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-

14

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

but in proportion to that of those whom it can feed. But when.The Wealth of Nations now. who generally grants the use of it to whoever takes the trouble of asking it. what is called a house may be built by one day’s labour of one man. that they are of no value to the landlord. A good stone quarry in the neighbourhood of London would afford a considerable rent. and of the coasts of the Baltic. require a great deal. The materials of lodging cannot always be transported to so great a distance as those of clothing. When they are superabundant in the country which produces them. it is easy to find the necessary clothing and lodging. All the other ninety-nine parts are frequently no more than enough to provide them with food. The simplest species of clothing. it may often be difficult to find food. it frequently happens. require somewhat more labour to dress and prepare them for use. or little more than a hundredth part of the labour of the whole year. Barren timber for building is of great value in a populous and well-cultivated country. for want of roads and water-carriage. however. the labour of one family can provide food for two. and the land which produces it affords a considerable rent. and which had no foreign commerce. In some parts of the Highlands of Scotland. The demand of wealthier nations. by the improvement and cultivation of land. and thereby afford some rent to their proprietors. however. Among savage or barbarous nations. will be sufficient to provide them with such clothing and lodging as satisfy the greater part of the people. The woods of Norway. In some parts of the British dominions. They do not. can be sent to market. But though these are at hand. the part made use of is worth only the labour and expense of fitting it for that use. a hundredth. the landlord would be much obliged to any body who would carry away the greater part of his large trees. and do not so readily become an object of foreign commerce. the skins of animals. When food is provided. that a great part of them would be thrown away as useless. even in the present commercial state of the world. But in many parts of North America. and no part could afford any rent to the landlord. sometimes enables him to get a rent for it. the bark is the only part of the wood which. the timber is left to rot upon the ground. the materials of clothing would evidently be so superabundant. the labour of half 140 . 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. not in proportion to the number of people whom their produce can clothe and lodge. which they could not find at home. find a market in many parts of Great Britain. Countries are populous. In many parts of Scotland and Wales it affords none. It affords no rent to the landlord. When the materials of lodging are so superabundant.

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

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

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

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

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

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

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

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

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

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

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

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

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

and. it became prudent to allow of importation. that when the price was so low. during the same period. the exportation of wheat was in the same manner prohibited. in reality. therefore. been considered as what is called the moderate and reasonable price of wheat. but that when it rose higher. was. in those times. it was enacted. In 1562. that no wheat should be imported if the price was not above six shillings and eightpence the quarter: The legislature had imagined. whenever the price of the quarter should exceed six shillings and eightpence. This rise in the value of silver. had probably sunk in the same manner through the greater part of Europe. the demand continuing the same as before. or it may have been owing partly to the one. than in the two centuries preceding. and partly to the other of those two circumstances. in the same manner. Its price. by the 1st of Elizabeth. the supply. 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. 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. 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). by the 1st and 2nd of Philip and Mary. in 1436. therefore. continuing the same as before. therefore. has been observed both by Mr Dupré de St Maur. in proportion to that of corn. consequently. in the mean time. That in France the average price of grain was. This price had at this time. But it had soon been found. that to restrain the exportation of wheat till the price was so very low. much lower in the end of the fifteenth and beginning of the sixteenth century. to prohibit it altogether. Six shillings and eightpence. been considered as what is called the moderate and reasonable price of wheat. by the 5th of Elizabeth. that the legislature did not think it worth while to attend to this circumstance. whenever the price of the quarter should not exceed ten shillings. and in 1558. the exportation of wheat was allowed from certain ports. the expense of working them much increased.The Wealth of Nations nal sum. which did not then contain two penny worth more silver than the same nominal sum does at present. In 154 . In 1554. there could be no inconveniency in exportation. containing nearly the same quantity of silver as the like nominal sum does at present. may either have been owing altogether to the increase of the demand for that metal. Thus. or. in consequence of increasing improvement and cultivation. had. It agrees nearly with the estimation of the Northumberland book in 1512. and by the elegant author of the Essay on the Policy of Grain.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

amounted to no less than 8. used to be supplied from that market. {See Tracts on the Corn Trade. Between 1741 and 1750. for these ten or twelve years past. which. indeed. one bushel. and whoever has inquired much into the history of the prices of corn in former times. observed to the house of commons. during these ten years. we should. The bounty paid for this amounted to £ 1. but to some rise in the real value of silver in the European market. In that single year. the average price of the quarter of nine bushels of the best wheat. it appears from the custom-house books.962:17:4 1/2. the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. it appears from the accounts of Eton college. may very well be set in opposition to its high price during these last eight or ten years. Ten years of extraordinary scarcity. He had good reason to make this observation. however. that. below the average price of the sixty-four first years of the present century.156 quarters. however. The average price of the quarter of eight bushels of middle wheat comes out.3d. impute this change. not to any fall in the real value of corn. at Windsor market. from 1741 to 1750. and the disorders of Poland have very much increased the scarcity in all those countries. has occasioned a suspicion that the real value of silver still continues to fall in the European market. according to this account. at that time prime minister. besides.} It is un- 169 . are not more wonderful than ten years of extraordinary plenty. The high price of corn during these ten or twelve years past. a very extraordinary sum had been paid as bounty for the exportation of corn. during the sixty-four first years of the present century. which is nearly 6s.Adam Smith three and four times its former money price. If. is by no means a singular one. therefore. the quantity of all sorts of grain exported. and in the following year he might have had still better. have been unfavourable through the greater part of Europe.029. In 1749. and ought. in dear years. to be regarded. though not a very common event. Tract 3. to have been. but as a transitory and occasional event.176:10:6. both inclusive. the bounty paid amounted to no less than £ 324. seems evidently to have been the effect of the extraordinary unfavourableness of the seasons. only £ 1:6:8. will be at no loss to recollect several other examples of the same kind. therefore. for the three years preceding. but to a fall in the real value of silver. in the same manner.514. So long a course of bad seasons. From 1741 to 1750. not as a permanent. The low price of corn. the average money price of corn has fallen somewhat below what it had been during the greater part of the last century. was only £ 1:13:9 4/5. not to any rise in the real value of corn. this change was universally ascribed. Mr Pelham. This high price of corn. The seasons. During these ten years. accordingly.

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

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

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

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

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

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

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

sterling. viz. at an average of eleven years.940 pounds weight. to about six millions sterling. Several other very well authenticated. mounts to about £ 6. too. the whole annual importation of the precious metals into both Spain and Portugal. He gives the detail. and into Portugal. 6d.446:14s.Adam Smith 1748 to 1753. which according to the register. too. The great experience of this judicious merchant renders his opinion of considerable weight.825.878:4s. however. author of the Philosophical and Political History of the Establishment of the Europeans in the two Indies. amounted in silver to 1.746. On account of what may have been smuggled. On account of what may have been smuggled. amounts to £ 3.185 3/5 piastres of ten reals. he assures us.000 sterling. He gives us the detail of the particular places from which the gold and silver were brought. he supposes.333.431:10s. The account of what was imported under register. The annual importation of the precious metals into Cadiz and Lisbon. is one-fifth of the standard metal. from 1747 to 1753. which the Spanish colonies carry on with those of other European 177 . Some part is sent annually by the Acapulco ships to Manilla. According to the eloquent. and of the particular quantities of each metal. or forty-five millions of French livres. both inclusive. by the amount of the tax paid to the king of Portugal. according to the register. may have amounted to seventeen millions of piastres. or £ 250. which it seems. both inclusive. he supposes. some part is employed in a contraband trade. therefore. at an average. sterling. at forty-four guineas and a half the pound troy. for the quantity of each metal which. sterling. and of the particular quantity of each metal. may have been smuggled. each of them afforded. amounted to 13. and in gold to 49. is exact. though manuscript accounts.413. agree in making this whole annual importation amount. we may safely. however. sometimes a little more. amounts to £ 2. at 4s.250.984. sometimes a little less. which. indeed. from 1754 to 1764. He makes an allowance. viz. the annual importation of registered gold and silver into Spain.107 pounds weight. is equal to £ 3. that if we were to judge of the quantity of gold annually imported from the Brazils to Lisbon. he says. too. so that the whole will amount to £ 2.000 sterling. we might value it at eighteen millions of cruzadoes.000 sterling.101. The silver. the whole annual importation. at an average of seven years. Both together amount to £ 5. I have been assured. The gold. both inclusive. He informs us. the piastre. is not equal to the whole annual produce of the mines of America. equal to about twenty millions sterling. each of them afforded. add to this sum an eighth more. which. at sixty two shillings the pound troy. and sometimes well-informed.075.000 sterling. According to this account. of the particular places from which the gold and silver were brought.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It comes from an order of men. and who accordingly have. but with the most suspicious attention. whose interest is never exactly the same with that of the public. 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 . not only with the most scrupulous. who have generally an interest to deceive and even to oppress the public. both deceived and oppressed it.The Wealth of Nations ought never to be adopted till after having been long and carefully examined.

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. ON LADY DAY AND MICHAELMAS. THE PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THESE TWO MARKET DAYS. FROM 1595 TO 1764 BOTH INCLUSIVE. £ 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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conveniencies. without occasioning any diminution either of his capital or of theirs. they may in that of other people. deductions from the neat revenue of the society. Whatever portion of those consumable goods is not employed in maintaining the former. gold and silver. by means of which every individual in the society has his subsistence. goes all to the latter. conveniencies. and of very curious labour. the subsistence. require a certain expense. That of an individual is totally excluded from making any part of his neat revenue. But though the circulating capital of every individual makes a part of that of the society to which he belongs. who. and amusements of individuals. and amusements. from a revenue derived from other funds. Secondly. besides what is necessary for maintaining the fixed capital. both which expenses. and afterwards to support them. first to collect it. Though the whole goods in a merchant’s shop must by no means be placed in his own stock reserved for immediate consumption. Money.Adam Smith placed either in the fixed capital of the society. make no part either of the gross or of the neat revenue of either. bear a very great resemblance to one another. withdraws no portion of the annual produce from the neat revenue of the society. and that part of the circulating capital which consists in money. as the machines and instruments of trade. so the stock of money which circulates in any country must require a certain expense. as those machines and instruments of trade. or in their stock reserved for immediate consumption. which must consist altogether in his profits. so far as they affect the revenue of the society. therefore. together with its profits. etc. A certain quantity of very valuable materials. The fixed capital. of which the maintenance can occasion any diminution in their neat revenue. it is not upon that account totally excluded from making a part likewise of their neat revenue. therefore. First. by means of which the whole revenue of the society is regularly distributed among all its different members. first to erect them. The maintenance of those three parts of the circulating capital. makes itself 233 . and afterwards to support it. regularly distributed to him in their proper proportions. though they make a part of the gross. though they make a part of the gross. 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. etc. and makes a part of the neat revenue of the society. in the same manner. are deductions from the neat revenue of the society. so money. is employed in supporting that great but expensive instrument of commerce. both which expenses. instead of augmenting the stock reserved for immediate consumption. may regularly replace their value to him. are. which compose the fixed capital either of an individual or of a society.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

£ 656. stock to the amount of £4. or for £ 96. since it could borrow at six per cent. we may believe. which necessarily occasioned their discredit.000 year for the expense of management. In 1696.375. discount. and £4. at six per cent. there was paid in. and it had advanced to government the sum of £3.171: 10s. per cent.559. tallies had been at forty. p. in pursuance of an act of parliament. when it was obliged to borrow at so high an interest. the common legal and market rate of those times.. In pursuance of the 7th Anne. therefore. interest.The Wealth of Nations The Bank of England is the greatest bank of circulation in Europe.775. therefore. established by the Revolution. the credit of government was as good as that of private persons. Its whole capital stock. must have been very low. and £4. In consequence of those two calls. the bank delivered up two millions of exchequer Bills to be cancelled.000.} During the great re-coinage of the silver.000.001. and fifty. In pursuance of the 3rd George I.027 17s.000 for expense of management. by an ingraftment of £1.21.448:12:11d.027:17:10½d. amounted at this time to £2.8.600.000 for an annuity of £100. its capital stock was increased by £ 3. {James Postlethwaite’s History of the Public Revenue.027:17 10d. the bank capital amounted to £ 5. It was incorporated. 10½d.204:1:9d. c. By a call of fifteen per cent.200.000. which it had advanced upon its original annuity of £96. In 1697. interest at the rate of eight per cent. In 1708. in consequence of the subscriptions which it had taken in for enabling it to make this purchase.201. and by another of ten per cent. making in all the sum of £1. in 1710. dated the 27th of July 1694.402. the bank had advanced to the public £ 9. and was at the same time allowed to take in subscriptions for doubling its capital.000.995:14:8d.171:10s. therefore.375. It at that time advanced to government the sum of £1. The credit of the new government. In pursuance of the same act. and bank notes at twenty per cent. the capital of the bank amounted to £4.000.000 interest.400.995:14:8d. the bank was allowed to enlarge its capital stock.027: 17s: 10½d. c. the bank advanced and paid into the exchequer the sum of £400. It was upon this occasion that the 260 . the bank had thought proper to discontinue the payment of its notes. In 1703. 7. interest. It had at this time.375. advanced to government £5. in 1709. This ingraftment is said to have been for the support of public credit.343. At this time. therefore. £501. the bank cancelled exchequer bills to the amount of £ 1. the bank purchased of the Southsea company. c. and made stock. In pursuance of the 8th George I.301.959. which was going on at this time. by a charter under the great seal.000 a-year. therefore. and sixty.000: and in 1722. and its capital stock amounted only to £ 8.. therefore.

780. as well as according to other circumstances. it is said to have advanced for this purpose. The stability of the bank of England is equal to that of the British government. its duty to the public may sometimes have obliged it. however. The dividend of the bank has varied according to the variations in the rate of the interest which it has. Upon other occasions. in 1763. that the bank began to have an undivided capital. and it advances to government the annual amount of the land and malt taxes. or the shortness of the time. that the most judicious operations of banking can increase the industry of the country. a great part of it in bullion. No other banking company in England can be established by act of parliament. produces noth- 261 . That part of his capital which a dealer is obliged to keep by him unemployed and in ready money. which. and its divided capital had been raised by different calls and subscriptions to £ 10. for answering occasional demands. Upon one occasion. supported the credit of the principal houses. the bank had. which are frequently not paid up till some years thereafter. but as a great engine of state. This sum. c. upon different occasions. without any fault of its directors. In these different operations. It likewise discounts merchants’ bills. I do not. therefore did not increase either of those two other sums. It acts. For some years past. In pursuance of the 4th of George III.000. but of Hamburgh and Holland. All that it has advanced to the public must be lost before its creditors can sustain any loss. began first to exceed its capital stock. not only as an ordinary bank. the bank agreed to pay to government for the renewal of its charter £110. and has. advanced to the public £11.800.600.25. the bank dividend has been at five and a half per cent.000. about £1.Adam Smith sum which the bank had advanced to the public. not only of England. pretend to warrant either the greatness of the sum. this great company has been reduced to the necessity of paying in sixpences.000. in one week. in other words. upon several different occasions. It is not by augmenting the capital of the country. so long as it remains in this situation. but by rendering a greater part of that capital active and productive than would otherwise be so. and for which it received interest. or. The state of those two sums has continued to be the same ever since. It has continued to have an undivided capital of the same kind ever since. It receives and pays the greater part of the annuities which are due to the creditors of the public.686. received for the money it had advanced to the public. it circulates exchequer bills. is so much dead stock. This rate of interest has gradually been reduced from eight to three per cent. over and above its divided one. or can consist of more than six members. without interest or re-payment. to overstock the circulation with paper money. In 1746. or the sum for which it paid a dividend to the proprietors of bank stock. at different times.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

and along with it the quantity of money which can be employed in circulating them. will not be allowed to lie idle. must in every country naturally increase as the value of the annual produce increases. By means of it. to support its consumption in adversity. The exportation of gold and silver is. and employed in purchasing gold and silver. on the contrary. The interest of whoever possesses it requires that it should be employed. Gold and silver are purchased everywhere in the same manner. The quantity of money. therefore. or in something which had been purchased with some part of that produce. Their value. the revenue and maintenance. in this manner. and employed in purchasing consumable goods. therefore. 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. alleviate the misery of that declension. will require a greater quantity of money to circulate them. by this annual diminution of produce. for some little time. not the cause. and no country will ever long retain a quantity which it has no occasion for. of all those whose labour or stock is employed in bringing them from the mine to the market. it will. in spite of all laws and prohibitions. But the money which. The country which has this price to pay. and lodging. have been a reproduction of an equal value of consumable goods. must diminish as the value of that produce diminishes. The quantity of money. The increase of those metals will. are bought and sold. therefore. The sole use of money is to circulate consumable goods. A part of the increased produce.The Wealth of Nations sides. materials. can not long remain in any country in which the value of the annual produce diminishes. but the effect of its declension. Its annual exportation will. will naturally be employed in purchasing. must be determined by the value of the consumable goods annually circulated within it. will contribute. for some little time. These must consist. and may even. is annually thrown out of domestic circulation. and finished work. of the public prosperity. be sent abroad. provisions. 278 . What in the days of its prosperity had been saved from that annual produce. in this case. The value of the consumable goods annually circulated within the society being greater. either in the immediate produce of the land and labour of the country itself. The same quantity of money. clothing. which may be of some use at home. not the cause. wherever it is to be had. be the effect. and distributed to their proper consumers. The food. but having no employment at home. which can be annually employed in any country. There would have been two values instead of one. besides. is the price paid for them in Peru as well as in England. continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. in this case.

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

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

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

and every years increase would have augmented still more 282 . not only to retard.000. In each of those periods. the two Dutch wars. however. probably. such absolute waste and destruction of stock. since the Revolution. and 1756. the greater part of it would naturally have been employed in maintaining productive hands. and for no other reason but because they believed it. we have all reason to believe. in maintaining an extraordinary number of unproductive hands. The annual produce of the land and labour of England.000. been employed upon different occasions. was certainly much greater at the Restoration than we can suppose it to have been about a hundred years before. than it had been about a century before. when its inhabitants were nearly in the same state with the savages in North America. at the accession of Elizabeth. Even then it was. the four expensive French wars of 1688. together with the two rebellions of 1715 and 1745. could they have been foreseen. which. than during the confusion of the Saxon heptarchy. as might be supposed. it was certainly a more improved country than at the invasion of Julius Caesar. the disorders of the revolution. At this period. 1701.000 of debt. too. not only the impoverishment. so that the whole cannot be computed at less than £200. in the happiest and most fortunate period of them all. So great a share of the annual produce of the land and labour of the country. there was not only much private and public profusion. the country was much more advanced in improvement. whose labour would have replaced. Thus. in the confusion of civil discord. But had not those wars given this particular direction to so large a capital. but sometimes. as it certainly did. 1742. the nation has contracted more than £145. who wrote nothing but what they believed. has. with a profit. how many disorders and misfortunes have occurred. at the end of the period. In the course of the four French wars. many expensive and unnecessary wars. the whole value of their consumption.000. that which has passed since the Restoration. great perversion of the annual produce from maintaining productive to maintain unproductive hands. over and above all the other extraordinary annual expense which they occasioned. but the total ruin of the country would have been expected from them? The fire and the plague of London. in a better condition than it had been at the Norman conquest: and at the Norman conquest. again. but to have left the country. Even at this early period. the war in Ireland. poorer than at the beginning. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year.The Wealth of Nations them have been written by very candid and very intelligent people. towards the close of the dissensions between the houses of York and Lancaster. the natural accumulation of riches.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But the price of the latter must. upon this account. the ordinary profits of agriculture to the farmer. than they must have employed had they attempted to prepare them themselves. 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. The town affords a market for the surplus produce of the country. 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. over and above the ordinary profits of agriculture. The town. however. it is always the more advantageous to a great number. or by the intervention of money. may very properly be said to gain its whole wealth and subsistence from the country. It consists in the exchange of rude for 307 . as in all other cases. sells there for the same price with that which comes from twenty miles distance. therefore. manufactured produce. and the more extensive that market. or what is over and above the maintenance of the cultivators. gain. The greater the number and revenue of the inhabitants of the town. and the division of labour is in this. or of some sort of paper which represents money. The corn which grows within a mile of the town. and they save. generally. in the price of what they sell. besides. 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. but afford. the more extensive is the market which it affords to those of the country. not only pay the expense of raising it and bringing it to market. in which there neither is nor can be any reproduction of substances. The country supplies the town with the means of subsistence and the materials of manufacture. which lies in the neighbourhood of the town. and it is there that the inhabitants of the country exchange it for something else which is in demand among them.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. We must not. by sending back a part of the manufactured produce to the inhabitants of the country. either immediately. too. The proprietors and cultivators of the country. The town repays this supply. advantageous to all the different persons employed in the various occupations into which it is subdivided.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

nor any of the finer manufactures. he maintains as great. and thus. however. than he could have done by the ancient method of expense. to many not a hundredth. each of them maintains entirely all his own tenants and all his own retainers. therefore. By paying that price. not of one. and the profits of all their immediate employers. but a very small proportion to that of each. He generally contributes. all of them taken together. or. a greater number of people than before. Though in some measure obliged to them all. or being able to command more than ten footmen. and the occupiers of land. they are all more or less independent of him. Each of them. Each tradesman or artificer derives his subsistence from the employment. this difference was perfectly decisive. 1000 families. a man of £10.000 a-year cannot well employ his revenue in any other way than in maintaining. a man of £10. Indirectly. perhaps. For though the quantity of precious productions for which he exchanges his whole revenue be very small. The personal expense of the great proprietors having in this manner gradually increased. perhaps. In the present state of Europe. till they were at last dismissed altogether. or even a ten thousandth part of their whole annual maintenance. however. on account of the waste which attends rustic hospitality. and to some not a thousandth. and thus indirectly contributes to the maintenance of all the workmen and their employers.Adam Smith ence. the number of workmen employed in collecting and preparing it must necessarily have been very great. or even a greater number of people. and the most sordid of all vanities they gradually bartered their whole power and authority. taken singly. In a country where there is no foreign commerce. Its great price generally arises from the wages of their labour. notwithstanding the complaints of de- 335 . not worth the commanding. but of a hundred or a thousand different customers. perhaps. without directly maintaining twenty people. When the great proprietors of land spend their rents in maintaining their tenants and retainers. he is not absolutely dependent upon any one of them. he indirectly pays all those wages and profits. Though he contributes. who are all of them necessarily at his command. and he generally does so. the meanest. it was impossible that the number of their retainers should not as gradually diminish. Farms were enlarged. But when they spend them in maintaining tradesmen and artificers. for the gratification of the most childish. to the maintenance of them all. therefore. contributes often but a very small share to the maintenance of any individual of this greater number. perhaps maintain as great. The same cause gradually led them to dismiss the unnecessary part of their tenants. they may. because generally they can all be maintained without him.000 a-year can spend his whole revenue. not a tenth. to a very few.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

upon every occasion. In the present times. could afford but a poor resource for maintaining a foreign war. however. too. in the East and West Indies. if you except the king of Prussia. been found a still more insignificant one. America.The Wealth of Nations mulated. and can give employment to no more.000. fewer are maintained at home. secondly. and several years duration. but the additional 2s. last of all. is generally withdrawn from this channel in the case of foreign war. and. the plate of private families.000. The kings of England had no accumulated treasure. to accumulate treasure seems to be no part of the policy of European princes. The accumulated treasures of the prince have in former times afforded a much greater and more lasting resource. seem to have had little dependency upon the exportation either of the circulating money. or of the plate of private families. or stored up in any country. Fewer goods are circulated there. and bank bills. however. or of the treasure of the prince.000 of new debt that was contracted. and what was annually borrowed of the sinking fund. An extraordinary quantity of paper money of some sort or other. navy bills. in Germany. The French. is generally issued upon such occasions. and never admits any more. The funds which maintained the foreign wars of the present century. The circulating gold and silver of the country had not been supposed to exceed £18. including not only the £75. the circulating money. and. gives an opportunity of sending a greater quantity of it abroad. All this. in the ports of the Mediterranean. The channel of circulation necessarily draws to itself a sum sufficient to fill it. Something. the money which may have been collected by many years parsimony.000. the most expensive perhaps which history records. We never heard of any extraordinary quantity of plate being melted down. Portugal.000. may be distinguished into three parts. The melting down of the plate of private families has. in the beginning of the last war. in the pound land-tax. and less money becomes necessary to circulate them. did not derive so much advantage from this expedient as to compensate the loss of the fashion. such as exchequer notes. The last French war cost Great Britain upwards of £90. It can seldom happen that much can be spared from the circulating money of the country. 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. in England. by supplying the place of circulating gold and silver. By the great number of people who are maintained abroad. because in that there can seldom be much redundancy. and laid up in the treasury of the prince. of great expense. More than two-thirds of this expense were laid out in distant countries. Since 352 .000. first.

Many people wanted it. must have been chiefly defrayed. were generally to be had for their value. rather by the exportation of commodities. two different times in so short a period. and this again occasioned the usual complaint of the scarcity of money. but especially towards the end of it. The great quantity of British goods. the whole money of the country must have gone from it. and consequently no profit. Gold and silver.000.Adam Smith the late recoinage of the gold. however. or those who acted under them. it would afford the most decisive argument. therefore. therefore. The transportation of commodities. never appeared more empty than usual during any part of this period. a general over-trading in all the ports of Great Britain. upon this supposition. nor credit to borrow it. he would endeavour to send them to some other country in which he could purchase a bill upon that country. not by the exportation of gold and silver. When those metals are sent abroad in order to purchase foreign commodities. The profits of foreign trade. by those who had that value to give for them. however. and because the debtors found it difficult to borrow. but from the sale of the returns. when properly suited to the market. He naturally. When the government. But when they are sent abroad merely to pay a debt. however. If the commodities of Great Britain were not in demand in that country. gold and silver together.000. according to the most exaggerated computation which I remember to have either seen or heard of. he gets no returns. by sending abroad rather commodities than gold and silver. the creditors found it difficult to get payment. it amounted to £30. than by that of gold and silver. The enormous expense of the late war. is always attended with a considerable profit. Had the war been carried on by means of our money. were greater than usual during the whole war. at least twice in a period of between six and seven years. the whole of it must. who had neither wherewithal to buy it. whereas that of gold and silver is scarce ever attended with any. This occasioned. but by that of British commodities of some kind or other. even according to this computation. he would naturally endeavour to pay his foreign correspondent. 353 . it is believed to have been a good deal under-rated. and returned to it again. the merchant’s profit arises. indeed. upon whom he granted a bill. contracted with a merchant for a remittance to some foreign country. Few people wanted money who had wherewithal to pay for it. that. have been sent out and returned again. without any body’s knowing any thing of the matter. exerts his invention to find out a way of paying his foreign debts. Should this be supposed. which always follows over-trading. what it always occasions. to demonstrate how unnecessary it is for government to watch over the preservation of money. therefore. Let us suppose. not from the purchase. The channel of circulation. since.

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

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

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

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

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

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

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

but is making great strides towards it. or to give it the most advantageous direction. perhaps. As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital. so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of the society. give a like advantage to the growers of that commodity.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. The variety of goods. secures to the graziers of Great Britain the monopoly of the home market for butcher’s meat. the importation of such goods from foreign countries as can be produced at home. Many other sorts of manufactures have. The prohibition of the importation of foreign woollen is equally favourable to the woollen manufacturers. or by absolute prohibitions. or very nearly. 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. Thus the prohibition of importing either live cattle or salt provisions from foreign countries. greatly exceeds what can easily be suspected by those who are not well acquainted with the laws of the customs. either altogether. cannot be doubted. amount to a prohibition. and never can exceed that proportion. though altogether employed upon foreign materials. a monopoly against their countrymen. either by high duties. That this monopoly of the home market frequently gives great encouragement to that particular species of industry which enjoys it. is not. has lately obtained the same advantage. or under certain circumstances. either absolutely. No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. of which the importation into Great Britain is prohibited. and it is by no means certain that this artificial direction is likely to be more ad- 361 . The silk manufacture. altogether so evident. which. the monopoly of the home market is more or less secured to the domestic industry employed in producing them. in the same manner obtained in Great Britain. But whether it tends either to increase the general industry of the society. The linen manufacture has not yet obtained it. The high duties upon the importation of corn. It can only divert a part of it into a direction into which it might not otherwise have gone. The general industry