ELECBOOK CLASSICS

An Inquiry into the Nature and Causes of

THE WEALTH OF NATIONS
Adam Smith

ELECBOOK CLASSICS
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An Inquiry Into the Nature and Causes of the Wealth of Nations
Adam Smith

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Contents
Click on page number to go to Chapter Introduction and Plan of the Work ....................................................12 Book One: Of The Causes Of Improvement In The Productive Powers Of Labour, And Of The Order According To Which Its Produce Is Naturally Distributed Among The Different Ranks Of The People ...............16 Chapter 1. Of the Division of Labour ................................................17 Chapter II. Of the Principle which gives occasion to the Division of Labour..........................................................................29 Chapter III. That the Division of Labour is limited by the Extent of the Market......................................................................35 Chapter IV. Of the Origin and Use of Money...................................41 Chapter V. Of the Real and Nominal Price of Commodities, or their Price in Labour, and their Price in Money.................................................................................................50 Chapter VI.Of the Component Parts of the Price of Commodities..........................................................................................73 Chapter VII. Of the Natural and Market Price of Commodities..........................................................................................83 Chapter VIII. Of the Wages of Labour ............................................96 Chapter IX. Of the Profits of Stock ................................................127 Chapter X. Of Wages and Profit in the different
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Employments of Labour and Stock .................................................142
PART 1.......................................................................................................... 143 Inequalities arising from the Nature of the Employments themselves................................................................................................. 143 PART 2.......................................................................................................... 169 Inequalities by the Policy of Europe........................................................... 169

Chapter XI. Of the Rent of Land .....................................................203
PART 1.......................................................................................................... 206 Of the Produce of Land which always affords Rent .................................... 206 PART 2.......................................................................................................... 227 Of the Produce of Land which sometimes does, and sometimes does not, afford Rent ................................................................................. 227 PART 3.......................................................................................................... 245 Of the Variations in the Proportion between the respective Values of that Sort of Produce which always affords Rent, and of that which sometimes does and sometimes does not afford Rent ................. 245 Digression Concerning The Variations In The Value Of Silver During The Course Of The Four Last Centuries ..................................... 248 First Period.......................................................................................... 248 Second Period ...................................................................................... 267 Third Period ........................................................................................ 269 Variations In The Proportion Between The Respective Values Of Gold And Silver ............................................................................... 292
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Continues To Decrease.......................................................................... 299 Different Effects Of The Progress Of Improvement Upon Three Different Sorts Of Rude Produce.................................................. 301 First Sort.............................................................................................. 301 Second Sort.......................................................................................... 304 Third Sort............................................................................................ 317 Conclusion Of The Digression Concerning The Variations In The Value Of Silver .............................................................................. 330 Effects Of The Progress Of Improvement Upon The Real Price Of Manufactures........................................................................... 337 Conclusion Of The Chapter ................................................................... 344

Book Two: Of the Nature, Accumulation, and Employment of Stock ........................................................................359 Chapter I. Of the Division of Stock..................................................363 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 ................................374 Chapter III. Of the Accumulation of Capital, or of Productive and Unproductive Labour ............................................438 Chapter IV. Of Stock Lent at Interest.............................................465 Chapter V. Of the Different Employment of Capitals...................477

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Book Three: Of the Different Progress of Opulence in Different Nations ................................................................................499 Chapter I. Of the Natural Progress of Opulence ...........................500 Chapter II. Of the Discouragement of Agriculture in the ancient State of Europe after the Fall of the Roman Empire ..................................................................................................507 Chapter III. Of the Rise and Progress of Cities and Towns after the Fall of the Roman Empire ....................................523 Chapter IV. How the Commerce of the Towns Contributed to the Improvement of the Country..........................538 Book Four: Of Systems of Political Economy ................................556 Introduction.........................................................................................557 Chapter I. Of the Principle of the Commercial, or Mercantile System ..............................................................................558 Chapter II. Of Restraints upon the Importation from Foreign Countries of such Goods as can be produced at Home.....................................................................................................589 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..................................................................................617
PART 1.......................................................................................................... 617 Of the Unreasonableness of those Restraints even upon the Principles of the Commercial System ......................................................... 617
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Concerning That Of Amsterdam ............................................................ 625 PART 2.......................................................................................................... 639 Of the Unreasonableness of those extraordinary Restraints upon other Principles.......................................................................................... 639

Chapter IV. Of Drawbacks................................................................654 Chapter V.Of Bounties ......................................................................662
DIGRESSION CONCERNING THE CORN TRADE AND CORN LAWS ....................................................................................... 686

Chapter VI. Of Treaties of Commerce ............................................715 Chapter VII. Of Colonies...................................................................732
PART 1.......................................................................................................... 732 Of the Motives for establishing new Colonies ............................................ 732 PART 2.......................................................................................................... 744 Causes of Prosperity of New Colonies........................................................ 744 PART 3.......................................................................................................... 780 Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope ................................................................................... 780

Chapter VIII. Conclusion of the Mercantile System ....................852 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 every Country........................880
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Appendix ..............................................................................................917 Book Five: Of the Revenue of the Sovereign or Commonwealth ...................................................................................921 Chapter I. Of the Expenses of the Sovereign or Commonwealth ...................................................................................922
PART 1.......................................................................................................... 922 Of the Expense of Defence......................................................................... 922 PART 2.......................................................................................................... 946 Of the Expense of Justice........................................................................... 946 PART 3.......................................................................................................... 963 Of the Expense of Public Works and Public Institutions ............................. 963 ARTICLE 1.................................................................................................... 964 Of the Public Works and Institutions for facilitating the Commerce of the Society And, first, of those which are necessary for facilitating Commerce in general. ......................................... 964 Of the Public Works and Institutions which are necessary for facilitating particular Branches of Commerce. ............................................ 976 ARTICLE II ..................................................................................................1013 Of the Expense of the Institutions for the Education of Youth....................1013 ARTICLE III.................................................................................................1049 Of the Expense of the Institutions for the Instruction of People of all Ages....................................................................................................1049
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PART 4.........................................................................................................1088 Of the Expense of Supporting the Dignity of the Sovereign .......................1088 CONCLUSION ....................................................................................1088

Chapter II. Of the Sources of the General or Public Revenue of the Society.....................................................................1091
PART 1.........................................................................................................1091 Of the Funds or Sources of Revenue which may peculiarly belong to the Sovereign or Commonwealth ...............................................1091 PART 2.........................................................................................................1103 Of Taxes ..................................................................................................1103 ARTICLE I ...................................................................................................1107 Taxes upon Rent. Taxes upon the Rent of Land.........................................1107 Taxes which are proportioned, not to the Rent, but to the Produce of Land...................................................................................1119 Taxes upon the Rent of Houses .............................................................1124 ARTICLE II ..................................................................................................1135 Taxes on Profit, or upon the Revenue arising from Stock...........................1135 Taxes upon as Profit of particular Employments ...................................1142 Appendix to ARTICLES I and II. ...................................................................1151 Taxes upon the Capital Value of Land, Houses, and Stock.........................1151 ARTICLE III.................................................................................................1159 Taxes upon the Wages of Labour ..............................................................1159
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ARTICLE IV .................................................................................................1164 Taxes which, it is intended, should fall indifferently upon every different Species of Revenue.....................................................................1164 Capitation Taxes ..................................................................................1164 Taxes upon Consumable Commodities..................................................1167

Chapter III. Of Public Debts ..........................................................1222

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Introduction and Plan of the Work

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he annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations. According therefore as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniences for which it has occasion. But this proportion must in every nation be regulated by two different circumstances; first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances. The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among the savage nations of hunters and fishers, every individual who is able to work, is more or less employed in useful labour, and endeavours to provide, as well as he can, the
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necessaries and conveniences of life, for himself, or such of his family or tribe as are either too old, or too young, or too infirm to go a hunting and fishing. Such nations, however, are so miserably poor that, from mere want, they are frequently reduced, or, at least, think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilised and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great that all are often abundantly supplied, and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniences of life than it is possible for any savage to acquire. The causes of this improvement, in the productive powers of labour, and the order, according to which its produce is naturally distributed among the different ranks and conditions of men in the society, make the subject of the first book of this Inquiry. Whatever be the actual state of the skill, dexterity, and judgment with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in
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setting them to work, and to the particular way in which it is so employed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed. Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed very different plans in the general conduct or direction of it; those plans have not all been equally favourable to the greatness of its produce. The policy of some nations has given extraordinary encouragement to the industry of the country; that of others to the industry of towns. Scarce any nation has dealt equally and impartially with every sort of industry. Since the downfall of the Roman empire, the policy of Europe has been more favourable to arts, manufactures, and commerce, the industry of towns, than to agriculture, the industry of the country. The circumstances which seem to have introduced and established this policy are explained in the third book. Though those different plans were, perhaps, first introduced by the private interests and prejudices of particular orders of men, without any regard to, or foresight of, their consequences upon the general welfare of the society; yet they have given occasion to very different theories of political economy; of which some magnify the importance of that industry which is carried on in towns, others of that which is carried on in the country. Those theories have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states. I have endeavoured, in the fourth book, to explain, as fully and distinctly as I can, those different theories, and the principal
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effects which they have produced in different ages and nations. To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds which, in different ages and nations, have supplied their annual consumption, is the object of these four first books. The fifth and last book treats of the revenue of the sovereign, or commonwealth. In this book I have endeavoured to show, first, what are the necessary expenses of the sovereign, or commonwealth; which of those expenses ought to be defrayed by the general contribution of the whole society; and which of them by that of some particular part only, or of some particular members of it: secondly, what are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society, and what are the principal advantages and inconveniences of each of those methods: and, thirdly and lastly, what are the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts, and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society.

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Book One
OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE

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Chapter I

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Of the Division of Labour

he greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labour. The effects of the division of labour, in the general business of society, will be more easily understood by considering in what manner it operates in some particular manufactures. It is commonly supposed to be carried furthest in some very trifling ones; not perhaps that it really is carried further in them than in others of more importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator. In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts than in those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed.
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To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each
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person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations. In every other art and manufacture, the effects of the division of labour are similar to what they are in this very trifling one; though, in many of them, the labour can neither be so much subdivided, nor reduced to so great a simplicity of operation. The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. The separation of different trades and employments from one another seems to have taken place in consequence of this advantage. This separation, too, is generally called furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man in a rude state of society being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labour, too, which is necessary to produce any one complete manufacture is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the
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dyers and dressers of the cloth! The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely the business of the grazier from that of the corn-farmer as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture is perhaps the reason why the improvement of the productive powers of labour in this art does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expense bestowed upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market
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than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn provinces, fully as good, and in most years nearly about the same price with the corn of England, though, in opulence and improvement, France is perhaps inferior to England. The corn-lands of England, however, are better cultivated than those of France, and the corn-lands of France are said to be much better cultivated than those of Poland. But though the poor country, notwithstanding the inferiority of its cultivation, can, in some measure, rival the rich in the cheapness and goodness of its corn, it can pretend to no such competition in its manufactures; at least if those manufactures suit the soil, climate, and situation of the rich country. The silks of France are better and cheaper than those of England, because the silk manufacture, at least under the present high duties upon the importation of raw silk, does not so well suit the climate of England as that of France. But the hardware and the coarse woollens of England are beyond all comparison superior to those of France, and much cheaper too in the same degree of goodness. In Poland there are said to be scarce any manufactures of any kind, a few of those coarser household manufactures excepted, without which no country can well subsist. This great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to
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the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. First, the improvement of the dexterity of the workman necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man’s business to some one simple operation, and by making this operation the sole employment of his life, necessarily increased very much dexterity of the workman. A common smith, who, though accustomed to handle the hammer, has never been used to make nails, if upon some particular occasion he is obliged to attempt it, will scarce, I am assured, be able to make above two or three hundred nails in a day, and those too very bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailer, can seldom with his utmost diligence make more than eight hundred or a thousand nails in a day. I have seen several boys under twenty years of age who had never exercised any other trade but that of making nails, and who, when they exerted themselves, could make, each of them, upwards of two thousand three hundred nails in a day. The making of a nail, however, is by no means one of the simplest operations. The same person blows the bellows, stirs or mends the fire as there is occasion, heats the iron, and forges every part of the nail: in forging the head too he is obliged to change his tools. The different operations into which the making of a pin, or of a metal button, is subdivided, are all of them much more simple, and the dexterity of the person, of whose life it has been the sole business to perform them, is usually much greater. The rapidity with which some of the operations of those manufacturers are performed, exceeds what the human hand could, by those who had never seen them,
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be supposed capable of acquiring. Secondly, the advantage which is gained by saving the time commonly lost in passing from one sort of work to another is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another that is carried on in a different place and with quite different tools. A country weaver, who cultivates a small farm, must lose a good deal of time in passing from his loom to the field, and from the field to his loom. When the two trades can be carried on in the same workhouse, the loss of time is no doubt much less. It is even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another. When he first begins the new work he is seldom very keen and hearty; his mind, as they say, does not go to it, and for some time he rather trifles than applies to good purpose. The habit of sauntering and of indolent careless application, which is naturally, or rather necessarily acquired by every country workman who is obliged to change his work and his tools every half hour, and to apply his hand in twenty different ways almost every day of his life, renders him almost always slothful and lazy, and incapable of any vigorous application even on the most pressing occasions. Independent, therefore, of his deficiency in point of dexterity, this cause alone must always reduce considerably the quantity of work which he is capable of performing. Thirdly, and lastly, everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. It is unnecessary to give any example. I shall only observe, therefore, that the invention of all those machines by
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which labour is so much facilitated and abridged seems to have been originally owing to the division of labour. Men are much more likely to discover easier and readier methods of attaining any object when the whole attention of their minds is directed towards that single object than when it is dissipated among a great variety of things. But in consequence of the division of labour, the whole of every man’s attention comes naturally to be directed towards some one very simple object. It is naturally to be expected, therefore, that some one or other of those who are employed in each particular branch of labour should soon find out easier and readier methods of performing their own particular work, wherever the nature of it admits of such improvement. A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures must frequently have been shown very pretty machines, which were the inventions of such workmen in order to facilitate and quicken their particular part of the work. In the first fire-engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his playfellows. One of the greatest improvements that has
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been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour. All the improvements in machinery, however, have by no means been the inventions of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade; and some by that of those who are called philosophers or men of speculation, whose trade it is not to do anything, but to observe everything; and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects. In the progress of society, philosophy or speculation becomes, like every other employment, the principal or sole trade and occupation of a particular class of citizens. Like every other employment too, it is subdivided into a great number of different branches, each of which affords occupation to a peculiar tribe or class of philosophers; and this subdivision of employment in philosophy, as well as in every other business, improves dexterity, and saves time. Each individual becomes more expert in his own peculiar branch, more work is done upon the whole, and the quantity of science is considerably increased by it. It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to
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sail-makers. and a general plenty diffuses itself through all the different ranks of the society. the woolcomber or carder. the scribbler. besides. for the price of a great quantity of theirs. has been employed in procuring him this accommodation. though but a small part. the weaver. or even the loom of the weaver. the dyer. sailors. the dresser. must all join their different arts in order to complete even this homely production. as coarse and rough as it may appear. must have been employed in order to bring together the different drugs made use of by the dyer. and they accommodate him as amply with what he has occasion for. 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. or. the sorter of the wool.The Wealth of Nations: Book 1 26 exchange a great quantity of his own goods for a great quantity. too. How many merchants and carriers. and you will perceive that the number of people of whose industry a part. Observe the accommodation of the most common artificer or day-labourer in a civilised and thriving country. which often come from the remotest corners of the world! What a variety of labour. with many others. rope-makers. let us consider only what a variety of labour is requisite in order to form that very Adam Smith ElecBook Classics . the fuller. The shepherd. the spinner. The woollen coat. the mill of the fuller. 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. is the produce of the joint labour of a great multitude of workmen. exceeds all computation. which covers the day-labourer. what comes to the same thing. He supplies them abundantly with what they have occasion for. for example. how many ship-builders.

the coals which he makes use of for that purpose. the seller of the timber. all the different parts of his dress and household furniture. the mill-wright. the very meanest person in a civilised country could not be provided. the shears with which the shepherd clips the wool. if we examine. the knives and forks. the smith. and brought to him perhaps by a long sea and a long land carriage. without the assistance and co-operation of many thousands. we shall be sensible that. I say. Adam Smith ElecBook Classics . together with the tools of all the different workmen employed in producing those different conveniences. dug from the bowels of the earth.The Wealth of Nations: Book 1 27 simple machine. and consider what a variety of labour is employed about each of them. the forger. must all of them join their different arts in order to produce them. the bed which he lies on. The miner. 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. the earthen or pewter plates upon which he serves up and divides his victuals. and all the different parts which compose it. the different hands employed in preparing his bread and his beer. the brick-maker. the shoes which cover his feet. Were we to examine. the burner of the charcoal to be made use of in the smelting-house. the coarse linen shirt which he wears next his skin. all the furniture of his table. and keeps out the wind and the rain. all the other utensils of his kitchen. with all the knowledge and art requisite for preparing that beautiful and happy invention. the kitchen-grate at which he prepares his victuals. the workmen who attend the furnace. the builder of the furnace for smelting the ore. the brick-layer. even according to what we very falsely imagine the easy and simple manner in which he is commonly accommodated. in the same manner. all these things.

that the accommodation of a European prince does not always so much exceed that of an industrious and frugal peasant as the accommodation of the latter exceeds that of many an African king. Adam Smith ElecBook Classics . the absolute master of the lives and liberties of ten thousand naked savages. perhaps.The Wealth of Nations: Book 1 28 Compared. and yet it may be true. indeed. his accommodation must no doubt appear extremely simple and easy. with the more extravagant luxury of the great.

and to be found in no other race of animals.The Wealth of Nations: Book 1 29 Chapter II Of the Principle which gives occasion to the Division of Labour T his division of labour. It is the necessary. the propensity to truck. It is common to all men. and exchange one thing for another. Each turns her towards his companion. When an ElecBook Classics Adam Smith . have sometimes the appearance of acting in some sort of concert. but of the accidental concurrence of their passions in the same object at that particular time. in running down the same hare. though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility. however. Whether this propensity be one of those original principles in human nature of which no further account can be given. This. or whether. it belongs not to our present subject to inquire. or endeavours to intercept her when his companion turns her towards himself. that yours. Nobody ever saw one animal by its gestures and natural cries signify to another. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. is not the effect of any contract. as seems more probable. this is mine. which foresees and intends that general opulence to which it gives occasion. which seem to know neither this nor any other species of contracts. it be the necessary consequence of the faculties of reason and speech. barter. I am willing to give this for that. Two greyhounds. from which so many advantages are derived. is not originally the effect of any human wisdom.

is entirely independent. But man has almost constant occasion for the help of his brethren. He has not time. however. is the meaning of every such offer. and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. Man sometimes uses the same arts with his brethren. when it is grown up to maturity. proposes to do this. the brewer. endeavours by every servile and fawning attention to obtain their good will. and when he has no other means of engaging them to act according to his inclinations. while his whole life is scarce sufficient to gain the friendship of a few persons. but from their regard to their own interest. In civilised society he stands at all times in need of the co-operation and assistance of great multitudes. and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour. it has no other means of persuasion but to gain the favour of those whose service it requires. to do this upon every occasion. and in its natural state has occasion for the assistance of no other living creature. and never talk to them of our own Adam Smith ElecBook Classics . when it wants to be fed by him. A puppy fawns upon its dam. It is not from the benevolence of the butcher. In almost every other race of animals each individual. or the baker that we expect our dinner.The Wealth of Nations: Book 1 30 animal wants to obtain something either of a man or of another animal. We address ourselves. not to their humanity but to their self-love. and a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner. and show them that it is for their own advantage to do for him what he requires of them. Give me that which I want. Whoever offers to another a bargain of any kind. and you shall have this which you want.

and he becomes a sort of armourer. by barter. clothes. so it is this same trucking disposition which originally gives occasion to the division of labour. as he has occasion. with which he can buy either food. who reward him in the same manner with cattle and with venison. and by purchase that we obtain from one another the greater part of those mutual good offices which we stand in need of. for example. Another excels in making the frames and covers of their little huts or movable houses. therefore. it neither does nor can provide him with them as he has occasion for them. or for lodging. But though this principle ultimately provides him with all the necessaries of life which he has occasion for. till at last he finds it his Adam Smith ElecBook Classics . supplies him with the whole fund of his subsistence. or lodging. He is accustomed to be of use in this way to his neighbours. by barter. or for money. by treaty. Even a beggar does not depend upon it entirely. and he finds at last that he can in this manner get more cattle and venison than if he himself went to the field to catch them.The Wealth of Nations: Book 1 31 necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. with more readiness and dexterity than any other. With the money which one man gives him he purchases food. He frequently exchanges them for cattle or for venison with his companions. and by purchase. The charity of well-disposed people. or for food. In a tribe of hunters or shepherds a particular person makes bows and arrows. As it is by treaty. From a regard to his own interest. The greater part of his occasional wants are supplied in the same manner as those of other people. indeed. The old clothes which another bestows upon him he exchanges for other old clothes which suit him better. the making of bows and arrows grows to be his chief business.

when grown up to maturity. and exchange. for such parts of the produce of other men’s labour as he may have occasion for. When they came into the world. they were perhaps very much alike. and the very different genius which appears to distinguish men of different professions. and to cultivate and bring to perfection whatever talent or genius he may possess for that particular species of business. a fourth a tanner or dresser of hides or skins. and neither their parents nor playfellows could perceive any remarkable difference. between a philosopher and a common street porter. the principal part of the nothing of savages. and to become a sort of house-carpenter. The difference of natural talents in different men is. every man must have procured to himself every necessary and conveniency of life which he wanted. is not upon many occasions so much the cause as the effect of the division of labour. and widens by degrees. custom. But without the disposition to truck. encourages every man to apply himself to a particular occupation. The difference of talents comes then to be taken notice of. which is over and above his own consumption. in reality. for example. seems to arise not so much from nature as from habit. All must have Adam Smith ElecBook Classics . and education. and for the first six or eight years of their existence. And thus the certainty of being able to exchange all that surplus part of the produce of his own labour. till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. The difference between the most dissimilar characters. they come to be employed in very different occupations. or soon after. About that age. barter. much less than we are aware of. In the same manner a third becomes a smith or a brazier.The Wealth of Nations: Book 1 32 interest to dedicate himself entirely to this employment.

however. and derives no sort of advantage from that variety of talents with which nature has distinguished its fellows. As it is this disposition which forms that difference of talents. by the general disposition to truck. Among men. than what.The Wealth of Nations: Book 1 33 had the same duties to perform. The strength of the mastiff is not. supported either by the swiftness of the greyhound. cannot be brought into a common stock. the most dissimilar geniuses are of use to one another. Each animal is still obliged to support and defend itself. though all of the same species. barter. as a mastiff is from a greyhound. are of scarce any use to one another. where every man may purchase whatever part of Adam Smith ElecBook Classics . into a common stock. and do not in the least contribute to the better accommodation and conveniency of the species. or this last from a shepherd’s dog. in the least. so remarkable among men of different professions. as it were. and the same work to do. so it is this same disposition which renders that difference useful. By nature a philosopher is not in genius and disposition half so different from a street porter. appears to take place among men. for want of the power or disposition to barter and exchange. The effects of those different geniuses and talents. Those different tribes of animals. the different produces of their respective talents. on the contrary. and there could have been no such difference of employment as could alone give occasion to any great difference of talents. or a greyhound from a spaniel. being brought. Many tribes of animals acknowledged to be all of the same species derive from nature a much more remarkable distinction of genius. and exchange. separately and independently. or by the sagacity of the spaniel. antecedent to custom and education. or by the docility of the shepherd’s dog.

34 Adam Smith ElecBook Classics .The Wealth of Nations: Book 1 the produce of other men’s talents he has occasion for.

In such situations we can scarce expect to find even a smith. which can be carried on nowhere but in a great town.The Wealth of Nations: Book 1 35 Chapter III That the Division of Labour is limited by the Extent of the Market A a it is the power of exchanging that gives occasion to the division of labour. There are some sorts of industry. baker and brewer for his own family. for which. for example. in other words. by the extent of the market. In the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland. every farmer must be butcher. or. for such parts of the produce of other men’s labour as he has occasion for. no person can have any encouragement to dedicate himself entirely to one employment. so the extent of this division must always be limited by the extent of that power. which is over and above his own consumption. within less than twenty miles of another of the same trade. can find employment and subsistence in no other place. When the market is very small. A village is by much too narrow a sphere for him. The scattered families that live at eight or ten miles distance from the nearest of them must learn to perform themselves a great number of little pieces of work. even of the lowest kind. even an ordinary market town is scarce large enough to afford him constant occupation. a carpenter. A porter. for want of the power to exchange all that surplus part of the produce of his own labour. or a mason. in ElecBook Classics Adam Smith .

therefore. Such a workman at the rate of a thousand nails a day. Six or eight men. and even a carver in wood. But in such a situation it would be impossible to dispose of one thousand. and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. of one day’s work in the year. by the help of waterAdam Smith ElecBook Classics . so it is upon the sea-coast. will make three hundred thousand nails in the year. that is. A broad-wheeled waggon. In about the same time a ship navigated by six or eight men. and along the banks of navigable rivers. they would call in the assistance of those workmen. a cart and waggon maker. that industry of every kind naturally begins to subdivide and improve itself. and drawn by eight horses.The Wealth of Nations: Book 1 36 more populous countries. The employments of the latter are still more various. a cabinet-maker. a plough-wright. in about six weeks’ time carries and brings back between London and Edinburgh near four ton weight of goods. and three hundred working days in the year. 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. as well as a wheel-wright. As by means of water-carriage a more extensive market is opened to every sort of industry than what land-carriage alone can afford it. A country carpenter deals in every sort of work that is made of wood: a country smith in every sort of work that is made of iron. attended by two men. frequently carries and brings back two hundred ton weight of goods. but a joiner. 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. and sailing between the ports of London and Leith. The former is not only a carpenter.

and the wear and tear of a ship of two hundred tons burden. there is to be charged only the maintenance of six or eight men. attended by a hundred men. Adam Smith ElecBook Classics . with what safety could they be transported through the territories of so many barbarous nations? Those two cities. or the difference of the insurance between land and watercarriage. as no goods could be transported from the one to the other. and. however. therefore. the wear and tear of four hundred horses as well as of fifty great waggons. at present carry on a very considerable commerce with each other. as fifty broadwheeled waggons. Were there no other communication between those two places.The Wealth of Nations: Book 1 37 carriage. 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. therefore. Whereas. there must be charged the maintenance of a hundred men for three weeks. together with the value of the superior risk. Upon two hundred tons of goods. and both the maintenance. what is nearly equal to the maintenance. except such whose price was very considerable in proportion to their weight. and drawn by four hundred horses. and by mutually affording a market. but by land-carriage. can carry and bring back in the same time the same quantity of goods between London and Edinburgh. upon the same quantity of goods carried by water. they could carry on but a small part of that commerce which at present subsists between them. carried by the cheapest land-carriage from London to Edinburgh. and consequently could give but a small part of that encouragement which they at present mutually afford to each other’s industry. give a good deal of encouragement to each other’s industry. There could be little or no commerce of any kind between the distant parts of the world.

are the advantages of water-carriage. The extent of their market. were those that dwelt round the coast of the Mediterranean Sea. to sail out of the Straits of Gibraltar. but the country which lies round about them. In our North American colonies the plantations have constantly followed either the sea-coast or the banks of the navigable rivers.The Wealth of Nations: Book 1 38 Since such. according to the best authenticated history. as well as by the multitude of its islands. and have scarce anywhere extended themselves to any considerable distance from both. from their ignorance of the compass. and from the imperfection of the art of shipbuilding. was. appear to have been first civilised. and the proximity of its neighbouring shores. The inland parts of the country can for a long time have no other market for the greater part of their goods. The nations that. must for a long time be in proportion to the riches and populousness of that country. extremely favourable to the infant navigation of the world. therefore. that is. having no tides. therefore. men were afraid to quit the view of the coast. and that they should always be much later in extending themselves into the inland parts of the country. nor consequently any waves except such as are caused by the wind only. To pass beyond the pillars of Hercules. by far the greatest inlet that is known in the world. and separates them from the seacoast. to abandon themselves to the boisterous waves of the ocean. when. and the great navigable rivers. That sea. by the smoothness of its surface. was. in the ancient world. 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. long considered as a most Adam Smith ElecBook Classics . and consequently their improvement must always be posterior to the improvement of that country.

but between all the considerable villages. Of all the countries on the coast of the Mediterranean Sea. or perhaps than both of them put Adam Smith ElecBook Classics . are well assured. nearly in the same manner as the Rhine and the Maas do in Holland at present. not only between all the great towns.The Wealth of Nations: Book 1 39 wonderful and dangerous exploit of navigation. though the great extent of this antiquity is not authenticated by any histories of whose authority we. which. and even to many farmhouses in the country. several great rivers form. seem to have afforded a communication by water-carriage. Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. and they were for a long time the only nations that did attempt it. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt. attempted it. in the East Indies. with the assistance of a little art. and by communicating with one another afford an inland navigation much more extensive than that either of the Nile or the Ganges. a multitude of canals. In Bengal the Ganges and several other great rivers form a great number of navigable canals in the same manner as the Nile does in Egypt. In the Eastern provinces of China too. Upper Egypt extends itself nowhere above a few miles from the Nile. the most skilful navigators and ship-builders of those old times. and in Lower Egypt that great river breaks itself into many different canals. by their different branches. It was late before even the Phoenicians and Carthaginians. The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal. and in some of the eastern provinces of China. in this part of the world.

and which runs into another territory before it reaches the sea. It is remarkable that neither the ancient Egyptians. nor the Indians. nor the Chinese. and Siam.The Wealth of Nations: Book 1 40 together. the ancient Scythia. Bengal. The Sea of Tartary is the frozen ocean which admits of no navigation. India. Persia. the modern Tartary and Siberia. such as the Baltic and Adriatic seas in Europe. The commerce besides which any nation can carry on by means of a river which does not break itself into any great number of branches or canals. in comparison of what it would be if any of them possessed the whole of its course till it falls into the Black Sea. in Asia. to carry maritime commerce into the interior parts of that great continent: and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. All the inland parts of Africa. the Mediterranean and Euxine seas in both Europe and Asia. Austria and Hungary. There are in Africa none of those great inlets. they are at too great a distance from one another to carry commerce and communication through the greater part of it. and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas. and the gulfs of Arabia. seem in all ages of the world to have been in the same barbarous and uncivilised state in which we find them at present. and though some of the greatest rivers in the world run through that country. The navigation of the Danube is of very little use to the different states of Bavaria. can never be very considerable. Adam Smith ElecBook Classics . encouraged foreign commerce. 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. but seem all to have derived their great opulence from this inland navigation.

this power of exchanging must frequently have been very much clogged and embarrassed in its operations. and the society itself grows to be what is properly a commercial society. But if this latter should chance to have nothing that the former stands in need of. a part of this superfluity. or becomes in some measure a merchant. for such parts of the produce of other men’s labour as he has occasion for. But when the division of labour first began to take place. except the different productions of their respective trades. The butcher has more meat in his shop than he himself can consume. The former consequently would be glad to dispose of. No exchange can. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour. it is but a very small part of a man’s wants which the produce of his own labour can supply. which is over and above his own consumption. One man.The Wealth of Nations: Book 1 41 Chapter IV W Of the Origin and Use of Money hen the division of labour has been once thoroughly established. and the brewer and the baker would each of them be willing to purchase a part of it. and the butcher is already provided with all the bread and beer which he has immediate occasion for. has more of a certain commodity than he himself has occasion for. Every man thus lives by exchanging. He cannot be ElecBook Classics Adam Smith . be made between them. we shall suppose. no exchange can be made between them. But they have nothing to offer in exchange. and the latter to purchase. in this case. while another has less.

but that of Glaucus cost an hundred oxen. men seem at last to have been determined by irresistible reasons to give the preference. Salt is said to be the common instrument of commerce and exchanges in Abyssinia. for this employment. for a workman to carry nails instead of money to the baker’s shop or the alehouse. In the rude ages of society. though they must have been a most inconvenient one. after the first establishment of the division of labour. and. nor they his customers. a certain quantity of some one commodity or other. every prudent man in every period of society. The armour of Diomede. I am told. besides the peculiar produce of his own industry. and they are all of them thus mutually less serviceable to one another. tobacco in Virginia. says Homer. however. cattle are said to have been the common instrument of commerce. to metals above every other commodity. such as he imagined few people would be likely to refuse in exchange for the produce of their industry. Many different commodities. but they can Adam Smith ElecBook Classics . cost only nine oxen. In all countries. a species of shells in some parts of the coast of India. and there is at this day a village in Scotland where it is not uncommon. hides or dressed leather in some other countries.The Wealth of Nations: Book 1 42 their merchant. must naturally have endeavoured to manage his affairs in such a manner as to have at all times by him. it is probable. Metals can not only be kept with as little loss as any other commodity. were successively both thought of and employed for this purpose. sugar in some of our West India colonies. yet in old times we find things were frequently valued according to the number of cattle which had been given in exchange for them. dried cod at Newfoundland. scarce anything being less perishable than they are. In order to avoid the inconveniency of such situations.

ElecBook Classics Adam Smith . and had nothing but cattle to give in exchange for it. an ancient historian. 3. he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for. Different metals have been made use of by different nations for this purpose.The Wealth of Nations: Book 1 43 likewise. he must. on the contrary. or a whole sheep at a time. he had metals to give in exchange for it. Thus we are told by Pliny. of two or three oxen. for example. Those metals seem originally to have been made use of for this purpose in rude bars. a quality which no other equally durable commodities possess. 1 Historia naturalis. for the same reasons. The man who wanted to buy salt. Iron was the common instrument of commerce among the ancient Spartans. performed at this time the function of money. These bars. the value.1 upon the authority of Timaeus. to purchase whatever they had occasion for. and if he had a mind to buy more. the Romans had no coined money. be divided into any number of parts. must have been obliged to buy salt to the value of a whole ox. but made use of unstamped bars of copper. as by fusion those parts can easily be reunited again. If. or of two or three sheep. therefore. and which more than any other quality renders them fit to be the instruments of commerce and circulation. and gold and silver among all rich and commercial nations. to wit. copper among the ancient Romans. without any stamp or coinage. that. because what he was to give for it could seldom be divided without loss. xxxiii. He could seldom buy less than this. without any loss. instead of sheep or oxen. till the time of Servius Tullius. have been obliged to buy double or triple the quantity.

in their outward appearance. less accuracy would. institutions exactly of the same nature Adam Smith ElecBook Classics . and. To prevent such abuses. Before the institution of coined money. in all countries that have made any considerable advances towards improvement. even the business of weighing. been made to resemble those metals. and thereby to encourage all sorts of industry and commerce. In the coarser metals. he was obliged to weigh the farthing. any conclusion that can be drawn from it. with proper dissolvents. is extremely uncertain. however. to affix a public stamp upon certain quantities of such particular metals as were in those countries commonly made use of to purchase goods.The Wealth of Nations: Book 1 44 The use of metals in this rude state was attended with two very considerable inconveniencies. however. with proper exactness. or pure copper. secondly. unless a part of the metal is fairly melted in the crucible. The weighing of gold in particular is an operation of some nicety. it has been found necessary. unless they went through this tedious and difficult operation. requires at least very accurate weights and scales. which had. Hence the origin of coined money. indeed. and. where a small difference in the quantity makes a great difference in the value. be necessary. The operation of assaying is still more difficult. Yet we should find it excessively troublesome. to facilitate exchanges. where a small error would be of little consequence. might receive in exchange for their goods an adulterated composition of the coarsest and cheapest materials. no doubt. and of those public offices called mints. still more tedious. In the precious metals. with the trouble of weighing. first. and instead of a pound weight of pure silver. with that of assaying them. people must always have been liable to the grossest frauds and impositions. if every time a poor man had occasion either to buy or sell a farthing’s worth of goods.

William the Conqueror introduced the custom of paying them in money. covering entirely both sides of the piece and sometimes the edges too. in the same manner as ingots of gold and bars of silver are at present. Such coins. but not the weight of the metal. The first public stamps of this kind that were affixed to the current metals. was. however. for a long time. the goodness or fineness of the metal. that is. and yet are received by weight and not by tale. received at the exchequer. in victuals and provisions of all sorts. The inconveniency and difficulty of weighing those metals with exactness gave occasion to the institution of coins. were received by tale as at present. what it was both most difficult and most important to ascertain. All of them are equally meant to ascertain. was supposed to ascertain not only the fineness. of which the stamp. by weight and not by tale. not in money but in kind. to be the current money of the merchant. without the trouble of weighing.The Wealth of Nations: Book 1 45 with those of the aulnagers and stamp-masters of woollen and linen cloth. This money. or the Spanish mark which is sometimes affixed to ingots of gold. by means of a public stamp. The denominations of those coins seem originally to have Adam Smith ElecBook Classics . but the weight of the metal. and not covering the whole surface. however. and which being struck only upon one side of the piece. the quantity and uniform goodness of those different commodities when brought to market. seem in many cases to have been intended to ascertain. The revenues of the ancient Saxon kings of England are said to have been paid. ascertains the fineness. therefore. They are said. Abraham weighs to Ephron the four hundred shekels of silver which he had agreed to pay for the field of Machpelah. and to have resembled the sterling mark which is at present affixed to plate and bars of silver.

however. contained a pound. The Scots money pound contained. between the shilling and either the penny on the one hand. and Scots pennies. Tower weight. says an ancient statute of Henry III. The French livre contained in the time of Charlemagne a pound. of silver. the Roman as or pondo contained a Roman pound of good copper. French. into twelve ounces. of silver of a known fineness. from the time of Alexander the First to that of Robert Bruce. and something less than the Troyes pound. or the pound on the other. English. This last was not introduced into the mint of England till the 18th of Henry VIII. It was divided in the same manner as our Troyes pound. seems not to have been so constant and uniform as that between the penny and the pound. too.The Wealth of Nations: Book 1 46 expressed the weight or quantity of metal contained in them. During the first race of the kings of France. each of which contained a real ounce of good copper. The shilling too seems originally to have been the denomination of a weight. then wastel bread of a farthing shall weigh eleven shillings and four pence. in the time of Edward I. the twentieth part of an ounce. a pound of silver of the same weight and fineness with the English pound sterling. In the time of Servius Tullius. Troyes weight. and the two-hundred-and-fortieth part of a pound. The Tower pound seems to have been something more than the Roman pound. the French sou or shilling appears upon different occasions to have contained five. and the weights and measures of so famous a market were generally known and esteemed. The fair of Troyes in Champaign was at that time frequented by all the nations of Europe. When wheat is at twelve shillings the quarter. The English pound sterling. The proportion. Adam Smith ElecBook Classics . who first coined money at Rome. of a known fineness. contained all of them originally a real pennyweight of silver.

and ruinous to the creditor. therefore. and. The English pound and penny contain at present about a third only. The Roman as.The Wealth of Nations: Book 1 47 twelve. and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old. seems to have been uniformly the same as at present. and forty pennies. the shilling. From the time of Charlemagne among the French. and the penny. for their creditors were really defrauded of a part of what was due to them. though the value of each has been very different. in appearance. in the latter ages of the Republic. came to weigh only half an ounce. I believe. and the French pound and penny about a sixty-sixth part of their original value. to pay their debts and to fulfil their engagements with a smaller quantity of silver than would otherwise have been requisite. and have sometimes produced a greater Adam Smith ElecBook Classics . have always proved favourable to the debtor. and it is not improbable that it may have been as variable among them as among their neighbours. have by degrees diminished the real quantity of metal. All other debtors in the state were allowed the same privilege. instead of weighing a pound. the ancient Franks. For in every country of the world. It was indeed in appearance only. and from that of William the Conqueror among the English. was reduced to the twenty-fourth part of its original value. the Scots pound and penny about a thirty-sixth. abusing the confidence of their subjects. Among the ancient Saxons a shilling appears at one time to have contained only five pennies. the avarice and injustice of princes and sovereign states. which had been originally contained in their coins. By means of those operations the princes and sovereign states which performed them were enabled. the proportion between the pound. twenty. Such operations.

has scarce any value in use. what is the real measure of this exchangeable value. Nothing is more useful than water: but it will purchase scarce anything. it is to be observed. by the intervention of which goods of all kinds are bought and sold. It is in this manner that money has become in all civilised nations the universal instrument of commerce. or. and sometimes the power of purchasing other goods which the possession of that object conveys. and sometimes expresses the utility of some particular object. on the contrary. Secondly. What are the rules which men naturally observe in exchanging them either for money or for one another. A diamond. wherein consists the real price of all commodities. I shall now proceed to examine. scarce anything can be had in exchange for it. In order to investigate the principles which regulate the exchangeable value of commodities. what are the different parts of which this real price is composed or made up. and. but a very great quantity of other goods may frequently be had in exchange for it. or exchanged for one another. These rules determine what may be called the relative or exchangeable value of goods. on the contrary. “value in exchange. the other.” The things which have the greatest value in use have frequently little or no value in exchange. The word value. I shall endeavour to show: First. than could have been occasioned by a very great public calamity. The one may be called “value in use”. has two different meanings.The Wealth of Nations: Book 1 48 and more universal revolution in the fortunes of private persons. those which have the greatest value in exchange have frequently little or no value in use. Adam Smith ElecBook Classics .

the actual price of commodities. after the fullest explication which I am capable of giving of it. appear still in some degree obscure.The Wealth of Nations: Book 1 49 And. Adam Smith ElecBook Classics . and after taking the utmost pains that I can to be perspicuous. from coinciding exactly with what may be called their natural price. those three subjects in the three following chapters. as fully and distinctly as I can. or. and his attention in order to understand what may. I am always willing to run some hazard of being tedious in order to be sure that I am perspicuous. that is. what are the different circumstances which sometimes raise some or all of these different parts of price above. some obscurity may still appear to remain upon a subject in its own nature extremely abstracted. I shall endeavour to explain. and sometimes sink them below their natural or ordinary rate. lastly. what are the causes which sometimes hinder the market price. for which I must very earnestly entreat both the patience and attention of the reader: his patience in order to examine a detail which may perhaps in some places appear unnecessarily tedious. perhaps.

is the toil and trouble which it can save to himself. and who wants to dispose of it or exchange it for something else. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the ElecBook Classics Adam Smith . The real price of everything. What is bought with money or with goods is purchased by labour as much as what we acquire by the toil of our own body. or their Price in Labour. what everything really costs to the man who wants to acquire it. is the real measure of the exchangeable value of all commodities. is equal to the quantity of labour which it enables him to purchase or command. it is but a very small part of these with which a man’s own labour can supply him.The Wealth of Nations: Book 1 50 Chapter V Of the Real and Nominal Price of Commodities. therefore. and he must be rich or poor according to the quantity of that labour which he can command. But after the division of labour has once thoroughly taken place. is the toil and trouble of acquiring it. or which he can afford to purchase. to the person who possesses it. The far greater part of them he must derive from the labour of other people. conveniences. That money or those goods indeed save us this toil. The value of any commodity. and who means not to use or consume it himself. and which it can impose upon other people. and amusements of human life. but to exchange it for other commodities. What everything is really worth to the man who has acquired it. Labour. and their Price in Money E very man is rich or poor according to the degree in which he can afford to enjoy the necessaries. therefore.

The different degrees of hardship endured. and its value. but the mere possession of that fortune does not necessarily convey to him either. But the person who either acquires. It is of difficult to ascertain the proportion between two different quantities of labour. of the produce of other men’s labour. does not necessarily acquire or succeed to any political power. or to the quantity either of other men’s labour. perhaps. The power which that possession immediately and directly conveys to him. afford him the means of acquiring both. precisely in proportion to the extent of this power. It was not by gold or by silver. which it enables him to purchase or command. what is the same thing. But though labour be the real measure of the exchangeable value of all commodities. is precisely equal to the quantity of labour which it can enable them to purchase or command. or succeeds to a great fortune. the original purchase-money that was paid for all things. and of ingenuity exercised. must likewise be taken into account. to those who possess it. either civil or military. or over all the produce of labour. and who want to exchange it for some new productions. a certain command over all the labour. is power. it is not that by which their value is commonly estimated. Labour was the first price. or. is the power of purchasing.The Wealth of Nations: Book 1 51 value of an equal quantity. Wealth. that all the wealth of the world was originally purchased. There Adam Smith ElecBook Classics . Hobbes says. but by labour. The exchangeable value of everything must always be precisely equal to the extent of this power which it conveys to its owner. His fortune may. His fortune is greater or less. as Mr. which is then in the market. The time spent in two different sorts of work will not always alone determine this proportion.

The quantity of money which he gets for them regulates. It is adjusted. too. The butcher seldom carries his beef or his mutton to the baker. In exchanging. every particular commodity is more frequently exchanged for money than for any other commodity. But when barter ceases. in order to exchange them for bread or for beer. But it is not easy to find any accurate measure either of hardship or ingenuity. It is more natural. and money has become the common instrument of commerce. however. and thereby compared with. indeed. and afterwards exchanges that money for bread and for beer. to estimate its exchangeable value by the quantity of some other commodity than by that of the labour which it can purchase. or the brewer. which. the other an abstract notion. is not altogether so natural and obvious. is more frequently exchanged for. though it can be made sufficiently intelligible. is sufficient for carrying on the business of common life. according to that sort of rough equality which. Adam Smith ElecBook Classics . not by any accurate measure. too. understand better what is meant by a quantity of a particular commodity than by a quantity of labour. but by the higgling and bargaining of the market. the different productions of different sorts of labour for one another. some allowance is commonly made for both. therefore. but he carries them to the market. other commodities than with labour. where he exchanges them for money. though not exact. the quantity of bread and beer which he can afterwards purchase. than in a month’s industry at an ordinary and obvious employment. or in an hour’s application to a trade which it cost ten years’ labour to learn. besides. Every commodity. The one is a plain palpable object. The greater part of people.The Wealth of Nations: Book 1 52 may be more labour in an hour’s hard work than in two hours’ easy business.

the commodities for which he can exchange them only by the intervention of another commodity. As it costs less labour to bring those metals from the mine to the market. Gold and silver. than by that of bread and beer. the value of gold and silver in Europe to about a third of what it had been before. The quantity of labour which any particular quantity of them can purchase or command. than by the quantity either of labour or of any other commodity which can be had in exchange for it. so a commodity which is itself continually varying in Adam Smith ElecBook Classics . or three or four quarts of small beer. vary in their value. or the quantity of other goods which it will exchange for. is by no means the only one of which history gives some account. depends always upon the fertility or barrenness of the mines which happen to be known about the time when such exchanges are made. can never be an accurate measure of the quantity of other things. sometimes of easier and sometimes of more difficult purchase. fathom. such as the natural foot. and this revolution in their value. The discovery of the abundant mines of America reduced. Hence it comes to pass that the exchangeable value of every commodity is more frequently estimated by the quantity of money. in the sixteenth century. than that it is worth three or four pounds of bread. the commodity for which he immediately exchanges them. therefore. so when they were brought thither they could purchase or command less labour. are sometimes cheaper and sometimes dearer. But as a measure of quantity. however.The Wealth of Nations: Book 1 53 It is more natural and obvious to him. though perhaps the greatest. to estimate their value by the quantity of money. and rather to say that his butcher’s meat is worth threepence or fourpence a pound. which is continually varying in its own quantity. or handful. like every other commodity.

is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. like commodities.The Wealth of Nations: Book 1 54 its own value. its nominal price. therefore. indeed. and his happiness. yet to the person who employs him they appear sometimes to be of greater and sometimes of smaller value. or which it costs much labour to acquire. Of these. and cheap in the other. and that cheap which is to be had easily. he must always lay down the same portion of his ease. it is the goods which are cheap in the one case. or with very little labour. may be said to be of equal value to the labourer. But though equal quantities of labour are always of equal value to the labourer. in the quantity of Adam Smith ElecBook Classics . at all times and places. It appears to him dear in the one case. whatever may be the quantity of goods which he receives in return for it. In reality. He purchases them sometimes with a greater and sometimes with a smaller quantity of goods. but it is their value which varies. and dear in the other. therefore. not that of the labour which purchases them. can never be an accurate measure of the value of other commodities. Equal quantities of labour. The price which he pays must always be the same. labour. In his ordinary state of health. it may sometimes purchase a greater and sometimes a smaller quantity. Labour alone. his liberty. strength and spirits. It is their real price. At all times and places that is dear which it is difficult to come at. however. may be said to have a real and a nominal price. never varying in its own value. and to him the price of labour seems to vary like that of all other things. in the ordinary degree of his skill and dexterity. Its real price may be said to consist in the quantity of the necessaries and conveniences of life which are given for it. money is their nominal price only. In this popular sense.

been almost continually diminishing. The distinction between the real and the nominal price of commodities and labour is not a matter of mere speculation. to those which arise from the different quantities of gold and silver which are contained at different times in coin of the same denomination. to those which arise from the different values of equal quantities of gold and silver at different times. if it is intended that this rent should always be of the same value. the same nominal price is sometimes of very different values. The discovery of the mines of America diminished the value of gold and silver in Europe. accordingly. secondly. it is of importance to the family in whose favour it is reserved that it should not consist in a particular sum of money. not to the nominal price of his labour. and hardly ever augmenting. but may sometimes be of considerable use in practice. though I apprehend without any certain proof. The labourer is rich or poor. is still Adam Smith ElecBook Classics . I believe of all nations. tend almost always to diminish the value of a money rent. The same real price is always of the same value.The Wealth of Nations: Book 1 55 money. but on account of the variations in the value of gold and silver. The quantity of metal contained in the coins. it is commonly supposed. therefore. Such variations. has. This diminution. and. is sold with a reservation of a perpetual rent. is well or ill rewarded. but they seldom have fancied that they had any to augment it. therefore. in proportion to the real. Princes and sovereign states have frequently fancied that they had a temporary interest to diminish the quantity of pure metal contained in their coins. When a landed estate. Its value would in this case be liable to variations of two different kinds. first.

the loss is frequently still greater. 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 Adam Smith ElecBook Classics . according to Dr. is in the present times. commonly near double of what arises from the other two-thirds. not in such a quantity of coined money of such a denomination (in so many pounds sterling.The Wealth of Nations: Book 1 56 going on gradually. but in so many ounces either of pure silver. therefore. The old money rents of colleges must. even though it should be stipulated to be paid. But since the reign of Philip and Mary the denomination of the English coin has undergone little or no alteration. for example). therefore. or according to the current prices at the nearest public market. has arisen altogether from the degradation in the value of silver. Blackstone. Upon this supposition. or of silver of a certain standard. either in kind. or are worth little more than a fourth part of the corn which they were formerly worth. The rents which have been reserved in corn have preserved their value much better than those which have been reserved in money. to be paid. have sunk almost to a fourth part of their ancient value. according to this account. This degradation. and the same number of pounds. By the 18th of Elizabeth it was enacted that a third of the rent of all college leases should be reserved in corn. shillings and pence have contained very nearly the same quantity of pure silver. though originally but a third of the whole. The money arising from this corn rent. in the value of the money rents of colleges. and is likely to continue to do so for a long time. even where the denomination of the coin has not been altered. such variations are more likely to diminish than to augment the value of a money rent.

I say. A rent therefore reserved in corn is liable only to the variations in the quantity of labour which a certain quantity of corn can purchase. Equal quantities of labour will at distant times be purchased more nearly with equal quantities of corn. and in one that is standing still than in one that is going backwards. The subsistence of the labourer. or the real price of labour. Equal quantities of corn. Though the real value of a corn rent. is very different upon different occasions. it is to be observed. some ancient rents. will at any particular time purchase a greater or smaller quantity of labour in proportion to the quantity of subsistence which it can purchase at that time. where the denomination of the coin has undergone much greater alterations than it ever did in England. or perhaps of any other commodity. originally of considerable value. for even equal quantities of corn will not do it exactly. Every other commodity. but to the variations in the quantity of corn which can be purchased by any particular quantity of that commodity. more nearly than equal quantities of almost any other commodity. at distant times. however. as I shall endeavour to show hereafter. be more nearly of the same real value. therefore. more liberal in a society advancing to opulence than in one that is standing still. But a rent reserved in any other commodity is liable not only to the variations in the quantity of labour which any particular quantity of corn can purchase. where it has undergone still greater than it ever did in Scotland. will. Adam Smith ElecBook Classics . the subsistence of the labourer. They will do this. have in this manner been reduced almost to nothing. than with equal quantities of gold and silver. or enable the possessor to purchase or command more nearly the same quantity of the labour of other people. and in France.The Wealth of Nations: Book 1 57 Scotland.

in the same or nearly in the same condition. not only the nominal. continuing the same during all these Adam Smith ElecBook Classics . The average or ordinary price of corn again is regulated. may. But when corn is at the latter price. or will command double the quantity either of labour or of the greater part of other commodities. but the real value of a corn rent will be double of what it is when at the former. and consequently of corn which must be consumed. but seems to be everywhere accommodated. or by the quantity of labour which must be employed. or fluctuate. for example. the money price of labour. therefore. at least. In the meantime the temporary and occasional price of corn may frequently be double. in other respects. in order to bring any particular quantity of silver from the mine to the market. as I shall endeavour to show hereafter. and along with it that of most other things. but frequently continues the same. or very nearly the same. as I shall likewise endeavour to show hereafter. and along with it the money price of labour. by the richness or barrenness of the mines which supply the market with that metal. The ordinary or average money price of corn. does not fluctuate from year to year with the money price of corn. it varies much more from year to year.The Wealth of Nations: Book 1 58 however. though it sometimes varies greatly from century to century. varies much less from century to century than that of a money rent. of what it had been the year before. the society continues. provided. The money price of labour. from five and twenty to fifty shillings the quarter. during so long a period. by the value of silver. but to the average or ordinary price of that necessary of life. one year. continue the same or very nearly the same too. for half a century or a century together. seldom varies much from year to year. But the value of silver. not to the temporary or occasional.

in the London market for example. it may be of use to distinguish between real and nominal price. at the same time and place only. money is the exact measure of the real exchangeable value of all commodities. therefore. however. on the contrary. From year to year. or even in letting very long leases. the more or less labour it will at that time and place enable you to purchase or command. At the same time and place the real and the nominal price of all commodities are exactly in proportion to one another. At the same time and place. is the only universal. it appears evidently. Labour. equal quantities of corn will command the same quantity of labour more nearly than equal quantities of silver. the real value of different commodities from century to century by the quantities of silver which were given for them.The Wealth of Nations: Book 1 59 fluctuations. as well as the only accurate measure of value. the more common and ordinary transactions of human life. because. From century to century. there is no regular proportion Adam Smith ElecBook Classics . and at all places. The more or less money you get for any commodity. We cannot estimate it from year to year by the quantities of corn. But though in establishing perpetual rents. silver is a better measure than corn. Though at distant places. By the quantities of labour we can. therefore. it is allowed. or the only standard by which we can compare the values of different commodities at all times. it is of none in buying and selling. because equal quantities of it will more nearly command the same quantity of labour. with the greatest accuracy. from century to century. It is so. estimate it both from century to century and from year to year. We cannot estimate. corn is a better measure than silver.

and this is precisely what he wants. It is of no importance to him that half an ounce of silver at Canton would have given him the command of more labour and of a greater quantity of the necessaries and conveniences of life than an ounce can do at London. or the different degrees of power over Adam Smith ElecBook Classics . therefore. which sells for half an ounce of silver at Canton may there be really dearer. however.The Wealth of Nations: Book 1 60 between the real and the money price of commodities. As it is the nominal or money price of goods. and thereby regulates almost the whole business of common life in which price is concerned. In such a work as this. of more real importance to the man who possesses it there. A commodity. it may sometimes be of use to compare the different real values of a particular commodity at different times and places. than a commodity which sells for an ounce at London is to the man who possesses it at London. a commodity which he can afterwards sell at London for an ounce. which finally determines the prudence or imprudence of all purchases and sales. therefore. or the difference between the quantity of silver for which he buys them. 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. Half an ounce of silver at Canton in China may command a greater quantity both of labour and of the necessaries and conveniences of life than an ounce at London. just as much as if an ounce of silver was at London exactly of the same value as at Canton. he gains a hundred per cent by the bargain. yet the merchant who carries goods from the one to the other has nothing to consider but their money price. An ounce at London will always give him the command of double the quantity of all these which half an ounce could have done there. If a London merchant. however. can buy at Canton for half an ounce of silver.

But the current prices of labour at distant times and places can scarce ever be known with any degree of exactness. upon different occasions. Having once begun to use it as their standard. content ourselves with them. In the progress of industry. not as being always exactly in the same proportion as the current prices of labour. We must in this case compare. they have generally continued to do so even when the necessity was not the same. though they have in few places been regularly recorded. therefore. We must generally. or some other coarse metal.The Wealth of Nations: Book 1 61 the labour of other people which it may. commercial nations have found it convenient to coin several different metals into money. considered one of those metals as more peculiarly the measure of value than any of the other two. however. not so much the different quantities of silver for which it was commonly sold. I shall hereafter have occasion to make several comparisons of this kind. for those of still smaller consideration. Those of corn. and copper. which they must have done when they had no other money. are in general better known and have been more frequently taken notice of by historians and other writers. as the different quantities of labour which those different quantities of silver could have purchased. gold for larger payments. and this preference seems generally to have been given to the metal which they happened first to make use of as the instrument of commerce. They have always. The Romans are said to have had nothing but copper money till Adam Smith ElecBook Classics . but as being the nearest approximation which can commonly be had to that proportion. have given to those who possessed it. silver for purchases of moderate value.

The northern nations who established themselves upon the ruins of the Roman empire. therefore. was originally a silver coin. which was peculiarly considered as the standard or measure of value. a legal tender of payment could be made only in the coin of that metal. its value was estimated in copper. At Rome all accounts appear to have been kept. therefore. in all countries. and the value of all goods and of all estates is generally computed in silver: and when we mean to express the amount of a person’s fortune. and the value of all estates to have been computed either in asses or in sestertii. Originally. The word sestertius signifies two asses and a half. In England. appears to have continued always the measure of value in that republic.1 when they first began to coin silver. At Rome.The Wealth of Nations: Book 1 62 within five years before the first Punic war. we seldom mention the number of guineas. seem to have had silver money from the first beginning of their settlements. xxxiii. 3. ElecBook Classics Adam Smith . but the number of pounds sterling which we suppose would be given for it. therefore. but there was little gold coined till the time of Edward III nor any copper till that of James I of Great Britain. In England. I believe. in all other modern nations of Europe. Though the sestertius. I believe. The as was always the denomination of a copper coin. gold was not considered as a legal tender for a long time after it was 1 Pliny. and for the same reason. one who owed a great deal of money was said to have a great deal of other people’s copper. Copper. There were silver coins in England in the time of the Saxons. and not to have known either gold or copper coins for several ages thereafter. all accounts are kept.

The Wealth of Nations: Book 1 63 coined into money. been found convenient to ascertain this proportion. something more than nominal again. in this regulated proportion. If the regulated value of a guinea. and consequently better acquainted with the proportion between their respective values. The proportion between the values of gold and silver money was not fixed by any public law or proclamation. all accounts being kept and almost all obligations for debt being expressed in silver money. the creditor might either reject such payment altogether. In consequence of any change. or be a legal tender for a debt of that amount. it has in most countries. In this state of things. was either reduced to twenty. becomes little more than a nominal distinction. and that which was not the standard. In process of time. I believe. was something more than a nominal distinction. for example. but was left to be settled by the market. the distinction between the metal which is the standard. of such a weight and fineness. and to declare by a public law that a guinea. or accept of it at such a valuation of the gold as he and his debtor could agree upon. for example. If a debtor offered payment in gold. this distinction becomes. Copper is not at present a legal tender except in the change of the smaller silver coins. should exchange for one-and-twenty shillings. and that which is not the standard. In this state of things the distinction between the metal which was the standard. however. and as people became gradually more familiar with the use of the different metals in coin. the greater part of payments could in either case be made with the same Adam Smith ElecBook Classics . or raised to two-and-twenty shillings. and during the continuance of any one regulated proportion of this kind. or at least seems to become.

In reality. and of expressing the amount of all great and small sums rather in silver than in gold money. a greater in the one case. In the payment of such a note. be still payable with fiveand-twenty or fifty guineas in the same manner as before. should ever become general. Silver would appear to be more invariable in its value than gold. This difference. and of expressing promissory notes and other obligations for money in this manner. and the value of silver would not seem to depend upon the quantity of gold which it would exchange for. but with very different quantities of silver. Drummond’s notes for five-and-twenty or fifty guineas would. The value of gold would seem to depend upon the quantity of silver which it would exchange for. would be considered as the metal which was peculiarly the standard or measure of value. would be altogether owing to the custom of keeping accounts. It would. of not the best quality. But as by the Adam Smith ElecBook Classics . the value of the most precious metal regulates the value of the whole coin. of copper. and not silver. Twelve copper pence contain half a pound. which. and gold would not appear to measure the value of silver. Silver would appear to measure the value of gold. be payable with the same quantity of gold as before. however. during the continuance of any one regulated proportion between the respective values of the different metals in coin. gold. before it is coined. after such an alteration. Gold would appear to measure the value of silver. and silver would not appear to measure the value of gold. after an alteration of this kind.The Wealth of Nations: Book 1 64 quantity of silver money as before. avoirdupois. If the custom of keeping accounts. gold would appear to be more invariable in its value than silver. is seldom worth sevenpence in silver. One of Mr. and a smaller in the other. but would require very different quantities of gold money.

The Wealth of Nations: Book 1 65 regulation twelve such pence are ordered to exchange for a shilling. gets back a pound weight or an ounce weight of gold in coin. without any deduction. Three pounds seventeen shillings and tenpence halfpenny an ounce. which. In the English mint a pound weight of gold is coined into fortyfour guineas and a half. and he who carries a pound weight or an ounce weight of standard gold bullion to the mint. An ounce of such gold coin. is equal to forty-six pounds fourteen shillings and sixpence. and a shilling can at any time be had for them. indeed. The reformation of the gold coin has evidently raised the value of the silver coin which can be exchanged for it. 10 1/2d. The silver coin still continues in the same worn and degraded state as before the reformation of the gold coin. at one-and-twenty shillings the guinea. were considered as equivalent to a guinea. was worn and defaced too. they are in the market considered as worth a shilling. however. therefore. and the order. one-and-twenty shillings of this degraded silver coin are still considered as worth a guinea of this excellent gold coin. which perhaps. In England no duty or seignorage is paid upon the coinage. was in general less degraded below its standard weight than the greater part of the silver. The late regulations have brought the gold coin as near perhaps to its standard weight as it is possible to bring the current coin of any nation. in silver. that part of it at least which circulated in London and its neighbourhood. but seldom so much so. therefore. as long as that order is enforced. One-and-twenty worn and defaced shillings. to receive no gold at the public offices but by weight. is worth £3 17s. Even before the late reformation of the gold coin of Great Britain. is Adam Smith ElecBook Classics . In the market. is likely to preserve it so. the gold. however.

or the quantity of silver coin which the mint gives in return for standard silver bullion. the market price has been constantly below the mint price. sometimes £3 19s. Before the reformation of the gold coin. five shillings and fivepence. the market price of standard gold bullion seldom exceeds £3 17s. Before the reformation of the gold coin. five shillings and fourpence. the rise in the value either of gold or silver coin in proportion to them may not be so distinct and sensible. and probably. seldom containing more than an ounce of standard gold. upon different occasions. Before the reformation of the gold coin. through the price of the greater part of other commodities being influenced by so many other causes. Since the reformation of the gold coin. is said to be the mint price of silver in England. the price of standard gold bullion in the market had for many years been upwards of £3 18s. But that market price is the same whether it is paid in gold or in silver coin. in the same manner. containing. five shillings and sixpence. five shillings and Adam Smith ElecBook Classics . The late reformation of the gold coin. therefore. Five shillings and twopence an ounce. a pound weight of standard silver. that sum. or the quantity of gold coin which the mint gives in return for standard gold bullion. Since that reformation. in the worn and degraded gold coin.The Wealth of Nations: Book 1 66 said to be the mint price of gold in England. it is probable. In the English mint a pound weight of standard silver bullion is coined into sixty-two shillings. therefore. but likewise that of the silver coin in proportion to gold bullion. the market price of standard silver bullion was. and very frequently £4 an ounce. the market price was always more or less above the mint price. 7d. has raised not only the value of the gold coin. in proportion to all other commodities. too. an ounce.

But as the price of copper in bars is not. even in England. But the number of people who want silver coin for Adam Smith ElecBook Classics . it exchanges for about fifteen ounces. for the same reason that copper in bars preserves its proper proportion to silver. so the price of silver in bullion is not sunk by the low rate of silver in English coin. seems to have been the most common price. and to the prohibition of exporting silver coin. Five shillings and sevenpence. Silver in bullion still preserves its proper proportion to gold. for more silver than it is worth according to the common estimation of Europe. In the market of Europe. that is. in the French coin and in the Dutch coin. Upon the reformation of the silver coin in the reign of William III the price of silver bullion still continued to be somewhat above the mint price. however. which last price it has scarce ever exceeded. rendered the demand for silver bullion greater than the demand for silver coin. so silver is rated somewhat below it. and five shillings and fivepence an ounce. raised by the high price of copper in English coin.The Wealth of Nations: Book 1 67 sevenpence. an ounce of fine gold exchanges for about fourteen ounces of fine silver. and very often five shillings and eightpence an ounce. Since the reformation of the gold coin. it has not fallen so low as the mint price. he said. This permission of exporting. as copper is rated very much above its real value. five shillings and fourpence. In the English coin. In the proportion between the different metals in the English coin. Though the market price of silver bullion has fallen considerably since the reformation of the gold coin. Locke imputed this high price to the permission of exporting silver bullion. Mr. the market price of standard silver bullion has fallen occasionally to five shillings and threepence.

Some alteration in the present proportion seems to be the only method of preventing this inconveniency. in the same manner as now. to sell the bullion for gold coin. There subsists at present a like permission of exporting gold bullion. But in the English coin silver was then. it is probable. under-rated in proportion to gold. The silver coin containing its full standard weight. is surely much greater than that of those who want silver bullion either for the use of exportation or for any other use. according to the present proportion. there would in this case be a profit in melting it down. The inconveniency perhaps would be less if silver was rated in the coin as much above its proper proportion to gold as it is at present rated below it. and afterwards to exchange this gold coin for silver coin to be melted down in the same manner. as no creditor can at present be cheated in consequence of the Adam Smith ElecBook Classics . in order.The Wealth of Nations: Book 1 68 the common uses of buying and selling at home. first. it is not very probable that a like reformation will do so now. As the reformation of the silver coin did not then reduce the price of silver bullion to the mint price. the real value of the whole coin. would. and a like prohibition of exporting gold coin: and yet the price of gold bullion has fallen below the mint price. and the gold coin (which at that time too was not supposed to require any reformation) regulated then. exchange for more silver in coin than it would purchase in bullion. provided it was at the same time enacted that silver should not be a legal tender for more than the change of a guinea. Were the silver coin brought back as near to its standard weight as the gold. in the same manner as copper is not a legal tender for more than the change of a shilling. as well as now. No creditor could in this case be cheated in consequence of the high valuation of silver in coin. a guinea.

In the present hurry of the mint. But gold in coin is more convenient than gold in bullion. and they would be precluded by this regulation from this discreditable method of evading immediate payment. therefore. If in the English coin silver was rated according to it proper proportion to gold. A small seignorage or duty upon the coinage of both gold and silver would probably increase still more the superiority of those metals in coin above an equal quantity of either of them in bullion. the coinage is free. When a run comes upon them they sometimes endeavour to gain time by paying in sixpences. 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. the price of silver bullion would probably fall below the mint price even without any reformation of the silver coin. and though. and though this might no doubt be a considerable inconveniency to them. yet the gold which is carried in bullion to the mint can seldom be returned in coin to the owner till after a delay of several weeks. and renders gold in coin somewhat more valuable than an equal quantity of gold in bullion.The Wealth of Nations: Book 1 69 high valuation of copper. even in our present excellent gold coin. They would be obliged in consequence to keep at all times in their coffers a greater quantity of cash than at present. and it may be thought. it could not be returned till after a delay of several months. it would at the same time be a considerable security to their creditors. Adam Smith ElecBook Classics . in England. more than an ounce of standard gold. The bankers only would suffer by this regulation. should not purchase more standard bullion. This delay is equivalent to a small duty. Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly does not contain.

With all their attention. the continual waste of them in gilding and plating.The Wealth of Nations: Book 1 70 The coinage would in this case increase the value of the metal coined in proportion to the extent of this small duty. If upon any public exigency it should become necessary to export the coin. Abroad it could sell only for its weight in bullion. is said to return home again of its own accord. rather than incur the risk and trouble of exporting it again. in order to repair this loss and this waste. when exported. and the French coin. they sometimes overdo the business. therefore. they are sometimes willing to sell a part of it for something less than the ordinary or average price. they import Adam Smith ElecBook Classics . the greater part of it would soon return again of its own accord. on the other hand. When they import more bullion than is wanted. however. The merchant importers. and in that of plate. to suit their occasional importations to what. When. a continual importation. The superiority of coin above bullion would prevent the melting down of the coin. for the same reason that the fashion increases the value of plate in proportion to the price of that fashion. The frequent loss of those metals from various accidents by sea and by land. in the wear and tear of coin. At home it would buy more than that weight. in bringing it home again. and sometimes underdo it. require. in all countries which possess no mines of their own. and would discourage its exportation. we may believe. as well as they can. like all other merchants. In France a seignorage of about eight per cent is imposed upon the coinage. they judge. endeavour. There would be a profit. 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. is likely to be the immediate demand. in lace and embroidery.

or eleven ounces of fine gold and one ounce of alloy. the measure of value comes to be liable to the same sort of uncertainty to which all other weights and measures are commonly exposed. The constancy and steadiness of the effect supposes a proportionable constancy and steadiness in the cause. If in England. more or less an accurate measure of value according as the current coin is more or less exactly agreeable to its standard. is the effect of something in the state of the coin. or more or less below the mint price. the market price either of gold or silver bullion continues for several years together steadily and constantly. by rubbing and wearing. as well as he can. not to what those weights and measures ought to be. which. we may be assured that this steady and constant. however. As it rarely happens that these are exactly agreeable to their standard. or contains more or less exactly the precise quantity of pure gold or pure silver which it ought to contain. The money of any particular country is. being greater in some pieces than in others. under all those occasional fluctuations. but to what. at any particular time and place. he finds Adam Smith ElecBook Classics . the merchant adjusts the price of his goods. upon an average. forty-four guineas and a half contained exactly a pound weight of standard gold. either more or less above. But if. at that time. forty-four guineas and a half generally contain less than a pound weight of standard gold.The Wealth of Nations: Book 1 71 less than is wanted. But when. they get something more than this price. for example. the diminution. either superiority or inferiority of price. renders a certain quantity of coin either of more value or of less value than the precise quantity of bullion which it ought to contain. the 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.

it is to be observed. In consequence of a like disorder in the coin. Six shillings and eightpence.The Wealth of Nations: Book 1 72 by experience they actually are. not to the quantity of pure gold or silver which the corn ought to contain. By the money-price of goods. Adam Smith ElecBook Classics . the same quantity of pure silver. it is found by experience. but to that which. because it contained. as nearly as we can judge. I understand always the quantity of pure gold or silver for which they are sold. in the same manner. to be adjusted. in the time of Edward I. I consider as the same money-price with a pound sterling in the present times. it actually does contain. upon an average. without any regard to the denomination of the coin. the price of goods comes. for example.

one beaver should naturally exchange for or be worth two deer. If the one species of labour should be more severe than the other. Or if the one species of labour requires an uncommon degree of dexterity and ingenuity. the esteem which men have for such talents will naturally give a value to their produce. it usually costs twice the labour to kill a beaver which it does to kill a deer. 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. ElecBook Classics Adam Smith . and the produce of one hour’s labour in the one way may frequently exchange for that of two hours’ labour in the other. should be worth double of what is usually the produce of one day’s or one hour’s labour. Such talents can seldom be acquired but in consequence of long application. for example. the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. In the advanced state of society. If among a nation of hunters. It is natural that what is usually the produce of two days’ or two hours’ labour.The Wealth of Nations: Book 1 73 Chapter VI Of the Component Parts of the Price of Commodities I n that early and rude state of society which precedes both the accumulation of stock and the appropriation of land. some allowance will naturally be made for this superior hardship. superior to what would be due to the time employed about it.

over and above what may be sufficient to pay the price of the materials. something must be given for the profits of the undertaker of the work who hazards his stock in this adventure. command. therefore. are commonly made in the wages of labour. the other the profits of their employer upon the whole stock of materials and wages which he advanced. or exchange for. for superior hardship and superior skill. it may perhaps be thought are only a Adam Smith ElecBook Classics . In this state of things. and something of the same kind must probably have taken place in its earliest and rudest period.The Wealth of Nations: Book 1 74 allowances of this kind. and the wages of the workmen. The value which the workmen add to the materials. and the quantity of labour commonly employed in acquiring or producing any commodity is the only circumstance which can regulate the quantity exchange for which it ought commonly to purchase. in order to make a profit by the sale of their work. resolves itself in this ease into two parts. He could have no interest to employ them. unless his profits were to bear some proportion to the extent of his stock. for labour. the whole produce of labour belongs to the labourer. or by what their labour adds to the value of the materials. unless he expected from the sale of their work something more than what was sufficient to replace his stock to him. whom they will supply with materials and subsistence. of which the one pays their wages. some of them will naturally employ it in setting to work industrious people. The profits of stock. In exchanging the complete manufacture either for money. or for other goods. As soon as stock has accumulated in the hands of particular persons. and he could have no interest to employ a great stock rather than a small one.

but to the trust which is reposed in him. and are greater or smaller in proportion to the extent of this stock. while that of the other will expect about seven hundred and thirty pounds. At the rate of ten per cent. His wages properly express the value of this labour of inspection and direction. and bear no proportion to the quantity. while the finer materials in the other cost seven thousand. Though in settling them some regard is had commonly. Let us suppose. there are two different manufactures. where the common annual profits of manufacturing stock are ten per cent. yet they never bear any regular proportion to the capital of which he oversees the management. the undertaker of the one will expect a yearly profit of about one hundred pounds only. or the ingenuity of this supposed labour of inspection and direction. for example. not only to his labour and skill. the hardship. altogether different. The capital annually employed in the one will in this case amount only to one thousand pounds. in each of which twenty workmen are employed at the rate of fifteen pounds a year each.The Wealth of Nations: Book 1 75 different name for the wages of a particular sort of labour. Let us suppose. In many great works almost the whole labour of this kind is committed to some principal clerk. too. the labour of inspection and direction. They are regulated altogether by the value of the stock employed. Adam Smith ElecBook Classics . however. that the coarse materials annually wrought up in the one cost only seven hundred pounds. whereas that employed in the other will amount to seven thousand three hundred pounds. They are. that in some particular place. or at the expense of three hundred a year in each manufactory. their labour of inspection and direction may be either altogether or very nearly the same. therefore. are regulated by quite different principles. But though their profits are so very different.

or exchange for. it is evident. must be due for the profits of the stock which advanced the wages and furnished the materials of that labour. In the price of commodities. The wood of the forest. like all other men. the landlords. though he is thus discharged of almost all labour. the only circumstance which can regulate the quantity which it ought commonly to purchase. and in the price of the greater part of commodities makes a third component part. when land was in common. As soon as the land of any country has all become private property. the whole produce of labour does not always belong to the labourer. cost the labourer only the trouble of gathering them. This portion. is measured by the quantity of labour which Adam Smith ElecBook Classics . In this state of things. An additional quantity. He must in most cases share it with the owner of the stock which employs him. constitutes the rent of land.The Wealth of Nations: Book 1 76 and the owner of this capital. command. Neither is the quantity of labour commonly employed in acquiring or producing any commodity. The real value of all the different component parts of price. and regulated by quite different principles. to have an additional price fixed upon them. what comes to the same thing. the grass of the field. which. and demand a rent even for its natural produce. love to reap where they never sowed. even to him. the price of this portion. it must be observed. and all the natural fruits of the earth. still expects that his profits should bear a regular proportion to his capital. the profits of stock constitute a component part altogether different from the wages of labour. He must then pay for the licence to gather them. therefore. or. and must give up to the landlord a portion of what his labour either collects or produces. come.

such as a labouring horse. the rent of the land upon which he is reared. another pays the wages or maintenance of the labourers and labouring cattle employed in producing it. In the price of corn. and of that which resolves itself into profit. we must add to the price of the corn. all the three enter more or less. purchase or command.The Wealth of Nations: Book 1 77 they can. the labour of tending and rearing him. and in every improved society. the profits of the baker. Labour measures the value not only of that part of price which resolves itself into labour. and the wages of his Adam Smith ElecBook Classics . and other instruments of husbandry. the profits of the miller. Though the price of the corn. therefore. into the price of the far greater part of commodities. in the price of bread. and the third pays the profit of the farmer. but of that which resolves itself into rent. or for compensating the wear and tear of his labouring cattle. labour. is itself made up of the same three parts. is necessary for replacing the stock of the farmer. and the wages of his servants. or all of those three parts. each of them. and the wages of this labour. These three parts seem either immediately or ultimately to make up the whole price of corn. In the price of flour or meal. and the profits of the farmer who advances both the rent of this land. may pay the price as well as the maintenance of the horse. as component parts. A fourth part. for example. In every society the price of every commodity finally resolves itself into some one or other. the whole price still resolves itself either immediately or ultimately into the same three parts of rent. and profit. But it must be considered that the price of any instrument of husbandry. one part pays the rent of the landlord. it may perhaps be thought.

. and rent. the labour of transporting the corn from the house of the farmer to that of the miller. at least through the greater part of Europe. The capital which employs the weavers. In the price of linen we must add to this price the wages of the flax-dresser. together with the profits of their respective employers. the wages of the weavers. there are always a few commodities of which the price resolves itself into two parts only. and a still smaller number. of the weaver. of the spinner. but every subsequent profit is greater than the foregoing. besides. not only the number of profits increase. one part pays the labour of the fishermen. however. The price of flax resolves itself into the same three parts as that of corn. In the price of sea-fish. and from that of the miner to that of the baker. etc. In the most improved societies. in river fisheries. In the progress of the manufacture. and the profits must always bear some proportion to the capital. and in the price of both. the wages of labour. though it does sometimes. because it not only replaces that capital with its profits. for example. but pays. of the bleacher. Rent very seldom makes any part of it. must be greater than that which employs the spinners. and the other the profits of the capital employed in the fishery. It is otherwise. in which it consists altogether in the wages of labour. together with the profits of those who advance the wages of that labour. and the profits of stock. As any particular commodity comes to be more manufactured. that part of the price which resolves itself into wages and profit comes to be greater in proportion to that which resolves itself into rent. though it cannot well be called the Adam Smith ElecBook Classics . for example. A salmon fishery pays a rent.The Wealth of Nations: Book 1 78 servants. as I shall show hereafter. because the capital from which it is derived must always be greater.

That derived from stock. so that of all the commodities which compose the whole annual produce of the labour of every country. All other revenue is ultimately derived from some one or other of these. neither rent nor profit make any part of it. the whole price of it. must necessarily be profit to somebody. and be parcelled out among different inhabitants of the country.The Wealth of Nations: Book 1 79 rent of land. either as the wages of their labour. As the price or exchangeable value of every particular commodity. is Adam Smith ElecBook Classics . is in this manner originally distributed among some of its different members. or the rent of their land. and the price of the whole labour employed in raising. must resolve itself into the same three parts. those little variegated stones commonly known by the name of Scotch Pebbles. along the sea-shore. or from his land. taken separately. taken complexly. as whatever part of it remains after paying the rent of the land. In some parts of Scotland a few poor people make a trade of gathering. Wages. must draw it either from his labour. The whole of what is annually either collected or produced by the labour of every society. are the three original sources of all revenue as well as of all exchangeable value. resolves itself into some one or other or all of those three parts. and bringing it to market. or what comes to the same thing. But the whole price of any commodity must still finally resolve itself into some one or other. makes a part of the price of a salmon as well as wages and profit. The price which is paid to them by the stone-cutter is altogether the wages of their labour. Whoever derives his revenue from a fund which is his own. or all of those three parts. from his stock. by the person who manages or employes it. and rent. manufacturing. the profits of their stock. profit. The revenue derived from labour is called wages.

at least in common language. All taxes. and are paid either immediately or mediately from the wages of labour. pensions. and to make the profits of this stock. He is apt to denominate. The revenue of the farmer is derived partly from his labour. must be paid from some other source of revenue.The Wealth of Nations: Book 1 80 called profit. A gentleman who farms a part of his own estate. they are readily distinguished. Part of that profit naturally belongs to the borrower. and partly from his stock. who affords him the opportunity of making this profit. who runs the risk and takes the trouble of employing it. The revenue which proceeds altogether from land. When those three different sorts of revenue belong to different persons. and an the revenue which is founded upon them. all salaries. for the profit which he has an opportunity of making by the use of the money. should gain both the rent of the landlord and the profit of the farmer. It is the compensation which the borrower pays to the lender. or the rent of land. which. but when they belong to the same they are sometimes confounded with one another. and part to the lender. if it is not paid from the profit which is made by the use of the money. The interest of money is always a derivative revenue. but lends it to another. and belongs to the landlord. Adam Smith ElecBook Classics . is called the interest or the use of money. That derived from it by the person who does not employ it himself. after paying the expense of cultivation. is called rent. and annuities of every kind. land is only the instrument which enables him to earn the wages of this labour. To him. are ultimately derived from some one or other of those three original sources of revenue. the profits of stock. who contracts a second debt in order to pay the interest of the first. unless perhaps the borrower is a spendthrift.

They generally. They farm. but frequently of its profit. too. The greater part of our North American and West Indian planters are in this situation. The whole. unites in his own person the three different characters of landlord. The farmer. Wages. and wages are. harrowers. who has stock enough both to purchase materials. should gain both the wages of a journeyman who works under a master. therefore. both as labourers and overseers. but pay them the wages which are due to them. Common farmers seldom employ any overseer to direct the general operations of the farm. and accordingly we seldom hear of the rent of a plantation. by saving these wages. His produce. together with its ordinary profits. as ploughmen. should not only replace to them their stock employed in cultivation. An independent manufacturer. and the wages of the third. But wages evidently make a part of it. at least in common language. the greater part of them. therefore. however. etc. his whole gain. and labourer. is commonly considered as the Adam Smith ElecBook Classics . their own estates. profit. therefore. is called profit. however. and thus confounds rent with profit. the profit of the second. are commonly called profit.The Wealth of Nations: Book 1 81 however. and the profit which that master makes by the sale of the journeyman’s work. work a good deal with their own hands. should pay him the rent of the first. confounded with profit. and to maintain himself till he can carry his work to market. A gardener who cultivates his own garden with his own hands. must necessarily gain them. are in this case confounded with profit. What remains of the crop after paying the rent. Whatever remains. His whole gains. after paying the rent and keeping up the stock. in this case too. however. farmer.

its ordinary or average value must either annually increase. Adam Smith ElecBook Classics . in this case. If the society were annually to employ all the labour which it can annually purchase. so the produce of every succeeding year would be of vastly greater value than that of the foregoing. Both rent and profit are. But there is no country in which the whole annual produce is employed in maintaining the industrious. The idle everywhere consume a great part of it. or continue the same from one year to another. as the quantity of labour would increase greatly every year. preparing. and according to the different proportions in which it is annually divided between those two different orders of people. or diminish. rent and profit contributing largely to that of the far greater part of them. so the annual produce of its labour will always be sufficient to purchase or command a much greater quantity of labour than what employed in raising. and bringing that produce to market. confounded with wages.The Wealth of Nations: Book 1 82 earnings of his labour. As in a civilised country there are but few commodities of which the exchangeable value arises from labour only.

and partly by the natural or improved fertility of the land. This rate is naturally regulated. and the profits of the stock employed in raising. partly by the general circumstances of the society or neighbourhood in which the land is situated. These ordinary or average rates may be called the natural rates of wages. stationary. preparing. profit. their advancing. the wages of the labour. which is regulated too. The commodity is then sold precisely for what it is worth. partly by the general circumstances of the society. according to their natural rates. their riches or poverty. and partly by the particular nature of each employment.The Wealth of Nations: Book 1 83 Chapter VII T Of the Natural and Market Price of Commodities here is in every society or neighbourhood an ordinary or average rate both of wages and profit in every different employment of labour and stock. the commodity is then sold for what may be called its natural price. and rent. as I shall show hereafter. When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land. at the time and place in which they commonly prevail. for though in common language what is called the prime cost of any commodity does not comprehend the profit of the person who is to ElecBook Classics Adam Smith . or for what it really costs the person who brings it to market. as I shall show hereafter. There is likewise in every society or neighbourhood an ordinary or average rate of rent. or declining condition. and bringing it to market.

he is evidently a loser by the trade. Unless they yield him this profit. Though the price. they do not repay him what they may very properly be said to have really cost him. or the whole value of the rent. The actual price at which any commodity is commonly sold is called its market price. which leaves him this profit is not always the lowest at which a dealer may sometimes sell his goods. the proper fund of his subsistence. labour. at least where there is perfect liberty. His profit. he advances to his workmen their wages. or below. which is generally suitable to the profit which he may reasonably expect from the sale of his goods. therefore. A very poor man may be said in some sense to have a demand for a coach and six. since by employing his stock in some other way he might have made that profit. while he is preparing and bringing the goods to market. As. or exactly the same with its natural price. yet if he sell it at a price which does not allow him the ordinary rate of profit in his neighbourhood. it is the lowest at which he is likely to sell them for any considerable time. since it may be sufficient to effectuate the bringing of the commodity to market. besides. is his revenue. he might like to have Adam Smith ElecBook Classics . in the same manner.The Wealth of Nations: Book 1 84 sell it again. and profit. The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market. his own subsistence. so he advances to himself. or where he may change his trade as often as he pleases. therefore. or their subsistence. It is different from the absolute demand. and their demand the effectual demand. which must be paid in order to bring it thither. Such people may be called the effectual demanders. It may either be above. and the demand of those who are willing to pay the natural price of the commodity.

as the commodity can never be brought to market in order to satisfy it. and the market price will rise more or less above the natural price. Among competitors of equal wealth and luxury the same deficiency will generally occasion a more or less eager competition. some of them will be willing to give more. and profit. When the quantity of any commodity which is brought to market falls short of the effectual demand. which must be paid in order to bring it thither. will occasion a much greater Adam Smith ElecBook Classics . A competition will immediately begin among them. wages. The same excess in the importation of perishable. Some part must be sold to those who are willing to pay less. Rather than want it altogether. and the low price which they give for it must reduce the price of the whole. but his demand is not an effectual demand. according as the acquisition of the commodity happens to be of more or less importance to them. it cannot be all sold to those who are willing to pay the whole value of the rent. Hence the exorbitant price of the necessaries of life during the blockade of a town or in a famine. or according as it happens to be more or less important to them to get immediately rid of the commodity. which must be paid in order to bring it thither. according as the greatness of the excess increases more or less the competition of the sellers. and profit. wages. When the quantity brought to market exceeds the effectual demand. cannot be supplied with the quantity which they want. The market price will sink more or less below the natural price.The Wealth of Nations: Book 1 85 it. or the wealth and wanton luxury of the competitors. happen to animate more or less the eagerness of the competition. according as either the greatness of the deficiency. all those who are willing to pay the whole value of the rent.

If it is rent. The quantity brought to market will soon be no more than sufficient to supply the effectual demand. If. or as nearly as can be judged of. and if it is wages or profit. All the different parts of its price will rise to their natural rate. the market price naturally comes to be either exactly. If it is rent. than in that of old iron. the quantity brought to market should at any time fall short of the effectual demand. and it is the interest of all other people that it never should fall short of that demand. will prompt them to withdraw a part of their labour or stock from this employment. some of the component parts of its price must be paid below their natural rate. in bringing any commodity to market. some of the component parts of its price must rise above their natural rate. the same with the natural price. in the importation of oranges. labour. the interest of the landlords will immediately prompt them to withdraw a part of their land. on the contrary. The whole quantity upon hand can be disposed of for this price. If at any time it exceeds the effectual demand. that the quantity never should exceed the effectual demand. but does not oblige them to accept of less. the interest of all other landlords will naturally prompt them to Adam Smith ElecBook Classics . The quantity of every commodity brought to market naturally suits itself to the effectual demand. It is the interest of all those who employ their land. When the quantity brought to market is just sufficient to supply the effectual demand. or stock. and of their employers in the other. and cannot be disposed of for more. The competition of the different dealers obliges them all to accept of this price. for example. and no more. and the whole price to its natural price.The Wealth of Nations: Book 1 86 competition than in that of durable commodities. the interest of the labourers in the one case.

to which the prices of all commodities are continually gravitating. But in some employments the same quantity of industry will in different years produce very different quantities of commodities. is. hops. and sometimes force them down even somewhat below it. wine. the central price. The natural price. they are constantly tending towards it. and no more than supply. while in others it will produce always the same. It is only the average produce of the one species of industry which can be suited in any respect to the effectual demand. But the same number of spinners and weavers will every year produce the same or very nearly the same quantity of linen and woollen cloth. and as its actual produce is frequently much greater and Adam Smith ElecBook Classics . 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. oil. that demand. produce very different quantities of corn. or very nearly the same. therefore. But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance. The quantity brought thither will soon be sufficient to supply the effectual demand. if it is wages or profit. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply. The whole quantity of industry annually employed in order to bring any commodity to market naturally suits itself in this manner to the effectual demand. in different years. and the whole price to its natural price. All the different parts of its price will soon sink to their natural rate. etc. The same number of labourers in husbandry will. as it were. Different accidents may sometimes keep them suspended a good deal above it.The Wealth of Nations: Book 1 87 prepare more land for the raising of this commodity.

their market price will be liable to great fluctuations. not only with the variations in the demand. the same with the natural price. The price of the one species of commodities varies only with the variations in the demand: that of the other varies. and sometimes rise a good deal above their natural price. and to be either altogether. therefore. While that demand continues the same. but it is seldom affected by Adam Smith ElecBook Classics . That part which resolves itself into rent is less affected by them. That the price of linen and woollen cloth is liable neither to such frequent nor to such great variations as the price of corn. A rent certain in money is not in the least affected by them either in its rate or in its value. or very nearly the same. the market price of the commodities is likely to do so too. the produce of equal quantities of labour being always the same. is no doubt affected in its yearly value by all the occasional and temporary fluctuations in the market price of that rude produce. every man’s experience will inform him. of the effectual demand. Even though that demand therefore should continue always the same. or as nearly as can be judged of. and sometimes fall short a good deal. it can be more exactly suited to the effectual demand. will sometimes fall a good deal below. A rent which consists either in a certain proportion or in a certain quantity of the rude produce. but with the much greater and more frequent variations in the quantity of what is brought to market in order to supply that demand. the quantity of the commodities brought to market will sometimes exceed a good deal. In the other species of industry. 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 Wealth of Nations: Book 1 88 frequently much less than its average produce.

for a long time together. yet sometimes particular accidents. There is an effectual demand for more labour. It raises the wages of journeymen tailors.The Wealth of Nations: Book 1 89 them in its yearly rate. but to the average and ordinary price of the produce. or with work to be done. for which all demand is stopped for six months. Such fluctuations affect both the value and the rate either of wages or of profit. towards the natural price. a good deal above the natural price. The market is here over-stocked both with commodities and with labour. A public mourning raises the price of black cloth (with which the market is almost always understocked upon such occasions). In settling the terms of the lease. It has no effect upon the wages of the weavers. The market is understocked with commodities. the wages of the workmen employed in preparing such commodities. according to their best judgment. and augments the profits of the merchants who possess any considerable quantity of it. Adam Smith ElecBook Classics . with work done. But though the market price of every particular commodity is in this manner continually gravitating. according as the market happens to be either overstocked or understocked with commodities or with labour. the landlord and farmer endeavour. to adjust that rate. keep up the market price. if one may say so. and sometimes particular regulations of police. not with labour. It sinks. sometimes natural causes. may. for more work to be done than can be had. not with work to be done. with work done. not to the temporary and occasional. too. The market is here understocked with labour. and thereby reduces the profits of the merchants who have any considerable quantity of them upon hand. in many commodities. perhaps for a twelvemonth. It sinks the price of coloured silks and cloths.

they may sometimes be able to keep the secret for several years together. and perhaps for some time even below it. however. they are commonly considered as extraordinary profits of stock. with good management.The Wealth of Nations: Book 1 90 When by an increase in the effectual demand. They properly consist in the high wages of that labour. those who employ their stocks in supplying that market are generally careful to conceal this change. Secrets in manufactures are capable of being longer kept than secrets in trade. Adam Smith ElecBook Classics . upon that account. enjoy the advantage of his discovery as long as he lives. however. and the extraordinary profit can last very little longer than they are kept. and as their whole amount bears. If it was commonly known. and even leave it as a legacy to his posterity. a regular proportion to it. the market price of some particular commodity happens to rise a good deal above the natural price. His extraordinary gains arise from the high price which is paid for his private labour. their great profit would tempt so many new rivals to employ their stocks in the same way that. 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. and may so long enjoy their extraordinary profits without any new rivals. Such enhancements of the market price are evidently the effects of particular accidents. If the market is at a great distance from the residence of those who supply it. the effectual demand being fully supplied. the operation may sometimes last for many years together. it must be acknowledged. can seldom be long kept. But as they are repeated upon every part of his stock. the market price would soon be reduced to the natural price. Secrets of this kind. may. of which.

therefore. like the rent of some vineyards in France of a peculiarly happy soil and situation. may not be sufficient to supply the effectual demand. The wages of the labour and the profits of the stock employed in bringing such commodities to market. Such enhancements of the market price are evidently the effect of natural causes which may hinder the effectual demand from ever being fully supplied. The monopolists. which is fit for producing them. Such commodities may continue for whole centuries together to be sold at this high price. on the contrary. therefore. A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. together with the wages of the labour. 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. according to their natural rates. and the profits of the stock which were employed in preparing and bringing them to market. by keeping the market constantly understocked. and raise their Adam Smith ElecBook Classics . The whole quantity brought to market. and that part of it which resolves itself into the rent of land is in this case the part which is generally paid above its natural rate. sell their commodities much above the natural price. The rent of the land which affords such singular and esteemed productions. by never fully supplying the effectual demand. and which may continue. are seldom out of their natural proportion to those of the other employments of labour and stock in their neighbourhood.The Wealth of Nations: Book 1 91 Some natural productions require such a singularity of soil and situation that all the land in a great country. bears no regular proportion to the rent of other equally fertile and equally well-cultivated land in its neighbourhood. to operate for ever.

though it may continue long above. for ages together. keep up the market price of particular commodities above the natural price. can seldom continue long below its natural price. or the price of free competition. statutes of apprenticeship. The price of monopoly is upon every occasion the highest which can be got. have the same tendency. The one is upon every occasion the highest which can be squeezed out of the buyers. whether they consist in wages or profit. The market price of any particular commodity. on the contrary. or so much stock. is the lowest which can be taken. from being employed about it. Whatever part of it was paid below the natural rate. greatly above their natural rate. and maintain both the wages of the labour and the profits of the stock employed about them somewhat above their natural rate. and in whole classes of employments. though in a less degree. They are a sort of enlarged monopolies. and all those laws which restrain. and would immediately withdraw either so much land. the persons whose interest it affected would immediately feel the loss. the competition to a smaller number than might otherwise go into them. not upon every occasion. and may frequently. or so much labour. that the quantity brought to market would soon be no more than sufficient Adam Smith ElecBook Classics . it is supposed.The Wealth of Nations: Book 1 92 emoluments. indeed. or which. and at the same time continue their business. but for any considerable time together. Such enhancements of the market price may last as long as the regulations of police which give occasion to them. The exclusive privileges of corporations. they will consent to give: the other is the lowest which the sellers can commonly afford to take. in particular employments. The natural price.

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. profit. which. the number of those who are afterwards educated to the trade will naturally suit itself to the effectual demand. and was supposed to commit the most horrid sacrilege if he changed it for another). therefore. which can in any particular employment. would soon rise to the natural price. according to Adam Smith ElecBook Classics . The police must be as violent as that of Indostan or ancient Egypt (where every man was bound by a principle of religion to follow the occupation of his father. to let them down a good deal below it. of the market price of commodities from the natural price. As in the one case they exclude many people from his employment. however. The effect of such regulations. 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 at least would be the case where there was perfect liberty. The same statutes of apprenticeship and other corporation laws indeed. When they are gone. whether occasional or permanent. when it decays. so in the other they exclude him from many employments. Their operation in the one way may endure for many centuries. of wages. when a manufacture is in prosperity. and for several generations together. as in raising them above their natural rate. sink either the wages of labour or the profits of stock below their natural rate. Its market price.The Wealth of Nations: Book 1 93 to supply the effectual demand. sometimes oblige him. and in every society this rate varies according to their circumstances. and rent. enable the workman to raise his wages a good deal above their natural rate. This is all that I think necessary to be observed at present concerning the deviations.

I shall endeavour to show what are the circumstances which regulate the rent of land. and in what manner those circumstances are affected by the riches or poverty. in the third place. it will appear hereafter. and partly upon the different laws and policy of the society in which they are carried on. yet a certain proportion seems commonly to take place between both the pecuniary wages in all the different employments of labour. or declining condition. by the advancing. the causes of those different variations. I shall. endeavour to explain. or declining condition. in the four following chapters. those circumstances are affected by the like variations in the state of the society. too. and in what manner. as fully and distinctly as I can. In the fourth and last place. Though pecuniary wages and profit are very different in the different employments of labour and stock. stationary. their advancing. stationary. and which either raise or lower the real price of all the different substances Adam Smith ElecBook Classics . depends partly upon the nature of the different employments. or declining state of the society. stationary. I shall endeavour to show what are the circumstances which naturally determine the rate of profit. This proportion. by its advancing. endeavour to explain all the different circumstances which regulate this proportion. I shall endeavour to explain what are the circumstances which naturally determine the rate of wages. First.The Wealth of Nations: Book 1 94 their riches or poverty. this proportion seems to be little affected by the riches or poverty of that society. I shall. but to remain the same or very nearly the same in all those different states. and the pecuniary profits in all the different employments of stock. Secondly. But though in many respects dependent upon the laws and policy.

The Wealth of Nations: Book 1 which it produces. 95 Adam Smith ElecBook Classics .

In that original state of things. In exchanging the produce of a day’s labour in the greater ElecBook Classics Adam Smith . All things would gradually have become cheaper. They would have been produced by a smaller quantity of labour.The Wealth of Nations: Book 1 96 Chapter VIII T Of the Wages of Labour he produce of labour constitutes the natural recompense or wages of labour. they would have been purchased likewise with the produce of a smaller quantity. He has neither landlord nor master to share with him. only to double. in appearance many things might have become dearer than before. that in the greater part of employments the productive powers of labour had been improved to ten fold. which precedes both the appropriation of land and the accumulation of stock. and as the commodities produced by equal quantities of labour would naturally in this state of things be exchanged for one another. or that a day’s labour could produce only twice the quantity of work which it had done before. or have been exchanged for a greater quantity of other goods. the whole produce of labour belongs to the labourer. Let us suppose. or that a day’s labour could produce ten times the quantity of work which it had done originally. But though all things would have become cheaper in reality. the wages of labour would have augmented with all those improvements in its productive powers to which the division of labour gives occasion. for example. Had this state continued. but that in a particular employment they had been improved.

or unless his stock was to be replaced to him with a profit. the farmer who employs him. It was at an end. Adam Smith ElecBook Classics . and it would be to no purpose to trace further what might have been its effects upon the recompense or wages of labour. could not last beyond the first introduction of the appropriation of land and the accumulation of stock. in which the labourer enjoyed the whole produce of his own labour. The acquisition. therefore.The Wealth of Nations: Book 1 97 part of employments for that of a day’s labour in this particular one. and who would have no interest to employ him. unless he was to share in the produce of his labour. would be twice as easy as before. however. long before the most considerable improvements were made in the productive powers of labour. His rent makes the first deduction from the produce of the labour which is employed upon land. therefore. His maintenance is generally advanced to him from the stock of a master. the landlord demands a share of almost all the produce which the labourer can either raise. ten times the original quantity of work in them would purchase only twice the original quantity in it. makes a second deduction from the produce of the labour which is employed upon land. it would require only half the quantity of labour either to purchase or to produce it. It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. As soon as land becomes private property. would appear to be five times dearer than before. a pound weight. therefore. or collect from it. But this original state of things. Though it required five times the quantity of other goods to purchase it. This profit. Any particular quantity in it. for example. In reality. it would be twice as cheap.

when the labourer is one person. indeed. and force the other into a compliance with their terms. He shares in the produce of their labour. and enjoys the whole produce of his own labour. however. What are the common wages of labour. and their wages and maintenance till it be completed. are not very frequent. upon all ordinary occasions. twenty workmen serve under a master for one that is independent. difficult to foresee which of the two parties must. and in every part of Europe. In all arts and manufactures the greater part of the workmen stand in need of a master to advance them the materials of their work. and the wages of labour. what they usually are. or the whole value which it adds to the materials upon which it is bestowed. depends everywhere upon the contract usually made between those two parties. whose interests are by no means the same. or in the value which it adds to the materials upon which it is bestowed. belonging to two distinct persons. however. The former are disposed to combine in order to raise. Such cases. that a single independent workman has stock sufficient both to purchase the materials of his work. the profits of stock. It includes what are usually two distinct revenues. and the wages of labour are everywhere understood to be. and the owner of the stock which employs him another. and in this share consists his profit. It is not. have the advantage in the dispute. It sometimes happens. the latter in order to lower the wages of labour. Adam Smith ElecBook Classics . the masters to give as little as possible. and to maintain himself till it be completed.The Wealth of Nations: Book 1 98 The produce of almost all other labour is liable to the like deduction of profit. The workmen desire to get as much. He is both master and workman.

indeed. without resistance. though severely felt by them. A landlord. few could subsist a month. being fewer in number. hear of this combination. In all such disputes the masters can hold out much longer. To violate this combination is everywhere a most unpopular action. till the moment of execution. and when the workmen yield. can combine much more easily. authorizes. We rarely hear. but constant and uniform combination. We seldom. Masters. though they did not employ a single workman. but many against combining to raise it. of the combinations of masters. it has been said. These are always conducted with the utmost silence and secrecy. is as ignorant of the world as of the subject. Such combinations. But whoever imagines. upon this account. and one may say. In the long run the workman may be as necessary to his master as his master is to him. Adam Smith ElecBook Classics . too. as they sometimes do.The Wealth of Nations: Book 1 99 The masters. a farmer. because it is the usual. and the law. that masters rarely combine. and a sort of reproach to a master among his neighbours and equals. sometimes enter into particular combinations to sink the wages of labour even below this rate. though frequently of those of workmen. the natural state of things. Masters are always and everywhere in a sort of tacit. Many workmen could not subsist a week. besides. but the necessity is not so immediate. they are never heard of by other people. could generally live a year or two upon the stocks which they have already acquired. which nobody ever hears of. or at least does not prohibit their combinations. not to raise the wages of labour above their actual rate. We have no acts of parliament against combining to lower the price of work. while it prohibits those of the workmen. a master manufacturer. a merchant. and scarce any a year without employment.

The masters upon these occasions are just as clamorous upon the other side. however. and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants. or frighten their masters into an immediate compliance with their demands. and journeymen. Their usual pretences are. partly from the necessity superior steadiness of the masters. sometimes the high price of provisions. there is. they are always abundantly heard of. and sometimes to the most shocking violence and outrage. the ordinary wages even of the lowest species of labour. and act with the folly and extravagance of desperate men. In order to bring the point to a speedy decision. a certain rate below which it seems impossible to reduce. partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence. accordingly. they have always recourse to the loudest clamour. A man must always live by his work. But whether their combinations be offensive or defensive.The Wealth of Nations: Book 1 100 however. are frequently resisted by a contrary defensive combination of the workmen. labourers. for any considerable time. which. sometimes the great profit which their masters make by their work. combine of their own accord to raise the price of their labour. partly from the interposition of the civil magistrate. and never cease to call aloud for the assistance of the civil magistrate. generally end in nothing. without any provocation of this kind. and his wages must at Adam Smith ElecBook Classics . The workmen. who must either starve. They are desperate. very seldom derive any advantage from the violence of those tumultuous combinations. masters must generally have the advantage. but the punishment or ruin of the ringleaders. who sometimes too. But though in disputes with their workmen.

being supposed no more than sufficient to provide for herself. They must even upon most occasions be somewhat more. may be nearly equal to that of one man. on account of her necessary attendance on the children. the labour of the wife. it is computed. and the race of such workmen could not last beyond the first generation. But one half the children born. to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance. Thus far at least seems certain. the labour of the husband and wife together must. it is supposed. in order to bring up a family. The labour of an able-bodied slave. be able to earn something more than what is precisely necessary for their own maintenance.The Wealth of Nations: Book 1 101 least be sufficient to maintain him. die before the age of manhood. or in any other. the same author adds. is computed to be worth double his maintenance. Mr. There are certain circumstances. which sometimes give the labourers an advantage. cannot be worth less than that of an able-bodied slave. one with another. whether in that above mentioned. Adam Smith ElecBook Classics . that. evidently the lowest which is consistent with common humanity. The poorest labourers. even in the lowest species of common labour. But the necessary maintenance of four children. according to this account. attempt to rear at least four children. I shall not take upon me to determine. otherwise it would be impossible for him to bring up a family. upon this account. Cantillon seems. therefore. however. and enable them to raise their wages considerably above this rate. and that of the meanest labourer. but in what proportion. in order that one with another they may be enabled to bring up two children. he thinks. in order that two may have an equal chance of living to that age. must.

therefore. the workmen have no occasion to combine in order to raise their wages. journeymen. cannot increase but in proportion to the increase of the funds which are destined for the payment of wages. has a greater revenue than what he judges sufficient to maintain his own family. is continually increasing. and. in order to get workmen. first. These funds are of two kinds. such as a weaver or shoemaker. Increase this surplus. and he will naturally increase the number of his journeymen. who bid against one another. revenue which is over and above what is necessary for the maintenance. The demand for those who live by wages. Increase this surplus. when every year furnishes employment for a greater number than had been employed the year before. he naturally employs one or more journeymen with the surplus.The Wealth of Nations: Book 1 102 When in any country the demand for those who live by wages. or monied man. in order to make a profit by their work. it is evident. he employs either the whole or a part of the surplus in maintaining one or more menial servants. When the landlord. The scarcity of hands occasions a competition among masters. and to maintain himself till he can dispose of it. necessarily increases with the increase of the revenue and stock of every Adam Smith ElecBook Classics . and thus voluntarily break through the natural combination of masters not to raise wages. labourers. secondly. When an independent workman. the stock which is over and above what is necessary for the employment of their masters. The demand for those who live by wages. and he will naturally increase the number of those servants. has got more stock than what is sufficient to purchase the materials of his own work. annuitant. servants of every kind.

equal in all to six shillings and sixpence sterling.* common labourers earn three shillings and sixpence currency. journeymen tailors. its real price. or in those which are growing rich the fastest. in the richest countries. It is not. in the present times. ship carpenters. England is certainly. but in the most thriving. ten shillings and sixpence currency. The price of provisions is everywhere in North America much lower than in England. be higher than it is anywhere in the mother country. which occasions a rise in the wages of labour. with a pint of rum worth sixpence sterling. ElecBook Classics Adam Smith . however. If the money price of labour.The Wealth of Nations: Book 1 103 country. five shillings currency. The wages of labour. the real * Written in 1773. The demand for those who live by wages. equal to two shillings sterling. and cannot possibly increase without it. A dearth has never been known there. and wages are said to be as high in the other colonies as in New York. equal to four shillings and sixpence sterling. though less for exportation. naturally increases with the increase of national wealth. but its continual increase. equal to about two shillings and tenpence sterling. therefore. eight shillings currency. therefore. are much higher in North America than in any part of England. These prices are all above the London price. It is not the actual greatness of national wealth. accordingly. a much richer country than any part of North America. In the province of New York. a day. and cannot possibly increase without it. The increase of revenue and stock is the increase of national wealth. In the worst seasons they have always had a sufficiency for themselves. house carpenters and bricklayers. that the wages of labour are highest.

there is a continual complaint of the scarcity of hands in North America. but to the great multiplication of the species. before it can leave their house. Nor in the present times is this increase principally owing to the continual importation of new inhabitants. In the British colonies in North America. Labour is there so well rewarded that a numerous family of children. is there frequently courted as a sort of fortune. it is much more thriving. Notwithstanding the great increase occasioned by such early marriages. The most decisive mark of the prosperity of any country is the increase of the number of its inhabitants. descendants from their own body. The labour of each child. and sometimes many more. A young widow with four or five young children. it has been found that they double in twenty or five-and-twenty years. wonder that the people in North America should generally marry very young. The value of children is the greatest of all encouragements to marriage. The demand for labourers. frequently see there from fifty to a hundred. the funds destined for maintaining Adam Smith ElecBook Classics . We cannot. would have so little chance for a second husband. and most other European countries. But though North America is not yet so rich as England. they are not supposed to double in less than five hundred years. and advancing with much greater rapidity to the further acquisition of riches. instead of being a burthen. who. therefore. it is said. is computed to be worth a hundred pounds clear gain to them. In Great Britain. Those who live to old age. among the middling or inferior ranks of people in Europe.The Wealth of Nations: Book 1 104 command of the necessaries and conveniencies of life which it conveys to the labourer must be higher in a still greater proportion. is a source of opulence and prosperity to the parents.

industry. on the contrary. the revenue and stock of its inhabitants. China has been long one of the richest. in this case. It had perhaps. almost in the same terms in which they are described by travellers in the present times. acquired that full complement of riches which the nature of its laws and institutions permits it to acquire. we must not expect to find the wages of labour very high in it. but if they have continued for several centuries of the same. best cultivated. If in such a country the wages of labour had ever been more than sufficient to maintain the labourer. The hands. may be of the greatest extent. describes its cultivation. however. that is. one of the most fertile. Though the wealth of a country should be very great. most industrious. to have been long stationary. and to enable him to bring up a family. It seems. the number of labourers employed every year could easily supply. still faster than they can find labourers to employ. nor could the masters be obliged to bid against one another in order to get them. There could seldom be any scarcity of hands. or very nearly of the same extent. The accounts of all travellers. Marco Polo. yet if it has been long stationary. inconsistent in many other Adam Smith ElecBook Classics . the competition of the labourers and the interest of the masters would soon reduce them to this lowest rate which is consistent with common humanity. and populousness.The Wealth of Nations: Book 1 105 them. naturally multiply beyond their employment. and most populous countries in world. who visited it more than five hundred years ago. There would be a constant scarcity of employment. the number wanted the following year. increase. even long before his time. it seems. and even more than supply. and the labourers would be obliged to bid against one another in order to get it. would. The funds destined for the payment of wages.

still worse. as in Europe. agree in the low wages of labour. for the calls of their customers. however. or drowned like puppies in the water. Any carrion. not by the profitableness of children. The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. The performance of this horrid office is even said to be the avowed business by which some people earn their subsistence. they are continually running about the streets with the tools of their respective trades. it is commonly said. Its towns are nowhere deserted by their inhabitants. offering their service. In the neighbourhood of Canton many hundred. does not seem to go backwards. The subsistence which they find there is so scanty that they are eager to fish up the nastiest garbage thrown overboard from any European ship. The same or very nearly the same annual labour must therefore continue to be performed.The Wealth of Nations: Book 1 106 respects. but live constantly in little fishing boats upon the rivers and canals. though it may perhaps stand still. and as it were begging employment. Marriage is encouraged in China. but by the liberty of destroying them. and the funds Adam Smith ElecBook Classics . he is contented. and in the difficulty which a labourer finds in bringing up a family in China. The condition of artificers is. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening. The lands which had once been cultivated are nowhere neglected. if possible. is as welcome to them as the most wholesome food to the people of other countries. China. many thousand families have no habitation on the land. the carcase of a dead dog or cat. for example. In all great towns several are every night exposed in the street. Instead of waiting indolently in their workhouses. though half putrid and stinking.

famine. and from thence extend themselves to all the superior classes. Many who had been bred in the superior classes. must some way or another make shift to continue their race so far as to keep up their usual numbers. three or four hundred Adam Smith ElecBook Classics . or be driven to seek a subsistence either by begging.The Wealth of Nations: Book 1 107 destined for maintaining it must not. the competition for employment would be so great in it. The lowest class of labourers. The lowest class being not only overstocked with its own workmen. and which had escaped either the tyranny or calamity which had destroyed the rest. and of some other of the English settlements in the East Indies. notwithstanding their scanty subsistence. Many would not be able to find employment even upon these hard terms. as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. This perhaps is nearly the present state of Bengal. would be glad to seek it in the lowest. and mortality would immediately prevail in that class. consequently. should not be very difficult. or by the perpetration perhaps of the greatest enormities. but would either starve. In a fertile country which had before been much depopulated. not being able to find employment in their own business. where subsistence. Every year the demand for servants and labourers would. till the number of inhabitants in the country was reduced to what could easily be maintained by the revenue and stock which remained in it. and where. notwithstanding. therefore. be sensibly diminished. but with the overflowings of all the other classes. consequently. in all the different classes of employments. Want. be less than it had been the year before. But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying.

First. But on account of the extraordinary expense of fuel. is the natural symptom that things are at a stand. and their starving condition that they are going fast backwards. the maintenance of a family is most expensive in winter. on the other hand. therefore. we may be assured that the funds destined for the maintenance of the labouring poor are fast decaying. There are many plain symptoms that the wages of labour are nowhere in this country regulated by this lowest rate which is consistent with common humanity. even in the lowest species of labour. it may be said indeed. In Great Britain the wages of labour seem. to be evidently more than what is precisely necessary to enable the labourer to bring up a family. and that of the mercantile company which oppresses and domineers in the East Indies.The Wealth of Nations: Book 1 108 thousand people die of hunger in one year. but by the quantity and supposed value of the work. The liberal reward of labour. as it is the necessary effect. The scanty maintenance of the labouring poor. in almost every part of Great Britain there is a distinction. between summer and winter wages. so it is the natural symptom of increasing national wealth. therefore. in the present times. Summer wages are always highest. being highest when this expense is lowest. ought to save part of his summer wages in order to defray his Adam Smith ElecBook Classics . A labourer. cannot perhaps be better illustrated than by the different state of those countries. it seems evident that they are not regulated by what is necessary for this expense. Wages. The difference between the genius of the British constitution which protects and governs North America. In order to satisfy ourselves upon this point it will not be necessary to enter into any tedious or doubtful calculation of what may be the lowest sum upon which it is possible to do this.

Thirdly. the labouring poor can maintain their families in dear years.The Wealth of Nations: Book 1 109 winter expense. they must be at their ease in times of moderate plenty. The prices of bread and butcher’s meat are generally the same or very nearly the same through the greater part of the United Kingdom. indeed. and that through the whole year they do not exceed what is necessary to maintain his family through the whole year. however. Adam Smith ElecBook Classics . Secondly. the way in which the labouring poor buy all things. are generally fully as cheap or cheaper in great towns than in the remoter parts of the country. The high price of provisions during these ten years past has not in many parts of the kingdom been accompanied with any sensible rise in the money price of labour. It has. the wages of labour vary more from place to place than the price of provisions. on the other hand. therefore. A slave. These and most other things which are sold by retail. But the wages of labour in a great town and its neighbourhood are frequently a fourth or a fifth part. for reasons which I shall have occasion to explain hereafter. But in many places the money price of labour remains uniformly the same sometimes for half a century together. frequently from month to month. in some. so. If in these places. would not be treated in this manner. twenty or five-and-twenty per cent higher than at a few miles distance. These vary everywhere from year to year. the wages of labour do not in Great Britain fluctuate with the price of provisions. owing probably more to the increase of the demand for labour than to that of the price of provisions. or one absolutely dependent on us for immediate subsistence. as the price of provisions varies more from year to year than the wages of labour. and in affluence in those of extraordinary cheapness. His daily subsistence would be proportioned to his daily necessities.

Grain. the country to which it is brought. Tenpence may be reckoned its price in Edinburgh and its neighbourhood. as would soon reduce them more nearly to a level. is dearer in Scotland than in England. it appears evidently from experience that a man is of all sorts of luggage the most difficult to be transported. and in proportion to its quality it cannot be sold dearer in Scotland than the Scotch corn that comes to the same market in competition with it. At a few miles distance it falls to fourteen and fifteenpence. than in England. but they are frequently quite opposite. but from one end of the kingdom. the variations in the price of labour not only do not correspond either in place or time with those in the price of provisions. would necessarily occasion so great a transportation of the most bulky commodities. which it seems is not always sufficient to transport a man from one parish to another. Such a difference of prices. the usual price of common labour through the greater part of the low country of Scotland. But English corn must be sold dearer in Scotland. almost from one end of the world to the other. the country from which it comes. After all that has been said of the levity and inconstancy of human nature. The quality of grain depends chiefly upon the quantity of flour or meal which it yields at the Adam Smith ElecBook Classics . where it varies a good deal less than in England. whence Scotland receives almost every year very large supplies. If the labouring poor. At a few miles distance it falls to eightpence.The Wealth of Nations: Book 1 110 Eighteenpence a day may be reckoned the common price of labour in London and its neighbourhood. they must be in affluence where it is highest. therefore. the food of the common people. can maintain their families in those parts of the kingdom where the price of labour is lowest. not only from one parish to another. Fourthly.

according to the actual state of the markets. therefore. of all the different sorts of grain in every different county of Scotland. annual valuations made upon oath. though often dearer in appearance. I have frequently heard it represented as the cause. The price of labour. can maintain their families in the one part of the United Kingdom. With regard to France there is the clearest Adam Smith ElecBook Classics . taking one year with another. but because the one is rich he keeps a coach. which is in general much inferior to that of their neighbours of the same rank in England.The Wealth of Nations: Book 1 111 mill. however. they must be in affluence in the other. or in proportion to its quality. by a strange misapprehension. grain was dearer in both parts of the United Kingdom than during that of the present. I would observe that this has likewise been the case in France. During the course of the last century. if possible. it is generally cheaper in reality. and in this respect English grain is so much superior to the Scotch that. on the contrary. still more decisive with regard to Scotland than with regard to England. This is a matter of fact which cannot now admit of any reasonable doubt. It is in Scotland supported by the evidence of the public fiars. or even to the measure of its weight. If such direct proof could require any collateral evidence to confirm it. Oatmeal indeed supplies the common people in Scotland with the greatest and the best part of their food. or in proportion to the measure of its bulk. is dearer in England than in Scotland. and because the other is poor he walks afoot. It is not because one man keeps a coach while his neighbour walks afoot that the one is rich and the other poor. and the proof of it is. though. and probably in most other parts of Europe. If the labouring poor. in the mode of their subsistence is not the cause. This difference. but the effect of the difference in their wages.

If the labouring poor. accordingly. In the last century. Through the greater part of the low country the most usual wages of common labour are now eightpence a day. The demand for labour. therefore. must necessarily have increased with those improvements. In England the improvements of agriculture. the rank of people from which foot soldiers are commonly drawn. They have risen. the pay of a foot soldier was the same as in the present times. and commerce began much earlier than in Scotland. too. When it was first established it would naturally be regulated by the usual wages of common labourers. Three shillings a week. Adam Smith ElecBook Classics . sometimes a shilling about Edinburgh. about Glasgow. still continues to be paid in some parts of the Highlands and Western Islands. Ayrshire. the wages of labour were higher in England than in Scotland. considerably since that time. Carron. manufactures. it is equally certain that labour was much cheaper. who wrote in the time of Charles II. the same price very nearly. the most usual day-wages of common labour through the greater part of Scotland were sixpence in summer and fivepence in winter. on account of the greater variety of wages paid there in different places. Lord Chief Justice Hales. In the last century. But though it is certain that in both parts of the United Kingdom grain was somewhat dearer in the last century than in the present. probably on account of that neighbourhood. in the counties which border upon England. and in a few other places where there has lately been a considerable rise in the demand for labour. as well as in the present. etc. it is more difficult to ascertain how much. In 1614.The Wealth of Nations: Book 1 112 proof. they must be much more at their ease now. could bring up their families then. and consequently its price. eightpence a day. tenpence. though.

therefore. corresponds very nearly at bottom with that of Judge Hales. He appears to have inquired very carefully into this subject. Mr. and in some less. though different in appearance. but according to the easiness or hardness of the masters. Where wages are not regulated by law. His calculation. Adam Smith . Both suppose the weekly expense of such families to be about twenty pence a head. consisting of six persons. and experience seems to show that law can never regulate them properly.1 In 1688. whose skill in political arithmetic is so much extolled by Doctor Davenant. in some places more. one with another. though perhaps scarce anywhere so much as some exaggerated accounts of the present wages of labour have lately represented them to the public. different prices being often paid at the same place and for the same sort of labour. If they cannot earn this by their labour. Both the pecuniary income and expense of such families have increased considerably since that time through the greater part of the kingdom. though 1 See his scheme for the maintenance of the poor. computed the ordinary income of labourers and out-servants to be fifteen pounds a year to a family. in Burns’ History of the ElecBook Classics Poor Laws. he supposes.The Wealth of Nations: Book 1 113 computes the necessary expense of a labourer’s family. either by begging or stealing. at ten shillings a week. not only according to the different abilities of the workmen. which he supposed to consist. of three and a half persons. cannot be ascertained very accurately anywhere. or twenty-six pounds a year. The price of labour. Gregory King. all that we can pretend to determine is what are the most usual. it must be observed. and two not able. two children able to do something. the father and mother. they must make it up.

Adam Smith ElecBook Classics . The common complaint that luxury extends itself even to the lowest ranks of the people. cost half the price which they used to do thirty or forty years ago. The great improvements in the coarser manufactures of both linen and woollen cloth furnish the labourers with cheaper and better clothing. and that the labouring poor will not now be contented with the same food. All sort of garden stuff. chiefly from the taxes which have been laid upon them. things which were formerly never raised but by the spade. but many other things from which the industrious poor derive an agreeable and wholesome variety of food have become a great deal cheaper. salt. during the course of the present century. The real recompense of labour. for example. The quantity of these. Not only grain has become somewhat cheaper. indeed. increased perhaps in a still greater proportion than its money price. has. and fermented liquors have. is so very small. candles. too. leather. and those in the manufactures of the coarser metals. but which are now commonly raised by the plough. The greater part of the apples and even of the onions consumed in Great Britain were in the last century imported from Flanders. with cheaper and better instruments of trade. become a good deal dearer. however.The Wealth of Nations: Book 1 114 it has often pretended to do so. cabbages. carrots. has become cheaper. through the greater part of the kingdom. Potatoes. as well as with many agreeable and convenient pieces of household furniture. the real quantity of the necessaries and conveniences of life which it can procure to the labourer. Soap. which the labouring poor are under any necessity of consuming. do not at present. The same thing may be said of turnips. that the increase in their price does not compensate the diminution in that of so many other things.

which has augmented. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. But poverty. It seems even to be favourable to generation. I have been frequently told. Luxury in the fair sex. and workmen of different kinds. clothe. may convince us that it is not the money price of labour only. while it inflames perhaps the passion for enjoyment. A half-starved Highland woman frequently bears more than twenty children. Servants. soon withers and dies. The tender plant is produced. besides. but its real recompense. and lodge the whole body of the people. It is but equity. Poverty. in the Highlands of Scotland for a mother who has borne Adam Smith ElecBook Classics . seems always to weaken. and lodging which satisfied them in former times. though it no doubt discourages. labourers. should have such a share of the produce of their own labour as to be themselves tolerably well fed. is very rare among those of inferior station. It is not uncommon. though it does not prevent the generation. does not always prevent marriage. so frequent among women of fashion. that they who feed. Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. but in so cold a soil and so severe a climate. is extremely unfavourable to the rearing of children. and is generally exhausted by two or three. and frequently to destroy altogether. while a pampered fine lady is often incapable of bearing any. of which the far greater part of the members are poor and miserable. the powers of generation. clothed. and lodged. No society can surely be flourishing and happy. Barrenness. make up the far greater part of every great political society.The Wealth of Nations: Book 1 115 clothing.

and in almost all places before they are nine or ten. The liberal reward of labour. and no species can ever multiply beyond it. however. and it can do so in no other way than by destroying a great part of the children which their fruitful marriages produce. who cannot afford to tend them with the same care as those of better station. that so far from recruiting their regiment. It deserves to be remarked. that it necessarily does this as nearly as possible in the proportion which the demand for labour Adam Smith ElecBook Classics . arrive at the age of thirteen or fourteen. by enabling them to provide better for their children. a smaller proportion of their children arrive at maturity. A greater number of fine children. it seems. and consequently to bring up a greater number. they have never been able to supply it with drums and fifes from all the soldiers’ children that were born in it.The Wealth of Nations: Book 1 116 twenty children not to have two alive. In foundling hospitals. This great mortality. But in civilised society it is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species. Very few of them. too. in many places before they are seven. is seldom seen anywhere than about a barrack of soldiers. and among the children brought up by parish charities. In some places one half the children born die before they are four years of age. naturally tends to widen and extend those limits. the mortality is still greater than among those of the common people. will everywhere be found chiefly among the children of the common people. Every species of animals naturally multiplies in proportion to the means of their subsistence. however. Though their marriages are generally more fruitful than those of people of fashion. Several officers of great experience have assured me.

in Europe. The wear and tear of a slave. according as the increasing. in reality. and if it should at any time be more. as would soon force back its price to that proper rate which the circumstances of the society required. as much at the expense of his master as that of the former. it has been said. is at the expense of his master. It is in this manner that the demand for men. the deficiency of hands would soon raise it. The wear and tear of the latter. their excessive multiplication would soon lower it to this necessary rate. to continue the race of journeymen and servants. The wages paid to journeymen and servants of every kind must be such as may enable them. If this demand is continually increasing. diminishing. or stationary demand of the society may happen to require. and stops it when it advances too fast. The market would be so much understocked with labour in the one case. which renders it rapidly progressive in the first. it generally costs him much less than that of Adam Smith ElecBook Classics . It is this demand which regulates and determines the state of propagation in all the different countries of the world. and altogether stationary in the last. necessarily regulates the production of men. But though the wear and tear of a free servant be equally at the expense of his master. the reward of labour must necessarily encourage in such a manner the marriage and multiplication of labourers. as may enable them to supply that continually increasing demand by a continually increasing population.The Wealth of Nations: Book 1 117 requires. and in China. If the reward should at any time be less than what was requisite for this purpose. but that of a free servant is at his own expense. however. quickens it when it goes on too slowly. like that for any other commodity. slow and gradual in the second. is. one with another. and so much overstocked in the other. in North America.

as it encourages the propagation. as it is the effect of increasing wealth. To complain of it is to lament over the necessary effect and cause of the greatest public prosperity. rather than when it has acquired its full complement of riches. from the experience of all ages and nations. is commonly managed by a negligent master or careless overseer. that it is in the progressive state. the wear and tear of the slave. so it is the cause of increasing population. and Philadelphia. The liberal reward of labour. It is found to do so even at Boston. the same purpose must require very different degrees of expense to execute it. and miserable in the declining state.The Wealth of Nations: Book 1 118 a slave. It deserves to be remarked. while the society is advancing to the further acquisition. accordingly. where the wages of common labour are so very high. of the great body of the people. Under such different management. the declining. The disorders which generally prevail in the economy of the rich. I believe. that the work done by freemen comes cheaper in the end than that performed by slaves. New York. melancholy. therefore. The fund destined for replacing or repairing. The progressive state is in reality the cheerful and the hearty state to all the different orders of the society. if I may say so. It is hard in the stationary. The liberal reward of labour. The stationary is dull. That destined for performing the same office with regard to the free man. Adam Smith ElecBook Classics . seems to be the happiest and the most comfortable. that the condition of the labouring poor. It appears. naturally introduce themselves into the management of the former: the strict frugality and parsimonious attention of the poor as naturally establish themselves in that of the latter. perhaps. is managed by the free man himself.

The Wealth of Nations: Book 1 119 so it increases the industry of the common people. and of ending his days perhaps in ease and plenty. Almost every class of artificers is subject to some peculiar infirmity occasioned by excessive application to their peculiar species of work. This. as they generally are in manufactures. indeed. and in some other places. and expeditious than where they are low: in England. will be idle the other three. has written a particular book concerning such diseases. Yet when soldiers have been employed in some particular sorts of work. however. and even in country labour. in the neighbourhood of great towns than in remote country places. Ramuzzini. animates him to exert that strength to the utmost. accordingly. is by no means the case with the greater part. and to ruin their health and constitution in a few years. and the comfortable hope of bettering his condition. Workmen. The wages of labour are the encouragement of industry. Where wages are high. and liberally paid by the piece. for example. diligent. their officers have frequently been Adam Smith ElecBook Classics . Some workmen. is not supposed to last in his utmost vigour above eight years. A carpenter in London. wherever wages are higher than ordinary. We do not reckon our soldiers the most industrious set of people among us. on the contrary. in which the workmen are paid by the piece. like every other human quality. improves in proportion to the encouragement it receives. which. when they can earn in four days what will maintain them through the week. an eminent Italian physician. are very apt to overwork themselves. Something of the same kind happens in many other trades. when they are liberally paid by the piece. than in Scotland. we shall always find the workmen more active. A plentiful subsistence increases the bodily strength of the labourer.

The Wealth of Nations: Book 1 120 obliged to stipulate with the undertaker. or that Adam Smith ElecBook Classics . in the course of the year. and sometimes fatal. Excessive application during four days of the week is frequently the real cause of the idleness of the other three. and a scanty one quickens their industry. too. it has been concluded. of dissipation and diversion. I believe. If it is not complied with. If masters would always listen to the dictates of reason and humanity. according to the rate at which they were paid. sometimes of ease only. therefore. It will be found. which. the consequences are often dangerous. That a little more plenty than ordinary may render some workmen idle. but sometimes. and in dear ones more industrious than ordinary. that they should not be allowed to earn above a certain sum every day. In cheap years. Till this stipulation was made. is almost irresistible. they have frequently occasion rather to moderate than to animate the application of many of their workmen. It is the call of nature. that the man who works so moderately as to be able to work constantly not only preserves his health the longest. relaxes. it is pretended. brings on the peculiar infirmity of the trade. either of mind or body. but. if not restrained by force or by some strong necessity. cannot well be doubted. A plentiful subsistence. which requires to be relieved by some indulgence. workmen are generally more idle. and such as almost always. but that it should have this effect upon the greater part. is in most men naturally followed by a great desire of relaxation. sooner or later. Great labour. and to hurt their health by excessive labour. in every sort of trade. mutual emulation and the desire of greater gain frequently prompted them to overwork themselves. so much and so loudly complained of. executes the greatest quantity of work. continued for several days together.

when they are frequently sick than when they are generally in good health. the difficulty and uncertainty of subsistence make all such people eager to return to service. disposes masters rather to diminish than to increase the number of those they have. too. Adam Smith ElecBook Classics . In years of scarcity. Years of dearth. encourages masters. many are willing to take it upon lower terms than ordinary. while the number of those who offer to supply that demand diminishes. The demand for servants increases. farmers especially. are generally among the common people years of sickness and mortality. therefore. to employ a greater number. servants frequently leave their masters. by increasing the fund which is destined for the maintenance of servants. Farmers upon such occasions expect more profit from their corn by maintaining a few more labouring servants than by selling it at a low price in the market. More people want employment than can easily get it. But the same cheapness of provisions. But the high price of provisions.The Wealth of Nations: Book 1 121 men in general should work better when they are ill fed than when they are well fed. seems not very probable. when they are disheartened than when they are in good spirits. poor independent workmen frequently consume the little stocks with which they had used to supply themselves with the materials of their work. and the wages of both servants and journeymen frequently sink in dear years. it is to be observed. and are obliged to become journeymen for subsistence. In years of plenty. The price of labour. frequently rises in cheap years. which cannot fail to diminish the produce of their industry. by diminishing the funds destined for the maintenance of servants. and trust their subsistence to what they can make by their own industry. In dear years.

Landlords and farmers. therefore. however. one of coarse woollens carried on at Elbeuf. which in large manufactories so frequently ruin the morals of the other. and find them more humble and dependent in the former than in the latter. A poor independent workman will generally be more industrious than even a journeyman who works by the piece. Cheap years tend to increase the proportion of independent workmen to journeymen and servants of all kinds. A French author of great knowledge and ingenuity. The superiority of the independent workman over those servants who are hired by the month or by the year. They naturally.The Wealth of Nations: Book 1 122 Masters of all sorts. besides. by comparing the quantity and value of the goods made upon those different occasions in three different manufactures. in his separate independent state. have another reason for being pleased with dear years. Nothing can be more absurd. The one. frequently make better bargains with their servants in dear than in cheap years. one of Adam Smith ElecBook Classics . Etienne. Mr. than when they work for other people. endeavours to show that the poor do more work in cheap than in dear years. is likely to be still greater. than to imagine that men in general should work less when they work for themselves. two of the largest classes of masters. and whose wages and maintenance are the same whether they do much or do little. therefore. The one enjoys the whole produce of his own industry. and dear years to diminish it. is less liable to the temptations of bad company. Messance. receiver of the taillies in the election of St. commend the former as more favourable to industry. the other shares it with his master. The rents of the one and the profits of the other depend very much upon the price of provisions.

indeed. of which the produce is generally. appear to have declined very considerably. which is copied from the registers of the public offices. In 1740. increasing both in quantity and value. The Yorkshire manufacture. indeed. though with some variations. after the repeal of the American Stamp Act. and that of coarse woollens in the West Riding of Yorkshire. however. All the three seem to be stationary manufactures. Upon examining. the accounts which have been published of their annual produce. declined. the Scotch manufacture made more than ordinary advances. and its produce did not rise to what it had been in 1755 till 1766. It appears from his account. that the quantity and value of the goods made in all those three manufactures has generally been greater in cheap than in dear years. another year of great scarcity. The produce of all great manufactures for distant sale must necessarily depend. and another of silk. both manufactures. But in 1756. are upon the whole neither going backwards nor forwards.The Wealth of Nations: Book 1 123 linen. and that it has always been greatest in the cheapest. are growing manufactures. a year of great scarcity. or which. not so much upon the dearness or cheapness of the seasons in the countries where they are carried on as upon the circumstances which affect the demand in the countries where Adam Smith ElecBook Classics . The manufacture of linen in Scotland. both which extend through the whole generality of Rouen. and it has continued to advance ever since. and least in the dearest years. In that and the following year it greatly exceeded what it had ever been before. though their produce may vary somewhat from year to year. I have not been able to observe that its variations have had any sensible connection with the dearness or cheapness of the seasons.

upon peace or war. according as it happens to be increasing. never enters the public registers of manufactures. determines the quantity of the necessaries and conveniencies of life which must be given to the labourer. The women return to their parents. The demand for labour. Though the variations in the price of labour not only do not always correspond with those in the price of provisions. besides. stationary. but are employed by some of their neighbours in manufactures for family use. Even the independent workmen do not always work for public sale. and from which our merchants and manufacturers would often vainly pretend to announce the prosperity or declension of the greatest empires. upon the prosperity or declension of other rival manufactures. Though the money price of labour. the demand for labour. or declining population. stationary.The Wealth of Nations: Book 1 124 they are consumed. therefore. and commonly spin in order to make clothes for themselves and their families. The money price of labour is necessarily regulated by two circumstances. frequently makes no figure in those public registers of which the records are sometimes published with so much parade. it would be Adam Smith ElecBook Classics . but are frequently quite opposite. or declining. imagine that the price of provisions has no influence upon that of labour. or to require an increasing. which is probably done in cheap years. upon this account. The produce of their labour. The men servants who leave their masters become independent labourers. A great part of the extraordinary work. and the money price of labour is determined by what is requisite for purchasing this quantity. is sometimes high where the price of provisions is low. and the price of the necessaries and conveniences of life. therefore. and upon the good or bad humour of their principal customers. we must not.

if the price of provisions was high. which sometimes raises both the real and the money price of their labour. by increasing the demand. tends to lower its price. tends to raise the price of labour. The plenty of a cheap year. as the cheapness of provisions tends to lower it. In the succeeding years of plenty. who want more workmen bid against one another. In a year of sudden and extraordinary plenty. that the money price of labour sometimes rises in the one and sinks in the other. it was more difficult to get labourers and servants. therefore. In the ordinary variations of the price of provisions those two opposite causes Adam Smith ElecBook Classics . which sometimes lowers both the real and the money price of labour. many people were willing to work for bare subsistence. The contrary of this happens in a year of sudden and extraordinary scarcity. and diminishes in those of sudden and extraordinary scarcity. as the high price of provisions tends to raise it. Those masters. by diminishing the demand for labour. The scarcity of a dear year. there are funds in the hands of many of the employers of industry sufficient to maintain and employ a greater number of industrious people than had been employed the year before. in order to get them. on the contrary. It is because the demand for labour increases in years of sudden and extraordinary plenty.The Wealth of Nations: Book 1 125 still higher. The funds destined for employing industry are less than they had been the year before. a year of extraordinary scarcity. and this extraordinary number cannot always be had. in order to get it. A considerable number of people are thrown out of employment. the demand continuing the same. who bid against one another. In 1740.

The same cause. to make such a proper division and distribution of employment that they may be enabled to produce the greatest quantity of work possible. he endeavours to supply them with the best machinery which either he or they can think of. the more they naturally divide themselves into different classes and subdivisions of employment. however. more likely to be invented. which is probably in part the reason why the wages of labour are everywhere so much more steady and permanent than the price of provisions. which. The increase in the wages of labour necessarily increases the price of many commodities.The Wealth of Nations: Book 1 126 seem to counterbalance one another. For the same reason. by increasing that part of it which resolves itself into wages. and to make a smaller quantity of labour produce a greater quantity of work. the increase of stock. There are many commodities. and so far tends to diminish their consumption both at home and abroad. Adam Smith ElecBook Classics . What takes place among the labourers in a particular workhouse takes place. and it is. More heads are occupied in inventing the most proper machinery for executing the work of each. for his own advantage. among those of a great society. in consequence of these improvements. therefore. tends to increase its productive powers. therefore. necessarily endeavours. The owner of the stock which employs a great number of labourers. for the same reason. come to be produced by so much less labour than before that the increase of its price is more than compensated by the diminution of its quantity. which raises the wages of labour. The greater their number.

not only from year to year. It is not easy. or even when stored in a warehouse. therefore. the increasing or declining state of the wealth of the society. tends to lower profit. the same competition must produce the same effect in them all. but those causes affect the one and the other very differently. seldom determine more than what are the most usual wages. even in this case. but by the good or bad fortune both of his rivals and of his customers. and at a particular time. When the stocks of many rich merchants are turned into the same trade. Profit is so very fluctuating that the person who carries on a particular trade cannot always tell you himself what is the average of his annual profit. It varies. But even this can seldom be done with regard to the profits of stock. it has already been observed. The increase of stock. but from day to day. We can. which raises wages. to ascertain what are the average wages of labour even in a particular place. It is affected not only by every variation of price in the commodities which he deals in. are liable.The Wealth of Nations: Book 1 127 Chapter IX T Of the Profits of Stock he rise and fall in the profits of stock depend upon the same causes with the rise and fall in the wages of labour. their mutual competition naturally tends to lower its profit. and almost from ElecBook Classics Adam Smith . and when there is a like increase of stock in all the different trades carried on in the same society. and by a thousand other accidents to which goods when carried either by sea or by land.

however. and that wherever little can be made by it. It may be laid down as a maxim. that wherever a great deal can be made by the use of money. But though it may be impossible to determine. More. a great deal will commonly be given for the use of it. The statute of Henry VIII was revived by the 13th of Elizabeth. therefore. some notion may be formed of them from the interest of money. it seems. and probably rather increased than diminished the evil of usury. All these different statutory regulations seem to have been Adam Smith ElecBook Classics . According. when it was restricted to eight per cent. c. with any degree of precision. like all others of the same kind. had sometimes been taken before that. what are or were the average profits of stock. To ascertain what is the average profit of all the different trades carried on in a great kingdom must be much more difficult. is said to have produced no effect. must be altogether impossible. either in the present or in ancient times. as the usual market rate of interest varies in any country. we may be assured that the ordinary profits of stock must vary with it. and by the 12th of Queen Anne to five per cent.The Wealth of Nations: Book 1 128 hour to hour. with any degree of precision. or in remote periods of time. By the 37th of Henry VIII all interest above ten per cent was declared unlawful. This prohibition. therefore. It was reduced to six per cent soon after the Restoration. In the reign of Edward VI religious zeal prohibited all interest. must sink as it sinks. less will commonly be given for it. and rise as it rises. and to judge of what it may have been formerly. The progress of interest. 8. and ten per cent continued to be the legal rate of interest till the 21st of James I. may lead us to form some notion of the progress of profit.

or the rate at which people of good credit usually borrowed. who therefore bid against one another in order to get employment. at three and a half. the government borrowed at three per cent. and lowers the profits of stock. In a thriving town the people who have great stocks to employ frequently cannot get the number of workmen they want. They seem not only to have been going on. their pace seems rather to have been gradually accelerated than retarded. They seem to have followed and not to have gone before the market rate of interest. in the course of their progress. and in the greater part of the different branches of trade and manufactures the profits of stock have been diminishing. five per cent seems to have been rather above than below the market rate. The great stocks employed in every branch of trade. and in many other parts of the kingdom. Before the late war. and therefore bid against one another in order to get as many as they can. but to have been going on faster and faster. generally reduce the rate of profit in the former below what it is in the latter But the wages of labour are generally higher in a great town than in a country village. and four and a half per cent. and the number of rich competitors. It generally requires a greater stock to carry on any sort of trade in a great town than in a country village. and. four. Since the time of Queen Anne. The wages of labour have been continually increasing during the same period. which lowers the wages of labour and Adam Smith ElecBook Classics . which raises the wages of labour. and people of good credit in the capital.The Wealth of Nations: Book 1 129 made with great propriety. In the remote parts of the country there is frequently not stock sufficient to employ all the people. Since the time of Henry VIII the wealth and revenue of the country have been continually advancing.

In Scotland. The common rate of profit. There are few trades which cannot be carried on with a smaller stock in Scotland than in England. People of the best credit there seldom borrow under five per cent. The country. though the legal rate of interest is the same as in England. of which payment either in whole or in part may be demanded at pleasure. The wages of labour. The Abbé Terray raised it afterwards to the old rate of five per cent. Even private bankers in Edinburgh give four per cent upon their promissory notes.1 In 1720 interest was reduced from the twentieth to the fiftieth penny. therefore. must be somewhat greater. iii. The supposed purpose of many of those violent reductions of interest was to prepare the way for reducing that of the public debts. or to five per cent. vol. during the administration of Mr. it was reduced to the twenty-fifth penny. or from five to two per cent. been always regulated by the market rate. or to 31/3 per cent. France is perhaps in the present times not so rich 1 See Denifart. Article Taux des Intérêts. seem to be much slower and more tardy. but the steps by which it advances to a better condition. are lower in Scotland than in England. a purpose which has sometimes been executed. 18. too. it has already been observed. is not only much poorer. during the course of the present century. Private bankers in London give no interest for the money which is deposited with them. In 1724 it was raised to the thirtieth penny. The legal rate of interest in France has not. In 1725 it was again raised to the twentieth penny.The Wealth of Nations: Book 1 130 raises the profits of stock. ElecBook Classics Adam Smith . Laverdy. p. or to four per cent. In 1766. the market rate is rather higher. for it is evidently advancing.

the market rate has generally been higher. it has been pretended by some people. and the Dutch.The Wealth of Nations: Book 1 131 a country as England. The profits of trade. though no doubt a richer country than Scotland. it is well known. is decaying. than in one where it is highly respected. trade upon lower profits than any people in Europe. The wages of labour are said to be higher in Holland than in England. who sees the country now. and private people of good credit at three. as in other countries. the difference which you may remark between the dress and countenance of the common people in the one country and in the other sufficiently indicates the difference in their condition. The province of Holland. and though the legal rate of interest has in France frequently been lower than in England. on the other hand. France. for there. I have been assured by British merchants who had traded in both countries. is a richer country than England. The trade of Holland. The government there borrows at two per cent. seems not to be going forward so fast. is ill founded even with regard to France. they have several very safe and easy methods of evading the law. and it is no doubt upon this account that many British subjects choose rather to employ their capitals in a country where trade is in disgrace. The contrast is still greater when you return from France. It is a common and even a popular opinion in the country that it is going backwards. and who saw it twenty or thirty years ago. and it may perhaps be true some particular Adam Smith ElecBook Classics . an opinion which. apprehend. in proportion to the extent of its territory and the number of its people. The wages of labour are lower in France than in England. but which nobody can possibly entertain with regard to Scotland. When you go from Scotland to England. are higher in France than in England.

merchants are very apt to complain that trade decays. which scarce ever go together. it is said. But these symptoms seem to indicate sufficiently that there is no general decay. A new colony must always for some time be more understocked in * The Seven Years’ War. except in the peculiar circumstances of new colonies. As the capital of a private man. of which they still retain a very large share. the great sums which they lend to private people in countries where the rate of interest is higher than in their own. 1756-1763. however. there is a considerable exaggeration). but the interest of money. so may likewise the capital of a great nation. When profit diminishes. are circumstances which no doubt demonstrate the redundancy of their stock. The great property which they possess both in the French and English funds. perhaps. High wages of labour and high profits of stock. may increase beyond what he can employ in it. not only the wages of labour. though the diminution of profit is the natural effect of its prosperity. are things. ElecBook Classics Adam Smith . or of a greater stock being employed in it than before. In the different colonies both the legal and the market rate of interest run from six to eight per cent. and consequently the profits of stock. about forty millions. During the late war* the Dutch gained the whole carrying trade of France. in the latter (in which I suspect. however.The Wealth of Nations: Book 1 132 branches of it are so. and yet that trade continue to increase too. are higher than in England. or that it has increased beyond what they can employ with tolerable profit in the proper business of their own country: but they do not demonstrate that that has decreased. In our North American and West Indian colonies. though acquired by a particular trade.

generally increases faster than a small stock with great profits. interest has declined. Such land. stock may not only continue to increase. and less interest can be afforded for the stock which is so employed. As riches. As the colony increases. Money. too. and consequently afford to pay a very large interest. The wages of labour do not sink with the profits of stock. A great stock. therefore. When the most fertile and best situated lands have been all occupied. and more underpeopled in proportion to the extent of its stock. Its rapid accumulation in so profitable an employment enables the planter to increase the number of his hands faster than he can find them in a new settlement. The demand for labour increases with the increase of stock whatever be its profits. and after these are diminished. than the greater part of other countries. says Adam Smith ElecBook Classics . is frequently purchased at a price below the value even of its natural produce. They have more land than they have stock to cultivate. Stock employed in the purchase and improvement of such lands must yield a very large profit. is applied to the cultivation only of what is most fertile and most favourably situated. In the greater part of our colonies. improvement. the profits of stock gradually diminish. but to increase much faster than before. Those whom he can find. and population have increased. less profit can be made by the cultivation of what is inferior both in soil and situation. and along the banks of navigable rivers. though with small profits.The Wealth of Nations: Book 1 133 proportion to the extent of its territory. therefore. are very liberally rewarded. What they have. It is with industrious nations who are advancing in the acquisition of riches as with industrious individuals. the land near the sea shore. both the legal and the market rate of interest have been considerably reduced during the course of the present century. accordingly.

The acquisition of new territory. The connection between the increase of stock and that of industry. who before that had not been used to pay more than four. afford to borrow at a higher interest. will sufficiently account for this. For some time after the conclusion of the late war. even in a country which is fast advancing in the acquisition of riches. In all those old trades. So great an accession of new business to be carried on by Adam Smith ElecBook Classics . and yields a greater profit to those who deal in them. therefore. without supposing any diminution in the capital stock of the society. Part of what had before been employed in other trades is necessarily withdrawn from them. or of new branches of trade. may sometimes raise the profits of stock. by our acquisitions in North America and the West Indies. which such acquisitions present to the different people among whom it is divided. Their price necessarily rises more or less. When you have got a little. not only private people of the best credit. makes money. who can. and turned into some of the new and more profitable ones. The great accession both of territory and trade. is applied to those particular branches only which afford the greatest profit.The Wealth of Nations: Book 1 134 the proverb. the competition comes to be less than before. The stock of the country not being sufficient for the whole accession of business. or of the demand for useful labour. The great difficulty is to get that little. it is often easy to get more. The market comes to be less fully supplied with many different sorts of goods. therefore. commonly borrowed at five per cent. has partly been explained already. but some of the greatest companies in London. but will be explained more fully hereafter in treating of the accumulation of stock. and with them the interest of money. and four and a half per cent.

money is frequently lent to the farmers at forty. the owners of what stock remains in the society can bring their goods at less expense to market than before. therefore. the profits must have been greater. In Bengal. in which the competition being less. they can sell them dearer. being augmented at both ends. The interest of money is proportionably so. and less stock being employed in supplying the market than before. can well afford a large interest. Their profits. Before the fall of the Roman republic. and sixty per cent and the succeeding crop is mortgaged for the payment. I shall hereafter have occasion to mention the reasons which dispose me to believe that the capital stock of Great Britain was not diminished even by the enormous expense of the late war. so such enormous usury must in its turn eat up the greater part of those profits. however. or of the funds destined for the maintenance of industry. as it lowers the wages of labour. fifty. under the ruinous administration of their proconsuls. By the wages of labour being lowered.The Wealth of Nations: Book 1 135 the old stock must necessarily have diminished the quantity employed in a great number of particular branches. so it raises the profits of stock. The diminution of the capital stock of the society. The virtuous Brutus lent money in Cyprus at eightAdam Smith ElecBook Classics . and consequently the interest of money. Their goods cost them less. as the wages of labour are very low. The great fortunes so suddenly and so easily acquired in Bengal and the other British settlements in the East Indies may satisfy us that. As the profits which can afford such an interest must eat up almost the whole rent of the landlord. and they get more for them. a usury of the same kind seems to have been common in the provinces. so the profits of stock are very high in those ruined countries.

the poor or the owners of small capitals enjoy Adam Smith ElecBook Classics . the nature of its soil. and its situation with respect to other countries. In a country fully stocked in proportion to all the business it had to transact. that number could never be augmented. and which admits the vessels of foreign nations into one or two of its ports only. allowed it to acquire. where. and which was not going backwards. as great a quantity of stock would be employed in every particular branch as the nature and extent of the trade would admit. But this complement may be much inferior to what. China seems to have been long stationary. In a country too. the country being already fully peopled. climate. therefore. and consequently the ordinary profit as low as possible. with other laws and institutions. In a country fully peopled in proportion to what either its territory could maintain or its stock employ. which could. In a country which had acquired that full complement of riches which the nature of its soil and climate. The competition. both the wages of labour and the profits of stock would probably be very low. and situation might admit of. A country which neglects or despises foreign commerce. would everywhere be as great. But perhaps no country has ever yet arrived at this degree of opulence. cannot transact the same quantity of business which it might do with different laws and institutions. and had probably long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions. advance no further. though the rich or the owners of large capitals enjoy a good deal of security.The Wealth of Nations: Book 1 136 and-forty per cent as we learn from the letters of Cicero. therefore. and. 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.

Among the barbarous nations who overran the western provinces of the Roman empire. Twelve per cent accordingly is said to be the common interest of money in China. A defect in the law may sometimes raise the rate of interest considerably above what the condition of the country. it puts all borrowers nearly upon the same footing with bankrupts or people of doubtful credit in better regulated countries. and the ordinary profits of stock must be sufficient to afford this large interest.The Wealth of Nations: Book 1 137 scarce any. under the pretence of justice. the performance of contracts was left for many ages to the faith of the contracting parties. will be able to make very large profits. to be pillaged and plundered at any time by the inferior mandarins. who. but are liable. The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts. When the law prohibits interest altogether. the oppression of the poor must establish the monopoly of the rich. In every different branch. The courts of justice of their kings seldom intermeddled in it. it does not prevent it. and nobody will lend without such a consideration for the use of their money as is suitable not only to what can be made by the use of it. Many people must borrow. by engrossing the whole trade to themselves. When the law does not enforce the performance of contracts. the quantity of stock employed in all the different branches of business transacted within it can never be equal to what the nature and extent of that business might admit. The high rate of interest which took place in those ancient times may perhaps be partly accounted for from this cause. would require. as to wealth or poverty. but to the difficulty and danger of evading the law. The high rate of interest among all Mahometan Adam Smith ElecBook Classics .

even with tolerable prudence. Montesquieu. not from their poverty. The lowest ordinary rate of interest must. and partly from the difficulty of recovering the money. not only this surplus.The Wealth of Nations: Book 1 138 nations is accounted for by Mr. It is there unfashionable not to be a man of business. In a country which had acquired its full complement of riches. or engage in some sort of trade. The province of Holland seems to be approaching near to this state. but what is retained for compensating such extraordinary losses. as the ordinary rate of clear profit would be very small. The interest which the borrower can afford to pay is in proportion to the clear profit only. charity or friendship could be the only motive for lending. 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. 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. be something more than sufficient to compensate the occasional losses to which lending. Were it not more. in the same manner. What is called gross profit comprehends frequently. Adam Smith ElecBook Classics . It would be necessary that almost every man should be a man of business. is exposed. but partly from this. It is this surplus only which is neat or clear profit. Necessity makes it usual for almost every man to be so. where in every particular branch of business there was the greatest quantity of stock that could be employed in it. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks.

who. but the landlord may not always have been paid. not to be employed. As it is ridiculous not to dress. terms which I apprehend mean no more than a common and usual profit. The highest ordinary rate of profit may be such as.The Wealth of Nations: Book 1 139 and custom everywhere regulates fashion. in the greater part of trades. eats up the whole of what should go to the rent of the land. moderate. wherever business is carried on with borrowed money. But the proportion between interest and clear profit might not be the same in countries where the ordinary rate of profit was either a Adam Smith ElecBook Classics . reasonable profit. be both a sufficient profit upon the risk of this insurance. The stock is at the risk of the borrower. necessarily varies as profit rises or falls. Double interest is in Great Britain reckoned what the merchants call a good. according to the lowest rate at which labour can anywhere be paid. The proportion which the usual market rate of interest ought to bear to the ordinary rate of clear profit. the bare subsistence of the labourer. The workman must always have been fed in some way or other while he was about the work. As a man of a civil profession seems awkward in a camp or a garrison. and is even in some danger of being despised there. it may be reasonable that one half of it should go to interest. and leaves only what is sufficient to pay the labour of preparing and bringing them to market. like other people. as it were. and a sufficient recompense for the trouble of employing the stock. The profits of the trade which the servants of the East India Company carry on in Bengal may not perhaps be very far from this rate. In a country where the ordinary rate of clear profit is eight or ten per cent. in the price of the greater part of commodities. so is it. insures it to the lender. so does an idle man among men of business. and four or five per cent may. in some measure.

the spinners. In reality high profits tend much more to raise the price of work than high wages. 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. If in the linen manufacture. should. the flax-dressers. the weavers. one half of it perhaps could not be afforded for interest. all of them. through all the different stages of the manufacture. for example. The employer of the spinners would require an additional five per cent both upon the advanced price of the flax and upon the wages of Adam Smith ElecBook Classics . and more might be afforded if it were a good deal higher. In countries which are fast advancing to riches. among whom the wages of labour may be lower. That part of the price of the commodity which resolved itself into wages would. through all the different stages of the manufacture. the low rate of profit may. the wages of the different working people. that part of the price of the commodity which resolved itself into profit would. multiplied by the number of days during which they had been so employed. be advanced twopence a day.The Wealth of Nations: Book 1 140 good deal lower. etc. The employer of the flax-dressers would in selling his flax require an additional five per cent upon the whole value of the materials and wages which he advanced to his workmen. rise only in arithmetical proportion to this rise of wages. compensate the high wages of labour. or a good deal higher. in the price of many commodities. If it were a good deal lower.. and enable those countries to sell as cheap as their less thriving neighbours. rise in geometrical proportion to this rise of profit. But if the profits of all the different employers of those working people should be raised five per cent.

In raising the price of commodities the rise of wages operates in the same manner as simple interest does in the accumulation of debt. and thereby lessening the sale of their goods both at home and abroad. They are silent with regard to the pernicious effects of their own gains. Adam Smith ElecBook Classics . They complain only of those of other people.The Wealth of Nations: Book 1 141 the spinners. They say nothing concerning the bad effects of high profits. The rise of profit operates like compound interest. Our merchants and mastermanufacturers complain much of the bad effects of high wages in raising the price. And the employer of the weavers would require a like five per cent both upon the advanced price of the linen yarn and upon the wages of the weavers.

so many people would crowd into it in the one case. If in the same neighbourhood. that its advantages would soon return to the level of other employments. and where every man was perfectly free both to choose what occupation he thought proper. there was any employment evidently either more or less advantageous than the rest. Every man’s interest would prompt him to seek the advantageous. or at least in the imaginations of men. indeed. be either perfectly equal or continually tending to equality. make up for a small pecuniary gain in some. which nowhere leaves things at perfect liberty. and partly from the policy of Europe. which. and to change it as often as he thought proper. and counterbalance a great one in others. This at least would be the case in a society where things were left to follow their natural course. and to shun the disadvantageous employment. either really. are everywhere in Europe extremely different according to the different employments of labour and stock. and so many would desert it in the other. The particular consideration of those circumstances and of that ElecBook Classics Adam Smith . Pecuniary wages and profit.The Wealth of Nations: Book 1 142 Chapter X Of Wages and Profit in the different Employments of Labour and Stock T he whole of the advantages and disadvantages of the different employments of labour and stock must. where there was perfect liberty. But this difference arises partly from certain circumstances in the employments themselves. in the same neighbourhood.

a journeyman tailor earns less than a journeyman weaver. as I shall endeavour to show by and by. A journeyman weaver earns less than a journeyman smith. the constancy or inconstancy of employment in them. Disgrace Adam Smith ElecBook Classics . the probability or improbability of success in them. is less dangerous. or the difficulty and expense of learning them. the wages of labour vary with the ease or hardship.The Wealth of Nations: Book 1 policy will divide this chapter into two parts. the agreeableness or disagreeableness of the employments themselves. and above ground. seldom earns so much in twelve hours as a collier. though an artificer. His work is not always easier. and counterbalance a great one in others: first. does in eight. who is only a labourer. the easiness and cheapness. fourthly. Thus in most places. Honour makes a great part of the reward of all honourable professions. A journeyman blacksmith. the honourableness or dishonourableness of the employment. but it is much cleanlier. so far as I have been able to observe. they are generally underrecompensed. the small or great trust which must be reposed in those who exercise them. In point of pecuniary gain. First. make up for a small pecuniary gain in some employments. fifthly. thirdly. all things considered. the cleanliness or dirtiness. and is carried on in daylight. 143 PART 1 Inequalities arising from the Nature of the Employments themselves The five following are the principal circumstances which. His work is not quite so dirty. and. secondly. take the year round. His work is much easier.

But there is scarce any common trade in which a small stock yields so great a profit. but it is in most places more profitable than the greater part of common trades. The natural taste for those employments makes more people follow them than can live comfortably by them. and who is exposed to the brutality of every drunkard. that of public executioner. and they pursue for pleasure what they once followed from necessity. The trade of a butcher is a brutal and an odious business. The keeper of an inn or tavern. In the advanced state of society. Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labour. the licensed hunter is not in a much better condition. become in its advanced state their most agreeable amusements. in proportion to the quantity of work done. and the produce of their labour. The most detestable of all employments. they are all very poor people who follow as a trade what other people pursue as a pastime. comes always too cheap to market to afford anything but the most scanty subsistence to the labourers. In countries where the rigour of the law suffers no poachers. ElecBook Classics Adam Smith . exercises neither a very agreeable nor a very creditable business. the wages of labour vary with the easiness and 1 See Idyllium XXI. is.1 A poacher is everywhere a very poor man in Great Britain.The Wealth of Nations: Book 1 144 has the contrary effect. better paid than any common trade whatever. Hunting and fishing. the most important employments of mankind in the rude state of society. who is never master of his own house. therefore. Fishermen have been so since the time of Theocritus. in proportion to its quantity. Secondly.

The Wealth of Nations: Book 1 145 cheapness. in the same manner as to the more certain duration of the machine. The work which he learns to perform. in order to qualify any person for exercising the one species of labour. as I shall endeavour to show by and by. will replace to him the whole expense of his education. with at least the ordinary profits of an equally valuable capital. or the difficulty and expense of learning the business. When any expensive machine is erected. too. it must be expected. impose the necessity of an apprenticeship. in many cases. and that of all country labourers as common labour. In the meantime he must. It must do this. over and above the usual wages of common labour. During the continuance of the apprenticeship. may be compared to one of those expensive machines. it must be expected. therefore. It is so perhaps in some cases. The laws and customs of Europe. as skilled labour. in a reasonable time. but in the greater part is it quite otherwise. will replace the capital laid out upon it. A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skill. and in Adam Smith ElecBook Classics . It seems to suppose that of the former to be of a more nice and delicate nature than that of the latter. The difference between the wages of skilled labour and those of common labour is founded upon this principle. They leave the other free and open to everybody. artificers. though with different degrees of rigour in different places. be maintained by his parents or relations. with at least the ordinary profits. regard being had to the very uncertain duration of human life. The policy of Europe considers the labour of all mechanics. the whole labour of the apprentice belongs to his master. and manufacturers. the extraordinary work to be performed by it before it is worn out.

Education in the ingenious arts and in the liberal professions is still more tedious and expensive. ought to be much more liberal. is always disadvantageous to the apprentice. very little more than the day wages of common labourers. and his own labour maintains him through all the different stages of his employment. learns the more difficult parts of his business. in most places. and manufacturers. artificers. however. Some money. of painters and sculptors. though it is not always advantageous to the master. may be somewhat greater. the labourer. or become bound for more than the usual number of years. and their superior gains make them in most places be considered as a superior rank of people. therefore. a consideration which. indeed. such as those of plain linen and woollen cloth. computed at an average. They who cannot give money give time. is more steady and uniform. It is reasonable. to be no greater than what is sufficient to compensate the superior expense of their education. Adam Smith ElecBook Classics . while he is employed about the easier. It seems evidently. the daily or weekly earnings of journeymen in the more common sorts of manufactures. is generally very small. that in Europe the wages of mechanics. however. taking the whole year together. 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 pecuniary recompense. therefore. and the superiority of their earnings. on account of the usual idleness of apprentices. are.The Wealth of Nations: Book 1 146 almost all cases must be clothed by them. should be somewhat higher than those of common labourers. and it is so accordingly. They are so accordingly. on the contrary. of lawyers and physicians. Their employment. In country labour. too. is commonly given to the master for teaching him his trade. This superiority.

No species of skilled labour. while he is employed. What he earns. a journeyman may be pretty sure of employment almost every day in the year that he is able to work. and his employment at all other times depends upon the occasional calls of his customers. the latter often earn nine and ten. A mason or bricklayer. as in London. Thirdly. are nearly upon a level with the day wages of common labourers. those of masons and bricklayers are generally from one half more to double those wages. Where common labourers earn four and five shillings a week. must not only maintain him while he is idle. to be almost equally easy and equally difficult to learn. to be frequently without any. in reality. on the contrary. Where the computed earnings of the greater part of manufacturers. therefore. Chairmen in London. during the summer season.The Wealth of Nations: Book 1 147 All the different ways in which stock is commonly employed in great towns seem. the wages of labour in different occupations vary with the constancy or inconstancy of employment. masons and bricklayers frequently earn seven and eight. where the former earn six. accordingly. in consequence. however. can work neither in hard frost nor in foul weather. are said sometimes to be Adam Smith ElecBook Classics . the latter commonly earn fifteen and eighteen. Employment is much more constant in some trades than in others. and where the former earn nine and ten. One branch either of foreign or domestic trade cannot well be a much more intricate business than another. seems more easy to learn than that of masons and bricklayers. He is liable. but make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. In the greater part of manufacturers.

accordingly. When the trades which generally afford constant employment happen in a particular place not to do so. does not depend so entirely upon the occasional calls of his customers. as the compensation for the inconstancy of their employment. though eighteenpence may be reckoned the wages of common labour. In small towns and country villages. the wages of the workmen always rise a good deal above their ordinary proportion to those of common labour. particularly during the summer. earn there half a crown a-day. When the inconstancy of employment is combined with the hardship. and it is not liable to be interrupted by the weather. to earn commonly about double. though it depends much. in the same manner as day-labourers in other places. The lowest order of artificers. therefore. A house carpenter seems to exercise rather a nicer and more ingenious trade than a mason. disagreeableness. but in London they are often many weeks without employment.The Wealth of Nations: Book 1 148 employed as bricklayers. are not so much the recompense of their skill. for it is not universally so. his day-wages are somewhat lower. the wages of journeymen tailors frequently scarce equal those of common labour. at Newcastle. journeymen tailors. His high wages arise altogether from the hardship. Adam Smith ElecBook Classics . A collier working by the piece is supposed. The high wages of those workmen. and in many parts of Scotland about three times the wages of common labour. disagreeableness and dirtiness of the work. and from week to week. In most places. In London almost all journeymen artificers are liable to be called upon and dismissed by their masters from day to day. His employment. however. it sometimes raises the wages of the most common labour above those of the most skilful artificers.

be as constant as he pleases. and in every particular trade the lowest common earnings may always be considered as those of the far greater number. the employment of the greater part of them is necessarily very inconstant. there would soon be so great a number of competitors as. therefore. would quickly reduce them to a lower rate. Fourthly. if they were more than sufficient to compensate all the disagreeable circumstances of the business. in a trade which has no exclusive privilege. almost equals that of colliers. commonly earn double and triple the wages of common labour. How extravagant soever those earnings may appear. the wages of labour vary accordingly to the small or great trust which must be reposed in the workmen. but the trader. dirtiness. The coal-heavers in London exercise a trade which in hardship. The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen. In the inquiry made into their condition a few years ago.The Wealth of Nations: Book 1 149 and dirtiness of his work. and from the unavoidable irregularity in the arrivals of coal-ships. Whether the stock is or is not constantly employed depends. and disagreeableness. not upon the trade. on account of the precious materials with Adam Smith ElecBook Classics . it ought not to seem unreasonable that coal-heavers should sometimes earn four and five times those wages. but of much superior ingenuity. it was found that at the rate at which they were then paid. not only of equal. The constancy or inconstancy of employment cannot affect the ordinary profits of stock in any particular trade. upon most occasions. His employment may. Six shillings are about four times the wages of common labour in London. they could earn from six to ten shillings a day. If colliers.

therefore. Fifthly. the wages of labour in different employments vary according to the probability or improbability of success in them. Such confidence could not safely be reposed in people of a very mean or low condition. When a person employs only his own stock in trade. success is almost certain. there is no trust. necessarily enhance still further the price of their labour. when combined with this circumstance. there is little doubt of his learning to make a pair of shoes. cannot arise from the different degrees of trust reposed in the traders. but send him to study the law. and the credit which he may get from other people depends. The counsellor-at-law Adam Smith ElecBook Classics . that one ought to gain all that should have been gained by the unsuccessful twenty. Put your son apprentice to a shoemaker. probity. not upon the nature of his trade. The probability that any particular person shall ever be qualified for the employment to which he is educated is very different in different occupations. as may give them that rank in the society which so important a trust requires.The Wealth of Nations: Book 1 150 which they are intrusted. those who draw the prizes ought to gain all that is lost by those who draw the blanks. and prudence. In a profession where twenty fail for one that succeeds. In a perfectly fair lottery. We trust our health to the physician: our fortune and sometimes our life and reputation to the lawyer and attorney. but upon their opinion of his fortune. The long time and the great expense which must be laid out in their education. but very uncertain in the liberal professions. therefore. Their reward must be such. in the different branches of trade. it is at least twenty to one if ever he makes such proficiency as will enable him to live by the business. In the greater part of mechanic trades. The different rates of profit.

the natural confidence which every man has more or less. not only of his own so tedious and expensive education. in point of pecuniary gain. and you will find that their annual gains bear but a very small proportion to their annual expense. by all the different workmen in any common trade. and. the desire of the reputation which attends upon superior excellence in any of them. at near forty years of age. even though you rate the former as high. Compute in any particular place what is likely to be annually gained. but that of more than twenty others who are never likely to make anything by it. therefore. such as that of shoemakers or weavers. not only in his own abilities. and the latter as low. notwithstanding these discouragements. Two different causes contribute to recommend them. secondly. is very far from being a perfectly fair lottery. But make the same computation with regard to all the counsellors and students of law. are. is the most decisive mark of what is called genius or superior talents. their real retribution is never equal to this. ought to receive the retribution. First. To excel in any profession. all the most generous and liberal spirits are eager to crowd into them. begins to make something by his profession. and. and you will find that the former sum will generally exceed the latter.The Wealth of Nations: Book 1 151 who. with other occupations. as can well be done. and that. and what is likely to be annually spent. evidently under-recompensed. in all the different inns of court. as well as many other liberal and honourable professions. but in his own good fortune. The public admiration which attends upon such Adam Smith ElecBook Classics . perhaps. Those professions keep their level. however. in which but few arrive at mediocrity. How extravagant soever the fees of counsellors-at-law may sometimes appear. The lottery of the law.

There are some very agreeable and beautiful talents of which the possession commands a certain sort of admiration. The exorbitant rewards of players. not only to pay for the time.The Wealth of Nations: Book 1 152 distinguished abilities makes always a part of their reward. of those who exercise them in this manner must be sufficient. in poetry and philosophy it makes almost the whole. It seems absurd at first sight that we should despise their persons and yet reward their talents with the most profuse liberality. The overweening conceit which the greater part of men have of their own abilities is an ancient evil remarked by the philosophers Adam Smith ElecBook Classics . we must of necessity do the other. Should the public opinion or prejudice ever alter with regard to such occupations. opera-dancers. whether from reason or prejudice. More people would apply to them. and many more are capable of acquiring them. While we do the one. however. Such talents. It makes a considerable part of that reward in the profession of physic. if anything could be made honourably by them. a still greater perhaps in that of law. and the competition would quickly reduce the price of their labour. Many people possess them in great perfection. their pecuniary recompense would quickly diminish. labour. and expense of acquiring the talents. The pecuniary recompense. and the discredit of employing them in this manner. etc. are by no means so rare as is imagined. are founded upon those two principles. the rarity and beauty of the talents. opera-singers. who disdain to make this use of them. therefore. a greater or smaller in proportion as it is higher or lower in degree. but of which the exercise for the sake of gain is considered.. though far from being common. but for the discredit which attends the employment of them as the means of subsistence. as a sort of public prostitution.

though in other respects it approached much nearer to a perfectly fair one than the common state lotteries. and the chance of loss is by most men undervalued. Adventure upon all the tickets in the lottery. thirty. who is in tolerable health and spirits. however. when in tolerable health and spirits. because the undertaker could make nothing by it. if possible. has not some share of it. the more likely you are to be a loser. nor ever will see. In a lottery in which no prize exceeded twenty pounds. still more universal. and by scarce any man. and yet commonly sell in the market for twenty. some people purchase several tickets. and sometimes forty per cent advance. small share in a still greater number. a perfectly fair lottery. or one in which the whole gain compensated the whole loss. It is. a more certain proposition in mathematics than that the more tickets you adventure upon. The vain hope of gaining some of the great prizes is the sole cause of this demand. though they know that even that small sum is perhaps twenty or thirty per cent more than the chance is worth. 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. That the chance of gain is naturally overvalued. valued more than it is worth. there would not be the same demand for tickets. however. There is no man living who. There is not.The Wealth of Nations: Book 1 153 and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of. In order to have a better chance for some of the great prizes. and others. The chance of gain is by every man more or less overvalued. and you lose for certain. and the greater the Adam Smith ElecBook Classics . The world neither ever saw. we may learn from the universal success of lotteries. In the state lotteries the tickets are really not worth the price which is paid by the original subscribers.

That the chance of loss is frequently undervalued. or even a great merchant. is. many people despise the risk too much to care to pay it. and the proportion of ships insured to those not insured is much greater. very few have made a great fortune.The Wealth of Nations: Book 1 154 number of your tickets the nearer you approach to this certainty. This may sometimes perhaps be done without any imprudence. the common premium must be sufficient to compensate the common losses. and scarce ever valued more than it is worth. are not insured from fire. and even in time of war. insure one another. In order to make insurance. The neglect of insurance upon shipping. or rather perhaps ninety-nine in a hundred. in the same manner as upon houses. at all seasons. a trade at all. in most Adam Smith ElecBook Classics . as the premium of insurance commonly is. Many fail. Taking the whole kingdom at an average. The premium saved upon them all may more than compensate such losses as they are likely to meet with in the common course of chances. and from this consideration alone. however. nineteen houses in twenty. has twenty or thirty ships at sea. When a great company. however. and to afford such a profit as might have been drawn from an equal capital employed in any common trade. we may learn from a very moderate profit of insurers. either from fire or sea-risk. they may. or the lowest price at which he can reasonably expect to insure it. however. But though many people have made a little money by insurance. to pay the expense of management. it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades by which so many people make fortunes. The person who pays no more than this evidently pays no more than the real value of the risk. as it were. Moderate. without any insurance. Sea risk is more alarming to the greater part of people.

The great admiral is less the object of public admiration than the great general. young volunteers never enlist so readily as at the beginning of a new war. Other people see some chance of his making something by the one trade: nobody but himself sees any of his making anything by the other. than in the eagerness of those of better fashion to enter into what are called the liberal professions. in their youthful fancies. How little the fear of misfortune is then capable of balancing the hope of good luck appears still more evidently in the readiness of the common People to enlist as soldiers. These romantic hopes make the whole price of their blood. or to go to sea. Their pay is less than that of common labourers. a thousand occasions of acquiring honour and distinction which never occur. the effect of no such nice calculation. What a common soldier may lose is obvious enough. but of mere thoughtless rashness and presumptuous contempt of the risk. and though they have scarce any chance of preferment. The same difference runs through all the inferior degrees of preferment in both. The lottery of the sea is not altogether so disadvantageous as that of the army. however. The contempt of risk and the presumptuous hope of success are in no period of life more active than at the age at which young people choose their professions. and the highest success in the sea service promises a less brilliant fortune and reputation than equal success in the land. but if he enlists as a soldier. The son of a creditable labourer or artificer may frequently go to sea with his father’s consent. they figure to themselves. and in actual service their fatigues are much greater.The Wealth of Nations: Book 1 155 cases. By the rules of precedency a captain in the navy ranks with a colonel in Adam Smith ElecBook Classics . Without regarding the danger. it is always without it.

the London price is from a guinea to about seven-andtwenty shillings the calendar month.The Wealth of Nations: Book 1 156 the army. 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. is supplied with provisions. therefore. Their Adam Smith ElecBook Classics . yet for all this dexterity and skill. Common sailors. the smaller ones must be more numerous. The sailor. for all those hardships and dangers. more frequently get some fortune and preferment than common soldiers. At London the wages of the greater part of the different classes of workmen are about double those of the same classes at Edinburgh. they receive scarce any other recompense but the pleasure of exercising the one and of surmounting the other. over and above his pay. and though their whole life is one continual scene of hardship and danger. and the rate of the port to and from which the greatest number sail. but he does not rank with him in the common estimation. while they remain in the condition of common sailors. A common labourer in London. that is the port of London. As they are continually going from port to port. and the difference is frequently not so great. As the great prizes in the lottery are less. the monthly pay of those who sail from all the different ports of Great Britain is more nearly upon a level than that of any other workmen in those different places. indeed. Though their skill and dexterity are much superior to that of almost any artificers. Their wages are not greater than those of common labourers at the port which regulates the rate of seamen’s wages. may earn in the calendar month from forty to five-and-forty shillings. at the rate of nine or ten shillings a week. regulates that of all the rest. and the hope of those prizes is what principally recommends the trade. and in the merchant service. In time of peace.

It does not. In all the different employments of stock. than in that to Jamaica. and in some branches of foreign trade than in others. the excess will not be clear gain to the sailor. or so as to compensate it completely. the wages of labour are always remarkably high. Unwholesomeness is a species of disagreeableness. the ordinary rate of profit varies more or less with the certainty or uncertainty of the returns.The Wealth of Nations: Book 1 157 value. The most hazardous of all trades. is not disagreeable to us. and does not raise the wages of labour in any employment. that of a Adam Smith ElecBook Classics . for example. whom he must maintain out of his wages at home. These are in general less uncertain in the inland than in the foreign trade. A tender mother. is of afraid to send her son to school at a seaport town. and its effects upon the wages of labour are to be ranked under that general head. among the inferior ranks of people. seem frequently to recommend a trade to them. It is otherwise with those in which courage and address can be of no avail. seem to rise in proportion to it. however. and though it sometimes should. from which we can hope to extricate ourselves by courage and address. The distant prospect of hazards. In trades which are known to be very unwholesome. because he cannot share it with his wife and family. instead of disheartening young people. The dangers and hairbreadth escapes of a life of adventures. lest the sight of the ships and the conversation and adventures of the sailors should entice him to go to sea. The ordinary rate of profit always rises more or less with the risk. may not perhaps always exceed the difference between his pay and that of the common labourer. in the trade to North America. Bankruptcies are most frequent in the most hazardous trades. however.

It should follow from all this. though when the adventure succeeds it is likewise the most profitable. the agreeableness or disagreeableness of the business. is the infallible road to bankruptcy. the common returns ought. there is little or no difference in the far greater part of the different employments of stock. in the same society or neighbourhood. To compensate it completely. that their competition reduces their profit below what is sufficient to compensate the risk. over and above the ordinary profits of stock. Of the five circumstances. and to entice so many adventurers into those hazardous trades. But if the common returns were sufficient for all this. does not always seem to rise in proportion to it. is evidently much greater than that between the ordinary profits in any two different branches of trade. and the ordinary profit of stock. 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. The presumptuous hope of success seems to act here as upon all other occasions. not only to make up for all occasional losses. two only affect the profits of stock. In point of agreeableness. but a great deal in those of labour. is generally a deception arising from our not always distinguishing Adam Smith ElecBook Classics . The difference between the earnings of a common labourer and those of a well employed lawyer or physician. therefore. The apparent difference. that. and the risk or security with which it is attended. though it rises with the risk. in the profits of different trades. but to afford a surplus profit to the adventurers of the same nature with the profit of insurers. They are so accordingly. which vary the wages of labour. bankruptcies would not be more frequent in these than in other trades. besides.The Wealth of Nations: Book 1 158 smuggler.

however. will sell in a year. and must be a Adam Smith ElecBook Classics . write. The man. and of the rich when the distress or danger is not very great. The trade of the grocer may be necessary for the conveniency of the inhabitants. The skill of an apothecary is a much nicer and more delicate matter than that of any artificer whatever. but live by it suitably to the qualifications which it requires. His reward. He is the physician of the poor in all cases. This great apparent profit. Though he should sell them. and account. Apothecaries’ profit is become a bye-word. while a considerable wholesale merchant in the same place will scarce make eight or ten per cent upon a stock of ten thousand. in the only way in which he can charge them. may not perhaps cost him above thirty or forty pounds. The greater part of the apparent profit is real wages disguised in the garb of profit. in a large market town. and the narrowness of the market may not admit the employment of a larger capital in the business. must not only live by his trade. Besides possessing a little capital. for three or four hundred. he must be able to read. however. and it arises generally from the price at which he sells his drugs. from what ought to be considered as profit. therefore. and the trust which is reposed in him is of much greater importance. ought to be suitable to his skill and his trust. But the whole drugs which the best employed apothecary. denoting something uncommonly extravagant. upon the price of his drugs. is frequently no more than the reasonable wages of labour. therefore. a little grocer will make forty or fifty per cent upon a stock of a single hundred pounds. this may frequently be no more than the reasonable wages of his labour charged.The Wealth of Nations: Book 1 159 what ought to be considered as wages. or at a thousand per cent profit. In a small seaport town.

It costs no more to bring grocery goods to the great town than to the country village. Grocery goods. but it costs a great deal more to bring corn and cattle. fifty or sixty different sorts of goods. are generally much cheaper. Adam Smith ElecBook Classics . therefore. It is upon this account that goods sold by retail are generally as cheap and frequently much cheaper in the capital than in small towns and country villages. The apparent profits of the wealthy retailer. Thirty or forty pounds a year cannot be considered as too great a recompense for the labour of a person so Accomplished. The prime cost of grocery goods. that is necessary for a great merchant. and the markets where they are to be had cheapest. are there more nearly upon a level with those of the wholesale merchant. real wages. qualities. Where ten thousand pounds can be employed in the grocery trade. their prices. than the ordinary profits of stock. which nothing hinders him from becoming but the want of a sufficient capital. they are cheapest where the least profit is charged upon them. He must have all the knowledge. in short. as the greater part of them must be brought from a much greater distance. Deduct this from the seemingly great profits of his capital. bread and butcher’s meat frequently as cheap. The difference between the apparent profit of the retail and that of the wholesale trade. and little more will remain. The greater part of the apparent profit is. perhaps.The Wealth of Nations: Book 1 160 tolerable judge too of. for example. the wages of the grocer’s labour make but a very trifling addition to the real profits of so great a stock. is much less in the capital than in small towns and country villages. perhaps. therefore. in this case too. being the same in both places.

trade can be extended as stock increases. In great towns. those of bread and butcher’s meat are generally very nearly the same through the greater part of it. on the contrary. which diminishes apparent profit. the same cause. His trade is extended in proportion to the amount of both. and the credit of a frugal and thriving man increases much faster than his stock. on account of the narrowness of the market. therefore. though the prices of corn and cattle are commonly very different in different parts of the kingdom. the sum or amount of them can never be very great.The Wealth of Nations: Book 1 161 The prime cost of bread and butcher’s meat is greater in the great town than in the country village. in most cases. In such articles as bread and butcher’s meat. In such places. and the sum or amount of his profits is in proportion to the extent of his trade. they are not always cheaper there. which is probably the reason that. trade cannot always be extended as stock extends. but often equally cheap. nor consequently that of his annual accumulation. and scarce ever in the latter. This diminution of the one and increase of the other seem. increases prime cost. In small towns and country villages. and though the profit is less. Though the profits of stock both in the wholesale and retail trade are generally less in the capital than in small towns and country villages. therefore. though the rate of a particular person’s profits may be very high. but by requiring supplies from a greater distance. it increases prime cost. diminishes apparent profit. and his annual accumulation Adam Smith ElecBook Classics . yet great fortunes are frequently acquired from small beginnings in the former. The extent of the market. by giving employment to greater stocks. nearly to counterbalance one another.

His profits and losses. or well-known branch of business. It is only in places of the most extensive commerce and correspondence that the intelligence requisite for it can be had. tobacco. but is just as likely to lose one by two or three unsuccessful ones. can bear no regular proportion to those of any one established and well-known branch of business. He enters into every trade when he foresees that it is likely to be more than commonly profitable. and attention. of the different employments of either. however. The speculative merchant exercises no one regular. established. and well-known branch of business. In order. though they occasion considerable inequalities in the wages of labour and profits of stock. however. established.The Wealth of Nations: Book 1 162 in proportion to the amount of his profits. three things are Adam Smith ElecBook Classics . The five circumstances above mentioned. The nature of those circumstances is such that they make up for a small pecuniary gain in some. real or imaginary. This trade can be carried on nowhere but in great towns. and counterbalance a great one in others. and a sugar. that this equality may take place in the whole of their advantages or disadvantages. and he quits it when he foresees that its profits are likely to return to the level of other trades. Sudden fortunes. He is a corn merchant this year. frugality. but in consequence of a long life of industry. A bold adventurer may sometimes acquire a considerable fortune by two or three successful speculations. therefore. are sometimes made in such places by what is called the trade of speculation. indeed. occasion none in the whole of the advantages and disadvantages. that great fortunes are made even in great towns by any one regular. It seldom happens. and a wine merchant the next. or tea merchant the year after.

and the same form or fabric may continue in demand for whole centuries together. and. and seldom last long enough to be considered as old established manufactures. Birmingham deals chiefly in manufactures of the former kind. Where all other circumstances are equal. and have been long established in the neighbourhood. are less liable to change. The wages of labour. they must be the sole or principal employments of those who occupy them. they must be in their ordinary. Sheffield in those of the latter. therefore. 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 Wealth of Nations: Book 1 163 requisite even where there is the most perfect freedom. on the contrary. The establishment of any new manufacture. are likely to be higher in manufactures of the former than in those of the latter kind. or than the nature of his work would otherwise require. is always a speculation. When a projector attempts to establish a new manufacture. of any new branch of commerce. the employments must be well known and long established in the neighbourhood. secondly. and a considerable time must pass away before he can venture to reduce them to the common level. thirdly. Manufactures for which the demand arises altogether from fashion and fancy are continually changing. First. from which the projector promises himself Adam Smith ElecBook Classics . or of any new practice in agriculture. or what may be called their natural state. for which the demand arises chiefly from use or necessity. he must at first entice his workmen from other employments by higher wages than they can either earn in their own trades. First. wages are generally higher in new than in old trades. this equality can take place only in those employments which are well known. Those.

when forty or fifty thousand sailors are forced from the merchant service into that of the king. These profits sometimes are very great. the competition reduces them to the level of other trades. In the one case the advantages of the employment rise above. this equality in the whole of the advantages and disadvantages of the different employments of labour and stock. and sometimes. The demand for almost every different species of labour is sometimes greater and sometimes less than usual. are contented with smaller wages than would otherwise be suitable to the nature of their employment. When the trade or practice becomes thoroughly established and well known. and wages rise with the demand. In a decaying manufacture. the demand for sailors to merchant ships necessarily rises with their scarcity. The profits of stock vary with the price of the commodities in which it is employed. perhaps. they are commonly at first very high. but in general they bear no regular proportion to those of other old trades in the neighbourhood. Secondly. more frequently. to forty shillings and three pounds a month. As the price of any commodity rises above the ordinary or average rate. rather than quit their old trade. rise above their Adam Smith ElecBook Classics . can take place only in the ordinary. The demand for country labour is greater at hay-time and harvest than during the greater part of the year. If the project succeeds.The Wealth of Nations: Book 1 164 extraordinary profits. they are quite otherwise. on the contrary. in the other they fall below the common level. or what may be called the natural state of those employments. In time of war. and their wages upon such occasions commonly rise from a guinea and seven-and-twenty shillings. many workmen. the profits of at least some part of the stock that is employed in bringing it to market.

He endeavours to buy them up when he foresees that their price is likely to rise. and as it falls they sink below it. for example. The price of such commodities. and is consequently extremely fluctuating. for example.The Wealth of Nations: Book 1 165 proper level. the same quantity of industry will always produce the same. so is likewise the price. All commodities are more or less liable to variations of price. as nearly as possible. the quantity of industry annually employed is necessarily regulated by the annual demand. therefore. can arise only from some accidental variation in the demand. be equal to the average annual consumption. A public mourning raises the price of black cloth. it has already been observed. and to sell them when it is likely to fall. in such a manner that the average annual produce may. But there are other employments in which the same quantity of industry will not always produce the same quantity of commodities. but some are much more so than others. will. In some employments. The operations of the speculative merchant are principally employed about such commodities. produce very different quantities of corn. but with the much greater and more frequent variations of quantity. hops. The same quantity of industry. therefore. in different years. tobacco. wine. But the profit of some of the dealers must necessarily fluctuate with the price of the commodities. varies not only with the variations of demand. In the linen or woollen manufactures. the same number of hands will annually work up very nearly the same quantity of linen and woollen cloth. But as the demand for most sorts of plain linen and woollen cloth is pretty uniform. Adam Smith ElecBook Classics . The variations in the market price of such commodities. In all commodities which are produced by human industry. sugar. etc. or very nearly the same quantity of commodities.

he gives them. perhaps. and to have wrought for less wages than other labourers. though they were more frequent some years ago than they are now. they are said to have been willing to give their spare time for a very small recompense to anybody. When such occupiers were more numerous than they are at present. in the intervals of his leisure he is often willing to work as another for less wages than would otherwise suit the nature of the employment. In ancient times they seem to have been common all over Europe. as much grass as will feed a cow. the greater part of landlords and farmers could not otherwise provide themselves with the extraordinary number of hands which country labour requires at certain season. In countries ill cultivated and worse inhabited. The usual reward which they receive from their masters is a house. and the cultivation of their own little possession is not sufficient to occupy the time which is left at their own disposal. When a person derives his subsistence from one employment. When their master has occasion for their labour. There still subsists in many parts of Scotland a set of people called Cotters or Cottagers. an acre or two of bad arable land. and. They are a sort of outservants of the landlords and farmers. worth about sixteenpence sterling. which does not occupy the greater part of his time. a small garden for pot-herbs. The daily or weekly recompense which such labourers occasionally Adam Smith ElecBook Classics . this equality in the whole of the advantages and disadvantages of the different employments of labour and stock can take only in such as are the sole or principal employments of those who occupy them. two pecks of oatmeal a week. During a great part of the year he has little or no occasion for their labour.The Wealth of Nations: Book 1 166 Thirdly. besides.

The following Adam Smith ElecBook Classics . In most parts of Scotland she is a good spinner who can earn twentypence a week. At Lerwick. More than a thousand pair of Shetland stockings are annually imported into Leith. The spinning of linen yarn is carried on in Scotland nearly in the same way as the knitting of stockings by servants. of which the price is from fivepence to sevenpence a pair. is a common price of common labour. This daily or weekly recompense. and at the same time deriving some little advantage from another.The Wealth of Nations: Book 1 167 received from their masters was evidently not the whole price of their labour. In opulent countries the market is generally so extensive that any one trade is sufficient to employ the whole labour and stock of those who occupy it. the small capital of the Shetland Islands. In the same islands they knit worsted stockings to the value of a guinea a pair and upwards. Stockings in many parts of Scotland are knit much cheaper than they can anywhere be wrought upon the loom. occur chiefly in poor countries. however. who endeavour to get their whole livelihood by either of those trades. They are the work of servants and labourers. Their small tenement made a considerable part of it. seems to have been considered as the whole of it. They earn but a very scanty subsistence. tenpence a day. Instances of people’s living by one employment. who are chiefly hired for other purposes. by many writers who have collected the prices of labour and provisions in ancient times. who derive the principal part of their subsistence from some other employment. The produce of such labour comes frequently cheaper to market than would otherwise suitable to its nature. and who have taken pleasures in representing both as wonderfully low. I have been assured.

Lodging is not only much cheaper in London than in Paris. and not by his lodgers. The dearness of house-rent in London arises not only from those causes which render it dear in all great capitals. the dearness of labour. in which house-rent is dearer than in London. however. and above all the dearness of ground-rent. A dwelling-house in England means everything that is contained under the same roof. He expects to maintain his family by his trade. and he and his family sleep in the garret. A tradesman in London is obliged to hire a whole house in that part of the town where his customers live. not only the rent of the house. the dearness of house-rent is the cause of the cheapness of lodging. and frequently exacting a higher rent for a single acre of bad land in a town than can be had for a hundred of the best in the country. There is no city in Europe. at Paris and Edinburgh. of something of the same kind is to be found in the capital of a very rich one. but it arises in part from the peculiar manners and customs of the people. the people who let lodgings have commonly no other means of subsistence and the price of the lodging must pay. and yet I know no capital in which a furnished apartment can be hired as cheap. Whereas. Scotland. every landlord acting the part the part of a monopolist. the dearness of all the materials of building. I believe. it frequently means no more than a single story. In France.The Wealth of Nations: Book 1 168 instance. it is much cheaper than in Edinburgh of the same degree of goodness. which oblige every master of a family to hire a whole house from top to bottom. and what may seem extraordinary. but the whole expense of the family. Adam Smith ElecBook Classics . His shop is upon the ground-floor. and many other parts of Europe. which must generally be brought from a great distance. and he endeavours to pay a part of his house-rent by letting the two middle stories to lodgers.

The exclusive privilege of an incorporated trade necessarily restrains the competition. The bye-laws of the corporation regulate sometimes the number of apprentices which Adam Smith ElecBook Classics . The exclusive privileges of corporations are the principal means it makes use of for this purpose. even where there is the most perfect liberty. It does this chiefly in the three following ways. is commonly the necessary requisite for obtaining this freedom. under a master properly qualified. by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them. which the defect of any of the three requisites above mentioned must occasion. and. To have served an apprenticeship in the town. by not leaving things at perfect liberty.The Wealth of Nations: Book 1 169 PART 2 Inequalities by the Policy of Europe Such are the inequalities in the whole of advantages and disadvantages of the different employments of labour and stock. in the town where it is established. by increasing it in others beyond what it naturally would be. by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. both from employment to employment and from place to place. secondly. thirdly. But the policy of Europe. by obstructing the free circulation of labour and stock. 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. First. occasions other inequalities of much greater importance. First. to those who are free of the trade.

etc. Both these regulations. A long term of apprenticeship restrains it more indirectly. All such incorporations were anciently called universities. When those Adam Smith ElecBook Classics . In Norfolk and Norwich no master weaver can have more than two apprentices.The Wealth of Nations: Book 1 170 any master is allowed to have. In Sheffield no master cutler can have more than one apprentice at a time. the university of tailors. though they have been confirmed by a public law of the kingdom. 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. are evidently dictated by the same corporation spirit which enacted the bye-law of Sheffield. all over Europe. No master hatter can have more than two apprentices anywhere in England. and almost always the number of years which each apprentice is obliged to serve. are expressions which we commonly meet with in the old charters of ancient towns. It required a particular Act of Parliament to rescind this bye-law.. The limitation of the number of apprentices restrains it directly. which indeed is the proper Latin name for any incorporation whatever. Seven years seem anciently to have been. half to the king and half to him who shall sue in any court of record. the usual term established for the duration of apprenticeships in the greater part of incorporated trades. but as effectually. The university of smiths. The silk weavers in London had scarce been incorporated a year when they enacted a bye-law restraining any master from having more than two apprentices at a time. under pain of forfeiting five pounds a month to the king. by a bye-law of the corporation. or in the English plantations. by increasing the expense of education. under pain of forfeiting five pounds a month.

or mystery at that time exercised in England. it having been held that in country villages a person may exercise several different trades. too. and to have himself apprenticed in a common trade. by interpretation its operation has been limited to market towns. that no person should for the future exercise any trade. of which the incorporations were much more ancient. appears evidently to have been copied from the terms of apprenticeship in common trades. they being necessary for the conveniency of the inhabitants. By the 5th of Elizabeth.The Wealth of Nations: Book 1 171 particular incorporations which are now peculiarly called universities were first established. though he has not served a seven years’ apprenticeship to each. craft. so to have studied seven years under a master properly qualified was necessary to entitle him to become a master. the term of years which it was necessary to study. teacher. or doctor (words anciently synonymous) in the liberal arts. in order to obtain the degree of master of arts. commonly called the Statute of Apprenticeship. and seem plainly to include the whole kingdom. By a strict interpretation of the words. and to have scholars or apprentices (words likewise originally synonymous) to study under him. and the number of people frequently not being sufficient to supply each with a particular set of hands. For though the words of the statute are very general. As to have wrought seven years under a master properly qualified was necessary in order to entitle any person to become a master. unless he had previously served to it an apprenticeship of seven years at least. it was enacted. and what before had been the bye-law of many particular corporations became in England the general and public law of all trades carried on in market towns. the operation of this Adam Smith ElecBook Classics .

In most towns. though he has never served an apprenticeship to a coachmaker. Where it is long. that a coachmaker can neither himself make nor employ journeymen to make his coach-wheels. a part of it may generally be redeemed by paying a small fine. the trade of a coachmaker not being within the statute. because not exercised in England at the time when it was made. and has never been extended to such as have been introduced since that time. But a wheel-wright. In France. the duration of apprenticeships is different in different towns and in different trades. but before any person can be qualified to exercise the trade as a master. he must. This limitation has given occasion to several distinctions which. During this latter term he is called the companion of his master. The Adam Smith ElecBook Classics . may either himself make or employ journeyman to make coaches. and Wolverhampton. In Scotland there is no general law which regulates universally the duration of apprenticeships. In Paris. five years is the term required in a great number. are many of them. and the term itself is called his companionship. but must buy them of a master wheel-wright. The term is different in different corporations. Birmingham. in many of them. It has been adjudged. considered as rules of police. upon this account. serve five years more as a journeyman. appear as foolish as can well be imagined. this latter trade having been exercised in England before the 5th of Elizabeth. for example. not within the statute. too. a very small fine is sufficient to purchase the freedom of any corporation.The Wealth of Nations: Book 1 172 statute has been limited to those trades which were established in England before the 5th of Elizabeth. The manufactures of Manchester. not having been exercised in England before the 5th of Elizabeth.

The affected anxiety of the law-giver lest they should employ an improper person is evidently as impertinent as it is oppressive. as well as all other artificers subservient to them.. as it is the original foundation of all other property. wheel-makers. reel-makers. and the longest apprenticeship can give no security Adam Smith ElecBook Classics . even in some very nice trades. As it hinders the one from working at what he thinks proper. etc. To judge whether he is fit to be employed may surely be trusted to the discretion of the employers whose interest it so much concerns. and in general I know of no country in Europe in which corporation laws are so little oppressive. and to hinder him from employing this strength and dexterity of his hands. and to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbour is a plain violation of this most sacred property. The institution of long apprenticeships can give no security that insufficient workmanship shall not frequently be exposed to public sale. the principal manufactures of the country. In all towns corporate all persons are free to sell butcher’s meat upon any lawful day of the week. may exercise their trades in any town corporate without paying any fine. so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands. and not of inability. so it hinders the others from employing whom they think proper.The Wealth of Nations: Book 1 173 weavers of linen and hempen cloth. Three years in Scotland is a common term of apprenticeship. It is a manifest encroachment upon the just liberty both of the workman and of those who might be disposed to employ him. When this is done it is generally the effect of fraud. The property which every man has in his own labour.

In the inferior employments. Quite different regulations are necessary to prevent this abuse. The boys who are put out apprentices from public charities are generally bound for more than the usual number of years. to assert that there is none) which expresses the idea we now annex to the word Apprentice. Apprenticeships were altogether unknown to the ancients. because he has no immediate interest to be otherwise. He generally looks at these. A young man naturally conceives an aversion to labour when for a long time he receives no benefit from it. I believe. a servant bound to work at a particular trade for the benefit of a master. because he derives a benefit from every exertion of his industry. upon condition that the master shall teach him that trade. The reciprocal duties of master and apprentice make a considerable article in every modern code. and almost always is so. and they generally turn out very idle and worthless. but never thinks it worth while to inquire whether the workman had served a seven years’ apprenticeship. and the stamps upon linen and woollen cloth. Adam Smith ElecBook Classics . The Roman law is perfectly silent with regard to them. give the purchaser much greater security than any statute of apprenticeship. A journeyman who works by the piece is likely to be industrious. An apprentice is likely to be idle. They who are soonest in a condition to enjoy the sweets of it are likely soonest to conceive a relish for it. during a term of years. The institution of long apprenticeships has no tendency to form a young people to industry.The Wealth of Nations: Book 1 174 against fraud. I know no Greek or Latin word (I might venture. and to acquire the early habit of industry. the sweets of labour consist altogether in the recompense of labour. The sterling mark upon plate.

indeed. such as those of making clocks and watches. But a young man would practice with much more diligence and attention. perhaps. cannot be acquired without much practice and experience. He would lose all the wages of the apprentice. for seven years together. In a trade so easily learnt he would have more competitors. 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. when he came to be a complete workman. how to apply the instruments and how to construct the machines. His education would generally in this way be more effectual. in the completest manner. The master. But when both have been fairly invented and are well understood. even in common trades. Adam Smith ElecBook Classics . have been the work of deep thought and long time. and always less tedious and expensive. to explain to any young man. The same increase of competition would reduce the profits of the masters as well as the wages of the workmen. In the end. In the common mechanic trades. being paid in proportion to the little work which he could execute. and paying in his turn for the materials which he might sometimes spoil through awkwardness and inexperience. The arts. which he now saves. The dexterity of hand. and his wages. indeed. would be much less than at present. which are much superior to common trades. and even that of some of the instruments employed in making them. if from the beginning he wrought as a journeyman. must. the apprentice himself would be a loser. no doubt. cannot well require more than the lessons of a few weeks: perhaps those of a few days might be sufficient.The Wealth of Nations: Book 1 175 Long apprenticeships are altogether unnecessary. those of a few days might certainly be sufficient. The first invention of such beautiful machines. indeed. would be a loser.

and consequently of wages and profit. the mysteries. In England. the work of all artificers coming in this way much cheaper to market. Upon paying a fine to the king. but obliged to fine annually to the king for permission to exercise their usurped privileges. The government of towns corporate was altogether in the 1 See Madox. were not always disfranchised upon that account. indeed. not from the king. such adulterine guilds. would all be losers. and when any particular class of artificers or traders thought proper to act as a corporation without a charter. the crafts. the charter seems generally to have been readily granted. but from the greater incorporation of which those subordinate ones were only parts or members. ElecBook Classics Adam Smith . have been established.The Wealth of Nations: Book 1 176 The trades. and whatever discipline was exercised over them proceeded commonly. etc. belonged to the town corporate in which they were established. In order to erect a corporation. Firma Burgi. and the greater part of corporation laws. by restraining that free competition which would most certainly occasion it. p. a charter from the king was likewise necessary. But this prerogative of the crown seems to have been reserved rather for extorting money from the subject than for the defence of the common liberty against such oppressive monopolies. as they were called. no other authority in ancient times was requisite in many parts of Europe. It is to prevent this reduction of price. that all corporations. 26.1 The immediate inspection of all corporations. But the public would be a gainer. but that of the town corporate in which it was established. and of the bye-laws which they might think proper to enact for their own government.

But in their dealings with the country they were all great gainers. It pays for these chiefly in two ways: first. from the country. Each class was eager to establish regulations proper for this purpose. and it was the manifest interest of every particular class of them to prevent the market from being overstocked. which is in reality to keep it always understocked. in which case their price is augmented by the wages of the workmen. But in recompense. too. each class was obliged to buy the goods they had occasion for from every other within the town. as they say. none of them were losers by these regulations. and all the materials of its industry. in which case.The Wealth of Nations: Book 1 177 hands of traders and artificers. imported into the town. so that so far it was as broad as long. or of distant parts of the same country. provided it was allowed to do so. either of other countries. Every town draws its whole subsistence. as they commonly express it. by sending back to the country a part of those materials wrought up and manufactured. secondly. and in the dealings of the different classes within the town with one another. by sending to it a part both of the rude and manufactured produce. In what is gained upon the first of those two branches of commerce consists the advantage Adam Smith ElecBook Classics . and by the profits of the merchants who employ them. was willing to consent that every other class should do the same. and. somewhat dearer than they otherwise might have done. indeed. and in these latter dealings consists the whole trade which supports and enriches every town. the original price of those goods is augmented by the wages of the carriers or sailors. and the profits of their masters or immediate employers. In consequence of such regulations. with their own particular species of industry. they were enabled to sell their own just as much dearer.

with a smaller quantity of its labour. In every country of Europe we find. we may satisfy ourselves by one very simple and obvious observation. The price which the town really pays for the provisions and materials annually imported into it is the quantity of manufactures and other goods annually exported from it. The dearer the latter are sold. make up the whole of what is gained upon both. the advantage of its inland and foreign trade. in what is gained upon the second. The whole annual produce of the labour of the society is annually divided between those two different sets of people.The Wealth of Nations: Book 1 178 which the town makes by its manufactures. tend to enable the town to purchase. The wages of the workmen. more advantageous than that which is carried on in the country. the produce of a greater quantity of the labour of the country. and labourers in the country. the industry which properly belongs to towns. The industry of the town becomes more. everywhere in Europe. without entering into any very nice computations. and that of the country less advantageous. Whatever regulations. and break down that natural equality which would otherwise take place in the commerce which is carried on between them. That the industry which is carried on in towns is. the cheaper the former are bought. and the profits of their different employers. By means of those regulations a greater share of it is given to the inhabitants of the town than would otherwise fall to them. and a less to those of the country. a hundred people who have acquired great fortunes from small beginnings by trade and manufactures. They give the traders and artificers in the town an advantage over the landlords. at least. tend to increase those wages and profits beyond what they otherwise would be. therefore. for one who has done so by that which properly belongs to the Adam Smith ElecBook Classics . farmers.

the aversion to take apprentices. in some place or other. Half a dozen wool-combers. and often teach them. cannot easily combine together. the wages of labour and the profits of stock must evidently be greater in the one situation than in the other. but the corporation spirit never has prevailed among them. must be better rewarded. and even where they have never been incorporated.The Wealth of Nations: Book 1 179 country. generally prevail in them. been incorporated. They have not only never been incorporated. No apprenticeship has ever been thought necessary to qualify for husbandry. perhaps. dispersed in distant places. being collected into one place. yet the corporation spirit. resort as much as they can to the town. there Adam Smith ElecBook Classics . are necessary to keep a thousand spinners and weavers at work. By combining not to take apprentices they can not only engross the employment. the raising of rude produce by the improvement and cultivation of land. and the liberal professions. and raise the price of their labour much above what is due to the nature of their work. The most insignificant trades carried on in towns have accordingly. The inhabitants of the country. by voluntary associations and agreements. They naturally. or to communicate the secret of their trade. however. But stock and labour naturally seek the most advantageous employment. to prevent that free competition which they cannot prohibit by bye-laws. but reduce the whole manufacture into a sort of slavery to themselves. therefore. After what are called the fine arts. The trades which employ but a small number of hands run most easily into such combinations. the great trade of the country. therefore. and desert the country. the jealousy of strangers. can easily combine together. Industry. The inhabitants of a town.

besides. which is commonly possessed even by the common farmer. requires much more judgment and discretion than that of those which are always the same or very nearly the same. strength.The Wealth of Nations: Book 1 180 is perhaps no trade which requires so great a variety of knowledge and experience. The man who works upon brass and iron. several of them are actually explained in this manner. are very different upon different occasions. There is scarce any common mechanic trade. The innumerable volumes which have been written upon it in all languages may satisfy us that. how contemptuously soever the very contemptible authors of some of them may sometimes affect to speak of him. works with instruments and upon materials of which the temper is always the same. among the wisest and most learned nations. And from all those volumes we shall in vain attempt to collect that knowledge of its various and complicated operations. which must be varied with every change of the weather. The condition of the materials Adam Smith ElecBook Classics . as well as with many other accidents. But the man who ploughs the ground with a team of horses or oxen. it has never been regarded as a matter very easily understood. on the contrary. or very nearly the same. The direction of operations. but many inferior branches of country labour require much more skin and experience than the greater part of mechanic trades. as it is possible for words illustrated by figures to explain them. Not only the art of the farmer. In the history of the arts. and temper. the general direction of the operations of husbandry. of which all the operations may not be as completely and distinctly explained in a pamphlet of a very few pages. works with instruments of which the health. now publishing by the French Academy of Sciences.

How much the lower ranks of people in the country are really superior to those of the town is well known to every man whom either business or curiosity has led to converse much with both. indeed. without fearing to be undersold by the free competition of their own countrymen. In China and Indostan accordingly both the rank and the wages of country labourers are said to be superior to those of the greater part of artificers and manufacturers. His understanding. He is less accustomed. The high duties upon foreign manufactures and upon all goods imported by alien merchants. It is supported by many other regulations. is generally much superior to that of the other. being accustomed to consider a greater variety of objects. is seldom defective in this judgment and discretion. however. and both require to be managed with much judgment and discretion. Those other regulations secure them Adam Smith ElecBook Classics . though generally regarded as the pattern of stupidity and ignorance. if corporation laws and the corporation spirit did not prevent it. Corporation laws enable the inhabitants of towns to raise their prices. The common ploughman. too. whose whole attention from morning till night is commonly occupied in performing one or two very simple operations. They would probably be so everywhere. is as variable as that of the instruments which he works with. The superiority which the industry of the towns has everywhere in Europe over that of the country is not altogether owing to corporations and corporation laws. His voice and language are more uncouth and more difficult to be understood by those who are not used to them. all tend to the same purpose.The Wealth of Nations: Book 1 181 which he works upon. to social intercourse than the mechanic who lives in a town.

That everywhere in Europe the greatest improvements of the country Adam Smith ElecBook Classics . and of a subordinate part of the society. who have seldom opposed the establishment of such monopolies. This change may be regarded as the necessary. if I may say so. That industry has its limits like every other. in a great measure. by increasing the competition. though very late consequence of the extraordinary encouragement given to the industry of the towns. The wages of country labour approach nearer to those of manufacturing labour. In Great Britain 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 creating a new demand for country labour. or in the beginning of the present. The lowering of profit in the town forces out stock to the country. and the clamour and sophistry of merchants and manufacturers easily persuade them that the private interest of a part. The enhancement of price occasioned by both is everywhere finally paid by the landlords. and the increase of stock. over the face of the land. and labourers of the country.The Wealth of Nations: Book 1 182 equally against that of foreigners. than they are said to have done in the last century. farmers. and the profits of stock employed in agriculture to those of trading and manufacturing stock. The stock accumulated in them comes in time to be so great that it can no longer be employed with the ancient profit in that species of industry which is peculiar to them. at the expense of which. necessarily reduces the profit. it had originally been accumulated in the town. is the general interest of the whole. where. They have commonly neither inclination nor fitness to enter into combinations. and by being employed in agriculture is in part restored to the country. It then spreads itself. it necessarily raises its wages.

their sick. I shall endeavour to show hereafter. or in some contrivance to raise prices. A regulation which enables those of the same trade to tax themselves in order to provide for their poor. it ought to do nothing to facilitate such assemblies. and gives every man of the trade a direction where to find every other man of it. which have given occasion to it. by giving them a common interest to manage. facilitates such assemblies. by any law which either could be executed. The interests. But though the law cannot hinder people of the same trade from sometimes assembling together. People of the same trade seldom meet together. their widows and orphans.The Wealth of Nations: Book 1 183 have been owing to such overflowings of the stock originally accumulated in the towns. Adam Smith ElecBook Classics . liable to be disturbed and interrupted by innumerable accidents. or would be consistent with liberty and justice. and in every respect contrary to the order of nature and of reason. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register. It connects individuals who might never otherwise be known to one another. even for merriment and diversion. renders such assemblies necessary. and at the same time to demonstrate that. It is impossible indeed to prevent such meetings. it is in itself necessarily slow. I shall endeavour to explain as fully and distinctly as I can in the third and fourth books of this Inquiry. but the conversation ends in a conspiracy against the public. uncertain. laws and customs. though some countries have by this course attained to a considerable degree of opulence. prejudices. much less to render them necessary.

It is the fear of losing their employment which restrains his frauds and corrects his negligence. by increasing the competition in some employments beyond what it naturally would be. and you must then smuggle it into the town as well as you can. occasions Adam Smith ElecBook Classics . but makes the act of the majority binding upon the whole. by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them. In a free trade an effectual combination cannot be established but by the unanimous consent of every single trader. it must be done in the suburbs. and it cannot last longer than every single trader continues of the same mind. where the workmen. the policy of Europe. let them behave well or ill. The majority of a corporation can enact a bye-law with proper penalties. The pretence that corporations are necessary for the better government of the trade is without any foundation. having no exclusive privilege. If you would have your work tolerably executed. The real and effectual discipline which is exercised over a workman is not that of his corporation. even in some of the most necessary trades. but that of his customers. occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock. which will limit the competition more effectually and more durably than any voluntary combination whatever. It is in this manner that the policy of Europe.The Wealth of Nations: Book 1 184 An incorporation not only renders them necessary. It is upon this account that in many large incorporated towns no tolerable workmen are to be found. have nothing but their character to depend upon. A particular set of workmen must then be employed. Secondly. An exclusive corporation necessarily weakens the force of this discipline.

At the same period fourpence a day. The long. and expensive education. containing the same quantity Adam Smith ElecBook Classics . which draw many more people into those trades than could otherwise pretend to follow them. in order to get employment. bursaries.. etc. all three. Very few of them are educated altogether at their own expense. as we find it regulated by the decrees of several different national councils. It would be indecent. The pay of a curate or chaplain. They are. are willing to accept of a much smaller recompense than what such an education would otherwise have entitled them to.The Wealth of Nations: Book 1 185 another inequality of an opposite kind in the whole of the advantages and disadvantages of the different employments of labour and stock. scholarships. the church being crowded with people who. therefore. Till after the middle of the fourteenth century. It has been considered as of so much importance that a proper number of young people should be educated for certain professions. paid for their work according to the contract which they may happen to make with their respective superiors. the education of the greater part of churchmen is paid for in this manner. exhibitions. In all Christian countries. will not always procure them a suitable reward. no doubt. and in this manner the competition of the poor takes away the reward of the rich. for this purpose. I believe. of those who are. may very properly be considered as of the same nature with the wages of a journeyman. five merks. was in England the usual pay of a curate or a stipendiary parish priest. containing about as much silver as ten pounds of our present money. however. to compare either a curate or a chaplain with a journeyman in any common trade. tedious. that sometimes the public and sometimes the piety of private founders have established many pensions.

equal to ninepence of our present money. supposing them to have been constantly employed. was declared to be the pay of a master mason.1 The wages of both these labourers. it is declared. This last sum indeed does not exceed what is frequently earned by common labourers in many country parishes. 25 Ed. it has always been rather to lower them than to raise them. that of a journeyman mason. not exceeding fifty and not less than twenty pounds a year. were much superior to those of the curate. and notwithstanding this Act of Parliament there are many curacies under twenty pounds a year. empowered to appoint by writing under his band and seal a sufficient certain stipend or allowance. 1 See the Statute of Labourers. the bishop is. to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept of. There are journeymen shoemakers in London who earn forty pounds a year. would have fully equalled them. III. The wages of the master mason. supposing him to have been without employment one third of the year. But the law has upon many occasions attempted to raise the wages of curates. By the 12th of Queen Anne. and for the dignity of the church. c. therefore. therefore.The Wealth of Nations: Book 1 186 of silver as a shilling of our present money.” Forty pounds a year is reckoned at present very good pay for a curate. and there is scarce an industrious workman of any kind in that metropolis who does not earn more than twenty. “That whereas for want of sufficient maintenance and encouragement to curates. 12. ElecBook Classics Adam Smith . the cures have in several places been meanly supplied. Whenever the law has attempted to regulate the wages of workmen. and threepence a day.

in which education is so easily procured. makes some compensation even to them for the meanness of their pecuniary recompense. or the other from receiving more. notwithstanding the mean circumstance of some of its inferior members. because it has never been able to hinder either the one from being willing to accept of less than the legal allowance. It might then not be worth any man’s while to educate his son to either of those professions at his own expense. the lottery of the church is in reality much more advantageous than is necessary. The respect paid to the profession. In England. They would be entirely abandoned to such as had been educated by those public charities. or to sink those of labourers to the degree that was intended. too. and in all Roman Catholic countries. The great benefices and other ecclesiastical dignities support the honour of the church. In professions in which there are no benefices. and has never either been able to raise the wages of curates. whose numbers and necessities would oblige them in general to content themselves Adam Smith ElecBook Classics . and of several other Protestant churches. such as law and physic. the hopes of much more moderate benefices will draw a sufficient number of learned. 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. if an equal proportion of people were educated at the public expense. decent.The Wealth of Nations: Book 1 187 And in both cases the law seems to have been equally ineffectual. the competition would soon be so great as to sink very much their pecuniary reward. may satisfy us that in so creditable a profession. of Geneva. on account of the indigence of their situation and the multitude of their competitors. The example of the churches of Scotland.

and their numbers are everywhere so great as commonly to reduce the price of their labour to a very paltry recompense. if the competition of those yet Adam Smith ElecBook Classics . and in general even a more profitable employment than that other of writing for a bookseller. They have generally. knowledge. are at least equal to what is necessary for the greatest practitioners in law and physic. been educated at the public expense. or by communicating to other people the curious and useful knowledge which he had acquired himself: and this is still surely a more honourable. to which the art of printing has given occasion. a more useful.The Wealth of Nations: Book 1 188 with a very miserable recompense. the genius. because the trade of the one is crowded with indigent people who have been brought up to it at the public expense. but have been hindered by different reasons from entering into holy orders. The time and study. In every part of Europe the greater part of them have been educated for the church. would undoubtedly be less than it is. The usual recompense. But the usual reward of the eminent teacher bears no proportion to that of the lawyer or physician. to the entire degradation of the now respectable professions of law and physic. however. therefore. the only employment by which a man of letters could make anything by his talents was that of a public or private teacher. of public and private teachers. whereas those of the other two are encumbered with very few who have not been educated at their own. That unprosperous race of men commonly called men of letters are pretty much in the situation which lawyers and physicians probably would be in upon the foregoing supposition. small as it may appear. and application requisite to qualify an eminent teacher of the sciences. Before the invention of the art of printing.

Something not less than the largest of those two sums. in what is called his discourse against the sophists. In ancient times. must at that time have been usually paid to the most eminent teachers at Athens. and in return for so important a service they stipulate the paltry reward of four or five minæ. “and undertake to teach them to be wise. When he taught at Athens.” says he. I understand this to be the number whom he taught at one time. or who attended what we could call one course of lectures. Isocrates himself demanded ten minæ. and we may be assured that it was not less than he represents it. The different governors of the universities before that time appear to have often granted licences to their scholars to beg. “They make the most magnificent promises to their scholars. Isocrates. reproaches the teachers of his own times with inconsistency. a number which will not appear Adam Smith ElecBook Classics . he would be convicted of the most evident folly. or thirty-three pounds six shillings and eightpence. Before the invention of the art of printing. before any charities of this kind had been established for the education of indigent people to the learned professions.” He certainly does not mean here to exaggerate the reward. Four minæ were equal to thirteen pounds six shillings and eightpence: five minæ to sixteen pounds thirteen shillings and fourpence. therefore. the rewards of eminent teachers appear to have been much more considerable. They who teach wisdom. but if any man were to sell such a bargain for such a price. ought certainly to be wise themselves.” continues he.The Wealth of Nations: Book 1 189 more indigent men of letters who write for bread was not taken out of the market. to be happy. he is said to have had a hundred scholars. a scholar and a beggar seem to have been terms very nearly synonymous. from each scholar. and to be just.

and as there never was a people more jealous of admitting foreigners to public offices than the Athenians. and though their city had then declined from its former grandeur. is said by Plutarch in another place. Teachers of the sciences were probably in those times less common than they came to be in an age or two afterwards. in order to resume the teaching of his school. Aristotle. 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. too. as it is universally agreed. to have been his Didactron. a thousand minæ. or £3333 6s. 8d. who taught. We must not. after having been tutor to Alexander. Gorgias made a present to the temple of Delphi of his own statue in solid gold. The Athenians sent Carneades the Academic. Carneades. what was at that time the most fashionable of all sciences. I presume. The most eminent of them. is represented by Plato as splendid even to ostentation. His way of living. A thousand minæ. suppose that it was as large as the life. Plato himself is said to have lived with a good deal of magnificence. by each course of lectures. or usual price of teaching. He must have made. two other eminent teachers of those times. Many other eminent teachers in those times appear to have acquired great fortunes. notwithstanding. when the competition had probably somewhat reduced both the price of their labour and the admiration for their persons. to return to Athens. both by him and his father Philip. thought it worth while.The Wealth of Nations: Book 1 190 extraordinary from so great a city to so famous a teacher. however. too. accordingly. upon a solemn embassy to Rome. therefore. was a Babylonian by birth. it was still an independent and considerable republic. as well as that of Hippias and Protagoras. rhetoric. and most munificently rewarded. their consideration Adam Smith ElecBook Classics .

The public. The one is in an advancing state. if the constitution of those schools and colleges. the policy of Europe. but the cheapness of literary education is surely an advantage which greatly overbalances this trifling inconveniency. rather advantageous than hurtful to the public. those in another are obliged to content themselves with bare subsistence. even in the same employment. This inequality is upon the whole. and sometimes in the same neighbourhood. therefore. might derive still greater benefit from it. and the superabundance of hands is continually increasing. The exclusive privileges of corporations obstruct it from one place to another. even in the same place. and both that and an exclusive corporation in the other. too. In many different manufactures. It frequently happens that while high wages are given to the workmen in one manufacture. The Statute of Apprenticeship obstructs the free circulation of labour from one employment to another. without being able to lend the least assistance to one another. and has. It may somewhat degrade the profession of a public teacher. was more reasonable than it is at present through the greater part of Europe. in which education is carried on. Thirdly.The Wealth of Nations: Book 1 191 for him must have been very great. The Statute of Apprenticeship may oppose it in the one case. and from place to place. Those two manufactures may sometimes be in the same town. a continual demand for new bands: the other is in a declining state. however. by obstructing the free circulation of labour and stock both from employment to employment. occasions in some cases a very inconvenient inequality in the whole of the advantages and disadvantages of their different employments. the operations are so Adam Smith ElecBook Classics . perhaps.

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. and their wages would neither rise too high in the thriving. are almost entirely the same. Whatever obstructs the free circulation of labour from one employment to another obstructs that of stock likewise. in England. if those absurd laws did not hinder them. but the difference is so insignificant that either a linen or a silk weaver might become a tolerable work in a very few days. that the workmen could easily change trades with one another. or to work as common labourers. The arts of weaving plain linen and plain silk. but as it is not much cultivated through the greater part of the country. by their habits.The Wealth of Nations: Book 1 192 much alike. for example. therefore. it can afford no general resource to the workmen of other decaying manufactures. who. The linen manufacture indeed is. the workmen might find a resource in one of the other two which was in a more prosperous condition. choose to come upon the parish. therefore. they are much worse qualified than for any sort of manufacture that bears any resemblance to their own. have no other choice but either to come upon the parish. wherever the Statute of Apprenticeship takes place. open to everybody. were decaying. by a particular statute. Corporation laws. nor sink too low in the decaying manufacture. for which. give less obstruction to the free circulation of stock from one place to another than to that of labour. than for a poor Adam Smith ElecBook Classics . however. That of weaving plain woollen is somewhat different. It is everywhere much easier for a wealthy merchant to obtain the privilege of trading in a town corporate. If any of those three capital manufactures. They generally.

so far as I know. with the churchwardens. and that overseers of the poor should be annually appointed. to every part of Europe. after some other ineffectual attempts for their relief. therefore. upon complaint made by the churchwardens or overseers of the poor. It is the labour of artificers and manufacturers only of which the free circulation is obstructed by corporation laws. When by the destruction of monasteries the poor had been deprived of the charity of those religious houses. peculiar to England. to remove Adam Smith ElecBook Classics . and present state of this disorder. but that within that time it should be lawful for two justices of the peace. that forty days’ undisturbed residence should gain any person a settlement in any parish. The obstruction which corporation laws give to the free circulation of labour is common. I believe. The difficulty of obtaining settlements obstructs even that of common labour. That which is given to it by the Poor Laws is. who. should raise by a parish rate competent sums for this purpose.The Wealth of Nations: Book 1 193 artificer to obtain that of working in it. Who were to be considered as the poor of each parish became. It may be worth while to give some account of the rise. By this statute the necessity of providing for their own poor was indispensably imposed upon every parish. or even in being allowed to exercise his industry in any parish but that to which he belongs. after some variation. c. the greatest perhaps of any in the police of England. that every parish should be bound to provide for its own poor. 2. progress. was at last determined by the 13th and 14th of Charles II when it was enacted. it was enacted by the 43rd of Elizabeth. a question of some importance. It consists in the difficulty which a poor man finds in obtaining a settlement. This question.

“After all.” says Doctor Burn. parish officers sometimes bribing their own poor to go clandestinely to another parish. “this kind of settlement. or could give such security for the discharge of the parish where he was then living. it is said. immediately after divine service. therefore. receiving the notice. of the place of his abode and the number of his family. and the design of the acts is not so much for gaining of settlements. as those justices should judge sufficient. Some frauds. unless he either rented a tenement of ten pounds a year. by the 1st of James II that the forty days’ undisturbed residence of any person necessary to gain a settlement should be accounted only from the time of his delivering notice in writing. It was enacted. and by keeping themselves concealed for forty days to gain a settlement there. as for the avoiding of them. But parish officers. and taking no proper steps in consequence of it. by continuing forty days after publication of notice in writing. As every person in a parish. to the discharge of that to which they properly belonged. by persons coming into a parish clandestinely: for the giving of notice is only Adam Smith ElecBook Classics .The Wealth of Nations: Book 1 194 any new inhabitant to the parish where he was last legally settled. was supposed to have an interest to prevent as much as possible their being burdened by such intruders. is very seldom obtained. it seems. and sometimes connived at such intrusions. therefore. to one of the churchwardens or overseers of the parish where he came to dwell. were committed in consequence of this statute. than they had been with regard to other parishes. it was further enacted by the 3rd of William III that the forty days’ residence should be accounted only from the publication of such notice in writing on Sunday in the church. were not always more honest with regard to their own.

or by electing him into a parish office. he shall by giving of notice compel the parish either to allow him a settlement uncontested. to try the right. An apprentice is scarce ever married. The first was. the third. the fourth. No married man can well gain any settlement in either of the two last ways. But if a person’s situation is such.” This statute. but by the public deed of the whole parish. by forty days’ inhabitancy. and continuing in the same service during the whole of it. that even at this day.The Wealth of Nations: Book 1 195 putting a force upon the parish to remove. rendered it almost impracticable for a poor man to gain a new settlement in the old way. either by taxing him to parish rates. by serving an apprenticeship in the parish. that it is doubtful whether he is actually removable or not. if no Adam Smith ElecBook Classics . who are too well aware of the consequences to adopt any new-comer who has nothing but his labour to support him. by being taxed to parish rates and paying them. and it is expressly enacted that no married servant shall gain any settlement by being hired for a year. But that it might not appear to preclude altogether the common people of one parish from ever establishing themselves with security in another. by being hired into service there for a year. and serving in it a year. the second. it appointed four other ways by which a settlement might be gained without any notice delivered or published. or. therefore. Nobody can gain a settlement by either of the two first ways. by removing him. which before had been so customary in England. by being elected into an annual parish office. The principal effect of introducing settlement by service has been to put out in a great measure the old fashion of hiring for a year. by suffering him to continue forty days.

whether labourer or artificer. What security they shall require.The Wealth of Nations: Book 1 196 particular term is agreed upon. subscribed by the churchwardens and overseers of the poor. as every last settlement discharges all the foregoing. But this is a security which scarce any man who lives by labour can give. When such a person. and servants are not always willing to be so hired. By the 8th and 9th of William III it was enacted that if any person should bring a certificate from the parish where he was last legally settled. they might thereby lose their original settlement in the places of their nativity. But masters are not always willing to give their servants a settlement by hiring them in this manner. it having been enacted that the purchase even of a freehold estate of less than thirty pounds’ value shall not gain any person a settlement. a thing impossible for one who has nothing but his labour to live by. is likely to gain any new settlement either by apprenticeship or by service. how healthy and industrious soever. In order to restore in some measure that free circulation of labour which those different statutes had almost entirely taken away. carried his industry to a new parish. but they cannot well require less than thirty pounds. 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. as not being sufficient for the discharge of the parish. because. he was liable to be removed. and much greater security is frequently demanded. therefore. and Adam Smith ElecBook Classics . indeed. the habitation of their parents and relations. is left altogether to their discretion. No independent workman. the invention of certificates was fallen upon. unless he either rented a tenement of ten pounds a year. the law intends that every servant is hired for a year. it is evident.

namely. the Adam Smith ElecBook Classics . nor by paying parish rates. and cannot be removed. it was further enacted by the same statute that he should gain no settlement there by any means whatever. And in order to give the most perfect security to the parish where such certificated man should come to reside. nor by apprenticeship. nor by paying parish rates.” says he. and for their maintenance in the meantime.The Wealth of Nations: Book 1 197 allowed by two justices of the peace. How far this invention has restored that free circulation of labour which the preceding statutes had almost entirely taken away. except either by renting a tenement of ten pounds a year. and the parish shall be paid for the removal. and that if they fall sick. but only upon his becoming actually chargeable. that they can settle neither apprentices nor servants. and that then the parish which granted the certificate should be obliged to pay the expense both of his maintenance and of his removal. c. nor by giving notice. that persons residing under them can gain no settlement. By the 12th of Queen Anne. nor by service. we may learn from the following very judicious observation of Doctor Burn. and consequently neither by notice. that every other parish should be obliged to receive him. or by serving upon his own account in an annual parish office for one whole year. too. stat. it is certainly known whither to remove them. it was further enacted that neither the servants nor apprentices of such certificated man should gain any settlement in the parish where he resided under such certificate. “It is obvious. that he should not be removable merely upon account of his being likely to become chargeable. neither by apprenticeship. nor by service. 18. 1. that if they become chargeable. “that there are divers good reasons for requiring certificates with persons coming to settle in any place.

The very unequal price of labour which we frequently find in England in places at no great distance from one another 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. it is altogether discretionary in the parish officers either to grant or to refuse it. and that they ought very seldom to be granted by that which he proposes to leave. or whatever advantage he may propose to himself by living elsewhere.” says the same very intelligent author in his History of the Poor Laws. A single man. “by putting it in the power of a parish officer to imprison a man as it were for life. Which reasons will hold proportionably for parishes not granting certificates in ordinary cases. indeed. and in a worse condition. but that they will have the certificated persons again. and certifies nothing but that the person belongs to the parish to which he really does belong. who is healthy and industrious. for it is far more than an equal chance. A mandamus was once moved for.” Though a certificate carries along with it no testimonial of good behaviour. to compel the churchwardens and overseers to sign a certificate. but a man with a wife and family who should attempt Adam Smith ElecBook Classics . but the court of King’s Bench rejected the motion as a very strange attempt.” The moral of this observation seems to be that certificates ought always to be required by the parish where any poor man comes to reside. “There is somewhat of hardship in this matter of certificates. 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. may sometimes reside by sufferance without one.The Wealth of Nations: Book 1 198 parish which gave the certificate must maintain them: none of all which can be without a certificate.

have now for more than a century together suffered themselves to be exposed to this oppression without a remedy. natural boundaries which sometimes separate very distinctly different rates of wages in other countries. The scarcity of hands in one parish. I will venture Adam Smith ElecBook Classics . and if the single man should afterwards marry. The common people of England. yet it has never been the object of any general popular clamour. In such countries. as it is constantly in Scotland. To remove a man who has committed no misdemeanour from the parish where he chooses to reside is an evident violation of natural liberty and justice. cannot always be relieved by their superabundance in another. till they fall back to the common rate of the country.The Wealth of Nations: Book 1 199 to do so would in most parishes be sure of being removed. Though men of reflection. such as that against general warrants. he would generally be removed likewise. however. so jealous of their liberty. where it is often more difficult for a poor man to pass the artificial boundary of a parish than an arm of the sea or a ridge of high mountains. in all other countries where there is no difficulty of settlement. therefore. but such a one as was not likely to occasion any general oppression. too. but like the common people of most other countries never rightly understanding wherein it consists. an abusive practice undoubtedly. There is scarce a poor man in England of forty years of age. I believe. and sink gradually as the distance from such places increases. yet we never meet with those sudden and unaccountable differences in the wages of neighbouring places which we sometimes find in England. or wherever else there is an extraordinary demand for labour. and. though wages may sometimes rise a little in the neighbourhood of a great town. have sometimes complained of the law of settlements as a public grievance.

for if all persons in the same kind of work were to receive equal wages. but it is sometimes otherwise when in favour of the masters. in goods. but did not always really pay. and five miles round it. except in the case of a general mourning. its counsellors are always the masters. “By the experience of above four hundred years. This law is in favour of the workmen: Adam Smith ElecBook Classics . When the regulation. who has not in some part of his life felt himself most cruelly oppressed by this ill-contrived law of settlements. it is always just and equitable. is in favour of the workmen. It only obliges them to pay that value in money. first by general laws extending over the whole kingdom. though anciently it was usual to rate wages. there would be no emulation. more than two shillings and sevenpence halfpenny a day. however. It imposes no real hardship upon the masters. I shall conclude this long chapter with observing that. and afterwards by particular orders of the justices of peace in every particular county. therefore. “it seems time to lay aside all endeavours to bring under strict regulations. from giving. still attempt sometimes to regulate wages in particular trades and in particular places. which they pretended to pay.” Particular Acts of Parliament. Thus the 8th of George III prohibits under heavy penalties all master tailors in London. both these practices have now gone entirely into disuse. and their workmen from accepting. Thus the law which obliges the masters in several different trades to pay their workmen in money and not in goods is quite just and equitable. Whenever the legislature attempts to regulate the differences between masters and their workmen.” says Doctor Burn. what in its own nature seems incapable of minute limitation. and no room left for industry or ingenuity.The Wealth of Nations: Book 1 200 to say.

The complaint of the workmen. which does not exist there. so far as I know. In the greater part of the towns of Scotland. there is an incorporation of bakers who claim Adam Smith ElecBook Classics . Where there is an exclusive corporation. the only remnant of this ancient usage. This defect was not remedied till the 3rd of George III. on account of a defect in the law. Were the workmen to enter into a contrary combination of the same kind. they commonly enter into a private bond or agreement not to give more than a certain wage under a certain penalty. When masters combine together in order to reduce the wages of their workmen. has produced no sensible advantage. The method of fixing the assize of bread established by the 31st of George II could not be put in practice in Scotland. too. it may perhaps be proper to regulate the price of the first necessary of life. the law would punish them very severely. it would treat the masters in the same manner. it was usual to attempt to regulate the profits of merchants and other dealers. that it puts the ablest and most industrious upon the same footing with an ordinary workman. its execution depending upon the office of a clerk of the market. The want of an assize occasioned no sensible inconveniency. however.The Wealth of Nations: Book 1 201 but the 8th of George III is in favour of the masters. the competition will regulate it much better than any assize. But where there is none. But the 8th of George III enforces by law that very regulation which masters sometimes attempt to establish by such combinations. in the few places where it has yet taken place. In ancient times. The assize of bread is. seems perfectly well founded. by rating the price both of provisions and other goods. not to accept of a certain wage under a certain penalty. and the establishment of one. and if it dealt impartially.

seems not to be much affected. Adam Smith ElecBook Classics . therefore. must in the end affect them equally in all different employments. at least for any considerable time. as has already been observed. by the riches or poverty. The proportion between them. Such revolutions in the public welfare. by any such revolutions.The Wealth of Nations: Book 1 202 exclusive privileges. The proportion between the different rates both of wages and profit in the different employments of labour and stock. or declining state of the society. though they affect the general rates both of wages and profit. must remain the same. the advancing. stationary. and cannot well be altered. though they are not very strictly guarded.

or. Sometimes. is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. is frequently no more than Adam Smith ElecBook Classics R Of the Rent of Land . it may be thought. may still be considered as the natural rent of land. whatever part of its price is over and above this share. indeed. The rent of land. together with the ordinary profits of farming stock in the neighbourhood. and purchases and maintains the cattle and other instruments of husbandry.The Wealth of Nations: Book 1 203 Chapter XI ent. he naturally endeavours to reserve to himself as the rent of his land. more frequently the ignorance. of the landlord. Whatever part of the produce. makes him accept of somewhat less than this portion. the liberality. and the landlord seldom means to leave him any more. the ignorance of the tenant makes him undertake to pay somewhat more. though more rarely. This is evidently the smallest share with which the tenant can content himself without being a loser. or the rent for which it is naturally meant that land should for the most part be let. which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed. however. pays the labour. This portion. or to content himself with somewhat less than the ordinary profits of farming stock in the neighbourhood. considered as the price paid for the use of land. and sometimes too. In adjusting the terms of the lease. what is the same thing.

may be partly the case upon some occasions. particularly in Scotland. But in order to profit by the produce of the water. no doubt. when burnt. the landlord commonly demands the same augmentation of rent as if they had been all made by his own.The Wealth of Nations: Book 1 204 a reasonable profit or interest for the stock laid out by the landlord upon its improvement. and of which the produce. they must have a habitation upon the neighbouring land. however. The rent of the landlord is in proportion. for it can scarce ever be more than partly the case. and the supposed interest or profit upon the expense of improvement is generally an addition to this original rent. The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish. soap. besides. The landlord demands a rent even for unimproved land. are not always made by the stock of the landlord. When the lease comes to be renewed. but to what he can make both by the land and by the water. Those improvements. upon such rocks only as lie within the high water mark. demands a rent for it as much as for his corn fields. however. The landlord. and for several other purposes. useful for making glass. It is partly paid in sea-fish. but sometimes by that of the tenant. was never augmented by human industry. which are twice every day covered with the sea. Kelp is a species of sea-weed. He sometimes demands rent for what is altogether incapable of human improvement. which makes a great part of the subsistence of their inhabitants. whose estate is bounded by a kelp shore of this kind. not to what the farmer can make by the land. This. which. therefore. It grows in several parts of Great Britain. yields an alkaline salt. and one of the very few instances in which rent makes a part of the Adam Smith ElecBook Classics .

according to different circumstances. though the commodity may be brought to market. considered as the price paid for the use of the land. Whether the price is or is not more depends upon the demand. enters into the composition of the price of commodities in a different way from wages and profit. If it is not more. 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 land. it is to be observed. in order to bring a particular commodity to market. Such parts only of the produce of land can commonly be brought to market of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither.The Wealth of Nations: Book 1 205 price of that commodity is to be found in that country. therefore. The rent of the land. Rent. or no more. is naturally a monopoly price. or very little more. it can afford no rent to the landlord. but to what the farmer can afford to give. together with its ordinary profits. High or low wages and profit are the causes of high or low price. that its price is high or low. The former must always afford a rent to the landlord. a great deal more. than what is sufficient to pay those wages and Adam Smith ElecBook Classics . It is not at all proportioned to what the landlord may have laid out upon the improvement of the land. or to what he can afford to take. If the ordinary price is more than this. and sometimes may not. therefore. high or low rent is the effect of it. There are some parts of the produce of land for which the demand must always be such as to afford a greater price than what is sufficient to bring them to market. But it is because its price is high or low. The latter sometimes may. It is because high or low wages and profit must be paid.

when compared both with one another and with manufactured commodities. PART 1 Of the Produce of Land which always affords Rent As men. too. is always more than sufficient to replace the stock which employed that labour. The quantity of labour. according to the rate at which the sort of labour is commonly maintained in the neighbourhood. that it affords a high rent. in the different periods of improvement. indeed. But land. or no rent at all. like all other animals. first. in demand. together with its Adam Smith ElecBook Classics . naturally take place in the relative value of those two different sorts of rude produce. which it can purchase is not always equal to what it could maintain. The surplus. and somebody can always be found who is willing to do something in order to obtain it. food is always.The Wealth of Nations: Book 1 206 profit. if managed in the most economical manner. will divide this chapter into three parts. It can always purchase or command a greater or smaller quantity of labour. in almost any situation. of those which sometimes may and sometimes may not afford rent. of the variations which. naturally multiply in proportion to the means of their subsistence. produces a greater quantity of food than what is sufficient to maintain all the labour necessary for bringing it to market in the most liberal way in which that labour is ever maintained. of those parts of the produce of land which always afford some rent. But it can always purchase such a quantity of labour as it can maintain. and. The particular consideration. secondly. or a low rent. more or less. thirdly. on account of the high wages which are sometimes given to labour.

less labour becomes requisite to tend them. A smaller proportion of this diminished surplus. Something. always remains for a rent to the landlord. but to afford some small rent to the landlord. whatever be its produce. must belong to the landlord. by the increase of the produce and by the diminution of the labour which must be maintained out of it. and the surplus. therefore. The most desert moors in Norway and Scotland produce some sort of pasture for cattle. and to collect their produce. A greater quantity of labour. The rent increases in proportion to the goodness of the pasture. Good roads. by diminishing the expense of carriage. put the remote parts of the country more Adam Smith ElecBook Classics . it must always cost more to bring the produce of the distant land to market. The landlord gains both ways. whatever be its fertility. But in remote parts of the country the rate of profits. must be maintained out of it. canals. and to pay the ordinary profit to the farmer or owner of the herd or flock. Though it may cost no more labour to cultivate the one than the other. Land in the neighbourhood of a town gives a greater rent than land equally fertile in a distant part of the country. is generally higher than in the neighbourhood of a large town. and navigable rivers. of which the milk and the increase are always more than sufficient. The rent of land not only varies with its fertility. but with its situation. from which are drawn both the profit of the farmer and the rent of the landlord. therefore. must be diminished. The same extent of ground not only maintains a greater number of cattle. therefore. as has already been shown.The Wealth of Nations: Book 1 207 profits. but as they are brought within a smaller compass. not only to maintain all the labour necessary for tending them.

however. and would thereby reduce their rents. would be able to sell their grass and corn cheaper in the London market than themselves. therefore. from the cheapness of labour. They are upon that account the greatest of all improvements. A cornfield of moderate fertility produces a much greater quantity of food for man than the best pasture of equal extent. Though they introduce some rival commodities into the old market. Monopoly. If a pound of butcher’s meat. It seems to have done so universally in the Adam Smith ElecBook Classics . yet the surplus which remains after replacing the seed and maintaining all that labour. this greater surplus would everywhere be of greater value. have risen. and their cultivation has been improved since that time. which must always be the most extensive circle of the country. Those remoter counties. besides. was never supposed to be worth more than a pound of bread. It is not more than fifty years ago that some of the counties in the neighbourhood of London petitioned the Parliament against the extension of the turnpike roads into the remoter counties. They encourage the cultivation of the remote. is likewise much greater. which can never be universally established but in consequence of that free and universal competition which forces everybody to have recourse to it for the sake of self-defence. by breaking down the monopoly of the country in its neighbourhood. They are advantageous to the town. is a great enemy to good management.The Wealth of Nations: Book 1 208 nearly upon a level with those in the neighbourhood of the town. and ruin their cultivation. They are advantageous even to that part of the country. Their rents. Though its cultivation requires much more labour. they open many new markets to its produce. and constitute a greater fund both for the profit of the farmer and the rent of the landlord. they pretended.

There is more butcher’s meat than bread. not only the labour necessary for tending them. at that time the direct road from Europe to the silver mines of Potosi. the ordinary price of an ox. By the extension besides of cultivation. he says. was. The cattle bred upon the most uncultivated moors. we are told by Ulloa. which then occupy the far greater part of the country. are all abandoned to cattle. one-and-twenty pence halfpenny sterling. but the rent which the landlord and the profit which the farmer could have drawn from such land employed in tillage. must be sufficient to pay. chosen from a herd of two or three hundred. the unimproved wilds become insufficient to supply the demand for butcher’s meat. An ox there. therefore. But corn can nowhere be raised without a great deal of labour. of which the price. cost little more than the labour of catching him. and in a country which lies upon the river Plate. It is otherwise when cultivation is extended over the greater part of the country. But the relative values of those two different species of food. and which consequently brings the greatest price. forty or fifty years ago. bread and butcher’s meat. the money price of labour could not be very cheap. A great part of the cultivated lands must be employed in rearing and fattening cattle. At Buenos Ayres. when brought to the same market. He says nothing of the price of bread. therefore. Adam Smith ElecBook Classics . four reals. and the price of butcher’s meat becomes greater than the price of bread. probably because he found nothing remarkable about it. There is then more bread than butcher’s meat. the unimproved wilds. The competition changes its direction. In its rude beginnings.The Wealth of Nations: Book 1 209 rude beginnings of agriculture. is the food for which there is the greatest competition. are very different in the different periods of agriculture. and bread.

and if it was not compensated.The Wealth of Nations: Book 1 210 are. sold at the same price as those which are reared upon the most improved land. and the rents of many highland estates have been tripled and quadrupled in the same time. therefore. between the rent and profit of grass and those of corn. In almost every part of Great Britain a pound of the best butcher’s meat is. It is thus that in the progress of improvement the rent and profit of unimproved pasture come to be regulated in some measure by the rent and profit of what is improved. will produce a much smaller quantity of the one species of food than of the other. of the land of which the immediate produce is food for cattle. Their ordinary price is at present about three times greater than at the beginning of the century. in the present times. generally worth more than two pounds of the best white bread. Corn is an annual crop. 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. The proprietors of those moors profit by it. more corn land would be turned into pasture. and raise the rent of their land in proportion to the price of their cattle. part of what was in pasture would be brought back into corn. If it was more than compensated. in proportion to their weight or goodness. the inferiority of the quantity must be compensated by the superiority of the price. and in plentiful years it is sometimes worth three or four pounds. It is not more than a century ago that in many parts of the highlands of Scotland. and these again by the rent and profit of corn. Butcher’s meat. a crop which requires four or five years to grow. This equality. and of that of which the immediate produce is food for men. As an acre of land. must be understood to take place only through the greater Adam Smith ElecBook Classics . however.

and the rent and profit of grass are much superior to what can be made by corn. and a considerable part of ancient Italy seems to have been so during the prosperity of the Romans. This corn was brought from the conquered provinces. the more bulky commodity. must have been very much discouraged by the distributions of corn which were frequently made to the people. the third. and to feed ill. This local advantage. either gratuitously. or at a very low price. Particular circumstances have sometimes rendered some countries so populous that the whole territory. of which several. Adam Smith ElecBook Classics . the second. cannot be communicated to the lands at a distance. has not been sufficient to produce both the grass and the corn necessary for the subsistence of their inhabitants. he ranked only in the fourth place of profit and advantage. and which cannot be so easily brought from a great distance.The Wealth of Nations: Book 1 211 part of the improved lands of a great country. old Cato said. therefore. the food of the great body of the people. together with the high price of butcher’s meat. have been principally employed in the production of grass. To feed well. Tillage. like the lands in the neighbourhood of a great town. as we are told by Cicero. Thus in the neighbourhood of a great town the demand for milk and for forage to horses frequently contribute. indeed. To plough. it is evident. to feed tolerably well. was the first and most profitable thing in the management of a private estate. has been chiefly imported from foreign countries. In some particular local situations it is quite otherwise. to raise the value of grass above what may be called its natural proportion to that of corn. and corn. Holland is at present in this situation. Their lands. in that part of ancient Italy which lay in the neighbourhood of Rome.

carrots. which feed better. and must have discouraged its cultivation in that country. upon the land which is fit for producing it. in an improved country. The low price at which this corn was distributed to the people must necessarily have sunk the price of what could be brought to the Roman market from Latium. not so properly paid from the value of its own produce as from that of the corn lands which are cultivated by means of it. and will probably last no longer than that scarcity. and the other expedients which have been fallen upon to make an equal quantity of land feed a greater number of cattle than when in natural grass. should somewhat reduce. a well-enclosed piece of grass will frequently rent higher than any corn field in its neighbourhood. about sixpence a peck. The advantage of enclosure is greater for pasture than for corn. The present high rent of enclosed land in Scotland seems owing to the scarcity of enclosure. of turnips. It is convenient for the maintenance of the cattle employed in the cultivation of the corn. the rent and profit of corn. cabbages. too. the rent and profit of pasture. when they are not liable to be disturbed by their keeper or his dog. must naturally regulate. It is likely to fall. it might be expected. the superiority which. of which the principal produce is corn. The use of the artificial grasses. It seems Adam Smith ElecBook Classics .The Wealth of Nations: Book 1 212 instead of taxes. or whatever else is the common vegetable food or the people. if ever the neighbouring lands are completely enclosed. It saves the labour of guarding the cattle. In an open country too. in this case. to the republic. or the ancient territory of Rome. and its high rent is. were obliged to furnish a tenth part of their produce at a stated price. But where there is no local advantage of this kind. the price of butcher’s meat naturally has over that of bread.

and there is some reason for believing that.The Wealth of Nations: Book 1 213 accordingly to have done so. there was a Parliamentary inquiry into the causes of the high price of provisions at that time. he had paid twenty-seven shillings for the same weight and sort. however. This high price in 1764 is. thirty-one shillings and eightpence per hundred pounds weight. in the nineteenth year of his age. The price paid by Prince Henry amounts to 33/4d. it must be observed. among other proof to the same purpose. in that dear year. the witnesses stated the price of the choice pieces of the best beef to be to the consumer 4d. In the Parliamentary inquiry in 1764. and it is the best beef only. that in March 1763. which he considered as the ordinary price. or 5d. Doctor Birch has given us an account of the prices of butcher’s meat as commonly paid by that prince. and at that rate the choice pieces could not have been sold by retail for less than 41/2d. he had victualled his ships for twenty-four or twenty-five shillings the hundredweight of beef. coarse and choice pieces taken together. that is. In the appendix to the Life of Prince Henry. Prince Henry died on the 6th of November 1612. It is there said that the four quarters of an ox weighing six hundred pounds usually cost him nine pounds ten shillings. It was then. In March 1764. which is fit to be salted for those distant voyages. whereas. or thereabouts. per pound weight of the whole carcase. at least in the London market. Adam Smith ElecBook Classics . four shillings and eightpence cheaper than the ordinary price paid by Prince Henry. given in evidence by a Virginia merchant. the price of butcher’s meat in proportion to the price of bread is a good deal lower in the present times than it was in the beginning of the last century. the pound.

the one a greater rent. than in the twelve years preceding 1764. In all great countries the greater part of the cultivated lands are employed in producing either food for men or food for cattle. and the coarse pieces in general to be from seven farthings to 21/2d. including that year. or a greater annual expense of cultivation.The Wealth of Nations: Book 1 214 and 41/4d. If any particular produce afforded less. 91/2d. But in the twelve years preceding 1764. wheat appears to have been a good deal cheaper. the average price of the best wheat at the Windsor market was £1 18s. and this they said was in general one halfpenny dearer than the same sort of pieces had usually been sold in the month of March. But even this high price is still a good deal cheaper than what we can well suppose the ordinary retail price to have been the time of Prince Henry. 31/6d. some part of the lands in corn or pasture would soon be turned to that produce. This superiority. which require either a greater original expense of improvement. and if any afforded more. however. During the twelve first years of the last century. the quarter of nine Winchester bushels. will seldom be found to amount to more than a reasonable interest or compensation for Adam Smith ElecBook Classics . appear commonly to afford. including that year. The rent and profit of these regulate the rent and profit of all other cultivated land. the average price of the same measure of the best wheat at the same market was £2 1s. in order to fit the land for them. the land would soon be turned into corn or pasture. and butcher’s meat a good deal dearer. In the twelve first years of the last century. Those productions. indeed. the other a greater profit than corn or pasture. therefore. the pound.

after the vineyard. Hence a greater rent becomes due to the landlord. Its price. The advantage which the landlord derives from such improvements seems at no time to have been greater than what was sufficient to compensate the original expense of making them. and bricks (he meant. therefore. a fruit garden. In the ancient husbandry. who wrote upon husbandry about two thousand years ago. he said. The circumstances of gardeners. because the persons who should naturally be their best customers supply themselves with all their most precious productions. But to bring the ground into this condition requires more expense. are generally greater than in a corn or grass field. and the winter storm. a kitchen garden. and always moderate. The crop too. Hence a greater profit becomes due to the farmer. It requires. that little advantage is to be made by those who practise it for profit. a more attentive and skilful management. besides compensating all occasional losses. generally mean. would not compensate the expense of a stone wall. a well-watered kitchen garden seems to have been the part of the farm which was supposed to yield the most valuable produce. must afford something like the profit of insurance. Their delightful art is practised by so many rich people for amusement. both the rent of the landlord. too.The Wealth of Nations: Book 1 215 this superior expense. and the profit of the farmer. and required Adam Smith ElecBook Classics . In a hop garden. and who was regarded by the ancients as one of the fathers of the art. thought they did not act wisely who enclosed a kitchen garden. But Democritus. I suppose. The profit. at least in the hop and fruit garden. may satisfy us that their great ingenuity is not commonly over-recompensed. is more precarious. bricks baked in the sun) mouldered with the rain.

in such countries must be sufficient to pay the expense of building and maintaining what they cannot be had without. to have the command of a stream of water which could be conducted to every bed in the garden. was the most valuable part of the farm. In Great Britain. That the vineyard. as we learn from Columella. Columella. it was thought proper. for in countries so near the sun. therefore. does not controvert it. but which. but proposes a very frugal method of enclosing with a hedge of brambles and briars. which.The Wealth of Nations: Book 1 216 continual repairs. which had before been recommended by Varro. the produce of a kitchen garden had. he had found by experience to be both a lasting and an impenetrable fence. and some other northern countries. who reports this judgment of Democritus. Palladius adopts the opinion of Columella. In the judgment of those ancient improvers. was not commonly known in the time of Democritus. which thus enjoys the benefit of an enclosure which its own produce could seldom pay for. he says. in those times as in the present. the finer fruits cannot be brought to perfection but by the assistance of a wall. like a true lover of all curious cultivation. been little more than sufficient to pay the extraordinary culture and the expense of watering. it seems. Adam Smith ElecBook Classics . when properly planted and brought to perfection. Through the greater part of Europe a kitchen garden is not at present supposed to deserve a better enclosure than that recommended by Columella. it seems. as it is in the modern through all the wine countries. The fruit-wall frequently surrounds the kitchen garden. He decides. But whether it was advantageous to plant a new vineyard was a matter of dispute among the ancient Italian husbandmen. Their price. seems to have been an undoubted maxim in the ancient agriculture.

seems to favour their opinion. to indicate another opinion. Their writers on agriculture. and to indicate a consciousness in those who must have the experience that this species of cultivation is at present in that country more profitable than any other. Such comparisons. however. by a comparison of the profit and expense. that this superior profit can last no longer than the laws which at present restrain the free cultivation of the vine. and the superabundance of wine. that it was a most advantageous improvement. they obtained an order of council prohibiting both the planting of new vineyards and the renewal of those old ones. and in nothing more so than in agriculture. Had the gain actually made by such plantations been commonly as great as he imagined it might have been. and that it was incapable of any other culture. In 1731. of which the cultivation had been interrupted for two years. certifying that he had examined the land. But had this superabundance been real. it would. In France the anxiety of the proprietors of the old vineyards to prevent the planting of any new ones. however. The pretence of this order was the scarcity of corn and pasture. the lovers and promoters of high cultivation. by reducing the profits Adam Smith ElecBook Classics . and endeavours to show. without any order of council. between the profit and expense of new projects are commonly very fallacious. The same point is frequently at this day a matter of controversy in the wine countries. have effectually prevented the plantation of new vineyards. there could have been no dispute about it. It seems at the same time. to be granted only in consequence of an information from the intendant of the province. without a particular permission from the king. indeed.The Wealth of Nations: Book 1 217 in favour of the vineyard. seem generally disposed to decide with Columella in favour of the vineyard.

where the land is fit for producing it. wages. and in this case only. is too small to supply the effectual demand. To diminish the number of those who are capable of paying for it is surely a most unpromising expedient for encouraging the cultivation of corn.The Wealth of Nations: Book 1 218 of this species of cultivation below their natural proportion to those of corn and pasture. With regard to the supposed scarcity of corn. therefore. It sometimes happens. or a greater annual expense of cultivation. The rent and profit of those productions. that the quantity of land. bear no regular proportion to the like surplus in corn or pasture. corn is nowhere in France more carefully cultivated than in the wine provinces. indeed. according to their natural rates. Guienne. It is like the policy which would promote agriculture by discouraging manufactures. yet when they do no more than compensate such extraordinary expense. and the Upper Languedoc. which require either a greater original expense of improvement in order to fit the land for them. occasioned by the multiplication of vineyards. The surplus part of the price which remains after defraying the whole expense of improvement and cultivation may commonly. though often much superior to those of corn and pasture. are in reality regulated by the rent and profit of those common crops. in this case. 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. which can be fitted for some particular produce. by affording a ready market for its produce. or according to the rates at which they are paid in the greater part of other cultivated land. but may exceed it Adam Smith ElecBook Classics . The numerous hands employed in the one species of cultivation necessarily encourage the other. as in Burgundy. and profit necessary for raising and bringing it to market.

can be disposed of to those who are willing to pay more. For though such vineyards are in general more Adam Smith ElecBook Classics . and which has nothing to recommend it but its strength and wholesomeness. upon any light. or according to the rate at which they are paid in common vineyards. Whatever it be. it is supposed. according to the ordinary rate. necessary for preparing and bringing them thither. The whole quantity. or the demand of those who would be willing to pay the whole rent. profit. for example.The Wealth of Nations: Book 1 219 in almost any degree. The vine is more affected by the difference of soils than any other fruit tree. gravelly. The difference is greater or less according as the fashionableness and scarcity of the wine render the competition of the buyers more or less eager. which necessarily raises the price above that of common wine. This flavour. From some it derives a flavour which no culture or management can equal. The whole quantity of such wines that is brought to market falls short of the effectual demand. sometimes it extends through the greater part of a small district. is sometimes peculiar to the produce of a few vineyards. and the greater part of this excess naturally goes to the rent of the landlord. upon any other. and wages. such as can be raised almost anywhere. and sometimes through a considerable part of a large province. between the rent and profit of wine and those of corn and pasture must be understood to take place only with regard to those vineyards which produce nothing but good common wine. the greater part of it goes to the rent of the landlord. It is with such vineyards only that the common land of the country can be brought into competition. for with those of a peculiar quality it is evident that it cannot. or sandy soil. therefore. The usual and natural proportion. real or imaginary.

about thirteen shillings and sixpence of our money. In so valuable a produce the loss occasioned by negligence is so great as to force even the most careless to attention. The greater part of the cultivated lands in Cochin China are employed in producing corn and rice. The respective prices of 1 Voyages d’un philosophe. In Cochin China the finest white sugar commonly sells for three piasters the quintal. ElecBook Classics Adam Smith . or a hundred and seventy-five Paris pounds at a medium. the high price of the wine seems to be not so much the effect as the cause of this careful cultivation.The Wealth of Nations: Book 1 220 carefully cultivated than most others. therefore. the food of the great body of the people. which reduces the price of the hundred-weight English to about eight shillings sterling. What is there called the quintal weighs from a hundred and fifty to two hundred Paris pounds. A small part of this high price.1 a very careful observer of the agriculture of that country. and wages necessary for preparing and bringing it to market. profit. Poivre. not a fourth part of what is commonly paid for the brown or muskavada sugars imported from our colonies. The sugar colonies possessed by the European nations in the West Indies may be compared to those precious vineyards. as we are told by Mr. Their whole produce falls short of the effectual demand of Europe. is sufficient to pay the wages of the extraordinary labour bestowed upon their cultivation. and not a sixth part of what is paid for the finest white sugar. according to the rate at which they are commonly paid by any other produce. and can be disposed of to those who are willing to give more than what is sufficient to pay the whole rent. and the profits of the extraordinary stock which puts that labour into motion.

and that his sugar should be all clear profit. are there probably in the natural proportion. and sugar. We see frequently societies of merchants in London and other trading town’s purchase waste lands in our sugar colonies. Nobody will attempt to improve and cultivate in the same manner the most fertile lands of Scotland. as nearly as can be computed according to what is usually the original expense of improvement and the annual expense of cultivation. But in our sugar colonies the price of sugar bears no such proportion to that of the produce of a rice or corn field either in Europe or in America. to that of corn. If this be true. as more profitable. for I pretend not to affirm it. Tobacco might be cultivated with advantage through the greater part of Europe. and which recompenses the landlord and farmer. and to collect a tax from every different farm in the country where this plant might happen to be cultivated would be Adam Smith ElecBook Classics .The Wealth of Nations: Book 1 221 corn. which they expect to improve and cultivate with profit by means of factors and agents. In Virginia and Maryland the cultivation of tobacco is preferred. notwithstanding the great distance and the uncertain returns from the defective administration of justice in those countries. or in that which naturally takes place in the different crops of the greater part of cultivated land. though from the more exact administration of justice in these countries more regular returns might be expected. Ireland. or the corn provinces of North America. it is as if a corn farmer expected to defray the expense of his cultivation with the chaff and the straw. and that the grain should be all clear profit. It is commonly said that a sugar planter expects that the rum and molasses should defray the whole expense of his cultivation. rice. but in almost every part of Europe it has become a principal subject of taxation.

too. though with some competitors. The cultivation of tobacco has upon this account been most absurdly prohibited through the greater part of Europe. it probably is more nearly so than that for sugar. wages. To prevent the market from being overstocked. which necessarily gives a sort of monopoly to the countries where it is allowed. over and above this quantity of tobacco. they reckon. Such a negro. and our tobacco colonies send us home no such wealthy planters as we see frequently arrive from our sugar islands. for every negro between sixteen and sixty years of age. Our tobacco planters. By act of assembly they have restrained its cultivation to six thousand plants. in Adam Smith ElecBook Classics . four acres of Indian corn. and though the present price of tobacco is probably more than sufficient to pay the whole rent. have shown the same fear of the superabundance of tobacco which the proprietors of the old vineyards in France have of the superabundance of wine. they share largely. it must not be so much more as the present price of sugar. according to the rate at which they are commonly paid in corn land. can manage. it has been supposed. than to levy one upon its importation at the custom-house. and profit necessary for preparing and bring it to market. in the advantage of this monopoly. it would appear that the effectual demand of Europe for tobacco is not completely supplied. supposed to yield a thousand weight of tobacco. and as Virginia and Maryland produce the greatest quantity of it. Though from the preference given in those colonies to the cultivation of tobacco above that of corn. seems not to be so advantageous as that of sugar.The Wealth of Nations: Book 1 222 more difficult. The cultivation of tobacco. accordingly. however. I have never even heard of any tobacco plantation that was improved and cultivated by the capital of merchants who resided in Great Britain. they have sometimes.

the superior advantage of its culture over that of corn. or the surplus quantity of food which would remain to him. ii. In Europe. it is because the quantity of land which can be fitted for it is too small to supply the effectual demand. pp. If such violent methods are necessary to keep up the present price of tobacco. If in any country the common and favourite vegetable food of the people should be drawn from a plant of which the most common land. will not probably be of long continuance. in the same manner as the Dutch are said to do of spices. No particular produce can long afford less. burnt a certain quantity of tobacco for every negro. Except in particular situations. And if any particular produce commonly affords more. the rent of the landlord. Britain need envy neither the vineyards of France nor the olive plantations of Italy. the rent of corn land regulates in Europe that of all other cultivated land. produced a much greater quantity than the most fertile does of corn. therefore. we are told by Dr.The Wealth of Nations: Book 1 223 plentiful years. if it still has any. vol. Except in particular situations. the value of these is regulated by that of corn. It is in this manner that the rent of the cultivated land. corn is the principal produce of land which serves immediately for human food. with the same or nearly the same culture. ElecBook Classics Adam Smith . after paying the labour and replacing the stock of 1 Douglas’ Summary. regulates the rent of the greater part of other cultivated land. Douglas1 (I suspect he has been ill informed). 372-73. of which the produce is human food. because the land would immediately be turned to another use. in which the fertility of Britain is not much inferior to that of either of those two countries.

his real power and authority. or pasture. requires more labour. together with its ordinary profits. from the prevalence of the customs of Europe. for any other vegetable produce that is very useful to men. are said to be the ordinary produce of an acre. and consequently enable the landlord to purchase or command a greater quantity of it. therefore. this greater surplus could always maintain a greater quantity of it. though their fields produce only one crop in the year. a greater share of this greater surplus should belong to the landlord than in corn countries. In Carolina. In those rice countries. where rice is the common and favourite vegetable food of the people. Though its cultivation. are generally both farmers and landlords. Two crops in the year from thirty to sixty bushels each. rice is not there the common and favourite vegetable food of the people. indeed. and the lands which are fit for those purposes are Adam Smith ElecBook Classics . where the planters.The Wealth of Nations: Book 1 224 the farmer. his command of the necessaries and conveniencies of life with which the labour of other people could supply him. the cultivation of rice is found to be more profitable than that of corn. as in other British colonies. A good rice field is a bog at all seasons. therefore. and at one season a bog covered with water. A rice field produces a much greater quantity of food than the most fertile corn field. or. It is unfit either for corn. would necessarily be much greater. would necessarily be much greater. and though. Whatever was the rate at which labour was commonly maintained in that country. or vineyard. and where rent consequently is confounded with profit. a much greater surplus remains after maintaining all that labour. and where the cultivators are chiefly maintained with it. The real value of his rent.

too.The Wealth of Nations: Book 1 225 not fit for rice. The food or solid nourishment. would belong to the landlord. more than compensating the hoeing and other extraordinary culture which is always given to potatoes. Should this root ever become in any part of Europe. which generally precedes the sowing of wheat. like rice in some rice countries. on account of the watery nature of potatoes. the common and favourite vegetable food of the people. three times the quantity produced by the acre of wheat. indeed. the same quantity of cultivated land would maintain a much greater number of people. Adam Smith ElecBook Classics . Population would increase. so as to occupy the same proportion of the lands in tillage which wheat and other sorts of grain for human food do at present. a greater surplus would remain after replacing all the stock and maintaining all the labour employed in cultivation. however. Twelve thousand weight of potatoes from an acre of land is not a greater produce than two thousand weight of wheat. and much superior to what is produced by a field of wheat. the fallow. and the labourers being generally fed with potatoes. The food produced by a field of potatoes is not inferior in quantity to that produced by a field of rice. which can never be turned to that produce. A greater share of this surplus. Allowing. and rents would rise much beyond what they are at present. which can be drawn from each of those two plants. therefore. is not altogether in proportion to their weight. such an acre of potatoes will still produce six thousand weight of solid nourishment. the rent of rice lands cannot regulate the rent of the other cultivated land. Even in the rice countries. An acre of potatoes is cultivated with less expense than an acre of wheat. half the weight of this root to go to water. a very large allowance.

The Wealth of Nations: Book 1 226 The land which is fit for potatoes is fit for almost every other useful vegetable. and as there is not the same difference between the people of fashion in the two countries. I am. and those unfortunate women who live by prostitution. for two or three years together. But it seems to be otherwise with potatoes. The fear of not being able to sell them before they rot discourages their cultivation. the strongest men and the most beautiful women perhaps in the British dominions. they would regulate. somewhat doubtful of the truth of it. In some parts of Lancashire it is pretended. nor look so well. and impossible to store them like corn. the chief obstacle to their ever Adam Smith ElecBook Classics . or of its being peculiarly suitable to the health of the human constitution. The common people in Scotland. and coalheavers in London. are said to be the greater part of them from the lowest rank of people in Ireland. nor so handsome as the same rank of people in England who are fed with wheaten bread. who are fed with oatmeal. and I have frequently heard the same doctrine held in Scotland. No food can afford a more decisive proof of its nourishing quality. are in general neither so strong. If they occupied the same proportion of cultivated land which corn does at present. in the same manner. The chairmen. I have been told. that bread of oatmeal is a heartier food for labouring people than wheaten bread. It is difficult to preserve potatoes through the year. experience would seem to show 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. porters. the rent of the greater part of other cultivated land. and is. however. who are generally fed with this root. perhaps. They neither work so well.

Land in its original rude state can afford the materials of clothing and lodging to a much greater number of people than it can feed. Somebody is always willing to give more for every part of them than what is sufficient to pay the expense of bringing them to market. and there is frequently a demand for more than can be had. Their price. at least in the way in which they require them. according to different circumstances. afford Rent Human food seems to be the only produce of land which always and necessarily affords some rent to the landlord. like bread. which are frequently. In its improved state it can sometimes feed a greater number of people than it can supply with those materials. Other sorts of produce sometimes may and sometimes may not. PART 2 Of the Produce of Land which sometimes does. the principal vegetable food of all the different ranks of the people. therefore. In the one state. which necessarily augments their value.The Wealth of Nations: Book 1 227 becoming in any great country. of little or no value. In the other they are all made use of. In the other there is often a scarcity. and sometimes does not. and are willing to pay for them. afford no rent to the landlord. In the one state a great part of them is thrown away as useless. therefore. and the price of what is used is considered as equal only to the labour and expense of fitting it for use. upon that account. After food. and can. clothing and lodging are the two great wants of mankind. can Adam Smith ElecBook Classics . there is always a superabundance of those materials. therefore.

and find among their wealthier neighbours such a demand for all the materials of clothing which their land produces. found a market in the then wealthier and more industrious country of Flanders. fire-arms. some rent to the landlord. therefore. Among nations of hunters and shepherds. as raises their price above what it costs to send them to those wealthier neighbours. which in old times could neither be consumed nor wrought up at home. have some foreign commerce of this kind. with whom they now exchange their surplus peltry for blankets.The Wealth of Nations: Book 1 228 always afford some rent to the landlord. and what they were exchanged for afforded some addition to the rent of the highland estates. whose food consists chiefly in the flesh of those animals. This was probably the case among the hunting nations of North America before their country was discovered by the Europeans. It affords. In countries not better cultivated than England was then. the most barbarous nations. and its price afforded something to the rent of the land which produced it. the exportation of their hides made the most considerable article of the commerce of that country. and which can neither be wrought up nor consumed at home. The skins of the larger animals were the original materials of clothing. therefore. In the present commercial state of the known world. and brandy. which gives it some value. The wool of England. by providing himself with food. the greater part of them would be thrown away as things of no value. every man. or than the highlands of Scotland are now. and Adam Smith ElecBook Classics . among whom land property is established. provides himself with the materials of more clothing than he can wear. If there was no foreign commerce. I believe. When the greater part of the highland cattle were consumed on their own hills.

the part made use of is worth only the labour and expense of fitting it for that use. the materials of clothing would evidently be so superabundant that a great part of them would be thrown away as useless. The woods of Norway and of the coasts of the Baltic find a market in many parts of Great Britain which they could not find at home. and thereby afford some rent to their Adam Smith ElecBook Classics . even in the present commercial state of the world. But in many parts of North America the landlord would be much obliged to anybody who would carry away the greater part of his large trees. The demand of wealthier nations. it frequently happens. In many parts of Scotland and Wales it affords none. for want of roads and water-carriage. When the materials of lodging are so superabundant. The timber is left to rot upon the ground. however. and no part could afford any rent to the landlord.The Wealth of Nations: Book 1 229 which had no foreign commerce. can be sent to market. Barren timber for building is of great value in a populous and well-cultivated country. sometimes enables him to get a rent for it. In some parts of the highlands of Scotland the bark is the only part of the wood which. and do not so readily become an object of foreign commerce. 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. When they are superabundant in the country which produces them. A good stone quarry in the neighbourhood of London would afford a considerable rent. that they are of no value to the landlord. and the land which produces it affords a considerable rent. The materials of lodging cannot always be transported to so great a distance as those of clothing. It affords no rent to the landlord. who generally grants the use of it to whoever takes the trouble of asking it.

and what is called Equipage. The rich man consumes no more food than his poor neighbour. can be employed in providing other things. are the principal objects of the greater part of those wants and fancies. household furniture. But compare the spacious palace and great wardrobe of the one with the hovel and the few rags of the other. All the other ninety-nine parts are frequently no more than enough to provide them with food. the skins of animals. They do not. or at least the greater part of them. it is easy to find the necessary clothing and lodging. a hundredth or little more than a hundredth part of the labour of the whole year will be sufficient to provide them with such clothing and lodging as satisfy the greater part of the people. but in quantity it is very nearly the same. and to select and prepare it may require more labour and art. The other half. The simplest species of clothing. it may often be difficult to find food. Countries are populous not in proportion to the number of people whom their produce can clothe and lodge. When food is provided. In quality it may be very different. the labour of half the society becomes sufficient to provide food for the whole. and you will be sensible Adam Smith ElecBook Classics . But when by the improvement and cultivation of land the labour of one family can provide food for two. require a great deal. Among savage and barbarous nations. require somewhat more labour to dress and prepare them for use. but in proportion to that of those whom it can feed. Clothing and lodging. or in satisfying the other wants and fancies of mankind. But though these are at hand.The Wealth of Nations: Book 1 230 proprietors. therefore. In some parts even of the British dominions what is called a house may be built by one day’s labour of one man. however.

for the fossils and minerals contained in the bowels of the earth. and the precious stones. Those. What is over and above satisfying the limited desire is given for the amusement of those desires which cannot be satisfied. Adam Smith ElecBook Classics . the precious metals. and household furniture. or. the quantity of materials which they can work up increases in a much greater proportion than their numbers. exert themselves to gratify those fancies of the rich. therefore. in building. Food is in this manner not only the original source of rent. The poor. The desire of food is limited in every man by the narrow capacity of the human stomach. dress. the price of it. in order to obtain food. equipage. what is the same thing. lodging. seems to have no limit or certain boundary. and as the nature of their business admits of the utmost subdivisions of labour. but every other part of the produce of land which afterwards affords rent derives that part of its value from the improvement of the powers of labour in producing food by means of the improvement and cultivation of land. and household furniture is almost as great in quantity as it is in quality. for gratifications of this other kind. are always willing to exchange the surplus. or with the growing improvement and cultivation of the lands. equipage. but the desire of the conveniences and ornaments of building. who have the command of more food than they themselves can consume. and to obtain it more certainly they vie with one another in the cheapness and perfection of their work. or household furniture.The Wealth of Nations: Book 1 231 that the difference between their clothing. The number of workmen increases with the increasing quantity of food. either usefully or ornamentally. but seem to be altogether endless. Hence arises a demand for every sort of material which human invention can employ. dress.

the stock employed in working them. together with it ordinary profits. Whether it is or is not such depends upon different circumstances. the demand for them is not always such as to afford a greater price than what is sufficient to pay the labour. gets the ordinary profit of the capital which he employs in it. and replace. according as the quantity of mineral which can be brought from it by a certain quantity of labour is greater or less than what can be brought by an equal quantity from the greater part of other mines of the same kind. do not afford it always. and replace. The produce does not pay the expense. the stock which must be employed in bringing them to market. but no rent to the landlord. who. which afterwards afford rent. A mine of any kind may be said to be either fertile or barren. can afford any rent depends partly upon its fertility. A quantity of Adam Smith ElecBook Classics . They can be wrought advantageously by nobody but the landlord. Whether a coal-mine. Even in improved and cultivated countries. Many coal-mines in Scotland are wrought in this manner. however. cannot be wrought on account of their situation. Other coal-mines in the same country. being himself undertaker of the work. Some coal-mines advantageously situated cannot be wrought on account of their barrenness. and can be wrought in no other. sufficiently fertile.The Wealth of Nations: Book 1 232 Those other parts of the produce of land. They can afford neither profit nor rent. and partly upon its situation. and nobody can afford to pay any. They afford some profit to the undertaker of the work. for example. together with it ordinary profits. The landlord will allow nobody else to work them without paying some rent. There are some of which the produce is barely sufficient to pay the labour.

secure them in the free enjoyment of all that she provides. when allowed to wander through the woods. at the place where they are consumed. nearly in the same manner.The Wealth of Nations: Book 1 233 mineral sufficient to defray the expense of working could be brought from the mine by the ordinary. too. These. The expense of coals. to be less wholesome. Coals are a less agreeable fuel than wood: they are said. which is then a mere encumbrance of no value to the landlord. hinder any young ones from coming up so that in the course of a century or two the whole forest goes to ruin. but in an inland country. and partly go to decay in consequence of the increased number of cattle. though they do not increase in the same proportion as corn. who through the whole year furnish them with a greater quantity of food than uncultivated nature provides for them. yet multiply under the care and protection of men. The scarcity of wood then raises its price. and without either good roads or water-carriage. thinly inhabited. must generally be somewhat less than that of wood. who store up in the season of plenty what may maintain them in that of scarcity. this quantity could not be sold. or even less than the ordinary. the woods are partly cleared by the progress of tillage. though they do not destroy the old trees. In its rude beginnings the greater part of every country is covered with wood. It affords a good rent. quantity of labour. and who by destroying and extirpating their enemies. As agriculture advances. which is altogether the acquisition of human industry. and the landlord sometimes finds that Adam Smith ElecBook Classics . therefore. and exactly for the same reason. who would gladly give it to anybody for the cutting. Numerous herds of cattle. The price of wood again varies with the state of agriculture. as the price of cattle.

This seems in the present times to be nearly the state of things in several parts of Great Britain. If they were not. A small quantity only could be sold. Whatever may be the price of wood. Upon the sea-coast of a well improved country. and the coal masters and coal proprietors find it more for their interest to sell a great quantity at a price somewhat above the lowest. where it is usual. and where the difference in the expense of those two sorts of fuel cannot. where the profit of planting is found to be equal to that of either corn or pasture. they could not bear the expense of a distant carriage. therefore. be very great. and in these circumstances. particularly in Oxfordshire. it will frequently not fall much short of this rent. in the coal countries. it may sometimes be cheaper to bring barren timber for building from less cultivated foreign countries than to raise it at home. than a small quantity at the highest. indeed. the price of coals is as high as it can be. even in the fires of the common people. and in an inland country which is highly cultivated. to mix coals and wood together. we may be assured that at that place. of which the greatness of the profit often compensates the lateness of the returns. perhaps.The Wealth of Nations: Book 1 234 he can scarce employ his best lands more advantageously than in growing barren timber. built within these few years. if coals can conveniently be had for fuel. if that of coals is such that the expense of a coal fire is nearly equal to that of a wood one. The advantage which the landlord derives from planting can nowhere exceed. there is not. Adam Smith ElecBook Classics . the rent which these could afford him. It seems to be so in some of the inland parts of England. are everywhere much below this highest price. Coals. at least for any considerable time. either by land or by water. In the new town of Edinburgh. a single stick of Scotch timber.

Rent. in a country where thirty years’ purchase is considered as a moderate price for the property of a landed estate. the price of coals must generally be nearly about this price. a tenth the common rent. The rent of an estate above ground commonly amounts to what is supposed to be a third of the gross produce. the other that he can get a greater profit. These are so great that. even where coals afford one. too. Some works are abandoned altogether. but depends upon the occasional variations in the produce. and it is generally a rent certain and independent of the occasional variations in the crop. has generally a smaller share in their prices than in that of most other parts of the rude produce of land. ten years’ purchase is regarded as a good price for that of a coal-mine. like that of all other commodities. Both the proprietor and the undertaker of the work find. the price which is barely sufficient to replace. and can be wrought only by the proprietor. though they cannot so well afford it. others can afford no rent. Adam Smith ElecBook Classics .The Wealth of Nations: Book 1 235 The most fertile coal-mine. but which he must either work himself or let it alone altogether. the one that he can get a greater rent. In coal-mines a fifth of the gross produce is a very great rent. Their neighbours are soon obliged to sell at the same price. regulates the price of coals at all the other mines in its neighbourhood. and sometimes takes away altogether both their rent and their profit. The lowest price at which coals can be sold for any considerable time is. the stock which must be employed in bringing them to market. and though it always diminishes. and it is seldom a rent certain. by somewhat underselling all their neighbours. At as coalmine for which the landlord can get no rent. together with its ordinary profits.

therefore. the silver mines of Europe were. The coarse. must necessarily more or less affect their price at every other in it.The Wealth of Nations: Book 1 236 The value of a coal-mine to the proprietor frequently depends as much upon its situation as upon its fertility. clothes. must have some influence on its price. and other necessaries which were Adam Smith ElecBook Classics . 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. After the discovery of the mines of Peru. not only at the silver mines of Europe. are so valuable that they can generally bear the expense of a very long land. of the coarse. at the most fertile mines in the world. but extends to the whole world. and their price in the Lionnois can have none at all. But the productions of the most distant metallic mines frequently may. The productions of such distant coal-mines can never be brought into competition with one another. That of a metallic mine depends more upon its fertility. Their market is not confined to the countries in the neighbourhood of the mine. The value of was so much reduced that their produce could no longer pay the expense of working them. the iron of Spain in that of Chili and Peru. with a profit. abandoned. but from Europe to China. when separated from the ore. and still more the precious metals. or replace. lodging. but at those of China. The silver of Peru finds its way. and in fact commonly are. The price of silver in Peru. not only to Europe. and of the most distant sea carriage. or the quantity either of labour or of other goods which it will purchase there. The price. and less upon its situation. The copper of Japan makes an article of commerce in Europe. the food. The price of copper in Japan must have some influence upon its price at the copper mines in Europe. the greater part of them.

therefore. If there had been no tax this fifth would naturally have belonged to the landlord. and can seldom afford a very high rent to the landlord. afford more. it can at the greater part of mines do very little more than pay the expense of working. The tax of the Duke of Adam Smith ElecBook Classics . with the mines of Cuba and St. of several very fertile lead mines in Scotland. and many mines might have been wrought which could not then be wrought. he says. Till 1736. and even with the ancient mines of Peru. but that he will grind the ore at his mill. because they could not afford this tax. seems at the greater part of mines to have but a small share in the price of the coarse. we are told by Frezier and Ulloa.The Wealth of Nations: Book 1 237 consumed in that operation. Labour and profit make up the greater part of both. accordingly. The price of every metal at every mine. In the silver mines of Peru. too. the richest which have been known in the world. and a still smaller in that of the precious metals. which till then might be considered as the real rent of the greater part of the silver mines of Peru. the tax of the King of Spain amounted to one-fifth of the standard silver. as we are told by the Reverend Mr. being regulated in some measure by its price at the most fertile mine in the world that is actually wrought. A sixth part of the gross produce may be reckoned the average rent of the tin mines of Cornwall the most fertile that are known in the world. indeed. and some do not afford so much. the proprietor frequently exacts no other acknowledgment from the undertaker of the mine. paying him the ordinary multure or price of grinding. after the discovery of those of Potosi. Domingo. vicewarden of the stannaries. too. Rent. A sixth part of the gross produce is the rent. Borlace. Some. This was the case.

and is upon that account shunned and avoided by everybody. it seems. belong to the proprietor of the mine. The same most respectable and well-informed authors acquaint us. in 1736. and that of the Duke of Cornwall very well. But the silver mines of Peru are not now able to pay even this low rent. together with its ordinary profits. gives more temptation to smuggling than the tax of one-twentieth upon tin. you will find that the whole average rent of the tin mines of Cornwall was to the whole average rent of the silver mines of Peru as thirteen to twelve. reduced from one-fifth to one-tenth. and whatever may be his proportion. he is universally looked upon as a man destined to bankruptcy and ruin. it is probable.The Wealth of Nations: Book 1 238 Cornwall upon tin is supposed to amount to more than five per cent or one-twentieth part of the value. and the tax upon silver was. the residue which remains to the proprietor is greater. Mining. But if you add one-twentieth to onesixth. too. therefore. as a lottery. 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. Adam Smith ElecBook Classics . in which the prizes do not compensate the blanks. too. Even this tax upon silver. in the coarse than in the precious metal. it seems. it would naturally. Neither are the profits of the undertakers of silver mines commonly very great in Peru. Rent. though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects. and smuggling must be much easier in the precious than in the bulky commodity. is considered there in the same light as here. that when any person undertakes to work a new mine in Peru. if tin was duty free. The tax of the King of Spain accordingly is said to be very ill paid. After replacing the stock employed in working those different mines.

or give it in lease to another. In both regulations the sacred rights of private property are sacrificed to the supposed interests of public revenue. a very small acknowledgment must be paid upon working it. according to what he supposes to be the direction of the vein.The Wealth of Nations: Book 1 239 As the sovereign. but it was found that the work could not bear even the lowest of these two taxes. and can work it without paying any acknowledgment to the landlord. however. Frezier and Ulloa. In waste and unenclosed lands any person who discovers a tin mine may mark its limits to a certain extent. The interest of the Duke of Cornwall has given occasion to a regulation nearly of the same kind in that ancient duchy. derives a considerable part of his revenue from the produce of silver mines. and half as much in breadth. say the same authors. It was once a fifth. Whoever discovers a new mine is entitled to measure off two hundred and forty-six feet in length. to find a person who has made his fortune by a silver. and in gold the king’s tax amounts only to a twentieth part of the standard metal. If it is rare. and may either work it himself. to whom. however. This twentieth part seems to be the whole rent which is paid by the greater part of the gold mines in Chili and Peru. it is still much rarer to find one who has done so by a gold mine. which is called bounding a mine. and afterwards a tenth. as in silver. Adam Smith ElecBook Classics . The bounder becomes the real proprietor of the mine. the law in Peru gives every possible encouragement to the discovery and working of new ones. without the consent of the owner of the land. The same encouragement is given in Peru to the discovery and working of new gold mines. however. He becomes proprietor of this portion of the mine.

which can be carried on in any private house by anybody who is possessed of a small quantity of mercury. and rent. earth. is much more liable to be smuggled than even silver. Gold. The stock which must commonly be employed. is generally mineralized with some other body. the clothes. like most other metals. determine it. and even when mixed in small and almost insensible particles with sand. however. but. is but ill paid upon silver. but by a very laborious and tedious operation. on the contrary. from which it is impossible to separate it in such quantities as will pay for the expense. the food. Their highest price. must make a much smaller part of the price of gold than even of that of silver. which cannot well be carried on but in workhouses erected for the purpose. therefore. If the king’s tax. and other extraneous bodies. It must at least be sufficient to replace that stock. it is likely to be much worse paid upon gold. The lowest price at which the precious metals can be sold. It is sometimes found in pieces of some bulk. or the smallest quantity of other goods for which they can be exchanged during any considerable time. seems not to be necessarily determined by anything but the actual scarcity or plenty of those Adam Smith ElecBook Classics . Silver is very seldom found virgin.The Wealth of Nations: Book 1 240 Gold. too. but on account of the peculiar way in which nature produces it. with the ordinary profits. is regulated by the same principles which fix the lowest ordinary price of all other goods. is almost always found virgin. and therefore exposed to the inspection of the king’s officers. not only on account of the superior value of the metal in proportion to its bulk. and lodging which must commonly be consumed in bringing them from the mine to the market. it can be separated from them by a very short and simple operation.

beauty. The demand for those metals arises partly from their utility and partly from their beauty. perhaps. No paint or dye can give so splendid a colour as gilding. and the utensils either of the table or the kitchen are often upon that account more agreeable when made of them. the chief enjoyment of riches consists in the parade of riches. copper. These qualities of utility. Such objects they are willing to purchase at a higher price than things much more beautiful and useful. or by the great labour which it requires to collect any considerable quantity of it. The merit of their beauty is greatly enhanced by their scarcity. In their eyes the merit of an object which is in any degree either useful or beautiful is greatly enhanced by its scarcity. in the same manner as the price of coals is by that of wood. a labour which nobody can afford to pay but themselves. however. they are more useful than. are the original foundation of the high price of those Adam Smith ElecBook Classics . which renders them peculiarly fit for the ornaments of dress and furniture. and the smallest bit of it may become more precious than a diamond. or tin one.The Wealth of Nations: Book 1 241 metals themselves. Their principal merit. arises from their beauty. Increase the scarcity of gold to a certain degree. As they are less liable to rust and impurity. and scarcity. which in their eye is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves. It is not determined by that of any other commodity. but more common. they can more easily be kept clean. and the same quality would render a gold boiler still better than a silver one. With the greater part of rich people. beyond which no scarcity can ever raise it. and exchange for a greater quantity of other goods. any other metal. A silver boiler is more cleanly than a lead. If you except iron.

As the price both of the precious metals and of the precious stones is regulated all over the world by their price at the most fertile mine in it. frequently for no share. the rent which a mine of either can afford to its proprietor is in proportion. That employment. and was the quality which fitted them for that employment. the value of silver might be so much degraded as to render even the mines of Potosi not worth the working. They are of no use but as ornaments. Rent comes in but for a very small share. and by diminishing the quantity which could be employed in any other way. or to its superiority over other mines of the same kind. upon most occasions. it seems. visited the diamond mines of Golconda and Visiapour. When Tavernier. for whose benefit they were wrought. If new mines were discovered as much superior to those of Potosi as they were superior to those Europe. however. The others. This value was antecedent to and independent of their being employed as coin.The Wealth of Nations: Book 1 242 metals. except those which yield the largest and finest stones. by occasioning a new demand. almost the whole of their high price. may have afterwards contributed to keep up or increase their value. Wages and profit accordingly make up. and the most fertile mines only afford any considerable rent. he was informed that the sovereign of the country. or of the great quantity of other goods for which they can everywhere be exchanged. The demand for the precious stones arises altogether from their beauty. were to the proprietor not worth the working. and the merit of their beauty is greatly enhanced by their scarcity. not to its absolute. or by the difficulty and expense of getting them from the mine. had ordered all of them to be shut up. a jeweller. but to what may be called its relative fertility. Before the discovery of the Spanish Adam Smith ElecBook Classics .

and the proprietor’s share might have enabled him to purchase or command an equal quantity either of labour or of commodities. is necessarily degraded by its abundance. Though the quantity of silver was much less.The Wealth of Nations: Book 1 243 West Indies. and in this would consist the sole advantage which the world could derive from that abundance. It is otherwise in estates above ground. A produce of which the value is principally derived from its scarcity. clothe. The value both of the produce and of the rent. The most abundant mines either of the precious metals or of the precious stones could add little to the wealth of the world. the real revenue which they afforded both to the public and to the proprietor. and of the commodities with which that labour can supply him. the most fertile mines in Europe may have afforded as great a rent to their proprietor as the richest mines in Peru do at present. A service of plate. and the other frivolous ornaments of dress and furniture. or for a smaller quantity of commodities. and lodging. and not to their relative fertility. The value of the most barren lands is not diminished by the neighbourhood of the most fertile. The great number of people maintained by the fertile lands afford a market to many parts of the produce of the barren. The value both of their produce and of their rent is in proportion to their absolute. it will always give him a proportionable command of the labour of those people. can always feed. it might have exchanged for an equal quantity of other goods. it is generally increased by it. and lodge a certain number of people. On the contrary. could be purchased for a smaller quantity of labour. clothes. The land which produces a certain quantity of food. which they could Adam Smith ElecBook Classics . and whatever may be the proportion of the landlord. might have been the same.

The Wealth of Nations: Book 1 244 never have found among those whom their own produce could maintain. is the great cause of the demand both for the precious metals and the precious stone. in consequence of the improvement of land. Could they have been made to Adam Smith ElecBook Classics . used to wear little bits of gold as ornaments in their hair and other parts of their dress. Whatever increases the fertility of land in producing food increases not only the value of the lands upon which the improvement is bestowed. They were astonished to observe the rage of the Spaniards to obtain them. without seeming to think that they had made them any very valuable present. and to consider them as just worth the picking up. but not worth the refusing to anybody who asked them. and equipage. when they were first discovered by the Spaniards. That abundance of food. They gave them to their new guests at the first request. Food not only constitutes the principal part of the riches of the world. as well as for every other conveniency and ornament of dress. many people have the disposal beyond what they themselves can consume. but contributes likewise to increase that of many other lands by creating a new demand for their produce. that for a very small quantity of those glittering baubles they would willingly give as much as might maintain a whole family for many years. so scanty always among themselves. household furniture. of which. They seemed to value them as we would do any little pebbles of somewhat more than ordinary beauty. lodging. Domingo. 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. The poor inhabitants of Cuba and St. but it is the abundance of food which gives the principal part of their value to many other sorts of riches.

or in other words. must necessarily increase the demand for every part of the produce of land which is not food. and of that which sometimes does and sometimes does not afford Rent The increasing abundance of food. if particular accidents had not upon some occasions increased the supply of some of them in a still greater proportion than the demand. there should be only one variation in the comparative values of those two different sorts of produce. This accordingly has been the case with most of these things upon most occasions. the materials of clothing and lodging. The value of a free-stone quarry. In the whole progress of improvement. the useful fossils and minerals of the earth. for example. and which can be applied either to use or to ornament. in consequence of increasing improvement and cultivation. it might therefore be expected. As art and industry advance. and would have been the case with all of them upon all occasions. should gradually become dearer and dearer. The value of that sort which sometimes does and sometimes does not afford rent. should gradually exchange for a greater and a greater quantity of food. PART 3 Of the Variations in the Proportion between the respective Values of that Sort of Produce which always affords Rent. the passion of the Spaniards would not have surprised them.The Wealth of Nations: Book 1 245 understand this. the precious metals and the precious stones should gradually come to be more and more in demand. will necessarily Adam Smith ElecBook Classics . should constantly rise in proportion to that which always affords some rent.

that is. the principal part of the subsistence of the labourer. much more fertile than any which had been known before. in the course of its improvement. yet if. therefore. a pound weight of it. though the demand for silver would necessarily increase. will not necessarily increase with the improvement of the country in which it is situated. for example. The great market for silver is the commercial and civilised part of the world. Any given quantity of Adam Smith ElecBook Classics . or exchange for a smaller and a smaller quantity of corn. Even though the world in general were improving. even though there should not be another within a thousand miles of it. new mines should be discovered. any given quantity. while at the same time the supply did not increase in the same proportion. the demand for silver might not be at all increased by the improvement even of a large country in the neighbourhood of the mine. yet the supply might increase in so much a greater proportion that the real price of that metal might gradually fall. The market for the produce of a freestone quarry can seldom extend more than a few miles round about it.The Wealth of Nations: Book 1 246 increase with the increasing improvement and population of the country round about it. But the value of a silver mine. But the market for the produce of a silver mine may extend over the whole known world. the value of silver would gradually rise in proportion to that of corn. If by the general progress of improvement the demand of this market should increase. be advancing in improvement and population. and the demand must generally be in proportion to the improvement and population of that small district. Unless the world in general. might gradually purchase or command a smaller and a smaller quantity of labour. especially if it should be the only one in the neighbourhood.

the average money price of corn would. too. on the other hand.The Wealth of Nations: Book 1 247 silver would exchange for a greater and a greater quantity of corn. But if. in which I have here set them down. the supply of the metal should increase nearly in the same proportion as the demand. in other words. in spite of all improvements. continue very nearly the same. in other words. the average money price of corn would gradually become cheaper and cheaper. if we may judge by what has happened both in France and Great Britain. and during the course of the four centuries preceding the present. These three seem to exhaust all the possible combinations of events which can happen in the progress of improvement. that metal would gradually become cheaper and cheaper. and nearly in the same order. or. in spite of all improvements. or. the supply by some accident should increase for many years together in a greater proportion than the demand. Adam Smith ElecBook Classics . If. and the average money price of corn would. gradually become dearer and dearer. each of those three different combinations seem to have taken place in the European market. on the contrary. it would continue to purchase or exchange for nearly the same quantity of corn.

the price at which we find it estimated in the beginning of the sixteenth century. Tower weight. and the four preceding years. since it required a particular statute to oblige servants to accept of it in exchange for their usual livery of provisions. was enacted what is called The Statute of Labourers. therefore. had.The Wealth of Nations: Book 1 248 DIGRESSION CONCERNING THE VARIATIONS IN THE VALUE OF SILVER DURING THE COURSE OF THE FOUR LAST CENTURIES First Period In 1350. and it had been reckoned a reasonable price ten years before that. the term to which the statute refers. the average price of the quarter of wheat in England seems not to have been estimated lower than four ounces of silver. who endeavoured to raise their wages upon their masters. that upon this account their livery wheat should nowhere be estimated higher than tenpence a bushel. In the preamble it complains much of the insolence of servants. It therefore ordains that all servants and labourers should for the future be contented with the same wages and liveries (liveries in those times signified not only clothes but provisions) which they had been accustomed to receive in the 20th year of the king. or in the 16th year of the king. Tenpence a bushel. From this price it seems to have fallen gradually to two ounces of silver. and for some time before. and that it should always be in the option of the master to deliver them either the wheat or the money. in the 25th of Edward III. been reckoned a very moderate price of wheat. being the 25th of Edward III. equal to about twenty shillings of our present money. In 1350. But in the 16th year of Adam Smith ElecBook Classics . and at which it seems to have continued to be estimated till about 1570. equal to about ten shillings of our present money.

or six shillings a quarter. and was nearly equal to half-a-crown of our present money. equal to about one-and-twenty shillings and sixpence of our present money. Canterbury. tenpence contained about half an ounce of silver. Four ounces of silver.The Wealth of Nations: Book 1 249 Edward III. fifty-eight quarters of malt. In 1309. therefore. first. and from which. equal to about eighteen shillings of our present money. twenty quarters of oats. which cost nineteen pounds. This statute is surely a better evidence of what was reckoned in those times a moderate price of grain than the prices of some particular years which have generally been recorded by historians and other writers on account of their extraordinary dearness or cheapness. equal to about twelve shillings of our present money. Tower weight. which cost four pounds. In that feast were consumed. which cost seventeen pounds ten shillings. Adam Smith ElecBook Classics . must have been reckoned a moderate price for the quarter of eight bushels. gave a feast upon his installation-day. and that of other grain in proportion. Tower weight. or seven shillings and twopence a quarter. and to near twenty shillings of that of the present. other reasons for believing that in the beginning of the fourteenth century. and for some time before. secondly. the common price of wheat was not less than four ounces of silver the quarter. thirdly. Augustine’s. equal to six shillings and eightpence of the money of those times. The prices of malt and oats seem here to be higher than their ordinary proportion to the price of wheat. fifty-three quarters of wheat. of which William Thorn has preserved not only the bill of fare but the prices of many particulars. besides. or four shillings a quarter. prior of St. therefore. Ralph de Born. it is difficult to form any judgment concerning what may have been the ordinary price. There are.

from one shilling to twenty shillings the quarter of the money of those times. we seem to have some reason to conclude that. being the 51st of Henry III. But statutes of this kind are generally presumed to provide with equal care for all deviations from the middle price. and for a considerable time before. was revived an ancient statute called The Assize of Bread and Ale. sometime kings of England. therefore. Tower weight. the average or ordinary price of the quarter of wheat was not supposed to be less Adam Smith ElecBook Classics . upon this supposition. It regulates the price of bread according as the prices of wheat may happen to be. and may have been as old as the Conquest. about the middle of the fourteenth century. which the king says in the preamble had been made in the times of his progenitors. therefore. Ten shillings. containing six ounces of silver. In 1262. must. and equal to about thirty shillings of our present money. From these different facts. as old at least as the time of his grandfather Henry II. Tower weight. We cannot therefore 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. It is probably. have been reckoned the middle price of the quarter of wheat when this statute was first enacted. therefore. or than six shillings and eightpence of the money of those times. and must have continued to be so in the 51st of Henry III. for those below it as well as for those above it. containing four ounces of silver.The Wealth of Nations: Book 1 250 These prices are not recorded on account of their extraordinary dearness or cheapness. but are mentioned accidentally as the prices actually paid for large quantities of grain consumed at a feast which was famous for its magnificence.

during the space of more than two hundred years. the fifth Earl of Northumberland. Tower weight. drawn up in 1512. seems to have sunk gradually to about one-half of this price. In 1512. so far compensated the diminution of the quantity of it contained in the same nominal sum that the legislature did not think it worth while to attend to this circumstance. continually diminishing. From about the middle of the fourteenth to the beginning of the sixteenth century. and were equal to about ten shillings of our present money. that is the ordinary or average price of wheat. there are two different estimations of wheat. six shillings and eightpence. equal to about ten shillings of our present money. so as at last to have fallen to about two ounces of silver. The quantity of silver. But the increase of the value of silver had. however.The Wealth of Nations: Book 1 251 than four ounces of silver. six shillings and eightpence contained only two ounces of silver. From the 25th of Edward III to the beginning of the reign of Elizabeth. It continued to be estimated at this price till about 1570. had continued to be considered as what is called the moderate and reasonable. what was reckoned the reasonable and moderate. during the course of this period. Tower weight. In one of them it is computed at six shillings and eightpence the quarter. it appears from several different statutes. Tower weight. in the other at five shillings and eightpence only. Thus in 1436 it was enacted that wheat might be exported without a licence when the price was so low as six shillings and Adam Smith ElecBook Classics . it seems. that is the ordinary or average price of wheat. contained in that nominal sum was. In the household book of Henry. in consequence of some alterations which were made in the coin.

containing nearly the same quantity of silver as the like nominal sum does at present. by the 1st and 2nd of Philip and Mary. It agrees nearly with the estimation of the Northumberland book in 1512. That in France the average price of grain was. had in those times been considered as what is called the moderate and reasonable price of wheat. therefore. But it had soon been found that to restrain the exportation of wheat till the price was so very low was. whenever the price of the quarter should exceed six shillings and eightpence. the exportation of wheat was allowed from certain ports whenever the price of the quarter should not exceed ten shillings. This price had at this time. therefore. which did not then contain two pennyworth more silver than the same nominal sum does at present. but that when it rose higher it became prudent to allow importation. Dupré de St. In 1554. to prohibit it altogether. Maur. therefore. In 1562. Six shillings and eightpence. by the 5th of Elizabeth. in reality. much lower in the end of the fifteenth and beginning of the sixteenth century than in the two centuries preceding has been observed both by Mr. by the 1st of Elizabeth. The legislature had imagined that when the price was so low there could be no inconveniency in exportation. the exportation of wheat was in the same manner prohibited. 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). and in 1463 it was enacted that no wheat should be imported if the price was not above six shillings and eightpence the quarter. been considered as what is called the moderate and reasonable price of wheat. in the same manner. and in 1558.The Wealth of Nations: Book 1 252 eightpence. and by the elegant Adam Smith ElecBook Classics .

of the greater part of those who have written upon the price of commodities in ancient times Adam Smith ElecBook Classics . the greater part of the mines which were then known in the world being much exhausted. Its price. The increase of security would naturally increase industry and improvement. or it may have been owing partly to the other of those two circumstances. the supply in the meantime continuing the same as before. however. during the same period. and the demand for the precious metals. They had been wrought many of them from the time of the Romans. It has been the opinion. may either have been owing altogether to the increase of the demand for that metal. the greater part of Europe was approaching towards a more settled form of government than it had enjoyed for several ages before. or. the demand continuing the same as before. and consequently the expense of working them much increased. and a greater number of rich people would require a greater quantity of plate and other ornaments of silver. that the greater part of the mines which then supplied the European market with silver might be a good deal exhausted. as well as for every other luxury and ornament. This rise in the value of silver in proportion to that of corn. and have become more expensive in the working. A greater annual produce would require a greater quantity of coin to circulate it. would naturally increase with the increase of riches. it may have been owing altogether to the gradual diminution of the supply. had probably sunk in the same manner through the greater part of Europe.The Wealth of Nations: Book 1 253 author of the Essay on the police of grain. It is natural to suppose. too. In the end of the fifteenth and beginning of the sixteenth centuries. in consequence of increasing improvement and cultivation.

accordingly. of the average price of all the different sorts of grain. poultry. too.The Wealth of Nations: Book 1 254 that. had not the institution of the public fiars put an end to it. the value of silver was continually diminishing. that the landlord would stipulate that he should be at liberty to demand of the tenant. perhaps from the invasion of Julius Caesar till the discovery of the mines of America. in a certain quantity of corn. It might probably have continued to take place. Through the greater part of Scotland this custom still continues with regard to poultry. it is necessary for the safety of the tenant that the conversion price should rather be below than above the average market price. etc. according to the judgment of an assize. These are annual valuations. three different circumstances seem frequently to have misled them. The price at which the payment in kind was in this manner exchanged for a certain sum of money is in Scotland called the conversion price. with regard to corn. from the Conquest. First. according to Adam Smith ElecBook Classics . and partly by the popular notion that as the quantity of silver naturally increases in every country with the increase of wealth. and of all the different qualities of each. In many places. It sometimes happened. it is not much above one-half of this price. or a certain sum of money instead of it. This opinion they seem to have been led into. and in some places with regard to cattle. cattle. either the annual payment in kind. partly by the observations which they had occasion to make upon the prices both of corn and of some other parts of the rude produce of land. In their observations upon the prices of corn. in ancient times almost all rents were paid in kind. As the option is always in the landlord to take either the substance or the price. however. so its value diminishes as its quantity increases.

the year at which he begins with it. they have been misled by the slovenly manner in which some ancient statutes of assize had been sometimes transcribed by lazy copiers. saving in this Adam Smith ElecBook Classics . Fleetwood acknowledges. according as the prices of those two sorts of grain should gradually rise above this lowest price. the year at which he ends with it. As he wrote his book. and sometimes perhaps actually composed by the legislature. rather at what should happen to be the price of the fiars of each year. The ancient statutes of assize seem to have begun always with determining what ought to be the price of bread and ale when the price of wheat and barley were at the lowest. and much more convenient for the landlord. The price is eight shillings the quarter of wheat. 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. Secondly. and to have proceeded gradually to determine what it ought to be. than at any certain fixed price. for a particular purpose. as they call it. to convert.The Wealth of Nations: Book 1 255 the actual market price in every different county. that he had made this mistake. upon one occasion. the corn rent. he does not think proper to make this acknowledgment till after transcribing this conversion price fifteen times. But in 1562. however. 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. This institution rendered it sufficiently safe for the tenant. This sum in 1423. contained the same quantity of silver as sixteen shillings of our present money. it contained no more than the same nominal sum does at present.

but the meaning is plain enough: “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. and that these prices were only given as an example of the proportion which ought to be observed in all other prices. the copiers had never transcribed this regulation beyond the price of twelve shillings. were printed. The expression is very slovenly. But in the manuscripts from which all the different editions of the statutes. the price of ale is regulated according to every sixpence rise in the price of barley. I suppose. That four shillings. Ruffhead. Several writers.The Wealth of Nations: Book 1 256 manner their own labour. and judging. very naturally concluded that the middle price. however.” In the composition of this statute the legislature itself seems to have been as negligent as the copiers were in the transcription of the others. that this was enough to show what proportion ought to be observed in all higher prices. Thus in the Assize of Bread and Ale. was the ordinary or average price of wheat at that time. of the money of those times. the price of bread was regulated according to the different prices of wheat. Adam Smith ElecBook Classics . In the Statute of Tumbrel and Pillory. enacted nearly about the same time. preceding that of Mr. whether higher or lower. was not considered as the highest price to which barley might frequently rise in those times. from one shilling to twenty shillings the quarter. equal to about eighteen shillings of our present money. or six shillings the quarter. from two shillings to four shillings the quarter. we may infer from the last words of the statute: et sic deinceps crescetur vel diminuetur per sex denarios. of the 51st of Henry III. being misled by this faulty transcription. therefore.

they seem to have been misled. however.The Wealth of Nations: Book 1 257 In an ancient manuscript of the Regiam Majestatem. etc.. an old Scotch law book. Fleetwood gives us two prices of the quarter of wheat. too. having a respect to the price of corn. however. and that tenpence. equal to about half an English quarter. or at most two shillings. were the ordinary prices. equal to fourteen pounds eight shillings of 1 See his preface to Anderson’s Diplomata. that in those ancient times its highest price was fully as much above. They might have found. a shilling. “You shall judge of the remaining cases according to what is above written.” Thirdly. Mr. Three shillings Scotch. that three shillings was the highest price to which wheat ever rose in those times. Upon consulting the manuscript. The one is four pounds sixteen shillings of the money of those times. by the very low price at which wheat was sometimes sold in very ancient times. there is a statute of assize in which the price of bread is regulated according to all the different prices of wheat. and to have imagined that as its lowest price was then much lower than in later times. Thus in 1270. Scotiæ. The last words of the statute are: reliqua judicabis secundum proescripta habendo respectum ad pretium bladi. it appears evidently1 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. as its lowest price was below anything that had even been known in later times. from tenpence to three shillings the Scotch boll. Ruddiman seems to conclude from this. its ordinary price must likewise have been much lower. at the time when this assize is supposed to have been enacted were equal to about nine shillings sterling of our present money. ElecBook Classics Adam Smith .

equal to nineteen pounds four shillings of our present money. The price of corn. who governed it from about the middle of the twelfth till towards the end of the fifteenth century. from the accounts of Adam Smith ElecBook Classics . The reader will find at the end of this chapter all the prices of wheat which have been collected by Fleetwood from 1202 to 1597. might be suffering all the horrors of a famine. into seven divisions of twelve years each. too. varies most in those turbulent and disorderly societies. in which the interruption of all commerce and communication hinders the plenty of one part of the country from relieving the scarcity of another. the one might not be able to give the least assistance to the other. both inclusive. or beginning of the sixteenth century. he will find the average price of the twelve years of which it consists. while another at no great distance. or by the incursion of some neighbouring baron. In the disorderly state of England under the Plantagenets. In that long period of time. though at all times liable to variation. which approaches to the extravagance of these. No price can be found in the end of the fifteenth.The Wealth of Nations: Book 1 258 that of the present. Under the vigorous administration of the Tudors. and digested according to the order of time. one district might be in plenty. I have added. by having its crop destroyed either by some accident of the seasons. no baron was powerful enough to dare to disturb the public security. Fleetwood has been able to collect the prices of no more than eighty years. the other is six pounds eight shillings. At the end of each division. therefore. so that four years are wanting to make out the last twelve years. and yet if the lands of some hostile lord were interposed between them. reduced to the money of the present times. who governed England during the latter part of the fifteenth and through the whole of the sixteenth century.

and that towards the end of the sixteenth century it begins to rise again. The prices of corn which he himself has collected certainly do not agree with this opinion. it is meant. Maur are the two authors who seem to have collected. and 1601. though their opinions are so very different. They agree perfectly with that of Mr. indeed. in consequence of its increasing abundance. being a sort of manufacture. Maur. Corn. however. so much from the low price of corn as from that of some other parts of the rude produce of land that the most judicious writers have inferred the great value of silver in those very ancient times. and with that which I have been endeavouring to explain. So far. their facts. the prices of things in ancient times. seem to have been those chiefly which were remarkable for extraordinary dearness or cheapness. to have believed that during all this period the value of silver. 1599. much dearer in proportion than the greater part of other commodities. It is the only addition which I have made. It is somewhat curious that. with the greatest diligence and fidelity. with most other writers. Fleetwood himself. was continually diminishing. The prices. Adam Smith ElecBook Classics . and I do not pretend that any very certain conclusion can be drawn from them. they confirm the account which I have been endeavouring to give. however. which Fleetwood has been able to collect. 1600. seems. Dupré de St.The Wealth of Nations: Book 1 259 Eton college. It is not. I suppose. the prices of 1598. Dupré de St. as they prove anything at all. in those rude ages. it has been said. was. Bishop Fleetwood and Mr. so far as they relate to the price of corn at least. The reader will see that from the beginning of the thirteenth till after the middle of the sixteenth century the average price of each twelve years grows gradually lower and lower. should coincide so very exactly. however.

Labour. cattle. it must always be remembered. and not any particular commodity or set of commodities. not many years ago.. etc. game of all kinds. But this cheapness was not the effect of the high value of silver. such as cattle. poultry. In a country naturally fertile. cattle. It was not because silver would in such times purchase or represent a greater quantity of labour. of a freight and an insurance. The low money price for which they may be sold is no proof that the real value of silver is there very high. game of all kinds. at the expense of a long carriage both by land and by sea. Silver must certainly be cheaper in Spanish America than in Europe. the price of an ox chosen from a herd of three or four hundred. or but thinly inhabited. but because such commodities would purchase or represent a much smaller quantity than in times of more opulence and improvement.The Wealth of Nations: Book 1 260 than the greater part of unmanufactured commodities. poultry. in the country where it is produced than in the country to which it is brought. but that the real value of those commodities is very low. That in those times of poverty and barbarism these were proportionably much cheaper than corn is undoubtedly true. as they are the spontaneous Adam Smith ElecBook Classics . however. Sixteen shillings sterling. One-and-twenty pence halfpenny sterling.. we are told by Ulloa. is the real measure of the value both of silver and of all other commodities. poultry. etc. but of the low value of those commodities. game of all kinds. we are told by Mr. so they will purchase or command but a very small quantity. But in countries almost waste. etc. Byron was the price of a good horse in the capital of Chili. at Buenos Ayres. as they can be acquired with a very small quantity of labour. but of which the far greater part is altogether uncultivated. was.

The Wealth of Nations: Book 1 261 productions of nature. Upon all these accounts. therefore. is. In every different stage of improvement. in all the different stages of wealth and improvement. it has already been observed. In different states of society. or whatever else is the common and favourite Adam Smith ElecBook Classics . In every state of society. more nearly represent. require nearly equal quantities of labour. to the average consumption. or what comes to the same thing. besides. the principal instruments of agriculture. equal quantities of labour than equal quantities of any other part of the rude produce of land. therefore. such commodities will represent. in different stages of improvement. so she frequently produces them in much greater quantities than the consumption of the inhabitants requires. a more accurate measure of value than any other commodity or set of commodities. besides. corn is the production of human industry. very different quantities of labour. the price of nearly equal quantities. at an average. we can judge better of the real value of silver by comparing it with corn than by comparing it with any other commodity or set of commodities. more or less exactly. we may rest assured that equal quantities of corn will. or be equivalent to. therefore. accordingly. the average supply to the average demand. in every stage of improvement. in every state of society. in every stage of improvement. But the average produce of every sort of industry is always suited. or be equivalent to. Corn. the continual increase of the productive powers of labour in an improving state of cultivation being more or less counterbalanced by the continually increasing price of cattle. In such a state of things the supply commonly exceeds the demand. the raising of equal quantities of corn in the same soil and climate will. In all those different stages. Corn.

the principal part of the subsistence of the labourer. and even in Scotland. from the increased Adam Smith ElecBook Classics . except upon holidays. In France. the land of every country produces a much greater quantity of vegetable than of animal food. except in the most thriving countries. where labour is somewhat better rewarded than in France. constitutes. and game no part of it. or where labour is most highly rewarded. and other extraordinary occasions. seems to be altogether groundless. The money price of labour. however. than upon that of butcher’s meat. Such slight observations. that as the quantity of silver naturally increases in every country with the increase of so its value diminishes as its quantity increases. upon the prices either of corn or of other commodities.The Wealth of Nations: Book 1 262 vegetable food of the people. This notion. The real value of gold and silver. makes but an insignificant part of his subsistence. the labouring poor seldom eat butcher’s meat. therefore. depends much more upon the average money price of corn. by the popular notion. however. would not probably have misled so many intelligent authors had they not been influenced. in every civilised country. Butcher’s meat. first. In consequence of the extension of agriculture. or of any other part of the rude produce of land. the real quantity of labour which they can purchase or command. depends much more upon the quantity of corn which they can purchase or command than upon that of butcher’s meat. the subsistence of the labourer. The quantity of the precious metals may increase in any country from two different causes. or any other part of the rude produce of land. poultry makes a still smaller part of it. and the labourer everywhere lives chiefly upon the wholesome food that is cheapest and most abundant. therefore. either. at the same time.

is likely to increase among them. When more abundant mines are discovered. So far. whatever be the state of the Adam Smith ElecBook Classics . it is necessarily connected with some diminution of their value. as it naturally rises with the wealth of every country. pictures. as they have more commodities to give for it. as they can afford it. The price of gold and silver. so gold and silver are not likely to be worse paid for. a greater quantity of the precious metals is brought to market. The first of these causes is no doubt necessarily connected with the diminution of the value of the precious metals. and the people. but the second is not. or. therefore. when the accidental discovery of more abundant mines does not keep it down. But as statuaries and painters are not likely to be worse rewarded in times of wealth and prosperity than in times of poverty and depression. will naturally purchase a greater and a greater quantity of plate. The quantity of their coin will increase from necessity. from the increased produce of their annual labour. the wealth of any country increases. a greater quantity of coin becomes necessary in order to circulate a greater quantity of commodities. as the increase of the quantity of the precious metals in any country arises from the increased abundance of the mines. secondly. from the increased wealth of the people. the quantity of their plate from vanity and ostentation. when the annual produce of its labour becomes gradually greater and greater. equal quantities of the metals must be exchanged for smaller quantities of commodities. so. When. or from the same reason that the quantity of fine statues. on the contrary.The Wealth of Nations: Book 1 263 abundance of the mines which supply it. and of every other luxury and curiosity. and the quantity of the necessaries and conveniencies of life for which they must be exchanged being the same as before.

Labour. the difference will be smaller. naturally seek the market where the best price is given for them. and in countries where labour is equally well regarded. China is a much richer country than any part of Europe. is the ultimate price which is paid for everything. England is a much richer country than Scotland. the money price of labour will be in proportion to that of the subsistence of the labourer. and the best price is commonly given for every thing in the country which can best afford it. but in proportion to its quality. the difference may be very great. it must be remembered. and every commodity must commonly be somewhat dearer in the country to which it is brought than in that Adam Smith ElecBook Classics . Gold and silver. In proportion to the quantity or measure. in a country which abounds with subsistence than in one which is but indifferently supplied with it. it is at all times naturally higher in a rich than in a poor country. and may sometimes be scarce perceptible. If the two countries are at a great distance. and the difference between the price of subsistence in China and in Europe is very great. and is but just perceptible. because though the metals naturally fly from the worse to the better market. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich than in a poor country.The Wealth of Nations: Book 1 264 mines. If the countries are near. Scotch corn generally appears to be a good deal cheaper than English. because in this case the transportation will be easy. Scotland receives almost every year very large supplies from England. yet it may be difficult to transport them in such quantities as to bring their price nearly to a level in both. like all other commodities. it is certainly somewhat dearer. but the difference between the money-price of corn in those two countries is much smaller. Rice in China is much cheaper than wheat is anywhere in Europe.

it cannot commonly be sold higher there than the Scotch corn which comes to market in competition with it. not of the real cheapness of silver.The Wealth of Nations: Book 1 265 from which it comes. Among savages. however. The money price of labour is lower in Scotland than in England because the real recompense of labour is much lower. must be dearer in Scotland than in England. as they are naturally of the greatest value among the richest. while China seems to be standing still. Gold and silver. but it costs a great deal more to bring corn. the greater part of Europe being in an improving state. stationary. sufficiently prove that the demand for labour is very different in the two countries. so they are naturally of the least value among the poorest nations. and the rarity of it from England. the poorest of all nations. and yet 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. they are of scarce any value. The frequency of emigration from Scotland. advancing much more slowly than England. though advancing to greater wealth. The difference between the money price of labour in China and in Europe is still greater than that between the money price of subsistence. but by their advancing. English corn. it must be remembered. is the effect. because the real recompense of labour is higher in Europe than in China. therefore. or declining condition. Adam Smith ElecBook Classics . Scotland. is naturally regulated not by their actual wealth or poverty. In great towns corn is always dearer than in remote parts of the country. This. The proportion between the real recompense of labour in different countries. or to the quantity and goodness of the flour or meal which can be made from it. but of the real dearness of corn.

rises in times of poverty and distress. in every sort of machinery which can facilitate and abridge labour. The real cost of silver must be nearly the same in both places. while the number of their inhabitants remains the same: diminish their power of supplying themselves from distant countries. but it costs a great deal more to bring corn.The Wealth of Nations: Book 1 266 In some very rich and commercial countries. Whatever. Corn is a necessary. They do not produce enough to maintain their inhabitants. which must necessarily accompany this declension either as its cause or as its effect. must. and the price of corn. and sinks in times of opulence and prosperity. in shipping. and in all the other instruments and means of carriage and commerce: but they are poor in corn. corn is dear for the same reason that it is dear in great towns. Their real price. Diminish the real opulence either of Holland or of the territory of Genoa. the quantity of labour which they can purchase or command. pay for the carriage from those countries. of which the value. which are always times of great abundance. When we are in want of necessaries we must part with all superfluities. will rise to the price of a famine. by an addition to its price. It does not cost less labour to bring silver to Amsterdam than to Dantzic. may have been the increase in the Adam Smith ElecBook Classics . as it rises in times of opulence and prosperity. They are rich in the industry and skill of their artificers and manufacturers. instead of sinking with that diminution in the quantity of their silver. but that of corn must be very different. so it sinks in times of poverty and distress. therefore. for they could not otherwise be times of opulence and prosperity. silver is only a superfluity. as it must be brought to them from distant countries. It is otherwise with necessaries. which. such as Holland and the territory of Genoa.

had. the variation in the proportion between the value of silver and that of corn held a quite opposite course. during a period of about seventy years. it could have no tendency to diminish their value either in Great Britain or in any other part of Europe. therefore. came to be sold for six and eight ounces of silver the quarter. From about 1570 to about 1640. from any observations which they had made upon the prices either of corn or of other commodities. and corn rose in its nominal price. no reason to infer the diminution of the value of silver. or would exchange for a smaller quantity of labour than before. It is accounted for accordingly in the same manner by everybody. and instead of being commonly sold for about two ounces of silver the quarter. during the period between the middle of the fourteenth and that of the sixteenth century. The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver in proportion to that of corn. The greater part of Adam Smith ElecBook Classics . during this period. If those who have collected the prices of things in ancient times. they had still less reason to infer it from any supposed increase of wealth and improvement. arose from the increase of wealth and improvement. which.The Wealth of Nations: Book 1 267 quantity of the precious metals. Silver sunk in its real value. and there never has been any dispute either about the fact or about the cause of it. or about ten shillings of our present money. they are unanimous concerning it during the second. Second Period But how various soever may have been the opinions of the learned concerning the progress of the value of silver during this first period. or about thirty and forty shillings of our present money.

the price of the quarter of eight bushels comes out to have been £1 16s. and the demand for silver must consequently have been increasing. and deducting a ninth. it seems. 10 2/3d. both inclusive. 6 3 /4d. 9d. The discovery of the mines of America. And from this sum.. or 4s. from which making the like deductions as in the foregoing case. so far exceeded that of the demand. But the increase of the supply had. both inclusive. to have been £2 1s. neglecting likewise the fraction. or about six ounces and one-third of an ounce of silver. 6d. from the accounts of Eton College. or about seven ounces and two-thirds of an ounce of silver. the average price of the same measure of the best wheat at the same market appears. during this period. 1d. From 1621 to 1636. it is to be observed. 7 1\3d.The Wealth of Nations: Book 1 268 Europe was... to have been £2 10s. or 4s. though even the mines of Potosi had been discovered more than twenty years before. advancing in industry and improvement. From which sum. neglecting the fraction. that the value of that metal sunk considerably. and deducting a ninth. from the same accounts. the price of the middle wheat comes out to have been about £1 12s. From 1595 to 1620. the average price of the quarter of eight bushels of middle wheat comes out to have been £1 19s. does not seem to have had any very sensible effect upon the prices of things in England till after 1570. Adam Smith ElecBook Classics .. the average price of the quarter of nine bushels of the best wheat at Windsor market appears. for the difference between the price of the best wheat and that of the middle wheat..

which. dearer than it had been during the sixteen years before. therefore. and it had probably begun to do so even some time before the end of the last. But in the course of these sixty-four years there happened two events which must have produced a much greater scarcity of corn than what the course of the seasons would otherwise have occasioned. the price of the best wheat at Windsor market appears.. both inclusive. being the sixty-four last years of the last century. must have raised the price of corn much above what the course of the seasons would otherwise have occasioned. which require to be supplied from the greatest distance. from the same accounts. In 1648. from the same accounts. and in 1649 to have been £4 the quarter of nine bushels. or about 1636. the effect of the discovery of the mines of America in reducing the value of silver appears to have been completed. 01\3d. From 1637 to 1700. the average price of the quarter of nine bushels of the best wheat at Windsor market appears. to have been £4 5s. without supposing any further reduction in the value of silver.. and which. It seems to have risen somewhat in the course of the present century. and the value of that metal seems never to have sunk lower in proportion to that of corn than it was about that time. will much more than account for this very small enhancement of price.The Wealth of Nations: Book 1 269 Third Period Between 1630 and 1640. which is only 1s 01\3d. The excess of those two years above £2 Adam Smith ElecBook Classics . by discouraging tillage and interrupting commerce. to have been £2 11s. but particularly at those in the neighbourhood of London. It must have had this effect more or less at all the different markets in the kingdom. accordingly. The first of these events was the civil war.

may. between 1688 and 1700. though it could not occasion any scarcity of corn. to raise the price in the home-market. both inclusive. and which. however. it had not time to produce any such effect. have occasioned a greater abundance. This event Adam Smith ElecBook Classics . must have been somewhat enhanced by the bounty. There was a third event which occurred in the course of the same period. by encouraging the exportation of the surplus produce of every year.. accordingly. The second event was the bounty upon the exportation of corn granted in 1688. perhaps.The Wealth of Nations: Book 1 270 10s. How far the bounty could produce this effect at any time. In 1699. are by no means the only high prices which seem to have been occasioned by the civil wars. I shall examine hereafter. These. and consequently a greater cheapness of corn in the home-market than what would otherwise have taken place there. The bounty. and thereby hindering the abundance of one year from compensating the scarcity of another. nor. by encouraging tillage. though no doubt principally owing to the badness of the seasons. The scarcity which prevailed in England from 1693 to 1699. During this short period its only effect must have been. I shall only observe at present that. the further exportation of corn was prohibited for nine months. in a long course of years. therefore. and. though the highest. which divided among the sixty-four last years of the last century will alone very nearly account for that small enhancement of price which seems to have taken place in them. any augmentation in the real quantity of silver which was usually paid for it. (the average price of the sixteen years preceding 1637) is £3 5s. must necessarily have occasioned some augmentation in the nominal sum. extending through a considerable part of Europe. it has been thought by many people.

according to the standard. is necessarily higher when the coin is much debased by clipping and wearing than when near to its standard value. the common price of silver bullion was six shillings and fivepence an ounce. This nominal sum. actually is contained in it. as we may learn from Mr. on the contrary. p. For though before the late recoinage. the coin. Lowndes. its value has been kept up by that of the gold coin for which it is exchanged. But the nominal sum which constitutes the market price of every commodity is necessarily regulated. This evil had begun in the reign of Charles II and had gone on continually increasing till 1695. But in 1695. as by that which. at an average. the silver coin has not at any time been more below its standard weight than it is at present. near five-and-twenty per cent below its standard value. the gold coin was a good deal defaced too. a guinea then commonly exchanging for thirty shillings of the worn and clipt silver. when compared with silver bullion. But though very much defaced. therefore. it was less so than the silver. In 1695.1 which is fifteenpence above the mint price. 68. ought to be contained in it. it is found by experience. ElecBook Classics Adam Smith . which. gold and silver together. which is but fivepence above the mint price. the value of the silver coin was not kept up by the gold coin. the current silver coin was.The Wealth of Nations: Book 1 271 was the great debasement of the silver coin. at which time. by clipping and wearing. the price of silver bullion was seldom higher than five shillings and sevenpence an ounce. was not supposed to 1 Lowndes’ Essay on the Silver Coin. In the course of the present century. not so much by the quantity of silver. therefore. Even before the late recoinage of the gold. Before the late recoinage of the gold.

too. or interrupt the interior commerce of the country. which has taken place through the greater part of this century. But in the beginning of the present century. And though the bounty. which is about ten shillings and sixpence. In the sixty-four first years of the present century accordingly the average price of the quarter of nine bushels of the best wheat at Windsor market appears. upon the principles of a system which I shall explain and examine hereafter. 6 1/2d. there has been no great public calamity. to have been £2 0s. immediately after the great recoinage in King William’s time. the bounty has had full time to produce all the good effects commonly imputed to it. be supposed to have done something to lower the price of that commodity the one way. In 1695. It is by many people supposed to have done more. and thereby to increase the quantity of corn in the home market. In the course of the present century. it had been supposed to be near five-and-twenty per cent below that value. in the course of this century. such as the civil war. to encourage tillage. or more than five-and-twenty per cent.The Wealth of Nations: Book 1 272 be more than eight per cent below its standard value.. which could either discourage tillage. that is. must always raise the price of corn somewhat higher than it otherwise would be in the actual state of tillage. it may. cheaper than it had been during the sixteen years preceding 1636. the greater part of the current silver coin must have been still nearer to its standard weight than it is at present. 6d. cheaper than it had been during the sixty-four last years of the last century. and about 9s. and about one shilling cheaper than it had been in the twenty-six years Adam Smith ElecBook Classics . yet as. by the accounts of Eton College. on the contrary. as well as to raise it the other. when the discovery of the abundant mines of America may be supposed to have produced its full effect.

therefore. The grower’s price I understand to be the same with what is sometimes called the contract price. In 1688. who then composed a still greater proportion of the legislature than they do at present. during these sixty-four first years of the present century. the price of the quarter of nine bushels of the best wheat at Windsor market was £1 5s. the ordinary contract price in all common years. the average price of middle wheat. the bushel. 2d. The country gentlemen. The value of silver. In 1687. I have been assured. comes out to have been about thirty-two shillings the quarter of eight bushels. or eightand-twenty shillings the quarter. Mr. King had judged eight-and-twenty shillings the quarter to be at that time the ordinary contract price in years of moderate plenty. a man famous for his knowledge in matters of this kind. Gregory King. before that discovery can well be supposed to have produced its full effect. Before the scarcity occasioned by the late extraordinary course of bad seasons. the contract price is generally lower than what is supposed to be the average market price. 6d. According to this account. the lowest price at which it had ever been from 1595. Adam Smith ElecBook Classics .The Wealth of Nations: Book 1 273 preceding 1620. and it had probably begun to do so even some time before the end of the last. it was. estimated the average price of wheat in years of moderate plenty to be to the grower 3s. As a contract of this kind saves the farmer the expense and trouble of marketing. Mr. In 1688 was granted the Parliamentary bounty upon the exportation of corn. seems to have risen somewhat in proportion to that of corn during the course 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.

It was to take place. 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 and III. The value of silver. But the government of King William was not then fully settled. It must. without some such expedient as the bounty. If his calculations deserve any part of the reputation which they have obtained very universally. till wheat was so high as forty-eight shillings the quarter. therefore. To encourage tillage. It was in no condition to refuse anything to the country gentlemen. indeed. By the extraordinary exportation Adam Smith ElecBook Classics . was the avowed end of the institution. by occasioning an extraordinary exportation. In plentiful years the bounty. therefore. King had in that very year estimated the grower’s price to be in times of moderate plenty. or five-sevenths dearer than Mr.The Wealth of Nations: Book 1 274 had felt that the money price of corn was falling. could not at that time be expected. have had some effect even upon the prices of many of those years. necessarily raises the price of corn above what it otherwise would be in those years. except in years of extraordinary scarcity. In years of great scarcity. had probably risen somewhat before the end of the last century. eightand-forty shillings the quarter was a price which. by keeping up the price of corn even in the most plentiful years. the bounty has generally been suspended. in proportion to that of corn. 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. and it seems to have continued to do so during the course of the greater part of the present. that is. from whom it was at that very time soliciting the first establishment of the annual landtax. however. twenty shillings.

But in France. therefore. Mr. in proportion to that of corn. diligent. Dupré de St. I shall endeavour to explain hereafter. the average price has been lower than during the sixty-four last years of the last century. Maur. and it is somewhat difficult to suppose that nearly the same diminution of price which took place in one country. I shall only observe at present that this rise in the value of silver. have been much more so. it may be said. had it not been for this operation of the bounty. to consider this variation in the average money price of corn as the effect rather of some gradual rise in the real value of silver in the European market than of any fall in the real average value of corn. Mr. by three very faithful. the bounty raises the price of corn above what it naturally would be in the actual state of tillage. the exportation of grain was by law prohibited.The Wealth of Nations: Book 1 275 which it occasions in years of plenty. therefore. in the same state of tillage. It has been observed to have taken place in France. Messance. when I come to treat particularly of bounties. Corn. should in another be owing to the extraordinary encouragement given to exportation. notwithstanding this prohibition. What may have been the effects of this institution upon the agriculture of the country. is at distant periods of time a more Adam Smith ElecBook Classics . and the author of the Essay on the police of grain. during the same period. during the sixty-four first years of the present century. it has already been observed. If. it must. the state of tillage would not have been the same. Both in years of plenty and in years of scarcity. But without the bounty. It would be more proper. and laborious collectors of the prices of corn. till 1764. it must frequently hinder the plenty of one year from compensating the scarcity of another. has not been peculiar to England. and nearly in the same proportion too. perhaps.

the average money price of corn has fallen somewhat below what it had been during the greater part of the last century.The Wealth of Nations: Book 1 276 accurate measure of value than either silver. are not more wonderful than ten years of extraordinary plenty. or perhaps any other commodity. therefore. has occasioned a suspicion that the real value of silver still continues to fall in the European market. but to a fall in the real value of silver. and the disorders of Poland have very much increased the scarcity in all those countries which. corn rose to three and four times its former money price. is by no means a singular one. but as a transitory and occasional event. not as a permanent. this change was universally ascribed. used to be supplied from that market. The seasons for these ten or twelve years past have been unfavourable through the greater part of Europe. not to any rise in the real value of corn. not to any fall in the real value of corn. If during the sixty-four first years of the present century. seems evidently to have been the effect of the extraordinary unfavourableness of the seasons. Ten years of extraordinary scarcity. though not a very common event. besides. So long a course of bad seasons. When. The high price of corn during these ten or twelve years past. we should in the same manner impute this change. and ought therefore to be regarded. but to some rise in the real value of silver in the European market. both inclusive. in dear years. indeed. may very well be set in opposition to its high price during these last eight or ten Adam Smith ElecBook Classics . after the discovery of the abundant mines of America. The low price of corn from 1741 to 1750. This high price of corn. however. and whoever has inquired much into the history of the prices of corn in former times will be at no loss to recollect several other examples of the same kind.

during these ten years. In 1749 accordingly. to have been. He will find there. of which the average is likewise below. Between 1741 and 1750. He had good reason to make this observation. it appears from the accounts of Eton College. The bounty paid for this amounted to £1. which is nearly 6s.176 10s. it appears from the customhouse books. amounted to no less than eight millions twenty-nine thousand one hundred and fifty-six quarters one bushel. however. 6d. 8d. From 1741 to 1750.1 It is unnecessary to observe how much this forced exportation must have raised the price of corn above what it otherwise would have been in the home market. was only £1 13s. the particular account of the preceding ten years. 1 See Tracts on the Corn Trade. In that single year the bounty paid amounted to no less than £324. Pelham.514. below the average price of the sixty-four first years of the present century. the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. 3d. 41/2d. only £1 6s.. 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. During these ten years the quantity of all sorts of grain exported. 91/2d. according to this account. ElecBook Classics Adam Smith . The average price of the quarter of eight bushels of middle wheat comes out.962 17s. observed to the House of Commons that for the three years preceding a very extraordinary sum had been paid as bounty for the exportation of corn. too. at that time Prime Minister. Tract 3. the average price of the quarter of nine bushels of the best wheat at Windsor market. Mr.The Wealth of Nations: Book 1 277 years. and in the following year he might have had still better.

a country not altogether so prosperous. the money price of labour has. The year 1740. In Great Britain the real recompense of labour. If the former have not been as much below the general average as the latter have been above it. The suddenness of the effect can be accounted for only by a cause which can operate suddenly. In France. so the latter have been a good deal above it. which is always slow and gradual. Both in the last century and in the present 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. however. not so much of any diminution in the value of silver in the European market. arising from the great. risen during the course of the present century. and almost universal prosperity of the country. of 1759. notwithstanding the intervention of one or two cheap ones. the real Adam Smith ElecBook Classics . indeed. These twenty years preceding 1750 may very well be set in opposition to the twenty preceding 1770. This. was a year of extraordinary scarcity. the general average of the sixty-four first years of the century. a measure which contains a little more than four Winchester bushels. The money price of labour in Great Britain has. The change has evidently been too sudden to be ascribed to any change in the value of silver. for example.The Wealth of Nations: Book 1 278 though not so much below. as of an increase in the demand for labour in Great Britain. we ought probably to impute it to the bounty. been observed to sink gradually with the average money price of corn. the accidental variation of the seasons. As the former were a good deal below the general average of the century. it has already been shown. notwithstanding the intervention of one or two dear years. however. seems to be the effect. since the middle of the last century.

at which rate it still continues. or to what was just sufficient to pay. Adam Smith ElecBook Classics . the tax of the King of Spain. would soon find that the whole annual importation could not be disposed of at this high price. Those who imported that metal into Europe. however. the whole rent of the land. and much above their natural rate. it soon afterwards fell to a third. The profits of mining would for some time be very great. which were once very high. according to their natural rates. which must be paid in order to bring it from the mine to the market. it has already been observed. has increased considerably during the course of the present century. not of any diminution of the value of silver in the general market of Europe. or not much below its former price. silver would continue to sell at its former. eats up. In the greater part of the silver mines of Peru this. it seems. are now as low as they can well be. then to a fifth. the profits of the stock. owing to the peculiarly happy circumstances of the country. For some time after the first discovery of America. Its price would sink gradually lower and lower till it fell to its natural price. and the rent of the land. Silver would gradually exchange for a smaller and a smaller quantity of goods. but of a rise in the real price of labour in the particular market of Great Britain. and at last to a tenth. This tax was originally a half.The Wealth of Nations: Book 1 279 quantities of the necessaries and conveniencies of life which are given to the labourer. the wages of the labour. The rise in its money price seems to have been the effect. consistently with carrying on their works. and it seems to be universally acknowledged that these profits. In the greater part of the silver mines of Peru. together with its ordinary profits. amounting to a tenth of the gross produce. is all that remains after replacing the stock of the undertaker of the work.

it can continue to be sold for any considerable time together. ElecBook Classics Adam Smith . vol. to its natural price. the date of the discovery of the mines of Potosi. or to the lowest price at which. while it pays a particular tax. is probably the cause which has prevented this from happening. or before 1636.The Wealth of Nations: Book 1 280 The tax of the King of Spain was reduced to a fifth part of the registered silver in 1504. while it continued to pay this tax to the King of Spain. or to reduce the value of silver in the European market as low as it could well fall. or the gradual enlargement of the market for the produce of the silver mines of America. these mines. the market for the produce of its silver mines has been growing gradually more and more extensive. the greater part of 1 Solorzano. had time sufficient to produce their full effect. and which has not only kept up the value of silver in the European market. ii. Since the first discovery of America. of which there is no monopoly. and it might have become necessary either to reduce the tax upon it. The gradual increase of the demand for silver. the most fertile in all America. The price of silver in the European market might perhaps have fallen still lower. in the same manner as that upon gold. the market of Europe has become gradually more and more extensive. In the course of ninety years. Since the discovery of America. First. but has perhaps even raised it somewhat higher than it was about the middle of the last century. or to give up working the greater part of the American mines which are now wrought. not only to one tenth.1 one-and-forty years before 1545. but to one twentieth. Ninety years is time sufficient to reduce any commodity. as in 1736.

perhaps. Spain and Portugal. The greater part. England. who had travelled so frequently through both countries. Secondly. that everything abounded in France. and population are much more rapid than those of the most thriving countries in Europe. indeed. and as its advances in agriculture. even in comparison with France. The English colonies are altogether a new market. Italy seems not to have gone backwards. requires a continually augmenting supply of silver through a great continent where there never was any demand before. Portugal. Adam Smith ElecBook Classics . France. industry. too. Since that time it seems rather to have recovered a little. and the increasing number of wealthy individuals must have required the like increase in the quantity of their plate and other ornaments of silver. and the declension of Spain is not. and Russia.The Wealth of Nations: Book 1 281 Europe has been much improved. are supposed to have gone backwards. is but a very small part of Europe. In the beginning of the sixteenth century. and the Brazils were. even Sweden. of the Spanish and Portuguese colonies are altogether new markets. but that everything was wanting in Spain. partly for coin and partly for plate. Denmark. Spain was a very poor country. Holland. have all advanced considerably both in agriculture and in manufactures. the Yucatan. and Germany. which. It was the well known remark of the Emperor Charles V. which has been so much improved since that time. New Granada. Paraguay. The fall of Italy preceded the conquest of Peru. America is itself a new market for the produce of its own silver mines. so great as is commonly imagined. however. 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. its demand must increase much more rapidly.

and commerce. though they cannot be considered as altogether new markets. sufficiently demonstrate that the story of this populousness and high cultivation is in a great Adam Smith ElecBook Classics . and there was accordingly scarce any division of labour among them. inhabited by savage nations who had neither arts nor agriculture. After all the wonderful tales which have been published concerning the splendid state of those countries in ancient times. though they scarce ever exceeded five hundred men. in countries. found almost everywhere great difficulty in procuring subsistence. Those who cultivated the ground were obliged to build their own houses. to make their own household furniture. with any degree of sober judgment. The famines which they are said to have occasioned almost wherever they went. The few artificers among them are said to have been all maintained by the sovereign. Their whole commerce was carried on by barter. too. whoever reads. will evidently discern that. which at the same time are represented as very populous and well cultivated. the more civilised nation of the two. the nobles. All the ancient arts of Mexico and Peru have never furnished one single manufacture to Europe. The Spanish armies. their own clothes. agriculture. A considerable degree of both has now been introduced into all of them. Even the Peruvians. their inhabitants were much more ignorant than the Tartars of the Ukraine are at present. in arts. and the priests. had no coined money of any kind. though they made use of gold and silver as ornaments. and were probably their servants or slaves. are certainly much more extensive ones than they ever were before. shoes. and frequently did not amount to half that number. and instruments of agriculture. Even Mexico and Peru.The Wealth of Nations: Book 1 282 before discovered by the Europeans. the history of their first discovery and conquest.

however. Since that time.The Wealth of Nations: Book 1 283 measure fabulous. America. represents Lima as containing between twenty-five and twenty-eight thousand inhabitants. Thirdly. the direct trade between America and the East Indies. and the indirect intercourse by the way of Europe has been augmenting in a still greater proportion. is. the Portuguese were the only European nation who Adam Smith ElecBook Classics . it marks an increase which is scarce inferior to that of the English colonies. so great an advantage as to compensate many defects in civil government. In a fertile soil and happy climate. The difference in their accounts of the populousness of several other principal towns in Chili and Peru is nearly the same. improvement. to be advancing in all these much more rapidly than any country in Europe. and as there seems to be no reason to doubt of the good information of either. is a new market for the produce of its own silver mines. Frezier. has been continually taking off a greater and a greater quantity of silver. a circumstance common to all new colonies. of which the demand must increase much more rapidly than that of the most thriving country in Europe. and population than that of the English colonies. The Spanish colonies are under a government in many respects less favourable to agriculture. which is carried on by means of the Acapulco ships. who visited Peru in 1713. During the sixteenth century. who resided in the same country between 1740 and 1746. They seem. Ulloa. from the time of the first discovery of those mines. the East Indies is another market for the produce of the silver mines of America. and a market which. has been continually augmenting. therefore. the great abundance and cheapness of land. represents it as containing more than fifty thousand. it seems.

and even this is not enough. from Gottenburg in Sweden. The English and French carried on some trade with India in the last century. amounts to more than a million and a half a year. The consumption of the porcelain of China. the trade of the Dutch continually augmenting in a still greater proportion than that of the Portuguese declined. of the piece goods of Bengal. During the greater part of the last century those two nations divided the most considerable part of the East India trade between them. and in a few years expelled them from their principal settlements in India. and from the coast of France too. The East India trade of all these nations. In the last years of that century the Dutch begun to encroach upon this monopoly. as long as the French East India Company was in prosperity. it seems. so great as to afford a gradual increase of employment to them all. but it has been greatly augmented in the course of the present. for example. and of innumerable other articles. if we except that of the French. The East India trade of the Swedes and Danes began in the course of the present century. was a drug very little used in Europe before the middle of the last century. Even the Muscovites now trade regularly with China by a sort of caravans which go overland through Siberia and Tartary to Pekin. At present the value of the tea annually imported by the English East India Company. a great deal more being constantly smuggled into the country from the ports of Holland. which the last war had well nigh annihilated. of the spiceries of the Moluccas. for the use of their own countrymen. Tea. The increasing consumption of East India goods in Europe is. has increased very nearly in a like Adam Smith ElecBook Classics . had been almost continually augmenting.The Wealth of Nations: Book 1 284 carried on any regular trade to the East Indies.

much greater than that of the English East India Company before the late reduction of their shipping. the great objects of the competition of the rich. of which they have the disposal. having a greater superabundance of food to dispose of beyond what they themselves can consume. The retinue of a grandee in China or Indostan accordingly is. such commodities would naturally exchange for a greater quantity of food in India than in Europe. enables them to give a greater quantity of it for all those singular and rare productions which nature furnishes but in very small quantities. the value of the precious metals. and those which supplied it with the precious stones a good deal more so. The same superabundance of food. sometimes three crops in the year. But in the East Indies. and it still continues to be so. each of them more plentiful than any common crop of corn. the abundance of food must be much greater than in any corn country of equal extent. which supplied the Indian market had been as abundant as those which supplied the European. particularly in China and Indostan. was much higher than in Europe. at any one time during the last century. the rich. The tonnage accordingly of all the European shipping employed in the East India trade. too. when the Europeans first began to trade to those countries. perhaps.The Wealth of Nations: Book 1 285 proportion. such as the precious metals and the precious stones. have the means of purchasing a much greater quantity of the labour of other people. In rice countries. by all accounts. Though the mines. Such countries are accordingly much more populous. In them. therefore. Adam Smith ElecBook Classics . much more numerous and splendid than that of the richest subjects in Europe. But the mines which supplied the Indian market with the precious metals seem to have been a good deal less abundant. was not. which generally yield two.

to bring first the materials. the first of all necessaries. the money price of the greater part of manufactures will be in proportion to the money price of labour. a great deal lower in the one country than in the other. the real quantity of the necessaries of life which is given to the labourer. and that of food. would be somewhat lower. The money price of the greater part of manufactures. and for a much greater quantity of food than in Europe. and of the low price of that food. would naturally exchange in India for somewhat a greater quantity of the precious stones. therefore. The money price of diamonds. and afterwards the complete manufacture to market. It costs more labour. too. China and Indostan. But the real price of labour. and in manufacturing art and industry. The precious metals. and as the money price of food is much lower in India than in Europe. the expense of land-carriage increases very much both the real and nominal price of most manufactures. though inferior. and consequently of this money. seem not to be much inferior to any part of Europe. the two great markets of India. is lower both in China and Indostan. Through the greater part of Europe. the money price of labour is there lower upon a double account.The Wealth of Nations: Book 1 286 than the mines which supplied the European. and thereby reduce still lower both the real and the Adam Smith ElecBook Classics . will naturally be much lower in those great empires than it is anywhere in Europe. But in countries of equal art and industry. therefore. The wages of the labourer will there purchase a smaller quantity of food. it has already been observed. In China and Indostan the extent and variety of inland navigation save the greater part of this labour. upon account both of the small quantity of food which it will purchase. than it is through the greater part of Europe. and therefore more money. the greatest of all superfluities.

silver has generally been one of the most valuable articles. will purchase or command a greater quantity of labour and commodities in India. In order to supply so very widely extended a market. but to repair that continual waste and consumption of silver which takes place in all countries where that metal is used. whereas in Europe it is as fourteen or fifteen to one. in Europe it requires from fourteen to fifteen ounces. Adam Smith ElecBook Classics . and it is by means of it. In the cargoes. and the greater part of the other markets of India. It is more advantageous. ten. extremely advantageous to carry from Europe to India. to one. that those distant parts of the world are connected with one another. and the greater part of the other markets of India. therefore. Upon all those accounts the precious metals axe a commodity which it always has been. or at most twelve. the proportion between fine silver and fine gold is but as ten. of the greater part of European ships which sail to India. or at most as twelve. in a great measure. It is the most valuable article in the Acapulco ships which sail to Manilla.The Wealth of Nations: Book 1 287 nominal price of the greater part of their manufactures. because in China. too. In China. in proportion to the quantity of labour and commodities which it costs in Europe. The silver of the new continent seems in this manner to be one of the principal commodities by which the commerce between the two extremities of the old one is carried on. to carry silver thither than gold. or which. There is scarce any commodity which brings a better price there. ounces of silver will purchase an ounce of gold. the quantity of silver annually brought from the mines must not only be sufficient to support that continual increase both of coin and of plate which is required in all thriving countries. and still continues to be.

must be annually lost in transporting those metals from one place to another both by sea and by land. and in plate both by wearing and cleaning. gold and silver stuffs. must occasion the loss of a still greater quantity. the almost universal custom of concealing treasures in the bowels of the earth. of which the knowledge frequently dies with the person who makes the concealment. furniture.The Wealth of Nations: Book 1 288 The continual consumption of the precious metals in coin by wearing. is very sensible. is. embroideries. The quantity of gold and silver imported at both Cadiz and Lisbon (including not only what comes under register. but what may be supposed to be smuggled) amounts. however. The consumption of those metals in some particular manufactures. as it is much more rapid. would alone require a very great annual supply. A considerable quantity. is said to amount to more than fifty thousand pounds sterling. In the manufactures of Birmingham alone the quantity of gold and silver annually employed in gilding and plating. according to the best accounts. etc. or in laces. and thereby disqualified from ever afterwards appearing in the shape of those metals. though it may not perhaps be greater upon the whole than this gradual consumption. too. We may from thence form some notion how great must be the annual consumption in all the different parts of the world either in manufactures of the same kind with those of Birmingham. and in commodities of which the use is so very widely extended. much more sensible. besides. the gilding of books. Adam Smith ElecBook Classics . In the greater part of the governments of Asia. to about six millions sterling a year.

three years after the publication of the book. at forty-four guineas and a half the pound Troy.. The gold.413. at sixty-two shillings the pound Troy. to be found in few copies: it corrects several errors in the book. and into Portugal. amounts to £3. and of the particular quantity of each metal. viz.984. too. According to the eloquent and. viz.940 pounds weight. and in gold to 29. The great experience of this judicious merchant renders his opinion of considerable weight. therefore. according to the register. He gives us the detail of the particular places from which the gold and silver were brought.101. He makes an allowance. sterling. amounts to £2. amounted to 13. for the quantity of each metal which he supposes may have been smuggled. well-informed author of the Philosophical and Political History of the Establishment of the Europeans in the two Indies.431 10s.333.. both inclusive.. at an average of six years. Meggens1 the annual importation of the precious metals into Spain. sterling. 1 Postscript to the Universal Merchant. both inclusive. from 1747 to 1753. the whole annual importation. he supposes. Adam Smith ElecBook Classics . sometimes. amounted in silver to 1. at an average of seven years. 15 and 16. viz. pp. may have amounted to seventeen millions of piastres. Both together amount to £5. which has never had a second edition. from 1754 to 1764. This postscript was not printed till 1756.446 14s. sterling.878 4s. The account of what was imported under register he assures us is exact. each of them afforded.1853/4 piastres of ten reals. the annual importation of registered gold and silver into Spain. The silver.746. The postscript is. at an average of eleven years. On account of what may have been smuggled. from 1748 to 1753.The Wealth of Nations: Book 1 289 According to Mr. however. both inclusive.107 pounds weight. which.

the piastre. add to the sum an eighth more. though manuscript. no doubt remains in the country. and some part. we might value it at eighteen millions of cruzadoes. besides. Some part is sent annually by the Acapulco ships to Manilla. They are. it is acknowledged. The annual importation of the precious metals into Cadiz and Lisbon. sometimes a little less. and of the particular quantities of each metal which. he says.250.000 sterling. however. which it seems is one-fifth of the standard metal. too. therefore.000 sterling.075. we may safely. of the particular places from which the gold and silver were brought. equal to about two millions sterling. the whole annual importation of the precious metals into both Spain and Portugal amounts to about £6. sometimes a little more. accounts. He informs us. The mines of America. in comparison with theirs. According to this account. or £250. The produce of all the other mines which are known is insignificant. Several other very well authenticated. is equal to £3. I have been assured.The Wealth of Nations: Book 1 290 which. He gives the detail. however. or forty-five millions of French livres. according to the register. and Adam Smith ElecBook Classics . some part is employed in the contraband trade which the Spanish colonies carry on with those of other European nations. are by no means the only gold and silver mines in the world. 6d. that if we were to judge of the quantity of gold annually imported from the Brazils into Lisbon by the amount of the tax paid to the King of Portugal. too. On account of what may have been smuggled.000 sterling. so that the whole will amount to £2. each of them afforded. is not equal to the whole annual produce of the mines of America. agree in making this whole annual importation amount at an average to about six millions sterling. at 4s. indeed.825.000 sterling. by far the most abundant.

too. however. and. is annually imported into Cadiz and Lisbon. We do not. indeed. but are liable. The durableness of metals is the foundation of this extraordinary steadiness of price.The Wealth of Nations: Book 1 291 the far greater part of their produce. Why should we imagine that the precious metals are likely to do so? The coarse metals. though harder. at the rate of fifty thousand pounds a year. it is likewise acknowledged. are put to much harder uses. The whole annual consumption of gold and silver. and consumed in a great variety of ways. is equal to the hundred-and-twentieth part of this annual importation at the rate of six millions a year. The corn which was Adam Smith ElecBook Classics . varies less from year to year than that of almost any other part of the rude produce of land. The quantity of brass and iron annually brought from the mine to the market is out of all proportion greater than that of gold and silver. to be lost. and the price of the precious metals is even less liable to sudden variations than that of the coarse ones. The price of all metals. therefore. however. are not necessarily immortal any more than they. or to become gradually cheaper and cheaper. less care is employed in their preservation. It may even have fallen so far short of time demand as somewhat to raise the price of those metals in the European market. in all the different countries of the world where those metals are used. as they are of less value. may perhaps be nearly equal to the whole annual produce. though liable to slow and gradual variations. wasted. imagine that those coarse metals are likely to multiply beyond the demand. The precious metals. upon this account. The remainder may be no more than sufficient to supply the increasing demand of all thriving countries. But the consumption of Birmingham alone.

those variations have not the same effect upon the price of the one species of commodities as upon that of the other. an ounce of fine gold came to be supposed to be worth between fourteen and fifteen ounces of fine silver. varies. an ounce of fine gold was supposed to be worth from ten to twelve ounces of fine silver. that is. and the proportion between the masses of gold will be still less affected by any such difference in the produce of the gold mines.The Wealth of Nations: Book 1 292 brought to market last year will be all or almost all consumed long before the end of this year. still more from year to year than that of the greater part of corn fields. perhaps. About the middle of the last century it came to be regulated. But some part of the iron which was brought from the mine two or three hundred years ago may be still in use. The different masses of corn which in different years must supply the consumption of the world will always be nearly in proportion to the respective produce of those different years. therefore. Though the produce of the greater part of metallic mines. But the proportion between the different masses of iron which may be in use in two different years will be very little affected by any accidental difference in the produce of the iron mines of those two years. the value of fine gold to fine silver was regulated in the different mints of Europe between the proportions of one to ten and one to twelve. and perhaps some part of the gold which was brought from it two or three thousand years ago. Gold Adam Smith ElecBook Classics . that is. between the proportions of one to fourteen and one to fifteen. VARIATIONS IN THE PROPORTION BETWEEN THE RESPECTIVE VALUES OF GOLD AND SILVER Before the discovery of the mines of America.

In China. the quantities of those metals which remain in Europe to the proportion of one to fourteen or fifteen. in some of the English settlements. it seems. Though both the gold and silver mines of America exceeded in fertility all those which had ever been known before. is as one to twenty-two nearly. The great quantities of silver carried annually from Europe to India have. or in the quantity of silver which was given for it. Both metals sunk in their real value. that is. In the mint of Calcutta an ounce of fine gold is supposed to be worth fifteen ounces of fine silver. or in the quantity of labour which they could purchase. but silver sunk more than gold. The proportion between the quantities of gold and silver annually imported into Europe. In Japan it is said to be as one to eight. been proportionably still greater than that of the gold ones. according to Mr. he supposes. must necessarily be the same as that between their quantities. in the same manner as in Europe. and would therefore be as one to twenty-two. the fertility of the silver mines had.The Wealth of Nations: Book 1 293 rose in its nominal value. were it not for this greater exportation of silver. But the ordinary proportion between the respective values of two commodities is not necessarily the same as that between the Adam Smith ElecBook Classics . the proportion of their values. The great quantity of silver sent annually to the East Indies reduces. the proportion of gold to silver still continues as one to ten. gradually reduced the value of that metal in proportion to gold. The proportion between their values. he seems to think. Meggens’s account. or one to twelve. It is in the mint perhaps rated too high for the value which it bears in the market of Bengal. for one ounce of gold there are imported a little more than twenty-two ounces of silver.

of the cheap commodity must commonly be greater in proportion to the whole quantity of the dear one than the value of a certain quantity of the dear one is to the value of an equal quantity of the cheap one. The price of an ox. We ought naturally to expect. but of greater value. can commonly be disposed of. but a greater value. than the whole quantity of poultry. it is probable is much greater in proportion to that of gold than the value of a certain quantity of gold is to that of an equal quantity of silver. and the whole quantity of wild fowl. The whole quantity. There are so many more purchasers for the cheap than for the dear commodity that not only a greater quantity of it. therefore. because an ounce of gold will commonly purchase from fourteen to fifteen ounces of silver. that there are commonly in the market only fourteen or fifteen ounces of silver for one ounce of gold. The quantity of silver commonly in the market. It would be absurd. 6d. is about threescore times the price of a lamb. but a greater value of silver than of gold.The Wealth of Nations: Book 1 294 quantities of them which are commonly in the market. the whole quantity of butcher’s meat. silver is a cheap and gold a dear commodity. reckoned at 3s. to infer from thence that there are commonly in the market threescore lambs for one ox: and it would be just as absurd to infer. When we compare the precious metals with one another. The whole quantity of a cheap commodity brought to market is commonly not only greater. Let any man who has a little of Adam Smith ElecBook Classics . however. therefore. than the whole quantity of a dear one. but of greater value than the whole quantity of butcher’s meat. The whole quantity of bread annually brought to market is not only greater. reckoned at ten guineas. that there should always be in the market not only a greater quantity.

silver always has been. the gold preponderated very little. of the silver plate above that of the gold. indeed. Though. the value of the gold preponderates greatly. not only according to the absolute greatness or smallness of its usual price. though it did somewhat.. which. in one sense of the word. snuffboxes.1 as it appears by the accounts of the mint. in the present state of the Spanish market. much cheaper than gold. the largest sums are commonly paid in that metal. before the union with England. be said to be somewhat cheaper than silver. Scotiæ. etc. besides. is generally confined to watchcases. In France. In the coin of many countries the silver preponderates. but according as that price is more or less above the lowest for which it is possible to 1 See Ruddiman’s preface to Anderson’s Diplomata. and it is there difficult to get more gold than what is necessary to carry about in your pocket. not only the quantity. and such like trinkets. and probably always will be. and he will probably find that.The Wealth of Nations: Book 1 295 both compare his own silver with his gold plate. which takes place in all countries. In the coin of some countries the value of the two metals is nearly equal. perhaps. have a good deal of silver who have no gold plate. even with those who have it. but it is not so in that of all countries. will much more than compensate the preponderancy of the gold coin above the silver. The superior value. Many people. which takes place only in some countries. of which the whole amount is seldom of great value. ElecBook Classics Adam Smith . In the Scotch coin. A commodity may be said to be dear or cheap. In the British coin. however. but the value of the former greatly exceeds that of the latter. yet in another sense gold may.

of the King of Portugal upon the gold of the Brazils is the same with the ancient tax of the King of Spain upon the silver of Mexico and Peru. as it affords both less rent and less profit. consists the whole rent of the greater part of the gold and silver mines of Spanish America. therefore. The profits of the undertakers of gold mines too. in general. The tax. whereas his tax upon silver amounts to one-tenth part of it. the stock which must be employed in bringing the commodity thither. or to ten per cent. be uncertain whether to the general market of Europe the whole mass of American gold comes at a price nearer to the lowest for which it is possible to bring it thither than the whole mass of American silver. in the present state of the Spanish market. or one-fifth part of the standard metal. gold is certainly somewhat nearer to this lowest price than silver. must.The Wealth of Nations: Book 1 296 bring it to market for any considerable time together. It may. be somewhat nearer to the lowest price for which it is possible to bring it thither than the price of Spanish silver. The tax of the King of Spain upon gold is only one-twentieth part of the standard metal. indeed. it has already been observed. The price of Spanish gold. But. cannot. must. of which rent makes not any component part. In these taxes too. When all expenses are computed. This lowest price is that which barely replaces. in the Spanish market. therefore. the whole quantity of the one metal. with a moderate profit. as they more rarely make a fortune. but which resolves itself altogether into wages and profit. It is the price which affords nothing to the landlord. be disposed of so advantageously as the whole quantity of the other. Adam Smith ElecBook Classics . it would seem. be still more moderate than those of the undertakers of silver mines. and that upon gold is still worse paid than that upon silver. in the Spanish market. or five per cent.

Though it is not very probable that any part of a tax. it must be compensated altogether by a proportionable diminution of the tax upon silver. or. and of the greater expense of drawing out the water and of supplying them with fresh air at those depths. in time.The Wealth of Nations: Book 1 297 The price of diamonds and other precious stones may. it must be compensated partly by the one. in the same manner as it made it necessary to reduce the tax upon gold to one-twentieth. first. on account of the greater depths at which it is necessary to carry on the works. This third event is very possible. That the silver mines of Spanish America. or. which is not only imposed upon one of the most proper subjects of taxation. The increase of the expense must either. a mere luxury and superfluity. thirdly. perhaps. yet the same impossibility of paying it. secondly. and partly by the other of those two expedients. may in time make it necessary to reduce it still further. be still nearer to the lowest price at which it is possible to bring them to market than even the price of gold. which are equivalent to a growing scarcity of silver (for a commodity may be said to grow scarcer when it becomes more difficult and expensive to collect a certain quantity of it) must. is acknowledged by everybody who has inquired into the state of those mines. which in 1736 made it necessary to reduce it from one-fifth to one-tenth. produce one or other of the three following events. These causes. be compensated altogether by a proportionable increase in the price of the metal. As gold rose in its price in Adam Smith ElecBook Classics . will ever be given up as long as it is possible to pay it. but which affords so very important a revenue as the tax upon silver. like all other mines. become gradually more expensive in the working.

than it otherwise would have been. has hitherto been so very small that after all that has been said it may. notwithstanding this reduction. and. The rise. because they could not afford to pay the old tax. during the course of the present century. Adam Smith ElecBook Classics . perhaps. though it may not at this day be lower than before that reduction. perhaps. however. the facts and arguments which have been alleged above dispose me to believe. supposing there has been any. In consequence of such reductions many mines may be wrought which could not be wrought before. but whether the contrary may not have taken place. though they may not prevent altogether. is. the value of silver in the European market.The Wealth of Nations: Book 1 298 proportion to silver. must certainly retard. for the best opinion which I can form upon this subject scarce. and the quantity of silver annually brought to market must always be somewhat greater. the value of silver has. In consequence of the reduction in 1736. not only whether this event has actually taken place. the rise of the value of silver in the European market. or more properly to suspect and conjecture. appear to many people uncertain. begun to rise somewhat in the European market. deserves the name of belief. That. Such successive reductions of the tax. the value of any given quantity somewhat less. more or less. or whether the value of the silver may not still continue to fall in the European market. notwithstanding an equal diminution of the tax upon silver. therefore. so silver might rise in its price in proportion to labour and commodities. indeed. at least ten per cent lower than it would have been had the Court of Spain continued to exact the old tax. probably. notwithstanding a great diminution of the tax upon gold.

that whatever may be the supposed annual importation of gold and silver. the annual consumption will gradually and insensibly accommodate itself to what that annual importation can maintain.The Wealth of Nations: Book 1 299 It must be observed. there must be a certain period at which the annual consumption of those metals will be equal to that annual importation. and the popular notion that. in this manner. till the annual importation become again stationary. The mass of those metals may gradually and insensibly diminish. perhaps. As their mass increases. however. is not supposed to be the case. exceed the annual importation. the annual importation should gradually diminish. the annual consumption may. dispose many people to believe that their value still continues to fall in the European market. for some time. may. as the quantity of the precious metals naturally increases with the increase of wealth so their value diminishes as their quantity increases. when the annual consumption has become equal to the annual importation. which. GROUNDS OF THE SUSPICION THAT THE VALUE OF SILVER STILL CONTINUES TO DECREASE The increase of the wealth of Europe. become equal to their annual importation. and the still Adam Smith ElecBook Classics . and their value gradually and insensibly rise. therefore. or rather in a much greater proportion. the annual consumption of those metals must. in the present times. their value diminishes. and their consumption consequently increases in a greater proportion than their mass. provided that importation is not continually increasing. They are more used and less cared for. Their consumption must increase as their mass increases. If. After a certain period.

they necessarily cease to go thither. but because they are dearer. Gold and silver naturally resort to a rich country. I have endeavoured to show already. It is the superiority of price which attracts them. not because they are cheaper there than in poorer countries. Though such commodities.. game of all kinds. or will purchase less labour than before. come to exchange for a greater quantity of silver than before. cattle. or will purchase more labour than before. It is not their nominal price only. for the same reason that all sorts of luxuries and curiosities resort to it. therefore. but of the rise in their real price. which arises in any country from the increase of wealth. If you except corn and such other vegetables as are raised altogether by human industry. Adam Smith ElecBook Classics . the useful fossils and minerals of the earth. it will not from thence follow that silver has become really cheaper. naturally grow dearer as the society advances in wealth and improvement. I have endeavoured to show already. that all other sorts of rude produce. but that such commodities have become really dearer. poultry. but their real price which rises in the progress of improvement. and as soon as that superiority ceases.The Wealth of Nations: Book 1 300 gradually increasing price of many parts of the rude produce of land may confirm them still further in this opinion. etc. or because a better price is given for them. has no tendency to diminish their value. The rise of their nominal price is the effect. not of any degradation of the value of silver. That that increase in the quantity of the precious metals.

as well as Adam Smith ElecBook Classics . almost all wild-fowl. and sometimes to rise more or less. many different sorts of game. those in which the efficacy of industry is either limited or uncertain. First Sort The first sort of rude produce of which the price rises in the progress of improvement is that which it is scarce in the power of human industry to multiply at all. it is impossible to accumulate together the produce of many different seasons. The second.The Wealth of Nations: Book 1 301 DIFFERENT EFFECTS OF THE PROGRESS OF IMPROVEMENT UPON THREE DIFFERENT SORTS OF RUDE PRODUCE These different sorts of rude produce may be divided into three classes. the real price of the first may rise to any degree of extravagance. The third. and seems not to be limited by any certain boundary. though it may rise greatly. being of a very perishable nature. sometimes to continue the same. That of the third. Such are the greater part of rare and singular birds and fishes. It consists in those things which nature produces only in certain quantities. according as different accidents render the efforts of human industry. those which it can multiply in proportion to the demand. more or less successful. all birds of passage in particular. however. and which. has. a certain boundary beyond which it cannot well pass for any considerable time together. in multiplying this sort of rude produce. In the progress of wealth and improvement. though its natural tendency is to rise in the progress of improvement. The first comprehends those which it is scarce in the power of human industry to multiply at all. yet in the same degree of improvement it may sometimes happen even to fall. That of the second.

the peck. the ordinary or average contract price of those times. remaining the same. These prices were not the effects of the low value of silver in those times. but of the high value of such rarities and curiosities as human industry could not multiply at pleasure. it is equal to Adam Smith ElecBook Classics . was the price which the republic paid for the modius or peck of the tithe wheat of Sicily. may in this manner easily be accounted for. while the competition to purchase them is continually increasing. and no effort of human industry may be able to increase the supply much beyond what it was before this increase of the demand. and seems not to be limited by any certain boundary. in the time of their greatest grandeur. had occasion to order more corn than the tithe of wheat amounted to. for rare birds and fishes. The high price paid by the Romans.The Wealth of Nations: Book 1 302 many other things. than it is through the greater part of Europe at present. Three sestertii. they were bound by capitulation to pay for the surplus at the rate of four sestertii. or eightpence sterling. If woodcocks should become so fashionable as to sell for twenty guineas apiece. however. When wealth and the luxury which accompanies it increase. was probably below the average market price. This price. the obligation to deliver their wheat at this rate being considered as a tax upon the Sicilian farmers. and this had probably been reckoned the moderate and reasonable. equal to about sixpence sterling. the demand for these is likely to increase with them. When the Romans. therefore. that is. The real value of silver was higher at Rome. their price may rise to any degree of extravagance. no effort of human industry could increase the number of those brought to market much beyond what it is at present. therefore. The quantity of such commodities. or nearly the same. for some time before and after the fall of the republic.

before the late years of scarcity. how much soever it may surprise us. to appear to us about one-third less than it really was. What occasioned the extravagance of those high prices was. The value of silver. 29. and generally sells for a lower price in the European market. which in quality is inferior to the Sicilian. Seius gave for the nightingale the command of a quantity of labour and subsistence equal to what £66 13s. the ordinary contract price of English wheat. three ounces of silver would then have purchased the same quantity of labour and commodities which four ounces will do at present. was about one-third more than their nominal price is apt to express to us in the present times. would purchase in the present times. 4d. Their real price. and Asinius Celer gave for the surmullet the command of a quantity equal to what £88 17s. equal to about fifty pounds of our present money. x. would purchase. that is. 91/2d. as a present for the Empress Agrippina. equal to about sixty-six pounds thirteen shillings and fourpence of our present money. ElecBook Classics Adam Smith . must have been to its value in the present as three to four inversely. 17. notwithstanding. and that Asinius Celer2 purchased a surmullet at the price of eight thousand sestertii. the extravagance of those prices. Eight-and-twenty shillings the quarter was. therefore. at a price of six thousand sestertii. the quantity of labour and subsistence which was given away for them. not so much the abundance of silver as the abundance of labour and subsistence of which 1 2 Pliny. When we read in Pliny.The Wealth of Nations: Book 1 303 about one-and-twenty shillings the quarter. is apt. that Seius1 bought a white nightingale. therefore. ix. in those ancient times. Pliny.

During a long period in the progress of improvement. If it did.The Wealth of Nations: Book 1 304 those Romans had the disposal beyond what was necessary for their own use. rises so high that it is as profitable to cultivate land in order to raise food for them as in order to raise food for man. Second Sort The second sort of rude procedure of which the price rises in the progress of improvement is that which human industry can multiply in proportion to the demand. If it did. nature produces with such profuse abundance that they are of little or no value. by diminishing the quantity of wild pasture. diminishes the quantity of butcher’s meat which the country naturally produces Adam Smith ElecBook Classics . The quantity of silver of which they had the disposal was a good deal less than what the command of the same quantity of labour and subsistence would have procured to them in the present times. When it has got so high it cannot well go higher. in uncultivated countries. When the price of cattle. it cannot well go higher. It consists in those useful plants and animals which. the quantity of these is continually diminishing. the real quantity of labour which they will purchase or command. more land and more industry would soon be employed to increase their quantity. and which. gradually rises. as cultivation advances are therefore forced to give place to some more profitable produce. for example. more corn land would soon be turned into pasture. while at the same time the demand for them is continually increasing. till at last it gets so high as to render them as profitable a produce as anything else which human industry can raise upon the most fertile and best cultivated land. Their real value. The extension of tillage. therefore.

therefore. first rises to this height. Had the Scotch cattle been always confined to the market of Scotland. The price of butcher’s meat. perhaps. perhaps. the price of corn. in a country in which the quantity of land which can be applied to no other purpose but the feeding of cattle is so great in proportion to what can be applied to other purposes. seems. in the neighbourhood of London. even of those lands which are Adam Smith ElecBook Classics . Till the price of cattle. There are. it is scarce possible. however. In England. indeed. in some of which. what comes to the same thing. to have got to this height about the beginning of the last century. has got to this height. perhaps. it may scarce yet have got to it. which compose this second sort of rude produce. in the progress of improvement. It had not got to this height in any part of Scotland before the union. increases the demand. some parts of Europe in which the price of cattle has not yet got to this height.The Wealth of Nations: Book 1 305 without labour or cultivation. if the country is advancing at all. or. their price must be continually rising. Of all the different substances. it seems scarce possible that the greater part. the price of cattle. and by increasing the number of those who have either corn. but it was much later probably before it got to it through the greater part of the remoter counties. and till it has got to this height. that their price could ever have risen so high as to render it profitable to cultivate land for the sake of feeding them. perhaps. must gradually rise till it gets so high that it becomes as profitable to employ the most fertile and best cultivated lands in raising food for them as in raising corn. to give in exchange for it. and consequently of cattle. it has already been observed. 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. that of which the price. cattle is.

and brought into the stable to them. therefore. can be completely cultivated. the most fertile. in the neighbourhood of the farmyard. that is. no more cattle can. is not sufficient to pay for the produce of improved and cultivated land. in the far greater part of those of every extensive country. will be kept constantly in good condition and fit for tillage. In all farms too distant from any town to carry manure from it.The Wealth of Nations: Book 1 306 capable of the highest cultivation. or those. In these circumstances. If the price of cattle. be allowed to lie Adam Smith ElecBook Classics . therefore. These. with profit. The land is manured either by pasturing the cattle upon it. and from thence carrying out their dung to it. be fed in the stable than what are necessary for tillage. when they are allowed to pasture it. that price will be still less sufficient to pay for that produce when it must be collected with a good deal of additional labour. because to collect the scanty and scattered produce of waste and unimproved lands would require too much labour and be too expensive. the quantity of well-cultivated land must be in proportion to the quantity of manure which the farm itself produces. But unless the price of the cattle be sufficient to pay both the rent and profit of cultivated land. the farmer cannot afford to pasture them upon it. But these can never afford manure enough for keeping constantly in good condition all the lands which they are capable of cultivating. The rest will. It is with the produce of improved and cultivated land only that cattle can be fed in the stable. What they afford being insufficient for the whole farm will naturally be reserved for the lands to which it can be most advantageously or conveniently applied. and this again must be in proportion to the stock of cattle which are maintained upon it. perhaps. the greater part of them. and he can still less afford to feed them in the stable. or by feeding them in the stable. therefore.

The lands which were kept constantly well manured and in good condition seldom exceeded a third or a fourth part of the whole farm. when it will yield. just sufficient to keep alive a few straggling. though much understocked in proportion to what would be necessary for its complete cultivation. no doubt. But how disadvantageous soever this system may appear. but a certain portion of them was in its turn.The Wealth of Nations: Book 1 307 waste. it is evident. however. yet before the union the low price of cattle seems to have rendered it almost unavoidable. Such accordingly was the general system of management all over the low country of Scotland before the union. may be ploughed up. regularly cultivated and exhausted. it still continues to prevail through a considerable part of the country. being very frequently overstocked in proportion to its actual produce. even that part of the land of Scotland which is capable of good cultivation could produce but little in comparison of what it may be capable of producing. or of some other coarse grain. notwithstanding. The rest were never manured. it must be rested and pastured again as before and another portion ploughed up to be in the same manner exhausted and rested again in its turn. and then. being entirely exhausted. it is owing. after having been pastured in this wretched manner for six or seven years together. and sometimes did not amount to a fifth or a sixth part of it. half-starved cattle. A portion of this waste land. a poor crop or two of bad oats. in many places. Under this system of management. If. producing scarce anything but some miserable pasture. the farm. but in most places to the unavoidable obstructions which the natural course of things opposes to the immediate or speedy establishment of a better system: first. to ignorance and attachment to old customs. perhaps. notwithstanding a great rise in their price. to the poverty of the Adam Smith ElecBook Classics .

The Wealth of Nations: Book 1 308 tenants. this rise in the price of cattle is. which can for many years be applied to no other purpose but the feeding of cattle. however. and. but it has. In all new colonies the great quantity of waste land. perhaps. It has not only raised the value of all highland estates. to their not having yet had time to acquire a stock of cattle sufficient to cultivate their lands more completely. must pass away before the old system. the greatest. The increase of stock and the improvement of land are two events which must go hand in hand. to their not having yet had time to put their lands in condition to maintain this greater stock properly. and of which the one can nowhere much outrun the other. perhaps. perhaps. These natural obstructions to the establishment of a better system cannot be removed but by a long course of frugality and industry. which is wearing out gradually. which Scotland has derived from the union with England. Of all the commercial advantages. secondly. the same rise of price which would render it advantageous for them to maintain a greater stock rendering it more difficult for them to acquire it. and half a century or a century more. Though all the cattle of the European colonies in America were originally carried from Europe. been the principal cause of the improvement of the low country. supposing they were capable of acquiring it. Without some increase of stock there can be scarce any improvement of land. and in everything great cheapness is the necessary consequence of great abundance. because otherwise the land could not maintain it. but there can be no considerable increase of stock but in consequence of a considerable improvement of land. they soon multiplied so much Adam Smith ElecBook Classics . soon renders them extremely abundant. can be completely abolished through all the different parts of the country.

and became of so little value that even horses were allowed to run wild in the woods without any owner thinking it worth while to claim them. after the first establishment of such colonies. so well skilled in all the different branches of agriculture. when he gives an account of the husbandry of some of the English colonies in North America. The same causes. having long ago extirpated almost all the annual grasses by cropping them too early in the spring. pp. he says.The Wealth of Nations: Book 1 309 there. before it can become profitable to feed cattle upon the produce of cultivated land.1 The annual grasses were. and the land which it is destined to cultivate. it seems. are likely to introduce there a system of husbandry not unlike that which still continues to take place in so many parts of Scotland. 344. could not maintain one cow. 343. the Swedish traveller. they used to grow very thick. and the disproportion between the stock employed in cultivation. and when that is exhausted. they clear and cultivate another piece of fresh land. ElecBook Classics Adam Smith . They make scarce any manure for their corn fields. observes. It must be a long time. before they had time to form their flowers. where they are half-starved. I. or to shed their seeds. Mr. the best natural grasses in that part of North America. vol. that he can with difficulty discover there the character of the English nation. would in former times. and when the Europeans first settled there. the want of manure. Kalm. and to rise three or four feet high. but when one piece of ground has been exhausted by continual cropping. accordingly. A piece of ground which. as he found it in 1749. he was 1 Kalms’ Travels. when he wrote. proceed to the third. therefore. Their cattle are allowed to wander through the woods and other uncultivated grounds.

The poorness of the pasture had. because till they bring it. They were probably not unlike that stunted breed which was common all over Scotland thirty or forty years ago.The Wealth of Nations: Book 1 310 assured. have maintained four. Adam Smith ElecBook Classics . they are perhaps the first which bring this price. which degenerated sensibly from one generation to another. 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. and which is now so much mended through the greater part of the low country. occasioned the degradation of their cattle. in his opinion. in the progress of improvement before cattle can bring such a price as to render it profitable to cultivate land for the sake of feeding them. so perhaps venison is among the last parts of this sort of rude produce which bring this price. the feeding of deer would soon become an article of common farming. If it was otherwise. not so much by a change of the breed. as by a more plentiful method of feeding them. as is well known to all those who have had any experience in the feeding of deer. in the same manner as the feeding of those small birds called Turdi was among the ancient Romans. Though it is late. how extravagant soever it may appear. is said to be so in some parts of France. yet of all the different parts which compose this second sort of rude produce. Varro and Columella assure us that it was a most profitable article. though that expedient has been employed in some places. The fattening of ortolans. The price of venison in Great Britain. is not near sufficient to compensate the expense of a deer park. birds of passage which arrive lean in the country. each of which would have given four times the quantity of milk which that one was capable of giving. As cattle are among the first. therefore.

These. which the farm in this manner produces without expense. according to different circumstances. and as they cost the farmer scarce anything. are a mere save-all. in consequence of improvement and cultivation. are often fully sufficient to supply the whole demand. there is a very long interval. which are thus raised without expense. Thus in every farm the offals of the barn and stables will maintain a certain number of poultry. In this state of things. Almost all that he gets is pure gain. is always preferred to what is common. and therefore but thinly inhabited. Between that period in the progress of improvement which brings to its height the price of so necessary an article as cattle. the price of poultry gradually rises above that of butcher’s meat. till at last it gets so high that it becomes profitable to cultivate land for the sake of feeding them. and their price can scarce be so low as to discourage him from feeding this number. in the course of which many other sorts of rude produce gradually arrive at their highest price. as they are fed with what would otherwise be lost. the poultry. they are often as cheap as butcher’s meat. and that which brings to it the price of such a superfluity as venison. or any other sort of animal food. therefore. But in countries ill cultivated. so he can afford to sell them for very little. When it has got to this height it cannot well go Adam Smith ElecBook Classics . with only nearly equal merit. its price may very probably rise still higher than it is at present.The Wealth of Nations: Book 1 311 If venison continues in fashion. and the wealth and luxury of Great Britain increase as they have done for some time past. But the whole quantity of poultry. must always be much smaller than the whole quantity of butcher’s meat which is reared upon it. therefore. some sooner and some later. As wealth and luxury increase. and in times of wealth and luxury what is rare.

but in consequence of these improvements he can afford to sell cheaper. like poultry. cabbage. is. the period at which every particular sort of animal food is dearest must naturally be that which immediately precedes the general practice of cultivating land for the sake of raising it. As long as the number of such Adam Smith ElecBook Classics . for if he could not afford it. more land would soon be turned to this purpose.. however. For some time before this practice becomes general. They are certainly. the scarcity must necessarily raise the price. as England receives considerable supplies from France. A middling farmer will there sometimes have four hundred fowls in his yard. The plenty not only obliges him to sell cheaper. It has been probably in this manner that the introduction of clover. In the progress of improvement. etc. After it has become general. carrots. In several provinces of France. has contributed to sink the common price of butcher’s meat in the London market somewhat below what it was about the beginning of the last century. the plenty would not be of long continuance. The hog. The feeding of poultry seems scarce yet to be generally considered as a matter of so much importance in England. the feeding of poultry is considered as a very important article in rural economy. and sufficiently profitable to encourage the farmer to raise a considerable quantity of Indian corn and buck-wheat for this purpose. new methods of feeding are commonly fallen upon. which enable the farmer to raise upon the same quantity of ground a much greater quantity of that particular sort of animal food. originally kept as a save-all.The Wealth of Nations: Book 1 312 higher. turnips. If it did. that finds his food among ordure and greedily devours many things rejected by every other useful animal. dearer in England than in France.

and they find the rest in the neighbouring fields without doing any sensible damage to anybody. In most parts of Great Britain it is at present somewhat higher. But when the demand rises beyond what this quantity can supply. according to Mr. In France. this sort of butcher’s meat comes to market at a much lower price than any other. By diminishing the number of those small occupiers. therefore. The little offals of their own table. happen to render the feeding of hogs more or less expensive than that of other cattle. but which at the same time may have contributed to raise the price of those articles both somewhat sooner and somewhat faster than it would otherwise have risen. the price of pork is nearly equal to that of beef. the quantity of this sort of provisions. an event which has in every part of Europe been the immediate forerunner of improvement and better cultivation. when it becomes necessary to raise food on purpose for feeding and fattening hogs. in the same manner as for feeding and fattening other cattle. must certainly have Adam Smith ElecBook Classics . skimmed milk. supply those animals with a part of their food. which can thus be reared at little or no expense. which is thus produced at little or no expense. and buttermilk. so the poorest occupiers of land can commonly maintain a few poultry. according as the nature of the country. at very little. the price necessarily rises. their whey. The great rise in the price of both hogs and poultry has in Great Britain been frequently imputed to the diminution of the number of cottagers and other small occupiers of land. and becomes proportionably higher or lower than that of other butcher’s meat.The Wealth of Nations: Book 1 313 animals. or a sow and a few pigs. is fully sufficient to supply the demand. As the poorest family can often maintain a cat or a dog without any expense. and the state of its agriculture. Buffon.

is originally carried on as a save-all. however. indeed. and they produce most at one particular season. or to the price which pays the labour and expense of cultivating the land which furnishes them with food as well as these are paid upon the greater part of other cultivated land. when it is most abundant. The cattle necessarily kept upon the farm produce more milk than either the rearing of their own young or the consumption of the farmer’s family requires. stores a small part of it for a week: by making it into salt butter. in the progress of improvement. The business of the dairy. he will be likely to manage his dairy in a very slovenly and dirty manner. for a year: and by making it into cheese. filth. it must at any rate have risen to the utmost height to which it is capable of rising. by making it into fresh butter. Sooner or later. If it is very low. but will suffer the business to be carried on amidst the smoke. and their price must consequently have been raised both sooner and faster than it would otherwise have risen. But of all the productions of land. The farmer. as was the case of almost all the farmers’ dairies in Scotland thirty or forty years Adam Smith ElecBook Classics . and will scarce perhaps think it worth while to have a particular room or building on purpose for it. it will scarce keep fourand-twenty hours. like the feeding of hogs and poultry. and nastiness of his own kitchen. he stores a much greater part of it for several years.The Wealth of Nations: Book 1 314 been a good deal diminished. In the warm season. in order to find the best price which is to be had. Part of all these is reserved for the use of his own family. The rest goes to market. and which can scarce be so low as to discourage him from sending thither whatever is over and above the use of his own family. milk is perhaps the most perishable.

be disposed of at a much better price. it seems not yet to have got to this height anywhere in Scotland. The price of the produce. is probably still too low to admit of it. If you except the neighbourhood of a few considerable towns.The Wealth of Nations: Book 1 315 ago. If it did. raise. where common farmers seldom employ much good land in raising food for cattle merely for the purpose of the dairy. or with the expense of feeding cattle. I apprehend. more land would soon be turned to this purpose. It seems to have got to this height through the greater part of England. in the present circumstances of the country. and when it has got to this height. Though the quality was much better. perhaps. and the quality of its produce gradually improves. rather the effect of this lowness of price than the cause of it. that of the produce of the dairy. The inferiority of the quality. the diminution of the quantity which can be fed at little or no expense. the increase of the demand. and. and as is the case of many of them still. The price at last gets so high 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. The same causes which gradually raise the price of butcher’s meat. and cleanliness. and the present price. care. is fully equal to that of the price. in the same manner. in consequence of the improvement of the country. indeed. where much good land is commonly employed in this manner. The dairy becomes more worthy of the farmer’s attention. of which the price naturally connects with that of butcher’s meat. though it has risen very considerably within these few years. it is Adam Smith ElecBook Classics . But this inferiority of quality is. compared with that of the produce of English dairies. the greater part of what is brought to market could not. The increase of price pays for more labour. it cannot well go higher.

ought to be regarded as the necessary forerunner and attendant of the greatest of all public Adam Smith ElecBook Classics . it is evident. as it is that which regulates the rent of the greater part of other cultivated land. In order to do this. to pay the labour and expense of the farmer as well as they are commonly paid upon good corn land. Gain is the end of all improvement. Though the greater part of England. first. secondly. The lands of no country. to replace with the ordinary profits the stock which he employs about it. the two great objects of agriculture. or. it cannot yet be even so profitable. notwithstanding the superiority of price. this rise in the price of all those different sorts of rude produce. or the fattening of cattle. and nothing could deserve that name of which loss was to be the necessary consequence. as it most certainly is. This rise in the price of each particular produce must evidently be previous to the improvement and cultivation of the land which is destined for raising it.The Wealth of Nations: Book 1 316 probable would not pay the expense of the land and labour necessary for producing a much better quality. therefore. the price of each particular produce must be sufficient. can ever be completely cultivated and improved till once the price of every produce. instead of being considered as a public calamity. the greatest of all public advantages. has got so high as to pay for the expense of complete improvement and cultivation. and. the dairy is not reckoned a more profitable employment of land than the raising of corn. which human industry is obliged to raise upon them. 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. in other words. to pay the rent of good corn land. If the complete improvement and cultivation of the country be. Through the greater part of Scotland.

in the nominal or money-price of all those different sorts of rude produce has been the effect. not only a greater quantity of silver. is either limited or uncertain. and sometimes to rise more or less in the same period. so when they are brought thither. is that in which the efficacy of human industry. They have become worth. but of a rise in their real price. As it costs a greater quantity of labour and subsistence to bring them to market. according as different accidents happen to render the efforts of human industry more or less successful in augmenting the quantity. yet. again Adam Smith ElecBook Classics . The state of its improvement. which any country can afford is necessarily limited by the number of great and small cattle that are kept in it. not of any degradation in the value of silver. they represent or are equivalent to a greater quantity. sometimes to continue the same in very different periods of improvement. so that the quantity of the one which any country can afford. is necessarily limited by that of the other. of which the price naturally rises in the progress of improvement. in augmenting the quantity. naturally tends to rise in the progress of improvement. Third Sort The third and last sort of rude produce.The Wealth of Nations: Book 1 317 advantages. for example. There are some sorts of rude produce which nature has rendered a kind of appendages to other sorts. This rise. but a greater quantity of labour and subsistence than before. too. therefore. The quantity of wool or of raw hides. it may happen sometimes even to fall. Though the real price of this sort of rude produce. and the nature of its agriculture.

The market for butcher’s meat is almost everywhere confined to the country which produces it. but they are. Hume observes that in the Saxon times the fleece was estimated at two-fifths of the value of Adam Smith ElecBook Classics . They can easily be transported to distant countries. The same causes which. on the contrary. the price of the wool and the hide bears always a much greater proportion to that of the whole beast than in countries where. there is more demand for butcher’s meat.The Wealth of Nations: Book 1 318 necessarily determine this number. Ireland. carry on a considerable trade in salt provisions. though that of the country which produces them might not occasion any. gradually raise the price of butcher’s meat. wool without any preparation. I believe. is in the rude beginnings of improvement very seldom confined to the country which produces them. it may be thought. too. the only countries in the commercial world which do so. upon the prices of wool and raw hides. The market for wool and raw hides. But the extent of their respective markets is commonly extremely different. and raw hides with very little: and as they are the materials of many manufactures. improvement and population being further advanced. and therefore but thinly inhabited. in the rude beginnings of improvement. the market for the latter commodities was confined within as narrow bounds as that for the former. It probably would be so if. should have the same effect. or which export to other countries any considerable part of their butcher’s meat. the industry of other countries may occasion a demand for them. in the progress of improvement. Mr. and some part of British America indeed. and raise them. In countries ill cultivated. nearly in the same proportion.

while it was infested by the Buccaneers. improvement. In some provinces of Spain. where the horned cattle are almost constantly killed merely for the sake of the hide and the tallow. Though in the progress of improvement and population the price of the whole beast necessarily rises. and in many other parts of Spanish America. at Buenos Ayres. it can very seldom be enlarged in the same proportion. The state of the whole commercial world can seldom be much affected by the improvement of any particular country. 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. who still continue to possess. If this sometimes happens even in Spain. being in the rude state of society confined always to the country which produces it. but the whole inland and mountainous part of the country. But the market for the wool and the hides even of a barbarous country often extending to the whole commercial world. must necessarily be extended in proportion to the improvement and population of that country. and that this was much above the proportion of its present estimation. the sheep is frequently killed merely for the sake of the fleece and the tallow. yet the price of the carcase is likely to be much more affected by this rise than that of the wool and the hide. or to be devoured by beasts and birds of prey. This. and before the settlement.The Wealth of Nations: Book 1 319 the whole sheep. it happens almost constantly in Chili. I have been assured. and the market for such commodities may remain the same or very nearly the same after Adam Smith ElecBook Classics . not only the eastern part of the coast. The carcase is often left to rot upon the ground. too. used to happen almost constantly in Hispaniola. The market for the carcase.

or twenty-eight pounds of English wool. It should. it ought naturally to rise somewhat. Though it might not rise therefore in the same proportion as that of butcher’s meat. ElecBook Classics Adam Smith . would at least be brought much nearer to the place of growth than before. in the time of Edward III. therefore. There are many authentic records which demonstrate that during the reign of that prince (towards the middle of the fourteenth century. and it ought certainly not to fall. If the manufactures. 6 and 7. 5. or about 1339) what was reckoned the moderate and reasonable price of the tod. though it might not be much enlarged. was not less than ten shillings of the money of those times. equal to about thirty shillings of our present money. the price of English wool has fallen very considerably since the time of Edward III. especially. i. In the present times. the market. ii. c. c. In England. also vol. At 11 See Smith’s Memoirs of Wool. vol. one-and-twenty shillings the tod may be reckoned a good price for very good English wool. At the rate of six shillings and eightpence the quarter. was to its money-price in the present times as ten to seven. however.1 containing at the rate of twentypence the ounce. in the natural course of things rather upon the whole be somewhat extended in consequence of them. 176. notwithstanding the flourishing state of its woollen manufacture. The superiority of its real price was still greater. The money-price of wool. six ounces of silver Tower weight. however. ten shillings was in those ancient times the price of twelve bushels of wheat. and the price of those materials might at least be increased by what had usually been the expense of transporting them to distant countries.The Wealth of Nations: Book 1 320 such improvements as before. of which those commodities are the materials should ever come to flourish in the country.

one-and-twenty shillings is in the present times the price of six bushels only. Wool was commonly paid as a subsidy to the king. thirdly. of the prohibition of exporting it from Ireland to any other country but England. at least in some degree. of Ireland are fully as much discouraged as is consistent with justice and fair dealing. In consequence of these regulations the market for English wool. or as two to one. where the wool of several other countries is allowed to come into competition with it. what was its ordinary Adam Smith ElecBook Classics . instead of being somewhat extended in consequence of the improvement of England. and its valuation in that subsidy ascertains. It has accordingly been the effect of violence and artifice: first. the only market they are allowed. This degradation both in the real and nominal value of wool could never have happened in consequence of the natural course of things. and where that of Ireland is forced into competition with it. has been confined to the home market. and are. The proportion between the real prices of ancient and modern times. therefore. and consequently twice the quantity of labour. obliged to send a greater proportion of it to Great Britain. In those ancient times a tod of wool would have purchased twice the quantity of subsistence which it will purchase at present. As the woollen manufactures.The Wealth of Nations: Book 1 321 the rate of twenty-eight shillings the quarter. the Irish can work up but a small part of their own wool at home. I have not been able to find any such authentic records concerning the price of raw hides in ancient times. of the permission of importing it from Spain duty free. is as twelve to six. of the absolute prohibition of exporting wool from England. too. therefore. secondly. if the real recompense of labour had been the same in both periods.

five cow hides at seven shillings and threepence. which at this moment (February 1773) I understand to be the common price. therefore. gives us their price. But this seems not to have been the case with raw hides. Though its nominal price. Its nominal price was a good deal lower than at present. An ox hide. is higher in the present than it was in those ancient times. when the cattle were half starved during the greater part of the winter. between the prior of Burcester Oxford and one of his canons. its real price. In 1425. But at halfa-crown the stone. however. such a hide would at present cost only ten shillings. would in the present times cost 51s. But at the rate of six shillings and eightpence the quarter. fourfifths of our present money. and in those ancient times would probably have been reckoned a very good one. at three and sixpence the bushel.The Wealth of Nations: Book 1 322 price. Fleetwood. we cannot suppose that they were of a very large size. at least as it was stated upon that particular occasion. viz. twelve shillings contained about the same quantity of silver as four-andtwenty shillings of our present money. thirty-six sheep skins of two years old at nine shillings. the real quantity Adam Smith ElecBook Classics . sixteen calves skins at two shillings. An ox hide. twelve shillings would in those times have purchased fourteen bushels and four-fifths of a bushel of wheat. five ox hides at twelve shillings. 4d. which. would in those times have purchased as much corn as ten shillings and threepence would purchase at present. Its real value was equal to ten shillings and threepence of our present money. An ox hide which weighs four stone of sixteen pounds avoirdupois is not in the present times reckoned a bad one. was in this account valued at the same quantity of silver as 4s.. therefore. In those ancient times. therefore. from an account in 1425.

the importation of raw hides from Ireland and from the plantations duty free. Take the whole of the present century at an average.The Wealth of Nations: Book 1 323 of subsistence which it will purchase or command. The price of raw hides is a good deal lower at present than it was a few years ago. Their skins. owing probably to the taking off the duty upon sealskins. are commonly good for little. as was the case in Scotland twenty or thirty years ago. is rather somewhat lower. therefore. therefore. A salted hide is reckoned inferior to a fresh one. to sink it in ancient and to raise it in modern times. The price of cow hides. That of calves skins. which are not intended to be reared in order to keep up the stock. the calves. Our Adam Smith ElecBook Classics . That of sheep skins is a good deal above it. as stated in the above account. The nature of the commodity renders it not quite so proper for being transported to distant markets as wool. are generally killed very young. It saves the milk. and to raise it in an improved and manufacturing country. is nearly in the common proportion to that of ox hides. They had probably been sold with the wool. and to the allowing. and comparatively to raise that of those produced in a country which does manufacture them. This circumstance must necessarily have some tendency to sink the price of raw hides produced in a country which does not manufacture them. It must have had some tendency. is greatly below it. In countries where the price of cattle is very low. and sells for a lower price. which their price would not pay for. for a limited time. It suffers more by keeping. It must have some tendency to sink their price in a barbarous. which was done in 1769. but is obliged to export them. their real price has probably been somewhat higher than it was in those ancient times. on the contrary.

The Wealth of Nations: Book 1 324 tanners. The less there is paid for the one. Whatever regulations tend to sink the price either of wool or of raw hides below what it naturally would be must. have not been quite so successful as our clothiers in convincing the wisdom of the nation that the safety of the commonwealth depends upon the prosperity of their particular manufacture. been prohibited. in an improved and cultivated country. The price both of the great and small cattle. but their importation from foreign countries has been subjected to a duty. or of those which are not manufactured at home. The exportation of raw hides has. the more must be paid for the other. In what manner this price is to be divided upon the different parts of the beast is indifferent to the landlords and farmers. provided it is all paid to them. indeed. If it is not. neither has the commerce of Ireland been in this case oppressed hitherto in order to support the manufactures of Great Britain. therefore. they will soon cease to feed them. besides. which are fed on improved and cultivated land. and though this duty has been taken off from those of Ireland and the plantations (for the limited time of five years only). The hides of common cattle have but within these few years been put among the enumerated commodities which the plantations can send nowhere but to the mother country. is not paid by the wool and the hide must be paid by the carcase. They have accordingly been much less favoured. must be sufficient to pay the rent which the landlord and the profit which the farmer has reason to expect from improved and cultivated land. Whatever part of this price. yet Ireland has not been confined to the market of Great Britain for the sale of its surplus hides. In an improved and Adam Smith ElecBook Classics . and declared a nuisance. have some tendency to raise the price of butcher’s meat.

where the greater part of the lands could be applied to no other purpose but the feeding of cattle. and where the wool and the hide made the principal part of the value of those cattle. Their interest as landlords and farmers would in this case be very deeply affected by such regulations. which is commonly. ascribed to Edward III. but very falsely. by which it was excluded Adam Smith ElecBook Classics . The wool of Scotland fell very considerably in its price in consequence of the union with England. their interest as landlords and farmers cannot be much affected by such regulations. It would be quite otherwise. have been the most destructive regulation which could well have been thought of. It would not only have reduced the actual value of the greater part of the lands of the kingdom. The same quantity of butcher’s meat would still come to market. however. therefore.The Wealth of Nations: Book 1 325 cultivated country. would. The whole price of cattle would fall. Its price. the same number would still continue to be fed. would be the same as before. in the then circumstances of the country. and their interest as consumers very little. and along with it both the rent and the profit of all those lands of which cattle was the principal produce. because the greater part of the lands of the country being applicable to no other purpose but the feeding of cattle. The demand for it would be no greater than before. in an unimproved and uncultivated country. therefore. by the rise in the price of provisions. of the greater part of the lands of the country. The fall in the price of wool and the hide would not in this case raise the price of the carcase. that is. but by reducing the price of the most important species of small cattle it would have retarded very much its subsequent improvement. The perpetual prohibition of the exportation of wool. though their interest as consumers may.

as the annual produce of the land and labour of the country grows greater and greater. but uncertain. the efficacy of human industry is not only limited. therefore. and by what may be called the fertility or barrenness of those seas. by the number of its lakes and rivers. and upon the restraints which they may or may not think proper to impose upon the exportation of this sort of rude produce. is limited. which are chiefly a sheep country. in increasing the quantity either of wool or of raw hides. or. not so much upon the quantity which they produce. so they necessarily render the efficacy of its efforts more or less uncertain. it is likewise both limited and uncertain. In multiplying another very important sort of rude produce. too. the price of a greater quantity Adam Smith ElecBook Classics . As the efficacy of human industry. would have been very deeply affected by this event. It so far depends. so far as it depends upon the produce of the country where it is exerted. As population increases. and those buyers. so it is uncertain so far as it depends upon the produce of other countries. and rivers. the quantity of fish that is brought to market. and confined to the narrow one of Great Britain. In multiplying this sort of rude produce. The value of the greater part of the lands in the southern counties of Scotland. had not the rise in the price of butcher’s meat fully compensated the fall in the price of wool.The Wealth of Nations: Book 1 326 from the great market of Europe. as to this sort of rude produce. by the proximity or distance of its different provinces from the sea. These circumstances. as they are altogether independent of domestic industry. what is the same thing. lakes. there come to be more buyers of fish. It is limited by the local situation of the country. have a greater quantity and variety of other goods. as upon that which they do not manufacture.

it may perhaps be thought is certain enough. In increasing the quantity of the different minerals and metals which are drawn from the bowels of the earth. the general efficacy of industry in bringing a certain quantity of fish to market. but to be altogether uncertain. therefore. larger vessels must be employed. its connection with the state of improvement is uncertain. from requiring only one thousand. that of the more precious ones particularly. As it depends more. Adam Smith ElecBook Classics . But it will generally be impossible to supply the great and extended market without employing a quantity of labour greater than in proportion to what had been requisite for supplying the narrow and confined one. naturally rises in the progress of improvement. and it is of this sort of uncertainty that I am here speaking. however. more or less in every country. taking the course of a year. as upon this account it may in different countries be the same in very different periods of improvement. can seldom be supplied without employing more than ten times the quantity of labour which had before been sufficient to supply it. A market which. the local situation of the country being supposed. It has accordingly done so. I believe. upon the local situation of the country than upon the state of its wealth and industry. Though the success of a particular day’s fishing may be a very uncertain matter. the efficacy of human industry seems not to be limited. and more expensive machinery of every kind made use of. The real price of this commodity. and very different in the same period. or of several years together. yet. The fish must generally be fought for at a greater distance.The Wealth of Nations: Book 1 327 and variety of other goods to buy with. comes to require annually ten thousand tons of fish. and it no doubt is so.

Those metals frequently abound in countries which possess no mines. is likely to rise with the wealth and improvement of the country. of their small bulk and great value. upon the fertility or barrenness of the mines which may happen at any particular time to supply the commercial world with those metals. The quantity of those metals in the countries most remote from the mines must be more or less affected by this fertility or barrenness. Their quantity in every particular country seems to depend upon two different circumstances.The Wealth of Nations: Book 1 328 The quantity of the precious metals which is to be found in any country is not limited by anything in its local situation. Their quantity in China and Indostan must have been more or less affected by the abundance of the mines of America. and to fall with its poverty and depression. upon its power of purchasing. either from its own mines or from those of other countries. on account of the easy and cheap transportation of those metals. first. like that of all other luxuries and superfluities. and. their real price. such as the fertility or barrenness of its own mines. in consequence of which it can afford to employ a greater or a smaller quantity of labour and subsistence in bringing or purchasing such superfluities as gold and silver. upon the annual produce of its land and labour. upon the state of its industry. secondly. Countries which have a great quantity of labour and subsistence to spare can afford to purchase any particular quantity of those metals at the expense of a greater quantity of labour and subsistence than countries which have less to spare. So far as their quantity in any particular country depends upon Adam Smith ElecBook Classics . So far as their quantity in any particular country depends upon the former of those two circumstances (the power of purchasing).

and rise in proportion to the barrenness of those mines. It seems even to have no very necessary connection with that of the world in general. and such as no human skill or industry can ensure. however.The Wealth of Nations: Book 1 329 the latter of those two circumstances (the fertility or barrenness of the mines which happen to supply the commercial world). The discovery of new mines. or even of its existence. and it is just equally possible the most fertile mine then known may be more barren than any that was wrought before the discovery of the mines of America. is a circumstance which. sink more or less in proportion to the fertility. it is possible that new mines may be discovered more fertile than any that have ever yet been known. the real quantity of labour and subsistence which they will purchase or exchange for. as the old ones come to be gradually exhausted. and the actual discovery and successful working of a new mine can alone ascertain the reality of its value. their real price. may have somewhat a better chance for being successful than when confined within narrower bounds. may have no sort of connection with the state of industry in a particular country. gradually spread themselves over a greater and a greater part of the earth. it is evident. will. As arts and commerce. are doubtful. Whether the one or the other of those two events may happen to take place is of very Adam Smith ElecBook Classics . indeed. the search for new mines. no doubt. which may happen at any particular time to supply the commercial world. is a matter of the greatest uncertainty. The fertility or barrenness of the mines. however. being extended over a wider surface. In the course of a century or two. it is acknowledged. In this search there seem to be no certain limits either to the possible success or to the possible disappointment of human industry. All indications.

This notion is connected with the system of political economy which represents national wealth as consisting in the abundance. be very different. The cheapness and abundance of gold and silver plate would be the sole advantage which the world could derive from the one event. or. the high value of gold and silver. and in the other he who had a penny would be just as rich as he who has a shilling now. and the dearness and scarcity of those trifling superfluities the only inconveniency it could suffer from the other. A shilling might in the one case represent no more labour than a penny does at present. and a penny in the other might represent as much as a shilling does now. but its real value. in other words. not only of the scarcity of those metals. But in the one case he who had a shilling in his pocket would be no richer than he who has a penny at present. the quantity of gold and silver by which this annual produce could be expressed or represented. would be precisely the same. Its nominal value. a system which I shall endeavour to explain and examine at great length in the fourth book of this inquiry. and national poverty in the scarcity of gold and silver. and of goods in general. to the real value of the annual produce of the land and labour of mankind. as a proof. the real quantity of labour which it could purchase or command.The Wealth of Nations: Book 1 330 little importance to the real wealth and prosperity of the world. but of the poverty and barbarism of the country at the time when it took place. would. CONCLUSION OF THE DIGRESSION CONCERNING THE VARIATIONS IN THE VALUE OF SILVER The greater part of the writers who have collected the money prices of things in ancient times seem to have considered the low money-price of corn. I shall Adam Smith ElecBook Classics . no doubt.

and the increase of its manufactures and agriculture. is at this day as beggarly a country as it was before the discovery of America. and from the establishment of a government which afforded to industry the only encouragement which it requires. so it can as little afford to pay dearer for gold and silver than a rich one. yet have arisen from very different causes. however. and the value of those metals. though they have happened nearly about the same time. The other from the fall of the feudal system. Poland. A poor country. It is a proof only of the barrenness of the mines which happened at that time to supply the commercial world. The money price of corn. a country much richer than any part of Europe. As the wealth of Europe. as it cannot afford to buy more. some tolerable security that it shall enjoy the fruits of its own labour. the real value of the Adam Smith ElecBook Classics . in which neither prudence nor policy either had or could have any share. has risen. This diminution of their value. The one has arisen from a mere accident. is not likely to be higher in the former than in the latter. has not been owing to the increase of the real wealth of Europe. but to the accidental discovery of more abundant mines than any that were known before. are two events which. indeed. therefore. however. so the value of gold and silver has gradually diminished. In China. has increased greatly since the discovery of the mines of America. The increase of the quantity of gold and silver in Europe.The Wealth of Nations: Book 1 331 only observe at present 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. the value of the precious metals is much higher than in any part of Europe. and have scarce any natural connection with one another. of the annual produce of its land and labour. where the feudal system still continues to take place.

game of all kinds. the low money price of some particular sorts of goods. therefore. in proportion to that of Adam Smith ElecBook Classics . As the low value of gold and silver. such as cattle. nor mended the circumstances of its inhabitants. or of corn in particular. it has not been succeeded by a much better. are. or the low money price either of goods in general. however. Spain and Portugal. their exportation being either prohibited. or subjected to a duty. are poorer than the greater part of Europe. has neither improved the manufactures and agriculture of the country. perhaps. be no proof of the poverty or barbarism of the times. or of corn in particular. however. therefore. therefore. increased that annual produce. poultry. In proportion to the annual produce of the land and labour. Their quantity. The value of the precious metals. as they come from those countries to all other parts of Europe. and nearly in the same proportion to the annual produce of its land and labour. any proof of its poverty and barbarism. but with the expense of smuggling. it seems. must have increased there as in other places. must be lower in Spain and Portugal than in any other part of Europe. not only with a freight and an insurance.The Wealth of Nations: Book 1 332 precious metals has fallen in Poland. after Poland. their quantity must be greater in those countries than in any other part of Europe. the two most beggarly countries in Europe. But though the low money price either of goods in general. Though the feudal system has been abolished in Spain and Portugal. so neither is their high value. Those countries. etc. loaded. in the same manner as in other parts of Europe. This increase of the quantity of those metals.. is no proof of the wealth and flourishing state of the country where it takes place. however. has not. the countries which possess the mines.

From the high or low money price either of goods in general. Any rise in the money price of goods which proceeded altogether from the degradation of the value of silver would affect all sorts of goods equally. not that the country was rich or poor. their great abundance in proportion to that of corn. and. It clearly demonstrates that the stock and population of the country did not bear the same proportion to the extent of its territory which they commonly do in civilised countries. we can infer only that the mines which at that time happened to supply the commercial world with gold and silver were fertile or barren. is a most decisive one. that the greater part of its lands were improved or unimproved. or a fifth part higher. we can infer. and consequently the uncultivated and unimproved state of the far greater part of the lands of the country. does not affect all sorts of provisions equally. which has been the subject of so much reasoning and conversation. 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. It clearly demonstrates. according as silver happened to lose a third. but in its infancy. that it was rich or poor. and raise their price universally a third. and that society was at that time. or of corn in particular.The Wealth of Nations: Book 1 333 corn. the low value of this land in proportion to that of corn land. or in a more or less civilised one. and in that country. or a fourth. But the rise in the price of provisions. with a degree of probability that approaches almost to certainty. secondly. or a fifth part of its former value. and consequently the great extent of the land which they occupied in proportion to what was occupied by corn. or a fourth. first. Taking the course of the present century at an Adam Smith ElecBook Classics .

it can be sufficiently accounted for from the badness of the seasons. sufficiently explain this rise in those particular sorts of provisions of which the price has actually risen in proportion to that of corn. it may. and by the accounts of several different markets in France. without supposing any degradation in the value of silver. either upon the prices of corn. the price of corn. will in the present times. cannot be owing altogether to the degradation of the value of silver. therefore. which have been collected with great diligence and fidelity by Mr. and those which have been above assigned will. even by those who account for this rise by the degradation of the value of silver. it is acknowledged. This fact is attested. The opinion. The rise in the price of those other sorts of provisions. The same quantity of silver. Some other causes must be taken into the account.The Wealth of Nations: Book 1 334 average. even according to the account which has been here Adam Smith ElecBook Classics . seems not to be founded upon any good observations. Maur. that silver is continually sinking in its value. during the sixty-four first years of the present century. Messance and by Mr. As to the high price of corn during these last ten or twelve years. perhaps. The evidence is more complete than could well have been expected in a matter which is naturally so very difficult to be ascertained. Dupré de St. has risen much less than that of some other sorts of provisions. but by the public fiars of all the different counties of Scotland. it has. or upon those of other provisions. be said. therefore. perhaps. As to the price of corn itself. and before the late extraordinary course of bad seasons. been somewhat lower than it was during the sixty-four last years of the preceding century. without having recourse to the supposed degradation of the value of silver. not only by the accounts of Windsor market.

The land constitutes by far the greatest. it is owing to a circumstance which indicates in the clearest manner the prosperous and advancing state of the country. as in most other parts of Europe. in consequence of more extended improvement and good cultivation. however. to have so decisive a proof of the increasing value of by far the greatest. 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. and the most durable part of the wealth of every extensive country. If the rise in the price of some sorts of provisions be owing altogether to a fall in the value of silver. it is owing to a circumstance from which nothing can be inferred but the fertility of the American mines. the most important. purchase a much smaller quantity of several sorts of provisions than it would have done during some part of the last century. it may give some satisfaction to the public. upon that account be altogether useless. at least. It may not. or to a fall in the value of silver. I certainly do not pretend that the knowledge of this distinction will enable him to buy cheaper. to its increased fertility. and to ascertain whether this change be owing to a rise in the value of those goods. may. or. to its having been rendered fit for producing corn. the annual produce of its land and labour. or a certain fixed revenue in money. or. It may be of some use to the public by affording an easy proof of the prosperous condition of the country. be either gradually declining. the Adam Smith ElecBook Classics . The real wealth of the country.The Wealth of Nations: Book 1 335 given. which can be of no sort of service to the man who has only a certain quantity of silver to go to market with. is only to establish a vain and useless distinction. notwithstanding this circumstance. or gradually advancing. It may surely be of some use. as in Portugal and Poland.

their pecuniary reward. because a great part of the land which produces it. The improvements of agriculture. introduce many sorts of vegetable food. be of some use to the public in regulating the pecuniary reward of some of its inferior servants. besides. in consequence of the improved fertility of the land which produces such provisions.The Wealth of Nations: Book 1 336 most important. which in the rude state of agriculture are confined to the kitchenAdam Smith ElecBook Classics . the two most important improvements which the agriculture of Europe. It lowers the price of vegetable food. too. come much cheaper to market. it increases its abundance. perhaps. every sort of vegetable food. requiring less land and not more labour than corn. their real recompense will evidently be so much diminished. But if this rise of price is owing to the increased value. which Europe itself has received from the great extension of its commerce and navigation. If it is not augmented. and the most durable part of its wealth. which. If this rise in the price of some sorts of provisions be owing to a fall in the value of silver. in proportion to the price of corn. provided it was not too large before. It raises the price of animal food. it becomes a much nicer matter to judge either in what proportion any pecuniary reward ought to be augmented. Many sorts of vegetable food. Such are potatoes and maize. because. that of every sort of animal food. so it as necessarily lowers that of. as it necessarily raises more or less. or whether it ought to be augmented at all. or what is called Indian corn. The extension of improvement and cultivation. by increasing the fertility of the land. I believe. ought certainly to be augmented in proportion to the extent of this fall. too. must afford to the landlord and farmer the rent and profit of corn-land. It may. being rendered fit for producing corn.

any rise which can afterwards happen in that of any other sort of animal food cannot much affect the circumstances of the inferior ranks of people. when corn is at its ordinary or average price. except. If in the progress of improvement. They suffer more. soap. as of salt. with regard to every sort. to diminish gradually the real price of almost all manufactures. beer. that of another as necessarily falls. etc. and raised only by the spade. as they must be relieved by the fall in that of potatoes. When the real price of butcher’s meat has once got to its height (which. The circumstances of the poor through a great part of England cannot surely be so much distressed by any rise in the price of poultry. perhaps. perhaps. and to be raised by the plough: such as turnips. the natural rise in the price of any other sort of rude produce cannot much affect them. in all of them Adam Smith ElecBook Classics . But in times of moderate plenty. candles. That of the manufacturing workmanship diminishes. therefore. that of hogs’ flesh. it seems to have done through a great part of England more than a century ago). fish. EFFECTS OF THE PROGRESS OF IMPROVEMENT UPON THE REAL PRICE OF MANUFACTURES It is the natural effect of improvement. by the artificial rise which has been occasioned by taxes in the price of some manufactured commodities. leather. or venison. carrots. and ale. come in its improved state to be introduced into common fields.The Wealth of Nations: Book 1 337 garden. malt. perhaps. In the present season of scarcity the high price of corn no doubt distresses the poor. wild-fowl. however. 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. etc. the real price of one species of food necessarily rises. cabbages.

and in all those goods which are commonly known by the name of Birmingham and Adam Smith ElecBook Classics . may now perhaps be had for twenty shillings. indeed. a few manufactures 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. and of a more proper division and distribution of work. In the work of cutlers and locksmiths. will more than compensate all the advantages which can be derived from the best machinery. the greatest dexterity. in consequence of the improvement of land. in all the toys which are made of the coarser metals. There are. in the course of the present and preceding century. yet the great diminution of the quantity will generally much more than compensate the greatest rise which can happen in the price. and though. This diminution of price has. been most remarkable in those manufactures of which the materials are the coarser metals.The Wealth of Nations: Book 1 338 without exception. the necessary rise in the real price of barren timber. A better movement of a watch. and in the coarser sort of cabinet work. But in all cases in which the real price of the rude materials either does not rise at all. that of the manufactured commodity sinks very considerably. that about the middle of the last century could have been bought for twenty pounds. In consequence of better machinery. the real price of labour should rise very considerably. in consequence of the flourishing circumstances of the society. or does not rise very much. of greater dexterity. In carpenters’ and joiners’ work. a much smaller quantity of labour becomes requisite for executing any particular piece of work. all of which are the natural effects of improvement. and the most proper division and distribution of work.

and the machinery employed is not very different. to have fallen a good deal in proportion to its quality.The Wealth of Nations: Book 1 339 Sheffield ware. It has. towards the end of the fifteenth century. Quality. have been some small improvements in both. which consists altogether of Spanish wool. during the same period. There are perhaps no manufactures in which the division of labour can be carried further. though not altogether so great as in watch-work. when the labour was probably Adam Smith ElecBook Classics . In the clothing manufacture. The price of superfine cloth. during the same period. however. There may. or even for triple the price. or in which the machinery employed admits of a greater variety of improvements. which is made altogether of English wool. I have been assured. is said indeed. on the contrary. however. during the course of the present century. which may have occasioned some reduction of price. has. the division of labour is nearly the same now as it was a century ago. who in many cases acknowledge that they can produce no work of equal goodness for double. been sufficient to astonish the workmen of every other part of Europe. But the reduction will appear much more sensible and undeniable if we compare the price of this manufacture in the present times with what it was in a much remoter period. than those of which the materials are the coarser metals. a very great reduction of price. within these fiveand-twenty or thirty years. That of the Yorkshire cloth. there has been. it was said. In the clothing manufacture there has. owing. however. is so very disputable a matter that I look upon all information of this kind as somewhat uncertain. risen somewhat in proportion to its quality. to a considerable rise in the price of the material. been no such sensible reduction of price.

than it is at present. though considerable.” Sixteen shillings. and that of the present times is most probably much superior. reckoned the average price of a quarter of wheat. The man who bought it must have parted with the command of a quantity of labour and subsistence equal to what that sum would purchase in the present times. The reduction in the real price of the coarse manufacture. therefore. should be supposed equal. even upon this supposition. such cloth. Sixteen shillings. Valuing a quarter of wheat in the present times at eight-and-twenty shillings.The Wealth of Nations: Book 1 340 much less subdivided. it was enacted that “whosoever shall sell by retail a broad yard of the finest scarlet grained. But its real price has been much more reduced. the real price of a yard of fine cloth must. reckoned not an unreasonable price for a yard of the finest cloth. containing about the same quantity of silver as four-and-twenty shillings of our present money. was the price of two quarters and more than three bushels of wheat. have been equal to at least three pounds six shillings and sixpence of our present money. had usually been sold somewhat dearer. In 1487. Even though the quality of the cloths. and long afterwards. above sixteen shillings. at that time. being the 4th of Henry VII. therefore. and as this is a sumptuary law. has not been so great as in that of the fine. Six shillings and eightpence was then. in those times. and the machinery employed much more imperfect. shall forfeit forty shillings for every yard so sold. A guinea may be reckoned the highest price in the present times. the money price of the finest cloth appears to have been considerably reduced since the end of the fifteenth century. was. it is probable. or of other grained cloth of the finest making. therefore. yet. Adam Smith ElecBook Classics .

by the same law. The real price is certainly a good deal cheaper. The same order of people are. of which the price should exceed fourteenpence the pair. But the Yorkshire cloth which is now sold at four shillings the yard is probably much superior to any that was then made for the wearing of the very poorest order of common servants. in proportion to the quality. therefore. Their clothing. in the present times. at three shillings and sixpence the bushel. be somewhat cheaper in the present than it was in those ancient times.” In the 3rd of Edward IV. Even the money price of their clothing. it was enacted that “no servant in husbandry. Two shillings. being the 3rd of Edward IV. would be worth eight shillings and ninepence. nor common labourer. which. We should in the present times consider this as a very high price for a Adam Smith ElecBook Classics . This is a sumptuary law too. therefore. two shillings contained very nearly the same quantity of silver as four of our present money. would cost five shillings and threepence. Tenpence was then reckoned what is called the moderate and reasonable price of a bushel of wheat. therefore. may. at three and sixpence the bushel. But fourteenpence was in those times the price of a bushel and near two pecks of wheat. equal to about eight-and-twentypence of our present money.The Wealth of Nations: Book 1 341 In 1643. had commonly been much more expensive. 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. prohibited from wearing hose. was the price of two bushels and near two pecks of wheat. nor servant to any artificer inhabiting out of a city or burgh shall use or wear in their clothing any cloth above two shillings the broad yard. restraining the luxury and extravagance of the poor. which in the present times.

the use of several very ingenious machines which facilitate and abridge in a still greater proportion the winding of the worsted and woollen yarn. nor. to a servant of the poorest and lowest order. Thirdly. previous to the invention of those machines. They had been introduced into Italy some time before. Secondly. She received them as a present from the Spanish ambassador. with the same quantity of labour. must have been extremely tedious and troublesome. The first person that wore stockings in England is said to have been Queen Elizabeth. the employment of the fulling mill for thickening the cloth. so far as I know. however. instead of treading it in water. in any other part of Europe north of the Alps. or the proper arrangement of the warp and woof before they are put into the loom. which may have been one of the causes of their dearness. which. besides. The three capital improvements are: first. Their hose were made of common cloth. Adam Smith ElecBook Classics . He must. an operation which. the exchange of the rock and spindle for the spinning-wheel. many smaller ones of which it may be difficult to ascertain either the number or the importance. Neither wind nor water mills of any kind were known in England so early as the beginning of the sixteenth century. will perform more than double the quantity of work. Both in the coarse and in the fine woollen manufacture. probably.The Wealth of Nations: Book 1 342 pair of stockings. In the time of Edward IV the art of knitting stockings was probably not known in any part of Europe. It has since received three very capital improvements. in those times have paid what was really equivalent to this price for them. the machinery employed was much more imperfect in those ancient than it is in the present times.

comes always much cheaper to market than that which is the principal or sole fund of the workman’s subsistence. in which every different part of the work was occasionally performed by all the different members of almost every private family. or the principal part of their subsistence from it. but in the rich and commercial country of Flanders. the ancient custom of tonnage and poundage at least. besides. the importation of foreign manufactures. in those ancient times. in the same manner as now. and not to be the principal business from which any of them derived the greater part of their subsistence. on the other hand. to the king. and it was probably conducted then. indeed. they must have purchased or exchanged for the price of a greater quantity.The Wealth of Nations: Book 1 343 The consideration of these circumstances may. in the same manner as it always has been in countries where arts and manufactures are in their infancy. It was. It cost a greater quantity of labour to bring the goods to market. carried on in England. perhaps. the great Adam Smith ElecBook Classics . therefore. was not in those times carried on in England. It was not then the policy of Europe to restrain. When they were brought thither. The work which is performed in this manner. and must have paid some duty. a foreign manufacture. This duty. The fine manufacture. It was probably a household manufacture. at as easy a rate as possible. in some measure 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. by people who derived the whole. but rather to encourage it. but so as to be their work only when they had nothing else to do. would not probably be very great. The coarse manufacture probably was. in order that merchants might be enabled to supply. it has already been observed. by high duties.

the stock which employs that labour. The real value of the landlord’s share. That rise in the real price of those parts of the rude produce of land.The Wealth of Nations: Book 1 344 men with the conveniences and luxuries which they wanted. in proportion to that of the fine. and in a still greater proportion. not only rises with the real value of the produce. so much lower than in the present times. The landlord’s share of the produce necessarily increases with the increase of the produce. the real price of the coarse manufacture was. to increase the real wealth of the landlord. in those ancient times. Adam Smith ElecBook Classics . The extension of improvement and cultivation tends to raise it directly. and afterwards the cause of their being still further extended. after the rise in its real price. requires no more labour to collect it than before. his power of purchasing the labour. the rise in the price of cattle. CONCLUSION OF THE CHAPTER I shall conclude this very long chapter with observing that every improvement in the circumstances of the society tends either directly or indirectly to raise the real rent of land. tends too to raise the rent of land directly. A greater proportion of it must. A smaller proportion of it will. his real command of the labour of other people. be sufficient to replace. consequently. or the produce of the labour of other people. The consideration of these circumstances may perhaps in some measure explain to us why. belong to the landlord. for example. which is first the effect of extended improvement and cultivation. therefore. with the ordinary profit. That produce. but the proportion of his share to the whole produce rises with it. and which the industry of their own country could not afford them.

ornaments. to lower the real rent of land. the price of that part of it. naturally divides itself. and the landlord is enabled to purchase a greater quantity of the conveniences. Every increase in the real wealth of the society. all tend. the fall in the real price of any part of the rude produce of land. The contrary circumstances. or luxuries. A certain proportion of this labour naturally goes to the land. to diminish his power of purchasing either the labour. The whole annual produce of the land and labour of every country. which he has occasion for. An equal quantity of the former becomes thereby equivalent to a greater quantity of the latter. it has already been Adam Smith ElecBook Classics . to reduce the real wealth of the landlord. for manufactured produce. Whatever reduces the real price of the latter. the rise in the real price of manufactures from the decay of manufacturing art and industry. The landlord exchanges that part of his rude produce. every increase in the quantity of useful labour employed within it. raises that of the former. tends indirectly to raise the real rent of land. or what comes to the same thing. which is over and above his own consumption. the whole price of that annual produce. on the other hand. or the produce of the labour of other people. which tend directly to reduce the real price of manufactures. A greater number of men and cattle are employed in its cultivation. or what comes to the same thing. the neglect of cultivation and improvement. and the rent increases with the produce. tend indirectly to raise the real rent of land.The Wealth of Nations: Book 1 345 All those improvements in the productive powers of labour. the declension of the real wealth of the society. the produce increases with the increase of the stock which is thus employed in raising it.

These are the three great. indeed. They are. is as strictly connected with the interest of the society as that of the first. are never so high as when the demand for labour is continually rising. and the profits of stock. at least. too often defective in this tolerable knowledge. not only ignorant. and independent of any plan or project of their own. The interest of the first of those three great orders.The Wealth of Nations: Book 1 346 observed. When the public deliberates concerning any regulation of commerce or police. original. but incapable of that application of mind which is necessary in order to foresee and understand the consequences of any public regulation. the proprietors of land never can mislead it. to those who live by rent. That indolence. The wages of the labourer. it has already been shown. and to those who live by profit. to those who live by wages. and constitutes a revenue to three different orders of people. into three parts. The interest of the second order. the wages of labour. but comes to them. renders them too often. of its own accord. They are the only one of the three orders whose revenue costs them neither labour nor care. necessarily promotes or obstructs the other. with a view to promote the interest of their own particular order. or when the quantity employed is every year Adam Smith ElecBook Classics . as it were. that of those who live by wages. and constituent orders of every civilised society. if they have any tolerable knowledge of that interest. it appears from what has been just now said. the rent of land. from whose revenue that of every other order is ultimately derived. is strictly and inseparably connected with the general interest of the society. Whatever either promotes or obstructs the one. which is the natural effect of the ease and security of their situation.

has not the same connection with the general interest of the society as that of the Adam Smith ElecBook Classics . His employers constitute the third order. not for his. and his education and habits are commonly such as to render him unfit to judge even though he was fully informed. when his clamour is animated. But the rate of profit does not. like rent and wages. gain more by the prosperity of the society than that of labourers: but there is no order that suffers so cruelly from its decline. When this real wealth of the society becomes stationary. they fall even below this. it is naturally low in rich and high in poor countries. The plans and projects of the employers of stock regulate and direct all the most important operations of labour. It is the stock that is employed for the sake of profit which puts into motion the greater part of the useful labour of every society. and it is always highest in the countries which are going fastest to ruin. His condition leaves him no time to receive the necessary information. and profit is the end proposed by all those plans and projects. except upon some particular occasions. his voice is little heard and less regarded. perhaps.The Wealth of Nations: Book 1 347 increasing considerably. When the society declines. The interest of this third order. therefore. therefore. that of those who live by profit. On the contrary. but their own particular purposes. The order of proprietors may. his wages are soon reduced to what is barely enough to enable him to bring up a family. set on and supported by his employers. But though the interest of the labourer is strictly connected with that of the society. rise with the prosperity and fall with the declension of the society. he is incapable either of comprehending that interest or of understanding its connection with his own. or to continue the race of labourers. In the public deliberations.

the two classes of people who commonly employ the largest capitals. to levy. that of the public. are commonly exercised rather about the interest of their own particular branch of business. but to narrow the competition must always be against it. and can serve only to enable the dealers. is always in some respects different from. The proposal of any new law Adam Smith ElecBook Classics . from a very simple but honest conviction that their interest. an absurd tax upon the rest of their fellow-citizens. in this order. is always the interest of the dealers. however. As their thoughts. Their superiority over the country gentleman is not so much in their knowledge of the public interest. in any particular branch of trade or manufactures. their judgment. they have frequently more acuteness of understanding than the greater part of country gentlemen. The interest of the dealers.The Wealth of Nations: Book 1 348 other two. Merchants and master manufacturers are. To widen the market may frequently be agreeable enough to the interest of the public. however. and persuaded him to give up both his own interest and that of the public. than about that of the society. To widen the market and to narrow the competition. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity. for their own benefit. as in their having a better knowledge of their own interest than he has of his. was the interest of the public. As during their whole lives they are engaged in plans and projects. and who by their wealth draw to themselves the greatest share of the public consideration. and not his. even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. by raising their profits above what they naturally would be. and even opposite to.

It comes from an order of men whose interest is never exactly the same with that of the public. both deceived and oppressed it.The Wealth of Nations: Book 1 349 or regulation of commerce which comes from this order ought always to be listened to with great precaution. and who accordingly have. but with the most suspicious attention. upon many occasions. and ought never to be adopted till after having been long and carefully examined. not only with the most scrupulous. who have generally an interest to deceive and even to oppress the public. Adam Smith ElecBook Classics .

s. d. 1 16 – 2–3 1 16 – – 10 – –6– –6– 28– 2–– 3 12 – 2 11 – 16 16 – 1202 1205 “ “ 1223 1237 1243 1244 1246 1247 1257 1258 “ “ 1270 “ 1286 “ –94 18– Total Average Price £35 9 3 £2 19 11/4 Adam Smith ElecBook Classics . d.The Wealth of Nations: Book 1 350 Tables Referred to in Chapter 11. s. d. – 12 – – 12 – – 13 4 – 15 – – 12 – –34 –2– –2– – 16 – – 13 4 14– 1–– – 15 – – 16 – 4 16 – 6 8 – – 16 – Average of the different Prices of the same Year £. Part 3 Years XII Price of the Quarter of Wheat each Year £ s. ––– – 13 5 ––– ––– ––– ––– ––– ––– ––– – 17 – 5 12 – The average Price of each Year in Money of the present Times £.

d. d. d. s.The Wealth of Nations: Book 1 351 Years XII Price of the Quarter of Wheat each Year £ s. s. –34 ––8 –1– –14 –16 –18 –2– –34 –94 – 12 – –6– –2– – 10 8 1–– – 16 – – 16 – –4– –72 1–– 1–– 1–– 1 10 – 1 12 – 2–– 24– – 14 – 2 13 – 4–– –68 –2– –34 Average of the different Prices of the same Year £. – 10 – – 3 –1/4 – 9 –3/4 – 10 1 /4 ––– ––– ––– ––– ––– 3 1 10 4 /2 28– 28– – 12 – 116 3–– 1 1 10 6 4 11 6 1317 1336 1338 1 19 6 ––– ––– 5 18 6 –6– – 10 – Total Average Price Adam Smith £23 4 111/4 £1 18 8 ElecBook Classics . ––– 1287 1288 “ “ “ “ “ “ “ 1289 “ “ “ “ 1290 1294 1302 1309 1315 1316 The average Price of each Year in Money of the present Times £.

–9– –2– 168 –2– – 15 – 1–– 14– –4– –2– – 13 4 – 14 – – 16 – – 16 – 3 – 4 4 /4 –34 – 16 – Average of the different Prices of the same Year £. 17– –52 322 –48 1 15 – 294 –94 –48 1401 1407 1416 – 14 5 ––– – 3 10 – 3 10 ––– 1 13 7 1 17 4 – 8 11 – 8 11 1 12 – Total Average Price £15 9 4 £1 5 91/3 Adam Smith ElecBook Classics . d. ––– ––– ––– ––– ––– 12– ––– ––– 1339 1349 1359 1361 1363 1369 1379 1387 1390 The average Price of each Year in Money of the present Times £. s. d. s.The Wealth of Nations: Book 1 352 Years XII Price of the Quarter of Wheat each Year £ s. d.

– 16 – –8– 2 13 4 – 10 8 268 28– –84 –9– – 16 – – 13 4 – 10 – – 16 – Total Average Price 1453 1455 1457 1459 1460 1463 –18 1464 1486 1491 1494 1495 1497 1 – – –54 –12 –78 –5– –8– –2– – 1 10 –68 14– – 14 8 –4– –34 ––– ––– ––– ––– ––– ––– –38 ––– ––– ––– ––– ––– 1 11 – £12 15 4 £1 1 31/2 – 10 8 –24 – 15 4 – 10 – – 16 – – 10 – 1 17 – 12– –6– –5– Total Average Price Adam Smith £8 9 – – 14 1 ElecBook Classics . d. d.The Wealth of Nations: Book 1 353 Years XII Price of the Quarter of Wheat each Year £ s. ––– ––– ––– ––– 134 ––– –42 ––– ––– ––– ––– ––– 1423 1425 1434 1435 1439 1440 1444 1445 1447 1448 1449 1452 The average Price of each Year in Money of the present Times £. s. d. –8– –4– 168 –54 1–– 168 14– –44 –4– –46 –8– –68 –5– –8– Average of the different Prices of the same Year £. s.

––– ––– ––– ––– ––– ––– ––– ––– 1499 1504 1521 1551 1553 1554 1555 1556 1557 The average Price of each Year in Money of the present Times £. s. d. d. –6– –86 1 10 – –2– –8– –8– –8– –8– 1558 1559 1560 – 17 81/2 ––– ––– ––– – 17 81/2 –8– –8– –8– Total Average Price 1561 1562 1574 1587 1594 1595 1596 1597 1598 1599 1600 1601 –8– –8– 2 16 – 14– 34– 2 16 – 2 13 – 4–– 54– 4–– 2 16 8 1 19 2 1 17 8 1 14 10 ––– ––– 2–– ––– ––– ––– ––– 4 12 – ––– ––– ––– ––– £6 0 21/2 – 10 –5/12 –8– –8– 2–– 34– 2 16 – 2 13 – 4–– 4 12 – 2 16 8 1 19 2 1 17 8 1 14 10 Total Average Price Adam Smith £28 9 4 £2 7 51/3 ElecBook Classics . –4– –58 1–– –8– –8– –8– –8– –8– –4– –5– –8– 2 13 4 –8– –8– –8– Average of the different Prices of the same Year £. s. d.The Wealth of Nations: Book 1 354 Years XII Price of the Quarter of Wheat each Year £ s.

2 2 3 2 1 1 1 1 1 1 1 1 1 2 2 1 1 2 2 2 1 2 2 2 1 1 26) 54 £2 s. the Price of each Year being the medium between the highest Prices of those Two Market Days. both inclusive.The Wealth of Nations: Book 1 355 Prices of the Quarter of nine Bushels of the best or highest priced Wheat at Windsor Market. 10 18 12 8 12 9 16 8 2 15 8 13 18 16 16 16 0 10 d. 0 8 9 16 19 17 14 9 15 10 15 13 16 16 10 15 18 2 8 1 18 0 8 6 15 10 0 1 d. 1 2 2 2 2 2 1 1 2 2 3 2 2 2 2 2 16) 40 £2 s. on Lady–day and Michaelmas. from 1595 to 1764. Years 1595 – 1596 – 1597 – 1598 – 1599 – 1600 – 1601 – 1602 – 1603 – 1604 – 1605 – 1606 – 1607 – 1608 – 1609 – 1610 – 1611 – 1612 – 1613 – 1614 – 1615 – 1616 – 1617 – 1618 – 1619 – 1620 – £. 0 0 6 8 2 8 10 4 4 8 10 0 8 8 0 10 8 4 8 81/2 8 4 8 8 4 4 61/2 69/12 Years 1621 – 1622 – 1623 – 1624 – 1625 – 1626 – 1627 – 1628 – 1629 – 1630 – 1631 – 1632 – 1633 – 1634 – 1635 – 1636 – £. 4 8 0 0 0 4 0 0 0 8 0 4 0 0 0 8 0 0 Adam Smith ElecBook Classics .

The Wealth of Nations: Book 1 356 Years 1637 – 1638 – 1639 – 1640 – 1641 – 1642 – 1643 – 1644 – 1645 – 1646 – 1647 – 1648 – 1649 – 1650 – 1651 – 1652 – 1653 – 1654 – 1655 – 1656 – 1657 – 1658 – 1659 – 1660 – 1661 – 1662 – 1663 – 1664 – 1665 – 1666 – 1667 – 1668 – 1669 – 1670 – Carry over Wheat per quarter £. 2 13 0 2 2 2 2 0 0 0 0 2 3 4 4 3 3 2 1 1 1 2 2 3 3 2 3 3 2 2 2 1 1 2 2 2 £79 17 4 4 8 0 0 0 0 8 13 5 0 16 13 9 15 6 13 3 6 5 6 16 10 14 17 0 9 16 16 0 4 1 14 4 10 8 0 0* 0 0 0 0 8 0 0 8 4 6 6 0 4 0 8 0 0 6 0 0 0 6 4 0 0 0 4 8 10 Years Brought over 1671 – 1672 – 1673 – 1674 – 1675 – 1676 – 1677 – 1678 – 1679 – 1680 – 1681 – 1682 – 1683 – 1684 – 1685 – 1686 – 1687 – 1688 – 1689 – 1690 – 1691 – 1692 – 1693 – 1694 – 1695 – 1696 – 1697 – 1698 – 1699 – 1700 – Wheat per quarter £. s. s. The year 1646 supplied by Bishop Fleetwood. d. 79 14 10 2 2 2 3 3 1 2 2 3 2 2 2 2 2 2 1 1 2 1 1 1 2 3 3 2 3 3 3 3 2 60) 153 1 £2 11 0 /3 2 1 6 8 4 18 2 19 0 5 6 4 0 4 6 14 5 6 10 14 14 6 7 4 13 11 0 8 4 0 1 0 0 8 8 8 0 0 0 0 0 8 0 0 0 8 0 2 0 0 8 0 8 8 0 0 0 0 4 0 0 8 * Wanting in the account. Adam Smith ElecBook Classics . d.

s. 69 8 8 1 2 2 1 1 1 2 2 1 1 1 1 1 1 1 1 1 1 2 2 1 1 2 3 2 1 1 1 1 2 2 13 £2 18 3 0 18 15 18 10 6 14 4 4 7 19 14 17 17 12 18 1 4 14 13 5 0 10 19 16 10 19 0 6 6 0 10 0 4 0 6 6 8 8 0 10 10 6 0 10 0 0 6 6 10 8 8 10 3 0 0 10 6 3 0 9 9 69/32 Adam Smith ElecBook Classics . d.The Wealth of Nations: Book 1 Years 1701 – 1702 – 1703 – 1704 – 1705 – 1706 – 1707 – 1708 – 1709 – 1710 – 1711 – 1712 – 1713 – 1714 – 1715 – 1716 – 1717 – 1718 – 1719 – 1720 – 1721 – 1722 – 1723 – 1724 – 1725 – 1726 – 1727 – 1728 – 1729 – 1730 – 1731 – 1732 – 1733 – Carry over Wheat per quarter £. d. 1 17 8 1 1 2 1 1 1 2 3 3 2 2 2 2 2 2 2 1 1 1 1 1 1 1 2 2 2 2 2 1 1 1 1 £69 9 16 6 10 6 8 1 18 18 14 6 11 10 3 8 5 18 15 17 17 16 14 17 8 6 2 14 6 16 12 6 8 8 6 0 6 0 0 6 6 6 0 0 4 0 4 0 0 8 10 0 0 6 0 8 0 6 0 0 6 10 6 10 8 4 8 Years Brought over 1734 – 1735 – 1736 – 1737 – 1738 – 1739 – 1740 – 1741 – 1742 – 1743 – 1744 – 1745 – 1746 – 1747 – 1748 – 1749 – 1750 – 1751 – 1752 – 1753 – 1754 – 1755 – 1756 – 1757 – 1758 – 1759 – 1760 – 1761 – 1762 – 1763 – 1764 – 64) 129 357 Wheat per quarter £. s.

The Wealth of Nations: Book 1 Years 1731 – 1732 – 1733 – 1734 – 1735 – 1736 – 1737 – 1738 – 1739 – 1740 – Wheat per quarter £. d. s. d. s. 2 6 8 1 14 0 1 4 10 1 4 10 1 7 6 1 19 0 1 14 10 1 17 0 1 17 0 1 12 6 10) 16 18 2 4 £1 13 9 /5 Adam Smith ElecBook Classics . 1 12 10 1 6 8 1 8 4 1 18 10 2 3 0 2 0 4 1 18 0 1 15 6 1 18 6 2 10 8 10) 18 12 8 1 £1 17 3 /5 Years 1741 – 1742 – 1743 – 1744 – 1745 – 1746 – 1747 – 1748 – 1749 – 1750 – 358 Wheat per quarter £.

Accumulation.Book Two Of the Nature. and Employment of Stock .

the produce of a man’s own labour can supply but a very small part of his occasional wants. A stock of goods of different kinds. at least. as well as he can. with the price of the produce of his own. and in which every man provides everything for himself. or. therefore.The Wealth of Nations: Book 2 360 Introduction I n that rude state of society in which there is no division of labour. Every man endeavours to supply by his own industry his own occasional wants as they occur. he repairs it. in which exchanges are seldom made. with the trees and the turf that are nearest it. which he purchases with the produce. he clothes himself with the skin of the first large animal he kills: and when his hut begins to go to ruin. but sold. he goes to the forest to hunt. But when the division of labour has once been thoroughly introduced. and to supply him with the materials and tools of his work. and to supply him with the materials and tools of his work till such time. A weaver cannot apply himself entirely to his peculiar business. a stock sufficient to maintain him. when his coat is worn out. But this purchase cannot be made till such time as the produce of his own labour has not only been completed. unless there is beforehand stored up somewhere. it is not necessary that any stock should be accumulated or stored up beforehand in order to carry on the business of the society. When he is hungry. must be stored up somewhere sufficient to maintain him. as both these events can be brought about. what is the same thing. either in his own possession or in that of some other person. till he ElecBook Classics Adam Smith . The far greater part of them are supplied by the produce of other men’s labour.

But the number of workmen in every branch of business generally increases with the division of labour in that branch. a variety of new machines come to be invented for facilitating and abridging those operations. must be accumulated beforehand. an equal stock of provisions. therefore. and to furnish them with the best machines which he can either invent or afford to purchase. be previous to his applying his industry for so long a time to such a peculiar business. both to make among his workmen the most proper distribution of employment. He endeavours.The Wealth of Nations: Book 2 361 has not only completed. and a greater stock of materials and tools than what would have been necessary in a ruder state of things. His abilities in both these Adam Smith ElecBook Classics . The person who employs his stock in maintaining labour. As the accumulation of stock must. so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated. evidently. The quantity of materials which the same number of people can work up. so that accumulation naturally leads to this improvement. As the division of labour advances. but sold his web. increases in a great proportion as labour comes to be more and more subdivided. in the nature of things. or rather it is the increase of their number which enables them to class and subdivide themselves in this manner. in order to give constant employment to an equal number of workmen. be previous to the division of labour. As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour. This accumulation must. necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. and as the operations of each workman are gradually reduced to a greater degree of simplicity. therefore.

the effects of its accumulation into capitals of different kinds. either of an individual. In the first chapter. not only increases in every country with the increase of the stock which employs it. or it may be lent to some other person. This book is divided into five chapters. may either be employed by the person to whom it belongs.The Wealth of Nations: Book 2 362 respects are generally in proportion to the extent of his stock. 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. or of a great society. The stock which is accumulated into a capital. I have endeavoured to show what are the different parts or branches into which the stock. but. Adam Smith ElecBook Classics . I have endeavoured to explain the nature and operation of money considered as a particular branch of the general stock of the society. or to the number of people whom it can employ. The quantity of industry. 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. therefore. and of the annual produce of land and labour. In the second. In the third and fourth chapters. naturally divides itself. in consequence of that increase. In the following book I have endeavoured to explain the nature of stock. I have endeavoured to examine the manner in which it operates in both these situations. and the effects of the different employments of those capitals.

as it gradually comes in. In one. or other. consists the stock which men commonly reserve for their ElecBook Classics Adam Smith . and which are not yet entirely consumed. His revenue is. This is the state of the greater part of the labouring poor in all countries. or. he expects. first. is to afford him this revenue.The Wealth of Nations: Book 2 363 Chapter I W Of the Division of Stock hen the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks. and which consists either. he naturally endeavours to derive a revenue from the greater part of it. thirdly. That part which. he seldom thinks of deriving any revenue from it. reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. He consumes it as sparingly as he can. in this case. in that portion of his whole stock which was originally reserved for this purpose. derived from his labour only. from whatever source derived. is distinguished into two parts. such as a stock of clothes. therefore. or. is called his capital. in such things as had been purchased by either of these in former years. The other is that which supplies his immediate consumption. and the like. But when he possesses stock sufficient to maintain him for months or years. secondly. household furniture. or all of these three articles. in his revenue. and endeavours by his labour to acquire something which may supply its place before it be consumed altogether. His whole stock.

The capital employed in this manner yields no revenue or profit to its employer. The goods of the merchant yield him no revenue or profit till he sells them for money. Secondly. therefore. and returning to him in another. and selling them again with a profit. that it can yield him any profit. His capital is continually going from him in one shape. is very small in some. or circulating any further. may very properly be called circulating capitals. and it is only by means of such circulation. A master tailor requires no other instruments of trade but a parcel of Adam Smith ElecBook Classics . however. Different occupations require very different proportions between the fixed and circulating capitals employed in them. or purchasing goods. or warehouse. be considered as such. while it either remains in his possession. or continues in the same shape. and very great in others. therefore. First. in the purchase of useful machines and instruments of trade. manufacturing.The Wealth of Nations: Book 2 364 own immediate consumption. for example. is altogether a circulating capital. unless his shop. or in suchlike things as yield a revenue or profit without changing masters. may very properly be called fixed capitals. Such capitals. This part. He has occasion for no machines or instruments of trade. Such capitals. it may be employed in raising. or successive exchanges. The capital of a merchant. There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer. it may be employed in the improvement of land. Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. and the money yields him as little till it is again exchanged for goods.

Their maintenance is a circulating capital. for example. neither for labour. is bought in. and by their increase. Those of the weaver rise a good deal above those of the shoemaker. The farmer makes his profit by parting with them. that which is employed in the wages and maintenance of his labouring servants. the forge. Both the price and the maintenance of the cattle which are brought in and fattened. but in order to make a profit by their wool. nor for sale.The Wealth of Nations: Book 2 365 needles. In coal-works and mines of every kind. is circulated. The profit is made by keeping them. In other works a much greater fixed capital is required. by their milk. A flock of sheep or a herd of cattle that. is a circulating capital. however. In a great iron-work. and repaid with a profit by the price of the work. Those of the master shoemaker are a little. though but a very little. but for sale. The far greater part of the capital of all such master artificers. are a circulating capital. more expensive. The price or value of his labouring cattle is a fixed capital in the same manner as that of the instruments of husbandry. the machinery necessary both for drawing out the water and for other purposes is frequently still more expensive. is a fixed capital. That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed. The Adam Smith ElecBook Classics . and by parting with their maintenance. The farmer makes his profit by keeping the labouring cattle. He makes a profit of the one by keeping it in his own possession. not for labour. Their maintenance is a circulating capital in the same manner as that of the labouring servants. and of the other by parting with it. the slitt-mill. either in the wages of their workmen. are instruments of trade which cannot be erected without a very great expense. the furnace for melting the ore. or in the price of their materials. in a breeding country.

A dwelling-house. household furniture. as such. if it is to be the dwelling-house of the proprietor. and not of his revenue. Though it goes backwards and forwards between the ground and the granary. too. The whole value of the seed.The Wealth of Nations: Book 2 366 profit is made by parting with it. and of which the characteristic is. which. or to afford any revenue to its owner. is properly a fixed capital. and it comes back with both its own profit and the profit upon the whole price of the cattle. but by its increase. and therefore naturally divides itself into the same three portions. clothes. and therefore does not properly circulate. makes a part of his expense. which have been purchased by their proper consumers. or stock. or land. not by its sale. and the increase. The general stock of any country or society is the same with that of all its inhabitants or members. in the price of the wool. each of which has a distinct function or office. The stock that is laid out in a house. The first is that portion which is reserved for immediate consumption. the milk.. but which are not yet entirely consumed. it never changes masters. The farmer makes his profit. It consists in the stock of food. no doubt. however. extremely useful to him. ceases from that moment to serve in the function of a capital. If it is to be let to a tenant for rent. and though it is. contributes nothing to the revenue of its inhabitant. may yield a revenue to its proprietor. The whole stock of mere dwelling-houses too. make a part of this first portion. that it affords no revenue or profit. etc. subsisting at any one time in the country. as the house itself can produce nothing. and thereby serve Adam Smith ElecBook Classics . it is as his clothes and household furniture are useful to him. therefore. Though a house. the tenant must always pay the rent out of some other revenue which he derives either from labour.

Of all parts of the stock. of which the characteristic is. It consists chiefly of the four following articles: First. in the same manner. reserved for immediate consumption. and household furniture. In countries where masquerades are common.The Wealth of Nations: Book 2 367 in the function of a capital to him. Undertakers let the furniture of funerals by the day and by the week. they are still as really a stock reserved for immediate consumption as either clothes or household furniture. and thereby serve in the function of a capital to particular persons. is the fixed capital. what is laid out in houses is most slowly consumed. of all useful machines and instruments of trade which facilitate and abridge labour: Adam Smith ElecBook Classics . Clothes. nor serve in the function of a capital to it. it is a trade to let out masquerade dresses for a night. The second of the three portions into which the general stock of the society divides itself. it cannot yield any to the public. that it affords a revenue or profit without circulating or changing masters. is more distant. either of an individual. however. Upholsterers frequently let furniture by the month or by the year. Though the period of their total consumption. not only for the use of the house. Many people let furnished houses. The revenue. and the revenue of the whole body of the people can never be in the smallest degree increased by it. but for that of the furniture. may last many centuries. or of a society. sometimes yield a revenue. which is derived from such things must always be ultimately drawn from some other source of revenue. well built and properly taken care of. A stock of clothes may last several years: a stock of furniture half a century or a century: but a stock of houses. and get a rent. however.

always costs a real expense. and reducing it into the condition most proper for tillage and culture. repays that expense with a profit. with all their necessary buildings. as they make a part of his fortune. of all those profitable buildings which are the means of procuring a revenue. An improved farm is equally advantageous and more durable than any of those machines. farmhouses. as it were. though it costs a certain expense. draining. such as shops. but to the person who possesses them and pays that rent for them. in his person.The Wealth of Nations: Book 2 368 Secondly. These are very different from mere dwelling houses. manuring. They are a sort of instruments of trade. or apprenticeship. enclosing. granaries. which is a capital fixed and realized. and may be considered in the same light: Thirdly. so do they likewise of that of the society to which he belongs. and by means of which an equal circulating capital can afford a much greater revenue to its employer. of the acquired and useful abilities of all the inhabitants or members of the society. of what has been profitably laid out in clearing. frequently requiring no other repairs than the most profitable application of the farmer’s capital employed in cultivating it: Fourthly. not only to their proprietor who lets them for a rent. The acquisition of such talents. etc. by the maintenance of the acquirer during his education. The third and last of the three portions into which the general Adam Smith ElecBook Classics . of the improvements of land. An improved farm may very justly be regarded in the same light as those useful machines which facilitate and abridge labour. study. stables. and which. 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. Those talents. workhouses. warehouses.

materials. furniture. the manufacturers. which are not yet made up into any of those three shapes. etc. the timber merchants. Of these four parts. Adam Smith ElecBook Classics . of clothes. and building. The circulating capital consists in this manner. the cabinet-maker. the farmer. and finished work of all kinds that are in the hands of their respective dealers. whether altogether rude. and finished work—are. but which remain in the hands of the growers. the china-merchant. the mercers and drapers. of the provisions. and from the sale of which they expect to derive a profit: Thirdly. but which is still in the hands of the merchant or manufacturer. the jeweller. regularly withdrawn from it. etc. such as the finished work which we frequently find ready-made in the shops of the smith.The Wealth of Nations: Book 2 369 stock of the society naturally divides itself. etc. of the stock of provisions which are in the possession of the butcher. the corn-merchant. the carpenters and joiners. the brickmakers. materials. that it affords a revenue only by circulating or changing masters. of the money by means of which all the other three are circulated and distributed to their proper consumers: Secondly. the brewer. three—provisions.. It is composed likewise of four parts: First. of which the characteristic is. either annually. Fourthly. or more or less manufactured. of the work which is made up and completed. is the circulating capital. of the materials. the goldsmith. the grazier. and placed either in the fixed capital or in the stock reserved for immediate consumption. or in a longer or shorter period. and lastly. and of the money that is necessary for circulating and distributing them to those who are finally to use or to consume them. and not yet disposed of or distributed to the proper consumers.

it must in its turn require continual supplies. All useful machines and instruments of trade are originally derived from a circulating capital. clothes. Land. the produce of land. So great a part of the circulating capital being continually withdrawn from it. It is this stock which feeds. 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. They require. and by which are replaced the Adam Smith ElecBook Classics . without which it would soon cease to exist. a capital of the same kind to keep them in constant repair. and the maintenance of the workmen who make them. These supplies are principally drawn from three sources. and requires to be continually supported by a circulating capital.The Wealth of Nations: Book 2 370 Every fixed capital is both originally derived from. of which part is afterwards wrought up into finished work. of mines. and the maintenance of the workmen who employ them. and of fisheries. which furnishes the materials of which they are made. Their riches or poverty depends upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. will yield no revenue without a circulating capital. and lodges the people. To maintain and augment the stock which may be reserved for immediate consumption is the sole end and purpose both of the fixed and circulating capitals. which maintains the labourers who cultivate and collect its produce. in order to be placed in the other two branches of the general stock of the society. These afford continual supplies of provisions and materials. too. however improved.

though it seldom happens that the rude produce of the one and the manufactured produce of the other. to the very same person of whom he chooses to purchase the clothes. and sometimes. in order to be placed in the other two branches of the general stock of the society. in the ordinary course of business. and it is the produce of Adam Smith ElecBook Classics . necessarily withdrawn from it. the manufactured produce he has occasion for. however. it must. therefore. require all both a fixed and a circulating capital to cultivate them. therefore. Thus the farmer annually replaces to the manufacturer the provisions which he had consumed and the materials which be had wrought up the year before. like all other things. is drawn what is necessary for maintaining and augmenting that part of it which consists in money. his rude produce for money. though. because it seldom happens that the farmer sells his corn and his cattle. no doubt. It is the produce of land which draws the fish from the waters. this part is not. not only those capitals. and must. This is the real exchange that is annually made between those two orders of people. with which he can purchase. the capitals with which fisheries and mines are cultivated. Land even replaces. too. For though. too. furniture. and fisheries. be wasted and worn out at last. wherever it is to be had. require continual. much smaller supplies. materials. are directly bartered for one another. in part at least. his flax and his wool. be either lost or sent abroad. Land. and their produce replaces with a profit. like the other three. mines.The Wealth of Nations: Book 2 371 provisions. and instruments of trade which he wants. and finished work continually withdrawn from the circulating capital. From mines. but all the others in the society. and the manufacturer replaces to the farmer the finished work which he had wasted and worn out in the same time. He sells.

and. they frequently bury and conceal a great part of their stock. it is a stock reserved for immediate consumption. it must procure this profit either staying with him. It seems to have been a common practice among our ancestors during the violence of the feudal government.The Wealth of Nations: Book 2 372 the surface of the earth which extracts the minerals from its bowels. in most other governments of Asia. If it is employed in procuring present enjoyment. indeed. Treasure-trove was in those times considered as no Adam Smith ElecBook Classics . where men are continually afraid of the violence of their superiors. whether be his own or borrowed of other people. in order to have it always at hand to carry with them to some place of safety. or by going from him. it is in proportion to their natural fertility. In all countries where there is tolerable security. When the capitals are equal and equally well applied. is in proportion to the extent and proper application of the capitals employed about them. in Indostan. In those unfortunate countries. when their natural fertility is equal. The produce of land. in the other it is a circulating capital. in some one or other of those three ways. In the one case it is fixed. in case of their being threatened with any of those disasters to which they consider themselves as at all times exposed. every man of common understanding will endeavour to employ whatever stock he can command in procuring either present enjoyment or future profit. and fisheries. does not employ all the stock which he commands. mines. where there is tolerable security. If it is employed in procuring future profit. A man must be perfectly crazy who. I believe. This is said to be a common practice in Turkey.

copper. unless the right to it had been conveyed to the latter by an express clause in his charter. which. and coal were as things of smaller consequence. were never supposed to be comprehended in the general grant of the lands. without a special clause in the charter. It was put upon the same footing with gold and silver mines. though mines of lead.The Wealth of Nations: Book 2 373 contemptible part of the revenue of the greatest sovereigns in Europe. This was regarded in those times as so important an object. and neither to the finder nor to the proprietor of the land. and to which no particular person could prove any right. tin. It consisted in such treasure as was found concealed in the earth. that it was always considered as belonging to the sovereign. Adam Smith ElecBook Classics .

the profits of their stock. every part of it which goes neither to rent nor to wages. that the price of the greater part of commodities resolves itself into three parts. another the profits of the stock. the wages of labour: but that the price of every commodity necessarily resolves itself into some one. and the profits of stock: and a very few in which it consists altogether in one. But though the whole value of the annual produce of the land and labour of every country is thus divided among and constitutes ElecBook Classics Adam Smith . or of the Expense of Maintaining the National Capital I t has been shown in the first book. or other. with regard to every particular commodity. it has been observed. taken complexly. it must be so with regard to all the commodities which compose the whole annual produce of the land and labour of every country. the wages of labour. and a third the rent of the land which had been employed in producing and bringing them to market: that there are.The Wealth of Nations: Book 2 374 Chapter II Of Money Considered as a Particular Branch of the General Stock of the Society. The whole price or exchangeable value of that annual produce must resolve itself into the same three parts. taken separately. indeed. or all of these three parts. of which one pays the wages of the labour. being necessarily profit to somebody. and be parcelled out among the different inhabitants of the country. either as the wages of their labour. Since this is the case. some commodities of which the price is made up of two of those parts only. or the rent of their land.

or to spend upon his table. the net rent. or what. their profitable buildings. equipage. without hurting his estate. what remains free to the landlord. yet as in the rent of a private estate we distinguish between the gross rent and the net rent. The price of that labour may indeed make a part of it.. conveniencies. the ornaments of his house and furniture. and all other necessary charges. what remains free to them after deducting the expense of maintaining—first. The whole expense of maintaining the fixed capital must evidently be excluded from the net revenue of the society. as the workmen so employed Adam Smith ElecBook Classics . too. is in proportion. but to his net rent. the net revenue. The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour. can ever make any part of it. not to his gross. His real wealth is in proportion. their fixed. without encroaching upon their capital. The gross rent of a private estate comprehends whatever is paid by the farmer. after deducting the expense of management. Neither the materials necessary for supporting their useful machines and instruments of trade. and. secondly. not to their gross. but to their net revenue. and amusements. he can afford to place in his stock reserved for immediate consumption. or what. his private enjoyments and amusements. nor the produce of the labour necessary for fashioning those materials into the proper form. etc. their circulating capital. of repairs.The Wealth of Nations: Book 2 375 a revenue to its different inhabitants. or spend upon their subsistence. Their real wealth. so may we likewise in the revenue of all the inhabitants of a great country. they can place in their stock reserved for immediate consumption.

A certain quantity of materials. or to enable the same number of labourers to perform a much greater quantity of work. highly advantageous indeed. clothing and lodging. will work up a much greater quantity of goods than with more imperfect instruments of trade. are in the most perfect good order. This support. The expense which is properly laid out upon a fixed capital of any kind. communications. and the labour of a certain number of workmen. as enable the same number of Adam Smith ElecBook Classics . both the price and the produce go to this stock. and amusements. The intention of the fixed capital is to increase the productive powers of labour. But in other sorts of labour. both of which might have been immediately employed to augment the food. fences.The Wealth of Nations: Book 2 376 may place the whole value of their wages in their stock reserved for immediate consumption. assisted with the best machinery. In manufactures the same number of hands. but still different from this one. conveniences. 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. the produce to that of other people. the subsistence and conveniencies of the society. It is upon this account that all such improvements in mechanics. are thus diverted to another employment.. drains. whose subsistence. however. the same number of labourers and labouring cattle will raise a much greater produce than in one of equal extent and equally good ground. etc. are augmented by the labour of those workmen. the price to that of the workmen. still requires a certain portion of that produce. but not furnished with equal conveniencies. In a farm where all the necessary buildings.

it is not the same case with that of maintaining the circulating capital. The expense of repairs may frequently be necessary for supporting the produce of the estate. which had before been employed in supporting a more complex and expensive machinery. and the labour of a certain number of workmen. 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 gross rent remains at least the same as before. therefore.The Wealth of Nations: Book 2 377 workmen to perform an equal quantity of work. When by a more proper direction. can afterwards be applied to augment the quantity of work which that or any other machinery is useful only for performing. and the net rent is necessarily augmented. will naturally be augmented. provisions. and consequently both the gross and the net rent of the landlord. it can be diminished without occasioning any diminution of produce. and with it all the advantage and conveniency which the society can derive from that work. The undertaker of some great manufactory who employs a thousand a year in the maintenance of his machinery. it Adam Smith ElecBook Classics . are always regarded as advantageous to every society. however. The quantity of that work. and finished work—the three last. materials. But though the whole expense of maintaining the fixed capital is thus necessarily excluded from the net revenue of the society. which his machinery was useful only for performing. Of the four parts of which this latter capital is composed— money. with cheaper and simpler machinery than had been usual before. The expense of maintaining the fixed capital in a great country may very properly be compared to that of repairs in a private estate. A certain quantity of materials.

without occasioning any diminution either of his capital or of theirs. or in their stock reserved for immediate consumption. besides what is necessary for maintaining the fixed capital. First. The circulating capital of a society is in this respect different from that of an individual. The fixed capital. But though the circulating capital of every individual makes a part of that of the society to which he belongs. so far as they affect the revenue of the society. as those machines and instruments of trade. That of an individual is totally excluded from making any part of his net revenue. may regularly replace their value to him. Whatever portion of those consumable goods is employed in maintaining the former. which must consist altogether in his profits.The Wealth of Nations: Book 2 378 has already been observed. from a revenue derived from other funds. therefore. goes all to the latter. withdraws no portion of the annual produce from the net revenue of the society. require Adam Smith ElecBook Classics . they may in that of other people. bear a very great resemblance to one another. is the only part of the circulating capital of a society. Though the whole goods in a merchant’s shop must by no means be placed in his own stock reserved for immediate consumption.. Money. it is not upon that account totally excluded from making a part likewise of their net revenue. of which the maintenance can occasion any diminution in their net revenue. and makes a part of the net revenue of the society. therefore. are regularly withdrawn from it. etc. together with its profits. The maintenance of those three parts of the circulating capital. who. and that part of the circulating capital which consists in money. and placed either in the fixed capital of the society.

and amusements regularly distributed to him in their proper proportions. and of very curious labour. both which expenses. The great wheel of circulation is altogether different from the goods which are circulated by means of it. In computing either the gross or the net revenue of any society. we must always. deduct the whole value of the money. It is the ambiguity of language only which can make this Adam Smith ElecBook Classics . A certain quantity of very valuable materials. gold and silver. by means of which the whole revenue of the society is regularly distributed among all its different members. so money. and amusements of individuals. and afterwards to support them. is employed in supporting that great but expensive instrument of commerce. are. conveniencies. instead of augmenting the stock reserved for immediate consumption. of which not a single farthing can ever make any part of either. though they make a part of the gross. in the same manner. so the stock of money which circulates in any country must require a certain expense. and afterwards to support it. are deductions from the net revenue of the society. from their whole annual circulation of money and goods. conveniencies.. both which expenses. first to collect it.The Wealth of Nations: Book 2 379 a certain expense. by means of which every individual in the society has his subsistence. the subsistence. etc. which compose the fixed capital either of an individual or of a society. deductions from the net revenue of the society. Secondly. The revenue of the society consists altogether in those goods. though they make a part of the gross. and not in the wheel which circulates them. as the machines and instruments of a trade. makes itself no part of that revenue. make no part either of the gross or of the net revenue of either. first to erect them.

conveniencies. we sometimes mean nothing but the metal pieces of which it is composed. but the value of the goods which he can annually purchase or consume. or rather have supposed to circulate in that country. and amusements. When we talk of any particular sum of money.The Wealth of Nations: Book 2 380 proposition appear either doubtful or paradoxical. But when we say that a man is worth fifty or a hundred pounds a year. it is almost self-evident. but to include in its signification some obscure reference to the goods which can be had in exchange for them. In Adam Smith ElecBook Classics . or to the power of purchasing which the possession of it conveys. Thus if a guinea be the weekly pension of a particular person. which some writers have computed. is equal only to one of the two values which are thus intimated somewhat ambiguously by the same word. When properly explained and understood. to the money’s worth more properly than to the money. we mean only to express the amount of the metal pieces. or the quantity and quality of the necessaries and conveniencies of life in which he can with propriety indulge himself. by any particular sum of money. We mean commonly to ascertain what is or ought to be his way of living. and to the latter more properly than to the former. Thus when we say that the circulating money of England has been computed at eighteen millions. we mean commonly to express not only the amount of the metal pieces which are annually paid to him. he can in the course of the week purchase with it a certain quantity of subsistence. When. we mean not only to express the amount of the metal pieces of which it is composed. and sometimes we include in our meaning some obscure reference to the goods which can be had in exchange for it. the wealth or revenue which it in this case denotes.

Though we frequently. His weekly revenue is certainly not equal both to the guinea. express a person’s revenue by the metal pieces which are annually paid to him. but only to one or other of those two equal values. the real weekly or yearly revenue of all of them taken together. it would. their real riches. does not so properly consist in the piece of gold. like a bill upon a bankrupt. If the pension of such a person was paid to him. or in what he can exchange it for. so are his real riches. but in a weekly bill for a guinea. as in what he could get for it. it is because the amount of those pieces regulates the extent of his power of Adam Smith ElecBook Classics . therefore.The Wealth of Nations: Book 2 381 proportion as this quantity is great or small. but only to one or other of those two values. The revenue of the person to whom it is paid. and to the latter more properly than to the former. The whole revenue of all of them taken together is evidently not equal to both the money and the consumable goods. as in what he can get for it. not in gold. and to what can be purchased with it. Though the weekly or yearly revenue of all the different inhabitants of any country. and in reality frequently is paid to them in money. and to the latter more properly than to the former. If it could be exchanged for nothing. however. must always be great or small in proportion to the quantity of consumable goods which they can all of them purchase with this money. to the guinea’s worth rather than to the guinea. his real weekly revenue. may be. his revenue surely would not so properly consist in the piece of paper. in the same manner. A guinea may be considered as a bill for a certain quantity of necessaries and conveniencies upon all the tradesmen in the neighbourhood. be of no more value than the most useless piece of paper.

or the goods which can successively be bought with the whole of those money pensions as they are successively paid. as must likewise be the revenue of the different persons to whom they are paid. the amount of the metal pieces which annually circulate in any country must always be of much less value than the whole money pensions annually paid with them. the great wheel of circulation. of which the amount is so much inferior to its value. but in the power of purchasing. and though the metal pieces of which it is composed. and that of a third the day thereafter. cannot consist in those metal pieces. therefore. makes no part of the revenue of the society to which it belongs. But the power of purchasing. it is still more so with regard to a society. That revenue. We still consider his revenue as consisting in this power of purchasing or consuming. or the value of the goods which he can annually afford to consume. like all other instruments of trade. though it makes a part and a very valuable part of the capital. in the goods which can successively be bought with them as they circulate from hand to hand. is often precisely equal to his revenue.The Wealth of Nations: Book 2 382 purchasing. The amount of the metal pieces which are annually paid to an individual. Money. and not in the pieces which convey it. must always be precisely of the same value with those pensions. in the course Adam Smith ElecBook Classics . may pay that of another tomorrow. As the same guinea which pays the weekly pension of one man to-day. therefore. But if this is sufficiently evident even with regard to an individual. the great instrument of commerce. But the amount of the metal pieces which circulate in a society can never be equal to the revenue of all its members. and is upon that account the shortest and best expression of its value.

It is the circulating capital which furnishes the materials and wages of labour. in the expense of maintaining the fixed capital. Every saving. the machines and instruments of trade. they make themselves no part of that revenue. therefore. Thirdly. While his whole capital remains the same. bear this further resemblance to that part of the circulating capital which consists in money. which compose the fixed capital. and consequently the annual produce of land and labour. and puts industry into motion. been explained already..The Wealth of Nations: Book 2 383 of their annual circulation. The substitution of paper in the room of gold and silver money. replaces a very expensive instrument of commerce with one much less costly. is an improvement of exactly the same kind. etc. and it has partly. must increase the fund which puts industry into motion. the real revenue of every society. in what manner every saving in the expense of supporting the fixed capital is an improvement of the net revenue of the society. the smaller the one part. too. the greater must necessarily be the other. and lastly. It is sufficiently obvious. which does not diminish the productive powers of labour. which does not diminish the productive powers of labour. so every saving in the expense of collecting and supporting that part of the circulating capital which consists in money. Circulation comes Adam Smith ElecBook Classics . distribute to every man the revenue which properly belongs to him. that as every saving in the expense of erecting and supporting those machines. and sometimes equally convenient. is an improvement of the net revenue of the society. The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital.

his debtors pay him the same interest as if he had lent them so much money. therefore. those notes come to have the same currency as gold and silver money. to the extent. and which seems best adapted for this purpose. we shall suppose. But in what manner this operation is performed. but the circulating notes of banks and bankers are the species which is best known. When the people of any particular country have such confidence in the fortune. part of them continue to circulate for months and years together. the same quantity Adam Smith ElecBook Classics . and prudence of a particular banker. and in what manner it tends to increase either the gross or the net revenue of the society. A particular banker lends among his customers his own promissory notes. There are several different sorts of paper money. The same exchanges may be made. probity.The Wealth of Nations: Book 2 384 to be carried on by a new wheel. This interest is the source of his gain. By this operation. twenty thousand pounds in gold and silver may frequently be a sufficient provision for answering occasional demands. and may therefore require some further explication. therefore. from the confidence that such money can at any time be had for them. notes to the extent of a hundred thousand pounds. 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. is not altogether so obvious. Though some of those notes are continually coming back upon him for payment. twenty thousand pounds in gold and silver perform all the functions which a hundred thousand could otherwise have performed. As those notes serve all the purposes of money. Though he has generally in circulation. of a hundred thousand pounds. which it costs less both to erect and to maintain than the old one.

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. in this manner. payable to the bearer. the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite. Let us suppose. There would remain. reserving in their different coffers two hundred thousand pounds for answering occasional demands. in circulation. that sum being then sufficient for circulating the whole annual produce of their land and labour. to the value of a hundred thousand pounds. for example. the same quantity of money will be sufficient for buying and selling them. The channel of circulation. and if different operations of the same kind should. by means of his promissory notes. as by an equal value of gold and silver money.The Wealth of Nations: Book 2 385 of consumable goods may be circulated and distributed to their proper consumers. to one million sterling. too. can. and a million of bank notes. therefore. at a particular time. be spared from the circulation of the country. if I may be allowed such an Adam Smith ElecBook Classics . to the extent of one million. eight hundred thousand pounds in gold and silver. The goods to be bought and sold being precisely the same as before. therefore. that the whole circulating money of some particular country amounted. that some time thereafter. Eighty thousand pounds of gold and silver. will be sufficient to circulate it after them. Let us suppose. and that annual produce cannot be immediately augmented by those operations of banking. different banks and bankers issued promissory notes. One million. or eighteen hundred thousand pounds of paper and money together. at the same time. therefore.

because at a distance from the banks which issue it. created for carrying on a new trade. is poured into it beyond this sum cannot run in it. in order to seek that profitable employment which it cannot find at home. and the channel of home circulation will remain filled with a million of paper. it will not be received in common payments. be sent abroad. it is too valuable to be allowed to lie idle. or that its proprietors make a present of it to foreign nations. But the paper cannot go abroad. therefore. therefore. or in what is called the carrying trade. and the gold and silver being converted into Adam Smith ElecBook Classics . Eight hundred thousand pounds. One million eight hundred thousand pounds are poured into it. One million we have supposed sufficient to fill that channel. If they employ it in purchasing goods in one foreign country in order to supply the consumption of another. instead of the million of those metals which filled it before. It is like a new fund. in order to supply the consumption either of some other foreign country or of their own. that sum being over and above what can be employed in the circulation of the country. and from the country in which payment of it can be exacted by law. But though this sum cannot be employed at home. domestic business being now transacted by paper. Gold and silver. we must not imagine that it is sent abroad for nothing. therefore. will remain precisely the same as before. therefore. But though so great a quantity of gold and silver is thus sent abroad. whatever profit they make will be an addition to the net revenue of their own country. Whatever. It will. must overflow.The Wealth of Nations: Book 2 386 expression. but must overflow. to the amount of eight hundred thousand pounds will be sent abroad. They will exchange it for foreign goods of some kind or another.

after deducting what is necessary for supporting the tools and instruments of their trade. or establishing any permanent fund for supporting that expense.The Wealth of Nations: Book 2 387 a fund for this new trade. being forced abroad by those operations of banking.. the annual produce of their land and labour. with a profit. is and must be employed in purchasing those of this second kind. That the greater part of the gold and silver which. or. first. tools. purchase such goods as are likely to be consumed by idle people who produce nothing. the people who consume reproducing. foreign silks. they may either. who reproduce. increases expense and consumption without increasing production. seems not only probable but almost unavoidable. and though it increases the consumption of the society. it promotes prodigality. the value of their annual consumption. So far as it is employed in the second way. etc. is increased by the whole value which the labour of those workmen adds to the materials upon which they are employed. secondly. it promotes industry. The gross revenue of the society. and provisions. and their net revenue by what remains of this value. in order to maintain and employ an additional number of industrious people. with a profit. such as foreign wines. Though some particular men may sometimes increase their expense very considerably though their revenue Adam Smith ElecBook Classics . is employed in purchasing foreign goods for home consumption. the whole value of their annual consumption. So far as it is employed in the first way. and is in every respect hurtful to the society. it provides a permanent fund for supporting that consumption. If they employ it in purchasing foreign goods for home consumption. they may purchase an additional stock of materials.

for foreign goods being the same. we may be assured that no class or order of men ever does so. three things are requisite.The Wealth of Nations: Book 2 388 does not increase at all. is likely to be employed in purchasing those for their use. as before. and which serves only to circulate those three. in the smallest degree. a very small part of the money. materials to work upon. and the wages or recompense for the sake of which the work is done. The greater part of it will naturally be destined for the employment of industry. because. is employed in purchasing foreign goods for home consumption. materials. Money is neither a material to work upon. When we compute the quantity of industry which the circulating capital of any society can employ. and finished work: the other. which consists in money. be increased by those operations of banking. nor a tool to work with. though that of a few individuals among them may. cannot be much increased by them. not in money. but in what can be got for them. but in the money’s worth. like that of all other men. cannot. which being forced abroad by those operations of banking. But the revenue of idle people. and in reality sometimes is. therefore. not in the metal pieces. and not for the maintenance of idleness. his real revenue. must always be deducted. or very nearly the same. Their expense in general. though the principles of common prudence do not always govern the conduct of every individual. tools to work with. we must always have regard to those parts of it only which consist in provisions. Adam Smith ElecBook Classics . consists. In order to put industry into motion. they always influence that of the majority of every class or order. The demand of idle people. and though the wages of the workman are commonly paid to him in money. therefore. considered as a class or order.

it is. as but a part. tools. and maintenance. and a maintenance suitable to the nature of the work. as well as the maintenance of the workmen. tools. and to the latter more properly than to the former. But how small soever the proportion which the circulating money may bear to the whole value of the annual produce. may be increased by the whole value of gold and silver which used to be employed in purchasing them. Money may be requisite for purchasing the materials and tools of the work. to the fund from which he furnishes materials and wages to his workmen. at a tenth. and adds the difference between its price and that of the new to his circulating capital. and maintenance. takes down his old machinery. in consequence of some improvement in mechanics. which the whole circulating capital can supply. and to the materials. at a twentieth. When paper is substituted in the room of gold and silver money. The operation. perhaps. evidently.The Wealth of Nations: Book 2 389 The quantity of industry which any capital can employ must. 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. tools. impossible to determine. but only to one or other of those two values. the quantity of the materials. resembles that of the undertaker of some great work. and frequently but a Adam Smith ElecBook Classics . 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. But the quantity of industry which the whole capital can employ is certainly not equal both to the money which purchases. and at a thirtieth part of that value. which are purchased with it. who. be equal to the number of workmen whom it can supply with materials. It has been computed by different authors at a fifth. in some measure.

is ever destined for the maintenance of industry. Silver very seldom appears except in the change of a twenty shillings bank note. has evidently derived great benefit from their trade. The business of the country is almost entirely carried on by means of the paper of those different banking companies. the country. and even in some country villages. and. by the erection of new banking companies in almost every considerable town. 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. that the trade of the city of Glasgow doubled in about fifteen years after the first erection of the banks there. a fifth part of the former quantity. of which the one. An operation of this kind has. When. consequently. either of Scotland in general. the gold and silver necessary for circulation is reduced to. of that produce. and gold still seldomer. it must make a very considerable addition to the quantity of that industry. Whether the trade. therefore. to the value of the annual produce of land and labour. the other. called the Bank of Scotland. Adam Smith ElecBook Classics . I have heard it asserted. by royal charter in 1727. The effects of it have been precisely those above described. it must always bear a very considerable proportion to that part. But though the conduct of all those different companies has not been unexceptionable.The Wealth of Nations: Book 2 390 small part. was established by act of Parliament in 1695. with which purchases and payments of kinds are commonly made. and that the trade of Scotland has more than quadrupled since the first erection of the two public banks at Edinburgh. perhaps. notwithstanding. called the Royal Bank. been performed in Scotland. and has accordingly required an act of Parliament to regulate it. within these five-and-twenty or thirty years. by the substitution of paper.

was brought into the Bank of Scotland in order to be recoined. cannot be estimated at less than a million sterling. ElecBook Classics Adam Smith . but it appears from the ancient accounts of the mint of Scotland. from a diffidence of repayment. upon this occasion. cannot be doubted. it seems to be an effect too great to be accounted for by the sole operation of this cause. of which that part which consists in gold and silver most probably does not amount to half a million. in 1707. too. That the trade and industry of Scotland. In the present times the whole circulation of Scotland cannot be estimated at less than two millions.The Wealth of Nations: Book 2 391 or the city of Glasgow in particular. But though the circulating gold and silver of Scotland have suffered so great a 1 See Ruddiman’s preface to Anderson’s Diplomata. immediately after it. If either of them has increased in this proportion. I do not pretend to know. was considerable. 9d.117 10s. it seems to have made but a very small part of the whole. Scotiæ. has really increased in so great a proportion. and which. besides. however. sterling. some English coin which was not called in. The value of the silver money which circulated in Scotland before the union. No account has been got of the gold coin. and that the banks have contributed a good deal to this increase. amounted to £411. during so short a period.. who. for though the circulation of the Bank of Scotland. etc. have increased very considerably during this period. that the value of the gold annually coined somewhat exceeded that of the silver. It seems to have constituted almost the whole circulation of that country. which had then no rival. The whole value of the gold and silver.1 There were a good many people. did not bring their silver into the Bank of Scotland: and there was. therefore. which circulated in Scotland before the union.

not gold and silver. The commerce of Scotland. another method of issuing their promissory notes. the annual produce of its land and labour. that is. and those companies would have had but little trade had they confined their business to the discounting of bills of exchange. within the sum for which the credit had been given. its real riches and prosperity do not appear to have suffered any. have evidently been augmented. that the greater part of banks and bankers issue their promissory notes. together with the legal Adam Smith ElecBook Classics . the legal interest till the bill shall become due. which he finds by experience are commonly in circulation. together with a clear profit of the interest. when it becomes due. that is by giving credit to the extent of a certain sum (two or three thousand pounds. should be repaid upon demand. They invented. which at present is not very great. The payment of the bill. He is thereby enabled to make his clear gain of interest on so much a larger sum. and trade. but his own promissory notes. upon whatever sum they advance. by granting what they called cash accounts. was still more inconsiderable when the two first banking companies were established. by advancing money upon them before they are due.The Wealth of Nations: Book 2 392 diminution during this period. replaces to the bank the value of what had been advanced. that whatever money should be advanced to him. manufactures. The banker who advances to the merchant whose bill he discounts. by the whole value of his promissory notes. It is chiefly by discounting bills of exchange. has the advantage of being able to discount to a greater amount. They deduct always. on the contrary. therefore. for example) to any individual who could procure two persons of undoubted credit and good landed estate to become surety for him. Its agriculture.

without Adam Smith ElecBook Classics . been the principal cause. and thus almost the whole money business of the country is transacted by means of them. The banks. Whoever has a credit of this kind with one of those companies. for example. by twenty and thirty pounds at a time. find it convenient to keep such cash accounts with them. Hence the great trade of those companies. and are thereby interested to promote the trade of those companies. or to replace what they may have borrowed of them. These the merchants pay away to the manufacturers for goods. the company discounting a proportionable part of the interest of the great sum from the day on which each of those small sums is paid in till the whole be in this manner repaid. commonly granted by banks and bankers in all different parts of the world. and almost all men of business. I believe. But the easy terms upon which the Scotch banking companies accept of repayment are. All merchants. peculiar to them. when their customers apply to them for money. by readily receiving their notes in all payments. generally advance it to them in their own promissory notes. may repay this sum piecemeal. the manufacturers to the farmers for materials and provisions. and have. therefore. the farmers to their landlords for rent. so far as I know. Credits of this kind are.The Wealth of Nations: Book 2 393 interest. and by encouraging all those with whom they have any influence to do the same. and the merchants again return them to the banks in order to balance their cash accounts. and borrows a thousand pounds upon it. perhaps. the landlords repay them to the merchants for the conveniencies and luxuries with which they supply them. By means of those cash accounts every merchant can. both of the great trade of those companies and of the benefit which the country has received from it.

one in London and the other in Edinburgh. therefore. once in the year. Let the ordinary amount of this sum be supposed five hundred pounds. either in his own coffers. who employ equal stocks in the same branch of trade. the Edinburgh merchant can. carry on a greater trade and give employment to a greater number of people than the London merchant. he satisfies them from his cash account with the bank. or of goods to the value of his whole stock upon hand. he can. without imprudence. keeps no money unemployed for answering such occasional demands. The London merchant must always keep by him a considerable sum of money. in order to answer the demands continually coming upon him for payment of the goods which he purchases upon credit. When they actually come upon him. The value of the goods in his warehouse must always be less by five hundred pounds than it would have been had he not been obliged to keep such a sum unemployed. he must sell in a year five hundred pounds’ worth less goods than he might otherwise have done. who gives him no interest for it. 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. Let us suppose that he generally disposes of his whole stock upon hand. If there are two merchants. carry on a greater trade than he otherwise could do. and gradually replaces the sum borrowed with the money or paper which comes in from the occasional sales of his goods. without imprudence. or in those of his banker. With the same stock. on the other hand. By being obliged to keep so great a sum unemployed.The Wealth of Nations: Book 2 394 imprudence. His annual profits must be less by all that he could have made by the sale of five hundred pounds worth more goods. have at all times in his Adam Smith ElecBook Classics . The merchant in Edinburgh.

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 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. they would immediately demand payment of it from the banks. as the excess could neither be sent abroad nor be employed in the circulation of the country. If twenty shilling notes. they could Adam Smith ElecBook Classics . Hence the great benefit which the country has derived from this trade. Should the circulating paper at any time exceed that sum. and have. it must be remembered. Many people would immediately perceive that they had more of this paper than was necessary for transacting their business at home. When this superfluous paper was converted into gold and silver. and give constant employment to a greater number of industrious people who prepare those goods for the market. it must immediately return upon the banks to be exchanged for gold and silver. of which it supplies the place.The Wealth of Nations: Book 2 395 warehouse a larger quantity of goods than the London merchant. and can thereby both make a greater profit himself. the additional conveniency of their cash accounts. and as they could not send it abroad. can discount their bills of exchange as easily as the English merchants. if there was no paper money. are the lowest paper money current in Scotland. for example. The facility of discounting bills of exchange it may be thought indeed. besides. or which (the commerce being supposed the same) would circulate there. But the Scotch merchants. The whole paper money of every kind which can easily circulate in any country never can exceed the value of the gold and silver.

for answering the occasional demands of the holders of its notes. to a much greater extent. of which it loses the interest. secondly. if they showed any difficulty or backwardness in payment.The Wealth of Nations: Book 2 396 easily find a use for it by sending it abroad. but they could find none while it remained in the shape of paper. but in a much greater proportion. and. Such a company. A banking company. in the expense of keeping at all times in its coffers. yet must empty themselves much faster than if their business was confined within more reasonable bounds. though they ought to be filled much fuller. but in a much greater proportion. and of which the excess is continually returning upon them for payment. a large sum of money. not only in proportion to this excessive increase of their circulation. their notes returning upon them much faster than in proportion to the excess of their quantity. in the expense of replenishing those coffers as fast as they are emptied by answering such occasional demands. the expenses peculiar to a bank consist chiefly in two articles: first. and. which issues more paper than can be employed in the circulation of the country. the wages of servants. which they keep at all times in their coffers. The coffers of such a company too. therefore. Over and above the expenses which are common to every branch of trade. not only a more violent. accountants. such as the expense of house-rent. etc. but a more constant and Adam Smith ElecBook Classics . be a run upon the banks to the whole extent of this superfluous paper.. ought to increase the quantity of gold and silver. the alarm which this would occasion necessarily increasing the run. clerks. ought to increase the first article of their expense. and must require. There would immediately. therefore. not only in proportion to this forced increase of their business.

which the circulation of the country can easily absorb and employ. it must. and this continual exportation of gold and silver. be sent abroad. in proportion to this forced increase of their business. It will thus gain nothing by the interest of the four thousand pounds’ excessive circulation. and is therefore over and above what can be employed in it too. It comes in place of a paper which is over and above what can be employed in that circulation. amounts exactly to forty thousand pounds.The Wealth of Nations: Book 2 397 uninterrupted exertion of expense in order to replenish them. this bank ought to keep at all times in its coffers. cannot be employed in the circulation of the country. and that for answering occasional demands. in finding new gold and silver in order to replenish those coffers. which empty themselves so very rapidly. in one shape or another. must necessarily enhance still further the expense of the bank. therefore. this bank is obliged to keep at all times in its coffers ten thousand pounds in gold and silver. in order to find that profitable employment which it cannot find at home. which will be Adam Smith ElecBook Classics . increase the second article of their expense still more than the first. But as that coin will not be allowed to lie idle. not eleven thousand pounds only. Should this bank attempt to circulate forty-four thousand pounds. therefore. Let us suppose that all the paper of a particular bank. by enhancing the difficulty. For answering occasional demands. must. will return upon it almost as fast as they are issued. the four thousand pounds which are over and above what the circulation can easily absorb and employ. which is thus continually drawn in such large quantities from their coffers. and it will lose the whole expense of continually collecting four thousand pounds in gold and silver. The coin too. Such a company. but fourteen thousand pounds.

in consequence of an excess of the same kind. which it soon after issued in coin at £3 17s. the circulation never could have been overstocked with paper money. This money was sent down by the waggon. this liberality of government did not prevent altogether the expense of the bank. losing in this manner between two and a half and three per cent upon the coinage of so very large a sum. Had every particular banking company always understood and attended to its own particular interest. and insured by the carriers at an additional expense of three quarters per cent or fifteen shillings on the hundred pounds. By issuing too great a quantity of paper. The Scotch banks.The Wealth of Nations: Book 2 398 continually going out of its coffers as fast as they are brought into them. But every particular banking company has not always understood or attended to its own particular interest. about eight hundred and fifty thousand pounds. were all obliged to employ constantly agents at London to collect money for them. 10 1/2d. of which the excess was continually returning. an ounce. at an expense which was seldom below one and a half or two per cent. though the government was properly at the expense of the coinage. 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. For this great coinage the bank (in consequence 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. and the circulation has frequently been overstocked with paper money. in order to be exchanged for gold and silver. Adam Smith ElecBook Classics . or at an average. Though the bank therefore paid no seignorage.

But they were of more value abroad. sometimes melted down and sent abroad in the shape of bullion. paying always the interest and commission upon the whole accumulated sum. When those correspondents afterwards drew upon them for the payment of this sum. from the distress into which their excessive circulation had thrown them. or by the Scotch banks. In this case the resource of the banks was to draw upon their correspondents in London bills of exchange to the extent of the sum which they wanted. It was the newest. and the best pieces only which were carefully picked out of the whole coin. was sometimes sent abroad in the shape of coin. and either sent abroad or melted down. in exchange for that part of their paper which was over and above what could be employed in the circulation of the country. The gold coin which was paid out either by the Bank of England. or rather bills for the same sum.The Wealth of Nations: Book 2 399 Those agents were not always able to replenish the coffers of their employers so fast as they were emptied. being likewise over and above what could be employed in that circulation. were sometimes obliged to employ this ruinous resource. the debtor. and while they remained in the shape of coin. or when melted down into Adam Smith ElecBook Classics . Even those Scotch banks which never distinguished themselves by their extreme imprudence. sonic of those banks. bank. together with the interest and a commission. had sometimes no other means of satisfying this draught but by drawing a second set of bills either upon the same. At home. or upon some other correspondents in London. and sometimes melted down and sold to the Bank of England at the high price of four pounds an ounce. and the same sum. those heavy pieces were of no more value than the light. the heaviest. would in this manner make sometimes more than two or three journeys.

by supplying its own coffers with coin. The Bank of England. but for the much greater imprudence of almost all the Scotch banks. The Scotch banks. it is to be observed. But the Bank of England paid very dearly. The Bank of England. into which coin is continually flowing from those coffers in a great variety of ways. the state of the coin. but that Adam Smith ElecBook Classics . at home. no doubt. paid all of them very dearly for their own imprudence and inattention. whatever vacuities this excessive circulation occasioned in the necessary coin of the kingdom. and that notwithstanding the great quantity of good and new coin which was every year issued from the bank. found to their astonishment that there was every year the same scarcity of coin as there had been the year before.The Wealth of Nations: Book 2 400 bullion. The overtrading of some bold projectors in both parts of the United Kingdom was the original cause of this excessive circulation of paper money. is not either the whole capital with which he trades. not only for its own imprudence. Every year they found themselves under the necessity of coining nearly the same quantity of gold as they had coined the year before. became every year worse and worse. or even any considerable part of that capital. the Bank of England was obliged to supply them. instead of growing better and better. the expense of this great annual coinage became every year greater and greater. and from the continual rise in the price of gold bullion. in consequence of the continual wearing and clipping of the coin. Whatever coin therefore was wanted to support this excessive circulation both of Scotch and English paper money. is indirectly obliged to supply the whole kingdom. What a bank can with propriety advance to a merchant or undertaker of any kind. notwithstanding their great annual coinage.

so far as its dealings are confined to such customers. The coffers of the bank. upon the easy terms of the banking companies of Scotland. from which. so that. 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 for answering occasional demands.The Wealth of Nations: Book 2 401 part of it only which he would otherwise be obliged to keep by him unemployed. together with the interest. advances him likewise upon such occasions such sums upon his cash account. it can never exceed the quantity which the circulation of the country can easily absorb and employ. it can never exceed the value of the gold and silver which would necessarily circulate in the country if there was no paper money. though a stream is continually running out. Little or no expense can ever be necessary for replenishing the coffers of such a bank. and in ready money for answering occasional demands. even when he has no bills to discount. and which. The payment of the bill. without overtrading. or very near equally full. When a bank discounts to a merchant a real bill of exchange drawn by a real creditor upon a real debtor. When a bank. may frequently have occasion for a sum of ready money. without any further care or attention. the pond keeps always equally. is really paid by that debtor. besides discounting his bills. If the paper money which the bank advances never exceeds this value. fully equal to that which runs out. it dispenses him entirely from the necessity of keeping any part of his stock by him unemployed and Adam Smith ElecBook Classics . when it becomes due. A merchant. replaces to the bank the value of what it had advanced. and accepts of a piecemeal repayment as the money comes in from the occasional sale of his goods. as soon as it becomes due. resemble a water pond. yet another is continually running in.

six. however. The stream which is in this case continually running out from its coffers is necessarily much larger than that which is continually running in. the sum of the repayments from certain other customers falls commonly very much short of the advances which it makes to them. five. in dealing with such customers. If. and scarce ever to require any extraordinary expense to replenish them. Adam Smith ElecBook Classics . he can answer them sufficiently from his cash account. or is not. whether in the course of some short period (of four. or eight months for example) the sum of the repayments which it commonly receives from them is. upon most occasions. so that. The banking companies of Scotland. fully equal to that of the advances. accordingly. within the course of such short periods. ought to observe with great attention. The bank. the sum of the repayments from certain customers is. If. that which is continually running into them must be at least equally large. so that without any further care or attention those coffers are likely to be always equally or very near equally full. fully equal to that of the advances which it commonly makes to them. at least if they continue to deal with it in this manner. on the contrary. and did not care to deal with any person. Though the stream which is in this case continually running out from its coffers may be very large.The Wealth of Nations: Book 2 402 in ready money for answering occasional demands. When such demands actually come upon him. it may safely continue to deal with such customers. unless they are replenished by some great and continual effort of expense. it cannot with any safety continue to deal with such customers. were for a long time very careful to require frequent and regular repayments from all their customers. those coffers must soon be exhausted altogether.

without being obliged to look out for any other evidence besides what their own books afforded them. By this attention. men being for the most part either regular or irregular in their repayments.The Wealth of Nations: Book 2 403 whatever might be his fortune or credit. the banking companies of Scotland had probably this advantage in view. which lends money to perhaps five hundred different people. can have no regular information concerning the conduct and circumstances of the greater part of its debtors beyond what its own books afford it. and of which the attention is continually occupied by objects of a very different kind. 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. Secondly. by this attention they were enabled to make some tolerable judgment concerning the thriving or declining circumstances of their debtors. they gained two other very considerable advantages. When they observed that within moderate periods of time the repayments of a particular customer were upon most occasions fully equal to the advances which they had made to him. But a banking company. according as their circumstances are either thriving or declining. besides saving almost entirely the extraordinary expense of replenishing their coffers. A private man who lends out his money to perhaps half a dozen or a dozen of debtors. either by himself or his agents. observe and inquire both constantly and carefully into the conduct and situation of each of them. First. they might be assured that Adam Smith ElecBook Classics . what they called. may. who did not make. frequent and regular operations with them. In requiring frequent and regular repayments from all their customers.

within moderate periods of time. and that. by means of the same dealings. is continually returning to every dealer in the shape of money. 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 had Adam Smith ElecBook Classics . for the purpose of keeping the rest of his capital in constant employment. regularity. the paper money. The advances of the bank paper. If the advances of the bank had commonly exceeded this part of his capital. by exceeding the quantity of gold and silver which. and amount of his repayments would sufficiently demonstrate that the amount of their advances had at no time exceeded that part of his capital which he would otherwise have been obliged to keep by him unemployed and in ready money for answering occasional demands. the ordinary amount of his repayments could not. could not have been equal to the stream which. consequently. The stream which. that is. had not at any time exceeded the quantity of gold and silver which would have circulated in the country had there been no paper money. which they had circulated by his means. and continually going from him in the same shape. had there been no such advances. he would have been obliged to keep by him for answering occasional demands. by means of his dealings. The frequency. have equalled the ordinary amount of its advances. It is this part of his capital only which. was continually running out. was continually running into the coffers of the bank. whether paper or coin. within moderate periods of time.The Wealth of Nations: Book 2 404 the paper money which they had advanced to him had not at any time exceeded the quantity of gold and silver which he would otherwise have been obliged to keep by him for answering occasional demands.

for example.The Wealth of Nations: Book 2 405 there been no paper money. This second advantage. the creditable traders of any country can be dispensed from the necessity of keeping any part of their stock by them unemployed and in ready money for answering occasional demands. etc. Still less. was not perhaps so well understood by all the different banking companies of Scotland as the first. they can reasonably expect no farther assistance from banks and bankers. partly by the conveniency of discounting bills. because. and consequently to exceed the quantity which the circulation of the country could easily absorb and employ. go farther. consistently with its own interest. advance to a trader the whole or even the greater part of the circulating capital with which he trades. yet the whole of the returns is too distant from the whole of the outgoings. employs in erecting his forge and smeltinghouse. consistently with their own interest and safety. could a bank afford to advance him any considerable part of his fixed capital. and the excess of this paper money would immediately have returned upon the bank in order to be exchanged for gold and silver. in making roads and waggon-ways. of the capital Adam Smith ElecBook Classics .. and the sum of his repayments could not equal the sum of its advances within such moderate periods of time as suit the conveniency of a bank. When. etc. when they have gone thus far. and partly by that of cash accounts. though equally real. the dwelling-houses of his workmen. of the capital which the undertaker of an iron forge. of the capital which the undertaker of a mine employs in sinking his shafts. and going from him in the same shape. cannot. his workhouses and warehouses. who.. though that capital is continually returning to him in the shape of money. A bank cannot. in erecting engines for drawing out the water.

A bank. to be sufficient to ensure. be a very convenient creditor to such traders and undertakers. a period by far too distant to suit the conveniency of a bank. or of attorneys’ fees for drawing bonds and mortgages. the money which is borrowed. The returns of the fixed capital are in almost all cases much slower than those of the circulating capital. and ploughing waste and uncultivated fields. and such expenses. even though the success of the project should fall very much short of the expectation of the projectors. their own capital ought. indeed. with all their necessary appendages of stables. ought not to be borrowed of a bank. with great propriety. would. in building farm-houses. very seldom return to the undertaker till after a period of many years. and who are upon that account willing to lend that capital to such people of good credit as are likely to keep it for several years. carry on a very considerable part of their projects with borrowed money. which lends its money without the expense of stamped paper. however. manuring. the capital of those creditors. etc. draining. even when laid out with the greatest prudence and judgment.The Wealth of Nations: Book 2 406 which the person who undertakes to improve land employs in clearing. Traders and other undertakers may. or to render it extremely improbable that those creditors should incur any loss. no doubt. and which accepts of repayment upon the easy terms of the banking companies of Scotland. In justice to their creditors. but ought to be borrowed upon bond or mortgage of such private people as propose to live upon the interest of their money without taking the trouble themselves to employ the capital. and which it is meant should not be repaid till after a period of several years. granaries. enclosing. in this case. But such traders and Adam Smith ElecBook Classics . no doubt. if I may say so. Even with this precaution too.

They had overtraded a little. or at least that diminution of profit. Those traders and other undertakers. they said. extend their credits in proportion to the extension of the trade of the country. It is now more than five-and-twenty years since the paper money issued by the different banking companies of Scotland was fully equal. to give. which in this particular business never fails to attend the smallest degree of overtrading. either with their own capital. having got so much assistance from banks and bankers.The Wealth of Nations: Book 2 407 undertakers would. be most inconvenient debtors to such a bank. and to provide them with all the capital which they wanted to trade with. Those companies. and upon their refusing to extend their credits. surely. or with what they had credit to borrow of private people in the usual way of bond or mortgage. to what the circulation of the country could easily absorb and employ. consistently with their own interest. which did not. meaning. and had brought upon themselves that loss. no doubt. wished to get still more. were of a different opinion. They complained of the contracted views and dastardly spirit of the directors of those banks. The banks. by the extension of that trade the extension of their own projects beyond what they could carry on. were in honour bound to supply the deficiency. or rather was somewhat more than fully equal. they seem to have thought. therefore. could extend their credits to whatever sum might be wanted. The banks. however. They had even done somewhat more. some of those traders had recourse to an Adam Smith ElecBook Classics . without incurring any other expense besides that of a few reams of paper. had so long ago given all the assistance to the traders and other undertakers of Scotland which it is possible for banks and bankers. The banks. they seem to have thought.

and as the effects of this practice upon the banking trade are not perhaps generally understood even by men of business themselves. and during the course of the late war. and to the very moderate capital of the country. have given such extraordinary privileges to bills of exchange that money is more readily advanced upon them than upon any other species of obligation. This expedient was no other than the well-known shift of drawing and redrawing. especially when they are made payable within so short a period as two or three months after their date. The practice of raising money in this manner had been long known in England. though at a much greater expense. But as this book may come into the hands of many people who are not men of business.The Wealth of Nations: Book 2 408 expedient which. the shift to which unfortunate traders have sometimes recourse when they are upon the brink of bankruptcy. If. The customs of merchants. served their purpose. in proportion to the very limited commerce. which were established when the barbarous laws of Europe did not enforce the performance of their contracts. for a time. where. I shall endeavour to explain it as distinctly as I can. is said to have carried on to a very great extent. and which during the course of the two last centuries have been adopted into the laws of all European nations. From England it was brought into Scotland. Adam Smith ElecBook Classics . The practice of drawing and redrawing is so well known to all men of business that it may perhaps be thought unnecessary to give an account of it. when the high profits of trade afforded a great temptation to overtrading. yet as effectually as the utmost extension of bank credits could have done. it was soon carried on to a much greater extent than it ever had been in England.

The trader A in Edinburgh. upon condition that before the term of payment he shall redraw upon A in Edinburgh for the same sum. The bill is protested. before it came to the person who presents it to the acceptor for payment. who. who had successively advanced to one another the contents of it either in money or goods. B accordingly. but it is a chance if it falls to-night. be persons of doubtful credit. the acceptor does not pay it as soon as it is presented. yet still the shortness of the date gives some security to the owner of the bill. that is. In reality B in London owes nothing to A in Edinburgh. we shall suppose. and who to express that each of them had in his turn received those contents. payable two months after date. if he does not immediately pay it. acceptor. payable likewise two months after date. and endorsers of the bill should. and. If. he becomes too from that moment a bankrupt. if he fails to pay. draws a bill upon B in London. becomes likewise a bankrupt. each endorser becomes in his turn liable to the owner of the bill for those contents. who again. had all of them in their order endorsed. Though the drawer. written their names upon the back of the bill. it is a chance if they all become so in so short a time. another bill. therefore.The Wealth of Nations: Book 2 409 when the bill becomes due. but he agrees to accept of A’s bill. redraws this bill upon A in Edinburgh. to sleep in it to-night. before the expiration of the first two months. and I will venture. Though all of them may be very likely to become bankrupts. together with the interest and a commission. it had passed through the hands of several other persons. Adam Smith ElecBook Classics . says a weary traveller to himself. The house is crazy. all of them. and will not stand very long. and returns upon the drawer. he becomes from that moment a bankrupt.

with the accumulated interest and commission of all the former bills. The projectors. payable also two months after date. cost him something more than eight per cent in the year. either at the end of their projects. when either the price of the commission happened to rise. however. This practice was called raising money by circulation. but for several years together. draws a second bill upon B in London. and sometimes a great deal more. and for several years carried on without any other fund to support them besides what was raised at this enormous expense. whatever money A might raise by this expedient must necessarily have.The Wealth of Nations: Book 2 410 before the expiration of the second two months. and the commission was never less than one half per cent on each draft. were undertaken. Upon their awaking. Adam Smith ElecBook Classics . payable likewise two months after date. or when he was obliged to pay compound interest upon the interest and commission of former bills. no doubt. but afford. not only for several months. In a country where the ordinary profits of stock in the greater part of mercantile projects are supposed to run between six and ten per cent. Many vast and extensive projects. The interest was five per cent in the year. a good surplus profit to the projector. had in their golden dreams the most distinct vision of this great profit. besides. This practice has sometimes gone on. or when they were no longer able to carry them on. the bill always returning upon A in Edinburgh. This commission being repeated more than six times in the year. and before the expiration of the third two months. it must have been a very fortunate speculation of which the returns could not only repay the enormous expense at which the money was thus borrowed for carrying it on. B in London redraws upon A in Edinburgh another bill. however.

and sometimes upon some fourth or fifth person. It frequently happened that A in Edinburgh would enable B in London to pay the first bill of exchange by drawing. Towards the end of the late war. a few days before it became due. upon its being accepted by C. a few days before it became due. sometimes upon his first correspondent B. who.1 1 411 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. and being loaded with a commission of at least one-half per cent upon each repetition. discounted it with some banker in London. the exchange between Edinburgh and London was frequently three per cent against Edinburgh. must at that period have cost A at least fourteen per cent in the year. to whom he sent them by the post. and with its contents purchased bills upon London payable at sight to the order of B. At other times A would enable B to discharge the first bill of exchange by drawing. as soon as it was accepted. This third bill was made payable to the order of C. a second bill at three months’ date upon the same B in London. This bill. who. A sold in Edinburgh at par. together with the legal interest of Adam Smith ElecBook Classics . a few days before it became due. likewise at two months’ date. and A enabled C to discharge it by drawing. for example. Such operations being repeated at least six times in the year. and being loaded with a commission of at least one half per cent upon each repetition. C. This other bill was made payable to the order of B. being payable to his own order. a third bill. D or E. a second bill at two months date. not upon B. for example. discounted it in the same manner with some banker in London.The Wealth of Nations: Book 2 they very seldom. in London. had the good fortune to find it. I believe. but upon some third person. and those bills at sight must frequently have cost A that premium. This transaction therefore being repeated at least four times in the year.

which. Though the bills upon which this paper had been advanced were all of them repaid in their turn as soon as they became due. because.The Wealth of Nations: Book 2 412 The bills A in Edinburgh drew upon B in London. this method of raising money. in Edinburgh. an advantage which many of these adventurers could not always find it easy to procure. and the discounting of this other bill was essentially necessary towards the payment of that which was soon to be due. By saving. another bill was always drawn to somewhat a greater amount than the bill which was soon to be paid. Adam Smith ElecBook Classics . it was less expensive than that mentioned in the foregoing part of this note. however. was never replaced by any stream which really run into them. was. yet the value which had been really advanced upon the first bill. he as regularly discounted either with the Bank of England. the exchange between Edinburgh and London. five per cent. was never really returned to the banks which advanced it. and in London. had once been made to run out from the coffers of the banks. and the bills which B in London redrew upon A in Edinburgh. was altogether fictitious. when they were discounted at the Bank of England. in the paper of that bank. Whatever was advanced upon such circulating bills. in the same manner as that described in the text. advanced in the paper of the Scotch banks. he regularly discounted two months before they were due with some bank or banker in Edinburgh. must have cost A something more than eight per cent. The stream. before each bill became due. therefore. This payment. but then it required an established credit with more houses than one in London. by means of those circulating bills of exchange. or with some other bankers in London.

The Wealth of Nations: Book 2 413 The paper which was issued upon those circulating bills of exchange. When two people. over and above the value of the gold and silver which would have circulated in the country. not with any capital of their own. unemployed and in ready money for answering occasional demands. had there been no paper money. commerce. consequently. who are continually drawing and redrawing upon one another. which they were to find as they could. and to render it. perhaps. or manufactures. and when the same two persons do not constantly draw and redraw upon one another. and see clearly that they are trading. But this discovery is not altogether so easy when they discount their bills sometimes with one banker. and not merely to that part of it which. and sometimes with another. as difficult as Adam Smith ElecBook Classics . he must immediately discover what they are about. upon many occasions. It was a capital which those projectors had very artfully contrived to draw from those banks. but with the capital which he advances to them. The greater part of this paper was. but for some time. had there been no paper money. amounted. discount their bills always with the same banker. without their having the most distant suspicion that they had really advanced it. upon that account. therefore. but occasionally run the round of a great circle of projectors. what the circulation of the country could easily absorb and employ. to the whole fund destined for carrying on some vast and extensive project of agriculture. the projector would have been obliged to keep by him. It was over and above. immediately returned upon the banks in order to be exchanged for gold and silver. and upon that account. who find it for their interest to assist one another in this method of raising money. not only without their knowledge or deliberate consent.

therefore. however. improve. either to other bankers. no doubt. after a certain time. pusillanimity. It was the duty Adam Smith ElecBook Classics . or to other methods of raising money. which the principal bankers in London. For his own interest and safety. but enraged in the highest degree those projectors. and enrich the country.The Wealth of Nations: Book 2 414 possible to distinguish between a real and fictitious bill of exchange. the immediate occasion. and thus. to make about discounting. between a bill drawn by a real creditor upon a real debtor. accordingly. of which this prudent and necessary reserve of the banks was. they called the distress of the country. which did not give a sufficiently liberal aid to the spirited undertakings of those who exerted themselves in order to beautify. and when all of them had already gone too far. The difficulties. was altogether owing to the ignorance. endeavouring. in this very perilous situation. and this distress of the country. and upon that account making every day greater and greater difficulties about discounting. and bad conduct of the banks. get out of the circle. so that he himself might. in order to force those projectors by degrees to have recourse. he might sometimes make it too late. Their own distress. to withdraw gradually. as soon as possible. by ruining them. nor any real debtor but the projector who made use of the money. not only alarmed. he might find it necessary. he would necessarily make them all bankrupts. and a bill for which there was properly no real creditor but the bank which discounted it. to go on for some time. and might find that he had already discounted the bills of those projectors to so great an extent that. When a banker had even made this discovery. and which even the more prudent Scotch banks began. by refusing to discount any more. might perhaps ruin himself. which the Bank of England. they said.

To promote such improvements was even said to be the chief of the public-spirited purposes for which it was instituted. The banks. But those bank notes being. In the midst of this clamour and distress. well understood. It was the avowed principle of this bank to advance. but the execution was imprudent. Its coffers were never well filled. however. The design was generous. and in discounting bills of exchange. a new bank was established in Scotland for the express purpose of relieving the distress of the country. to lend for as long a time.The Wealth of Nations: Book 2 415 of the banks. This bank was more liberal than any other had ever been. such as the improvements of land. returned upon it. By its liberality in granting cash accounts. by refusing in this manner to give more credit to those to whom they had already given a great deal too much. perhaps. they seemed to think. the greater part of them. the whole capital which was to be employed in those improvements of which the returns are the most slow and distant. took the only method by which it was now possible to save either their own credit or the public credit of the country. but to have discounted all equally. over and above what the circulation of the country could easily absorb and employ. no doubt. issued great quantities of its bank notes. both in granting cash accounts. amounted to one hundred and sixty Adam Smith ElecBook Classics . it. With regard to the latter. upon any reasonable security. in order to be exchanged for gold and silver as fast as they were issued. and to as great an extent as they might wish to borrow. and in discounting bills of exchange. and the nature and causes of the distress which it meant to relieve were not. it seems to have made scarce any distinction between real and circulating bills. The capital which had been subscribed to this bank at two different subscriptions.

When it was obliged to stop. of which the number and value were continually increasing. thinking themselves obliged to treat their own proprietors with the same liberality with which they treated all other men. and. paying it.The Wealth of Nations: Book 2 416 thousand pounds. Its coffers having been filled so very ill. Such payments. and the directors. when it stopped. it is said to have been driven to this resource within a very few months after it began to do business. therefore. But had the coffers of this bank been filled ever so well. of which eighty per cent only was paid up. it had been constantly in the practice of drawing bills of exchange upon London. only put into one coffer what had the moment before been taken out of another. enabled to carry on business for more than two years. together with interest and commission. This sum ought to have been paid in at several different instalments. by another draft upon the same place. and by their subscription to the original bond or contract of the bank. In order to support the circulation of those notes which were continually returning upon it as fast they were issued. A great part of the proprietors. and when the bill became due. it had in the circulation about two hundred thousand pounds in bank notes. notwithstanding its too liberal conduct. By means of the great credit which so great a pledge necessarily gave it. opened a cash account with the bank. amounted to Adam Smith ElecBook Classics . when they paid in their first instalment. allowed many of them to borrow upon this cash account what they paid in upon all their subsequent instalments. were really pledged for answering all its engagements. The estates of the proprietors of this bank were worth several millions. 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. it was.

so that. 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. advanced to different people upwards of eight hundred thousand pounds at five per cent. in the way of interest and commission. for which it was continually drawing bills of exchange upon London. therefore. by drawing the whole banking business to themselves. This bank. for as such they considered them. But it thereby only enabled them to get so much deeper into debt. which were at that time carrying on in different parts of the country. instead of relieving. to supplant all the other Scotch banks. had. it was paying. They seem to have intended to support the spirited undertakings. particularly those established in Edinburgh. whose backwardness in discounting bills of exchange had given some offence. This bank. and at the same time. when ruin came. in little more than the course of two years. no doubt. The operations of this bank. gave some temporary relief to those projectors. in reality aggravated in the long-run the distress which those projectors had brought both upon themselves and upon Adam Smith ElecBook Classics . therefore. and was consequently losing more than three per cent upon more than three-fourths of all its dealings. be considered as clear gain. But upon upwards of six hundred thousand pounds. and enabled them to carry on their projects for about two years longer than they could otherwise have done. perhaps. this five per cent might.The Wealth of Nations: Book 2 417 upwards of six hundred thousand pounds. it fell so much the heavier both upon them and upon their creditors. without any other deduction besides the expense of management. Upon the two hundred thousand pounds which it circulated in bank notes. upwards of eight per cent.

proved a real and permanent relief to the other Scotch banks. I believe. and their country.The Wealth of Nations: Book 2 418 their country. it might easily replenish them by raising money upon the securities of those to whom it had advanced its paper. Experience. and which emptied themselves so very fast. which those other banks had become so backward in discounting. Those other banks. they must have suffered a loss by every Adam Smith ElecBook Classics . and effectually relieved from a very great distress those rivals whom it meant to supplant. where they were received with open arms. instead of making a profit. from which they could not otherwise have disengaged themselves without incurring a considerable loss. therefore. and that coffers which originally were so ill filled. In the long-run. had recourse to this new bank. the operations of this bank increased the real distress of the country which it meant to relieve. it was the opinion of some people that how fast soever its coffers might be emptied. The temporary relief. At the first setting out of this bank. however. and when they became due. could be replenished by no other expedient but the ruinous one of drawing bills upon London. and perhaps too even some degree of discredit. yet. therefore. But though they had been able by this method to raise money as fast as they wanted it. had the greater part of them been obliged to stop two years sooner than they actually did. It would have been much better for themselves. were enabled to get very easily out of that fatal circle. their creditors. paying them by other drafts upon the same place with accumulated interest and commission. soon convinced them that this method of raising money was by much too slow to answer their purpose. which this bank afforded to those projectors. All the dealers in circulating bills of exchange.

Those who wanted to borrow must have applied to this bank instead of applying to the private persons who had lent it their money. the greater part Adam Smith ElecBook Classics . But though this operation had proved not only practicable but profitable to the bank as a mercantile company. and of drawing the proper bond or assignment. though. and into which no stream was continually running. so that in the long-run they must have ruined themselves as a mercantile company. 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. returned upon them. as fast as they issued it. of negotiating with those people. the whole expense of this borrowing. but. They could still have made nothing by the interest of the paper. On the contrary. It could only have erected this bank into a sort of general loan office for the whole country. This operation could not augment in the smallest degree the quantity of money to be lent. perhaps. of employing agents to look out for people who had money to lend.The Wealth of Nations: Book 2 419 such operation. and have been so much clear loss upon the balance of their accounts. but who proposed to keep it always equally full by employing a number of people to go continually with buckets to a well at some miles distance in order to bring water to replenish it. must have fallen upon them. But a bank which lends money perhaps to five hundred different people. and for the payment of which they were themselves continually obliged to borrow money. on the contrary. in order to be exchanged for gold and silver. being over and above what the circulation of the country could absorb and employ. yet the country could have derived no benefit from it. must have suffered a very considerable loss by it. not so soon as by the more expensive practice of drawing and redrawing.

The sober and frugal debtors of private persons. which he seems to have imagined Adam Smith ElecBook Classics . would only have transferred a great part of it from prudent and profitable to imprudent and unprofitable undertakings. would have more of the solid and the profitable. the drawers and re-drawers of circulating bills of exchange. 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.The Wealth of Nations: Book 2 420 of whom its directors can know very little about. By establishing a bank of a particular kind. would never afford a fund capable of maintaining a quantity of labour equal to that which had been employed about them. 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. the greater part of them. would never repay the expense which they had really cost. The success of this operation. though they might have less of the grand and the marvellous. who would employ the money in extravagant undertakings. without increasing in the smallest degree the capital of the country. The debtors of such a bank as that whose conduct I have been giving some account of were likely. to be chimerical projectors. on the contrary. would be more likely to employ the money borrowed in sober undertakings which were proportioned to their capitals. they would probably never be able to complete. Law. which would repay with a large profit whatever had been laid out upon them. That the industry of Scotland languished for want of money to employ it was the opinion of the famous Mr. and which. therefore. and in whose sober and frugal conduct he thinks he has good reason to confide. if they should be completed. and which. which.

perhaps. did not think proper to adopt it. It at that time advanced to government the sum of one million two hundred thousand pounds. so clearly. The credit of the new government. the world ever saw. perhaps. when he first proposed his project.The Wealth of Nations: Book 2 421 might issue paper to the amount of the whole value of all the lands in the country. with some variations. the most extravagant project both of banking and stockjobbing that. by Mr. in pursuance of an act of Parliament. or for £96. Law himself. at the rate of eight per cent. in a discourse concerning money and trade. du Tot. dated the 27th of July. It was afterwards adopted. and £4000 a year for the expense of management. The different operations of this scheme are explained so fully. at that time Regent of France. which he published in Scotland when he first proposed his project.000 a year interest. established by the Revolution. The idea of the possibility of multiplying paper to almost any extent was the real foundation of what is called the Mississippi scheme. The principles upon which it was founded are explained by Mr. and with so much order and distinctness. by a charter under the Great Seal. by the Duke of Orleans. 1694. du Verney. for an annuity of one hundred thousand pounds. The splendid but visionary ideas which are set forth in that and some other works upon the same principles still continue to make an impression upon many people. and have. he proposed to remedy this want of money. contributed to that excess of banking which has of late been complained of both in Scotland and in other places. The Bank of England is the greatest bank of circulation in Europe. in part. It was incorporated. The Parliament of Scotland. that I shall not give any account of them. we Adam Smith ElecBook Classics . in his Examination of the Political Reflections upon Commerce and Finances of Mr.

1 During the great recoinage of the silver. tallies had been at forty. 1 James Postlethwaite’s History of the Public Revenue. the bank had thought proper to discontinue the payment of its notes. In 1708. and bank notes at twenty per cent.375. and sixty per cent discount.559. This engraftment is said to have been for the support of public credit. making in all the sum of £1. 11d.995 14s.343.201. since it could borrow at six per cent interest the common legal and market rate of those times.027 17s.204 1s. and was at the same time allowed to take in subscriptions for doubling its capital.448 12s. In pursuance of the 7th Anne. when it was obliged to borrow at so high an interest. the bank capital amounted to £5. the credit of government was as good as that of private persons. and fifty. must have been very low. which was going on at this time. amounted at this time to £2.171 10s. 301.000 which it had advanced upon its original annuity of £96.. therefore. p.001. and by another of ten per cent in 1710. By a call of fifteen per cent in 1709. 10 1/2d. 8d. In 1696.000. In 1697 the bank was allowed to enlarge its capital stock by an engraftment of £1. and it had advanced to government the sum of £3. c.775. therefore. the capital of the bank amounted to £4.171 10s.600. In consequence of those two calls.402. which necessarily occasioned their discredit. In 1708. at six per cent interest.027 17s.000 interest and £4000 for expense of management. the bank advanced and paid into the exchequer the sum of £400. 101/2d. 9d. the bank cancelled exchequer bills to the amount of £1.The Wealth of Nations: Book 2 422 may believe. ElecBook Classics Adam Smith . 7. £501. therefore. there was paid in and made stock £656. Its whole capital stock therefore. In pursuance of the same act.

This sum. received for the money it had advanced to the public. began first to exceed its capital stock. over and above its divided one. that the bank began to have an undivided capital. therefore.800 and its divided capital had been raised by different calls and subscriptions to £10.000.400. 10d.000.The Wealth of Nations: Book 2 423 In pursuance of the 3rd George I.. its capital stock was increased by £3. at different times. the bank had advanced to the public £9. the bank had. therefore. upon different occasions. 25. It was upon this occasion that the sum which the bank had advanced to the public. or the sum for which it paid a dividend to the proprietors of bank stock. For some years past the bank dividend has been at five and a half per cent. At this time. It has continued to have an undivided capital of the same kind ever since. the bank purchased of the South Sea Company stock to the amount of 14.000 without interest or repayment.686.027 17s. therefore. and for which it received interest. It had at this time. c. and its capital stock amounted only to £8.000. in other words. and in 1722. c. the bank delivered up two millions of exchequer bills to be cancelled. The state of those two sums has continued to be the same ever since. advanced to government 17s.000. In pursuance of the 8th George 1. The dividend of the bank has varied according to the variations in the rate of the interest which it has. or. 8. This rate of interest has gradually been reduced from eight to three per cent. 21. c. did not increase either of those two other sums. In pursuance of the 4th of George III.780.959.375. the bank agreed to pay to government for the renewal of its charter £110. 8d. Adam Smith ElecBook Classics .995 14s. advanced to the public £11. 101/2d. In 1746. as well as according to other circumstances. in consequence of the subscriptions which it had taken in for enabling it to make this purchase.

All that it has advanced to the public must be lost before its creditors can sustain any loss. That part of his capital which a dealer is obliged to keep by him unemployed. It likewise discounts merchants’ bills. a great part of it in bullion. but of Hamburg and Holland. pretend to warrant either the greatness of the sum. and in ready money. It acts. produces nothing either to him or to his country. upon several different occasions.600. not only of England. which are frequently not paid up till some years thereafter. and it advances to government the annual amount of the land and malt taxes. supported the credit of the principal houses. It is not by augmenting the capital of the country. but as a great engine of state. Upon one occasion. or the shortness of the time. its duty to the public may sometimes have obliged it. not only as an ordinary bank. however. It receives and pays the greater part of the annuities which are due to the creditors of the public. it is said to have advanced for this purpose. without any fault of its directors. so long as it remains in this situation. I do not.000. about £1. is so much dead stock. In those different operations. for answering occasional demands. in 1763.The Wealth of Nations: Book 2 424 The stability of the Bank of England is equal to that of the British government. that the most judicious operations of banking can increase the industry of the country. to overstock the circulation with paper money. The judicious operations of Adam Smith ElecBook Classics . or can consist of more than six members. but by rendering a greater part of that capital active and productive than would otherwise be so. in one week. this great company has been reduced to the necessity of paying in sixpences. and has. No other banking company in England can be established by act of Parliament. it circulates exchequer bills. Upon other occasions. which.

suspended upon the Daedalian wings of paper money as when they travel about upon the solid ground of gold and silver. by substituting paper in the room of a great part of this gold and silver. cannot be altogether so secure when they are thus. in the same manner as the ready money of the dealer. though they may be somewhat augmented. a sort of waggon-way through the air. into stock which produces something both to himself and to his country. all dead stock. and into provisions and subsistence to work for. into tools to work with. they are Adam Smith ElecBook Classics .The Wealth of Nations: Book 2 425 banking enable him to convert this dead stock into active and productive stock. which produces nothing to the country. The judicious operations of banking. is. and thereby to increase very considerably the annual produce of its land and labour. The gold and silver money which circulates in any country. It is a very valuable part of the capital of the country. The judicious operations of banking. which. The gold and silver money which circulates in any country may very properly be compared to a highway. and by means of which the produce of its land and labour is annually circulated and distributed to the proper consumers. as it were. it must be acknowledged. as it were. a great part of its highways into good pastures and corn-fields. by providing. into stock which produces something to the country. however. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money. while it circulates and carries to market all the grass and corn of the country. produces itself not a single pile of either. if I may be allowed so violent a metaphor. into materials to work upon. The commerce and industry of the country. enables the country to convert a great part of this dead stock into active and productive stock. enable the country to convert.

The usual instrument of commerce having lost its value. would occasion a much greater confusion in a country where the whole circulation was carried on by paper. The circulation of every country may be considered as divided into two different branches: the circulation of the dealers with one another. Though the same pieces of money. whether paper or metal. for example. or to furnish his magazines. A prince. may be employed sometimes in the one circulation and sometimes in the other. upon this account.The Wealth of Nations: Book 2 426 liable to several others. in which the enemy got possession of the capital. 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. anxious to maintain his dominions at all times in the state in which he can most easily defend them. yet as both are constantly going on at the same time. ought. but even against that multiplication of it which enables them to fill the greater part of the circulation of the country with it. and consequently of that treasure which supported the credit of the paper money. and the circulation between the dealers and the consumers. the prince would not have wherewithal either to pay his troops. than in one where the greater part of it was carried on by gold and silver. no exchanges could be made but either by barter or upon credit. to guard. each requires a certain stock of money of one kind or another to carry it on. from which no prudence or skill of those conductors can guard them. The value of the goods circulated between the different Adam Smith ElecBook Classics . All taxes having been usually paid in paper money. not only against that excessive multiplication of paper money which ruins the very banks which issue it. An unsuccessful war.

or to extend itself likewise to a great part of that between the dealers and the consumers. as it is generally carried on by retail. A shilling changes masters more frequently than a guinea. by a more rapid circulation. they can generally be transacted with a much smaller quantity of money. as in London. never can exceed the value of those circulated between the dealers and the consumers. Though the annual purchases of all the consumers. Where no bank notes are circulated under ten pounds value. That between the dealers and the consumers. being often sufficient. or even a halfpenny. serving as the instrument of many more purchases of the one kind than of the other. so that it often returns into the hands of a dealer before the consumer has spent the fortieth part of the money. But small sums circulate much faster than large ones. and a halfpenny more frequently than a shilling. therefore. When a ten pound bank note comes into the hands of a consumer. paper money extends itself to a considerable part of the circulation between dealers and Adam Smith ElecBook Classics . the same pieces. a shilling. whatever is bought by the dealers.The Wealth of Nations: Book 2 427 dealers. Where bank notes are issued for so small sums as twenty shillings. as it is carried on by wholesale. The circulation between the dealers. paper money confines itself very much to the circulation between the dealers. as in Scotland. frequently requires but very small ones. being ultimately destined to be sold to the consumers. are at least equal in value to those of all the dealers. he is generally obliged to change it at the first shop where he has occasion to purchase five shillings’ worth of goods. Paper money may be so regulated as either to confine itself very much to the circulation between the different dealers. on the contrary. requires generally a pretty large sum for every particular transaction.

It were better. and is as seldom spent all at once. there is always plenty of gold and silver. and sometimes even a very great calamity to many poor people who had received their notes in payment. Where paper money. Before the Act of Parliament. Where the issuing of bank notes for such very small sums is allowed and commonly practised. In the currencies of North America. In some paper currencies of Yorkshire. confine itself. it filled a still greater part of that circulation. in every part of the kingdom. perhaps. where no bank notes are issued under ten pounds’ value. which put a stop to the circulation of ten and five shilling notes. is as much considered. though it will purchase.The Wealth of Nations: Book 2 428 consumers. it was issued even for so small a sum as a sixpence. Paper money would then. five pounds being. as ten pounds are amidst the profuse expense of London. a sum which. paper was commonly issued for so small a sum as a shilling. to the circulation between the different dealers. Where it extends Adam Smith ElecBook Classics . probably. as much as it does at present in London. that no bank notes were issued in any part of the kingdom for a smaller sum than five pounds. would be rejected by everybody. A person whose promissory note for five pounds. in most parts of the kingdom. little more than half the quantity of goods. is pretty much confined to the circulation between dealers and dealers. will get it to be received without scruple when it is issued for so small a sum as a sixpence. as at London. it is to be observed. But the frequent bankruptcies to which such beggarly bankers must be liable may occasion a very considerable inconveniency. and filled almost the whole of that circulation. or even for twenty shillings. many mean people are both enabled and encouraged to become bankers.

and still more in North America. He has no occasion to keep any by him for the circulation between himself and the consumers. partly by discounting real bills of exchange. likewise. 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. and the suppression of twenty shilling notes would probably relieve it still more. as in Scotland.The Wealth of Nations: Book 2 429 itself to a considerable part of the circulation between dealers and consumers. and partly by lending upon cash accounts. it banishes gold and silver almost entirely from the country. The ready money which a dealer is obliged to keep by him. yet banks and bankers might still be able to give nearly the same assistance to the industry and commerce of the country as they had done when paper money filled almost the whole circulation. yet. Those metals are said to have become more abundant in America since the suppression of some of their paper currencies. therefore. is destined altogether for the circulation between himself and other dealers of whom he buys goods. They are said. and who bring ready money to him. instead of taking any from him. Though no paper money. who are his customers. unemployed and in ready money. was allowed to be issued but for such sums as would confine it pretty much to the circulation between dealers and dealers. almost all the ordinary transactions of its interior commerce being thus carried on by paper. for answering occasional demands. for answering occasional Adam Smith ElecBook Classics . The suppression of ten and five shilling bank notes somewhat relieved the scarcity of gold and silver in Scotland. Though paper money should be pretty much confined to the circulation between dealers and dealers. to have been more abundant before the institution of those currencies.

in every respect. issued by people of undoubted credit. The increase of paper money. The obligation of building party walls. when all his neighbours are willing to accept of them. it has been said. or to restrain a banker from issuing such notes. from receiving in payment the promissory notes of a banker. equal in value to gold and silver money. restrained by the laws of all governments. by augmenting the quantity. with propriety. and ought to be. are. it may be said. They might still be able to give the utmost assistance which banks and bankers can. is. when they themselves are willing to receive them.The Wealth of Nations: Book 2 430 demands. necessarily augments the money price of commodities. payable upon demand without any condition. but to support. and in fact always readily paid as soon as presented. be considered as in some respects a violation of natural liberty. in order to prevent the communication of fire. which is taken from the Adam Smith ElecBook Classics . But as the quantity of gold and silver. since gold and silver money can at any time be had for it. and consequently diminishing the value of the whole currency. But those exertions of the natural liberty of a few individuals. of the most free as well as of the most despotical. Such regulations may. To restrain private people. Whatever is either bought or sold for such paper must necessarily be bought or sold as cheap as it could have been for gold and silver. A paper money consisting in bank notes. give to traders of every kind. which might endanger the security of the whole society. no doubt. for any sum whether great or small. is a manifest violation of that natural liberty which it is the proper business of law not to infringe. is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed.

from the circulation of ten and five shilling bank notes. paper money does not necessarily increase the quantity of the whole currency. fully as cheap in England as in France. no doubt. Such a paper money would. or upon a condition which the holder of the notes might not always have it in his power to fulfil. there was a very sensible rise in the price of provisions. Some years ago the different banking companies of Scotland Adam Smith ElecBook Classics . probably. though there is a great deal of paper money in England. indeed. fall more or less below the value of gold and silver. according as the difficulty or uncertainty of obtaining immediate payment was supposed to be greater or less. when Mr. upon most occasions. In 1751 and in 1752. with a paper money consisting in promissory notes. there was then more paper money in the country than at present. is always equal to the quantity of paper which is added to it. or of which the payment was not exigible till after a certain number of years. owing. of which the immediate payment depended. and soon after the great multiplication of paper money in Scotland. in any respect. Hume published his Political Discourses. From the beginning of the last century to the present time. and not to the multiplication of paper money.The Wealth of Nations: Book 2 431 currency. or according to the greater or less distance of time at which payment was exigible. though. Corn is. and scarce any in France. 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. It would be otherwise. either upon the good will of those who issued them. and which in the meantime bore no interest. provisions never were cheaper in Scotland than in 1759. to the badness of the seasons.

which this uncertainty of payment necessarily degraded below the value of gold and silver money. what they called an Optional Clause. six months after such presentment. The promissory notes of those banking companies constituted at that time the far greater part of the currency of Scotland. while the exchange between London and Carlisle was at par. and sometimes threatened those who demanded gold and silver in exchange for a considerable number of their notes that they Would take advantage of it. 1763. together with the legal interest for the said six months. and thereby restored the exchange between England and Scotland to its natural rate. The same Act of Parliament which suppressed ten and five shilling bank notes suppressed likewise this optional clause. or to what the course of trade and remittances might happen to make it. and 1764). In the paper currencies of Yorkshire.The Wealth of Nations: Book 2 432 were in the practice of inserting into their bank notes. by which they promised payment to the bearer. that between London and Dumfries would sometimes be four per cent against Dumfries. whereas at Dumfries they were paid in Scotch bank notes. During the continuance of this abuse (which prevailed chiefly in 1762. though this town is not thirty miles distant from Carlisle. The directors of some of those banks sometimes took advantage of this optional clause. and the uncertainty of getting those bank notes exchanged for gold and silver coin had thus degraded them four per cent below the value of that coin. in the option of the directors. the payment of so small a sum as a sixpence sometimes depended upon the condition that Adam Smith ElecBook Classics . either as soon as the note should be presented. unless such demanders would content themselves with a part of what they demanded. But at Carlisle. or. bills were paid in gold and silver.

a legal tender of payment for the full value for which it was issued. all promissory notes. pretended. indeed. It bears the evident marks of having originally been. but in government paper. to render their paper of equal value with 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. therefore. in the same manner as in Scotland. and though the colony governments paid no interest to the holders of this paper. of which the payment was not exigible till several years after it was issued. they declared it to be. in a country where interest at six per cent. is worth little more than forty pounds ready money. payable to the bearer. perhaps. in 1722. not in bank notes payable to the bearer on demand. what the honest and downright Doctor Douglas assures us it was. a hundred pounds payable fifteen years hence. The government of Pennsylvania.The Wealth of Nations: Book 2 433 the holder of the note should bring the change of a guinea to the person who issued it. to accept of this as full payment for a debt of a hundred pounds actually paid down in ready money was an act of such violent injustice as has scarce. But allowing the colony security to be perfectly good. and when Adam Smith ElecBook Classics . An Act of Parliament accordingly declared all such clauses unlawful. been attempted by the government of any other country which pretended to be free. for example. upon their first emission of paper money. and which must have degraded this currency below the value of gold and silver money. The paper currencies of North America consisted. and suppressed. a condition which the holders of such notes might frequently find it very difficult to fulfil. To oblige a creditor. and in fact rendered it. a scheme of fraudulent debtors to cheat their creditors. under twenty shillings value.

to a hundred and thirty pounds. to accept of a shilling as equivalent to a guinea in the price of them. by act of assembly. even when that currency was gold and Adam Smith ElecBook Classics . this difference in the value arising from the difference in the quantity of paper emitted in the different colonies. Its paper currency. and who is at liberty to sell or not to sell as he pleases. A pound colony currency. and afterwards for six and eightpence. so unjustly complained of in the colonies. a regulation equally tyrannical. therefore. No law. in some of the colonies. it appeared by the course of exchange with Great Britain. therefore. But no positive law can oblige a person who sells goods. and in others to so great a sum as eleven hundred pounds currency. which declared that no paper currency to be emitted there in time coming should be a legal tender of payment. because it may direct the courts of justice to discharge the debtor who has made that tender. Pennsylvania was always more moderate in its emissions of paper money than any other of our colonies. could be more equitable than the Act of Parliament. Before that emission. ordered five shillings sterling to pass in the colony for six and threepence. A positive law may render a shilling a legal tender for guinea.The Wealth of Nations: Book 2 434 they sold them for gold and silver. and in the distance and probability of the term of its final discharge and redemption. is said never to have sunk below the value of the gold and silver which was current in the colony before the first emission of its paper money. accordingly. and had. Notwithstanding any regulation of this kind. that a hundred pounds sterling was occasionally considered as equivalent. the colony had raised the denomination of its coin. but much less effectual than that which it was meant to support.

A prince who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind might thereby give a certain value to this paper money. for the full value for which it had been issued. and when that currency was turned into paper it was seldom much more than thirty per cent below that value. It was found. even though the term of its final discharge and redemption should depend altogether upon the will of the prince. that the price of all goods from the mother country rose exactly in proportion as they raised the denomination of their coin. The pretence for raising the denomination of the coin. Some people account in this manner for what Adam Smith ElecBook Classics . however. was to prevent the exportation of gold and silver. 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. It was in all the colonies very much above what could be employed in this manner. or sell for somewhat more in the market than the quantity of gold or silver currency for which it was issued. the demand for it might be such as to make it even bear a premium. it necessarily derived from this use some additional value over and above what it would have had from the real or supposed distance of the term of its final discharge and redemption. This additional value was greater or less. was more than thirty per cent below the value of a pound sterling. 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. 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. The paper of each colony being received in the payment of the provincial taxes.The Wealth of Nations: Book 2 435 silver.

and the directors of the bank. that bank money sells for a premium. by a transfer in the books of the bank. as they pretend. however. though this bank money. or for the superiority of bank money over current money. for less than a certain sum. or bears an agio of four or five per cent above the same nominal sum of the gold and silver currency of the country. The greater part of foreign bills of exchange must be paid in bank money. or notes payable to the bearer. is in a great measure chimerical. cannot be taken out of the bank at the will of the owner. that is. it will appear hereafter. If bankers are restrained from issuing any circulating bank notes. they allege. It is upon this account.The Wealth of Nations: Book 2 436 is called the Agio of the bank of Amsterdam. are careful to keep the whole quantity of bank money always below what this use occasions a demand for. but upon the richness or poverty of the mines. This account of the bank of Amsterdam. which happen at any particular time to supply the great market of the commercial world with those metals. they say. or occasion equal quantities of them to exchange for a smaller quantity of goods of any other kind. which may be current in any particular country. 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. A paper currency which falls below the value of gold and silver coin does not thereby sink the value of those metals. The proportion between the value of gold and silver and that of goods of any other kind depends in all cases not upon the nature or quantity of any particular paper money. and if they are subjected to the obligation of an immediate and Adam Smith ElecBook Classics . and that which is necessary in order to bring thither a certain quantity of any other sort of goods.

too. By dividing the whole circulation into a greater number of parts. with safety to the public. be advantageous to the public. in the course of things. In general. instead of diminishing. be rendered in all other respects perfectly free. an event by which many people have been much alarmed. the freer and more general the competition. lest their rivals should carry them away. if any branch of trade. The late multiplication of banking companies in both parts of the United Kingdom. and reduces their circulating notes to a smaller number. becomes of less consequence to the public. their trade may. it will always be the more so. by not extending their currency beyond its due proportion to their cash. Adam Smith ElecBook Classics . must sometimes happen. increases the security of the public. It obliges all of them to be more circumspect in their conduct.The Wealth of Nations: Book 2 437 unconditional payment of such bank notes as soon as presented. It restrains the circulation of each particular company within a narrower circle. the failure of any one company. to guard themselves against those malicious runs which the rivalship of so many competitors is always ready to bring upon them. obliges all bankers to be more liberal in their dealings with their customers. and. This free competition. an accident which. or any division of labour.

costs him no expense. on the contrary. But the maintenance of a menial servant never is restored. Though the manufacturer has his wages advanced to him by his master. adds to the value of nothing. he. which lasts for some time at least after that labour is past. and deserves its reward as well as that of the former.The Wealth of Nations: Book 2 438 Chapter III Of the Accumulation of Capital. In the last chapter of the fourth book I shall endeavour to show that their sense is an improper one. unproductive1 labour. the value of those wages being generally restored. generally. A man grows rich by employing a multitude of manufacturers: he grows poor by maintaining a multitude of menial servants. the latter. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity. in the improved value of the subject upon which his labour is bestowed. The former. that of his own maintenance. together with a profit. Adam Smith ElecBook Classics . Thus the labour of a manufacturer adds. has its value. It is. as T 1 Some French authors of great learning and ingenuity have used those words in a different sense. as it produces a value. however. or of Productive and Unproductive Labour here is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. may be called productive. The labour of a menial servant. to the value of the materials which he works upon. in reality. and of his master’s profit. The labour of the latter.

and defence for the year to come. In the same class must be ranked. or what is the same thing. and are maintained by a part of the annual produce of the industry of other people. musicians. security. upon some other occasion. with all the officers both of justice and war who serve under him. like that of menial servants. buffoons. players. The labour of the meanest of these has a certain value. The sovereign. The protection. unproductive of any value. lawyers. produces nothing for which an equal quantity of service can afterwards be procured. His services generally perish in the very instant of their performance. and for which an equal quantity of labour could afterwards be procured. or vendible commodity. etc. opera-singers. the price of that subject. That subject. can afterwards. for example. if necessary. security. opera-dancers. men of letters of all kinds. how useful. and seldom leave any trace or value behind them for which an equal quantity of service could afterwards be procured. and defence of the commonwealth. the effect of their labour this year will not purchase its protection. are unproductive labourers. and does not fix or realize itself in any permanent subject. and some of the most frivolous professions: churchmen. put into motion a quantity of labour equal to that which had originally produced it. how honourable. the whole army and navy. a certain quantity of labour stocked and stored up to be employed.The Wealth of Nations: Book 2 439 it were. does not fix or realize itself in any particular subject or vendible commodity. or how necessary soever. if necessary. physicians. on the contrary. The labour of the menial servant. The labour of some of the most respectable orders in the society is. Their service. some both of the gravest and most important. regulated Adam Smith ElecBook Classics . which endures after that labour is past. They are the servants of the public.

This produce. and for procuring a revenue to them. being the effect of productive labour. if we except the spontaneous productions of the earth. and the next year’s produce will be greater or smaller accordingly. which had been withdrawn from a capital. as the rent of his land. or for renewing the provisions. Like the declamation of the actor. are all equally maintained by the annual produce of the land and labour of the country. or the tune of the musician. can never be infinite. the work of all of them perishes in the very instant of its production. of the produce of land.The Wealth of Nations: Book 2 440 by the very same principles which regulate that of every other sort of labour. no doubt. the more in the one case and the less in the other will remain for the productive. is. one part replaces the capital of the farmer. and those who do not labour at all. the other pays his Adam Smith ElecBook Classics . it naturally divides itself into two parts. but must have certain limits. and finished work. how great soever. ultimately destined for supplying the consumption of its inhabitants. therefore. According. materials. One of them. the other for constituting a revenue either to the owner of this capital. or to some other person. yet when it first comes either from the ground. in the first place. Both productive and unproductive labourers. and frequently the largest. as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands. or from the hands of the productive labourers. and that of the noblest and most useful. the whole annual produce. as the profit of his stock. produces nothing which could afterwards purchase or procure an equal quantity of labour. destined for replacing a capital. Though the whole annual produce of the land and labour of every country is. the harangue of the orator. Thus.

by that part which. first. in maintaining productive bands only. or. Whatever part of his stock a man employs as a capital. by that part of the annual produce which is originally destined for constituting a revenue to some particular persons. He employs it. in the same manner. either. either as the rent of land or as the profits of stock. may maintain indifferently either productive or unproductive hands. are all maintained by revenue. That part of the annual produce of the land and labour of any country which replaces a capital never is immediately employed to maintain any but productive hands. and placed in his stock reserved for immediate consumption. and thus constitutes a revenue both to the owner of this capital. and after having served in the function of a capital to him. Whenever he employs any part of it in maintaining unproductive hands of any kind. and thus constitutes a revenue to the owner of this capital. and that always the largest. That which is immediately destined for constituting a revenue. It pays the wages of productive labour only. one part. and to some other person. therefore.The Wealth of Nations: Book 2 441 profit and the rent of the landlord. as the rent of his land. either as profit or as rent. the other pays his profit. as the profits of his stock. though originally destined for replacing a capital and for maintaining productive labourers only. withdrawn from his capital. it constitutes a revenue to them. Of the produce of a great manufactory. secondly. that part is. Unproductive labourers. he always expects is to be replaced to him with a profit. from that moment. and those who do not labour at all. replaces the capital of the undertaker of the work. yet when it comes into their hands whatever part of it is over and above their necessary subsistence may be Adam Smith ElecBook Classics .

but even the common workman. or all that it could put into motion in the way in which it was employed. They seem. therefore. yet by his expense. the smallness of their contribution. in some measure. however. he feeds commonly the very same sort as the great lord. but equally unproductive. the principal sources from which unproductive hands derive their subsistence. They generally have some. more honourable and useful indeed. It is his spare revenue only. These are the two sorts of revenue of which the owners have generally most to spare.The Wealth of Nations: Book 2 442 employed in maintaining indifferently either productive or unproductive hands. They might both maintain indifferently either productive or unproductive hands. however. No part of the annual produce. to have some predilection for the latter. too. by the employment of his revenue. is ever directed towards maintaining unproductive hands till after it has put into motion its full complement of productive labour. The rich merchant. and so contribute his share towards maintaining one set of unproductive labourers. Adam Smith ElecBook Classics . not only the great landlord or the rich merchant. or he may sometimes go to a play or a puppet-show. Thus. may maintain a menial servant. The rent of land and the profits of stock are everywhere. and thus help to maintain another set. The workman must have earned his wages by work done before he can employ any part of them in this manner. if his wages are considerable. however. which had been originally destined to replace a capital. That part. or he may pay some taxes. is generally but a small one. and in the payment of taxes the greatness of their number may compensate. The expense of a great lord feeds generally more idle than industrious people. of which productive labourers have seldom a great deal. though with his capital he maintains industrious people only. that is.

and was by him advanced to the occupiers of the land. Thus. depends very much in every country upon the proportion between that part of the annual produce. either as rent for his land. Their lord could at all times command their labour in peace and their service in war. at present. Though they lived at a distance from his house. All the rest of the produce properly belonged to him too. whose persons and effects were equally his property. and which might. is destined for replacing a capital. This proportion is very different in rich from what it is in poor countries. Those who were not bondmen were tenants at will. between the productive and unproductive hands. belonged to the landlord. during the prevalency of the feudal government. a very large. be considered as a part of that spontaneous produce. therefore. frequently the largest portion of the produce of the land is destined for replacing the capital of the rich and independent farmer. a very small portion of the produce was sufficient to replace the capital employed in cultivation. in the opulent countries of Europe. It generally. But anciently. they were equally dependent upon him as his retainers who Adam Smith ElecBook Classics . either as rent or as profit. and though the rent which they paid was often nominally little more than a quit-rent. which. The occupiers of land were generally bondmen. and that which is destined for constituting a revenue.The Wealth of Nations: Book 2 443 The proportion. it really amounted to the whole produce of the land. therefore. It consisted commonly in a few wretched cattle. as soon as it comes either from the ground or from the hands of the productive labourers. too. maintained altogether by the spontaneous produce of uncultivated land. the other for paying his profits and the rent of the landlord. or as profit upon this paltry capital.

In the present state of Europe.The Wealth of Nations: Book 2 444 lived in it. it seems. three. is not only much greater in rich than in poor countries. In the opulent countries of Europe. has been tripled and quadrupled since those ancient times. Though that part of the revenue of the inhabitants which is derived from the profits of stock is always much greater in rich than in poor countries. required but very small capitals. great capitals are at present employed in trade and manufactures. in all the improved parts of the country. three or four times greater than the whole had been before. though it increases in proportion to the extent. That part of the annual produce. and the few homely and coarse manufactures that were carried on. and this third or fourth part of the annual produce is. In the ancient state. in the improved parts of Europe. These. is destined for replacing a capital. the share of the landlord seldom exceeds a third. sometimes not a fourth part of the whole produce of the land. but bears a much greater Adam Smith ElecBook Classics . however. In the progress of improvement. must have yielded very large profits. rent. and their profits must have been sufficient to afford this great interest. diminishes in proportion to the produce of the land. the little trade that was stirring. At present the rate of interest. The rent of land. therefore. is nowhere higher than six per cent. and in some of the most improved it is so low as four. as soon as it comes either from the ground or from the hands of the productive labourers. The rate of interest was nowhere less than ten per cent. which. it is because the stock is much greater: in proportion to the stock the profits are generally much less. But the whole produce of the land undoubtedly belongs to him who can dispose of the labour and service of all those whom it maintains. however. and two per cent.

In those towns which are principally supported by the constant or occasional residence of a court. but bear a much greater proportion to those which. and poor. If you except Rouen and Bordeaux. Compiègne. says the proverb. and in which the inferior ranks of people are chiefly maintained by the spending of revenue. and of those who come to plead before Adam Smith ElecBook Classics . as in many English. It is better. being elderly maintained by the expense of the members of the courts of justice.The Wealth of Nations: Book 2 445 proportion to that which is immediately destined for constituting a revenue either as rent or as profit. to play for nothing than to work for nothing. and Fontainebleu. dissolute. sober. because in the present times 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 than they were two or three centuries ago. The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. as at Rome. they are in general industrious. In mercantile and manufacturing towns. and the inferior ranks of people. they are in general idle. though they may be employed to maintain either productive or unproductive hands. Our ancestors were idle for want of a sufficient encouragement to industry. The funds destined for the maintenance of productive labour are not only much greater in the former than in the latter. there is little trade or industry in any of the parliament towns of France. Versailles. We are more industrious than our forefathers. and in most Dutch towns. and thriving. where the inferior ranks of people are chiefly maintained by the employment of capital. have generally a predilection for the latter.

Of those three cities. perhaps. are. and naturally fits them to be the entrepôts of a great part of the goods destined for the consumption of distant places. but Paris itself is the principal market of all the manufactures established at Paris.The Wealth of Nations: Book 2 446 them. very little more capital seems to be employed than what is necessary for supplying their own consumption. for the consumption of the great city of Paris. and its own consumption is the principal object of all the trade which it carries on. and which seems to produce the wine fittest for exportation. London. little more than the smallest capital which can be employed in them. and of the rivers which run into it. The same thing may be said of Paris. to Adam Smith ElecBook Classics . The situation of all the three is extremely advantageous. or from the maritime provinces of France. or as cities which trade not only for their own consumption. and Vienna. or best suited to the taste of foreign nations. are in general idle and poor. Rouen is necessarily the entrepôt of almost all the goods which are brought either from foreign countries. Madrid. but for that of other cities and countries. In the other parliament towns of France. Paris is by far the most industrious. that is. The great trade of Rouen and Bordeaux seems to be altogether the effect of their situation. the only three cities in Europe which are both the constant residence of a court. In a city where a great revenue is spent. and Copenhagen. Such advantageous situations necessarily attract a great capital by the great employment which they afford it. and the employment of this capital is the cause of the industry of those two cities. one of the richest wine countries in the world. Lisbon. and can at the same time be considered as trading cities. Bordeaux is in the same manner the entrepôt of the wines which grow upon the banks of the Garonne.

It still continues. Every increase or diminution of capital. When the Scotch Parliament was no longer to be assembled in it. A considerable revenue. seems everywhere to regulate the proportion between industry and idleness. etc. it has sometimes been observed. idleness. There was little trade or industry in Edinburgh before the union. it became a city of some trade and industry. still continues to be spent in it. In trade and industry it is much inferior to Glasgow. therefore. the number of productive hands. however. to be the residence of the principal courts of justice in Scotland. industry prevails: wherever revenue. and renders it less advantageous to employ a capital there than in other places. The proportion between capital and revenue. it is probable. when it ceased to be the necessary residence of the principal nobility and gentry of Scotland. of which the inhabitants are chiefly maintained by the employment of capital. therefore. The inhabitants of a large village. naturally tends to increase or diminish the real quantity of industry. and consequently the exchangeable value of the annual produce of the Adam Smith ElecBook Classics .The Wealth of Nations: Book 2 447 employ with advantage a capital for any other purpose than for supplying the consumption of that city 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. of the Boards of Customs and Excise. after having made considerable progress in manufactures. have become idle and poor in consequence of a great lord having taken up his residence in their neighbourhood. therefore. The idleness of the greater part of the people who are maintained by the expense of revenue corrupts. Wherever capital predominates. the industry of those who ought to be maintained by the employment of capital.

or enables some other person to do so. Industry. the capital would never be the greater. so the capital of a society. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains. that is. but it is consumed by a different set of people. Whatever a person saves from his revenue he adds to his capital. and nearly in the same time too. by increasing the fund which is destined for the maintenance of productive hands. is the immediate cause of the increase of capital. to increase the exchangeable value of the annual produce of the land and labour of the country. by lending it to him for an interest. if parsimony did not save and store up. Capitals are increased by parsimony. indeed. It puts into motion an additional quantity of industry.The Wealth of Nations: Book 2 448 land and labour of the country. What is annually saved is as regularly consumed as what is annually spent. the real wealth and revenue of all its inhabitants. tends to increase the number of those hands whose labour adds to the value of the subject upon which it is bestowed. It tends. therefore. can be increased only in the same manner. which gives an additional value to the annual produce. and not industry. Parsimony. and diminished by prodigality and misconduct. But whatever industry might acquire. That portion of his revenue which a rich man annually spends is in most cases consumed by Adam Smith ElecBook Classics . which is the same with that of all the individuals who compose it. for a share of the profits. provides the subject which parsimony accumulates. Parsimony. and either employs it himself in maintaining an additional number of productive hands.

clothing. His revenue. and nearly in the same time too. clothing. That portion which he annually saves. we shall suppose. manufacturers. The prodigal perverts it in this manner. which the whole could have purchased. is paid him in money. but by a different set of people. but. indeed. and lodging. The consumption is the same. by labourers. are necessarily reserved for the latter. by any trust-right or deed of mortmain. No part of it can ever afterwards be employed to maintain any but productive hands without an evident loss to the person who thus perverts it from its proper destination. is consumed in the same manner. would have been distributed among the former set of people. but the consumers are different. as that part is for the sake of the profit immediately employed as a capital either by himself or by some other person. By not confining his Adam Smith ElecBook Classics .The Wealth of Nations: Book 2 449 idle guests and menial servants. for that or the ensuing year. as for the sake of the profit it is immediately employed as a capital. The perpetual allotment and destination of this fund. he not only affords maintenance to an additional number of productive hands. like the founder of a public workhouse. which may be purchased with it. the plain and evident interest of every individual to whom any share of it shall ever belong. and artificers. the food. Had he spent the whole. and lodging. he establishes as it were a perpetual fund for the maintenance of an equal number in all times to come. It is always guarded. By what a frugal man annually saves. who reproduce with a profit the value of their annual consumption. the food. is not always guarded by any positive law. By saving a part of it. by a very powerful principle. who leave nothing behind them in return for their consumption. however.

together with a profit. Though the expense of the prodigal should be altogether in home-made. the same quantity of money would remain in the country as before. he pays the wages of idleness with those funds which the frugality of his forefathers had.The Wealth of Nations: Book 2 450 expense within his income. but to impoverish his country. the real wealth and revenue of its inhabitants. as it were. consecrated to the maintenance of industry. therefore. they would have reproduced. By diminishing the funds destined for the employment of productive labour. employed in maintaining unproductive hands. he encroaches upon his capital. and. so far as it depends upon him. If the prodigality of some was not compensated by the frugality of others. it may be said indeed. its effect upon the productive funds of the society would still be the same. which ought to have maintained productive. tends not only to beggar himself. the full value of Adam Smith ElecBook Classics . Like him who perverts the revenues of some pious foundation to profane purposes. by feeding the idle with the bread of the industrious. not being in foreign goods. But if the quantity of food and clothing. and no part of it in foreign commodities. the quantity of that labour which adds a value to the subject upon which it is bestowed. and not occasioning any exportation of gold and silver. had been distributed among productive hands. there would still be some diminution in what would otherwise have been the value of the annual produce of the land and labour of the country. the value of the annual produce of the land and labour of the whole country. Every year there would still be a certain quantity of food and clothing. which were thus consumed by unproductive. This expense. the conduct of every prodigal. Every year. he necessarily diminishes. consequently.

or in something which had been. be sent abroad. cannot long remain in any country in which the value of the annual produce diminishes. materials. purchased with some part of that produce. and employed in purchasing consumable goods which may be of some use at home.The Wealth of Nations: Book 2 451 their consumption. and there would besides have been a reproduction of an equal value of consumable goods. Their value. besides. in spite of all laws and prohibitions. and along with it the quantity of money which can be employed in circulating them. The exportation Adam Smith ElecBook Classics . Its annual exportation will in this manner continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. and employed in purchasing gold and silver. The same quantity of money would in this case equally have remained in the country. will contribute for some little time to support its consumption in adversity. These must consist either in the immediate produce of the land and labour of the country itself. which can be annually employed in any country must be determined by the value of the consumable goods annually circulated within it. The sole use of money is to circulate consumable goods. There would have been two values instead of one. The interest of whoever possesses it requires that it should be employed. it will. provisions. The same quantity of money. By means of it. and distributed to their proper consumers. What in the days of its prosperity had been saved from that annual produce. and finished work. must diminish as the value of that produce diminishes. are bought and sold. therefore. therefore. But the money which by this annual diminution of produce is annually thrown out of domestic circulation will not be allowed to lie idle. But having no employment at home. The quantity of money.

every prodigal appears to be a public enemy. will naturally be employed in purchasing. Gold and silver are purchased everywhere in the same manner. The effects of misconduct are often the same as those of prodigality. is the price paid for them in Peru as well as in England. The country which has this price to pay will never be long without the quantity of those metals which it has occasion for. as vulgar prejudices suppose. in this case. whether in the value of the annual produce of its land and labour. Every injudicious and unsuccessful project in agriculture. The food. The increase of those metals will in this case be the effect. but the effect of its declension. or manufactures. tends in the Adam Smith ElecBook Classics . and every frugal man a public benefactor. mines. trade. on the contrary. not the cause. The value of the consumable goods annually circulated within the society being greater will require a greater quantity of money to circulate them. the revenue and maintenance of all those whose labour or stock is employed in bringing them from the mine to the market. must in every country naturally increase as the value of the annual produce increases. as plain reason seems to dictate. and may even. clothing. we may imagine the real wealth and revenue of a country to consist in. therefore. Whatever. the additional quantity of gold and silver necessary for circulating the rest. in either view of the matter. of the public prosperity.The Wealth of Nations: Book 2 452 of gold and silver is. not the cause. alleviate the misery of that declension. wherever it is to be had. therefore. or in the quantity of the precious metals which circulate within it. and lodging. for some little time. and no country will ever long retain a quantity which it has no occasion for. A part of the increased produce. fisheries. The quantity of money.

there is scarce perhaps a single instant in which any man is so perfectly and completely satisfied with his situation as to be without any wish of alteration or improvement of any kind. With regard to profusion.The Wealth of Nations: Book 2 453 same manner to diminish the funds destined for the maintenance of productive labour. and never leaves us till we go into the grave. It is the means the most vulgar and the most obvious. though the capital is consumed by productive hands only. there must always be some diminution in what would otherwise have been the productive funds of the society. Though the principle of expense. yet. In every such project. and the most likely way of augmenting their fortune is to save and accumulate some part of what they acquire. In the whole interval which separates those two moments. prevails in Adam Smith ElecBook Classics . a desire which. either regularly and annually. which. though sometimes violent and very difficult to be restrained. as by the injudicious manner in which they are employed they do not reproduce the full value of their consumption. the profusion or imprudence of some being always more than compensated by the frugality and good conduct of others. the principle which prompts to expense is the passion for present enjoyment. is in general only momentary and occasional. indeed. though generally calm and dispassionate. therefore. that the circumstances of a great nation can be much affected either by the prodigality or misconduct of individuals. It can seldom happen. comes with us from the womb. But the principle which prompts to save is the desire of bettering our condition. or upon some extraordinary occasions. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition.

The greater part of men. are sufficiently careful to avoid it. even while the war lasts. When multiplied. Bankruptcy is perhaps the greatest and most humiliating calamity which can befall an innocent man. as they themselves produce nothing. The whole. to an unnecessary number. great fleets and armies. therefore. a great ecclesiastical establishment. Such are the people who compose a numerous and splendid court. they may in a particular year consume so great a share of this produce. are all maintained by the produce of other men’s labour. not much more perhaps than one in a thousand. the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. the unhappy men who fall into this misfortune make but a very small part of the whole number engaged in trade.The Wealth of Nations: Book 2 454 almost all men upon some occasions. therefore. who in time of peace produce nothing. as some do not avoid the gallows. therefore. Such people. and in some men upon almost all occasions. as not to leave a sufficiency for maintaining the productive labourers. though they sometimes are by public prodigality and misconduct. who should reproduce it next year. and all other sorts of business. is in most countries employed in maintaining unproductive hands. After all our complaints of the frequency of bankruptcies. The next year’s produce. indeed. Great nations are never impoverished by private. With regard to misconduct. do not avoid it. the principle of frugality seems not only to predominate. Adam Smith ElecBook Classics . or almost the whole public revenue. yet in the greater part of men. but to predominate very greatly. taking the whole course of their life at an average. Some. and in time of war acquire nothing which can compensate the expense of maintaining them.

in spite both of the extravagance of government and of the greatest errors of administration. is upon most occasions. This frugality and good conduct. is frequently powerful enough to maintain the natural progress of things towards improvement. 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. upon the funds destined for the maintenance of productive labour. The annual produce of the land and labour of any nation can be increased in its value by no other means but by increasing either the number of its productive labourers. and if the same disorder should continue.The Wealth of Nations: Book 2 455 will be less than that of the foregoing. it is evident. that of the third year will be still less than that of the second. can never be much increased. Like the unknown principle of animal life. The number of its productive labourers. as well as private opulence is originally derived. but of the absurd prescriptions of the doctor. but in consequence of an increase of capital. or of the Adam Smith ElecBook Classics . the principle from which public and national. in spite. but the public extravagance of government. constant. however. it frequently restores health and vigour to the constitution. sufficient to compensate. Those unproductive hands. and uninterrupted effort of every man to better his condition. not only the private prodigality and misconduct of individuals. who should be maintained by a part only of the spare revenue of the people. The uniform. may consume so great a share of their whole revenue. or the productive powers of those labourers who had before been employed. it appears from experience. and thereby oblige so great a number to encroach upon their capitals. not only of the disease.

we must compare the state of the country at periods somewhat distant from one another. therefore. that its lands are better cultivated.The Wealth of Nations: Book 2 456 funds destined for maintaining them. we may be assured that its capital must have increased during the interval between those two periods. and that more must have been added to it by the good conduct of some than had been taken from it either by the private misconduct of others or by the public extravagance of government. and find. even of those who have not enjoyed the most prudent and parsimonious governments. but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour. the state of a nation at two different periods. It is by means of an additional capital only that the undertaker of any work can either provide his workmen with better machinery or make a more proper distribution of employment among them. to keep every man constantly employed in one way requires a much greater capital than where every man is occasionally employed in every different part of the work. indeed. When we compare. But we shall find this to have been the case of almost all nations. the improvement is not only not sensible. and its trade more extensive. that the annual produce of its land and labour is evidently greater at the latter than at the former. its manufactures more numerous and more flourishing. in all tolerably quiet and peaceable times. but from the declension either of certain Adam Smith ElecBook Classics . When the work to be done consists of a number of parts. or of a more proper division and distribution of employment. The progress is frequently so gradual that. To form a right judgment of it. The productive powers of the same number of labourers cannot be increased. at near periods. In either case an additional capital is almost always required.

at the restoration of Charles II. who wrote nothing but what they believed. in a better condition than it had been at the Norman Conquest. for example. is certainly much greater than it was. than we can suppose it to have been about an hundred years before. with such abilities as to gain some authority with the public. The annual produce of the land and labour of England. probably. doubt of this. Even at this early period. Though. again. too. manufactures decaying. was certainly much greater at the Restoration. it was certainly a more improved country than at the invasion of Julius Adam Smith ElecBook Classics . Many of them have been written by very candid and very intelligent people. At this period. we have all reason to believe. too. things which sometimes happen though the country in general be in great prosperity. and for no other reason but because they believed it. agriculture neglected. the country was much more advanced in improvement than it had been about a century before. and trade undone. I believe. the wretched offspring of falsehood and venality. and at the Norman Conquest than during the confusion of the Saxon Heptarchy. five years have seldom passed away in which some book or pamphlet has not been published. or of certain districts of the country. written. Even then it was. that the country was depopulated. The annual produce of the land and labour of England.The Wealth of Nations: Book 2 457 branches of industry. few people. at the accession of Elizabeth. a little more than a century ago. towards the close of the dissensions between the houses of York and Lancaster. and pretending to demonstrate that the wealth of the nation was fast declining. at present. there frequently arises a suspicion that the riches and industry of the whole are decaying. Nor have these publications been all party pamphlets. yet during this period.

not only the impoverishment. at the end of the period. the whole Adam Smith ElecBook Classics . 1702. 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. so that the whole cannot be computed at less than two hundred millions. that which has passed since the Restoration.The Wealth of Nations: Book 2 458 Caesar. the two Dutch wars. the four expensive French wars of 1688. been employed upon different occasions in maintaining an extraordinary number of unproductive hands. the disorders of the Revolution. great perversion of the annual produce from maintaining productive to maintain unproductive hands. 1742. as might be supposed. In the course of the four French wars. Thus. the greater part of it would naturally have been employed in maintaining productive hands. many expensive and unnecessary wars. but sometimes. when its inhabitants were nearly in the same state with the savages in North America. whose labour would have replaced. in the confusion of civil discord. the war in Ireland. poorer than at the beginning. But had not those wars given this particular direction to so large a capital. the natural accumulation of riches. as it certainly did. since the Revolution. however. there was not only much private and public profusion. could they have been foreseen. 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 has. and 1756. In each of those periods. the nation has contracted more than a hundred and forty-five millions of debt. how many disorders and misfortunes have occurred. but to have left the country. such absolute waste and destruction of stock. not only to retard. with a profit. which. together with the two rebellions of 1715 and 1745.

and those which had been improved before would have been better cultivated. it has not been able to stop it. more manufactures would have been established. In the midst of all the exactions of government. and in maintaining this labour. and every year’s increase would have augmented still more that of the following year. protected by law and allowed by liberty to exert itself in the manner that is most advantageous. More houses would have been built. undoubtedly. have been raised. It is this effort. But though the profusion of government must. undoubtedly. more lands would have been improved. annually employed in cultivating this land. must likewise be much greater. much greater at present than it was either at the Restoration or at the Revolution. and those which had been established before would have been more extended. therefore. and which. which has maintained the progress of England towards opulence and improvement in almost all former times. and uninterrupted effort to better their own condition. so parsimony has at no time been the characteristical virtue of its inhabitants. by this time. England. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year. continual. as it has never been blessed with a very parsimonious government. have retarded the natural progress of England towards wealth and improvement. and to what height the real wealth and revenue of the country might. by their universal. The annual produce of its land and labour is. however. it is not perhaps very easy even to imagine. will do so in all future times. The capital. It is the highest Adam Smith ElecBook Classics . this capital has been silently and gradually accumulated by the private frugality and good conduct of individuals. it is to be hoped.The Wealth of Nations: Book 2 459 value of their consumption.

statues. in useful or ornamental furniture. or it may be spent in things more durable. neither increases nor diminishes it. and without any exception. in collecting books. in kings and ministers. as he chooses. They are themselves always. Let them look well after their own expense. either alleviate or support and heighten the effect of that of the following day. and they may safely trust private people with theirs. without either accumulating or encroaching. or contenting himself with a frugal table and few attendants. pictures. which can therefore be accumulated. in useful or ornamental buildings. however. As frugality increases and prodigality diminishes the public capital. he may lay out the greater part of it in adorning his house or his country villa. may either spend his revenue in a profuse and sumptuous table. or by prohibiting the importation of foreign luxuries. to pretend to watch over the economy of private people. and to restrain their expense. and in maintaining a great number of menial servants. jewels. The revenue of an individual may be spent either in things which are consumed immediately. so the conduct of those whose expense just equals their revenue.The Wealth of Nations: Book 2 460 impertinence and presumption. ingenious Adam Smith ElecBook Classics . for example. baubles. that of their subjects never will. and a multitude of dogs and horses. either by sumptuary laws. or in things more frivolous. and in which one day’s expense can neither alleviate nor support that of another. Some modes of expense. therefore. If their own extravagance does not ruin the state. A man of fortune. the greatest spendthrifts in the society. and in which every day’s expense may. seem to contribute more to the growth of public opulence than others.

Were two men of equal fortune to spend their revenue. you will frequently find the inferior ranks of people in possession both of houses and furniture perfectly good and entire. In countries which have long been rich. or. too. The houses. would.The Wealth of Nations: Book 2 461 trinkets of different kinds. No trace or vestige of the expense of the latter would remain. the one chiefly in the one way. the other in the other. and the general accommodation of the whole people is thus gradually improved. nor the other have been made for their use. but of which neither the one could have been built. every day’s expense contributing something to support and heighten the effect of that of the following day: that of the other. The former. the magnificence of the person whose expense had been chiefly in durable commodities. would be no greater at the end of the period than at the beginning. the furniture. on the contrary. and the effects of ten or twenty years profusion would be as completely annihilated as if they had never existed. become useful to the inferior and middling ranks of people. would always be worth something. be the richer man of the two. when this mode of expense becomes universal among men of fortune. so is it likewise to that of a nation. the clothing of the rich. which. They are able to purchase them when their superiors grow weary of them. at the end of the period. what is most trifling of all. like the favourite and minister of a great prince who died a few years ago. would be continually increasing. As the one mode of expense is more favourable than the other to the opulence of an individual. in amassing a great wardrobe of fine clothes. though it might not be worth all that it cost. What was formerly a seat of the Adam Smith ElecBook Classics . He would have a stock of goods of some kind or other. in a little time.

magnificent villas. pictures and other curiosities. Stowe and Wilton to England. which his queen brought with her from Denmark as a present fit for a sovereign to make to a sovereign. not only to accumulation. In some ancient cities. of Adam Smith ElecBook Classics . though antiquated pieces of furniture. and though the genius which planned them seems to be extinguished. to reform his table from great profusion to great frugality. great collections of books. To reduce very much the number of his servants. not only to the neighbourhood. or have gone somewhat to decay. Noble palaces. If you go into those houses too. though the wealth which produced them has decayed. he can easily reform without exposing himself to the censure of the public. and which could as little have been made for them. Italy still continues to command some sort of veneration by the number of monuments of this kind which it possesses. perhaps from not having the same employment. The marriage-bed of James the First of Great Britain. which either have been long stationary. Few. the ornament of an alehouse at Dunfermline. Versailles is an ornament and an honour to France. are changes which cannot escape the observation of his neighbours. you will sometimes scarce find a single house which could have been built for its present inhabitants.The Wealth of Nations: Book 2 462 family of Seymour is now an inn upon the Bath road. was. are frequently both an ornament and an honour. The expense too. a few years ago. you will frequently find many excellent. but to frugality. If a person should at any time exceed in it. which are still very fit for use. therefore. and which are supposed to imply some acknowledgment of preceding bad conduct. is favourable. but to the whole country to which they belong. statues. which is laid out in durable commodities. to lay down his equipage after he has once set it up.

by all this be understood to mean that the one species of expense always betokens a more liberal or generous spirit than the other. he appears to do so. carpenters. perhaps. and there is always a great deal wasted and abused. to a greater number of people than that which is employed in the most profuse hospitality. In the one way. but because he has satisfied his fancy. But if a person has. till ruin and bankruptcy oblige them.. The expense. besides. no imprudence can be inferred from his changing his conduct. this expense maintains productive. in the other. besides. a quantity of provisions. Of two or three hundredweight of provisions. is thrown to the dunghill. But if the expense of this entertainment had been employed in setting to work masons. In the one way. commonly. and not have lost or thrown away a single ounce of them. have afterwards the courage to reform. one half. These are things in which further expense is frequently rendered unnecessary by former expense. however. in furniture. mechanics.The Wealth of Nations: Book 2 463 those who have once been so unfortunate as to launch out too far into this sort of expense. therefore. it increases. at any time. the exchangeable value of the annual produce of the land and labour of the country. would have been distributed among a still greater number of people who would have bought them in pennyworths and pound weights. that is laid out in durable commodities gives maintenance. I would not. not because he has exceeded his fortune. When a man of fortune spends his revenue chiefly in hospitality. and when a person stops short. he shares the greater part of it with his Adam Smith ElecBook Classics . which may sometimes be served up at a great festival. of equal value. in the other unproductive hands. it does not increase. been at too great an expense in building. etc. upholsterers. in books or pictures.

gewgaws.The Wealth of Nations: Book 2 464 friends and companions. and as it maintains productive. conduces more than the other to the growth of public opulence. Adam Smith ElecBook Classics . The latter species of expense. jewels. he often spends the whole upon his own person. especially when directed towards frivolous objects. frequently indicates. rather than unproductive hands. trinkets. the little ornaments of dress and furniture. that the one sort of expense. as it is more favourable to private frugality. as it always occasions some accumulation of valuable commodities. consequently. therefore. All that I mean is. not only a trifling. but a base and selfish disposition. but when he employs it in purchasing such durable commodities. and. to the increase of the public capital. and gives nothing to anybody without an equivalent.

If he uses it as a stock reserved for immediate consumption. therefore. and dissipates in the maintenance of the idle what was destined for the support of the industrious. neither restore the capital nor pay the interest without either alienating or encroaching upon some other source of revenue. contrary to the interest of both parties. He can. no doubt. and though it no ElecBook Classics Adam Smith . The stock which is lent at interest is. and that in the meantime the borrower is to pay him a certain annual rent for the use of it.The Wealth of Nations: Book 2 465 Chapter IV T Of Stock Lent at Interest he stock which is lent at interest is always considered as a capital by the lender. The borrower may use it either as a capital. who reproduce the value with a profit. To borrow or to lend for such a purpose. in this case. where gross usury is out of the question. He can. he acts the part of a prodigal. in this case. both restore the capital and pay the interest without alienating or encroaching upon any other source of revenue. or as a stock reserved for immediate consumption. but in the former much more frequently than in the latter. and he who lends to him will generally have occasion to repent of his folly. he employs it in the maintenance of productive labourers. He expects that in due time it is to be restored to him. such as the property or the rent of land. The man who borrows in order to spend will soon be ruined. is in all cases. If he uses it as a capital. occasionally employed in both these ways.

and he will laugh at you for proposing the question. It is not properly borrowed in order to be spent. without their being expected to make any very profitable use of it. is not the money. The only people to whom stock is commonly lent. not the people in the world most famous for frugality. it is those goods only which Adam Smith ElecBook Classics . one may say. the number of the frugal and industrious surpasses considerably that of the prodigal and idle. The capital borrowed replaces the capitals of those shopkeepers and tradesmen. from the regard that all men have for their own interest. What they borrow. Even among borrowers. advanced to them upon credit by shopkeepers and tradesmen. we may be assured that it cannot happen so very frequently as we are sometimes apt to imagine.The Wealth of Nations: Book 2 466 doubt happens sometimes that people do both the one and the other. that they find it necessary to borrow at interest in order to pay the debt. But what the borrower really wants. either of paper. which the country gentlemen could not have replaced from the rents of their estates. If he wants it as a stock for immediate consumption. therefore. are country gentlemen who borrow upon mortgage. is commonly spent before they borrow it. or of gold and silver. or the goods which it can purchase. and what the lender really supplies him with. but the money’s worth. will employ it profitably. They have generally consumed so great a quantity of goods. Even they scarce ever borrow merely to spend. or to those who will spend it idly. yet. but in order to replace a capital which had been spent before. Ask any rich man of common prudence to which of the two sorts of people he has lent the greater part of his stock. Almost all loans at interest are made in money. he thinks. to those who.

It is distinct. or. as it were. but by the value of that part of the annual produce which. which serves as the instrument of the different loans made in that country. A. of money which can be lent at interest in any country. it is from those goods only that the industrious can be furnished with the tools. is not regulated by the value of the money. As such capitals are commonly lent out and paid back in money. or from the hands of the productive labourers. however.The Wealth of Nations: Book 2 467 he can place in that stock. they constitute what is called the monied interest. lends to W a thousand pounds. B Adam Smith ElecBook Classics . the lender. as it is commonly expressed. but such a capital as the owner does not care to be at the trouble of employing himself. Even in the monied interest. is destined not only for replacing a capital. The quantity of stock. but from the trading and manufacturing interests. therefore. which conveys from one hand to another those capitals which the owners do not care to employ themselves. but the deed of assignment. whether paper or coin. as it were. as in these last the owners themselves employ their own capitals. as soon as it comes either from the ground. not only from the landed. and maintenance necessary for carrying on their work. Those capitals may be greater in almost any proportion than the amount of the money which serves as the instrument of their conveyance. the money is. for example. assigns to the borrower his right to a certain portion of the annual produce of the land and labour of the country to be employed as the borrower pleases. as well as for many different purchases. By means of the loan. If he wants it as a capital for employing industry. with which W immediately purchases of B a thousand pounds’ worth of goods. the same pieces of money successively serving for many different loans. materials.

called the repayment. and for the same reason. The stock lent by the three monied men is equal to the value of the goods which can be purchased with it. upon condition that the borrower in return shall. and is three times greater than that of the money with which the purchases are made. B. C in the same manner. may be all perfectly well secured. serve as the instrument of three different loans. and of three different purchases. either of coin or paper. each of which is. to thirty times their value. be considered as an assignment from the lender to the borrowers of a certain considerable portion of the annual produce. In this power consist both the value and the use of the loans. Those loans however. Though money. And as the same pieces of money can thus serve as the instrument of different loans to three. and C assign to the three borrowers. in value. In this manner the same pieces. to bring back.The Wealth of Nations: Book 2 468 having no occasion for the money himself. with a profit. may in the course of a few days. so they may likewise successively serve as the instrument of repayment. annually assign to the lender a smaller portion. in due time. What the three monied men A. W. the goods purchased by the different debtors being so employed as. either coin or paper. and at the end of it a portion equally considerable with that which had originally been assigned to him. an equal value either of coin or of paper. lends the identical pieces to X. during the continuance of the loan. or for the same reason. equal to the whole amount of those pieces. is the power of making those purchases. serves generally as the deed of Adam Smith ElecBook Classics . X. A capital lent at interest may. who again purchases goods with them of D. lends them to Y. called the interest. Y. with which X immediately purchases of C another thousand pounds’ worth of goods. in this manner.

what is called the monied interest naturally increases with it. increases in any country. the owner of one endeavouring to get possession of that employment which is occupied by another. by the increase of the funds which Adam Smith ElecBook Classics . it is itself altogether different from what is assigned by it. the interest. As the quantity of stock to be lent at interest increases.The Wealth of Nations: Book 2 469 assignment both to the smaller and to the more considerable portion. naturally accompanies the general increase of capitals. necessarily diminishes. But upon most occasions he can hope to jostle that other out of this employment by no other means but by dealing upon more reasonable terms. as soon as it comes either from the ground. There arises in consequence a competition between different capitals. or. As capitals increase in any country. In proportion as that share of the annual produce which. in other words. or the price which must be paid for the use of that stock. he must sometimes. without being at the trouble of employing them themselves. as stock increases. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. He must not only sell what he deals in somewhat cheaper. the profits which can be made by employing them necessarily diminish. or from the hands of the productive labourers. buy it dearer. the quantity of stock to be lent at interest grows gradually greater and greater. is destined for replacing a capital. not only from those general causes which make the market price of things commonly diminish as their quantity increases. but in order to get it to sell. too. but from other causes which are peculiar to this particular case. The demand for productive labour. The increase of those particular capitals from which the owners wish to derive a revenue.

and that in those countries. perhaps. This notion.The Wealth of Nations: Book 2 470 are destined for maintaining it. they say. Law. five. seem to have imagined that the increase of the quantity of gold and silver. has been so fully exposed by Mr. Hume that it is. was the real cause of the lowering of the rate of interest through the greater part of Europe. having become of less value themselves. Labourers easily find employment. in consequence of the discovery of the Spanish West Indies. Those metals. which at first sight seems plausible. may serve to explain more distinctly the fallacy which seems to have misled those gentlemen. the use of any particular portion of them necessarily became of less value too. as well as many other writers. It has since that time in different countries sunk to six. Their competition raises the wages of labour and sinks the profits of stock. that is. ten per cent seems to have been the common rate of interest through the greater part of Europe. the same quantity of silver can now purchase just Adam Smith ElecBook Classics . and consequently the price which could be paid for it. Montesquieu. Locke. Mr. the price which can be paid for the use of it. But when the profits which can be made by the use of a capital are in this manner diminished. as it were. The following very short and plain argument. Let us suppose that in every particular country the value of silver has sunk precisely in the same proportion as the rate of interest. four. Mr. the rate of interest. at both ends. for example. where interest has been reduced from ten to five per cent. unnecessary to say anything more about it. and Mr. Before the discovery of the Spanish West Indies. and three per cent. but the owners of capitals find it difficult to get labourers to employ. however. grows every day greater and greater. must necessarily be diminished with them.

ten pounds must now be of no more value than five pounds were then. and exactly in the same proportion. Any increase in the quantity of silver. would be precisely Adam Smith ElecBook Classics . on the contrary. and even upon this supposition it is utterly impossible that the lowering of the value of silver could have the smallest tendency to lower the rate of interest. Whatever were the causes which lowered the value of the capital. the same must necessarily have lowered that of the interest. which is supposed to be equal to one half of its former value. the proportion between those two values is necessarily altered. but their real value would be precisely the same as before. the number of people whom they could maintain and employ. If a hundred pounds now are worth no more than fifty were then. while that of the commodities circulated by means of it remained the same. This supposition will not. therefore. By reducing the rate of interest. but the quantity of labour which they could command. could have no other effect than to diminish the value of that metal. be found anywhere agreeable to the truth. we give for the use of a capital.The Wealth of Nations: Book 2 471 half the quantity of goods which it could have purchased before. The proportion between the value of the capital and that of the interest must have remained the same. from ten to five per cent. I believe. an interest which is equal to one fourth only of the value of the former interest. They would be exchanged for a greater number of pieces of silver. five pounds now can be worth no more than two pounds ten shillings were then. though the rate had been altered. By altering the rate. but it is the most favourable to the opinion which we are going to examine. If a hundred pounds are in those countries now of no more value than fifty pounds were then. The nominal value of all sorts of goods would be greater.

but the thing assigned would be precisely the same as before. what can commonly be given for the use of money being necessarily regulated by what can commonly be made by the use of it. though they may sometimes be no greater than before. would be more cumbersome. The funds for maintaining productive labour being the same. like the conveyances of a verbose attorney. would be the same. Thus in a particular country five shillings a week are said to be the common wages of labour. The wages of labour are commonly computed by the quantity of silver which is paid to the labourer. but they would purchase only the same quantity of goods. therefore.The Wealth of Nations: Book 2 472 the same. therefore. his wages appear to be increased. The common proportion between capital and profit. The profits of stock would be the same both nominally and really. But the profits of stock are not computed by the number of pieces of silver with which they are paid. therefore. Any increase in the quantity of commodities annually circulated Adam Smith ElecBook Classics . would really be the same. The deeds of assignment. Its price or wages. though a greater number of pieces might be requisite for conveying any equal portion of it from one hand to another. though nominally greater. The capital of the country would be the same. They would be paid in a greater number of pieces of silver. and consequently the common interest of money. but by the proportion which those pieces bear to the whole capital employed. They would all trade with the same advantages and disadvantages. and ten per cent the common profits of stock. the competition between the different capitals of individuals into which it was divided would likewise be the same. When that is increased. and could produce only the same effects. But the whole capital of the country being the same as before. the demand for it would be the same.

would really be augmented. has been found from experience to increase the evil of usury. The interest of money. and yet might appear to sink. would. was greatly augmented. might. Its wages would naturally rise with the demand. the debtor being obliged to pay. They might be paid with a smaller quantity of money.The Wealth of Nations: Book 2 473 within the country. The quantity of productive labour which it could maintain and employ would be increased. the competition between the different capitals of which it was composed would naturally be augmented along with it. though the value of money. in this manner. on the contrary. produce many other important effects. something ought everywhere to be paid for the use of it. besides that of raising the value of the money. instead of preventing. but that smaller quantity might purchase a greater quantity of goods than a greater had done before. but it would command a greater quantity of labour. while that of the money which circulated them remained the same. be greatly diminished. It might continue to be expressed by the same quantity of money. or the quantity of goods which any particular sum could purchase. This regulation. but for the risk which his Adam Smith ElecBook Classics . and consequently the demand for that labour. But as something can everywhere be made by the use of money. keeping pace always with the profits of stock. The profits of stock would be diminished both really and in appearance. The whole capital of the country being augmented. 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. In some countries the interest of money has been prohibited by law. though it might nominally be the same. The capital of the country.

who respect the laws of their country. The legal rate. for example. if one may say so. If it is fixed precisely at the lowest market price. it ruins with honest people. In a country. The creditor will not lend his money for less than the use of it is worth. where money is lent to government at three per cent and to private people upon a good security at four and four and a half. the effects of this fixation must be nearly the same as those of a total prohibition of interest. and obliges them to have recourse to exorbitant usurers. He is obliged. In countries where interest is permitted. the present legal rate. who alone would be willing to give this high interest. If this legal rate should be fixed below the lowest market rate. was fixed so high as eight or ten per cent. in order to prevent the extortion of usury. 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. Sober people. ought not to be much above the lowest market rate. to insure his creditor from the penalties of usury. five per cent. such as Great Britain. the greater part of the money which was to be lent would be lent to prodigals and projectors. generally fixes the highest rate which can be taken without incurring a penalty. This rate ought always to be somewhat above the lowest market price. or the price which is commonly paid for the use of money by those who can give the most undoubted security. though it ought to be somewhat above. it is to be observed. If the legal rate of interest in Great Britain. is perhaps as proper as any. and the debtor must pay him for the risk which he runs by accepting the full value of that use. the law. the credit of all those who cannot give the very best security. would not venture Adam Smith ElecBook Classics .The Wealth of Nations: Book 2 474 creditor runs by accepting a compensation for that use.

money continued to be lent in France at five per cent. depends everywhere upon the ordinary market rate of interest. as borrowers. together with some other advantages which almost everywhere attend upon this species of property. Notwithstanding the edict of 1766. 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. without taking the trouble to employ it himself. to prodigals and projectors. These advantages are sufficient to compensate a certain difference of revenue. is fixed but a very little above the lowest market rate. No law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law is made. Where the legal rate of interest. and thrown into those which were most likely to waste and destroy it. and his money is much safer in the hands of the one set of people than in those of the other. deliberates whether he should buy land with it or lend it out at interest. by which the French king attempted to reduce the rate of interest from five to four per cent. 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. The ordinary market price of land. The person who lends money gets nearly as much interest from the former as he dares to take from the latter. will generally dispose him to content himself with a smaller revenue from land than what he might have by lending out his money at interest. sober people are universally preferred. but they will compensate a certain Adam Smith ElecBook Classics . The person who has a capital from which he wishes to derive a revenue. on the contrary. it is to be observed.The Wealth of Nations: Book 2 475 into the competition. the law being evaded in several different ways. The superior security of land.

five-and-twenty. in France at twenty years’ purchase. On the contrary. which would soon reduce its ordinary price. five. As interest sunk to six. which again would soon raise its ordinary price. Adam Smith ElecBook Classics . if the advantages should much more than compensate the difference. The market rate of interest is higher in France than in England. nobody would buy land. In England it commonly sells at thirty. and if the rent of land should fall short of the interest of money by a greater difference.The Wealth of Nations: Book 2 476 difference only. everybody would buy land. land was commonly sold for ten and twelve years’ purchase. and the common price of land is lower. the price of land rose to twenty. and thirty years’ purchase. When interest was at ten per cent. and four per cent.

The Wealth of Nations: Book 2 477 Chapter V T Of the Different Employment of Capitals hough all capitals are destined for the maintenance of productive labour only. and in the fourth. A capital may be employed in four different ways: either. In the first way are employed the capitals of all those who undertake the improvement or cultivation of lands. those of all master manufacturers. in manufacturing and preparing that rude produce for immediate use and consumption. or to the general conveniency of the society. those of all wholesale merchants. in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. in the second. lastly. or. in procuring the rude produce annually required for the use and consumption of the society. ElecBook Classics Adam Smith . or fisheries. first. thirdly. Each of these four methods of employing a capital is essentially necessary either to the existence or extension of the other three. in the third. those of all retailers. or. secondly. yet the quantity of that labour which equal capitals are capable of putting into motion varies extremely according to the diversity of their employment. as does likewise the value which that employment adds to the annual produce of the land and labour of the country. mines. in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted. 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. or.

The capital of the merchant exchanges the surplus produce of one place for that of another. neither manufactures nor trade of any kind could exist. every man would be obliged to purchase a greater quantity of the goods he wanted than his immediate occasions required. and which yields him a revenue. or in the furniture of his shop. every man would be obliged to purchase a whole ox or a whole sheep at a time. or if it was produced spontaneously. he would be forced to place in that part of his stock Adam Smith ElecBook Classics . for example.The Wealth of Nations: Book 2 478 Unless a capital was employed in furnishing rude produce to a certain degree of abundance. no more of either could be produced than was necessary for the consumption of the neighbourhood. it either would never be produced. because there could be no demand for it. and much more so to the poor. If there was no such trade as a butcher. If a poor workman was obliged to purchase a month’s or six months’ provisions at a time. and could add nothing to the wealth of the society. Unless a capital was employed in manufacturing that part of the rude produce which requires a good deal of preparation before it can be fit for use and consumption. and thus encourages the industry and increases the enjoyments of both. 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. a great part of the stock which he employs as a capital in the instruments of his trade. This would generally be inconvenient to the rich. 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. it would be of no value in exchange.

He is thus enabled to furnish work to a greater value. for example. but to take care of this is the business of the parties concerned. The prejudices of some political writers against shopkeepers and tradesmen are altogether without foundation. The quantity of grocery goods. on the contrary. their competition would be just so much the greater. Their competition might perhaps ruin some of themselves. and which yields him no revenue. just so much the less. or even from hour to hour. He is thereby enabled to employ almost his whole stock as a capital. It can never hurt either the consumer or the producer. Some of them.The Wealth of Nations: Book 2 479 which is reserved for immediate consumption. and the chance of their combining together. it must tend to make the retailers both sell cheaper and buy dearer than if the whole trade was monopolized by one or two persons. and it may safely be trusted to their discretion. and the profit. and if it were divided among twenty. much more than compensates the additional price which the profit of the retailer imposes upon the goods. which he makes by it in this way. therefore. as he wants it. their competition will tend to make both of them sell cheaper than if it were in the hands of one only. which can be employed in the grocery trade cannot exceed what is sufficient to purchase that quantity. in order to raise the price. Nothing can be more convenient for such a person than to be able to purchase his subsistence from day to day. So far is it from being necessary either to tax them or to restrict their numbers that they can never be multiplied so as to hurt the public. If this capital is divided between two different grocers. though they may so as to hurt one another. may sometimes decoy a weak customer to Adam Smith ElecBook Classics . The capital. perhaps. which can be sold in a particular town is limited by the demand of that town and its neighbourhood.

and generally adds to its price the value at least of their own maintenance and consumption. of the manufacturer. In his profits consists the whole value which its employment adds to the annual produce of the land and labour of the society.The Wealth of Nations: Book 2 480 buy what he has no occasion for. to give the most suspicious example. however. fixes and realizes itself in the subject or vendible commodity upon which it is bestowed. and retailer. the capitals of the farmers and manufacturers of whom he purchases the rude and manufactured produce which he Adam Smith ElecBook Classics . Equal capitals. The capital of the wholesale merchant replaces. This evil. nor would it necessarily be prevented by restricting their numbers. but that disposition arising from other causes necessarily gives employment to a multitude of ale-houses. Their labour. that of the merchant of whom he purchases goods. The retailer himself is the only productive labourer whom it immediately employs. when properly directed. and the two last buy and sell. together with their profits. of the merchant. and augment. The persons whose capitals are employed in any of those four ways are themselves productive labourers. The profits of the farmer. together with its profits. It is not the multitude of ale-houses. however. are all drawn from the price of the goods which the two first produce. and thereby enables him to continue his business. that occasions a general disposition to drunkenness among the common people. will immediately put into motion very different quantities of productive labour. employed in each of those four different ways. too. is of too little importance to deserve the public attention. in very different proportions the value of the annual produce of the land and labour of the society to which they belong. The capital of the retailer replaces.

the sailors and carriers who transport his goods from one place to another. either annually. with their profits. together with its profits. It puts immediately into motion. It augments the value of those materials by their wages. and to increase the value of its annual produce. This is all the productive labour which it immediately puts into motion. In Adam Smith ElecBook Classics . and by their matters’ profits upon the whole stock of wages. and adds a much greater value to the annual produce of the land and labour of the society than an equal capital in the hands of any wholesale merchant. It is by this service chiefly that he contributes indirectly to support the productive labour of the society. and it augments the price of those goods by the value. materials. Not only his labouring servants. His capital employs. that of some other artificer of whom he purchases them. but his labouring cattle. too. and replaces. Part of his circulating capital is employed in purchasing materials. but of their wages. distributed among the different workmen whom he employs. and thereby enables them to continue their respective trades. a much greater quantity of productive labour. No equal capital puts into motion a greater quantity of productive labour than that of the farmer. Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade. and all the value which it immediately adds to the annual produce. are productive labourers. the capitals of the farmers and miners of whom he purchases them. not only of his profits.The Wealth of Nations: Book 2 481 deals in. and instruments of trade employed in the business. and replaces. or in a much shorter period. therefore. But a great part of it is always. Its operation in both these respects is a good deal superior to that of the capital of the retailer.

It is greater or smaller according to the supposed extent of those powers. together with its owners’ profits. therefore. its produce has its value. or in other words. the use of which the landlord lends to the farmer. the reproduction of a value equal to their own consumption. but of a much greater value. A field overgrown with briars and brambles may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field. Planting and tillage frequently regulate more than they animate the active fertility of nature. too. and after all their labour. This rent may be considered as the produce of those powers of nature. employed in agriculture. No equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction. The most important operations of agriculture seem intended not so much to increase. It is seldom less than a fourth. nature labours along with man. In them nature does nothing. man does all. though they do that too. according to the supposed natural or improved fertility of the land. or to the capital which employs them. like the workmen in manufactures. and the reproduction must always be in proportion to the strength of the Adam Smith ElecBook Classics . The labourers and labouring cattle. and though her labour costs no expense. a great part of the work always remains to be done by her. not only occasion. as to direct the fertility of nature towards the production of the plants most profitable to man. as well as that of the most expensive workmen. Over and above the capital of the farmer and all its profits. It is the work of nature which remains after deducting or compensating everything which can be regarded as the work of man. they regularly occasion the reproduction of the rent of the landlord.The Wealth of Nations: Book 2 482 agriculture. and frequently more than a third of the whole produce.

and from that where the complete manufacture is consumed. from the materials which their own produces. to the quantity of productive labour which it employs. to the farm and to the shop of the retailer. belong to resident members of the society. on the contrary. too. but in proportion. The capital employed in agriculture. though there are some exceptions to this.The Wealth of Nations: Book 2 483 agents that occasion it. but may wander about from place to place. Their employment is confined almost to a precise spot. The capital of a wholesale merchant. They must generally. It may frequently be at a great distance both from the place where the materials grow. not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures. Lyons is very distant both from the places which afford the materials of its manufactures. The people of fashion in Sicily are clothed in silks made in other countries. too. it is by far the most advantageous to the society. therefore. but where this shall be is not always necessarily determined. Part of the wool of Spain is manufactured in Great Britain. Of all the ways in which a capital can be employed. it adds a much greater value to the annual produce of the land and labour of the country. according as it can either buy cheap or sell dear. and from those which consume them. The capital of the manufacturer must no doubt reside where the manufacture is carried on. seems to have no fixed or necessary residence anywhere. to the real wealth and revenue of its inhabitants. The capitals employed in the agriculture and in the retail trade of any society must always reside within that society. and some part of that cloth is Adam Smith ElecBook Classics .

unless it was annually exchanged for something which is in demand there. would be of no value. though it should not reside within it. and to augment the value of the annual produce of the society to which he belongs. in the same manner as if he had been a native. be very useful to the country. and adds a greater value to the annual produce of the land and labour of the society. or to some third country. The capitals of the British manufacturers who work up the flax and hemp annually imported from the coasts of the Baltic are surely very useful to the countries which produce them. It may. however. If he is a foreigner. It necessarily puts into motion a greater quantity of productive labour.The Wealth of Nations: Book 2 484 afterwards sent back to Spain. The capital of a foreigner gives a value to their surplus produce equally with that of a native by exchanging it for something for which there is a demand at home. and would soon cease to be produced. and the value of their annual produce by the profits of that one man. The merchants who export it replace the capitals of the Adam Smith ElecBook Classics . and as effectually enables him to continue his business. the number of their productive labourers is necessarily less than if he had been a native by one man only. It is of more consequence that the capital of the manufacturer should reside within the country. The sailors or carriers whom he employs may still belong indifferently either to his country or to their country. the service by which the capital of a wholesale merchant chiefly contributes to support the productive labour. Those materials are a part of the surplus produce of those countries which. Whether the merchant whose capital exports the surplus produce of any society be a native or a foreigner is of very little importance. It as effectually replaces the capital of the person who produces that surplus.

and thereby encourage them to continue the production. in the same manner as a particular person. manufactured in Yorkshire. The inhabitants of many different parts of Great Britain have not capital sufficient to improve and cultivate all their lands. A particular country. to manufacture and prepare their whole rude produce for immediate use and consumption. and adds the greatest value to the annual Adam Smith ElecBook Classics . a great part of it. may frequently not have capital sufficient both to improve and cultivate all its lands. the capital employed in manufactures puts into motion the greatest quantity of productive labour. When the capital of any country is not sufficient for all those three purposes. they are properly only the agents of wealthier merchants who reside in some of the greater commercial cities. The wool of the southern counties of Scotland is.The Wealth of Nations: Book 2 485 people who produce it. as will likewise be the value which its employment adds to the annual produce of the land and labour of the society. and to transport the surplus part either of the rude or manufactured produce to those distant markets where it can be exchanged for something for which there is a demand at home. 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. after a long land carriage through very bad roads. the greater will be the quantity of productive labour which it puts into motion within the country. in proportion as a greater share of it is employed in agriculture. There are many little manufacturing towns in Great Britain. If there are any merchants among them. and the British manufacturers replace the capitals of those merchants. for want of capital to manufacture it at home. After agriculture.

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. The capital of all the individuals of a nation is increased in the same manner as that of a single individual by their continually accumulating and adding to it whatever they save out of their revenue. to acquire a sufficient one. The country. however. It is likely to increase the fastest. prematurely and with an insufficient capital to do all the three is certainly not the shortest way for a society. The capital of all the individuals of a nation has its limits in the same manner as that of a single individual. The greater part both of the exportation and coasting trade of America is carried on by the capitals of merchants who reside in Great Britain. as they will thus be enabled to make the greatest savings. They have no manufactures.The Wealth of Nations: Book 2 486 produce. To attempt. That which is employed in the trade of exportation has the least effect of any of the three. those household and courser manufactures excepted which necessarily accompany the progress of agriculture. no more than it would be for an individual. and is capable of executing only certain purposes. and which are the work of the women and children in every private family. when it is employed in the way that affords the greatest revenue to all the inhabitants of the country. Even the stores and warehouses from which goods are retailed in some provinces. It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness that almost their whole capitals have hitherto been employed in agriculture. which has not capital sufficient for all those three purposes has not arrived at that degree of opulence for which it seems naturally destined. therefore. indeed. Adam Smith ElecBook Classics .

a superstition nearly of the same kind prevails among the Indians. They do not appear to have been eminent for foreign trade. and. they would retard instead of accelerating the further increase in the value of their annual produce. either by combination or by any other sort of violence. seems scarce ever to have been of so long continuance as to enable any great country to acquire capital sufficient for all those three purposes. who gave in exchange for it something else for which they found a Adam Smith ElecBook Classics . according to all accounts. the wealthiest. in the same manner. and of the ancient state of Indostan. Even those three countries. to monopolize to themselves their whole exportation trade. and the Chinese have never excelled in foreign commerce. indeed. we give credit to the wonderful accounts of the wealth and cultivation of China. of those of ancient Egypt. by thus giving a monopoly to such of their own countrymen as could manufacture the like goods. This would be still more the case were they to attempt. The ancient Egyptians had a superstitious antipathy to the sea. to stop the importation of European manufactures. are chiefly renowned for their superiority in agriculture and manufactures. belong many of them to merchants who reside in the mother country. that ever were in the world. The course of human prosperity. 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.The Wealth of Nations: Book 2 487 particularly in Virginia and Maryland. Were the Americans. The greater part of the surplus produce of all those three countries seems to have been always exported by foreigners. and would obstruct instead of promoting the progress of their country towards real wealth and greatness. unless perhaps. divert any considerable part of their capital into this employment.

It comprehends both the inland and the coasting trade. The carrying trade is employed in transacting the commerce of foreign countries. frequently gold and silver. too. may be reduced to three different sorts. 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 Adam Smith ElecBook Classics . and selling in another. it generally brings back in return at least an equal value of other commodities. generally replaces by every such operation two distinct capitals that had both been employed in the agriculture or manufactures of that country. The home trade. or in carrying the surplus produce of one to another. it necessarily replaces by every such operation two distinct capitals which had both been employed in supporting productive labour. according to the different sorts of wholesale trade in which any part of it is employed. the foreign trade of consumption. and the carrying trade. and wholesale trade. and add a greater or smaller value to the annual produce of its land and labour. is very great. the produce of the industry of that country. according to the different proportions in which it is employed in agriculture. The foreign trade of consumption is employed in purchasing foreign goods for home consumption.The Wealth of Nations: Book 2 488 demand there. When it sends out from the residence of the merchant a certain value of commodities. The difference. All wholesale trade. The capital which is employed in purchasing in one part of the country in order to sell in another the produce of the industry of that country. The home trade is employed in purchasing in one part of the same country. When both are the produce of domestic industry. manufactures. and thereby enables them to continue that employment. all buying in order to sell again by wholesale.

The returns of the foreign trade of consumption seldom come in before the end of the year. employed in the home trade will sometimes make twelve operations. The other is a Portuguese one. when this purchase is made with the produce of domestic industry. But the returns of the foreign trade of consumption are very seldom so quick as those of the home trade.The Wealth of Nations: Book 2 489 them to continue that support. and sometimes three or four times in the year. two distinct capitals. The returns of the home trade generally come in before the end of the year. and brings back English corn and manufactures to Edinburgh. therefore. Though the returns. The capital which sends Scotch manufactures to London. If the capitals are equal. The capital which sends British goods to Portugal. replaces too. of the foreign trade of consumption should be as quick as those of the home trade. the one will give four-and-twenty times more encouragement and support to the industry of the country than the other. by every such operation. the capital employed in it will give but one half the encouragement to the industry or productive labour of the country. necessarily replaces by every such operation. therefore. replaces by every such operation only one British capital. before a capital employed in the foreign trade of consumption has made one. two British capitals which had both been employed in the agriculture or manufactures of Great Britain. Adam Smith ElecBook Classics . therefore. or be sent out and returned twelve times. and brings back Portuguese goods to Great Britain. and sometimes not till after two or three years. but one of them only is employed in supporting domestic industry. The capital employed in purchasing foreign goods for home consumption. A capital.

the case of war and conquest excepted. and the third buys those imported by the second. not with British manufactures. but the final returns of the whole capital employed in the trade will be just as slow as ever. which had been purchased with British manufactures. for.The Wealth of Nations: Book 2 490 The foreign goods for home consumption may sometimes be purchased. the merchant must wait for the returns of two distinct foreign trades before he can employ the same capital in re-purchasing a like quantity of British manufactures. in order to export them again. the same as those of one employed in the most direct trade of the same kind. are. These last. or after two or more different exchanges. of a capital employed in such a roundabout foreign trade of consumption. therefore. he must wait for the returns of three. however. either immediately. not with the produce of domestic industry. If those two or three distinct foreign trades should happen to be carried on by two or three distinct merchants. each merchant indeed will in this case receive the returns of his own capital more quickly. in every respect. as they must depend upon the returns of two or three distinct foreign trades. but with the sugar and rum of Jamaica which had been purchased with those manufactures. If the flax and hemp of Riga are purchased with the tobacco of Virginia. The effects. Whether the whole capital employed in such a round-about trade belong to Adam Smith ElecBook Classics . must have been purchased either immediately with the produce of domestic industry. of whom the second buys the goods imported by the first. or with something else that had been purchased with it. but with some other foreign goods. except that the final returns are likely to be still more distant. If the tobacco of Virginia had been purchased. foreign goods can ever be acquired but in exchange for something that had been produced at home.

must have been purchased with something that either was the produce of the industry of the country. and will replace just as fast or just as slow the capital which is immediately employed in supporting that productive labour. or in the encouragement and support which it can give to the productive labour of the country from which it is carried on. therefore. like the tobacco of Virginia.The Wealth of Nations: Book 2 491 one merchant or to three can make no difference with regard to the country. as the productive labour of the country is concerned. for example. The whole capital employed. or with the silver of Peru. Three times a greater capital must in both cases be employed in order to exchange a certain value of British manufactures for a certain quantity of flax and hemp than would have been necessary had the manufactures and the flax and hemp been directly exchanged for one another. though it may with regard to the particular merchants. Whatever be the foreign commodity with which the foreign goods for home consumption are purchased. If they are purchased with the gold of Brazil. in such a round-about foreign trade of consumption will generally give less encouragement and support to the productive labour of the country than an equal capital employed in a more direct trade of the same kind. So far. it can occasion no essential difference either in the nature of the trade. therefore. It seems even to have one advantage over any Adam Smith ElecBook Classics . this gold and silver. the foreign trade of consumption which is carried on by means of gold and silver has all the advantages and all the inconveniences of any other equally round-about foreign trade of consumption. or that had been purchased with something else that was so.

therefore. When. The profits only return regularly to Holland. Their freight is much less. on account of their small bulk and great value. Whether. indeed.The Wealth of Nations: Book 2 492 other equally roundabout foreign trade. The transportation of those metals from one place to another. Though it may replace by every operation two distinct capitals. An equal quantity of foreign goods. That part of the capital of any country which is employed in the carrying trade is altogether withdrawn from supporting the productive labour of that particular country. be supplied more completely and at a smaller expense than in any other. in any other way. but one of them in supporting that of Poland. is less expensive than that of almost any other foreign goods of equal value. replaces by every such operation two capitals. and no goods. by the intervention of gold and silver. besides. The demand of the country may frequently. neither of which had been employed in supporting the productive labour of Holland. The capital of the Dutch merchant. are less liable to suffer by the carriage. yet neither of them belongs to that particular country. by the continual exportation of those metals. to support that of some foreign countries. and brings back the fruits and wines of Portugal to Poland. than by that of any other foreign goods. which carries the corn of Poland to Portugal. the carrying trade of any particular Adam Smith ElecBook Classics . may frequently be purchased with a smaller quantity of the produce of domestic industry. in this manner. I shall have occasion to examine at great length hereafter. and the other that of Portugal. a trade of this kind is likely to impoverish the country from which it is carried on. and their insurance not greater. and constitute the whole addition which this trade necessarily makes to the annual produce of the land and labour of that country.

and puts into motion. though the ports are at no great distance. for example. and partly upon the distance of the ports between which they are to be carried. for example. however. that part of the capital employed in it which pays the freight is distributed among. the people of such countries being the carriers to other countries. when carried on by coasting vessels. or even in the home trade. employ his capital in transacting the commerce of Poland and Portugal. therefore. It is upon this account. The trade itself has probably derived its name from it. carried it on in this manner. The number of sailors and shipping which any particular capital can employ does not depend upon the nature of the trade. The coal trade from Newcastle to London. not in Dutch. To force. It does not. chiefly upon the former of those two circumstances. A Dutch merchant may. seem essential to the nature of the trade that it should be so. a certain number of productive labourers of that country. a larger share of the capital of any Adam Smith ElecBook Classics . But the same capital may employ as many sailors and shipping. as it could in the carrying trade. It may be presumed that he actually does so upon some particular occasions. by extraordinary encouragements. employs more shipping than all the carrying trade of England. Almost all nations that have had any considerable share of the carrying trade have. either in the foreign trade of consumption. in fact. but in British bottoms. however. by carrying part of the surplus produce of the one to the other. but partly upon the bulk of the goods in proportion to their value. that the carrying trade has been supposed peculiarly advantageous to such a country as Great Britain. of which the defence and security depend upon the number of its sailors and shipping.The Wealth of Nations: Book 2 493 country is carried on with the ships and sailors of that country.

and increase the value of its annual produce more than an equal capital employed in the foreign trade of consumption: and the capital employed in this latter trade has in both these respects a still greater advantage over an equal capital employed in the carrying trade.The Wealth of Nations: Book 2 494 country into the carrying trade than what would naturally go to it will not always necessarily increase the shipping of that country. The surplus part of them. woollens. therefore. the fund from which all taxes must ultimately be paid. and hardware 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. the power of every country must always be in proportion to the value of its annual produce. The capital. nor to the carrying trade above either of the other two. The land and labour of Great Britain produce generally more corn. therefore. and so far as power depends upon riches. When the produce of any particular branch of industry exceeds what the demand of the country requires. The riches. It ought neither to force nor to allure into either of those two channels a greater share of the capital of the country than what would naturally flow into them of its own accord. But the great object of the political economy of every country is to increase the riches and power of that country. employed in the home trade of any country will generally give encouragement and support to a greater quantity of productive labour in that country. must be sent Adam Smith ElecBook Classics . It ought. Without such exportation a part of the productive labour of the country must cease. therefore. and the value of its annual produce diminish. the surplus must be sent abroad and exchanged for something for which there is a demand at home.

are advantageous situations for industry. could not be sent abroad and exchanged for something more in demand at home. which are part of the produce of the land and labour of Great Britain. more than fourteen thousand. Those goods. and being deprived of that which they had abroad. and the banks of all navigable rivers. the importation of them must cease immediately. The neighbourhood of the sea-coast. having no market at home. and exchanged for something for which there is a demand at home. therefore may. It is only by means of such exportation that this surplus can acquire a value sufficient to compensate the labour and expense of producing it. be as necessary for supporting the productive labour of the country. as the most direct. the surplus part of them must be sent abroad again and exchanged for something more in demand at home. If the remaining eighty-two thousand.The Wealth of Nations: Book 2 495 abroad. But the demand of Great Britain does not require. therefore. When the foreign goods which are thus purchased with the surplus produce of domestic industry exceed the demand of the home market. who are at present employed in preparing the goods with which these eighty-two thousand hogsheads are annually purchased. The most round-about foreign trade of consumption. Adam Smith ElecBook Classics . and with it the productive labour of all those inhabitants of Great Britain. and the value of its annual produce. About ninety-six thousand hogsheads of tobacco are annually purchased in Virginia and Maryland with a part of the surplus produce of British industry. must cease to be produced. only because they facilitate the exportation and exchange of such surplus produce for something else which is more in demand there. upon some occasions. perhaps.

in a great measure. accordingly. in proportion to the extent of the land and the number of its inhabitants. and the final returns of those trades are generally used or consumed in Great Britain. though what commonly passes for the carrying trade of England will frequently. perhaps.The Wealth of Nations: Book 2 496 When the capital stock of any country is increased to such a degree that it cannot be all employed in supplying the consumption and supporting the productive labour of that particular country. make. the principal branches of what is properly the carrying trade of Great Britain. Such are. but it does not seem to be the natural cause of it. has. The carrying trade is the natural effect and symptom of great national wealth. perhaps. Those goods are generally purchased either immediately with the produce of British industry. to different European markets. The trade which is carried on in British bottoms between the different ports of the Mediterranean. is likewise supposed to have a considerable share of it. the surplus part of it naturally disgorges itself into the carrying trade. and of America. and some trade of the same kind carried on by British merchants between the different ports of India. perhaps the second richest country of Europe. by far the richest country in Europe. Those statesmen who have been disposed to favour it with particular encouragements seem to have mistaken the effect and symptom for the cause. Holland. England. or with something else which had been purchased with that produce. The extent of the home trade and of the capital which can be Adam Smith ElecBook Classics . the greatest share of the carrying trade of Europe. and is employed in performing the same offices to other countries. be found to be no more than a round-about foreign trade of consumption. the trades which carry the goods of the East and West Indies.

Its possible extent. In countries. a very simple observation may satisfy us that the result of them must be Adam Smith ElecBook Classics . and farming and improving the most direct roads to a splendid fortune. have within these few years amused the public with most magnificent accounts of the profits to be made by the cultivation and improvement of land. the capitals of individuals will naturally be employed in the manner most advantageous to the whole society. therefore. never enter into his thoughts.The Wealth of Nations: Book 2 497 employed in it. in every corner of it. The different quantities of productive labour which it may put into motion. seem to have no superiority over those of other employments in any part of Europe. Projectors. however. according as it is employed in one or other of those different ways. in manufactures. therefore. by the value of the surplus produce of the whole country and of what can be purchased with it: that of the carrying trade by the value of the surplus produce of all the different countries in the world. The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture. indeed. Without entering into any particular discussion of their calculations. where agriculture is the most profitable of all employments. The profits of agriculture. or in some particular branch of the wholesale or retail trade. is in a manner infinite in comparison of that of the other two. and is capable of absorbing the greatest capitals. produce of the land and labour of the society. 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 another: that of the foreign trade of consumption. and the different values which it may add to the annual.

however. perhaps. has not. much good land still remains uncultivated. Agriculture.The Wealth of Nations: Book 2 498 false. therefore. sometimes from no capital. Adam Smith ElecBook Classics . I shall endeavour to explain at full length in the two following books. and the greater part of what is cultivated is far from being improved to the degree of which it is capable. occurred in Europe during the course of the present century. We see every day the most splendid fortunes that have been acquired in the course of a single life by trade and manufacturers. 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 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. is almost everywhere capable of absorbing a much greater capital than has ever yet been employed in it. A single instance of such a fortune acquired by agriculture in the same time. and from such a capital. In all the great countries of Europe. frequently from a very small capital.

Book Three Of the Different Progress of Opulence in Different Nations .

The gains of both are mutual and reciprocal. and the division of labour is in this. We must not. or of some sort of paper which represents money. The town. The country supplies the town with the means of subsistence and the materials of manufacture. however. with the produce of a much smaller quantity of their own labour.The Wealth of Nations: Book 3 500 Chapter I T Of the Natural Progress of Opulence he great commerce of every civilised society is that carried on between the inhabitants of the town and those of the country. The greater the number and revenue of ElecBook Classics Adam Smith . advantageous to all the different persons employed in the various occupations into which it is subdivided. either immediately. imagine that the gain of the town is the loss of the country. and it is there that the inhabitants of the country exchange it for something else which is in demand among them. The town affords a market for the surplus produce of the country. or what is over and above the maintenance of the cultivators. upon this account. than they must have employed had they attempted to prepare them themselves. The inhabitants of the country purchase of the town a greater quantity of manufactured goods. The town repays this supply by sending back a part of the manufactured produce to the inhabitants of the country. It consists in the exchange of rude for manufactured produce. or by the intervention of money. in which there neither is nor can be any reproduction of substances. may very properly be said to gain its whole wealth and subsistence from the country. as in all other cases.

But the price of the latter must generally not only pay the expense of raising and bringing it to market. It is the surplus produce of the country only. necessarily. or what is over and above the maintenance of the cultivators. therefore. Among all the absurd speculations that have been propagated concerning the balance of trade. over and above the ordinary profits of agriculture. the ordinary profits of agriculture to the farmer. Compare the cultivation of the lands in the neighbourhood of any considerable town with that of those which lie at some distance from it. which lies in the neighbourhood of the town. and they have. so the industry which procures the former must necessarily be prior to that which ministers to the latter.The Wealth of Nations: Book 3 501 the inhabitants of the town. in the price of what they sell. and the more extensive that market. besides. in the nature of things. be prior to the increase of the town. gain. The proprietors and cultivators of the country. must. the more extensive is the market which it affords to those of the country. The cultivation and improvement of the country. therefore. or the town by that with the country which maintains it. that constitutes Adam Smith ElecBook Classics . and you will easily satisfy yourself how much the country is benefited by the commerce of the town. which furnishes only the means of conveniency and luxury. prior to conveniency and luxury. but afford. As subsistence is. it is always the more advantageous to a great number. The corn which grows within a mile of the town sells there for the same price with that which comes from twenty miles distance. too. it has never been pretended that either the country loses by its commerce with the town. which affords subsistence. the whole value of this carriage in the price of what they buy. the whole value of the carriage of the like produce that is brought from more distant parts.

promoted by the natural inclinations of man. though it forms no exception from the general rule. or even from the territory to which it belongs. by giving great credits in distant countries to men with whose character and situation he can seldom be thoroughly acquainted. though not in every particular country. the towns could nowhere have increased beyond what the improvement and cultivation of the territory in which they were situated could support. may not always derive its whole subsistence from the country in its neighbourhood. the tranquillity of mind which it promises. but from very distant countries. and his fortune is much less liable to accidents than that of the trader. If human institutions had never thwarted those natural inclinations. which can therefore increase only with the increase of this surplus produce. which is fixed in the improvement of his land. in every particular country. but to the more uncertain elements of human folly and injustice. till such time.The Wealth of Nations: Book 3 502 the subsistence of the town. indeed. as the whole of that territory was completely cultivated and improved. on the contrary. is. and wherever the injustice of human laws Adam Smith ElecBook Classics . has occasioned considerable variations in the progress of opulence in different ages and nations. The beauty of the country besides. and this. The capital of the landlord. not only to the winds and the waves. seems to be as well secured as the nature of human affairs can admit of. The man who employs his capital in land has it more under his view and command. most men will choose to employ their capitals rather in the improvement and cultivation of land than either in manufactures or in foreign trade. who is obliged frequently to commit it. at least. Upon equal. That order of things which necessity imposes in general. The town. or nearly equal profits. the pleasures of a country life.

too. together with many other artificers and retailers. and bricklayers. indeed. shoemakers. The butcher. and as their residence is not. and as to cultivate the ground was the original destination of man. necessarily tied down to a precise spot. The town is a continual fair or market. and tailors are people whose service the farmer has frequent occasion for. wheelwrights. carpenters. have charms that more or less attract everybody. stand occasionally in need of the assistance of one another. and the means of their subsistence. they naturally settle in the neighbourhood of one another. and thus form a small town or village. to which the inhabitants of the country resort in order to exchange their rude for manufactured produce. so in every stage of his existence he seems to retain a predilection for this primitive employment. masons.The Wealth of Nations: Book 3 503 does not disturb it. The inhabitants of the town and those of the country are mutually the servants of one another. and who contribute still further to augment the town. the brewer. The quantity of the finished work which they sell to the inhabitants of the country necessarily regulates the quantity of the materials and provisions which they buy. like that of the farmer. and the baker soon join them. necessary or useful for supplying their occasional wants. Without the assistance of some artificers. Such artificers. Smiths. and ploughwrights. tanners. the independency which it really affords. It is this commerce which supplies the inhabitants of the town both with the materials of their work. Neither their employment nor subsistence. the cultivation of land cannot be carried on but with great inconveniency and continual interruption. can augment but in proportion to the augmentation of the demand from the country Adam Smith ElecBook Classics . therefore.

where uncultivated land is still to be had upon easy terms. he does not. The smith erects some sort of iron. He feels that an artificer is the servant of his customers. From artificer he becomes planter. In countries. and this demand can augment only in proportion to the extension of improvement and cultivation. and derives his necessary subsistence from the labour of his own family. and neither the large wages nor the easy subsistence which that country affords to artificers can bribe him rather to work for other people than for himself. the weaver some sort of linen or woollen manufactory. Those different manufactures come. Had human institutions. in process of time. therefore. is really a master. but that a planter who cultivates his own land.The Wealth of Nations: Book 3 504 for finished work. attempt to establish with it a manufacture for more distant sale. on the contrary. Adam Smith ElecBook Classics . every artificer who has acquired more stock than he can employ in the occasional jobs of the neighbourhood endeavours to prepare work for more distant sale. to be gradually subdivided. or none that can be had upon easy terms. never disturbed the natural course of things. and independent of all the world. in North America. but employs it in the purchase and improvement of uncultivated land. no manufactures for distant sale have ever yet been established in any of their towns. from whom he derives his subsistence. be consequential. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country. in every political society. In our North American colonies. the progressive wealth and increase of the towns would. where there is either no uncultivated land. and in proportion to the improvement and cultivation of the territory or country.

being at all times more within his view and command. or that for which there is no demand at home. the surplus part both of the rude and manufactured produce. upon equal or nearly equal profits. in order that the whole stock of the society may be employed in more useful purposes. naturally preferred to foreign commerce. for the same reason that agriculture is naturally preferred to manufactures. and to manufacture in the completest manner the whole of its rude produce.The Wealth of Nations: Book 3 505 and thereby improved and refined in a great variety of ways. that of China and Indostan. is more secure than that of the foreign merchant. The wealth of ancient Egypt. The progress of our North American and West Indian colonies would have been much less rapid had no capital but what belonged to themselves been employed in exporting their surplus produce. of every society. must be sent abroad in order to be exchanged for something for which there is some demand at home. manufactures are. which carries this surplus produce abroad. In every period. indeed. there is even a considerable advantage that rude produce should be exported by a foreign capital. But whether the capital. sufficiently demonstrate that a nation may attain a very high degree of opulence though the greater part of its exportation trade be carried on by foreigners. and which it is therefore unnecessary to explain any further. As the capital of the landlord or farmer is more secure than that of the manufacturer. the Adam Smith ElecBook Classics . be a foreign or a domestic one is of very little importance. According to the natural course of things. If the society has not acquired sufficient capital both to cultivate all its lands. so the capital of the manufacturer. therefore. which may easily be conceived. In seeking for employment to a capital.

But though this natural order of things must have taken place in some degree in every such society. before they could well think of employing themselves in foreign commerce. been. or such as were fit for distant sale. and last of all to foreign commerce. in all the modern states of Europe. The foreign commerce of some of their cities has introduced all their finer manufactures. and which remained after that government was greatly altered. Some of their lands must have been cultivated before any considerable towns could be established. Adam Smith ElecBook Classics . been in some degree observed. first. it has. I believe. and manufactures and foreign commerce together have given birth to the principal improvements of agriculture. The manners and customs which the nature of their original government introduced. directed to agriculture. afterwards to manufactures. entirely inverted. necessarily forced them into this unnatural and retrograde order. and some sort of coarse industry of the manufacturing kind must have been carried on in those towns. This order of things is so very natural that in every society that had any territory it has always.The Wealth of Nations: Book 3 506 greater part of the capital of every growing society is. in many respects.

During the continuance of those confusions. was left without a proprietor. sunk into the lowest state of poverty and barbarism. The rapine and violence which the barbarians exercised against the ancient inhabitants interrupted the commerce between the towns and the country. is considered as the means only of ElecBook Classics Adam Smith . which had enjoyed a considerable degree of opulence under the Roman empire. though a great. the chiefs and principal leaders of those nations acquired or usurped to themselves the greater part of the lands of those countries. This original engrossing of uncultivated lands. When land. and the country was left uncultivated. The towns were deserted. A great part of them was uncultivated. whether cultivated or uncultivated. The law of primogeniture hindered them from being divided by succession: the introduction of entails prevented their being broke into small parcels by alienation. and the greater part by a few great proprietors.The Wealth of Nations: Book 3 507 Chapter II Of the Discouragement of Agriculture in the ancient State of Europe after the Fall of the Roman Empire W hen the German and Scythian nations overran the western provinces of the Roman empire. and broke into small parcels either by succession or by alienation. and the western provinces of Europe. might have been but a transitory evil. but no part of them. like movables. All of them were engrossed. They might soon have been divided again. the confusions which followed so great a revolution lasted for several centuries.

not of subsistence merely. Adam Smith ElecBook Classics . and consequently the security of the monarchy. His tenants were his subjects. That the power. though not always at their first institution. therefore. not immediately. for the same reason that it has generally taken place in that of monarchies. but upon some plain and evident difference which can admit of no dispute. between male and female. To divide it was to ruin it. To which of them so important a preference shall be given must be determined by some general rule. like them. and their leader in war. and to expose every part of it to be oppressed and swallowed up by the incursions of its neighbours.The Wealth of Nations: Book 3 508 subsistence and enjoyment. Among the children of the same family. The security of a landed estate. who made no more distinction between elder and younger. but in process of time. among all the children of the family. came to take place. indeed. But when land was considered as the means. in the inheritance of lands than we do in the distribution of movables. it must descend entire to one of the children. therefore. The law of primogeniture. but of power and protection. and in some respects their legislator in peace. the natural law of succession divides it. in the succession of landed estates. In those disorderly times every great landlord was a sort of petty prince. may not be weakened by division. He made war according to his own discretion. it was thought better that it should descend undivided to one. the protection which its owner could afford to those who dwelt on it. This natural law of succession accordingly took place among the Romans. founded not upon the doubtful distinctions of personal merit. He was their judge. depended upon its greatness. of an of whom the subsistence and enjoyment may be supposed equally dear to the father. and sometimes against his sovereign. frequently against his neighbours.

and that of age. The right of primogeniture. Entails are the natural consequences of the law of primogeniture. and to hinder any part of the original estate from being carried out of the proposed line either by gift. Neither their substitutions nor fideicommisses bear any resemblance to entails. beggars all the rest of the children. When great landed estates were a sort of principalities. They were altogether unknown to the Romans. entails might not be unreasonable. and when all other things are equal. though some French lawyers have thought proper to dress the modern institution in the language and garb of those ancient ones.The Wealth of Nations: Book 3 509 there can be no indisputable difference but that of sex. and of what is called lineal succession. still continues to be respected. The male sex is universally preferred to the female. and which could alone render them reasonable. either by the folly. or devise. Like what are called the fundamental laws of some monarchies. they might frequently hinder the Adam Smith ElecBook Classics . are no more. In the present state of Europe. in order to enrich one. In every other respect. and as of all institutions it is the fittest to support the pride of family distinctions. Laws frequently continue in force long after the circumstances which first gave occasion to them. however. nothing can be more contrary to the real interest of a numerous family than a right which. Hence the origin of the right of primogeniture. the proprietor of a single acre of land is as perfectly secure of his possession as the proprietor of a hundred thousand. it is still likely to endure for many centuries. of which the law of primogeniture first gave the idea. the elder everywhere takes place of the younger. They were introduced to preserve a certain lineal succession. or by the misfortune of any of its successive owners. or alienation.

in this manner. and that order having usurped one unjust advantage over the rest of their fellow citizens. Entails are thought necessary for maintaining this exclusive privilege of the nobility to the great offices and honours of their country. is said to abhor perpetuities. indeed. when small as well as great estates derive their security from the laws of their country. are still respected through the greater part of Europe. Great tracts of uncultivated land were. but that the property of the present generation should be restrained and regulated according to the fancy of those who died perhaps five hundred years ago. part of the whole lands of the country are at present supposed to be under strict entail. however. and they are accordingly more restricted there than in any other European monarchy. however. 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. the supposition that every successive generation of men have not an equal right to the earth. lest their poverty should render it ridiculous. But in the present state of Europe. the great proprietor was sufficiently Adam Smith ElecBook Classics . It seldom happens. They are founded upon the most absurd of all suppositions. that a great proprietor is a great improver. and to all that it possesses. it is thought reasonable that they should have another. not only engrossed by particular families. Entails. In Scotland more than one-fifth. The common law of England. in those countries particularly in which noble birth is a necessary qualification for the enjoyment either of civil or military honours. nothing can be more completely absurd. perhaps more than one-third. though even England is not altogether without them.The Wealth of Nations: Book 3 510 security of thousands from being endangered by the caprice or extravagance of one man.

he generally found it more profitable to employ his annual savings in new purchases than in the improvement of his old estate.The Wealth of Nations: Book 3 511 employed in defending his own territories. is very seldom capable. he often wanted the inclination. and finds that if he was to improve his whole estate in the same manner. If the expense of his house and person either equalled or exceeded his revenue. The turn of mind which this habit naturally forms follows him when he comes to think of the improvement of land. even though naturally frugal. as it did very frequently. he would be a bankrupt before he had finished the tenth part of it. or in extending his jurisdiction and authority over those of his neighbours. are objects which from his infancy he has been accustomed to have some anxiety about. at ten times the expense which the land is worth after all his improvements. He had no leisure to attend to the cultivation and improvement of land. There still remain in both parts of the United Kingdom some great estates which have continued without interruption in the hands of the same family since the times of Adam Smith ElecBook Classics . To improve land with profit. If he was an economist. The elegance of his dress. The situation of such a person naturally disposes him to attend rather to ornament which pleases his fancy than to profit for which he has so little occasion. like all other commercial projects. he had no stock to employ in this manner. When the establishment of law and order afforded him this leisure. He embellishes perhaps four or five hundred acres in the neighbourhood of his house. and he has little taste for any other. of his house. of which a man born to a great fortune. and almost always the requisite abilities. and household furniture. of his equipage. requires an exact attention to small savings and small gains.

They were not. the cattle. and he could take it from them at pleasure. that. They could marry. Poland. Moravia. In the ancient state of Europe. occupied his own lands. This species of slavery still subsists in Russia. Whatever cultivation and improvement could be carried on by means of such slaves was properly carried on by their master. and cultivated them by his own bondmen. Bohemia. he was liable to some penalty. or even in our West Indian colonies. It was for his benefit. therefore. be sold with it. and the instruments of husbandry were all his. Compare the present condition of those estates with the possessions of the small proprietors in their neighbourhood. provided it was with the consent of their master. Hungary. If little improvement was to be expected from such great proprietors. and he could not afterwards dissolve the marriage by selling the man and wife to different persons. though generally but to a small one. The seed. It was properly the proprietor himself. in this case.The Wealth of Nations: Book 3 512 feudal anarchy. still less was to be hoped for from those who occupied the land under them. and you will require no other argument to convince you how unfavourable such extensive property is to improvement. Such slaves could acquire nothing but their daily maintenance. It was at his expense. If he maimed or murdered any of them. capable of acquiring property. the occupiers of land were all tenants at will. They could. and other parts of Adam Smith ElecBook Classics . They were all or almost all slaves. however. therefore. but not separately. They were supposed to belong more directly to the land than to their master. but their slavery was of a milder kind than that known among the ancient Greeks and Romans. Whatever they acquired was acquired to their master.

cannot. therefore. The experience of all ages and nations. can have no other interest but to eat as much. The pride of man makes him love to domineer. and to labour as little as possible. Speaking of the ideal republic described in the laws of Plato. It is only in the western and southwestern provinces of Europe that it has gradually been abolished altogether. and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors. The planting of sugar and tobacco can afford the expense of slave-cultivation. demonstrates that the work done by slaves.The Wealth of Nations: Book 3 513 Germany. though it appears to cost only their maintenance. a territory of boundless extent and fertility. is remarked by both Pliny and Columella. Wherever the law allows it. he will generally prefer the service of slaves to that of freemen. of which the principal produce is corn. But if great improvements are seldom to be expected from great proprietors. like the plains of Babylon. in the present times. the far greater part of the Adam Smith ElecBook Classics . how unprofitable it became to the master when it fell under the management of slaves. to maintain five thousand idle men (the number of warriors supposed necessary for its defence) together with their women and servants. it seems. I believe. The raising of corn. A person who can acquire no property. In ancient Italy. how much the cultivation of corn degenerated. Whatever work he does beyond what is sufficient to purchase his own maintenance can be squeezed out of him by violence only. would require. is in the end the dearest of any. In the time of Aristotle it had not been much better in ancient Greece. and not by any interest of his own. they are least of all to be expected when they employ slaves for their workmen. In the English colonies. he says. and the nature of the work can afford it.

after setting aside what was judged necessary for keeping up the stock. in proportion to that of whites. but sugar can afford it still better than tobacco. The late resolution of the Quakers in Pennsylvania to set at liberty all their negro slaves may satisfy us that their number cannot be very great. as has already been observed. They have been so long in disuse in England that at present I know no English name for them. In our sugar colonies. the whole work is done by slaves. Coloni partiarii. There is. such a resolution could never have been agreed to. the whole stock. They are called in Latin. or was turned out of the farm. Adam Smith ElecBook Classics . though inferior to those of sugar. cattle. in our sugar than in our tobacco colonies. Land occupied by such tenants is properly cultivated at the expense of the proprietor as much as that occupied by slaves. Both can afford the expense of slave-cultivation. Had they made any considerable part of their property. The proprietor furnished them with the seed. however. which was restored to the proprietor when the farmer either quitted. The produce was divided equally between the proprietor and the farmer. and instruments of husbandry. The number of negroes accordingly is much greater. The profits of a sugar-plantation in any of our West Indian colonies are generally much greater than those of any other cultivation that is known either in Europe or America. and the profits of a tobacco plantation. one very essential difference between them. on the contrary. and in our tobacco colonies a very great part of it.The Wealth of Nations: Book 3 514 work is done by freemen. necessary for cultivating the farm. are superior to those of corn. in short. To the slave cultivators of ancient times gradually succeeded a species of farmers known at present in France by the name of metayers.

to have been rather a pious exhortation than a law to which exact obedience was required from the faithful. The Church of Rome claims great merit in it. The time and manner. till it was gradually abolished by the joint operation of the two interests above mentioned. however. however. be the interest even of this last species Adam Smith ElecBook Classics . they have a plain interest that the whole produce should be as great as possible. always jealous of the great lords. who can acquire nothing but his maintenance. have been what the French called a metayer. could cultivate it only by means of what the landlord advanced to him. Alexander III published a bull for the general emancipation of slaves. being freemen.The Wealth of Nations: Book 3 515 Such tenants. in which so important a revolution was brought about is one of the most obscure points in modern history. gradually encouraged their villains to make upon their authority. It is probable that it was partly upon account of this advantage. and having a certain proportion of the produce of the land. are capable of acquiring property. It could never. Slavery continued to take place almost universally for several centuries afterwards. that of the proprietor on the one hand. A villain enfranchised. and that of the sovereign on the other. on the contrary. having no stock of his own. It seems. and which seem at last to have been such as rendered this species of servitude altogether inconvenient. and partly upon account of the encroachments which the sovereign. consults his own ease by making the land produce as little as possible over and above that maintenance. in order that their own proportion may be so. therefore. and at the same time allowed to continue in possession of the land. and it is certain that so early as the twelfth century. and must. A slave. that tenure in villanage gradually wore out through the greater part of Europe. however.

was long extremely Adam Smith ElecBook Classics . farmers properly so called. Those ancient English tenants. In France. is found to be a very great hindrance to improvement. any part of the little stock which they might save from their own share of the produce. before the expiration of the lease. in the other they share them with their landlord. who laid out nothing. paying a rent certain to the landlord. which amounted to one half must have been an effectual bar to it. because in the one case they get the whole profits to themselves. They are called steel-bow tenants. When such farmers have a lease for a term of years. the proprietors complain that their metayers take every opportunity of employing the master’s cattle rather in carriage than in cultivation. which is but a tenth of the produce. with a large profit. where five parts out of six of the whole kingdom are said to be still occupied by this species of cultivators. To this species of tenancy succeeded.The Wealth of Nations: Book 3 516 of cultivators to lay out. they may sometimes find it for their interest to lay out part of their capital in the further improvement of the farm. though by very slow degrees. was to get one half of whatever it produced. because the lord. who are said by Chief Baron Gilbert and Doctor Blackstone to have been rather bailiffs of the landlord than farmers properly so called. in the further improvement of the land. 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. This species of tenants still subsists in some parts of Scotland. however. who cultivated the land with their own stock. because they may sometimes expect to recover it. A tax. The tithe. The possession even of such farmers. but it could never be his interest to mix any part of his own with it. were probably of the same kind. therefore.

in England. It did not always reinstate them in the possession of the land. In England. and still is so in many parts of Europe. but gave them damages which never amounted to the real loss. by which the tenant recovers. in the modern practice.The Wealth of Nations: Book 3 517 precarious. the country perhaps of Europe where the yeomanry has always been most respected. when the landlord has occasion to sue for the possession of the land. If they were turned out illegally by the violence of their master. not damages only but possession. except in England. They could before the expiration of their term be legally outed of their lease by a new purchaser. and trusting that the honour of his landlord would take no advantage of so important an improvement. I believe. the security of the tenant is equal to that of the proprietor. There is. a lease for life of forty shillings a year value is a freehold. therefore. nowhere in Europe. the action by which they obtained redress was extremely imperfect. even by the fictitious action of a common recovery. Even in England. but sues in the name of his tenant by the Writ of Ejectment. This action has been found so effectual a remedy that. the Writ of Right or the Writ of Entry. it was not till about the 14th of Henry VII that the action of ejectment was invented. and in which his claim is not necessarily concluded by the uncertain decision of a single assize. In England. any instance of the tenant building upon the land of which he had no lease. besides. he seldom makes use of the actions which properly belong to him as landlord. the whole order becomes respectable to their landlords on account of the political consideration which this gives them. and as a great part of the yeomanry have freeholds of this kind. Those laws and customs so favourable Adam Smith ElecBook Classics . and entitles the lessee to vote for a Member of Parliament.

A late Act of Parliament has. Its beneficial influence. In Scotland. been lately extended to twenty-seven. and Adam Smith ElecBook Classics . for example. that no lease granted by any of his predecessors should hinder him from enjoying. It was for his interest.The Wealth of Nations: Book 3 518 to the yeomanry have perhaps contributed more to the present grandeur of England than all their boasted regulations of commerce taken together. therefore. the term of their security was still limited to a very short period. a law of James II. The proprietors of land were anciently the legislators of every part of Europe. the full value of his land. The law which secures the longest leases against successors of every kind is. so far as I know. Avarice and injustice are always short-sighted. a period still too short to encourage the tenant to make the most important improvements. after it was found convenient to secure tenants both against heirs and purchasers. and they did not foresee how much this regulation must obstruct improvement. It has in that country. In other parts of Europe. though they are still by much too strait. they had imagined. as no leasehold gives a vote for a Member of Parliament. to nine years from the commencement of the lease. somewhat slackened their fetters. in France. the heirs of entail being generally restrained from letting leases for any long term of years. peculiar to Great Britain. during a long term of years. the yeomanry are upon this account less respectable to their landlords than in England. indeed. besides. It was introduced into Scotland so early as 1449. in this respect. were all calculated for what they supposed the interest of the proprietor. The laws relating to land. however. frequently for more than one year. has been much obstructed by entails.

it was supposed. but by the use and wont of the manor or barony. were anciently. and had not knowledge enough to foresee how much this must in the end affect their own revenue. The ancient lords.The Wealth of Nations: Book 3 519 thereby hurt in the long-run the real interest of the landlord. at a price regulated by the purveyor. the yeomanry were bound to provide them with horses. which Adam Smith ElecBook Classics . carriages. a servitude which still subsists. In Scotland the abolition of all services not precisely stipulated in the lease has in the course of a few years very much altered for the better the condition of the yeomanry of that country. though with different degrees of oppression in different countries. and provisions. being almost entirely arbitrary. The public services to which the yeomanry were bound were not less arbitrary than the private ones. as it still subsists in France. I believe. besides paying the rent. When the king’s troops. The public taxes to which they were subject were as irregular and oppressive as the services. easily allowed him to tallage. may serve as an example of those ancient tallages. The farmers too. everywhere. which were seldom either specified in the lease. These services. Great Britain is. subjected the tenant to many vexations. It still subsists in France and Germany. was not the only one. I believe. The taille. though extremely unwilling to grant themselves any pecuniary aid to their sovereign. It is a tax upon the supposed profits of the farmer. as they called it their tenants. therefore. bound to perform a great number of services to the landlord. the only monarchy in Europe where the oppression of purveyance has been entirely abolished. or regulated by any precise rule. To make and maintain the high roads. when his household or his officers of any kind passed through any part of the country.

The ancient tenths and fifteenths. The lands cultivated by the farmer must. but that of the one. and whoever rents the lands of another becomes subject to it. with all the liberty and security which law can give. is supposed to dishonour whoever is subject to it. It is his interest. is as a merchant who trades with borrowed money compared with one who trades with his own. little improvement could be expected from the occupiers of land. to appear to have as little as possible. and to degrade him below. not only the rank of a gentleman. must always improve more slowly than that of the other. but drives away an other stock from it. No gentleman. must always improve under great disadvantages. not only hinders the stock which accumulates upon the land from being employed in its improvement. This tax.The Wealth of Nations: Book 3 520 they estimate by the stock that he has upon the farm. therefore. but that of a burgher. and consequently to employ as little as possible in its cultivation. seem. the taille is almost equal to a prohibition of its ever being employed upon the land. on account of the large share of the profits which is consumed by the interest of the loan. compared with the proprietor. nor even any burgher who has stock. That order of people. Should any stock happen to accumulate in the hands of a French farmer. and none in its improvement. so far as they affected the land. to have been taxes of the same nature with the taille. be improved more slowly than those cultivated by the proprietor. so usual in England in former times. Under all these discouragements. besides. This tax. The stock of both may improve. with only equal good conduct. therefore. in the same manner. The farmer. with only equal good conduct. on account of Adam Smith ElecBook Classics . will submit to this degradation.

After small proprietors. whether carried on by the proprietor or by the farmer. little stock is likely to go from any other profession to the improvement of land in the way of farming. perhaps. and in all parts of Europe to the great merchants and master manufacturers. in every country. first.The Wealth of Nations: Book 3 521 the large share of the produce which is consumed in the rent. Even in the present state of Europe. The ancient policy of Europe was. that a man of any considerable stock should quit the superior in order to place himself in an inferior station. inferior to that of a proprietor. but of almost every other part of the Adam Smith ElecBook Classics . not only of corn. even to the better sort of tradesmen and mechanics. Through the greater part of Europe the yeomanry are regarded as an inferior rank of people. therefore. employed in farming have generally been acquired by farming. in some places. It can seldom happen. which seems to have been a very universal regulation. the farmers are said to be not inferior to those of England. and secondly. and which. The station of a farmer besides is. the trade. he might have employed in the further improvement of the land. by the general prohibition of the exportation of corn without a special licence. by the restraints which were laid upon the inland commerce. In the republican governments of Holland and of Berne in Switzerland. the principal improvers. More does perhaps in Great Britain than in any other country. There are more such perhaps in England than in any other European monarchy. rich and great farmers are. however. from the nature of things. had the farmer been proprietor. in which of all others stock is commonly acquired most slowly. therefore. though even there the great stocks which are. over and above all this. unfavourable to the improvement and cultivation of land.

together with some encouragement given to the importation of foreign corn. It has already been observed in what manner the prohibition of the exportation of corn.The Wealth of Nations: Book 3 522 produce of the farm by the absurd laws against engrossers. naturally the most fertile country in Europe. and by the privileges of fairs and markets. it is not perhaps very easy to imagine. regrators. To what degree such restraints upon the inland commerce of this commodity. and forestallers. must have discouraged the cultivation of countries less fertile and less favourably circumstanced. joined to the general prohibition of exportation. and at that time the seat of the greatest empire in the world. obstructed the cultivation of ancient Italy. Adam Smith ElecBook Classics .

and not their lord. The people to whom it is granted as a privilege that they might give away their own daughters in marriage without the consent of their lord. and who found it convenient to build their houses in the neighbourhood of one another. of a very different order of people from the first inhabitants of the ancient republics of Greece and Italy. not more favoured than those of the country. should succeed to their goods. among whom the public territory was originally divided. have been either altogether or very nearly in the same state of villanage ElecBook Classics Adam Smith . They consisted. and that they might dispose of their own effects by will. for the sake of common defence. on the contrary. that upon their death their own children. must. The towns were chiefly inhabited by tradesmen and mechanics. These last were composed chiefly of the proprietors of lands. or very nearly of servile condition. before those grants. the proprietors of land seem generally to have lived in fortified castles on their own estates. and to surround them with a wall. The privileges which we find granted by ancient charters to the inhabitants of some of the principal towns in Europe sufficiently show what they were before those grants. who seem in those days to have been of servile. after the fall of the Roman empire. indeed. After the fall of the Roman empire.The Wealth of Nations: Book 3 523 Chapter III Of the Rise and Progress of Cities and Towns after the Fall of the Roman Empire T he inhabitants of cities and towns were. and in the midst of their own tenants and dependants.

though in other respects of servile. would grant to particular traders. They in return usually paid to their protector a sort of annual poll-tax. sometimes a great lord. Such traders. In those days protection was seldom granted without a valuable consideration. At first. mean set of people. and to have affected only particular individuals during either their lives or the pleasure of their protectors.The Wealth of Nations: Book 3 524 with the occupiers of land in the country. and this tax might. In the very imperfect accounts which have been published from Domesday Book of several of the towns of England. were upon this account called free-traders. They seem. and from fair to fair. to have been a very poor. it seems. indeed. authority to do this. who had. like the hawkers and pedlars of the present times. lastage. These different taxes were known in England by the names of passage. perhaps. to such particularly as lived in their own demesnes. when they went over certain bridges. or very nearly of servile condition. when they erected in it a booth or stall to sell them in. when they carried about their goods from place to place in a fair. pontage. both those poll-taxes and those exemptions seem to have been altogether personal. upon some occasions. a general exemption from such taxes. who used to travel about with their goods from place to place. each of Adam Smith ElecBook Classics . in the same manner as in several of the Tartar governments of Asia at present. taxes used to be levied upon the persons and goods of travellers when they passed through certain manors. Sometimes the king. be considered as compensation for what their patrons might lose by their exemption from other taxes. In all the different countries of Europe then. mention is frequently made sometimes of the tax which particular burghers paid. and stallage.

That part of the king’s revenue which arose from such poll-taxes in any particular town used commonly to be let in farm during a term of years for a rent certain.1 But how servile soever may have been originally the condition of the inhabitants of the towns. it appears evidently that they arrived at liberty and independency much earlier than the occupiers of land in the country. etc. 18. I believe. 233. Adam Smith . ElecBook Classics V. and sometimes of the general amount only of all those taxes. p. and sometimes to other persons. and being thus altogether freed from the insolence of the king’s officers—a circumstance in those days regarded as of the greatest importance. See Madox. Firma Burgi. The burghers themselves frequently got credit enough to be admitted to farm the revenues of this sort which arose out of their own town. the sovereigns of all the different countries of Europe.2 To let a farm in this manner was quite agreeable to the usual economy of. ch. for a term of 1 2 See Brady’s Historical Treatise of Cities and Burroughs. 10.The Wealth of Nations: Book 3 525 them.. sect. they becoming jointly and severally answerable for the whole rent. first edition. in the same manner as it had been to other farmers. At first the farm of the town was probably let to the burghers. either to the king or to some other great lord for this sort of protection. who used frequently to let whole manors to all the tenants of those manors. 3. they becoming jointly and severally answerable for the whole rent. p. and to pay it into the king’s exchequer by the hands of their own bailiff. sometimes to the sheriff of the county. p. but in return being allowed to collect it in their own way. also History of the Exchequer.

the exemptions. reserving a rent certain never afterwards to be augmented. upon this account. Along with this grant. therefore. But however this may have been. were generally bestowed upon the burghers of the town to whom it was given. the important privileges above mentioned. it seems to have become the general practice to grant it to them in fee. Nor was this all. ceased to be personal. however. with the privilege of having magistrates and a town council of their own. which. In process of time. they now. Whether such privileges had before been usually granted along with the freedom of trade to particular burghers. I know not. for the same reason that they had been called free burghers or free traders. that is for ever. They were generally at the same time erected into a commonalty or corporation. though I cannot produce any direct evidence of it. that their children should succeed to them. naturally became perpetual too. and of reducing all their inhabitants under a sort of military discipline by obliging them to watch and ward. The payment having thus become perpetual. I reckon it not improbable that they were. to guard and defend those walls against all attacks Adam Smith ElecBook Classics . the principal attributes of villanage and slavery being thus taken away from them. at least. and that they might dispose of their own effects by will. that they might give away their own daughters in marriage. became really free in our present sense of the word Freedom. of building walls for their own defence.The Wealth of Nations: Book 3 526 years only. and could not afterwards be considered as belonging to individuals as individuals. as individuals. of making bye-laws for their own government. that is. was called a free burgh. Those exemptions. as anciently understood. but as burghers of a particular burgh. in return for which it was made.

and who were not strong enough to defend themselves. In England they were generally exempted from suit to the hundred and county courts. have in this manner voluntarily erected a sort of independent republics in the heart of their own dominions. Those whom the law could not protect. In other countries much greater and more extensive jurisdictions were frequently granted to them. never more to be augmented. perhaps. without either expense or attention of their own: and that they should. the weaker part of his subjects from the oppression of the great lords. probably. that branch of the revenue which was.1 It might. were obliged either to have recourse to the protection of some great lord. Adam Smith . and all such pleas as should arise among them. be necessary to grant to such towns as were admitted to farm their own revenues some sort of compulsive jurisdiction to oblige their own citizens to make payment. In those disorderly times it might have been extremely inconvenient to have left them to seek this sort of justice from any other tribunal. and in order to obtain it to become 1 See Madox. besides. the pleas of the crown excepted. But it must seem extraordinary that the sovereigns of all the different countries of Europe should have exchanged in this manner for a rent certain.The Wealth of Nations: Book 3 527 and surprises by night as well as by day. of all others the most likely to be improved by the natural course of things. In order to understand this. it must be remembered that in those days the sovereign of perhaps no country in Europe was able to protect. Firma Burgi: See also Pfeffel in the remarkable events ElecBook Classics under Frederic II and his successors of the house of Suabia. were left to the decision of their own magistrates. through the whole extent of his dominions.

The lords despised the burghers.The Wealth of Nations: Book 3 528 either his slaves or vassals. but by entering into a league of mutual defence with their neighbours. he gave them all the means of security and independency of the barons which it was in his power to bestow. he took Adam Smith ElecBook Classics . or have enabled them to give the king any considerable support. without some authority to compel their inhabitants to act according to some certain plan or system. By granting them the farm of their town in fee. Without the establishment of some regular government of this kind. and it was his interest to render them as secure and independent of those enemies as he could. therefore. Mutual interest. the privilege of making bye-laws for their own government. they were capable of making no contemptible resistance. The king hated and feared them too. he had no reason either to hate or fear the burghers. no voluntary league of mutual defence could either have afforded them any permanent security. considered as single individuals. almost of a different species from themselves. but as a parcel of emancipated slaves. and that of reducing all their inhabitants under a sort of military discipline. and they plundered them upon every occasion without mercy or remorse. that of building walls for their own defence. The burghers naturally hated and feared the lords. They were the enemies of his enemies. or to enter into a league of mutual defence for the common protection of one another. and the king to support them against the lords. but though perhaps he might despise. disposed them to support the king. The wealth of the burghers never failed to provoke their envy and indignation. The inhabitants of cities and burghs. whom they considered not only as of a different order. had no power to defend themselves. By granting them magistrates of their own.

for his allies. appears to have been a most munificent benefactor to his towns. The other was to form a new militia. that we are to date the institution of the magistrates and councils of cities in France. and that the famous Hanseatic league first became formidable. in those times. not to have been 1 2 See Madox. It is from this period. march out upon proper occasions to the assistance of the king. according to Father Daniel. Towards the end of his reign. if one may say so. One was to erect a new order of jurisdiction. either by raising the farm rent of their town or by granting it to some other farmer. his son Lewis. for example. by making the inhabitants of those towns. under the command of their own magistrates.2 The militia of the cities seems. all ground of jealousy and suspicion that he was ever afterwards to oppress them.The Wealth of Nations: Book 3 529 away from those whom he wished to have for his friends.1 Philip the First of France lost all authority over his barons. It was during the unprosperous reigns of the princes of the house of Suabia that the greater part of the free towns of Germany received the first grants of their privileges. and. by establishing magistrates and a town council in every considerable town of his demesnes. with the bishops of the royal demesnes concerning the most proper means of restraining the violence of the great lords. consulted. King John of England. ElecBook Classics Adam Smith . See Pfeffel. according to the French antiquarians. Their advice consisted of two different proposals. The princes who lived upon the worst terms with their barons seem accordingly to have been the most liberal in grants of this kind to their burghs. known afterwards by the name of Lewis the Fat.

it is the history of all the considerable Italian republics. in which. upon urgent occasions. to have been employed by him as a counterbalance in those assemblies to the authority of the great lords. In countries. on account either of their distance from the principal seat of government. or of some other reason. Being generally. sometimes. their deputies seem. Hence the origin of the representation of burghs in the Adam Smith ElecBook Classics . and as they could be more readily assembled upon any sudden occasion. however. and conquered all the nobility in their neighbourhood. obliging them to pull down their castles in the country and to live. some extraordinary aid to the king. If you except Venice. like other peaceable inhabitants.The Wealth of Nations: Book 3 530 inferior to that of the country. In countries such as France or England. of which so great a number arose and perished between the end of the twelfth and the beginning of the sixteenth century. called upon to send deputies to the general assembly of the states of the kingdom. so considerable that the sovereign could impose no tax upon them. the cities had no opportunity of becoming entirely independent. They became. for of that city the history is somewhat different. such as Italy and Switzerland. where the authority of the sovereign. in the city. of the natural strength of the country itself. the sovereign came to lose the whole of his authority. the cities generally became independent republics. they frequently had the advantage in their disputes with the neighbouring lords. This is the short history of the republic of Berne as well as of several other cities in Switzerland. too. therefore. where they might join with the clergy and the barons in granting. though frequently very low. more favourable to his power. never was destroyed altogether. without their own consent. They were. besides the stated farmrent of the town.

That industry. and the whole materials and means of their industry. and so desirous of diminishing the authority of the lords over those of the country. and along with them the liberty and security of individuals.The Wealth of Nations: Book 3 531 states-general of all the great monarchies in Europe. The inhabitants of a city. to whom it would otherwise have belonged. Order and good government. it is true. The law was at that time so indulgent to the inhabitants of towns. but the conveniences and elegancies of life. that if he could conceal himself there from the pursuit of his lord for a year. and take the first opportunity of running away to a town. accumulated in the hands of the industrious part of the inhabitants of the country naturally took refuge in cities as the only sanctuaries in which it could be secure to the person that acquired it. some little stock should accumulate. in this manner. oppressed with the servitude of villanage. were. If in the hands of a poor cultivator. Whatever stock. On the contrary. was established in cities long before it was commonly practised by the occupiers of land in the country. because to acquire more might only tempt the injustice of their oppressors. they naturally exert it to better their condition. when they are secure of enjoying the fruits of their industry. therefore. from the country. he would naturally conceal it with great care from his master. situated near Adam Smith ElecBook Classics . must always ultimately derive their subsistence. established in cities at a time when the occupiers of land in the country were exposed to every sort of violence. therefore. But men in this defenceless state naturally content themselves with their necessary subsistence. he was free for ever. and to acquire not only the necessaries. But those of a city. which aims at something more than necessary subsistence.

They have a much wider range. and all those provinces of Spain which were under the government of the Moors. were in poverty and wretchedness. while not only the country in its neighbourhood. are not necessarily confined to derive them from the country in their neighbourhood. Such was the Greek empire as long as it subsisted.The Wealth of Nations: Book 3 532 either the sea coast or the banks of a navigable river. within the narrow circle of the commerce of those times. or by performing the office of carriers between distant countries and exchanging the produce of one for that of another. Italy lay in the centre of what was at that time the improved and civilised part of the world. A city might in this manner grow up to great wealth and splendour. and may draw them from the most remote corners of the world. Each of those countries. could afford it but a small part either of its subsistence or of its employment. some countries that were opulent and industrious. were extremely favourable to that of some Italian cities. some part of the coast of Barbary. though by the great waste of stock and destruction of inhabitants which they occasioned they must necessarily have retarded the progress of the greater part of Europe. Such too was Egypt till it was conquered by the Turks. The cities of Italy seem to have been the first in Europe which were raised by commerce to any considerable degree of opulence. either in exchange for the manufactured produce of their own industry. taken singly. however. There were. The great armies which marched from all parts to the conquest of the Holy Land gave extraordinary Adam Smith ElecBook Classics . perhaps. but all those to which it traded. and that of the Saracens during the reigns of the Abassides. The Crusades too. but all of them taken together could afford it both a great subsistence and a great employment.

of those armies. accordingly. in order to save the expense of carriage. it must be observed. Genoa. The inhabitants of trading cities. consisted chiefly in the exchange of their own rude for the. Hence the origin of the first manufactures for distant sale that seem to have been established in the western provinces of Europe after the fall of the Roman empire. afforded some food to the vanity of the great proprietors. The commerce of a great part of Europe in those times.The Wealth of Nations: Book 3 533 encouragement to the shipping of Venice. and always in supplying them with provisions. the merchants. sometimes in transporting them thither. in the same manner as the corn in Poland is at this day exchanged for the wines and brandies of France and for the silks and velvets of France and Italy. naturally endeavoured to establish some manufactures of the same kind in their own country. who eagerly purchased them with great quantities of the rude produce of their own lands. it must always be Adam Smith ElecBook Classics . and Pisa. and the most destructive frenzy that ever befell the European nations was a source of opulence to those republics. No large country. They were the commissaries. by importing the improved manufactures and expensive luxuries of richer countries. ever did or could subsist without some sort of manufactures being carried on in it. if one may say so. A taste for the finer and more improved manufactures was in this manner introduced by foreign commerce into countries where no such works were carried on. Thus the wool of England used to be exchanged for the wines of France and the fine cloths of Flanders. and when it is said of any such country that it has no manufactures. But when this taste became so general as to occasion a considerable demand. manufactured produce of more civilised nations.

and brocades. in the manner above mentioned. and they began the manufacture with three hundred workmen.. you will generally find. Isortia civile de Vinezia. velvets. ElecBook Classics Adam Smith . Those manufactures which are fit for distant sale seem to have been introduced into different countries in two different ways. In 1310. This is even more universally the case in those poor countries which are commonly said to have no manufactures than in those rich ones that are said to abound in them. who established them in imitation of some foreign manufactures of the same kind. part ii. Sometimes they have been introduced. of whom thirty-one retired to Venice and offered to introduce there the silk manufacture. therefore. both in the clothes and household furniture of the lowest rank of people. and which were introduced into England in the beginning of the 1 See Sandi. Castruccio Castracani. are the offspring of foreign commerce. by the violent operation. seem to have been the manufactures of fine cloths that anciently flourished in Flanders. In the latter.. too. i.The Wealth of Nations: Book 3 534 understood of the finer and more improved or of such as are fit for distant sale. nine hundred families were driven out of Lucca. many privileges were conferred upon them. which flourished in Lucca during the thirteenth century. In every large country both the clothing and household furniture of the far greater part of the people are the produce of their own industry. pp. a much greater proportion of foreign productions than in the former. vol. They were banished from thence by the tyranny of one of Machiavel’s heroes. if one may say so. Such. and such seem to have been the ancient manufactures of silks. Such manufactures. 247 and 256.1 Their offer was accepted. of the stocks of particular merchants and undertakers.

manufactures for distant sale group up naturally. The more ancient manufacture of Lucca was likewise carried on with foreign materials. is sometimes established in a maritime city. when it was first established. foreign silk. Manufactures introduced in this manner are generally employed upon foreign materials. The seat of such manufactures. Spanish wool was the material. At other times. and sometimes in an inland town. or caprice happen to determine. Such manufactures are generally employed upon the materials which the country produces. judgment. and as it were of their own accord. The manufactures of Flanders were carried on chiefly with Spanish and English wool. 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. The cultivation of mulberry trees and the breeding of silk-worms seem not to have been common in the northern parts of Italy before the sixteenth century. as they are generally introduced by the scheme and project of a few individuals. and such are the present silk manufactures of Lyons and Spitalfields. the whole or very nearly the whole was so. Those arts were not introduced into France till the reign of Charles IX. according as their interest. No part of the materials of the Spitalfields manufacture is ever likely be the produce of England.The Wealth of Nations: Book 3 535 reign of Elizabeth. the materials were all brought from Sicily and the Levant. When the Venetian manufacture was first established. but of the first that was fit for distant sale. not of the first woollen manufacture of England. and they seem frequently to have been first refined and improved in such inland countries Adam Smith ElecBook Classics . being imitations of foreign manufactures. More than one half the materials of the Lyons manufacture is at this day.

so the progress of the manufacture reacts upon the land and increases still further its fertility. For though neither the rude produce nor even the coarse manufacture could. The manufacturers first supply the neighbourhood. produces a great surplus of provisions beyond what is necessary for maintaining the cultivators. therefore. who find that their industry can there procure them more of the necessaries and conveniencies of life than in other places. and as the fertility of the land had given birth to the manufacture. renders provisions cheap. An inland country. without the greatest difficulty. as their work improves and refines. The cultivators get a better price for their surplus produce. and can purchase cheaper other conveniences which they have occasion for. not indeed at a very great. it may frequently be difficult to send this surplus abroad. and exchange their finished work. They are thus both encouraged and enabled to increase this surplus produce by a further improvement and better cultivation of the land. They give a new value to the surplus part of the rude produce by saving the expense of carrying it to the water side or to some distant market. more distant markets.The Wealth of Nations: Book 3 536 as were. naturally fertile and easily cultivated. and encourages a great number of workmen to settle in the neighbourhood. and they furnish the cultivators with something in exchange for it that is either useful or agreeable to them upon easier terms than they could have obtained it before. support the Adam Smith ElecBook Classics . or what is the same thing the price of it. but at a considerable distance from the sea coast. and on account of the expense of land carriage. and inconveniency of river navigation. Abundance. for more materials and provisions. and sometimes even from all water carriage. and afterwards. They work up the materials of manufacture which the land produces.

the price.The Wealth of Nations: Book 3 537 expense of a considerable land carriage. Birmingham. England was noted for the manufacture of fine cloths made of Spanish wool more than a century before any of those which now flourish in the places above mentioned were fit for foreign sale. which weighs only eighty pounds. Such manufactures are the offspring of agriculture. A piece of fine cloth. not only of eighty pounds’ weight of wool. and as it were of their own accord. contains in it. is in this manner virtually exported in that of the complete manufacture. In this manner have grown up naturally. and may easily be sent to the remotest corners of the world. and Wolverhampton. Halifax. for example. In a small bulk it frequently contains the price of a great quantity of rude produce. The extension and improvement of these last could not take place but in consequence of the extension and improvement of agriculture the last and greatest effect of foreign commerce. the manufactures of Leeds. and which I shall now proceed to explain. which could with difficulty have been carried abroad in its own shape. and of the manufactures immediately introduced by it. their extension and improvement have generally been posterior to those which were the offspring of foreign commerce. Sheffield. the maintenance of the different working people and of their immediate employers. the refined and improved manufacture easily may. The corn. Adam Smith ElecBook Classics . but sometimes of several thousand weight of corn. In the modern history of Europe.

A merchant is accustomed to employ his money chiefly in profitable ElecBook Classics Adam Smith . but extended more or less to all those with which they had any dealings. and yet afford it as cheap to the consumers as that of more distant countries.The Wealth of Nations: Book 3 538 Chapter IV How the Commerce of the Towns Contributed to the Improvement of the Country he increase and riches of commercial and manufacturing towns contributed to the improvement and cultivation of the countries to which they belonged in three different T ways. they gave encouragement to its cultivation and further improvement. Secondly. and when they do. Their own country. of which a great part would frequently be uncultivated. necessarily derived the greatest benefit from this market. by affording a great and ready market for the rude produce of the country. Merchants are commonly ambitious of becoming country gentlemen. and consequently gave some encouragement to the industry and improvement of all. the traders could pay the growers a better price for it. To all of them they afforded a market for some part either of their rude or manufactured produce. they are generally the best of all improvers. First. Its rude produce being charged with less carriage. This benefit was not even confined to the countries in which they were situated. however. on account of its neighbourhood. the wealth acquired by the inhabitants of cities was frequently employed in purchasing such lands as were to be sold.

is by far the most important of all their effects. with profit and success. Whoever has had the fortune to live in a mercantile town situated in an unimproved country must have frequently observed how much more spirited the operations of merchants were in this way than those of mere country gentlemen. The one often sees his money go from him and return to him again with a profit. whereas a mere country gentleman is accustomed to employ it chiefly in expense. to which mercantile business naturally forms a merchant. economy. The one is not afraid to lay out at once a large capital upon the improvement of his land when he has a probable prospect of raising the value of it in proportion to the expense. who had before lived almost in a continual state of war with their neighbours and of servile dependency upon their superiors. has hitherto taken notice of it. of order. the liberty and security of individuals. the other. This. nor any of Adam Smith ElecBook Classics . Hume is the only writer who. very seldom expects to see any more of it. seldom ventures to employ it in this manner. The habits. a country gentleman a timid undertaker. The other. In a country which has neither foreign commerce. and with them. though it has been the least observed. Thirdly. among the inhabitants of the country. when once he parts with it. render him much fitter to execute. if he has any capital. and attention. commerce and manufactures gradually introduced order and good government. Those different habits naturally affect their temper and disposition in every sort of business. but with what he can save out of his annual revenue. so far as I know. it is commonly not with a capital. which is not always the case.The Wealth of Nations: Book 3 539 projects. Mr. If he improves at all. and lastly. any project of improvement. besides. A merchant is commonly a bold.

he can make use of it in no other way than by maintaining a hundred or a thousand men. It was reckoned a piece of magnificence in Thomas Becket that he strewed the floor of his hall with clean hay or rushes in the season.The Wealth of Nations: Book 3 540 the finer manufactures. but being fed entirely by his bounty. for the same reason that soldiers must obey the prince who pays them. exceeded everything which in the present times we can easily form a notion of. surrounded with a multitude of retainers and dependants. Westminster Hall was the dining-room of William Rufus. He is at all times. and though the number here may have been exaggerated. perhaps. having no equivalent to give in return for their maintenance. from the sovereign down to the smallest baron. therefore. a great proprietor. If this surplus produce is sufficient to maintain a hundred or a thousand men. who. 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. in order that the knights and squires who could not get seats might not spoil their fine clothes when they sat down on the floor to eat their dinner.” says Doctor Pocock. and might frequently. It seems to be common in all nations to whom commerce and manufactures are little known. the hospitality of the rich. Before the extension of commerce and manufacture in Europe. The great Earl of Warwick is said to have entertained every day at his different manors thirty thousand people. have been very great to admit of such exaggeration. consumes the whole in rustic hospitality at home. “I have seen. however. it must. and the great. must obey him. not be too large for his company. “an Arabian chief dine in the streets of a town where he Adam Smith ElecBook Classics . A hospitality nearly of the same kind was exercised not many years ago in many different parts of the highlands of Scotland.

A crown. even common beggars. and its continuance depends upon his good pleasure. nor will money at present purchase a greater quantity of commodities there than in other places. and the leaders in war. a lamb. half a crown. so he feeds his tenants at their houses. Such a proprietor. The subsistence of both is derived from his bounty. He is thereby saved from the embarrassment of either too large a company or too large a family.” The occupiers of land were in every respect as dependent upon the great proprietor as his retainers. of all who dwelt upon Adam Smith ElecBook Classics . who paid a rent in no respect equivalent to the subsistence which the land afforded them. Upon the authority which the great proprietor necessarily had in such a state of things over their tenants and retainers was founded the power of the ancient barons. who possesses land sufficient to maintain his family for little more than a quit-rent. is as dependent upon the proprietor as any servant or retainer whatever and must obey him with as little reserve. was some years ago in the highlands of Scotland a common rent for lands which maintained a family. and invite all passengers. it will frequently be more convenient for the proprietor that part of it be consumed at a distance from his own house provided they who consume it are as dependent upon him as either his retainers or his menial servants. to sit down with him and partake of his banquet.The Wealth of Nations: Book 3 541 had come to sell his cattle. In some places it is so at this day. In a country where the surplus produce of a large estate must be consumed upon the estate itself. as he feeds his servants and retainers at his own house. A tenant at will. Even such of them as were not in a state of villanage were tenants at will. a sheep. They necessarily became the judges in peace.

The Wealth of Nations: Book 3 542 their estates. had he attempted it by his own authority. In those ancient times he was little more than the greatest proprietor in his dominions. 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. No other persons had sufficient authority to do this. and for the same reason to leave the command of the country militia to those whom that militia would obey. To have enforced payment of a small debt within the lands of a great proprietor. and even that of making bye-laws for the government of their own people. That the most extensive Adam Smith ElecBook Classics . were all rights possessed allodially by the great proprietors of land several centuries before even the name of the feudal law was known in Europe. would have cost the king. to whom. obliged to abandon the administration of justice through the greater part of the country to those who were capable of administering it. for the sake of common defence against their common enemies. almost the same effort as to extinguish a civil war. therefore. It is a mistake to imagine that those territorial jurisdictions took their origin from the feudal law. of coining money. But the feudal law is not supposed to have become the common law of England till after the Conquest. He was. The king in particular had not. because each of them could there turn the whole force of all the inhabitants against the injustice of any one. where all the inhabitants were armed and accustomed to stand by one another. They could maintain order and execute the law within their respective demesnes. but the power of levying troops. Not only the highest jurisdictions both civil and criminal. the other great proprietors paid certain respects.

fell into the hands of his immediate superior. He is said to have done so with great equity. but a vassal of the Duke of Argyle. together with the management of his lands. It established a regular subordination. the rent. and without being so much as a justice of peace. used. and who. accompanied with a long train of services and duties. so far from extending. consequently. eight hundred of his own people into the rebellion with him. whose rent never exceeded five hundred pounds a year. though without any of the formalities of justice. without any legal warrant whatever. 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 in order to maintain the public peace.The Wealth of Nations: Book 3 543 authority and jurisdictions were possessed by the great lords in France allodially long before the feudal law was introduced into that country is a matter of fact that admits of no doubt. It is not thirty years ago since Mr. may be regarded as an attempt to moderate the authority of the great allodial lords. from his Adam Smith ElecBook Classics . in 1745. Cameron of Lochiel. those of all great proprietors into the hands of the king. That authority and those jurisdictions all necessarily flowed from the state of property and manners just now described. who was charged with the maintenance and education of the pupil. we may find in much later times many proofs that such effects must always flow from such causes. from the king down to the smallest proprietor. and. nor even a tenant in chief. not being what was then called a lord of regality. That gentleman. to exercise the highest criminal jurisdiction over his own people. During the minority of the proprietor. a gentleman of Lochabar in Scotland. carried. notwithstanding. Without remounting to the remote antiquities of either the French or English monarchies. The introduction of the feudal law.

rapine. provided it was in a manner not unsuitable to his rank. and very frequently upon the king. almost continually upon one another.The Wealth of Nations: Book 3 544 authority as guardian. the silent and insensible operation of foreign commerce and manufactures gradually brought about. in every age of the world. After the institution of feudal subordination. the king was as incapable of restraining the violence of the great lords as before. as they could find a method of consuming the whole value of their rents themselves. and which they could consume themselves without sharing it either with tenants or retainers. because it could not alter sufficiently that state of property and manners from which the disorders arose. and the excessive strength of the inferior members was the cause of the weakness of the head. as before. seems. The authority of government still continued to be. too weak in the head and too strong in the inferior members. As soon. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands. But what all the violence of the feudal institutions could never have effected. and the open country still continued to be a scene of violence. But though this institution necessarily tended to strengthen the authority of the king. They still continued to make war according to their own discretion. All for ourselves and nothing for other people. to have been the vile maxim of the masters of mankind. therefore. it could not do either sufficiently for establishing order and good government among the inhabitants of the country. was supposed to have a right of disposing of him in marriage. they had no disposition to share them with any other Adam Smith ElecBook Classics . and to weaken that of the great proprietors. and disorder.

and the profits of all their immediate employers. and with it the whole weight and authority which it could give them. The buckles. a thousand families.The Wealth of Nations: Book 3 545 persons. the number of workmen employed in collecting and preparing it must necessarily have been very great. whereas in the more ancient method of expense they must have shared with at least a thousand people. With the judges that were to determine the preference this difference was perfectly decisive. and no other human creature was to have any share of them. for the gratification of the most childish. without directly maintaining twenty people. For a pair of diamond buckles. a man of ten thousand a year cannot well employ his revenue in any other way than in maintaining. who are all of them necessarily at his command. the price of the maintenance of a thousand men for a year. In a country where there is no foreign commerce. Indirectly. a man of ten thousand a year can spend his whole revenue. For though the quantity of precious productions for which he exchanges his whole revenue be very small. perhaps. were to be all their own. and he generally does so. they exchanged the maintenance. and thus. the meanest. and the most sordid of all vanities. perhaps. perhaps. By paying that price he indirectly pays all those wages Adam Smith ElecBook Classics . or being able to command more than ten footmen not worth the commanding. they gradually bartered their whole power and authority. or for something as frivolous and useless. nor any of the finer manufactures. he maintains as great or even a greater number of people than he could have done by the ancient method of expense. however. Its great price generally arises from the wages of their labour. In the present state of Europe. or what is the same thing.

The Wealth of Nations: Book 3 546 and profits and thus indirectly contributes to the maintenance of all the workmen and their employers. Farms were enlarged. Each tradesman or artificer derives his subsistence from the employment. perhaps. all of them taken together. Each of them. to many not a hundredth. Though in some measure obliged to them all. not of one. because generally they can all be maintained without him. but a very small proportion to that of each. each of them maintains entirely all his own tenants and all his own retainers. they are all more or less independent of him. and the occupiers of land. they may. He generally contributes. When the great proprietors of land spend their rents in maintaining their tenants and retainers. therefore. The same cause gradually led them to dismiss the unnecessary part of their tenants. to very few perhaps a tenth. contributes often but a very small share to the maintenance of any individual of this greater number. notwithstanding the complaints of depopulation. reduced to the number necessary for cultivating it. but of a hundred or a thousand different customers. a greater number of people than before. it was impossible that the number of their retainers should not as gradually diminish till they were at last dismissed altogether. But when they spend them in maintaining tradesmen and artificers. Though he contributes. and to some not a thousandth. on account of the waste which attends rustic hospitality. however. he is not absolutely dependent upon any one of them. taken singly. however. therefore. maintain as great. to the maintenance of them all. nor even a ten-thousandth part of their whole annual maintenance. The personal expense of the great proprietors having in this manner gradually increased. according to the imperfect state of cultivation and Adam Smith ElecBook Classics . or.

and hence the origin of long leases. and his landlord must not expect from him the most trifling service beyond what is either expressly stipulated in the lease or imposed upon him by the common and known law of the country. The same cause continuing to operate. in the actual state of their improvement. His tenants could agree to this upon one condition only. Having sold their birthright. fitter to Adam Smith ElecBook Classics . and such a tenant will expose neither his life nor his fortune in the service of the proprietor. But if he has a lease for a long term of years. the great proprietors were no longer capable of interrupting the regular execution of justice or of disturbing the peace of the country. for trinkets and baubles. is not altogether dependent upon the landlord. he is altogether independent. The pecuniary advantages which they receive from one another are mutual and equal. which the merchants and manufacturers soon furnished him with a method of spending upon his own person in the same manner as he had done the rest. that they should be secured in their possession for such a term of years as might give them time to recover with profit whatever they should lay out in the further improvement of the land. Even a tenant at will.The Wealth of Nations: Book 3 547 improvement in those times. the price of a greater surplus. who pays the full value of the land. The expensive vanity of the landlord made him willing to accept of this condition. a greater surplus. was obtained for the proprietor. The tenants having in this manner become independent. not like Esau for a mess of pottage in time of hunger and necessity. but in the wantonness of plenty. could afford. or what is the same thing. he was desirous to raise his rents above what his lands. By the removal of the unnecessary mouths. and by exacting from the farmer the full value of the farm. and the retainers being dismissed.

The Arabian histories seem to be all full of genealogies. very seldom remain long in the same family. perhaps. for among nations of shepherds. Adam Smith ElecBook Classics . such as the Tartars and Arabs. on the contrary.The Wealth of Nations: Book 3 548 be the playthings of children than the serious pursuits of men. they became as insignificant as any substantial burgher or tradesman in a city. and there is a history written by a Tartar Khan. But where he can spend the greatest revenue upon his own person. on the contrary. Among simple nations. the consumable nature of their property necessarily renders all such regulations impossible. In countries where a rich man can spend his revenue in no other way than by maintaining as many people as it can maintain. A regular government was established in the country as well as in the city. in spite of the most violent regulations of law to prevent their dissipation. a proof that ancient families are very common among those nations. therefore. In commercial countries. It does not. they frequently do without any regulations of law. and his benevolence it seems is seldom so violent as to attempt to maintain more than he can afford. they are very common. relate to the present subject. he frequently has no bounds to his expense. which has been translated into several European languages. but I cannot help remarking it. such as Wales or the highlands of Scotland. that very old families. and which contains scarce anything else. because he frequently has no bounds to his vanity or to his affection for his own person. nobody having sufficient power to disturb its operations in the one any more than in the other. he is not apt to run out. In countries which have little commerce. riches. such as have possessed some considerable estate from father to son for many successive generations are very rare in commercial countries.

the law of primogeniture and perpetuities of different kinds prevent the division of great estates. acted merely from a view to their own interest. Neither of them had either knowledge or foresight of that great revolution which the folly of the one. being contrary to the natural course of things. is necessarily both slow and uncertain. and thereby hinder the multiplication of small proprietors. have been the cause and occasion of the improvement and cultivation of the country. A small proprietor. and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. To gratify the most childish vanity was the sole motive of the great proprietors. however. In several of our North American colonies. especially small property.The Wealth of Nations: Book 3 549 A revolution of the greatest importance to the public happiness was in this manner brought about by two different orders of people who had not the least intention to serve the public. however. Compare the slow progress of those European countries of which the wealth depends very much upon their commerce and manufactures with the rapid advances of our North American colonies. of which the wealth is founded altogether in agriculture. It is thus that through the greater part of Europe the commerce and manufactures of cities. Through the greater part of Europe the number of inhabitants is not supposed to double in less than five hundred years. naturally inspires. and the industry of the other. In Europe. and who upon that account takes pleasure not only in Adam Smith ElecBook Classics . who knows every part of his little territory. The merchants and artificers. who views it with all the affection which property. was gradually bringing about. This order. it is found to double in twenty or five-and-twenty years. much less ridiculous. instead of being the effect.

which by a different employment of his stock he might have had the same chance of acquiring with other people. will often disdain to be a farmer. burdened with repairs and other occasional charges to which the interest of money is not liable. might indeed expect to live very happily. besides. the most intelligent. besides. Such a person too. For the sake of the superior security.The Wealth of Nations: Book 3 550 cultivating but in adorning it. But a young man. but must bid adieu forever to all hope of either great fortune or great illustration. instead of applying to trade or to some profession. often loves to secure his savings in the same way. though he cannot aspire at being a proprietor. The same regulations. therefore. A man of profession too. The rent never pays the interest of the purchase-money. which is brought to market. In North America. indeed. fifty or sixty pounds is often found a sufficient stock to begin a plantation with. The small quantity of land. a man of moderate circumstances. is generally of all improvers the most industrious. so that what is sold always sells at a monopoly price. and the high price of what is brought thither. and is. To purchase land is everywhere in Europe a most unprofitable employment of a small capital. on the contrary. keep so much land out of the market that there are always more capitals to buy than there is land to sell. who. should employ a capital of two or three thousand pounds in the purchase and cultivation of a small piece of land. and the most successful. whose revenue is derived from another source. The purchase and improvement of uncultivated land is there Adam Smith ElecBook Classics . when he retires from business. prevents a great number of capitals from being employed in its cultivation and improvement which would otherwise have taken that direction. and very independently. will sometimes choose to lay out his little capital in land.

The cultivation and improvement of the country has. or. So much land would come to market that it could no longer sell at a monopoly price. no doubt. and of the many navigable rivers which run through it and afford the conveniency of water carriage to some of the most inland parts of it. and the most direct road to all the fortune and illustration which can be acquired in that country. however. and a small capital might be employed in purchasing land as profitably as in any other way. and in reality there is no country in Europe. or at a price much below the value of the natural produce—a thing impossible in Europe. were divided equally among all the children upon the death of any proprietor who left a numerous family. but it Adam Smith ElecBook Classics . in any country where all lands have long been private property. The free rent of the land would go nearer to pay the interest of the purchase-money. England. From the beginning of the reign of Elizabeth too.The Wealth of Nations: Book 3 551 the most profitable employment of the smallest as well as of the greatest capitals. of the great extent of the sea-coast in proportion to that of the whole country. Commerce and manufactures have accordingly been continually advancing during all this period. the estate would generally be sold. of manufactures for distant sale. been gradually advancing too. and of all the improvements which these can occasion. indeed. Holland itself not excepted. is perhaps as well fitted by nature as any large country in Europe to be the seat of foreign commerce. the English legislature has been peculiarly attentive to the interests of commerce and manufactures. indeed. more favourable to this sort of industry. upon the whole. is in North America to be had almost for nothing. of which the law is. Such land. If landed estates. on account of the natural fertility of the soil.

The importation of live cattle. the yeomanry of England are rendered as secure. These encouragements. is prohibited at all times. except from Ireland. The law of England. therefore. and as respectable as law can make them. and it is but of late that it was permitted from thence. as I shall endeavour to show hereafter. the importation of foreign corn is loaded with duties that amount to a prohibition. though at bottom. perhaps. have a monopoly against their countrymen for the two greatest and most important articles of land produce. and the cultivation of the far greater part much inferior to what it might be. What would it have been had the law given no direct encouragement to agriculture besides what arises indirectly from the progress of commerce.The Wealth of Nations: Book 3 552 seems to have followed slowly. In times of moderate plenty. favours agriculture not only indirectly by the protection of commerce. bread and butcher’s meat. No country. in which the right of primogeniture takes place. and had left the Adam Smith ElecBook Classics . however. as independent. But what is of much more importance than all of them. however. are admitted in some cases. and a very great part of it still remains uncultivated. sufficiently demonstrate at least the good intention of the legislature to favour agriculture. altogether illusory. Such. the exportation of corn is not only free. the more rapid progress of commerce and manufactures. Those who cultivate the land. but by several direct encouragements. notwithstanding. can give more encouragement to agriculture than England. and at a distance. which pays tithes. Except in times of scarcity. and where perpetuities. is the state of its cultivation. The greater part of the country must probably have been cultivated before the reign of Elizabeth. but encouraged by a bounty. therefore. though contrary to the spirit of the law.

inferior to that of England. according to the notions of the times. The cultivation and improvement of France. Italy according to Guicciardin. however. probably contributed not a little to this Adam Smith ElecBook Classics . before the expedition of Charles VIII to Naples. a period as long as the course of human prosperity usually endures. and the greater part of both still remains uncultivated.The Wealth of Nations: Book 3 553 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. except Italy. The foreign commerce of Spain and Portugal to the other parts of Europe. That to their colonies is carried on in their own. France seems to have had a considerable share of foreign commerce near a century before England was distinguished as a commercial country. on account of the great riches and extent of those colonies. though chiefly carried on in foreign ships. The foreign commerce of Portugal is of older standing than that of any great country in Europe. is very considerable. But it has never introduced any considerable manufactures for distant sale into either of those countries. upon the whole. was cultivated not less in the most mountainous and barren parts of the country than in the plainest and most fertile. and the great number of independent states which at that time subsisted in it. The marine of France was considerable. is. Italy is the only great country of Europe which seems to have been cultivated and improved in every part by means of foreign commerce and manufactures for distant sale. The law of the country has never given the same direct encouragement to agriculture. Before the invasion of Charles VIII. and is much greater. The advantageous situation of the country.

It is in a great measure indifferent to him from what place he carries on his trade. and the Spanish government which succeeded them. those countries still continue to be among the most populous and best cultivated in Europe. either in buildings or in the lasting improvement of lands. and together with it all the industry which it supports. But Flanders still continues to be one of the richest. is not necessarily the citizen of any particular country. No vestige now remains of the great wealth said to have been possessed by the greater part of the Hans towns except in the obscure histories of the thirteenth and fourteenth centuries. No part of it can be said to belong to any particular country.The Wealth of Nations: Book 3 554 general cultivation. Ghent. A merchant. and Bruges. chased away the great commerce of Antwerp. The civil wars of Flanders. and a very trifling disgust will make him remove his capital. however. that Italy was not at that time better cultivated than England is at present. notwithstanding this general expression of one of the most judicious and reserved of modern historians. It is not impossible too. It is even uncertain where some of them were situated or to what towns in Europe the Latin names given to some of them belong. that is acquired to any country by commerce and manufactures is all a very precarious and uncertain possession till some part of it has been secured and realized in the cultivation and improvement of its lands. The capital. But though the misfortunes of Italy in the end of the fifteenth and beginning of the sixteenth centuries greatly diminished the commerce and manufactures of the cities of Lombardy and Tuscany. from one country to another. till it has been spread as it were over the face of that country. it has been said very properly. best Adam Smith ElecBook Classics .

Adam Smith ElecBook Classics .The Wealth of Nations: Book 3 555 cultivated. The ordinary revolutions of war and government easily dry up the sources of that wealth which arises from commerce only. such as those that happened for some time before and after the fall of the Roman empire in the western provinces of Europe. and most populous provinces of Europe. 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.

Book Four Of Systems of Political Economy .

or more properly to enable them to provide such a revenue or subsistence for themselves. proposes two distinct objects: first.The Wealth of Nations: Book 4 557 P Introduction olitical economy. It proposes to enrich both the people and the sovereign. and is best understood in our own country and in our own times. It is the modern system. The different progress of opulence in different ages and nations has given occasion to two different systems of political economy with regard to enriching the people. I shall endeavour to explain both as fully and distinctly as I can. The one may be called the system of commerce. considered as a branch of the science of a statesman or legislator. and secondly. to supply the state or commonwealth with a revenue sufficient for the public services. to provide a plentiful revenue or subsistence for the people. the other that of agriculture. Adam Smith ElecBook Classics . and shall begin with the system of commerce.

or Mercantile System T hat wealth consists in money. considered as in every respect synonymous. When that is obtained. We say of a rich man that he is worth a great deal. In consequence of its being the instrument of commerce. For some time after the discovery of America. we estimate that of all other commodities by the quantity of money which they will exchange for.The Wealth of Nations: Book 4 558 Chapter I Of the Principle of the Commercial. or and silver. is said to love money. or a profuse man. is to get money. is supposed to be a country abounding in money. in the same manner as a rich man. The great affair. we always find. in short. in common language. and a careless. there is no difficulty in making any subsequent purchase. is said to be indifferent about it. are. A rich country. In consequence of its being the measure of value. as the instrument of commerce and as the measure of value. the first inquiry of the Spaniards. and of a poor man that he is worth very little money. when they arrived upon an unknown coast. when we have money we can more readily obtain whatever else we have occasion for than by means of any other commodity. used to be. is a popular notion which naturally arises from the double function of money. and to heap up gold and saver in any country is supposed to be the readiest way to enrich it. and wealth and money. To grow rich is to get money. a generous. A frugal man. if there was any gold or silver to be found in the ElecBook Classics Adam Smith . or a man eager to be rich.

is not very liable to be wasted and consumed. to be the great object of its political economy. he says. be in great want of them the next. are of so consumable a nature that the wealth which consists in them cannot be much depended on. therefore. the Tartar notion. and a nation which abounds in them one year may. Gold and silver. or how little Adam Smith ElecBook Classics . or if the country was worth the conquering. Locke remarks a distinction between money and other movable goods. though it may travel about from hand to hand. are. Money. Mr. he thinks. Wealth. on the contrary. who are generally ignorant of the use of money. is a steady friend. was the nearest to the truth. which. the most solid and substantial part of the movable wealth of a nation. yet if it can be kept from going out of the country. as according to the Spaniards it consisted in gold and silver. it would be of no consequence how much. By the information which they received. and to multiply those metals ought. according to him. They wanted to know if the country was rich enough to be worth the conquering. according to them. sent ambassador from the King of France to one of the sons of the famous Genghis Khan. a monk. All other movable goods. without any exportation. Of the two. cattle are the instruments of commerce and the measures of value. Others admit that if a nation could be separated from all the world. Among the Tartars. Plano Carpino.The Wealth of Nations: Book 4 559 neighbourhood. therefore. but merely their own waste and extravagance. consisted in cattle. upon that account. they judged whether it was worth while to make a settlement there. Their inquiry had the same object with that of the Spaniards. perhaps. as among all other nations of shepherds. says that the Tartars used frequently to ask him if there was plenty of sheep and oxen in the kingdom of France.

upon many occasions. must endeavour in time of peace to accumulate gold and silver that. though to little purpose. in some old Scotch acts of Parliament. all the different nations of Europe have studied. the proprietors of the principal mines which supply Europe with those metals. with countries which have connections with foreign nations. have either prohibited their exportation under the severest penalties. Spain and Portugal. which forbid under heavy penalties the carrying gold or silver forth of the kingdom. and which are obliged to carry on foreign wars. They could frequently buy more advantageously Adam Smith ElecBook Classics . 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. Every such nation. every possible means of accumulating gold and silver in their respective countries. In consequence of these popular notions. when occasion requires. where we should least of all expect to find it. would depend altogether upon the abundance or scarcity of those consumable goods. extremely inconvenient. The consumable goods which were circulated by means of this money would only be exchanged for a greater or a smaller number of pieces. they allow. and to maintain fleets and armies in distant countries. it may have wherewithal to carry on foreign wars. they say. The like policy anciently took place both in France and England. It is even to be found. they think. therefore. and a nation cannot send much money abroad unless it has a good deal at home. This. the merchants found this prohibition. But it is otherwise. When those countries became commercial. but the real wealth or poverty of the country. cannot be done but by sending abroad money to pay them with.The Wealth of Nations: Book 4 560 money circulated in it.

that this prohibition could not hinder the exportation of gold and silver. we shall find the worth and plentiful increase of his action. That. That when the country exported to a greater value than it imported. a balance became due to it from foreign nations. “If we only behold. “the actions of the husbandman in the seed-time. which was necessarily paid to it in gold and silver. and thereby increased the quantity of those metals in the kingdom. that the exportation of gold and silver in order to purchase foreign goods. therefore. Mr. or to carry to some other foreign country. secondly. on account of the smallness of their bulk in proportion to their value. if the consumption of foreign goods was not thereby increased in the country.” They represented. against this prohibition as hurtful to trade. those goods might be re-exported to foreign countries. being there sold for a large profit. Mun compares this operation of foreign trade to the seed-time and harvest of agriculture. either to import into their own. the balance of trade. and. could easily be smuggled abroad.” says he.The Wealth of Nations: Book 4 561 with gold and silver than with any other commodity the foreign goods which they wanted. because. first. which is the end of his endeavours. on the contrary. But that when it imported to a greater value than it exported. might bring back much more treasure than was originally sent out to purchase them. when he casteth away much good corn into the ground. did not always diminish the quantity of those metals in the kingdom. we shall account him rather a madman than a husbandman. They represented. They remonstrated. a contrary balance Adam Smith ElecBook Classics . what they called. That this exportation could only be prevented by a proper attention to. But when we consider his labours in the harvest. it might frequently increase that quantity. which.

the merchant who purchased a bill upon the foreign country being obliged to pay the banker who sold it. and the other so much more English money to Holland. but that a hundred ounces of silver in Holland. for example. and would purchase a proportionable quantity of English goods: that the English goods which were sold to Holland would be sold so much cheaper. by making it more dangerous. that the one would draw so much less Dutch money to England. not only for the natural risk. the money of that country becoming necessarily of so much less value in comparison with that of the country to which the balance was due. and would purchase only a proportionable quantity of Dutch goods. but for the extraordinary risk arising from the prohibition. That the exchange was thereby turned more against the country which owed the balance than it otherwise might have been. That if the exchange between England and Holland. But that the more the exchange was against any country. it would require a hundred and five ounces of silver in England to purchase a bill for a hundred ounces of silver in Holland: that a hundred and five ounces of silver in England. as this difference amounted to: and that the balance of Adam Smith ElecBook Classics . trouble. but only. which was necessarily paid to them in the same manner. would be worth only a hundred ounces of silver in Holland. was five per cent against England. and the Dutch goods which were sold to England so much dearer by the difference of the exchange. would be worth a hundred and five ounces in England. and expense of sending the money thither. therefore. That in this case to prohibit the exportation of those metals could not prevent it. on the contrary. the more the balance of trade became necessarily against it. and thereby diminished that quantity.The Wealth of Nations: Book 4 562 became due to foreign nations. render it more expensive.

Those arguments were partly solid and partly sophistical. This expense would generally be all laid out in the country.The Wealth of Nations: Book 4 563 trade. That high price. would necessarily be so much more against England. was extremely disadvantageous to the merchants who had any money to pay in foreign countries. perhaps. in smuggling the money out of it. in asserting that no prohibition could prevent their exportation when private people found any advantage in exporting them. The high price of exchange too would naturally dispose the merchants to endeavour to make their exports nearly balance Adam Smith ElecBook Classics . and would require a greater balance of gold and silver to be exported to Holland. indeed. which the freedom of trade. without any such attention. They were solid so far as they asserted that the exportation of gold and silver in trade might frequently be advantageous to the country. never fails to supply in the proper quantity. therefore. But they were sophistical in supposing that either to preserve or to augment the quantity of those metals required more the attention of government than to preserve or to augment the quantity of any other useful commodities. But though the risk arising from the prohibition might occasion some extraordinary expense to the bankers. it would not necessarily carry any more money out of the country. and could seldom occasion the exportation of a single sixpence beyond the precise sum drawn for. too. They were sophistical too. They were solid. They paid so much dearer for the bills which their bankers granted them upon those countries. in asserting that the high price of exchange necessarily increased what they called the unfavourable balance of trade. or occasioned the exportation of a greater quantity of gold and silver.

must necessarily have operated as a tax. This subject never came into their consideration but when they had occasion to apply to their country for some change in the laws relating to foreign trade. Such as they were. by those who were supposed to understand trade to those who were conscious to themselves that they knew nothing about the matter. not to increase but to diminish what they called the unfavourable balance of trade. those arguments convinced the people to whom they were addressed. and consequently the exportation of gold and silver. but how. experience demonstrated to the nobles and country gentlemen as well as to the merchants. however. therefore. besides. It would tend. The merchants knew perfectly in what manner it enriched themselves. But to know in what manner it enriched the country was no part of their business. It was their business to know it. but that the laws in question hindered it from bringing so much as it otherwise would do.The Wealth of Nations: Book 4 564 their imports. The high price of exchange. when they were told that foreign trade brought money into the country. To the judges who were to decide the business it appeared a most satisfactory account of the matter. The Adam Smith ElecBook Classics . It then became necessary to say something about the beneficial effects of foreign trade. and thereby diminishing their consumption. That foreign trade enriched the country. in order that they might have this high exchange to pay upon as small a sum as possible. in raising the price of foreign goods. none of them well knew. and the manner in which those effects were obstructed by the laws as they then stood. They were addressed by merchants to parliaments and to the councils of princes. Those arguments therefore produced the wished-for effect. or in what manner. to nobles and to country gentlemen.

however. and creates the greatest employment to the people of the country. A country that has no mines of its own must undoubtedly draw its gold and silver from foreign countries in the same manner as one that has no vineyards of its own must draw its wines. therefore. nor carried any out of it. and a country that has wherewithal to buy gold and silver will never be in want of those Adam Smith ElecBook Classics . was considered as subsidiary only to foreign trade. and in some other places. that the attention of government should be more turned towards the one than towards the other object. The attention of government was turned away from guarding against the exportation of gold and silver to watch over the balance 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.The Wealth of Nations: Book 4 565 prohibition of exporting gold and silver was in France and England confined to the coin of those respective countries. It does not seem necessary. A country that has wherewithal to buy wine will always get the wine which it has occasion for. From one fruitless care it was turned away to another care much more intricate. but of all other commercial countries. The country. In Holland. and just equally fruitless. The title of Mun’s book. the most important of all. became a fundamental maxim in the political economy. The inland or home trade. much more embarrassing. it was said. England’s Treasure in Foreign Trade. except so far as its prosperity or decay might indirectly influence the state of foreign trade. this liberty was extended even to the coin of the country. not of England only. the trade in which an equal capital affords the greatest revenue. could never become either richer or poorer by means of it. It neither brought money into the country.

either in circulating our commodities. no commodities can be more easily transported from one place to another. so all other commodities are the price of those metals. because. The navy of England would not be sufficient. on account of the small bulk and great value of those metals. or from wherever else it was to be had. or in other uses. without any attention of government. at five guineas a ton. will always supply us with the wine which we have occasion for: and we may trust with equal security that it will always supply us with all the gold and silver which we can afford to purchase or to employ. If there were in England. We trust with perfect security that the freedom of trade. for example. from the places where they exceed to those where they fall short of this effectual demand. a million of tons of shipping. which could be coined into more than five millions of guineas. from the places where they are cheap to those where they are dear. fifty tons of gold. or a thousand ships of a thousand tons each. But no commodities regulate themselves more easily or more exactly according to this effectual demand than gold and silver. to import it would require. But if there were an effectual demand for grain to the same value. an effectual demand for an additional quantity of gold. labour. or according to the demand of those who are willing to pay the whole rent. and profits which must be paid in order to prepare and bring it to market. They are to be bought for a certain price like all other commodities.The Wealth of Nations: Book 4 566 metals. a packet-boat could bring from Lisbon. and as they are the price of all other commodities. Adam Smith ElecBook Classics . The quantity of every commodity which human industry can either purchase or produce naturally regulates itself in every country according to the effectual demand.

A pound of tea.The Wealth of Nations: Book 4 567 When the quantity of gold and silver imported into any country exceeds the effectual demand. is about a hundred times the bulk of one of the highest prices. however. indeed. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home. so as to raise their price above that of the neighbouring countries. The. that is commonly paid for it in silver. it would not be able to effectuate it. It is partly owing to the easy transportation of gold and silver from the places where they abound to those where they are wanted that the price of those metals does not fluctuate continually like that of the greater part of other commodities. on the contrary. If. Those metals. is not altogether Adam Smith ElecBook Classics . All the sanguinary laws of the customs are not able to prevent the importation of the teas of the Dutch and Gottenburgh East India Companies. no vigilance of government can prevent their exportation. broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedemon. the government would have no occasion to take any pains to import them. and consequently just so many times more difficult to smuggle. which are hindered by their bulk from shifting their situation when the market happens to be either over or under-stocked with them. price of those metals. when the Spartans had got wherewithal to purchase them. and more than two thousand times the bulk of the same price in gold. The continual importations from Peru and Brazil exceed the effectual demand of those countries. in any particular country their quantity fell short of the effectual demand. sixteen shillings. and sink the price of those metals there below that in the neighbouring countries. because somewhat cheaper than those of the British company. If it were even to take pains to prevent their importation.

not only without any inconveniency. In Europe. If. sinking in their value. industry must stop. that during the course of the present and preceding century they have been constantly. Buying and selling upon credit. the money price of all other commodities. but the changes to which it is liable are generally slow. however. and the different dealers compensating their credits with one another. requires such a revolution in commerce as that occasioned by the discovery of America. but. on account of the continual importations from the Spanish West Indies. for example. No complaint. But if money is wanted. once a month or once a year. Upon every account. But to make any sudden change in the price of gold and silver. If provisions are wanted. sensibly and remarkably. Money. there are more expedients for supplying their place than that of almost any other commodity. will supply it with less inconveniency. barter will supply its place. gradual and uniform. A well-regulated paper money will supply it. it is supposed. If the materials of manufacture are wanted. the attention of government never was so unnecessarily employed as when directed to watch over the preservation or increase of the quantity of money in any country. though with a good deal of inconveniency. must always be scarce with those who have neither wherewithal to buy it nor credit to borrow it. like wine. so as to raise or lower at once. the people must starve. but gradually. with some advantages. is more common than that of a scarcity of money.The Wealth of Nations: Book 4 568 exempted from variation. in some cases. without much foundation. therefore. notwithstanding all this. gold and silver should at any time fall short in a country which has wherewithal to purchase them. perhaps. Those Adam Smith ElecBook Classics .

This complaint. which they send to some distant market in hopes that the returns will come in before the demand for payment. of the scarcity of money is not always confined to improvident spendthrifts. their stock is gone. are as likely to have neither wherewithal to buy money nor credit to borrow it. They run about everywhere to borrow money. that occasions the general complaint of the scarcity of money. When the profits of trade happen to be greater than ordinary. It is not any scarcity of gold and silver.The Wealth of Nations: Book 4 569 who have either will seldom be in want either of the money or of the wine which they have