediately. but in exchange for something that had been produced at home. These last. not with the produce of domestic industry but with some other foreign goods. The returns of the foreign trade of consumption seldom come in before the end of the year. the one will give four-andtwenty times more encouragement and support to the industry of the country than the other. or with something else that had been purchased with it. the case of war and conquest excepted. or after two or more different exchanges. The capital which sends British goods to Portugal. when this purchase is made with the produce of domestic industry. must have been purchased. If the hemp and flax of Riga are purchased with the tobacco of Virginia. the same as those of one employed in the most direct trade of the same kind. in every respect. therefore. will sometimes make twelve operations. either immediately with the produce of domestic industry. however. by every such operation. But the returns of the foreign trade of consumption are very seldom so quick as those of the home trade. before he can employ the same capital in repurchasing a like quantity of British manufactures. The effects. which had been purchased with British manufactures. therefore. of a capital employed in such a round-about foreign trade of consumption. before a capital employed in the foreign trade of consumption has made one. replaces. and sometimes three or four times in the year. but one of them only is employed in supporting domestic industry. the merchant must wait for the returns of two distinct foreign trades. not with British manufac- 301 . A capital. and brings back English corn and manufactures to Edinburgh.Adam Smith Scotch manufactures to London. The capital employed in purchasing foreign goods for home consumption. The returns of the home trade generally come in before the end of the year. only one British capital. as they must depend upon the returns of two or three distinct foreign trades. two British capitals. should be as quick as those of the home trade. except that the final returns are likely to be still more distant. or be sent out and returned twelve times. by every such operation. Though the returns. and sometimes not till after two or three years. If the capitals are equal. The other is a Portuguese one. therefore. the capital employed in it will give but one half of the encouragement to the industry or productive labour of the country. necessarily replaces. employed in the home trade. are. by every such operation. two distinct capitals. replaces. for. The foreign goods for home consumption may sometimes be purchased. which had both been employed in the agriculture or manufactures of Great Britain. If the tobacco of Virginia had been purchased. of the foreign trade of consumption. too. therefore. foreign goods can never be acquired.

So far. or that had been purchased with something else that was so. the capital which is immediately employed in supporting that productive labour. in order to exchange a certain value of British manufactures for a certain quantity of flax and hemp. or in the encouragement and support which it can give to the productive labour of the country from which it is carried on. are less liable to suffer by the carriage. must have been purchased with something that either was the produce of the industry of the country. besides. If they are purchased with the gold of Brazil. which had been purchased with those manufactures. than by that of any other foreign goods. had the manufactures and the flax and hemp been directly exchanged for one another. or just as slow. The transportation of those metals from one place to another. like the tobacco of Virginia. he must wait for the returns of three. but the final returns of the whole capital employed in the trade will be just as slow as ever. each merchant. and their insurance not greater. is less expensive than that of almost any other foreign goods of equal value. therefore. in order to export them again. An equal quantity of foreign goods. though it may with regard to the particular merchants. Three times a greater capital must in both cases be employed. and will replace. in such a round-about foreign trade of consumption.The Wealth of Nations tures. and the third buys those imported by the second. it can occasion no essential difference. therefore. will. just as fast. therefore. but with the sugar and rum of Jamaica. this gold and silver. in this case. The whole capital employed. than an equal capital employed in a more direct trade of the same kind. by the intervention of gold and silver. for example. can make no difference with regard to the country. Whatever be the foreign commodity with which the foreign goods for home consumption are purchased. indeed. Their freight is much less. will generally give less encouragement and support to the productive labour of the country. The demand of the 302 . as the productive labour of the country is concerned. and no goods. Whether the whole capital employed in such a round about trade belong to one merchant or to three. either in the nature of the trade. the foreign trade of consumption. If those two or three distinct foreign trades should happen to be carried on by two or three distinct merchants. receive the returns of his own capital more quickly. which is carried on by means of gold and silver. has all the advantages and all the inconveniencies of any other equally round-about foreign trade of consumption. may frequently be purchased with a smaller quantity of the produce of domestic industry. of whom the second buys the goods imported by the first. or with the silver of Peru. than would have been necessary. on account of their small bulk and great value. It seems even to have one advantage over any other equally round-about foreign trade.

indeed. I shall have occasion to examine at great length hereafter. and constitute the whole addition which this trade necessarily makes to the annual produce of the land and labour of that country. employ his capital in transacting the commerce of Poland and Portugal. yet neither of them belongs to that particular country. Whether. which carries the corn of Poland to Portugal. a trade of this kind is likely to impoverish the country from which it is carried on in any other way. The trade itself has probably derived its name from it. and puts into motion. not in Dutch. of which the defence and security depend upon the number of its sailors and shipping. Though it may replace. the carrying trade of any particular country is carried on with the ships and sailors of that country. for example. to support that of some foreign countries. employs more shipping than all the carrying trade of England. than in any other. two distinct capitals. and at a smaller expense. seem essential to the nature of the trade that it should be so. however. and partly upon the distance of the ports between which they are to be carried. A Dutch merchant may. That part of the capital of any country which is employed in the carrying trade. It is upon this account. however. or even in the home trade. by carrying part of the surplus produce of the one to the other. The number of sailors and shipping which any particular capital can employ. that he actually does so upon some particular occasions. that part of the capital employed in it which pays the freight is distributed among. is altogether withdrawn from supporting the productive labour of that particular country. for example. It maybe presumed. either in the foreign trade of consumption.Adam Smith country may frequently. but partly upon the bulk of the goods. in fact. by the continual exportation of those metals. but one of them in supporting that of Poland. replaces by every such operation two capitals. as it could in the carrying trade. When. But the same capital may employ as many sailors and shipping. The profits only return regularly to Holland. that the carrying trade has been supposed peculiarly advantageous to such a country as Great Britain. neither of which had been employed in supporting the productive labour of Holland. and the other that of Portugal. The capital of the Dutch merchant. though the ports are at no great 303 . chiefly upon the former of those two circumstances. a certain number of productive labourers of that country. in this manner. does not depend upon the nature of the trade. by every operation. The coal trade from Newcastle to London. It does not. when carried on by coasting vessels. Almost all nations that have had any considerable share of the carrying trade have. but in British bottoms. be supplied more completely. in proportion to their value. and brings back the fruits and wines of Portugal to Poland. the people of such countries being the carriers to other countries. carried it on in this manner.

only because they facilitate the exportation and exchange of such surplus produce for something else which is more in demand there. but necessary and unavoidable. in both these respects. nor to the carrying trade above either of the other two. than what would naturally flow into them of its own accord.The Wealth of Nations distance. To force. The surplus part of them. when the course of things. a larger share of the capital of any country into the carrying trade. The land and labour of Great Britain produce generally more corn. woollens. The capital. and the value of its annual produce diminish. will generally give encouragement and support to a greater quantity of productive labour in that country. and exchanged for something for which there is a demand at home. and increase the value of its annual produce. therefore. It ought. The riches. a part of the productive labour of the country must cease. must be sent abroad. without any constraint or violence. that this surplus can acquired value sufficient to compensate the labour and expense of producing it. is not only advantageous. When the produce of any particular branch of industry exceeds what the demand of the country requires. employed in the home trade of any country. and the capital employed in this latter trade has. and so far as power depends upon riches. When the foreign goods which are thus purchased with the surplus produce of domestic industry exceed the demand of the home market. therefore. and exchanged for something more in demand at home. But the great object of the political economy of every country. therefore. will not always necessarily increase the shipping of that country. more than an equal capital employed in the foreign trade of consumption. by extraordinary encouragements. and hardware. to give no preference nor superior encouragement to the foreign trade of consumption above the home trade. Without such exportation. the surplus must be sent abroad. are advantageous situations for industry. than the demand of the home market requires. is to increase the riches and power of that country. the fund from which all taxes must ultimately be paid.000 hogsheads of tobacco are annually purchased in Virginia and Mary- 304 . and exchanged for something for which there is a demand at home. the power of every country must always be in proportion to the value of its annual produce. and the banks of all navigable rivers. naturally introduces it. therefore. The neighbourhood of the sea-coast. About 96. It is only by means of such exportation. than what would naturally go to it. however. It ought neither to force nor to allure into either of those two channels a greater share of the capital of the country. the surplus part of them must be sent abroad again. a still greater advantage over an equal capital employed in the carrying trade. Each of those different branches of trade.

000 hogsheads are annually purchased. must cease to be produced. be found to be no more than a roundabout foreign trade of consumption. and some trade of the same kind carried on by British merchants between the different ports of India. England. When the capital stock of any country is increased to such a degree that it cannot be all employed in supplying the consumption.000. could not be sent abroad. If the remaining 82. perhaps. perhaps. The most round-about foreign trade of consumption. The extent of the home trade. which are part of the produce of the land and labour of Great Britain. having no market at home. upon some occasions. be as necessary for supporting the productive labour of the country. is likewise supposed to have a considerable share in it. perhaps the second richest country of Europe.Adam Smith land with a part of the surplus produce of British industry. Those statesmen who have been disposed to favour it with particular encouragement. and supporting the productive labour of that particular country. and of the capital which can be employed in it. and being deprived of that which they had abroad. make. but it does not seem to be the natural cause of it. But the demand of Great Britain does not require. in a great measure. The trade which is carried on in British bottoms between the different ports of the Mediterranean. Those goods. the importation of them must cease immediately. the principal branches of what is properly the carrying trade of Great Britain. and the final returns of those trades are generally used or consumed in Great Britain.000. either immediately with the produce of British industry. and exchanged for something more in demand at home. Those goods are generally purchased. in proportion to the extent of the land and the number of it’s inhabitants. the trades which carry the goods of the East and West Indies and of America to the different European markets. more than 14. and is employed in performing the same offices to other countries. The carrying trade is the natural effect and symptom of great national wealth. Holland. therefore. the surplus part of it naturally disgorges itself into the carrying trade. seem to have mistaken the effect and symptom for the cause. or with something else which had been purchased with that produce. and with it the productive labour of all those inhabitants of Great Britain who are at present employed in preparing the goods with which these 82. perhaps. therefore. has accordingly the greatest share of the carrying trade of Europe. may. 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 an- 305 . though what commonly passes for the carrying trade of England will frequently. and the value of its annual produce. as the most direct. Such are. by far the richest country in Europe.

never enter into his thoughts. by the value of the surplus produce of all the different countries in the world. is almost everywhere capable of absorbing a much greater capital than has ever yet been employed in it. We see. Agriculture. according as it is employed in one or other of those different ways. however. and farming and improving the most direct roads to a splendid fortune. In all the great countries of Europe. I shall endeavour to explain at full length in the two following books. and of what can be purchased with it. The profits of agriculture. in manufactures. however. occurred in Europe. Without entering into any particular discussion of their calculations. seem to have no superiority over those of other employments in any part of Europe. amused the public with most magnificent accounts of the profits to be made by the cultivation and improvement of land. that have been acquired in the course of a single life.The Wealth of Nations other. that of the foreign trade of consumption. within these few years. is in a manner infinite in comparison of that of the other two. where agriculture is the most profitable of all employments. a very simple observation may satisfy us that the result of them must be false. The different quantities of productive labour which it may put into motion. acquired by agriculture in the same time. and the greater part of what is cultivated. therefore. and is capable of absorbing the greatest capitals. 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. In countries. therefore. frequently from a very small capital. Its possible extent. indeed. or in some particular branch of the wholesale or retail trade. by the value of the surplus produce of the whole country. has not. The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture. 306 . that of the carrying trade. during the course of the present century. perhaps. the capitals of individuals will naturally be employed in the manner most advantageous to the whole society. is far from being improved to the degree of which it is capable. Projectors. in every corner of it. by trade and manufactures. have. 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. 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. and from such a capital. therefore. A single instance of such a fortune. every day. the most splendid fortunes. sometimes from no capital.

too. the more extensive is the market which it affords to those of the country. or by the intervention of money. The country supplies the town with the means of subsistence and the materials of manufacture. sells there for the same price with that which comes from twenty miles distance. therefore. upon this account. We must not. but afford. in the price of what they sell. may very properly be said to gain its whole wealth and subsistence from the country.Adam Smith BOOK III PROGRESS OF THE DIFFERENT PROGRESS OF NATIONS OPULENCE IN DIFFERENT NATIONS CHAPTER I NATURAL PROGRESS OF THE NATURAL PROGRESS OF OPULENCE cal. however. The town repays this supply. The greater the number and revenue of the inhabitants of the town. advantageous to all the different persons employed in the various occupations into which it is subdivided. besides. and it is there that the inhabitants of the country exchange it for something else which is in demand among them. 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. The gains of both are mutual and recipro- T HE GREAT COMMERCE of every civilized society is that car ried on between the inhabitants of the town and those of the country. as in all other cases. The proprietors and cultivators of the country. which lies in the neighbourhood of the town. or of some sort of paper which represents money. manufactured produce. But the price of the latter must. imagine that the gain of the town is the loss of the country. the whole value of the carriage of the like produce that is brought from more distant parts. than they must have employed had they attempted to prepare them themselves. and the more extensive that market. The town affords a market for the surplus produce of the country. in which there neither is nor can be any reproduction of substances. gain. it is always the more advantageous to a great number. It consists in the exchange of rude for 307 . generally. by sending back a part of the manufactured produce to the inhabitants of the country. not only pay the expense of raising it and bringing it to market. The town. the ordinary profits of agriculture to the farmer. either immediately. and the division of labour is in this. or what is over and above the maintenance of the cultivators. over and above the ordinary profits of agriculture. The corn which grows within a mile of the town. and they save.

or even from the territory to which it belongs. so the industry which procures the former. indeed. seems to be as well secured as the nature of human affairs can admit of. than either in manufactures or in foreign trade. If human institutions had never thwarted those natural inclinations. The town. rather in the improvement and cultivation of land. has occasioned considerable variations in the progress of opulence in different ages and nations. but to the more uncertain elements of human folly and injustice. and. may not always derive its whole subsistence from the country in its neighbourhood. and this. but from very distant countries. It is the surplus produce of the country only. The capital of the landlord. not only to the winds and the waves. or the town by that with the country which maintains it. must. on the contrary. Compare the cultivation of the lands in the neighbourhood of any considerable town. in the nature of things. most men will choose to employ their capitals. or what is over and above the maintenance of the cultivators. with that of those which lie at some distance from it. which can therefore increase only with the increase of the surplus produce. and his fortune is much less liable to accidents than that of the trader. the tranquillity of mind which it promises. That order of things which necessity imposes. The man who employs his capital in land. besides. As subsistence is. Upon equal. to men with whose character and situation he can seldom be thoroughly acquainted. in general. is in every particular country promoted by the natural inclinations of man. The beauty of the country. therefore. it has never been pretended that either the country loses by its commerce with the town. the pleasure of a country life. necessarily. wherever the injustice of human laws does not dis- 308 . that constitutes the subsistence of the town. Among all the absurd speculations that have been propagated concerning the balance of trade. which affords subsistence. The cultivation and improvement of the country. at least. or nearly equal profits. be prior to the increase of the town. has it more under his view and command. which furnishes only the means of conveniency and luxury. as the whole of that territory was completely cultivated and improved. must necessarily be prior to that which ministers to the latter. the towns could nowhere have increased beyond what the improvement and cultivation of the territory in which they were situated could support. in distant countries.The Wealth of Nations the whole value of this carriage in the price of what they buy. prior to conveniency and luxury. till such time. which is fixed in the improvement of his land. by giving great credits. and you will easily satisfy yourself bow much the country is benefited by the commerce of the town. who is obliged frequently to commit it. though not in every particular country. though it forms no exception from the general rule.

no manufactures for distant sale have ever yet been established in any of their towns. therefore. he seems to retain a predilection for this primitive employment. masons and bricklayers. and as their residence is not. in every political society. where uncultivated land is still to be had upon easy terms. therefore. are people whose service the farmer has frequent occasion for. necessarily regulates the quantity of the materials and provisions which they buy. stand occasionally in need of the assistance of one another. the brewer. in North America. and who contribute still further to augment the town. together with many other artificers and retailers. have charms that. both with the materials of their work. indeed. but that a planter who cultivates his own land. The butcher. in order to exchange their rude for manufactured produce. Had human institutions. can augment. He feels that an artificer is the servant of his customers. Without the assistance of some artificers. the cultivation of land cannot be carried on. Neither their employment nor subsistence. necessarily tied down to a precise spot. the progressive wealth and increase of the towns would. more or less. Such artificers. The town is a continual fair or market. attract everybody.Adam Smith turb it. and the baker. never disturbed the natural course of things. are mutually the servants of one another. Smiths. carpenters. and those of the country. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country. the independency which it really affords. from whom he derives his subsistence. and derives his necessary sub- 309 . but in proportion to the augmentation of the demand from the country for finished work. in every stage of his existence. and in proportion to the improvement and cultivation of the territory of country. necessary or useful for supplying their occasional wants. they naturally settle in the neighbourhood of one another. and as to cultivate the ground was the original destination of man. attempt to establish with it a manufacture for more distant sale. and this demand can augment only in proportion to the extension of improvement and cultivation. tanners. The inhabitants of the town. be consequential. and neither the large wages nor the easy subsistence which that country affords to artificers. shoemakers. From artificer he becomes planter. but employs it in the purchase and improvement of uncultivated land. It is this commerce which supplies the inhabitants of the town. and thus form a small town or village. soon join them. can bribe him rather to work for other people than for himself. to which the inhabitants of the country resort. wheelwrights and ploughwrights. so. too. and the means of their subsistence. but with great inconveniency and continual interruption. like that of the farmer. In our North American colonies. and tailors. he does not. The quantity of the finished work which they sell to the inhabitants of the country.

In countries. The progress of our North American and West Indian colonies. therefore. and to manufacture in the completest manner the whole of its rude produce. is more secure than that of the foreign merchant. According to the natural course of things. to foreign commerce. there is even a considerable advantage that the rude produce should be exported by a foreign capital. in order to be exchanged for something for which there is some demand at home. afterwards to manufactures. of every society. on the contrary. In seeking for employment to a capital. to be gradually subdivided. before they could well think of employing 310 . and thereby improved and refined in a great variety of ways. naturally preferred to foreign commerce. been in some degree observed. in order that the whole stock of the society may be employed in more useful purposes. In every period. where there is either no uncultivated land. for the same reason that agriculture is naturally preferred to manufactures. last of all. If the society has not acquired sufficient capital. or none that can be had upon easy terms. endeavours to prepare work for more distant sale. first. But whether the capital which carries this surplus produce abroad be a foreign or a domestic one. the weaver some sort of linen or woollen manufactory. so the capital of the manufacturer. or that for which there is no demand at home. directed to agriculture.The Wealth of Nations sistence from the labour of his own family. must be sent abroad. Those different manufactures come. that in every society that had any territory. both to cultivate all its lands. I believe. the surplus part both of the rude and manufactured produce. in process of time. had no capital but what belonged to themselves been employed in exporting their surplus produce. being at all times more within his view and command. This order of things is so very natural. and which it is therefore unnecessary to explain any farther. upon equal or nearly equal profits. and. manufactures are. Some of their lands must have been cultivated before any considerable towns could be established. the greater part of the capital of every growing society is. indeed. As the capital of the landlord or farmer is more secure than that of the manufacturer. and some sort of coarse industry of the manufacturing kind must have been carried on in those towns. it has always. The: wealth of ancient Egypt. would have been much less rapid. every artificer who has acquired more stock than he can employ in the occasional jobs of the neighbourhood. that of China and Indostan. is really a master. which may easily be conceived. The smith erects some sort of iron. is of very little importance. sufficiently demonstrate that a nation may attain a very high degree of opulence. and independent of all the world. though the greater part of its exportation trade be carried on by foreigners.

and the country was left uncultivated. All of them were engrossed. A great part of them was uncultivated. the confusions which followed so great a revolution lasted for several centuries. been in many respects entirely inverted. sunk into the lowest state of poverty and barbarism. The manners and customs which the nature of their original government introduced. it has. the chiefs and principal leaders of those nations acquired. The towns were deserted. and the western provinces of Europe. CHAPTER II DISCOURAGEMENT AGRIOF THE DISCOURAGEMENT OF AGRICULTURE STA CULTURE IN THE ANCIENT STATE OF FALL ROEUROP OPE.Adam Smith themselves in foreign commerce. or such as were fit for distant sale. The foreign commerce of some of their cities has introduced all their finer manufactures. During the continuance of those confusions. and manufactures and foreign commerce together have given birth to the principal improvements of agriculture. though a great. EUROPE. which had enjoyed a considerable degree of opulence under the Roman empire. or usurped to themselves. the greater part of the lands of those countries. in all the modern states of Europe. interrupted the commerce between the towns and the country. and the greater part by a few great proprietors. and which remained after that government was greatly altered. necessarily forced them into this unnatural and retrograde order. 311 . This original engrossing of uncultivated lands. AFTER THE FALL OF THE ROEMPIRE MAN EMPIRE WHEN THE GERMAN and Scythian nations overran the western provinces of the Roman empire. The rapine and violence which the barbarians exercised against the ancient inhabitants. But though this natural order of things must have taken place in some degree in every such society. was left without a proprietor. but no part of them. whether cultivated or uncultivated.

To divide it was to ruin it. The male sex is universally preferred to the female. and of what is called lineal succession. Laws frequently continue in force long after the circumstances which first gave occasion to them. The right of primogeniture. He made war according to his own discretion.000. He was their judge. and broke into small parcels. it must descend entire to one of the children. Hence the origin of the right of primogeniture. and sometimes against his sovereign. like moveables. for the same reason that it has generally taken place in that of monarchies. among all the children of the family. This natural law of succession. either by succession or by alienation. and to expose every part of it to be oppressed and swallowed up by the incursions of its neighbours. and in some respects their legislator in peace and their leader in war. than we do in the distribution of moveables.The Wealth of Nations might have been but a transitory evil. the introduction of entails prevented their being broke into small parcels by alienation. and that of age. The law of primogeniture. frequently against his neighbours. in the inheritance of lands. When land. though not always at their first institution. not immediately indeed. came to take place. That the power. the protection which its owner could afford to those who dwelt on it. not of subsistence merely. are no more. it was thought better that it should descend undivided to one. of all of whom the subsistence and enjoyment may be supposed equally dear to the father. depended upon its greatness. In the present state of Europe. in the succession of landed estates. between male and female. founded not upon the doubtful distinctions of personal merit. and which could alone render them reasonable. Among the children of the same family there can be no indisputable difference but that of sex. In those disorderly times. but of power and protection. took place among the Romans who made no more distinction between elder and younger. and when all other things are equal. it is still 312 . but upon some plain and evident difference which can admit of no dispute. accordingly. therefore. however. the natural law of succession divides it. still continues to be respected. The security of a landed estate. may not be weakened by division. the elder everywhere takes place of the younger. The law of primogeniture hindered them from being divided by succession. and as of all institutions it is the fittest to support the pride of family distinctions. must be determined by some general rule. every great landlord was a sort of petty prince. But when land was considered as the means. like them. therefore. To which of them so important a preference shall be given. but in process of time. is considered as the means only of subsistence and enjoyment. His tenants were his subjects. and consequently the security of the monarchy. the proprietor of a single acre of land is as perfectly secure in his possession as the proprietor of 100. They might soon have been divided again.

nothing can be more contrary to the real interest of a numerous family. it is thought reasonable that they should have another. They are founded upon the most absurd of all suppositions. however. perhaps more than one third part of the whole lands in the country. and to hinder any part of the original estate from being carried out of the proposed line. through the greater part of Europe.Adam Smith likely to endure for many centuries. nothing can be more completely absurd. than a right which. they might frequently hinder the security of thousands from being endangered by the caprice or extravagance of one man. lest their poverty should render it ridiculous. are at present supposed to be under strict entail. either by gift. but the possibility of their being divided again was as much as possible precluded for ever. Entails are the natural consequences of the law of primogeniture. Like what are called the fundamental laws of some monarchies. When great landed estates were a sort of principalities. indeed. Neither their substitutions. They were altogether unknown to the Romans. and to all that it possesses. Entails are thought necessary for maintaining this exclusive privilege of the nobility to the great offices and honours of their country. In those countries. or device. It seldom happens. however. nor fidei commisses. the great proprietor was sufficiently employed in defend- 313 . that a great proprietor is a great improver. or alienation. In the disorderly times which gave birth to those barbarous institutions. of which the law of primogeniture first gave the idea. but that the property of the present generation should be restrained and regulated according to the fancy of those who died. the supposition that every successive generation of men have not an equal right to the earth. are still respected. or by the misfortune of any of its successive owners. either by the folly. In every other respect. in which noble birth is a necessary qualification for the enjoyment either of civil or military honours. is said to abhor perpetuities. perhaps five hundred years ago. more than one fifth. though even England is not altogether without them. But in the present state of Europe. In Scotland. and that order having usurped one unjust advantage over the rest of their fellow-citizens. Entails. entails might not be unreasonable. bear any resemblance to entails. beggars all the rest of the children. though some French lawyers have thought proper to dress the modern institution in the language and garb of those ancient ones. Great tracts of uncultivated land were in this manner not only engrossed by particular families. They were introduced to preserve a certain lineal succession. The common law of England. and they are accordingly more restricted there than in any other European monarchy. particularly. when small as well as great estates derive their security from the laws of their country. in order to enrich one.

still less was to be hoped for from those who occupied the land under them. he was liable to some penalty. like all other commercial projects. in the hands of the same family since the times of feudal anarchy. he had no stock to employ in this manner. If the expense of his house and person either equalled or exceeded his revenue. and finds. They were all. of which a man born to a great fortune. for which he has so little occasion. capable of acquiring property. the occupiers of land were all tenants at will. and you will require no other argument to convince you how unfavourable such extensive property is to improvement. requires an exact attention to small savings and small gains. therefore. and almost always the requisite abilities. he generally found it more profitable to employ his annual savings in new purchases than in the improvement of his old estate. Whatever they acquired was acquired to their mas- 314 . They could marry. are objects which. he would be a bankrupt before he had finished the tenth part of it. is very seldom capable. In the ancient state of Europe. in both parts of the united kingdom. but their slavery was of a milder kind than that known among the ancient Greeks and Romans. he often wanted the inclination. slaves. perhaps. and he has little taste for any other. than to profit. If he was an economist. some great estates which have continued. be sold with it. There still remain. Compare the present condition of those estates with the possessions of the small proprietors in their neighbourhood. as it did very frequently. or even in our West Indian colonies. provided it was with the consent of their master. follows him when he comes to think of the improvement of land. of his house and household furniture. though generally but to a small one. but not separately. of his equipage. If little improvement was to be expected from such great proprietors. They could. When the establishment of law and order afforded him this leisure. If he maimed or murdered any of them. from his infancy. four or five hundred acres in the neighbourhood of his house.The Wealth of Nations ing his own territories. without interruption. he has been accustomed to have some anxiety about. that if he was to improve his whole estate in the same manner. He embellishes. The turn of mind which this habit naturally forms. or almost all. even though naturally frugal. or in extending his jurisdiction and authority over those of his neighbours. They were supposed to belong more directly to the land than to their master. and he could not afterwards dissolve the marriage by selling the man and wife to different persons. To improve land with profit. They were not. which pleases his fancy. at ten times the expense which the land is worth after all his improvements. The situation of such a person naturally disposes him to attend rather to ornament. The elegance of his dress. however. He had no leisure to attend to the cultivation and improvement of land.

of which the principal produce is corn. The pride of man makes him love to domineer. I believe. The seed. Moravia. would require. and not by any interest of his own. he will generally prefer the service of slaves to that of freemen. The profits of a sugar plantation in any of our West Indian colonies. therefore. and the profits 315 .. It is only in the western and south-western provinces of Europe that it has gradually been abolished altogether. such a resolution could never have been agreed to. in the present times. and the instruments of husbandry. that in this case occupied his own lands. how unprofitable it became to the master. It was for his benefit. It was at his expense. together with their women and servants. Such slaves could acquire nothing but their daily maintenance. it seems. is remarked both by Pliny and Columella. may satisfy us that their number cannot be very great. he says. Poland. and cultivated them by his own bondmen. the far greater part of the work is done by freemen. the whole work is done by slaves. Whatever cultivation and improvement could be carried on by means of such slaves. a territory of boundless extent and fertility. and he could take it from them at pleasure. But if great improvements are seldom to be expected from great proprietors. was properly carried on by their master. can be squeezed out of him by violence only. to maintain 5000 idle men (the number of warriors supposed necessary for its defence). and in our tobacco colonies a very great part of it. therefore. and the nature of the work can afford it. Hungary. This species of slavery still subsists in Russia. and other parts of Germany. though it appears to cost only their maintenance. demonstrates that the work done by slaves. to set at liberty all their negro slaves. are generally much greater than those of any other cultivation that is known either in Europe or America. A person who can acquire no property can have no other interest but to eat as much and to labour as little as possible. The raising of corn. The late resolution of the Quakers in Pennsylvania. The experience of all ages and nations. Whatever work he does beyond what is sufficient to purchase his own maintenance. when it fell under the management of slaves. It was properly the proprietor himself. In the English colonies. like the plains of Babylon. cannot. The planting of sugar and tobacco can afford the expense of slave cultivation. In our sugar colonies. Speaking of the ideal republic described in the laws of Plato. Bohemia. is in the end the dearest of any. how much the cultivation of corn degenerated. In the time of Aristotle. were all his. In ancient Italy. on the contrary. it had not been much better in ancient Greece.Adam Smith ter. Wherever the law allows it. and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors. Had they made any considerable part of their property. they are least of all to be expected when they employ slaves for their workmen. the cattle.

A slave. consults his own ease. to have been rather a pious exhortation. is one of the most obscure points in modern history. as much as that occupied by slaves. however. are capable of acquiring property. To the slave cultivators of ancient times gradually succeeded a species of farmers. after setting aside what was judged necessary for keeping up the stock. who can acquire nothing but his maintenance. A villain. It seems. The proprietor furnished them with the seed. It is probable that it was partly upon account of this advantage. The produce was divided equally between the proprietor and the farmer. on the contrary. gradually encouraged their villains to make upon their authority. in which so important a revolution was brought about. always jealous of the great lords. that tenure in villanage gradually wore out through the greater part of Europe. which was restored to the proprietor. The number of negroes. The church of Rome claims great merit in it. however. that so early as the twelfth century. cattle. necessary for cultivating the farm. and partly upon account of the encroachments which the sovereigns. known at present in France by the name of metayers. are superior to those of corn. in proportion to that of whites. in our sugar than in our tobacco colonies. The time and manner. when the farmer either quitted or was turned out of the farm.The Wealth of Nations of a tobacco plantation. Alexander III. There is. the whole stock. and that of the sovereign on the other. accordingly. They have been so long in disuse in England. in short. is much greater. published a bull for the general emancipation of slaves. could cultivate it only by means of 316 . Slavery continued to take place almost universally for several centuries afterwards. and which seem. however. and at the same time allowed to continue in possession of the land. that of the proprietor on the one hand. being freemen. Such tenants. they have a plain interest that the whole produce should be as great as possible. They are called in Latin Coloni Partiarii. and having a certain proportion of the produce of the land. than a law to which exact obedience was required from the faithful. till it was gradually abolished by the joint operation of the two interests above mentioned. Both can afford the expense of slave cultivation but sugar can afford it still better than tobacco. one very essential difference between them. having no stock of his own. by making the land produce as little as possible over and above that maintenance. Land occupied by such tenants is properly cultivated at the expense of the proprietors. enfranchised. that at present I know no English name for them. in order that their own proportion may be so. to have been such as rendered this species of servitude altogether inconvenient. and instruments of husbandry. as has already been observed. though inferior to those of sugar. and it is certain. at least.

was long extremely precarious. Even in England. The tithe. the proprietors complain. In France. and in which his claim is not necessarily concluded by the uncertain decision of a single assize. the country. was to get one half of whatever it produced. it was not till about the 14th of Henry VII. where five parts out of six of the whole kingdom are said to be still occupied by this species of cultivators. farmers. they get the whole profits to themselves. that. were probably of the same kind. not damages only. before the expiration of their term. To this species of tenantry succeeded. perhaps of Europe. however. however. It did not always reinstate them in the possession of the land. The possession. because the landlord. that their metayers take every opportunity of employing their master’s cattle rather in carriage than in cultivation. When such farmers have a lease for a term of years. which is but a tenth of the produce. in the one case. They could. when the land- 317 . must have been an effectual bar to it. is found to be a very great hindrance to improvement. It could never. though by very slow degrees. properly so called. to lay out. Those ancient English tenants. because they may sometimes expect to recover it. who cultivated the land with their own stock. even. with a large profit. where the yeomanry has always been most respected. A tax. but gave them damages. 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. and must therefore have been what the French call a metayer. that the action of ejectment was invented. They are called steelbow tenants. because. even of such farmers. before the expiration of the lease. in the other they share them with their landlord. This action has been found so effectual a remedy. If they were turned out illegally by the violence of their master. properly so called. by the fictitious action of a common recovery. in the further improvement of the land. be legally ousted of their leases by a new purchaser. therefore. This species of tenants still subsists in some parts of Scotland. and still is so in many parts of Europe. who laid out nothing. they may sometimes find it for their interest to lay out part of their capital in the further improvement of the farm. but possession. but it could never be his interest to mix any part of his own with it. which amounted to one half. in the modern practice. by which the tenant recovers. in England. any part of the little stock which they might save from their own share of the produce. which never amounted to a real loss. who are said by ChiefBaron Gilbert and Dr Blackstone to have been rather bailiffs of the landlord than farmers. the action by which they obtained redress was extremely imperfect. paying a rent certain to the landlord.Adam Smith what the landlord advanced to him. be the interest even of this last species of cultivators.

Its beneficial influence. indeed. It was for his interest. The farmers. and they did not foresee how much this regulation must obstruct improvement. were anciently. than all their boasted regulations of commerce taken together. been lately extended to twentyseven. and as a great part of the yeomanry have freeholds of this kind. a period still too short to encourage the tenant to make the most important improvements. in the long-run. somewhat slackened their fetters. too. to nine years from the commencement of the lease. and entitles the lessee to a vote for a member of parliament. A late act of parliament has. for example. and thereby hurt. or regu- 318 . so far as I know. frequently for more than one year. besides paying the rent. In England. it was supposed. bound to perform a great number of services to the landlord. The proprietors of land were anciently the legislators of every part of Europe. however. therefore the security of the tenant is equal to that of the proprietor. so favourable to the yeomanry. by the writ of ejectment. were all calculated for what they supposed the interest of the proprietor. besides. the whole order becomes respectable to their landlords. the term of their security was still limited to a very short period. which were seldom either specified in the lease. by a law of James II. in this respect. except in England. I believe. therefore. There is. the writ of right or the writ of entry. and trusting that the honour of his landlord would take no advantage of so important an improvement. is. It was introduced into Scotland so early as 1449. he seldom makes use of the actions which properly belong to him as a landlord. the real interest of the landlord. any instance of the tenant building upon the land of which he had no lease. It has in that country. during a long term of years. a lease for life of forty shillings a-year value is a freehold. Those laws and customs. in France. they had imagined. besides. but sues in the name of his tenant. on account of the political consideration which this gives them. that no lease granted by any of his predecessors should hinder him from enjoying. Avarice and injustice are always short-sighted. the full value of his land. nowhere in Europe. has been much obstructed by entails.The Wealth of Nations lord has occasion to sue for the possession of the land. after it was found convenient to secure tenants both against heirs and purchasers. In Scotland. though they are still by much too strait. as no leasehold gives a vote for a member of parliament. the yeomanry are upon this account less respectable to their landlords than in England. have perhaps contributed more to the present grandeur of England. The laws relating to land. the heirs of entail being generally restrained from letting leases for any long term of years. In England. The law which secures the longest leases against successors of every kind. peculiar to Great Britain. In other parts of Europe.

The taille. It is his interest. being almost entirely arbitrary. I believe. a servitude which still subsists. the yeomanry were bound to provide them with horses. may serve as an example of those ancient tallages. but that of a burgher. compared with the proprietor. was not the only one. though with different degrees of oppression in different countries. and consequently to employ as little as possible in its cultivation. That order of people. as it still subsists in France. This tax. passed through any part of the country. will submit to this degradation. the taille is almost equal to a prohibition of its ever being employed upon the land. themselves. to appear to have as little as possible. to have been taxes of the same nature with the taille. has. affect their own revenue.Adam Smith lated by any precise rule. Great Britain is. Should any stock happen to accumulate in the hands of a French farmer. and provisions. compared with one 319 . were as irregular and oppressive as the services The ancient lords. It still subsists in France and Germany. which they estimate by the stock that he has upon the farm. with all the liberty and security which law can give. easily allowed him to tallage. nor even any burgher. Under all these discouragements. This tax. is supposed to dishonour whoever is subject to it. and none in its improvement. any pecuniary aid to their sovereign. therefore. but by the use and wont of the manor or barony. in the course of a few years. little improvement could be expected from the occupiers of land. as they called it. When the king’s troops. carriages. the only monarchy in Europe where the oppression of purveyance has been entirely abolished. so far as they affected the land. therefore. when his household. everywhere. their tenants. subjected the tenant to many vexations. and had not knowledge enough to foresee how much this must. in the end. and to degrade him below. not only the rank of a gentleman. not only hinders the stock which accumulates upon the land from being employed in its improvement. The farmer. The public services to which the yeomanry were bound. is as a merchant who trades with burrowed money. must always improve under great disadvantage. and whoever rents the lands of another becomes subject to it. These services. very much altered for the better the condition of the yeomanry of that country. though extremely unwilling to grant. but drives away all other stock from it. or his officers of any kind. seem. therefore. To make and maintain the high roads. who has stock. In Scotland the abolition of all services not precisely stipulated in the lease. so usual in England in former times. I believe. The ancient tenths and fifteenths. at a price regulated by the purveyor. to which they were subject. The public taxes. No gentleman. were not less arbitrary than the private ones. It is a tax upon the supposed profits of the farmer. besides.

from the nature of things. perhaps. perhaps. even to the better sort of tradesmen and mechanics. in England than in any other European monarchy. the farmers are said to be not inferior to those of England. with only equal good conduct. the yeomanry are regarded as an inferior rank of people. and by the privileges of fairs and markets. stock is commonly acquired most slowly. therefore. secondly. over and above all this. It can seldom happen. It has already been observed in what manner the prohibition of the exportation of corn. with only equal good conduct. and. There are more such. but that of the one. More does. therefore. 320 . obstructed the cultivation of ancient Italy. it is not. naturally the most fertile country in Europe. perhaps. that a man of any considerable stock should quit the superior. of all others. he might have employed in the further improvement of the land. by the restraints which were laid upon the inland commerce. Even in the present state of Europe. and of Berne in Switzerland. After small proprietors. Through the greater part of Europe. inferior to that of a proprietor. together with some encouragement given to the importation of foreign corn. by the absurd laws against engrossers. the trade. must always improve more slowly than that of the other. The lands cultivated by the farmer must. however. in order to place himself in an inferior station. To what degree such restraints upon the inland commerce of this commodity. without a special licence. very easy to imagine. The station of a farmer. whether carried on by the proprietor or by the farmer. regraters. in which. unfavourable to the improvement and cultivation of land. must have discouraged the cultivation of countries less fertile. by the general prohibition of the exportation of corn. The ancient policy of Europe was. The stock of both may improve. on account of the large share of the produce which is consumed in the rent. rich and great farmers are in every country the principal improvers. is. and forestallers. though even there the great stocks which are in some places employed in farming. joined to the general prohibition of exportation. besides. in the same manner. be improved more slowly than those cultivated by the proprietor. not only of corn. and at that time the seat of the greatest empire in the world. but of almost every other part of the produce of the farm. perhaps. on account of the large share of the profits which is consumed by the interest of the loan. In the republican governments of Holland. in Great Britain than in any other country.The Wealth of Nations who trades with his own. have generally been acquired by fanning. and in all parts of Europe to the great merchants and master manufacturers. and which. first. little stock is likely to go from any other profession to the improvement of land in the way of farming. had the farmer been proprietor. which seems to have been a very universal regulation. and less favourably circumstanced.

when they went over certain bridges. and in the midst of their own tenants and dependants. a general exemption from such taxes. indeed. were upon this account called free traders. after the fall of the Roman empire. and that they might dispose of their own effects by will. taxes used to be levied upon the persons and goods of travellers. and to surround them with a wall. have been either altogether. indeed. should succeed to their goods. not more favoured than those of the country. or very nearly of servile condition. who seem. pontage. among whom the public territory was originally divided. The towns were chiefly inhabited by tradesmen and mechanics. lastage. in the same manner as in several of the Tartar governments of Asia at present. sometimes a great lord. These last were composed chiefly of the proprietors of lands. They. that they might give away their own daughters in marriage without the consent of their lord. and stallage. sufficiently show what they were before those grants. for the sake of common defence. before those grants. The privileges which we find granted by ancient charters to the inhabitants of some of the principal towns in Europe. The people to whom it is granted as a privilege. or very nearly. must. that upon their death their own children. authority to do this. of a very different order of people from the first inhabitants of the ancient republics of Greece and Italy. to have been of servile. to such particularly as lived in their own demesnes. They seem. or very nearly of servile condition. and who found it convenient to build their houses in the neighbourhood of one another. in return. when they passed through certain manors. In all the different countries of Europe then. After the fall of the Roman empire. though in other respects of servile. These different taxes were known in England by the names of passage. upon some occasions. They consisted. on the contrary. to have been a very poor. AFTER THE FALL OF THE EMPIRE ROMAN EMPIRE THE INHABITANTS of cities and towns were. who had. and from fair to fair. who seemed to travel about with their goods from place to place. Sometimes the king. when they erected in it a booth or stall to sell them in. in those days. when they carried about their goods from place to place in a fair.Adam Smith CHAPTER III PROGRESS OF THE RISE AND PROGRESS OF CITIES FALL AND TOWNS. the proprietors of land seem generally to have lived in fortified castles on their own estates. like the hawkers and pedlars of the present times. it seems. in the same state of villanage with the occupiers of land in the country. mean set of people. Such traders. usually paid to their protector a sort of 321 . and not their lord. would grant to particular traders.

and to have affected only particular individuals. who used frequently to let whole manors to all the tenants of those manors. 223. also History of the Exchequer. never afterwards to be augmented. 3. that they arrived at liberty and independency much earlier than the occupiers of land in the country. that is for ever. or to some other great lord. each of them. was called a free burgh. but in return being allowed to collect it in their own way. however. I believe. the sovereigns of all the different countries of Europe. the exemptions. Those exemptions. chap. sometimes of the tax which particular burghers paid.} But how servile soever may have been originally the condition of the inhabitants of the towns. At first. p. 10.} To let a farm in this manner. as individuals. p. The payment having thus become perpetual. both those poll-taxes and those exemptions seem to have been altogether personal. The burghers themselves frequently got credit enough to be admitted to farm the revenues of this sort winch arose out of their own town. for this sort of protection. naturally became perpetual too.The Wealth of Nations annual poll-tax. and could not afterwards be considered as belonging to individuals. 322 . mention is frequently made. in return. 18. and sometimes to other persons. during a term of years. sometimes to the sheriff of the county. sect. used commonly to be let in farm. either to the king. they becoming jointly and severally answerable for the whole rent. {See Madox. for a term of years only. it appears evidently. Firma Burgi. and to pay it into the king’s exchequer by the hands of their own bailiff. first edition. In process of time. for a rent certain. during either their lives. therefore. for the same reason that they had been called free burghers or free traders. but as burghers of a particular burgh. the farm of the town was probably let to the burghers. In those days protection was seldom granted without a valuable consideration. in the same manner as it had been to other farmers. At first. a circumstance in those days regarded as of the greatest importance. In the very imperfect accounts which have been published from Doomsday-book. That part of the king’s revenue which arose from such poll-taxes in any particular town. which. and being thus altogether freed from the insolence of the king’s officers. v. ceased to be personal. was quite agreeable to the usual economy of. p. and this tax might perhaps be considered as compensation for what their patrons might lose by their exemption from other taxes. etc. reserving a rent certain. and sometimes of the general amount only of all those taxes. they becoming jointly and severally answerable for the whole rent. {see Brady’s Historical Treatise of Cities and Boroughs. it seems to have become the general practice to grant it to them in fee. for which it was made. or the pleasure of their protectors. of several of the towns of England. upon this account.

the most likely to be improved by the natural course of things. above mentioned. perhaps. that their children should succeed to them. See also Pfeffel in the Remarkable events under Frederick II.Adam Smith Along with this grant. I know not. and that they might dispose of their own effects by will. the weaker part of his subjects from the oppression of the great lords. that they might give away their own daughters in marriage. that is. of making bye-laws for their own government. have in this manner voluntarily erected a sort of independent republics in the heart of their own dominions. and his Successors of the House of Suabia. In other countries. as anciently understood. But however this may have been. and who were not strong enough to defend themselves. that the sovereigns of all the different countries of Europe should have exchanged in this manner for a rent certain. In England they were generally exempted from suit to the hundred and county courts: and all such pleas as should arise among them. in those days. of all others. Nor was this all. by night as well as by day. besides. with the privilege of having magistrates and a town-council of their own.} It might. to particular burghers. Whether such privileges had before been usually granted. In order to understand this. in our present sense of the word freedom. of building walls for their own defence. along with the freedom of trade. {See Madox. the important privileges. they now at least became really free. though I cannot produce any direct evidence of it. be necessary to grant to such towns as were admitted to farm their own revenues. the pleas of the crown excepted. But it must seem extraordinary. that branch of their revenue. to guard and defend those walls against all attacks and surprises. were left to the decision of their own magistrates. some sort of compulsive jurisdiction to oblige their own citizens to make payment. In those disorderly times. without either expense or attention of their own. the principal attributes of villanage and slavery being thus taken away from them. were generally bestowed upon the burghers of the town to whom it was given. it might have been extremely inconvenient to have left them to seek this sort of justice from any other tribunal. it must be remembered. through the whole extent of his dominions. and that they should. I reckon it not improbable that they were. Firma Burgi. which was. never more to be augmented. Those whom the law could not protect. and of reducing all their inhabitants under a sort of military discipline. that. much greater and more extensive jurisdictions were frequently granted to them. the sovereign of perhaps no country in Europe was able to protect. They were generally at the same time erected into a commonalty or corporation. by obliging them to watch and ward. probably. as individuals. were obliged either to have recourse 323 .

therefore. They were the enemies of his enemies. but as a parcel of emancipated slaves. but by entering into a league of mutual defence with their neighbours. of France lost all authority over his barons. they were capable of making no contemptible resistance. perhaps. considered as single individuals. his son Lewis. and. but though. Mutual interest. for example. the privilege of making bye-laws for their own government. Without the establishment of some regular government of this kind. either by raising the farm-rent of their town. The princes who lived upon the worst terms with their barons. without some authority to compel their inhabitants to act according to some certain plan or system. had no power to defend themselves. almost of a different species from themselves. By granting them the farm of their own town in fee. By granting them magistrates of their own. The other was to form a 324 . Their advice consisted of two different proposals.} Philip I. appears to have been a most munificent benefactor to his towns. and it was his interest to render them as secure and independent of those enemies as he could. King John of England. he gave them all the means of security and independency of the barons which it was in his power to bestow. according to Father Daniel. that he was ever afterwards to oppress them. and that of reducing all their inhabitants under a sort of military discipline. Towards the end of his reign. known afterwards by the name of Lewis the Fat. or to enter into a league of mutual defence for the common protection of one another. that of building walls for their own defence. by establishing magistrates and a town-council in every considerable town of his demesnes. no voluntary league of mutual defence could either have afforded them any permanent security. and they plundered them upon every occasion without mercy or remorse. The wealth of the burghers never failed to provoke their envy and indignation. he had no reason either to hate or fear the burghers. if one may say so. to become either his slaves or vassals. The inhabitants of cities and burghs. The king hated and feared them too. {See Madox. consulted. seem accordingly to have been the most liberal in grants of this kind to their burghs. he might despise.The Wealth of Nations to the protection of some great lord. all ground of jealousy and suspicion. whom they considered not only as a different order. and in order to obtain it. The burghers naturally hated and feared the lords. One was to erect a new order of jurisdiction. The lords despised the burghers. for his allies. and the king to support them against the lords. he took away from those whom he wished to have for his friends. concerning the most proper means of restraining the violence of the great lords. with the bishops of the royal demesnes. disposed them to support the king. or by granting it to some other farmer. or have enabled them to give the king any considerable support.

where they might join with the clergy and the barons in granting. in those times. too. were in this manner established in cities. It was during the unprosperous reigns of the princes of the house of Suabia. It is from this period. Order and good government. of which so great a number arose and perished between the end of the twelfth and the beginning of the sixteenth century. and along with them the liberty and security of individuals. might only tempt the injustice of their 325 . some extraordinary aid to the king. If you except Venice. however. more favourable to his power. without their own consent. that the greater part of the free towns of Germany received the first grants of their privileges. the cities had no opportunity of becoming entirely independent. by making the inhabitants of those towns. because. They became. their deputies seem sometimes to have been employed by him as a counterbalance in those assemblies to the authority of the great lords. This is the short history of the republic of Berne. though frequently very low. the sovereign came to lose the whole of his authority.} The militia of the cities seems. the cities generally became independent republics. therefore. and to live. and that the famous Hanseatic league first became formidable. But men in this defenceless state naturally content themselves with their necessary subsistence. In countries such as Italy or Switzerland. were exposed to every sort of violence. like other peaceable inhabitants. never was destroyed altogether. They were. and conquered all the nobility in their neighbourhood. that the sovereign could impose no tax upon them. in the city. that we are to date the institution of the magistrates and councils of cities in France. they frequently had the advantage in their disputes with the neighbouring lords. or of some other reason. upon urgent occasions. and as they could be more readily assembled upon any sudden occasion. called upon to send deputies to the general assembly of the states of the kingdom. at a time when the occupiers of land in the country.Adam Smith new militia. {See Pfeffel. for of that city the history is somewhat different. besides the stated farmrent of the town. so considerable. to acquire more. according to the French antiquarians. march out upon proper occasions to the assistance of the king. of the natural strength of the country itself. under the command of their own magistrates. as well as of several other cities in Switzerland. on account either of their distance from the principal seat of government. obliging them to pull down their castles in the country. where the authority of the sovereign. Being generally. not to have been inferior to that of the country. in which. In countries such as France and England. it is the history of all the considerable Italian republics. Hence the origin of the representation of burghs in the states-general of all great monarchies in Europe.

in this manner. was established in cities long before it was commonly practised by the occupiers of land in the country. There were. some part of the coast of Barbary. situated near either the sea-coast or the banks of a navigable river. are not necessarily confined to derive them from the country in their neighbourhood. On the contrary. as the only sanctuaries in which it could be secure to the person that acquired it. oppressed with the servitude of villanage. taken singly. The law was at that time so indulgent to the inhabitants of towns. therefore. but the conveniencies and elegancies of life. perhaps. but all of them taken together. could afford it both a great subsistence and a great employment. were in poverty and wretchedness. Italy lay in the centre of what was at that time the improved and civilized part of the world. either of its subsistence or of its employment. either in exchange for the manufactured produce of their own industry. when they are secure of enjoying the fruits of their industry. must always ultimately derive their subsistence. A city might. to whom it would otherwise have belonged. and that of the Saracens during the reigns of the Abassides. but all those to which it traded. they naturally exert it to better their condition. was Egypt till it was conquered by the Turks. and may draw them from the most remote corners of the world. it is true. too. Whatever stock. grow up to great wealth and splendour. If. and so desirous of diminishing the authority of the lords over those of the country. within the narrow circle of the commerce of those times.The Wealth of Nations oppressors. he would naturally conceal it with great care from his master. that if he could conceal himself there from the pursuit of his lord for a year. too. which aims at something more than necessary subsistence. The crusades. some countries that were opulent and industrious. some little stock should accumulate. Such. and all those provinces of Spain which were under the government of the Moors. and take the first opportunity of running away to a town. The cities of Italy seem to have been the first in Europe which were raised by commerce to any considerable degree of opulence. while not only the country in its neighbourhood. That industry. and to acquire not only the necessaries. or by performing the office of carriers between distant countries. therefore. Each of those countries. from the country. The inhabitants of a city. They have a much wider range. But those of a city. and the whole materials and means of their industry. however. by the great waste of stock and destruction of inhabitants which they occa- 326 . and exchanging the produce of one for that of another. could afford it but a small part. though. Such was the Greek empire as long as it subsisted. in the hands of a poor cultivator. accumulated in the hands of the industrious part of the inhabitants of the country. he was free for ever. naturally took refuge in cities.

who eagerly purchased them with great quantities of the rude produce of their own lands. and for the silks and velvets of France and Italy. by importing the improved manufactures and expensive luxuries of richer countries. were extremely favourable to that of some Italian cities. was a source of opulence to those republics. or of such as are fit for distant sale. ever did or could subsist without some sort of manufactures being carried on in it. of the stocks of 327 . No large country. after the fall of the Roman empire. it must be observed. they must necessarily have retarded the progress of the greater part of Europe. seem to have been introduced into different countries in two different ways. Those manufactures which are fit for distant sale. gave extraordinary encouragement to the shipping of Venice. and the most destructive frenzy that ever befel the European nations. accordingly. in the same manner as the corn in Poland is at this day. in this manner. it must always be understood of the finer and more improved. by the violent operation. introduced by foreign commerce into countries where no such works were carried on. that seem to have been established in the western provinces of Europe. afforded some food to the vanity of the great proprietors. if one may say so. But when this taste became so general as to occasion a considerable demand. The inhabitants of trading cities. The great armies which marched from all parts to the conquest of the Holy Land. They were the commissaries. the merchants. are the produce of their own industry. In every large country both the clothing and household furniture or the far greater part of the people.Adam Smith sioned. if one may say so. naturally endeavoured to establish some manufactures of the same kind in their own country. of those armies. This is even more universally the case in those poor countries which are commonly said to have no manufactures. for the manufactured produce of more civilized nations. Genoa. in order to save the expense of carriage. exchanged for the wines and brandies of France. and always in supplying them with provisions. Sometimes they have been introduced in the manner above mentioned. sometimes in transporting them thither. The commerce of a great part of Europe in those times. In the latter you will generally find. and Pisa. A taste for the finer and more improved manufactures was. both in the clothes and household furniture of the lowest rank of people. a much greater proportion of foreign productions than in the former. consisted chiefly in the exchange of their own rude. than in those rich ones that are said to abound in them. and the fine cloths of Flanders. and when it is said of any such country that it has no manufactures. Hence the origin of the first manufactures for distant sale. Thus the wool of England used to be exchanged for the wines of France.

or caprice. the whole. and brocades. The cultivation of mulberry trees. as they are generally introduced by the scheme and project of a few individuals. Such. but at a considerable distance from the sea-coast. manufactures for distant sale grow up naturally. page 247 and 256. too. and they began the manufacture with three hundred workmen. and offered to introduce there the silk manufacture. i. The seat of such manufactures. and which were introduced into England in the beginning of the reign of Elizabeth. not of the first woollen manufacture of England. An inland country. Manufactures introduced in this manner are generally employed upon foreign materials.The Wealth of Nations particular merchants and undertakers. Such manufactures are generally employed upon the materials which the country produces. indeed. At other times. produces a great surplus of pro- 328 . Spanish wool was the material. according as their interest. Castruccio Castracani. Such manufactures. nine hundred families were driven out of Lucca. part 2 vol. and such are the present silk manufactures of Lyons and Spitalfields. {See Sandi Istoria civile de Vinezia. More than one half the materials of the Lyons manufacture is at this day foreign silk. the materials were all brought from Sicily and the Levant. and they seem frequently to have been first refined and improved In such inland countries as were not. when it was first established. No part of the materials of the Spitalfields manufacture is ever likely to be the produce of England. and the breeding of silkworms. In 1310. and sometimes even from all water carriage. seem not to have been common in the northern parts of Italy before the sixteenth century. Those arts were not introduced into France till the reign of Charles IX. and such seem to have been the ancient manufactures of silks. but of the first that was fit for distant sale. was so. of whom thirty-one retired to Venice. therefore. naturally fertile and easily cultivated. and sometimes in an inland town. are the offspring of foreign commerce. who established them in imitation of some foreign manufactures of the same kind. 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. being imitations of foreign manufactures. or very nearly the whole. happen to determine. They were banished from thence by the tyranny of one of Machiavel’s heroes.} Their offer was accepted. is sometimes established in a maritime city. seem to have been the manufactures of fine cloths that anciently flourished in Flanders. at a very great. many privileges were conferred upon them. which flourished in Lucca during the thirteenth century. The more ancient manufacture of Lucca was likewise carried on with foreign materials. judgment. The manufactures of Flanders were carried on chiefly with Spanish and English wool. and as it were of their own accord. velvets. When the Venetian manufacture was first established.

nor even the coarse manufacture. renders provisions cheap. and as the fertility of she land had given birth to the manufacture. Birmingham. and of their immediate employers. who find that their industry can there procure them more of the necessaries and conveniencies of life than in other places. by saving the expense of carrying it to the water-side. the manufactures of Leeds. or to some distant market. and Wolverhampton. their extension and improvement have generally been posterior to those which were the offspring of foreign commerce. so the progress of the manufacture reacts upon the land. more distant markets. upon easier terms than they could have obtained it before. could. more than a century before any of those which now flourish in the places above mentioned were fit for foreign sale. They work up the materials of manufacture which the land produces. A piece of fine cloth. of their own accord. The manufacturers first supply the neighbourhood. For though neither the rude produce. In this manner have grown up naturally. The extension and improvement of these last could not take place but in consequence of the extension and improvement of 329 . and encourages a great number of workmen to settle in the neighbourhood. Halifax. and inconveniency of river navigation. and afterwards. The corn which could with difficulty have been carried abroad in its own shape. as it were. The cultivators get a better price for their surplus produce. therefore. They give a new value to the surplus part of the rude produce. for more materials and provisions.Adam Smith visions beyond what is necessary for maintaining the cultivators. In the modern history of Europe. Sheffield. is in this manner virtually exported in that of the complete manufacture. Such manufactures are the offspring of agriculture. for example which weighs only eighty pounds. They are thus both encouraged and enabled to increase this surplus produce by a further improvement and better cultivation of the land. In a small bulk it frequently contains the price of a great quantity of rude produce. or. the maintenance of the different working people. and on account of the expense of land carriage. and. but sometimes of several thousand weight of corn. without the greatest difficulty. and can purchase cheaper other conveniencies which they have occasion for. what is the same thing. support the expense of a considerable land-carriage. the refined and improved manufacture easily may. and may easily be sent to the remotest corners of the world. and exchange their finished work. contains in it the price. Abundance. and they furnish the cultivators with something in exchange for it that is either useful or agreeable to them. the price of it. it may frequently be difficult to send this surplus abroad. as their work improves and refines. not only of eighty pounds weight of wool. England was noted for the manufacture of fine cloths made of Spanish wool. and increases still further it’s fertility.

however. CHAPTER IV HOW COMMERCE HOW THE COMMERCE OF TOWNS CONTRIBUTED IMPRO CONTRIBUTED TO THE IMPROVECOUNTRY MENT 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. To all of them they afforded a market for some part either of their rude or manufactured produce. the last and greatest effect of foreign commerce. in three different ways: First. by affording a great and ready market for the rude produce of the country. they gave encouragement to its cultivation and further improvement. consequently. and which I shall now proceed to explain. and yet afford it as cheap to the consumers as that of more distant countries. Secondly. the traders could pay the growers a better price for it. the wealth acquired by the inhabitants of cities was 330 . Its rude produce being charged with less carriage.The Wealth of Nations agriculture. Their own country. on account of its neighbourhood. and of the manufactures immediately introduced by it. necessarily derived the greatest benefit from this market. but extended more or less to all those with which they had any dealings. gave some encouragement to the industry and improvement of all. and. This benefit was not even confined to the countries in which they were situated.

seldom ventures to employ it in this manner. The one often sees his money go from him. besides. In a country which has neither foreign commerce nor any of the finer manufactures. economy. commerce and manufactures gradually introduced order and good government. when he has a probable prospect of raising the value of it in proportion to the expense. He is at all times. when once he parts with it. Whoever has had the fortune to live in a mercantile town. who had before lived almost in a continual state of war with their neighbours. the other. he can make use of it in no other way than by maintaining a hundred or a thousand men. and of servile dependency upon their superiors. must obey him. has hitherto taken notice of it. situated in an unimproved country. This. a country gentleman a timid undertaker. it is commonly not with a capital. the other. The habits. and with them the liberty and security of individuals. to which mercantile business naturally forms a merchant. when they do. very seldom expects to see any more of it. Thirdly. If this surplus produce is sufficient to maintain a hundred or a thousand men. but with what he can save out or his annual revenue. though it has been the least observed. a great proprietor. among the inhabitants of the country. than those of mere country gentlemen. Mr Hume is the only writer who. If he improves at all. any project of improvement. who. whereas a mere country gentleman is accustomed to employ it chiefly in expense. and lastly. and return to him again with a profit. The merchant is commonly a bold. must have frequently observed how much more spirited the operations of merchants were in this way. if he has any capital. with profit and success. is by far the most important of all their effects. A merchant is accustomed to employ his money chiefly in profitable projects. they are generally the best of all improvers. of which a great part would frequently be uncultivated. the hospitality of the rich and 331 . Before the extension of commerce and manufactures in Europe. and attention. consumes the whole in rustic hospitality at home. surrounded with a multitude of retainers and dependants. for the same reason that soldiers must obey the prince who pays them. Those different habits naturally affect their temper and disposition in every sort of business. having no equivalent to give in return for their maintenance. but being fed entirely by his bounty.Adam Smith frequently employed in purchasing such lands as were to be sold. of order. Merchants are commonly ambitious of becoming country gentlemen. 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. The one is not afraid to lay out at once a large capital upon the improvement of his land. which is not always the case. therefore. and. render him much fitter to execute. so far as I know.

The Wealth of Nations the great. is as dependent upon the proprietor as any servant or retainer whatever. A tenant at will. and its continuance depends upon his good pleasure. 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. or too large a family. provided they who consume it are as dependent upon him as either his retainers or his menial servants. half a crown. who paid a rent in no respect equivalent to the subsistence which the land afforded them. 30. at his different manors. who possesses land sufficient to maintain his family for little more than a quit-rent. and must obey him with as little reserve. it must. that part of it be consumed at a distance from his own house. a sheep. and invite all passengers. a common rent for lands which maintained a family. not be too large for his company. in order that the knights and squires. however.000 people. we can easily form a notion of Westminster-hall was the dining-room of William Rufus. In a country where the surplus produce of a large estate must be consumed upon the estate itself. I have seen. perhaps. In some places it is so at this day. might not spoil their fine clothes when they sat down on the floor to eat their dinner. who could not get seats. of all who dwelt upon their estates. The great Earl of Warwick is said to have entertained every day. that he strewed the floor of his hall with clean hay or rushes in the season. to sit down with him and partake of his banquet. They could maintain order. The subsistence of both is derived from his bounty. were tenants at will. and might frequently. and execute the 332 . Upon the authority which the great proprietors necessarily had. says Doctor Pocock. Even such of them as were not in a state of villanage. even common beggars. It seems to be common in all nations to whom commerce and manufactures are little known. He is thereby saved from the embarrassment of either too large a company. as he feeds his servants and retainers at his own house. Such a proprietor. a lamb. A hospitality nearly of the same kind was exercised not many years ago in many different parts of the Highlands of Scotland. in the present times. over their tenants and retainers. in such a state of things. It was reckoned a piece of magnificence in Thomas Becket. it will frequently be more convenient for the proprietor. have been very great to admit of such exaggeration. nor will money at present purchase a greater quantity of commodities there than in other places. A crown. and the leaders in war. and though the number here may have been exaggerated. exceeded every thing which. in the Highlands of Scotland. was some years ago. from the sovereign down to the smallest baron. so he feeds his tenants at their houses. They necessarily became the judges in peace. an Arabian chief dine in the streets of a town where he had come to sell his cattle.

He was. Without remounting to the remote antiquities of either the French or English monarchies. within their respective demesnes. without any legal warrant whatever. to leave the command of the country militia to those whom that militia would obey. of coining money. because each of them could there turn the whole force of all the inhabitants against the injustice of anyone.Adam Smith law. It is not thirty years ago since Mr Cameron of Lochiel. whose rent never exceeded £500 a-year. but the power of levying troops. and accustomed to stand by one another. a gentleman of Lochaber in Scotland. had not. No other person had sufficient authority to do this. to those who were capable of administering it. we may find. obliged to abandon the administration of justice. He is said to have done so with great equity. in 1745. in order to maintain the public peace. many proofs that such effects must always flow from such causes. carried. 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. through the greater part of the country. used. in much later times. Not only the highest jurisdictions. That the most extensive authority and jurisdictions were possessed by the great lords in France allodially. he was little more than the greatest proprietor in his dominions. long before the feudal law was introduced into that country. That authority. It is a mistake to imagine that those territorial jurisdictions took their origin from the feudal law. had he attempted it by his own authority. In those ancient times. and with out being so much as a justice of peace. for the sake of common defence against their common enemies. all necessarily flowed from the state of property and manners just now described. in particular. to exercise the highest criminal jurisdictions over his own people. and even that of making bye-laws for the government of their own people. nor even a tenant in chief. several centuries before even the name of the feudal law was known in Europe. though without any of the formalities of justice. would have cost the king. 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. were all rights possessed allodially by the great proprietors of land. but a vassal of the Duke of Argyll. therefore. and those jurisdictions. both civil and criminal. not being what was then called a lord of regality. To have enforced payment of a small debt within the lands of a great proprietor. notwithstanding. The king. to whom. is a matter of fact that admits of no doubt. That gentleman. the other great proprietors paid certain respects. for the same reason. 800 of 333 . But the feudal law is not supposed to have become the common law of England till after the Conquest. where all the inhabitants were armed. almost the same effort as to extinguish a civil war. and.

accompanied with a long train of services and duties. the authority of the great allodial lords. All for ourselves. they exchanged the maintenance. without sharing it either with tenants or retainers. or for something as frivolous and useless. But though this institution necessarily tended to strengthen the authority of the king. provided it was in a manner not unsuitable to his rank. and too strong in the inferior members. For a pair of diamond buckles. from his authority as guardian.The Wealth of Nations his own people into the rebellion with him. whereas. was supposed to have a right of disposing of him in marriage. the silent and insensible operation of foreign commerce and manufactures gradually brought about. from the king down to the smallest proprietor. They still continued to make war according to their own discretion. and which they could consume themselves. and disorder. therefore. it could not do either sufficiently for establishing order and good government among the inhabitants of the country. together with the management of his lands. they must have shared with at least 1000 people. the king was as incapable of restraining the violence of the great lords as before. and to weaken that of the great proprietors. The buckles. consequently. however. too weak in the head. But what all the violence of the feudal institutions could never have effected. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands. were to be all their own. The authority of government still continued to be. so far from extending. and. seems. or. because it could not alter sufficiently that state of property and manners from which the disorders arose. in the more ancient method of expense. may be regarded as an attempt to moderate. almost continually upon one another. what is the same thing. and very frequently upon the king. and no other human creature was to have any share of them. the rent. rapine. perhaps. It established a regular subordination. and nothing for other people. With the judges that were to determine the prefer- 334 . and the excessive strength of the inferior members was the cause of the weakness of the head. as before. After the institution of feudal subordination. those of all great proprietors into the hands of the king. The introduction of the feudal law. fell into the hands of his immediate superior. to have been the vile maxim of the masters of mankind. they had no disposition to share them with any other persons. During the minority of the proprietor. As soon. and who. as they could find a method of consuming the whole value of their rents themselves. and with it the whole weight and authority which it could give them. who was charged with the maintenance and education of the pupil. and the open country still continued to be a scene of violence. the price of the maintenance of 1000 men for a year. in every age of the world.

it was impossible that the number of their retainers should not as gradually diminish. but of a hundred or a thousand different customers. they may. and the profits of all their immediate employers. nor any of the finer manufactures. he indirectly pays all those wages and profits. Farms were enlarged. not of one. who are all of them necessarily at his command. the number of workmen employed in collecting and preparing it must necessarily have been very great. however.000 a-year can spend his whole revenue. Its great price generally arises from the wages of their labour. When the great proprietors of land spend their rents in maintaining their tenants and retainers. they are all more or less independent of him. and to some not a thousandth. and thus. perhaps maintain as great. but a very small proportion to that of each. and thus indirectly contributes to the maintenance of all the workmen and their employers. In the present state of Europe. The personal expense of the great proprietors having in this manner gradually increased. By paying that price. or even a ten thousandth part of their whole annual maintenance. In a country where there is no foreign commerce. this difference was perfectly decisive. to many not a hundredth. a man of £10. For though the quantity of precious productions for which he exchanges his whole revenue be very small. on account of the waste which attends rustic hospitality. a man of £10. or even a greater number of people. and the most sordid of all vanities they gradually bartered their whole power and authority.000 a-year cannot well employ his revenue in any other way than in maintaining. Indirectly. He generally contributes. or being able to command more than ten footmen. the meanest. therefore. without directly maintaining twenty people. therefore. than he could have done by the ancient method of expense. to the maintenance of them all. because generally they can all be maintained without him. contributes often but a very small share to the maintenance of any individual of this greater number. But when they spend them in maintaining tradesmen and artificers. not worth the commanding. Though he contributes. Each of them. to a very few. all of them taken together. perhaps. for the gratification of the most childish. perhaps. or. till they were at last dismissed altogether. each of them maintains entirely all his own tenants and all his own retainers. 1000 families. Each tradesman or artificer derives his subsistence from the employment. The same cause gradually led them to dismiss the unnecessary part of their tenants. he maintains as great. however.Adam Smith ence. taken singly. and he generally does so. perhaps. and the occupiers of land. not a tenth. a greater number of people than before. he is not absolutely dependent upon any one of them. notwithstanding the complaints of de- 335 . Though in some measure obliged to them all.

a greater surplus. The tenants having in this manner become independent.The Wealth of Nations population. or of disturbing the peace of the country. reduced to the number necessary for cultivating it. beyond what is either expressly stipulated in the lease. he is altogether independent. who pays the full value of the land. but I cannot help remarking it. fitter to be the playthings of children than the serious pursuits of men. in the actual state of their improvement. was obtained for the proprietor. and hence the origin of long leases. what is the same thing. but. for a mess of pottage in time of hunger and necessity. that they should be secured in their possession for such a term of years as might give them time to recover. The Arabian histories seem to be all full of genealogies. or imposed upon him by the common and known law of the country. on the contrary. whatever they should lay not in the further improvement of the land. and the retainers being dismissed. Having sold their birth-right. in the same manner as he had done the rest. and such a tenant will expose neither his life nor his fortune in the service of the proprietor. they became as insignificant as any substantial burgher or tradesmen in a city. or the Highlands of Scotland. In 336 . a proof that ancient families are very common among those nations. and by exacting from the farmer the full value of the farm. that very old families. The expensive vanity of the landlord made him willing to accept of this condition. could afford. It does not. relate to the present subject. in the wantonness of plenty. In countries which have little commerce. they are very common. with profit. The cause continuing to operate. By the removal of the unnecessary mouths. and his landlord must not expect from him even the most trifling service. he was desirous to raise his rents above what his lands. which the merchants and manufacturers soon furnished him with a method of spending upon his own person. any more than in the other. nobody having sufficient power to disturb its operations in the one. and there is a history written by a Tartar Khan. or. not like Esau. the great proprietors were no longer capable of interrupting the regular execution of justice. for trinkets and baubles. But if he has a lease for along term of years. is not altogether dependent upon the landlord. which has been translated into several European languages. according to the imperfect state of cultivation and improvement in those times. are very rare in commercial countries. His tenants could agree to this upon one condition only. A regular government was established in the country as well as in the city. and which contains scarce any thing else. such as have possessed some considerable estate from father to son for many successive generations. perhaps. such as Wales. the price of a greater surplus. The pecuniary advantages which they receive from one another are mutual and equal. Even a tenant at will.

In commercial countries. especially small property. Compare the slow progress of those European countries of which the wealth depends very much upon their commerce and manufactures. Neither of them had either knowledge or foresight of that great revolution which the folly of the one. This order. they frequently do. views it with all the affection which property. Among simple nations. much less ridiculous. keep so much land out of the market. and the industry of the other. Through the greater part of Europe. the most intelligent. In Europe. but in adorning it. not only in cultivating. It was thus. and perpetuities of different kinds. without any regulations of law. for among nations of shepherds. or to his affection for his own person. he is apt to run out. such as the Tartars and Arabs. and the most successful. is generally of all improvers the most industrious. that there are always more capitals to buy than there is land to 337 .Adam Smith countries where a rich man can spend his revenue in no other way than by maintaining as many people as it can maintain. acted merely from a view to their own interest. is necessarily both slow and uncertain. and thereby hinder the multiplication of small proprietors. the consumable nature of their property necessarily renders all such regulations impossible. he frequently has no bounds to his expense. prevent the division of great estates. in spite of the most violent regulations of law to prevent their dissipation. and who upon that account takes pleasure. and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. A small proprietor. being contrary to the natural course of things. instead of being the effect. The merchants and artificers. A revolution of the greatest importance to the public happiness. have been the cause and occasion of the improvement and cultivation of the country. who knows every part of his little territory. on the contrary. the law of primogeniture. because he frequently has no bounds to his vanity. But where he can spend the greatest revenue upon his own person. the number of inhabitants is not supposed to double in less than five hundred years. The same regulations. therefore. was gradually bringing about. is seldom so violent as to attempt to maintain more than he can afford. To gratify the most childish vanity was the sole motive of the great proprietors. that. was in this manner brought about by two different orders of people. with the rapid advances of our North American colonies. it is found to double in twenty or five-and-twenty years. who had not the least intention to serve the public. however. and his benevolence. through the greater part of Europe. very seldom remain long in the same family. besides. the commerce and manufactures of cities. it seems. of which the wealth is founded altogether in agriculture. naturally inspires. riches. however. In several of our North American colonies.

by a different employment of his stock. and of the many navigable rivers which run through it. a thing impossible in Europe. The purchase and improvement of uncultivated land is there the most profitable employment of the smallest as well as of the greatest capitals. and a small capital might be employed in purchasing land as profitable as in any other way. therefore. the estate would generally be sold. In North America. a man of moderate circumstances. Such land. The free rent of the land would go no nearer to pay the interest of the purchase-money.The Wealth of Nations sell. who. too. The rent never pays the interest of the purchase-money. might indeed expect to live very happily and very independently. of the great extent of the sea-coast in proportion to that of the whole country. indeed. and is. and of all the improvements which these can occasion. But a young man. that it could no longer sell at a monopoly price. burdened with repairs and other occasional charges. should employ a capital of two or three thousand pounds in the purchase and cultivation of a small piece of land. too. is in North America to be had almost for nothing. so that what is sold always sells at a monopoly price. upon the death of any proprietor who left a numerous family. is perhaps as well fitted by nature as any large country in Europe to be the seat of foreign commerce. fifty or sixty pounds is often found a sufficient stock to begin a plantation with. though he cannot aspire at being a proprietor. when he retires from business. will often disdain to be a farmer. to which the interest of money is not liable. A man of profession. he might have had the same chance of acquiring with other people. prevents a great number of capitals from being employed in its cultivation and improvement. The small quantity of land. which is brought to market. which would otherwise have taken that direction. on account of the natural fertility of the soil. For the sake of the superior security. To purchase land. or at a price much below the value of the natural produce. If landed estates. of manufactures for distant sale. everywhere in Europe. So much land would come to market. instead of applying to trade or to some profession. England. on the contrary. indeed. From the beginning of the reign of Elizabeth. too whose revenue is derived from another source often loves to secure his savings in the same way. besides. which. however. and the most direct road to all the fortune and illustration which can be required in that country. and afford the conveniency of water carriage to some of the most inland parts of it. but must bid adieu for ever to all hope of either great fortune or great illustration. or indeed in any country where all lands have long been private property. will sometimes choose to lay out his little capital in land. and the high price of what is brought thither. 338 . were divided equally among all the children. is. Such a person. a most unprofitable employment of a small capital.

In times of moderate plenty. no doubt. favours agriculture. The importation of live cattle. except from Ireland. before the expedition of Charles VIII. have a monopoly against their countrymen for the two greatest and most important articles of land produce. are admitted in some cases. The cultivation and improvement of the country has. The law of England. and the cultivation of the far greater part much inferior to what it might be. but by several direct encouragements. upon the whole. by the protection of commerce. however. The greater part of the country must probably have been cultivated before the reign of Elizabeth. What would it have been. bread and butcher’s meat. the exportation of corn is not only free. been gradually advancing too. as independent. sufficiently demonstrate at least the good intention of the legislature to favour agriculture. 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. of which the law is. but it seems to have followed slowly. to Naples. therefore. as law can make them. perhaps. which the right of primogeniture takes place. No country. although at bottom. more favourable to this sort of industry. The law of the country has never given the same direct encouragement to agriculture. But what is of much more importance than all of them. altogether illusory. however. and at a distance. Such. is. however. 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. a period as long as the course of human prosperity usually endures. 339 . and where perpetuities. The cultivation and improvement of France. France seems to have had a considerable share of foreign commerce. and in reality there is no country in Europe. the more rapid progress of commerce and manufactures. not only indirectly.Adam Smith the English legislature has been peculiarly attentive to the interest of commerce and manufactures. upon the whole. Commerce and manufactures have accordingly been continually advancing during all this period. near a century before England was distinguished as a commercial country. Those who cultivate the land. but encouraged by a bounty. Except in times of scarcity. as I shall endeavour to show hereafter. and as respectable. therefore. notwithstanding. and it is but of late that it was permitted from thence. Holland itself not excepted. and a very great part of it still remains uncultivated. the importation of foreign corn is loaded with duties that amount to a prohibition. is the state of its cultivation. The marine of France was considerable. which pays tithes. inferior to that of England. can give more encouragement to agriculture than England. the yeomanry of England are rendered as secure. These encouragements. though contrary to the spirit of the law. is prohibited at all times.

on account of the great riches and extent of those colonies. than in the plainest and most fertile.The Wealth of Nations The foreign commerce of Spain and Portual to the other parts of Europe. however. The advantageous situation of the country. and the great number of independent status which at that time subsisted in it. and Bruges. Italy is the only great country of Europe which seems to have been cultivated and improved in every part. But it has never introduced any considerable manufactures for distant sale into either of those countries. It is not impossible. The civil wars of Flanders. according to Guicciardini. That to their colonies is carried on in their own. as it were. by means of foreign commerce and manufactures for distant sale. The foreign commerce of Portugal is of older standing than that of any great country in Europe. was cultivated not less in the most mountainous and barren parts of the country. The ordinary 340 . and a very trifling disgust will make him remove his capital. over the face of that 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. those countries still continue to be among the most populous and best cultivated in Europe. is not necessarily the citizen of any particular country.. and the greater part of both still remains uncultivated. A merchant. and the Spanish government which succeeded them. No part of it can be said to belong to any particular country. greatly diminished the commerce and manufactures of the cities of Lombardy and Tuscany. or in the lasting improvement of lands. But Flanders still continues to be one of the richest. probably contributed not a little to this general cultivation. except in the obscure histories of the thirteenth and fourteenth centuries. best cultivated. or to what towns in Europe the Latin names given to some of them belong. Italy. and most populous provinces of Europe. Ghent. notwithstanding this general expression of one of the most judicious and reserved of modern historians. it has been said very properly. till some part of it has been secured and realized in the cultivation and improvement of its lands. till it has been spread. and. Before the invasion of Charles VIII. and is much greater. that is acquired to any country by commerce and manufactures. But though the misfortunes of Italy. that Italy was not at that time better cultivated than England is at present. from one country to another. The capital. together with it. is always a very precarious and uncertain possession. too. in the end of the fifteenth and beginning of the sixteenth centuries. chased away the great commerce of Antwerp. It is in a great measure indifferent to him from what place he carries on his trade. though chiefly carried on in foreign ships. It is even uncertain where some of them were situated. except Italy. is very considerable. all the industry which it supports.

and shall begin with the system of commerce. proposes two distinct objects. 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. considered as a branch of the science of a statesman or legislator. to enable them to provide such a revenue or subsistence for themselves. and. with regard to enriching the people. first. to supply the state or commonwealth with a revenue sufficient for the public services. and is best understood in our own country and in our own times. secondly. It proposes to enrich both the people and the sovereign. the other that of agriculture. to provide a plentiful revenue or subsistence for the people. The one may be called the system of commerce. BOOK IV OF SYSTEMS OF POLITICAL ECONOMY P OLITICAL ECONOMY. That which arises from the more solid improvements of agriculture is much more durable. The different progress of opulence in different ages and nations. more properly. 341 . I shall endeavour to explain both as fully and distinctly as I can. has given occasion to two different systems of political economy. such as those that happened for some time before and after the fall of the Roman empire in the western provinces of Europe. or. It is the modern system.Adam Smith revolutions of war and government easily dry up the sources of that wealth which arises from commerce only.

is a popular notion which naturally arises from the double function of money. as among all other nations of shepherds. perhaps. that the Tartars used frequently to ask him. if there was plenty of sheep and oxen in the kingdom of France? Their inquiry had the same object with that of the Spaniards. or a man eager to be rich. We say of a rich man. it consisted in gold and silver. than by means of any other commodity. or a profuse man. a generous. therefore. says. there is no difficulty in making any subsequent purchase. the Tartar notion. Among the Tartars. that the wealth which consists in them cannot be much depended on. as the instrument of commerce. but merely by their own waste 342 . or in gold and silver. Of the two. is supposed to be a country abounding in money.The Wealth of Nations CHAPTER I OF THE PRINCIPLE OF THE COMMERMERCANTILE CIAL OR MERCANTILE SYSTEM THAT WEALTH consists in money. without any exportation. in common language. A frugal man. in short. or if the country was worth the conquering. When that is obtained. All other moveable goods. consisted in cattle. In consequence of its being the measure of value. For some time after the discovery of America. cattle are the instruments of commerce and the measures of value. according to them. who are generally ignorant of the use of money. was the nearest to the truth. To grow rich is to get money. In consequence of its being the instrument of commerce. The great affair. are of so consumable a nature. Plano Carpino. and a nation which abounds in them one year may. when they arrived upon any unknown coast. is to get money. A rich country. used to be. he says. that he is worth a great deal. is said to love money. we estimate that of all other commodities by the quantity of money which they will exchange for. Wealth. and to heap up gold and silver in any country is supposed to be the readiest way to enrich it. and wealth and money. are. is said to be indifferent about it. we always find. and as the measure of value. that he is worth very little money. considered as in every respect synonymous. a monk sent ambassador from the king of France to one of the sons of the famous Gengis Khan. Mr Locke remarks a distinction between money and other moveable goods. when we have money we can more readily obtain whatever else we have occasion for. and a careless. and of a poor man. if there was any gold or silver to be found in the neighbourhood? By the information which they received. the first inquiry of the Spaniards. according to the Spaniards. as. they judged whether it was worth while to make a settlement there. in the same manner as a rich man. They wanted to know if the country was rich enough to be worth the conquering.

Gold and silver. cannot be done. Others admit. They could frequently buy more advantageously with gold and silver. which were circulated by means of this money. on the contrary. upon many occasions. therefore. where we should least of all expect to find it. This. it might frequently increase the quantity. on the contrary. When those countries became commercial. the carrying gold or silver forth of the kingdom. that if a nation could be separated from all the world. the must solid and substantial part of the moveable wealth of a nation. if the consump- 343 . that when occasion requires. but by sending abroad money to pay them with. in order to purchase foreign goods. But it is otherwise. yet if it can be kept from going out of the country. it may have wherewithal to carry on foreign wars. the proprietors of the principal mines which supply Europe with those metals. would depend altogether upon the abundance or scarcity of those consumable goods. to accumulate gold and silver. that. all the different nations of Europe have studied. in some old Scotch acts of Parliament. They represented. under heavy penalties. be in great want of them the next. they think. The consumable goods. that the exportation of gold and silver. is not very liable to be wasted and consumed. They remonstrated. and to multiply those metals ought. is a steady friend. did not always diminish the quantity of those metals in the kingdom. he thinks. have either prohibited their exportation under the severest penalties. which forbid. with countries which have connections with foreign nations. first. or to carry to some other foreign country.Adam Smith and extravagance. unless it has a good deal at home. the foreign goods which they wanted. Every such nation. Money. In consequence of those popular notions. Spain and Portugal. every possible means of accumulating gold and silver in their respective countries. but the real wealth or poverty of the country. therefore. The like policy anciently took place both in France and England. in time of peace. they allow. The like prohibition seems anciently to have made a part of the policy of most other European nations. the merchants found this prohibition. though to little purpose. It is even to be found. which. and to maintain fleets and armies in distant countries. would only be exchanged for a greater or a smaller number of pieces. either to import into their own. than with any other commodity. according to him. though it may travel about from hand to hand. and a nation cannot send much money abroad. and which are obliged to carry on foreign wars. they say. against this prohibition as hurtful to trade. or subjected it to a considerable duty. extremely inconvenient. are. must endeavour. therefore. it would be of no consequence how much or how little money circulated in it. to be the great object of its political economy. upon that account. because.

those goods might be re-exported to foreign countries. and would purchase a proportionable quantity of English goods.” They represented. would be worth 105 ounces in England. Mr Mun compares this operation of foreign trade to the seed-time and harvest of agriculture. the more the balance of trade became necessarily against it. which. a contrary balance became due to foreign nations. which is the end of his endeavours. could easily be smuggled abroad. that this prohibition could not hinder the exportation of gold and silver. in comparison with that of the country to which the balance was due. by the difference of 344 . and being there sold for a large profit. That this exportation could only be prevented by a proper attention to what they called the balance of trade. which was necessarily paid to them in the same manner. the money of that country becoming necessarily of so much less value. and thereby increased the quantity of those metals in the kingdom. we shall find the worth and plentiful increase of his actions. might bring back much more treasure than was originally sent out to purchase them. a balance became due to it from foreign nations. That if the exchange between England and Holland. that the English goods which were sold to Holland would be sold so much cheaper. But that when it imported to a greater value than it exported. but for the extraordinary risk arising from the prohibition. not only for the natural risk. and thereby diminished that quantity: that in this case. which was necessarily paid to it in gold and silver. when he casteth away much good corn into the ground. secondly. trouble. for example. to prohibit the exportation of those metals. could not prevent it. but that 100 ounces of silver in Holland. but only. and expense of sending the money thither. would be worth only 100 ounces of silver in Holland.The Wealth of Nations tion of foreign goods was not thereby increased in the country. That when the country exported to a greater value than it imported. than it otherwise might have been. on account of the smallness of their bulk in proportion to their value. “If we only behold. render it more expensive: that the exchange was thereby turned more against the country which owed the balance.” says he. by making it more dangerous. and would purchase only a proportionable quantity of Dutch goods. the merchant who purchased a bill upon the foreign country being obliged to pay the banker who sold it. therefore. was five per cent. “the actions of the husbandman in the seed time. on the contrary. but that the more the exchange was against any country. we shall account him rather a madman than a husbandman. against England. and the Dutch goods which were sold to England so much dearer. But when we consider his labours in the harvest. 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.

They were sophistical. too. as well as to the merchants. The high price of exchange. so far as they asserted that the exportation of gold and silver in trade might frequently be advantageous to the country. or in what manner. than to preserve or to augment the quantity of any other useful commodities. never fails to supply in the proper quantity. in asserting that the high price of exchange necessarily increased what they called the unfavourable balance of trade. They were solid. and would require a greater balance of gold and silver to be exported to Holland. But though the risk arising from the prohibition might occasion some extraordinary expense to the bankers. in raising the price of foreign goods. 345 . experience demonstrated to the nobles and country gentlemen. But they were sophistical. They were addressed by merchants to parliaments and to the councils of princes. in smuggling the money out of it. it would not necessarily carry any more money out of the country. however. That foreign trade enriched the country. It would tend. must necessarily have operated as a tax. Such as they were. They paid so much dearer for the bills which their bankers granted them upon those countries. to nobles. in order that they might have this high exchange to pay upon as small a sum as possible. but how. perhaps. That high price.Adam Smith the exchange: that the one would draw so much less Dutch money to England. those arguments convinced the people to whom they were addressed. and thereby diminishing their consumption. what they called the unfavourable balance of trade. indeed. The high price of exchange. in asserting that no prohibition could prevent their exportation. They were solid. and consequently the exportation of gold and silver. or occasioned the exportation of a greater quantity of gold and silver. by those who were supposed to understand trade. but to diminish. which the freedom of trade. too. Those arguments were partly solid and partly sophistical. and to country gentlemen. to those who were conscious to them selves that they knew nothing about the matter. therefore. as this difference amounted to: and that the balance of trade. would necessarily be so much more against England. in supposing. was extremely disadvantageous to the merchants who had any money to pay in foreign countries. would naturally dispose the merchants to endeavour to make their exports nearly balance their imports. not to increase. besides. that either to preserve or to augment the quantity of those metals required more the attention of government. when private people found any advantage in exporting them. too. and could seldom occasion the exportation of a single sixpence beyond the precise sum drawn for. This expense would generally be all laid out in the country. therefore. without any such attention. and the other so much more English money to Holland.

In Holland. nor carried any out of it. this liberty was extended even to the coin of the country. but of all other commercial countries. must undoubtedly draw its gold and silver from foreign countries.The Wealth of Nations none of them well knew. was no part of their business. It neither brought money into the country. but that the laws in question hindered it from bringing so much as it otherwise would do. that the attention of government should be more turned towards the one than towards the other object. could never become either richer or poorer by means of it. To the judges who were to decide the business. as the only cause which could occasion any augmentation or diminution of those metals. and just equally fruitless. it appeared a most satisfactory account of the matter. therefore. that the freedom of trade. it was their business to know it. Those arguments. the trade in which an equal capital affords the greatest revenue. in the same manner as one that has no vineyards of its own must draw its wines. without any at- 346 . England’s Treasure in Foreign Trade. when they were told that foreign trade brought money into the country. produced the wished-for effect. But to know in what manner it enriched the country. with perfect security. The title of Mun’s book. and as they are the price of all other commodities. and in some other places. The inland or home trade. It then became necessary to say something about the beneficial effects of foreign trade. not of England only. The attention of government was turned away from guarding against the exportation of gold and silver. confined to the coin of those respective countries. became a fundamental maxim in the political economy. From one fruitless care. A country that has no mines of its own. so all other commodities are the price of those metals. however. The exportation of foreign coin and of bullion was made free. The prohibition of exporting gold and silver was. but when they had occasion to apply to their country for some change in the laws relating to foreign trade. therefore. and creates the greatest employment to the people of the country. except so far as its prosperity or decay might indirectly influence the state of foreign trade. like all other commodities. The country. will always get the wine which it has occasion for. It does not seem necessary. and the manner in which those effects were obstructed by the laws as they then stood. and a country that has wherewithal to buy gold and silver. The merchants knew perfectly in what manner it enriched themselves. in France and England. They are to be bought for a certain price. it was said. A country that has wherewithal to buy wine. it was turned away to another care much more intricate. much more embarrassing. will never be in want of those metals. We trust. the most important of all. The subject never came into their consideration. to watch over the balance of trade. was considered as subsidiary only to foreign trade.

fifty tons of gold. with equal security. because somewhat cheaper than those of the British company. If it were even to take pains to prevent their importation. on the contrary. no vigilance of government can prevent their exportation. to those where they fall short of this effectual demand. and more than two thousand times the bulk of 347 . will always supply us with the wine which we have occasion for. The quantity of every commodity which human industry can either purchase or produce. than gold and silver. at five guineas a-ton. according to this effectual demand.Adam Smith tention of government. from the places where they exceed. no commodities can be more easily transported from one place to another. If. 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. a packet-boat could bring from Lisbon. sixteen shillings. from the places where they are cheap. however. or according to the demand of those who are willing to pay the whole rent. because. that is commonly paid for it in silver. broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedaemon. on account of the small bulk and great value of those metals. when the Spartans had got wherewithal to purchase them. it would not be able to effectuate it. which could be coined into more than five millions of guineas. so as to raise their price above that of the neighbouring countries. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home. their quantity fell short of the effectual demand. But if there were an effectual demand for grain to the same value. or from wherever else it was to be had. Those metals. A pound of tea. labour. and profits. and we may trust. or a thousand ships of a thousand tons each. to those where they are dear. is about a hundred times the bulk of one of the highest prices. and sink the price of those metals there below that in the neighbouring countries. a million of tons of shipping. If there were in England. When the quantity of gold and silver imported into any country exceeds the effectual demand. The navy of England would not be sufficient. which must be paid in order to prepare and bring it to market. to import it would require. either in circulating our commodities or in other uses. for example. The continual importations from Peru and Brazil exceed the effectual demand of those countries. that it will always supply us with all the gold and silver which we can afford to purchase or to employ. But no commodities regulate themselves more easily or more exactly. in any particular country. the government would have no occasion to take any pains to import them. an effectual demand for an additional quantity of gold. naturally regulates itself in every country according to the effectual demand.

but the changes to which it is liable are generally slow. there are more expedients for supplying their place. If provisions are wanted. once a-month. than that of almost any other commodity. is not altogether exempted from variation. will supply it with less inconveniency. of the scarcity of money. perhaps. and. the attention of government never was so unnecessarily employed. Before their 348 . for example. A well-regulated paper-money will supply it not only without any inconveniency. so as to raise or lower at once. If the materials of manufacture are wanted. The price of those metals. that the price of those metals does not fluctuate continually. however. they have been constantly. is not always confined to improvident spendthrifts. Money. sensibly and remarkably. it is supposed. whose expense has been disproportioned to their revenue. and uniform.The Wealth of Nations the same price in gold. It is partly owing to the easy transportation of gold and silver. must always be scarce with those who have neither wherewithal to buy it. with some advantages. nor credit to borrow it. are as likely to have neither wherewithal to buy money. sinking in their value. Those who have either. the money price of all other commodities. just so many times more difficult to smuggle. therefore. This complaint. not withstanding all this. If. gradual. as when directed to watch over the preservation or increase of the quantity of money in any country. but. however. But if money is wanted. or of the wine which they have occasion for. as prodigals. gold and silver should at any time fall short in a country which has wherewithal to purchase them. like that of the greater part of other commodities. in some cases. the people must starve. or once a-year. from the places where they abound to those where they are wanted. which are hindered by their bulk from shifting their situation. whose projects have been disproportioned to their capitals. No complaint. Sober men. Buying and selling upon credit. But to make any sudden change in the price of gold and silver. but gradually. requires such a revolution in commerce as that occasioned by the discovery of America. when the market happens to be either over or under-stocked with them. like wine. indeed. Upon every account. and the different dealers compensating their credits with one another. consequently. industry must stop. on account of the continual importations from the Spanish West Indies. will seldom be in want either of the money. nor credit to borrow it. is more common than that of a scarcity of money. without much foundation. though with a good deal of inconveniency. barter will supply its place. that during the course of the present and preceding century. It is sometimes general through a whole mercantile town and the country in its neighbourhood. In Europe. Over-trading is the common cause of it.

They do not always send more money abroad than usual. than when he has got their price in his coffers. which they send to some distant market. both among great and small dealers. and is valuable only for purchasing. his profit arises more directly from selling than from buying. than to buy money with goods. a nation or country is not liable to the same accident. for which every thing is readily given in exchange. generally much more anxious to exchange his goods for money than his money for goods. but the difficulty which such people find in borrowing. but it has already been shown that it generally makes but a small part. but that many people want those pieces who have nothing to give for them. both at home and abroad. in hopes that the returns will come in before the demand for payment. But it is but a very small part of the annual produce of the land and labour of a country. The far greater part is circulated and consumed among 349 . They run about everywhere to borrow money. It is not because wealth consists more essentially in money than in goods. but in what money purchases. The demand comes before the returns. When the profits of trade happen to be greater than ordinary over-trading becomes a general error. But though a particular merchant.Adam Smith projects can be brought to bear. It is not any scarcity of gold and silver. but which is not always with equal readiness to be got in exchange for every thing. and he may frequently sustain a much greater loss by keeping them. and always the most unprofitable part of it. and he is. or in gold and silver. 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. makes always a part of the national capital. but they buy upon credit. and their credit with it. that the merchant finds it generally more easy to buy goods with money. It would be too ridiculous to go about seriously to prove. upon all these accounts. with abundance of goods in his warehouse. The greater part of goods. When his goods are upon hand. but because money is the known and established instrument of commerce. are more perishable than money. their stock is gone. Money. that occasions the general complaint of the scarcity of money. Over and above all this. and everybody tells them that they have none to lend. besides. too. and which their creditor find in getting payment. which can ever be destined for purchasing gold and silver from their neighbours. he is more liable to such demands for money as he may not be able to answer. The whole capital of a merchant frequently consists in perishable goods destined for purchasing money. an unusual quantity of goods. may sometimes be ruined by not being able to sell them in time. that wealth does not consist in money. and they have nothing at hand with which they can either purchase money or give solid security for borrowing. no doubt.

the number of pots and pans would readily increase along with it. whereas he who sells always means to buy again. but frequently to use or to consume. might be accumulated for ages together. or in maintaining an additional number of workmen whose business it was to make them. as coin. or very nearly the same as usual. therefore. suffer some loss and inconveniency.The Wealth of Nations themselves. in the long-run they draw it more necessarily than even it draws them. and that. but money can serve no other purpose besides purchasing goods. The one may frequently have done the whole. could not be had in exchange for the goods destined to purchase them. however. but for the sake of what they can purchase with it. It might. therefore. the nation would not be ruined. if the quantity of victuals were to increase. and in affording a species of household furni- 350 . which consists in the exchange of the hardware of England for the wines of France. it is pretended. It should as readily occur. Goods can serve many other purposes besides purchasing money. And though goods do not always draw money so readily as money draws goods. but the other can never have done more than the one half of his business. that their use consists in circulating commodities. But it readily occurs. but goods do not always or necessarily run after money. and even of the surplus which is sent abroad. limited by the use which there is for those metals. does not always mean to sell again. Consumable commodities. that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there. a part of the increased quantity of victuals being employed in purchasing them. and were it not for this continual exportation. The man who buys. than the trade which consists in the exchange of such lasting for such perishable commodities. that the quantity of gold and silver is. necessarily runs after goods. it is said. that the number of such utensils is in every country necessarily limited by the use which there is for them. to the incredible augmentation of the pots and pans of the country. indeed. and were it not for this continual exportation. however. or very nearly the same consumable capital would be employed in maintaining it. It is not for its own sake that men desire money. in every country. and be forced upon some of those expedients which are necessary for supplying the place of money. Though gold and silver. the greater part is generally destined for the purchase of other foreign goods. would be the same. and yet hardware is a very durable commodity. The annual produce of its land and labour. because the same. We do not. are soon destroyed. Nothing. to the incredible augmentation of the real wealth of the country. might too be accumulated for ages together. whereas gold and silver are of a more durable nature. therefore. Money. reckon that trade disadvantageous. can be more disadvantageous to any country.

and lodges. first. which in those metals can never be greater than what the use requires. has wherewithal to purchase those consumable goods in distant countries. Were they ever to be accumulated beyond this quantity. and to maintain fleets and armies in distant countries. you will as infallibly diminish the use. that no law could prevent their being immediately sent out of the country. and prepared by means of them. and immediately a part of it will be sent abroad to purchase. Gold and silver. are utensils. either the quantity or goodness of the family provisions. As the expense of purchasing those unnecessary utensils would diminish. from the annual produce of its domestic industry. that the quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it. clothes. can maintain foreign wars there. by obliging them to keep an unnecessary number of kitchen utensils. an additional quantity of plate. not with gold and silver. in every country. by sending abroad either. instead of increasing. either by introducing or by detaining in it an unnecessary quantity of gold and silver. or. and labour. which maintains and employs the people. in order to enable a country to carry on foreign wars. wherever it is to be found. that to attempt to increase the wealth of any country. from the annual revenue arising out of its lands. some part of its accumulated gold and silver. A nation may purchase the pay and provisions of an army in a distant country three different ways. Fleets and armies are maintained. The gold and silver which can properly be considered as accu- 351 . increase the number and wealth of such families. as much as the furniture of the kitchen. wherever it is to be had. and consumable stock. but with consumable goods. as plate. whether in the shape of coin or of plate. some part of the annual produce of its manufactures. some part of its annual rude produce. as necessarily diminish the wealth which feeds. their transportation is so easy.Adam Smith ture. It is not always necessary to accumulate gold and silver. but if you attempt by extraordinary means to increase the quantity. and you will infallibly increase the quantity. 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. Increase the use of them. so the expense of purchasing an unnecessary quantity of gold and silver must. increase the consumable commodities which are to be circulated. and a part of this increased wealth will most probably be employed in purchasing. or. last of all. and even the quantity too. secondly. is as absurd as it would be to attempt to increase the good cheer of private families. The nation which. managed. it must be remembered. increase that value. and the loss which attends their lying idle and unemployed so great.

such as exchequer notes. navy bills. first. last of all. upon every occasion. in the pound land-tax. An extraordinary quantity of paper money of some sort or other. Something. to accumulate treasure seems to be no part of the policy of European princes. Fewer goods are circulated there. The melting down of the plate of private families has. may be distinguished into three parts. The circulating gold and silver of the country had not been supposed to exceed £18. The channel of circulation necessarily draws to itself a sum sufficient to fill it. secondly. if you except the king of Prussia. and laid up in the treasury of the prince. in the ports of the Mediterranean. in the East and West Indies. Since 352 . 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. The last French war cost Great Britain upwards of £90.000. is generally withdrawn from this channel in the case of foreign war. It can seldom happen that much can be spared from the circulating money of the country. the money which may have been collected by many years parsimony. in Germany. More than two-thirds of this expense were laid out in distant countries. or stored up in any country. or of the treasure of the prince. and bank bills. however. including not only the £75. The accumulated treasures of the prince have in former times afforded a much greater and more lasting resource. The funds which maintained the foreign wars of the present century. and never admits any more. because in that there can seldom be much redundancy. Portugal. however. The kings of England had no accumulated treasure. is generally issued upon such occasions.000.000 of new debt that was contracted. and. but the additional 2s. in the beginning of the last war. All this.000. the most expensive perhaps which history records. In the present times. too.000. and can give employment to no more. seem to have had little dependency upon the exportation either of the circulating money. been found a still more insignificant one.The Wealth of Nations mulated. and. the plate of private families. fewer are maintained at home. and what was annually borrowed of the sinking fund. by supplying the place of circulating gold and silver. the circulating money. or of the plate of private families. By the great number of people who are maintained abroad. gives an opportunity of sending a greater quantity of it abroad. The French. could afford but a poor resource for maintaining a foreign war. America. and less money becomes necessary to circulate them.000. in England. and several years duration. did not derive so much advantage from this expedient as to compensate the loss of the fashion. We never heard of any extraordinary quantity of plate being melted down. of great expense.

gold and silver together. when properly suited to the market. he gets no returns. The channel of circulation. than by that of gold and silver. two different times in so short a period. The enormous expense of the late war. The profits of foreign trade. nor credit to borrow it. But when they are sent abroad merely to pay a debt. Few people wanted money who had wherewithal to pay for it. must have been chiefly defrayed. it would afford the most decisive argument. he would endeavour to send them to some other country in which he could purchase a bill upon that country. 353 .000. therefore. or those who acted under them. by sending abroad rather commodities than gold and silver. the whole of it must. however. it amounted to £30. not from the purchase. rather by the exportation of commodities. He naturally. at least twice in a period of between six and seven years. This occasioned. have been sent out and returned again. and because the debtors found it difficult to borrow.Adam Smith the late recoinage of the gold.000. a general over-trading in all the ports of Great Britain. Let us suppose. were greater than usual during the whole war. even according to this computation. by those who had that value to give for them. which always follows over-trading. Many people wanted it. the whole money of the country must have gone from it. and returned to it again. The transportation of commodities. who had neither wherewithal to buy it. Gold and silver. he would naturally endeavour to pay his foreign correspondent. indeed. not by the exportation of gold and silver. When the government. contracted with a merchant for a remittance to some foreign country. is always attended with a considerable profit. however. it is believed to have been a good deal under-rated. Should this be supposed. to demonstrate how unnecessary it is for government to watch over the preservation of money. were generally to be had for their value. but by that of British commodities of some kind or other. whereas that of gold and silver is scarce ever attended with any. When those metals are sent abroad in order to purchase foreign commodities. but from the sale of the returns. upon this supposition. never appeared more empty than usual during any part of this period. therefore. If the commodities of Great Britain were not in demand in that country. what it always occasions. the creditors found it difficult to get payment. but especially towards the end of it. since. the merchant’s profit arises. Had the war been carried on by means of our money. however. and this again occasioned the usual complaint of the scarcity of money. and consequently no profit. upon whom he granted a bill. exerts his invention to find out a way of paying his foreign debts. that. The great quantity of British goods. 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. therefore.

from those circulated between different countries. and probably was.000. This bullion. as it circulates among different commercial countries.The Wealth of Nations exported during the course of the late war. In time of a general war. Besides the three sorts of gold and silver above mentioned. without bringing back any returns. It is natural. indeed. in order to purchase there either the pay and provisions of an army. which could have supported it. employed in carrying on the late war.000. amounted to more than £19. the one between different individuals of the same. A country whose industry produces a great annual surplus of such manufactures. There is no annual produce. The whole gold and silver annually imported into both Spain and Portugal. that so great an annual expense must have been defrayed from a great annual produce. to the annual produce of the land and labour of the country. The commodities most proper for being transported to distant countries. for example. there is in all great commercial countries a good deal of bullion alternately imported and exported. But whatever part of this money of the mercantile republic Great Britain may have annually employed in this manner. No accumulation could have supported so great an annual profusion. in some years. Both are employed in facilitating exchanges. seem to be the finer and more improved manufactures.000 sterling. or with something else that had been purchased with them. it is natural to suppose that a movement and direction should be impressed upon it. and be more employed in purchasing there. which are usually exported to foreign 354 . the pay and provisions of the different armies. such as contain a great value in a small bulk. as the ultimate resources which enabled us to carry on the war. would scarce have paid four months expense of the late war. to suppose. and in the neighbouring countries. it must have been annually purchased. Part of this money of the great mercantile republic may have been. different from what it usually follows in profound peace. may be considered as the money of the great mercantile republic. even of gold and silver. The expense of 1761. that it should circulate more about the seat of the war. and can therefore be exported to a great distance at little expense. is accordingly remarked by the author of the Present State of the Nation. according to the best accounts. or some part of the money of the mercantile republic to be employed in purchasing them. does not commonly much exceed £6. the money in the mercantile republic. The national coin receives its movement and direction from the commodities circulated within the precincts of each particular country. either with British commodities. which still brings us back to commodities. in the same manner as the national coin circulates in every country.000. for the purposes of foreign trade. which. the other between those of different nations.

but either the rude produce of the soil. 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. though it does to the merchant. Buying and selling was transacted by means of money in England then as well as now. without interruption. of which no considerable part could be spared from the home consumption. of great expense or duration. to the number and value of purchases and sales usually transacted at that time. without either exporting any considerable quantity of gold and silver. Mr Hume frequently takes notice of the inability of the ancient kings of England to carry on. The quantity of circulating money must have borne the same proportion. may serve as an illustration of what has been just now said. be exported without bringing back any returns to the country.Adam Smith countries. on the contrary. however. but of the finer and more improved manufactures. therefore. This inability did not arise from the want of money. It is otherwise with the exportation of manufactures. to work up such as are necessary for purchasing the common returns that had usually been consumed in the country. and begin to decay upon the return of its prosperity. could conveniently be carried on by the exportation of the rude produce of the soil. Few countries. To send abroad any great quantity of it. No foreign war. may carry on for many years a very expensive foreign war. The different state of many different branches of the British manufactures during the late war. The maintenance of the people employed in them is kept at home. and only the surplus part of their work is exported. In the midst of the most destructive foreign war. secondly. and be called upon first to work up goods to be sent abroad. too. and. They may flourish amidst the ruin of their country. the government purchasing of the merchant his bills upon foreign countries. 355 . indeed. in this case. produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. would be to send abroad a part of the necessary subsistence of the people. they may decline on the return of peace. or a few manufactures of the coarsest kind. of which. Some part of this surplus. in order to purchase there the pay and provisions of an army. therefore. may still continue to bring back a return. or even having any such quantity to export. any foreign war of long duration. and for some time after the peace. The manufacturers during. A considerable part of the annual surplus of its manufactures must. the war will have a double demand upon them. the transportation was too expensive. as well as of the rude produce. for paying the bills drawn upon foreign countries for the pay and provisions of the army: and. The English in those days had nothing wherewithal to purchase the pay and provisions of their armies in foreign countries. the greater part of manufactures may frequently flourish greatly.

though vanity almost always does. they all of them derive two distinct benefits from it. seem likewise to have accumulated treasures. But bounty and hospitality very seldom lead to extravagance. and hospitality to his retainers. but frequently encroaches upon the funds destined for more necessary expenses.. therefore. for reasons which shall be explained hereafter. and their expense comes to be regulated by the same extravagant vanity which directs that of all the other great proprietors in their dominions. may be applied to that of several European princes. which now occupies a great part of the employment of gold and silver. or. as the most essential measure for securing the succession. that he generally endeavours to accumulate a treasure. The insignificant pageantry of their court becomes every day more brilliant. The Saxon princes. In that simple state. follow the mode of the times. in such a situation. They naturally. It gives a value to their superfluities. that he saw there much splendour. The French kings of the Merovingian race had all treasures. it must have borne a greater proportion. and the expense of it not only prevents accumulation. because there was then no paper. as the only resource against such emergencies. much less the sole benefit. they divided their treasures too. It is in such countries. because they can generally draw from their subjects extraordinary aids upon extraordinary occasions. Independent of this necessity. accordingly. the sovereign. chief of the Cossacks in the Ukraine. but little strength. Among nations to whom commerce and manufactures are little known. can seldom draw any considerable aid from his subjects. but few soldiers. and many servants. Between whatever places foreign trade is carried on. are said to have been very great. When they divided their kingdom among their different children. which may 356 . and the first kings after the Conquest. Every Tartar chief. It carries out that surplus part of the produce of their land and labour for which there is no demand among them. rather. by exchanging them for something else. The sovereigns of improved and commercial countries are not under the same necessity of accumulating treasures. he is. What Dercyllidas said of the court of Persia. has a treasure. perhaps necessarily. The treasures of Mazepa.The Wealth of Nations which it does to those transacted at present. upon extraordinary occasions. which a nation derives from its foreign trade. but is employed in bounty to his tenants. and brings back in return for it something else for which there is a demand. They are likewise less disposed to do so. naturally disposed to the parsimony requisite for accumulation. The first exploit of every new reign was commonly to seize the treasure of the preceding king. the famous ally of Charles XII. The importation of gold and silver is not the principal. the expense even of a sovereign is not directed by the vanity which delights in the gaudy finery of a court.

Europe can annually purchase about three times the quantity of plate which it could have purchased at that time. or a third part of the labour. In order to make the same purchases. It is. than of any other particular country. To import the gold and silver which may be wanted into the countries which have no mines. They all derive great benefit from it. not only more than three times.Adam Smith satisfy a part of their wants and increase their enjoyments. By the abundance of the American mines. Neither the one nor the other could have made any very essential change in the state of Europe. but more than twenty or thirty times the quantity of plate which would have been in it. and carrying out the superfluities of his own. no doubt. though surely a very trifling one. With the same annual expense of labour and commodities. which it would have cost in the fifteenth century. it encourages them to improve its productive power. A service of plate can now be purchased for about a third part of the corn. is. or the opposite conveniency. had the discovery of the American mines never been made. those metals have become cheaper. By means of it. and thereby to increase the real revenue and wealth of the society. But when a commodity comes to be sold for a third part of what bad been its usual price. perhaps to more than ten. It is difficult to say which is most trifling. even in its present state of improvement. By opening a more extensive market for whatever part of the produce of their labour may exceed the home consumption. could scarce have occasion to freight a ship in a century. not only those who purchased it before can purchase three times their former quantity. but it is brought down to the level of a much greater number of purchasers. we must load ourselves with a greater quantity of them. It is not by the importation of gold and silver that the discovery of America has enriched Europe. this inconveniency. where a groat would have done before. A country which carried on foreign trade merely upon this account. no doubt a part of the business of foreign commerce. a most insignificant part of it. and to augment its annual produce to the utmost. 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. however. So far Europe has. The discovery of 357 . These great and important services foreign trade is continually occupied in performing to all the different countries between which it is carried on. So that there may be in Europe at present. though that in which the merchant resides generally derives the greatest. gained a real conveniency. perhaps to more than twenty times the former number. 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.

much richer. and many of those of America were new to Europe. they vested their whole East India commerce in an exclusive company. than from that with America. in every other respect. opened perhaps a still more extensive range to foreign commerce. even though we should credit. began to encroach upon them. without having richer mines of gold or silver. and Danes. than either Mexico or Peru. A new set of exchanges. and which should naturally have proved as advantageous to the new. notwithstanding the greater distance. between almost every nation of Europe and its own colonies. is free to all its subjects. Indostan. The Portuguese monopolized the East India trade to themselves for about a century. which in the narrow circle of the ancient commerce could never have taken place. in the beginning of the last century. Swedes. better cultivated. in any respect. for want of a market to take off the greater part of their produce. But the empires of China. The rest were mere savages. what plainly deserves no credit. than with savages and barbarians. and these were destroyed almost as soon as discovered. The commodities of Europe were almost all new to America. have all followed their example. By opening a new and inexhaustible market to all the commodities of Europe. Japan. There were but two nations in America. The discovery of a passage to the East Indies by the Cape of Good Hope.The Wealth of Nations America. however. which ought to have been beneficial to all. French. and together with it the real revenue and wealth of the inhabitants. that the other nations of Europe could either send out or receive any goods from that country. has hitherto derived much less advantage from its commerce with the East Indies. were. their great riches. as it certainly did to the old continent. as well as several others in the East Indies. and it was only indirectly. The exclusive privileges of those East India companies. began to take place. The English. which had never been thought of before. therefore. But rich and civilized nations can always exchange to a much greater value with one another. and more advanced in all arts and manufactures. When the Dutch. than even that of America. No other reason need be assigned why it has never been so advantageous as the trade to America. ruinous and destructive to several of those unfortunate countries. however. certainly made a most essential one. the exaggerated accounts of the Spanish writers concerning the ancient state of those empires. The productive powers of labour were improved. which. and its produce increased in all the different countries of Europe. and through them. which happened much about the same time. superior to the savages. the great 358 . so that no great nation of Europe has ever yet had the benefit of a free commerce to the East Indies. it gave occasion to new divisions of labour and improvements of art. The savage injustice of the Europeans rendered an event. Europe.

Adam Smith favour and protection which these have procured them from their respective governments. by opening a market to the commodities of Europe. have excited much envy against them. and consequently the real wealth and revenue of Europe. might indeed tend to impoverish Europe in general. By the annual exportation of silver to the East Indies. the lands. that wealth consisted in gold and silver. on account of the great quantities of silver which it every year exports from the countries from which it is carried on. to examine at full length this popular notion. The two principles being established. it necessarily 359 . seem to slip out of their memory. the latter a very small advantage. and that to multiply those metals is the great object of national industry and commerce. and consumable goods of all different kinds. to the gold and silver which is purchased with those commodities. because. and consumable goods. and coined silver probably purchases a larger quantity both of labour and commodities. or. Both the objection and the reply are founded in the popular notion which I have been just now examining. are very apt to forget their own principles. and the strain of their argument frequently supposes that all wealth consists in gold and silver. not in its gold and silver only. that the wealth of a country consists. It is therefore unnecessary to say any thing further about either. Some of the best English writers upon commerce set out with observing. and this ambiguity of expression has rendered this popular notion so familiar to us. both too insignificant to deserve any part of the public attention. That it has hitherto increased them so little. must necessarily tend to increase the annual production of European commodities. The trade to the East Indies. that even they who are convinced of its absurdity. plate is probably somewhat dearer in Europe than it otherwise might have been. to take it for granted as a certain and undeniable truth. houses. that wealth consists in money or in gold and silver. is probably owing to the restraints which it everywhere labours under. The former of these two effects is a very small loss. The parties concerned have replied. in common language. In the course of their reasonings. houses. what comes nearly to the same thing. by the exportation of a part of the returns to other European countries. and. that their trade by this continual exportation of silver. however. as I have already observed. or by exporting to a greater value than it imported. only by the balance of trade. though at the hazard of being tedious. but not the particular country from which it was carried on. and that those metals could be brought into a country which had no mines. it annually brought home a much greater quantity of that metal than it carried out. Money. I thought it necessary. frequently signifies wealth. but in its lands. This envy has frequently represented their trade as altogether pernicious. however. in the course of their reasonings.

Secondly. together with these four encouragements to exportation. Those different restraints consisted sometimes in high duties. from whatever country they were imported. and encouragement to exportation. restraints upon the importation of such foreign goods for home consumption as could be produced at home. particular privileges were procured in some foreign state for the goods and merchants of the country. and. either the whole or a part of this duty was sometimes given back upon such exportation. By advantageous treaties of commerce. 360 . either of some beginning manufactures. constitute the six principal means by which the commercial system proposes to increase the quantity of gold and silver in any country. and to increase as much as possible the exportation of the produce of domestic industry. and when foreign goods liable to a duty were imported. were restraints upon importation. Bounties were given for the encouragement. Exportation was encouraged sometimes by drawbacks. I shall examine chiefly what are likely to be the effects of each of them upon the annual produce of its industry. According as they tend either to increase or diminish the value of this annual produce. Its two great engines for enriching the country. sometimes by bounties. and sometimes in absolute prohibitions. beyond what were granted to those of other countries. not only particular privileges. sometimes by advantageous treaties of commerce with foreign states. The two sorts of restraints upon importation above mentioned.The Wealth of Nations became the great object of political economy to diminish as much as possible the importation of foreign goods for home consumption. By the establishment of colonies in distant countries. When the home manufactures were subject to any duty or excise. in order to be exported again. by turning the balance of trade in its favour. either the whole or a part of it was frequently drawn back upon their exportation. or of such sorts of industry of other kinds as were supposed to deserve particular favour. from those particular countries with which the balance of trade was supposed to be disadvantageous. without taking much farther notice of their supposed tendency to bring money into the country. The restraints upon importation were of two kinds. therefore. restraints upon the importation of goods of almost all kinds. but a monopoly was frequently procured for the goods and merchants of the country which established them. First. I shall consider each of them in a particular chapter. and sometimes by the establishment of colonies in distant countries. they must evidently tend either to increase or diminish the real wealth and revenue of the country. Drawbacks were given upon two different occasions.

Thus the prohibition of importing either live cattle or salt provisions from foreign countries. It can only divert a part of it into a direction into which it might not otherwise have gone. or by absolute prohibitions. amount to a prohibition. has lately obtained the same advantage. of which the importation into Great Britain is prohibited. either absolutely. either altogether. The variety of goods. The silk manufacture. in times of moderate plenty. 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. greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs. or very nearly. or under certain circumstances. the monopoly of the home market is more or less secured to the domestic industry employed in producing them. is not.Adam Smith CHAPTER II RESTRAINTS IMPORT OF RESTRAINTS UPON IMPORTATION FROM FROM FOREIGN COUNTRIES OF SUCH PRODUCED AT GOODS AS CAN BE PRODUCED AT HOME BY RESTRAINING. either by high duties. No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. the importation of such goods from foreign countries as can be produced at home. altogether so evident. perhaps. That this monopoly of the home market frequently gives great encouragement to that particular species of industry which enjoys it. but is making great strides towards it. The general industry of the society can never exceed what the capital of the society can employ. though altogether employed upon foreign materials. But whether it tends either to increase the general industry of the society. or to give it the most advantageous direction. The linen manufacture has not yet obtained it. The high duties upon the importation of corn. give a like advantage to the growers of that commodity. Many other sorts of manufactures have. As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital. The prohibition of the importation of foreign woollen is equally favourable to the woollen manufacturers. cannot be doubted. a monopoly against their countrymen. secures to the graziers of Great Britain the monopoly of the home market for butcher’s meat. in the same manner obtained in Great Britain.