Adam Smith - The Wealth of Nations

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1776

AN INQUIRY INTO THE NATURE AND

CAUSES OF THE WEALTH OF NATIONS

by Adam Smith

INTRODUCTION AND PLAN OF THE WORK

THE annual labour of every nation is the fund which originallyit with all thenecessaries and conveniences of life which itconsumes, and which consist always either inthe immediateof that labour, or in what is purchased with that produce fromnations.

According therefore as this produce, or what is purchased with it,a greater orsmaller proportion to the number of those who areconsume it, the nation will be better orworse supplied with allnecessaries and conveniences for which it has occasion.

But this proportion must in every nation be regulated by twocircumstances; first,by the skill, dexterity, andwith which its labour is generally applied; and, secondly,byproportion between the number of those who are employed inlabour, and that of thosewho are not so employed. Whateverthe soil, climate, or extent of territory of anyparticular nation,abundance or scantiness of its annual supply must, in thatsituation,depend upon those two circumstances.

The abundance or scantiness of this supply, too, seems to dependupon the formerof those two circumstances than upon the. Among the savage nations of hunters andfishers, everywho is able to work, is more or less employed in useful, and endeavours toprovide, as well as he can, theand conveniences of life, for himself, or such of hisor tribeas are either too old, or too young, or too infirmgo a hunting and fishing. Such nations,however, are so miserablythat, from mere want, they are frequently reduced, or, at, thinkthemselves reduced, to the necessity sometimes ofdestroying, and sometimes ofabandoning their infants,old people, and those afflicted with lingering diseases, towithhunger, or to be devoured by wild beasts. Amongand thriving nations, on the contrary,though a great numberpeople do not labour at all, many of whom consume the produceoftimes, frequently of a hundred times more labour than thepart of those who work; yetthe produce of the whole labour ofsociety is so great that all are often abundantlysupplied, andworkman, even of the lowest and poorest order, if he is frugal and, mayenjoy a greater share of the necessaries andof life than it is possible for any savage toacquire.

The causes of this improvement, in the productive powers of, and the order,according to which its produce is naturallyamong the different ranks and conditions ofmen in the, make the subject of the first book of this Inquiry.

Whatever be the actual state of the skill, dexterity, and judgmentwhich labour isapplied in any nation, the abundance orof its annual supply must depend, during thecontinuance ofstate, upon the proportion between the number of those who areemployedin useful labour, and that of those who are not so. The number of useful and productivelabourers, it willappear, is everywhere in proportion to the quantity ofstock which is



employed in setting them to work, and to theway in which it is so employed. The secondbook, therefore,of the nature of capital stock, of the manner in which it isaccumulated, andof the different quantities of labour whichputs into motion, according to the different waysin which it is.

Nations tolerably well advanced as to skill, dexterity, and, in the application oflabour, have followed very differentin the general conduct or direction of it; those planshaveall been equally favourable to the greatness of its produce. Theof some nations hasgiven extraordinary encouragement to theof the country; that of others to the industry oftowns.any nation has dealt equally and impartially with every sort of. Since the downfall ofthe Roman empire, the policy of Europebeen more favourable to arts, manufactures, andcommerce, theof towns, than to agriculture, the industry of the country.circumstanceswhich seem to have introduced and established thisare explained in the third book.

Though those different plans were, perhaps, first introduced byprivate interestsand prejudices of particular orders of men,any regard to, or foresight of, theirconsequences upon thewelfare of the society; yet they have given occasion to verytheoriesof political economy; of which some magnify theof that industry which is carried on intowns, others ofwhich is carried on in the country. Those theories have had ainfluence, notonly upon the opinions of men of learning,upon the public conduct of princes andsovereign states. I have, in the fourth book, to explain, as fully and distinctlyI can, thosedifferent theories, and the principal effects whichhave produced in different ages andnations.

To explain in what has consisted the revenue of the great bodythe people, or whathas been the nature of those funds which, inages and nations, have supplied their annualconsumption, isobject of these four first books. The fifth and last book treatsthe revenueof the sovereign, or commonwealth. In this book Iendeavoured to show, first, what are thenecessary expenses ofsovereign, or commonwealth; which of those expenses ought tobeby the general contribution of the whole society; and whichthem by that of someparticular part only, or of some particularof it: secondly, what are the different methods inwhich thesociety may be made to contribute towards defraying the expenseson the wholesociety, and what are the principaland inconveniences of each of those methods: and,thirdlylastly, what are the reasons and causes which have inducedall modern governmentsto mortgage some part of this revenue,to contract debts, and what have been the effects ofthose debtsthe real wealth, the annual produce of the land and labour of the.

BOOK ONE OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVEPOWERS. OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS.PRODUCE IS NATURALLY

DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.

CHAPTER I

Of the Division of Labour

THE greatest improvement in the productive powers of labour, andgreater part ofthe skill, dexterity, and judgment with which itanywhere directed, or applied, seem to havebeen the effects of theof labour.



The effects of the division of labour, in the general businesssociety, will be moreeasily understood by considering in whatit operates in some particular manufactures. It iscommonlyto be carried furthest in some very trifling ones; notthat it really is carriedfurther in them than in others ofimportance: but in those trifling manufactures which aredestinedsupply the small wants of but a small number of people, the wholeof workmenmust necessarily be small; and those employed indifferent branch of the work can often becollected into theworkhouse, and placed at once under the view of the spectator. Ingreatmanufactures, on the contrary, which are destined tothe great wants of the great body ofthe people, everybranch of the work employs so great a number of workmen thatisimpossible to collect them all into the same workhouse. We cansee more, at one time, thanthose employed in one single. Though in such manufactures, therefore, the work mayreally beinto a much greater number of parts than in those of a morenature, the division isnot near so obvious, and hasbeen much less observed.

To take an example, therefore, from a very trifling manufacture;one in which thedivision of labour has been very often takenof, the trade of the pin-maker; a workman noteducated tobusiness (which the division of labour has rendered a distinct), nor acquaintedwith the use of the machinery employed in it(to the invention of which the same division oflabour has probablyoccasion), could scarce, perhaps, with his utmost industry, makepin ina day, and certainly could not make twenty. But in thein which this business is now carriedon, not only the wholeis a peculiar trade, but it is divided into a number of branches,whichthe greater part are likewise peculiar trades. One manout the wire, another straights it, athird cuts it, a fourthit, a fifth grinds it at the top for receiving, the head; tothe headrequires two or three distinct operations; to put itis a peculiar business, to whiten the pinsis another; it is even aby itself to put them into the paper; and the importantbusinessmaking a pin is, in this manner, divided into about eighteenoperations, which, insome manufactories, are all performeddistinct hands, though in others the same man willsometimestwo or three of them. I have seen a small manufactory ofkind where ten menonly were employed, and where some of themperformed two or three distinct operations.But thoughwere very poor, and therefore but indifferently accommodated withnecessarymachinery, they could, when they exerted themselves,among them about twelve pounds ofpins in a day. There are in aupwards of four thousand pins of a middling size. Those ten,therefore, could make among them upwards of forty-eightpins in a day. Each person,therefore, making a tenth part ofeight thousand pins, might be considered as making fourthousandhundred pins in a day. But if they had all wrought separatelyindependently, andwithout any of them having been educated topeculiar business, they certainly could noteach of them havetwenty, perhaps not one pin in a day; that is, certainly, not thehundredand fortieth, perhaps not the four thousand eightpart of what they are at present capable ofperforming, inof a proper division and combination of their different.

In every other art and manufacture, the effects of the division ofare similar to whatthey are in this very trifling one; though,many of them, the labour can neither be so muchsubdivided, norto so great a simplicity of operation. The division of labour,, so far as itcan be introduced, occasions, in every art, aincrease of the productive powers of labour.Theof different trades and employments from one anotherto have taken place inconsequence of this advantage. This, too, is generally called furthest in those countries



whichthe highest degree of industry and improvement; what is the workone man in a rudestate of society being generally that ofin an improved one. In every improved society, thefarmer isnothing but a farmer; the manufacturer, nothing but a. The labour, too, which isnecessary to produce any onemanufacture is almost always divided among a greatnumberhands. How many different trades are employed in each branch of theand woollenmanufactures from the growers of the flax and the, to the bleachers and smoothers of thelinen, or to the dyers andof the cloth! The nature of agriculture, indeed, does notof somany subdivisions of labour, nor of so complete aof one business from another, asmanufactures. It isto separate so entirely the business of the grazier fromof the corn-farmer as the trade of the carpenter is commonlyfrom that of the smith. The spinner isalmost always aperson from the weaver; but the ploughman, the harrower,sower of theseed, and the reaper of the corn, are often the same.occasions for those different sorts oflabour returning with theseasons of the year, it is impossible that one man shouldbeemployed in any one of them. This impossibility of makingcomplete and entire aseparation of all the different branches ofemployed in agriculture is perhaps the reasonwhy theof the productive powers of labour in this art does notkeep pace with theirimprovement in manufactures. The mostnations, indeed, generally excel all theirneighbours inas well as in manufactures; but they are commonly moreby their superiorityin the latter than in the former.lands are in general better cultivated, and having morelabourexpense bestowed upon them, produce more in proportion to theand natural fertilityof the ground. But this superiority ofis seldom much more than in proportion to thesuperiority ofand expense. In agriculture, the labour of the rich countrynot always muchmore productive than that of the poor; or, at, it is never so much more productive as itcommonly is in. The corn of the rich country, therefore, will not, in the same degree ofgoodness, come cheaper to market thanof the poor. The corn of Poland, in the samedegree of, is as cheap as that of France, notwithstanding theopulence and improvement ofthe latter country. The corn ofis, in the corn provinces, fully as good, and in mostyearsabout the same price with the corn of England, though, inand improvement, France isperhaps inferior to England. Thelands of England, however, are better cultivated thanthose of, and the corn-lands of France are said to be much betterthan those of Poland. Butthough the poor country,the inferiority of its cultivation, can, in some, rival the rich in thecheapness and goodness of its corn,can pretend to no such competition in itsmanufactures; at least ifmanufactures suit the soil, climate, and situation of the rich. Thesilks of France are better and cheaper than those of, because the silk manufacture, at leastunder the present highupon the importation of raw silk, does not so well suit theofEngland as that of France. But the hardware and thewoollens of England are beyond allcomparison superior to thoseFrance, and much cheaper too in the same degree ofgoodness. Inthere are said to be scarce any manufactures of any kind, a fewthose coarserhousehold manufactures excepted, without which nocan well subsist.

This great increase of the quantity of work which, inof the division of labour, thesame number of people areof performing, is owing to three different circumstances;, to theincrease of dexterity in every particular workman;, to the saving of the time which iscommonly lost infrom one species of work to another; and lastly, to theof a great numberof machines which facilitate and abridge, and enable one man to do the work of many.



First, the improvement of the dexterity of the workman necessarilythe quantity ofthe work he can perform; and the division of, by reducing every man's business to someone simple operation,by making this operation the sole employment of his life,increasedvery much dexterity of the workman. A common, who, though accustomed to handle thehammer, has never beento make nails, if upon some particular occasion he isobligedattempt it, will scarce, I am assured, be able to make above two orhundred nails ina day, and those too very bad ones. A smith whobeen accustomed to make nails, butwhose sole or principalhas not been that of a nailer, can seldom with his utmostmake morethan eight hundred or a thousand nails in a day. Iseen several boys under twenty years ofage who had neverany other trade but that of making nails, and who, whentheythemselves, could make, each of them, upwards of twothree hundred nails in a day.The making of a nail,, is by no means one of the simplest operations. The sameblows thebellows, stirs or mends the fire as there is, heats the iron, and forges every part of the nail:inthe head too he is obliged to change his tools. Theoperations into which the making of apin, or of a metal, is subdivided, are all of them much more simple, and theof the person,of whose life it has been the sole businessperform them, is usually much greater. Therapidity with which somethe operations of those manufacturers are performed, exceedswhathuman hand could, by those who had never seen them, be supposedof acquiring.

Secondly, the advantage which is gained by saving the timelost in passing fromone sort of work to another is muchthan we should at first view be apt to imagine it. Itisto pass very quickly from one kind of work to anotheris carried on in a different placeand with quite different. A country weaver, who cultivates a small farm, must lose agoodof time in passing from his loom to the field, and from the fieldhis loom. When thetwo trades can be carried on in the same, the loss of time is no doubt much less. It is evenincase, however, very considerable. A man commonly saunters ain turning his hand fromone sort of employment to another.he first begins the new work he is seldom very keenand hearty;mind, as they say, does not go to it, and for some time hetrifles than applies togood purpose. The habit of saunteringof indolent careless application, which is naturally,or ratheracquired by every country workman who is obliged to changework and his toolsevery half hour, and to apply his hand indifferent ways almost every day of his life, rendershim almostslothful and lazy, and incapable of any vigorous applicationon the most pressingoccasions. Independent, therefore, of hisin point of dexterity, this cause alone mustalwaysconsiderably the quantity of work which he is capable of.

Thirdly, and lastly, everybody must be sensible how much labour isand abridgedby the application of proper machinery. It isto give any example. I shall only observe,therefore, thatinvention of all those machines by which labour is so muchand abridgedseems to have been originally owing to theof labour. Men are much more likely todiscover easier andmethods of attaining any object when the whole attention ofminds isdirected towards that single object than when it isamong a great variety of things. But inconsequence ofdivision of labour, the whole of every man's attention comesto be directedtowards some one very simple object. It isto be expected, therefore, that some one orother of thoseare employed in each particular branch of labour should soonout easier andreadier methods of performing their own particular, wherever the nature of it admits ofsuch improvement. A greatof the machines made use of in those manufactures in which



labourmost subdivided, were originally the inventions of common, who, being each ofthem employed in some very simple, naturally turned their thoughts towards findingoutand readier methods of performing it. Whoever has been muchto visit suchmanufactures must frequently have beenvery pretty machines, which were the inventionsof suchin order to facilitate and quicken their particular part ofwork. In the first fire-engines, a boy was constantly employedopen and shut alternately the communicationbetween the boilerthe cylinder, according as the piston either ascended or. One of thoseboys, who loved to play with his companions,that, by tying a string from the handle of thevalve whichthis communication to another part of the machine, the valveopen and shutwithout his assistance, and leave him at libertydivert himself with his playfellows. One ofthe greatestthat has been made upon this machine, since it wasinvented, was in this mannerthe discovery of a boy who wantedsave his own labour.

All the improvements in machinery, however, have by no meansthe inventions ofthose who had occasion to use the machines.improvements have been made by theingenuity of the makers of the, when to make them became the business of a peculiartrade;some by that of those who are called philosophers or men of, whose trade it is not todo anything, but to observe; and who, upon that account, are often capable ofcombiningthe powers of the most distant and dissimilar objects. In theof society,philosophy or speculation becomes, like everyemployment, the principal or sole trade andoccupation of aclass of citizens. Like every other employment too, it isinto a great numberof different branches, each of whichoccupation to a peculiar tribe or class of philosophers;andsubdivision of employment in philosophy, as well as in everybusiness, improvesdexterity, and saves time. Each individualmore expert in his own peculiar branch, morework is done uponwhole, and the quantity of science is considerably increased by.

It is the great multiplication of the productions of all thearts, in consequence ofthe division of labour, which, in a well-governed society, that universal opulencewhichitself to the lowest ranks of the people. Every workman hasgreat quantity of his ownwork to dispose of beyond what hehas occasion for; and every other workman beingexactly in thesituation, he is enabled to exchange a great quantity of hisgoods for a greatquantity, or, what comes to the same thing,the price of a great quantity of theirs. Hesupplies themwith what they have occasion for, and they accommodateas amply with whathe has occasion for, and a general plentyitself through all the different ranks of the society.

Observe the accommodation of the most common artificer orlabourer in a civilisedand thriving country, and you willthat the number of people of whose industry a part,thougha small part, has been employed in procuring him this, exceeds all computation. Thewoollen coat, for example,covers the day-labourer, as coarse and rough as it mayappear,the produce of the joint labour of a great multitude of workmen.shepherd, thesorter of the wool, the wool-comber or carder, the, the scribbler, the spinner, the weaver,the fuller, the dresser,many others, must all join their different arts in order toeven thishomely production. How many merchants and carriers,, must have been employed intransporting the materials fromof those workmen to others who often live in a verydistantof the country! How much commerce and navigation in particular,many ship-builders, sailors, sail-makers, rope-makers, must haveemployed in order to bring togetherthe different drugs madeof by the dyer, which often come from the remotest corners



ofworld! What a variety of labour, too, is necessary in order tothe tools of the meanest ofthose workmen! To say nothing ofcomplicated machines as the ship of the sailor, the millof the, or even the loom of the weaver, let us consider only what aof labour is requisite inorder to form that very simple, the shears with which the shepherd clips the wool. Theminer,builder of the furnace for smelting the ore, the seller of the, the burner of thecharcoal to be made use of in thehouse, the brickmaker, the brick-layer, the workmenwhothe furnace, the mill-wright, the forger, the smith, must allthem join their different artsin order to produce them. Were we to, in the same manner, all the different parts of hisdresshousehold furniture, the coarse linen shirt which he wears nextskin, the shoes whichcover his feet, the bed which he lies on,all the different parts which compose it, thekitchen-grate athe prepares his victuals, the coals which he makes use of forpurpose, dugfrom the bowels of the earth, and brought to himby a long sea and a long land carriage, allthe other utensilshis kitchen, all the furniture of his table, the knives and, the earthen orpewter plates upon which he serves up andhis victuals, the different hands employed inpreparing hisand his beer, the glass window which lets in the heat and the, and keeps outthe wind and the rain, with all the knowledge andrequisite for preparing that beautiful andhappy invention,which these northern parts of the world could scarce havea verycomfortable habitation, together with the tools of alldifferent workmen employed inproducing those different; if we examine, I say, all these things, and considera variety oflabour is employed about each of them, we shall bethat, without the assistance and co-operation of many, the very meanest person in a civilised country could not be, evenaccording to what we very falsely imagine the easysimple manner in which he is commonlyaccommodated. Compared,, with the more extravagant luxury of the great, hismust nodoubt appear extremely simple and easy; andit may be true, perhaps, that theaccommodation of a Europeandoes not always so much exceed that of an industriousandpeasant as the accommodation of the latter exceeds that of manyAfrican king, theabsolute master of the lives and liberties of tennaked savages.

CHAPTER II Of the Principle which gives occasion to the Division of Labour

THIS division of labour, from which so many advantages are, is not originally theeffect of any human wisdom, whichand intends that general opulence to which it givesoccasion.is the necessary, though very slow and gradual consequence of apropensity inhuman nature which has in view no such extensive; the propensity to truck, barter, andexchange one thing for.

Whether this propensity be one of those original principles innature of which nofurther account can be given; or whether,seems more probable, it be the necessaryconsequence of theof reason and speech, it belongs not to our presentto inquire. It iscommon to all men, and to be found in norace of animals, which seem to know neither thisnor any otherof contracts. Two greyhounds, in running down the same hare,sometimes theappearance of acting in some sort of concert.turns her towards his companion, orendeavours to intercept herhis companion turns her towards himself. This, however, isnoteffect of any contract, but of the accidental concurrence of theirin the same object atthat particular time. Nobody ever saw amake a fair and deliberate exchange of one bonefor another withdog. Nobody ever saw one animal by its gestures and naturalsignify toanother, this is mine, that yours; I am willing tothis for that. When an animal wants to



obtain something either ofman or of another animal, it has no other means of persuasionbut tothe favour of those whose service it requires. A puppy fawns upondam, and aspaniel endeavours by a thousand attractions tothe attention of its master who is at dinner,when it wantsbe fed by him. Man sometimes uses the same arts with his, and when he hasno other means of engaging them to actto his inclinations, endeavours by every servile andfawningto obtain their good will. He has not time, however, to doupon every occasion. Incivilised society he stands at allin need of the cooperation and assistance of greatmultitudes,his whole life is scarce sufficient to gain the friendship offew persons. In almostevery other race of animals each, when it is grown up to maturity, is entirely, and in itsnatural state has occasion for theof no other living creature. But man has almostconstantfor the help of his brethren, and it is in vain for him toit from their benevolenceonly. He will be more likely toif he can interest their self-love in his favour, and showthatit is for their own advantage to do for him what he requiresthem. Whoever offers toanother a bargain of any kind, proposesdo this. Give me that which I want, and you shallhave this whichwant, is the meaning of every such offer; and it is in this mannerwe obtainfrom one another the far greater part of those goodwhich we stand in need of. It is notfrom the benevolence ofbutcher, the brewer, or the baker that we expect our dinner,buttheir regard to their own interest. We address ourselves, nottheir humanity but to theirself-love, and never talk to them ofown necessities but of their advantages. Nobody but abeggarto depend chiefly upon the benevolence of his fellow-citizens.a beggar does notdepend upon it entirely. The charity ofdisposed people, indeed, supplies him with thewhole fund ofsubsistence. But though this principle ultimately provides himall thenecessaries of life which he has occasion for, it neithernor can provide him with them as hehas occasion for them. Thepart of his occasional wants are supplied in the samemannerthose of other people, by treaty, by barter, and by purchase.the money which oneman gives him he purchases food. The oldwhich another bestows upon him he exchangesfor other oldwhich suit him better, or for lodging, or for food, or for, with which he canbuy either food, clothes, or lodging, as heoccasion.

As it is by treaty, by barter, and by purchase that we obtain fromanother thegreater part of those mutual good offices which wein need of, so it is this same truckingdisposition whichgives occasion to the division of labour. In a tribe ofor shepherds aparticular person makes bows and arrows, for, with more readiness and dexterity than anyother. Heexchanges them for cattle or for venison with his; and he finds at last that he canin this manner get moreand venison than if he himself went to the field to catch them.aregard to his own interest, therefore, the making of bows andgrows to be his chiefbusiness, and he becomes a sort of. Another excels in making the frames and covers oftheirhuts or movable houses. He is accustomed to be of use in thisto his neighbours, whoreward him in the same manner with cattlewith venison, till at last he finds it his interest todedicateentirely to this employment, and to become a sort ofcarpenter. In the same mannera third becomes a smith or a, a fourth a tanner or dresser of hides or skins, the principalofthe nothing of savages. And thus the certainty of being ableexchange all that surplus partof the produce of his own labour,is over and above his own consumption, for such parts oftheof other men's labour as he may have occasion for,every man to apply himself to aparticular occupation,to cultivate and bring to perfection whatever talent or geniusmaypossess for that particular species of business.



The difference of natural talents in different men is, in reality,less than we areaware of; and the very different genius whichto distinguish men of different professions,when grown upmaturity, is not upon many occasions so much the cause as theof thedivision of labour. The difference between the mostcharacters, between a philosopher anda common street, for example, seems to arise not so much from nature as from, custom,and education. When they came into the world, and forfirst six or eight years of theirexistence, they were perhapsmuch alike, and neither their parents nor playfellows couldanyremarkable difference. About that age, or soon after,come to be employed in very differentoccupations. The differencetalents comes then to be taken notice of, and widens bydegrees,at last the vanity of the philosopher is willing to acknowledgeany resemblance.But without the disposition to truck,, and exchange, every man must have procured tohimself everyand conveniency of life which he wanted. All must have hadsame duties toperform, and the same work to do, and there couldbeen no such difference of employmentas could alone giveto any great difference of talents.

As it is this disposition which forms that difference of, so remarkable among menof different professions, so it issame disposition which renders that difference useful.Manyof animals acknowledged to be all of the same species derivenature a much moreremarkable distinction of genius, than what,to custom and education, appears to take placeamong men.nature a philosopher is not in genius and disposition half sofrom a streetporter, as a mastiff is from a greyhound, or afrom a spaniel, or this last from a shepherd'sdog. Thosetribes of animals, however, though all of the same, are of scarce any use to oneanother. The strength of theis not, in the least, supported either by the swiftness of the, orby the sagacity of the spaniel, or by the docility ofshepherd's dog. The effects of thosedifferent geniuses and, for want of the power or disposition to barter and, cannot bebrought into a common stock, and do not in thecontribute to the better accommodationind conveniency of the. Each animal is still obliged to support and defend itself,andindependently, and derives no sort of advantage fromvariety of talents with which naturehas distinguished its. Among men, on the contrary, the most dissimilar geniusesof use toone another; the different produces of theirtalents, by the general disposition to truck,barter, and, being brought, as it were, into a common stock, whereman may purchasewhatever part of the produce of other men'she has occasion for.

CHAPTER III That the Division of Labour is limited by the Extent of the Market

AS it is the power of exchanging that gives occasion to theof labour, so the extentof this division must always beby the extent of that power, or, in other words, by theextentthe market. When the market is very small, no person can have anyto dedicatehimself entirely to one employment, for wantthe power to exchange all that surplus part ofthe produce of hislabour, which is over and above his own consumption, for suchof theproduce of other men's labour as he has occasion for.

There are some sorts of industry, even of the lowest kind, whichbe carried onnowhere but in a great town. A porter, for, can find employment and subsistence in noother place. Ais by much too narrow a sphere for him; even an ordinarytown is scarcelarge enough to afford him constant. In the lone houses and very small villages whichareabout in so desert a country as the Highlands of Scotland,farmer must be butcher,baker and brewer for his own family.such situations we can scarce expect to find even a



smith, a, or a mason, within less than twenty miles of another of thetrade. The scatteredfamilies that live at eight or ten milesfrom the nearest of them must learn to performthemselves anumber of little pieces of work, for which, in more populous, they would callin the assistance of those workmen. Countryare almost everywhere obliged to applythemselves to all thebranches of industry that have so much affinity to oneas to beemployed about the same sort of materials. Acarpenter deals in every sort of work that ismade of wood:country smith in every sort of work that is made of iron. The formernotonly a carpenter, but a joiner, a cabinet-maker, and even ain wood, as well as a wheel-wright, a plough-wright, a cart andmaker. The employments of the latter are still morevarious. Itimpossible there should be such a trade as even that of a nailer inremote andinland parts of the Highlands of Scotland. Such aat the rate of a thousand nails a day, andthree hundreddays in the year, will make three hundred thousand nails inyear. But in sucha situation it would be impossible to dispose ofthousand, that is, of one day's work in theyear.

As by means of water-carriage a more extensive market is opened tosort ofindustry than what land-carriage alone can afford it, sois upon the sea-coast, and along thebanks of navigable rivers,industry of every kind naturally begins to subdivide anditself, andit is frequently not till a long time after thatimprovements extend themselves to the inlandparts of the. A broad-wheeled waggon, attended by two men, and drawn byhorses, inabout six weeks' time carries and brings back betweenand Edinburgh near four ton weightof goods. In about thetime a ship navigated by six or eight men, and sailing betweenportsof London and Leith, frequently carries and brings backhundred ton weight of goods. Sixor eight men, therefore, by theof water-carriage, can carry and bring back in the sametimesame quantity of goods between London and Edinburgh, as fiftywheeled waggons,attended by a hundred men, and drawn by fourhorses. Upon two hundred tons of goods,therefore, carriedthe cheapest land-carriage from London to Edinburgh, theremustcharged the maintenance of a hundred men for three weeks, andthe maintenance, and,what is nearly equal to the maintenance,wear and tear of four hundred horses as well as offifty great. Whereas, upon the same quantity of goods carried by water,is to be chargedonly the maintenance of six or eight men, andwear and tear of a ship of two hundred tonsburden, togetherthe value of the superior risk, or the difference of thebetween land andwater-carriage. Were there no otherbetween those two places, therefore, but bycarriage,as no goods could be transported from the one to the, except such whose price was veryconsiderable in proportiontheir weight, they could carry on but a small part of thatcommerceat present subsists between them, and consequently could givea small part ofthat encouragement which they at presentafford to each other's industry. There could belittle orcommerce of any kind between the distant parts of the world. Whatcould bear theexpense of land-carriage between London and? Or if there were any so precious as to beable to supportexpense, with what safety could they be transported through theof so manybarbarous nations? Those two cities, however,present carry on a very considerablecommerce with each other,by mutually affording a market, give a good deal ofto eachother's industry.

Since such, therefore, are the advantages of water-carriage, it isthat the firstimprovements of art and industry should be madethis conveniency opens the whole world



for a market to theof every sort of labour, and that they should always be muchinextending themselves into the inland parts of the country.inland parts of the country canfor a long time have no otherfor the greater part of their goods, but the country whichliesabout them, and separates them from the sea-coast, and the greatrivers. The extent oftheir market, therefore, must for atime be in proportion to the riches and populousness ofthat, and consequently their improvement must always be posteriorthe improvement ofthat country. In our North American colonies thehave constantly followed either the sea-coast or the banksthe navigable rivers, and have scarce anywhere extendedto anyconsiderable distance from both.

The nations that, according to the best authenticated history,to have been firstcivilised, were those that dwelt round theof the Mediterranean Sea. That sea, by far thegreatest inletis known in the world, having no tides, nor consequently anyexcept such asare caused by the wind only, was, by theof its surface, as well as by the multitude of itsislands,the proximity of its neighbouring shores, extremely favourablethe infant navigationof the world; when, from their ignorance ofcompass, men were afraid to quit the view ofthe coast, and fromimperfection of the art of shipbuilding, to abandon themselvestheboisterous waves of the ocean. To pass beyond the pillars of, that is, to sail out of theStraits of Gibraltar, was, inancient world, long considered as a most wonderful anddangerousof navigation. It was late before even the Phoenicians and, the most skilfulnavigators and ship-builders ofold times, attempted it, and they were for a long timethenations that did attempt it.

Of all the countries on the coast of the Mediterranean Sea,seems to have been thefirst in which either agriculture orwere cultivated and improved to any considerable.Upper Egypt extends itself nowhere above a few miles fromNile, and in Lower Egypt thatgreat river breaks itself intodifferent canals, which, with the assistance of a little art,tohave afforded a communication by water-carriage, not onlyall the great towns, butbetween all the considerable, and even to many farmhouses in the country; nearly inthemanner as the Rhine and the Maas do in Holland at present. Theand easiness of thisinland navigation was probably one ofprincipal causes of the early improvement of Egypt.

The improvements in agriculture and manufactures seem likewisehave been ofvery great antiquity in the provinces of Bengal, inEast Indies, and in some of the easternprovinces of China; thoughgreat extent of this antiquity is not authenticated by anyofwhose authority we, in this part of the world, are well. In Bengal the Ganges and severalother great rivers form anumber of navigable canals in the same manner as the NiledoesEgypt. In the Eastern provinces of China too, several greatform, by their differentbranches, a multitude of canals, andcommunicating with one another afford an inlandnavigation muchextensive than that either of the Nile or the Ganges, orthan both of themput together. It is remarkable thatthe ancient Egyptians, nor the Indians, nor theChinese,foreign commerce, but seem all to have derived theiropulence from this inlandnavigation.

All the inland parts of Africa, and all that part of Asia whichany considerable waynorth of the Euxine and Caspian seas, theScythia, the modern Tartary and Siberia, seem inall ages ofworld to have been in the same barbarous and uncivilised statewhich we findthem at present. The Sea of Tartary is the frozenwhich admits of no navigation, and



though some of the greatestin the world run through that country, they are at toogreatdistance from one another to carry commerce and communicationthe greater part ofit. There are in Africa none of thoseinlets, such as the Baltic and Adriatic seas in Europe,theand Euxine seas in both Europe and Asia, and the gulfsArabia, Persia, India, Bengal,and Siam, in Asia, to carry maritimeinto the interior parts of that great continent: andtherivers of Africa are at too great a distance from one another tooccasion to anyconsiderable inland navigation. The commercewhich any nation can carry on by means of ariver which doesbreak itself into any great number of branches or canals, andruns intoanother territory before it reaches the sea, can neververy considerable; because it is alwaysin the power of the nationspossess that other territory to obstruct the communicationbetweenupper country and the sea. The navigation of the Danube is of veryuse to thedifferent states of Bavaria, Austria and Hungary, inof what it would be if any of thempossessed the whole ofcourse till it falls into the Black Sea.

CHAPTER IV

Of the Origin and Use of Money

WHEN the division of labour has been once thoroughly, it is but a very small partof a man's wants which theof his own labour can supply. He supplies the far greaterpartthem by exchanging that surplus part of the produce of his own, which is over andabove his own consumption, for such parts ofproduce of other men's labour as he hasoccasion for. Every manlives by exchanging, or becomes in some measure a merchant,andsociety itself grows to be what is properly a commercial society.

But when the division of labour first began to take place, thisof exchanging mustfrequently have been very much clogged andin its operations. One man, we shall suppose,has morea certain commodity than he himself has occasion for, while anotherless. Theformer consequently would be glad to dispose of, and theto purchase, a part of thissuperfluity. But if this latterchance to have nothing that the former stands in need of,nocan be made between them. The butcher has more meat in histhan he himself canconsume, and the brewer and the baker wouldof them be willing to purchase a part of it.But they haveto offer in exchange, except the different productions ofrespective trades,and the butcher is already provided withthe bread and beer which he has immediateoccasion for. Nocan, in this case, be made between them. He cannot be their, nor they hiscustomers; and they are all of them thusless serviceable to one another. In order to avoidtheof such situations, every prudent man in every period of, after the first establishment ofthe division of labour, musthave endeavoured to manage his affairs in such a mannerashave at alltimes by him, besides the peculiar produce of his own, a certain quantity ofsome one commodity or other, such asimagined few people would be likely to refuse inexchange for theof their industry.

Many different commodities, it is probable, were successively bothof andemployed for this purpose. In the rude ages of society,are said to have been the commoninstrument of commerce; and,they must have been a most inconvenient one, yet in oldtimesfind things were frequently valued according to the number ofwhich had been givenin exchange for them. The armour of, says Homer, cost only nine oxen; but that ofGlaucus costhundred oxen. Salt is said to be the common instrument ofand exchanges in



Abyssinia; a species of shells in some partsthe coast of India; dried cod at Newfoundland;tobacco in Virginia;in some of our West India colonies; hides or dressed leathersome othercountries; and there is at this day a village inwhere it is not uncommon, I am told, for aworkman to carryinstead of money to the baker's shop or the alehouse.

In all countries, however, men seem at last to have beenby irresistible reasons togive the preference, for this, to metals above every other commodity. Metals can notonlykept with as little loss as any other commodity, scarce anythingless perishable thanthey are, but they can likewise, withoutloss, be divided into any number of parts, as byfusion thosecan easily be reunited again; a quality which no other equallycommoditiespossess, and which more than any other qualitythem fit to be the instruments of commerceand circulation.man who wanted to buy salt, for example, and had nothing butto give inexchange for it, must have been obliged to buyto the value of a whole ox, or a wholesheep at a time. Heseldom buy less than this, because what he was to give for itseldom bedivided without loss; and if he had a mind to buy, he must, for the same reasons, havebeen obliged to buy doubletriple the quantity, the value, to wit, of two or three oxen, orofor three sheep. If, on the contrary, instead of sheep or oxen,had metals to give inexchange for it, he could easily proportionquantity of the metal to the precise quantity ofthe commodityhe had immediate occasion for.

Different metals have been made use of by different nations forpurpose. Iron wasthe common instrument of commerce among theSpartans; copper among the ancientRomans; and gold and silverall rich and commercial nations.

Those metals seem originally to have been made use of for thisin rude bars,without any stamp or coinage. Thus we are toldPliny, upon the authority of Timaeus, anancient historian, that,the time of Servius Tullius, the Romans had no coined money,madeuse of unstamped bars of copper, to purchase whatever theyoccasion for. These bars,therefore, performed at this time theof money.

The use of metals in this rude state was attended with two veryinconveniencies;first, with the trouble of weighing;, secondly, with that of assaying them. In the preciousmetals,a small difference in the quantity makes a great difference invalue, even thebusiness of weighing, with proper exactness,at least very accurate weights and scales. Theweighing ofin particular is an operation of some nicety. In the coarser, indeed, where asmall error would be of little consequence,accuracy would, no doubt, be necessary. Yetwe should find ittroublesome, if every time a poor man had occasionto buy or sell afarthing's worth of goods, he was obliged tothe farthing. The operation of assaying is stillmore difficult,more tedious, and, unless a part of the metal is fairly meltedthe crucible,with proper dissolvents, any conclusion that can befrom it, is extremely uncertain. Beforethe institution ofmoney, however, unless they went through this tedious andoperation,people must always have been liable to thefrauds and impositions, and instead of a poundweight of pure, or pure copper, might receive in exchange for their goods ancompositionof the coarsest and cheapest materials,had, however, in their outward appearance, beenmade to resemblemetals. To prevent such abuses, to facilitate exchanges, andto encourageall sorts of industry and commerce, it has beennecessary, in all countries that have madeany considerabletowards improvement, to affix a public stamp upon certainof suchparticular metals as were in those countriesmade use of to purchase goods. Hence the



origin of coined, and of those public offices called mints; institutionsof the same naturewith those of the aulnagers andmasters of woolen and linen cloth. All of them are equallymeantascertain, by means of a public stamp, the quantity and uniformof those differentcommodities when brought to market.

The first public stamps of this kind that were affixed to themetals, seem in manycases to have been intended to ascertain,it was both most difficult and most important toascertain, theor fineness of the metal, and to have resembled themark which is at presentaffixed to plate and bars of silver,the Spanish mark which is sometimes affixed to ingots ofgold,which being struck only upon one side of the piece, and notthe whole surface,ascertains the fineness, but not theof the metal. Abraham weighs to Ephron the fourhundred shekelssilver which he had agreed to pay for the field of Machpelah.are said,however, to be the current money of the merchant, andare received by weight and not bytale, in the same manner asof gold and bars of silver are at present. The revenues ofancientSaxon kings of England are said to have been paid, notmoney but in kind, that is, invictuals and provisions of all. William the Conqueror introduced the custom of payingthem in. This money, however, was, for a long time, received at the, by weight and not bytale.

The inconveniency and difficulty of weighing those metals withgave occasion tothe institution of coins, of which the, covering entirely both sides of the piece andsometimes thetoo, was supposed to ascertain not only the fineness, but theof the metal.Such coins, therefore, were received by tale aspresent, without the trouble of weighing.

The denominations of those coins seem originally to have expressedweight orquantity of metal contained in them. In the time ofTullius, who first coined money atRome, the Roman as or pondoa Roman pound of good copper. It was divided in thesameas our Troyes pound, into twelve ounces, each of whicha real ounce of good copper.The English pound sterling,the time of Edward I, contained a pound, Tower weight, ofsilver,a known fineness. The Tower pound seems to have been something morethe Romanpound, and something less than the Troyes pound. Thiswas not introduced into the mint ofEngland till the 18th ofVIII. The French livre contained in the time of Charlemagne a,Troyes weight, of silver of a known fineness. The fair ofin Champaign was at that timefrequented by all the nationsEurope, and the weights and measures of so famous a marketwereknown and esteemed. The Scots money pound contained, fromtime of Alexander theFirst to that of Robert Bruce, a pound ofof the same weight and fineness with the Englishpound. English, French, and Scots pennies, too, contained all oforiginally a realpennyweight of silver, the twentieth part of an, and the two-hundred-and-fortieth part of apound. Thetoo seems originally to have been the denomination of a. When wheat is attwelve shillings the quarter, says an ancientof Henry III, then wastel bread of a farthingshall weighshillings and four pence. The proportion, however, betweenshilling and eitherthe penny on the one hand, or the pound on the, seems not to have been so constant anduniform as thatthe penny and the pound. During the first race of the kings of, the Frenchsou or shilling appears upon different occasions tocontained five, twelve, twenty, and fortypennies. Among theSaxons a shilling appears at one time to have contained onlypennies,and it is not improbable that it may have been asamong them as among their neighbours,the ancient Franks.the time of Charlemagne among the French, and from that ofthe



Conqueror among the English, the proportion between the, the shilling, and the penny,seems to have been uniformly theas at present, though the value of each has been very.For in every country of the world, I believe, the avariceinjustice of princes and sovereignstates, abusing theof their subjects, have by degrees diminished the realof metal, which hadbeen originally contained in their coins.Roman as, in the latter ages of the Republic, wasreduced to thefourth part of its original value, and, instead of weighing a, came to weighonly half an ounce. The English pound and pennyat present about a third only; the Scotspound and penny aboutthirty-sixth; and the French pound and penny about a sixty-sixthoftheir original value. By means of those operations the princessovereign states whichperformed them were enabled, in appearance,pay their debts and to fulfil theirengagements with a smallerof silver than would otherwise have been requisite. It wasinappearance only; for their creditors were really defraudeda part of what was due to them.All other debtors in the state werethe same privilege, and might pay with the same nominalsum ofnew and debased coin whatever they had borrowed in the old. Such, therefore, havealways proved favourable to the debtor,ruinous to the creditor, and have sometimesproduced a greater anduniversal revolution in the fortunes of private persons, thanhavebeen occasioned by a very great public calamity.

It is in this manner that money has become in all civilisedthe universal instrumentof commerce, by the intervention ofgoods of all kinds are bought and sold, or exchangedfor one.

What are the rules which men naturally observe in exchangingeither for money orfor one another, I shall now proceed to. These rules determine what may be called therelative orvalue of goods.

The word value, it is to be observed, has two different, and sometimes expressesthe utility of some particular, and sometimes the power of purchasing other goods whichtheof that object conveys. The one may be called "value in"; the other, "value inexchange." The things which have thevalue in use have frequently little or no value in; and,on the contrary, those which have the greatest value inhave frequently little or no value inuse. Nothing is morethan water: but it will purchase scarce anything; scarcecan be had inexchange for it. A diamond, on the contrary,scarce any value in use; but a very greatquantity of othermay frequently be had in exchange for it.

In order to investigate the principles which regulate thevalue of commodities, Ishall endeavour to show:

First, what is the real measure of this exchangeable value; or,consists the real priceof all commodities.

Secondly, what are the different parts of which this real price isor made up.

And, lastly, what are the different circumstances whichraise some or all of thesedifferent parts of price above,sometimes sink them below their natural or ordinary rate; or,whatthe causes which sometimes hinder the market price, that is, theprice of commodities,from coinciding exactly with what maycalled their natural price.

I shall endeavour to explain, as fully and distinctly as I can,three subjects in thethree following chapters, for which I mustearnestly entreat both the patience and attention



of the: his patience in order to examine a detail which may perhaps inplaces appearunnecessarily tedious; and his attention in orderunderstand what may, perhaps, after thefullest explication which Icapable of giving of it, appear still in some degree obscure.Ialways willing to run some hazard of being tedious in order to bethat I am perspicuous;and after taking the utmost pains that Ito be perspicuous, some obscurity may still appearto remaina subject in its own nature extremely abstracted.

CHAPTER V

Of the Real and Nominal Price of Commodities,

or their Price in Labour, and their Price in Money

EVERY man is rich or poor according to the degree in which heafford to enjoythe necessaries, conveniences, and amusements oflife. But after the division of labour hasonce thoroughly taken, it is but a very small part of these with which a man's owncansupply him. The far greater part of them he must derivethe labour of other people, and hemust be rich or poor accordingthe quantity of that labour which he can command, orwhich he canto purchase. The value of any commodity, therefore, to thewho possesses it,and who means not to use or consume it, but to exchange it for other commodities, isequal to theof labour which it enables him to purchase or command., therefore, is the realmeasure of the exchangeable value ofcommodities.

The real price of everything, what everything really costs toman who wants toacquire it, is the toil and trouble ofit. What everything is really worth to the man whohasit, and who wants to dispose of it or exchange it forelse, is the toil and trouble which itcan save to, and which it can impose upon other people. What is boughtmoney or withgoods is purchased by labour as much as what weby the toil of our own body. That moneyor those goodssave us this toil. They contain the value of a certain quantitylabour whichwe exchange for what is supposed at the time tothe value of an equal quantity. Labourwas the first price,original purchase-money that was paid for all things. It was notgold orby silver, but by labour, that all the wealth of thewas originally purchased; and its value, tothose who possess, and who want to exchange it for some new productions, is preciselytothe quantity of labour which it can enable them to purchasecommand.

Wealth, as Mr. Hobbes says, is power. But the person who either, or succeeds toa great fortune, does not necessarily acquiresucceed to any political power, either civil ormilitary. Hismay, perhaps, afford him the means of acquiring both, butmere possession ofthat fortune does not necessarily convey to him. The power which that possessionimmediately and directlyto him, is the power of purchasing; a certain command overalllabour, or over all the produce of labour, which is then in the. His fortune is greater orless, precisely in proportion to theof this power; or to the quantity either of other men'slabour,, what is the same thing, of the produce of other men's labour,it enables him topurchase or command. The exchangeable value ofmust always be precisely equal to theextent of thiswhich it conveys to its owner.

But though labour be the real measure of the exchangeable value ofcommodities,it is not that by which their value is commonly. It is of difficult to ascertain the proportionbetweendifferent quantities of labour. The time spent in two differentof work will not



always alone determine this proportion. Thedegrees of hardship endured, and of ingenuityexercised,likewise be taken into account. There may be more labour in an's hard work thanin two hours' easy business; or in an hour'sto a trade which it cost ten years' labour tolearn,in a month's industry at an ordinary and obvious employment.it is not easy to findany accurate measure either of hardshipingenuity. In exchanging, indeed, the differentproductions ofsorts of labour for one another, some allowance ismade for both. It isadjusted, however, not by any accurate, but by the higgling and bargaining of the market,accordingthat sort of rough equality which, though not exact, isfor carrying on thebusiness of common life.

Every commodity, besides, is more frequently exchanged for, andcompared with,other commodities than with labour. It isnatural, therefore, to estimate its exchangeablevalue by theof some other commodity than by that of the labour which itpurchase. Thegreater part of people, too, understand betteris meant by a quantity of a particularcommodity than by aof labour. The one is a plain palpable object; the other annotion,which, though it can be made sufficiently, is not altogether so natural and obvious.

But when barter ceases, and money has become the commoninstrumentcommerce, every particular commodity is more frequently exchangedmoneythan for any other commodity. The butcher seldom carries hisor his mutton to the baker,or the brewer, in order to exchangefor bread or for beer; but he carries them to themarket, whereexchanges them for money, and afterwards exchanges that money forand forbeer. The quantity of money which he gets for them, too, the quantity of bread and beerwhich he can afterwards. It is more natural and obvious to him, therefore, totheir value bythe quantity of money, the commodity for whichimmediately exchanges them, than by thatof bread and beer, thefor which he can exchange them only by the interventionofcommodity; and rather to say that his butcher's meat isthreepence or fourpence a pound,than that it is worth threefour pounds of bread, or three or four quarts of small beer.itcomes to pass that the exchangeable value of everyis more frequently estimated by thequantity of money,by the quantity either of labour or of any other commoditycan be had inexchange for it.

Gold and silver, however, like every other commodity, vary invalue, aresometimes cheaper and sometimes dearer, sometimeseasier and sometimes of moredifficult purchase. The quantity ofwhich any particular quantity of them can purchase or,or the quantity of other goods which it will exchange for,always upon the fertility orbarrenness of the mines whichto be known about the time when such exchanges are made.Theof the abundant mines of America reduced, in the sixteenth, the value of gold andsilver in Europe to about a third ofit had been before. As it costs less labour to bring thosemetalsthe mine to the market, so when they were brought thither theypurchase orcommand less labour; and this revolution in their, though perhaps the greatest, is by nomeans the only one ofhistory gives some account. But as a measure of quantity, suchthenatural foot, fathom, or handful, which is continuallyin its own quantity, can never be anaccurate measure of theof other things; so a commodity which is itself continuallyin itsown value, can never be an accurate measure of theof other commodities. Equal quantitiesof labour, at all timesplaces, may be said to be of equal value to the labourer. In hisstate ofhealth, strength and spirits; in the ordinary degreehis skill and dexterity, he must always



laydown the same portion ofease, his liberty, and his happiness. The price which he paysmustbe the same, whatever may be the quantity of goods which hein return for it. Ofthese, indeed, it may sometimes purchasegreater and sometimes a smaller quantity; but it istheir valuevaries, not that of the labour which purchases them. At alland places that is dearwhich it is difficult to come at, orit costs much labour to acquire; and that cheap which isto beeasily, or with very little labour. Labour alone, therefore, neverin its own value, isalone the ultimate and real standard bythe value of all commodities can at all times andplaces beand compared. It is their real price; money is their nominalonly.

But though equal quantities of labour are always of equal value tolabourer, yet tothe person who employs him they appearto be of greater and sometimes of smaller value.Hethem sometimes with a greater and sometimes with a smallerof goods, and to him theprice of labour seems to vary likeof all other things. It appears to him dear in the onecase,cheap in the other. In reality, however, it is the goods which arein the one case, anddear in the other.

In this popular sense, therefore, labour, like commodities, may beto have a realand a nominal price. Its real price may be said toin the quantity of the necessaries andconveniences of lifeare given for it; its nominal price, in the quantity of money.labourer isrich or poor, is well or ill rewarded, in proportionthe real, not to the nominal price of hislabour.

The distinction between the real and the nominal price ofand labour is not a matterof mere speculation, but maybe of considerable use in practice. The same real price isofthe same value; but on account of the variations in theof gold and silver, the same nominalprice is sometimes ofdifferent values. When a landed estate, therefore, is sold with aof aperpetual rent, if it is intended that this rentalways be of the same value, it is of importanceto thein whose favour it is reserved that it should not consist inparticular sum of money.Its value would in this case be liable toof two different kinds; first, to those which arisefromdifferent quantities of gold and silver which are contained attimes in coin of the samedenomination; and, secondly, towhich arise from the different values of equal quantitiesofand silver at different times.

Princes and sovereign states have frequently fancied that they hadtemporaryinterest to diminish the quantity of pure metalin their coins; but they seldom have fanciedthat they hadto augment it. The quantity of metal contained in the coins, Iof all nations,has, accordingly, been almost continually, and hardly ever augmenting. Such variations,therefore,almost always to diminish the value of a money rent.

The discovery of the mines of America diminished the value of goldsilver inEurope. This diminution, it is commonly supposed, thoughapprehend without any certainproof, is still going on gradually,is likely to continue to do so for a long time. Upon this,therefore, such variations are more likely to diminishto augment the value of a money rent,even though it should beto be paid, not in such a quantity of coined money ofadenomination (in so many pounds sterling, for example), butso many ounces either of puresilver, or of silver of a certain.

The rents which have been reserved in corn have preserved theirmuch better thanthose which have been reserved in money, eventhe denomination of the coin has not been



altered. By the 18thElizabeth it was enacted that a third of the rent of all collegeshould bereserved in corn, to be paid, either in kind, orto the current prices at the nearest publicmarket. Thearising from this corn rent, though originally but a third ofwhole, is in thepresent times, according to Dr. Blackstone,near double of what arises from the other two-thirds. The oldrents of colleges must, according to this account, have sunkto a fourth partof their ancient value; or are worth littlethan a fourth part of the corn which they wereformerly worth.since the reign of Philip and Mary the denomination of the Englishhasundergone little or no alteration, and the same number of, shillings and pence havecontained very nearly the sameof pure silver. This degradation, therefore, in the valuethemoney rents of colleges, has arisen altogether from thein the value of silver.

When the degradation in the value of silver is combined with theof the quantity ofit contained in the coin of the same, the loss is frequently still greater. In Scotland,wheredenomination of the coin has undergone much greater alterationsit ever did inEngland, and in France, where it has undergonegreater than it ever did in Scotland, someancient rents,of considerable value, have in this manner been reducedto nothing.

Equal quantities of labour will at distant times be purchased morewith equalquantities of corn, the subsistence of the labourer,with equal quantities of gold and silver,or perhaps of any other. Equal quantities of corn, therefore, will, at distant, be more nearlyof the same real value, or enable theto purchase or command more nearly the samequantity oflabour of other people. They will do this, I say, more nearly thanquantities ofalmost any other commodity; for even equalof corn will not do it exactly. The subsistenceof the, or the real price of labour, as I shall endeavour to show, is very different upondifferent occasions; more liberal insociety advancing to opulence than in one that isstanding still;in one that is standing still than in one that is going backwards.othercommodity, however, will at any particular time purchase aor smaller quantity of labour inproportion to the quantity ofwhich it can purchase at that time. A rent thereforein corn isliable only to the variations in the quantity ofwhich a certain quantity of corn can purchase.But a rentin any other commodity is liable not only to the variationsthe quantity of labourwhich any particular quantity of corn can, but to the variations in the quantity of cornwhich can beby any particular quantity of that commodity.

Though the real value of a corn rent, it is to be observed,, varies much less fromcentury to century than that of a money, it varies much more from year to year. Themoney price of, as I shall endeavour to show hereafter, does not fluctuateyear to year withthe money price of corn, but seems to beaccommodated, not to the temporary oroccasional, but toaverage or ordinary price of that necessary of life. The averageordinaryprice of corn again is regulated, as I shall likewiseto show hereafter, by the value of silver,by the richnessbarrenness of the mines which supply the market with that metal, orthequantity of labour which must be employed, and consequentlycorn which must beconsumed, in order to bring any particularof silver from the mine to the market. But thevalue of, though it sometimes varies greatly from century to century,varies much fromyear to year, but frequently continues the, or very nearly the same, for half a century or acentury. The ordinary or average money price of corn, therefore, may,so long a period,continue the same or very nearly the same, and along with it the money price of labour,provided, at, the society continues, in other respects, in the same or nearlythe same



condition. In the meantime the temporary and occasionalof corn may frequently be double,one year, of what it hadthe year before, or fluctuate, for example, from five andto fiftyshillings the quarter. But when corn is at theprice, not only the nominal, but the real valueof a cornwill be double of what it is when at the former, or willdouble the quantity eitherof labour or of the greater part ofcommodities; the money price of labour, and along withit thatmost other things, continuing the same during all these.

Labour, therefore, it appears evidently, is the only universal, asas the onlyaccurate measure of value, or the only standard bywe can compare the values of differentcommodities at all times,at all places. We cannot estimate, it is allowed, the realvaluedifferent commodities from century to century by the quantitiessilver which weregiven for them. We cannot estimate it from yearyear by the quantities of corn. By thequantities of labour we can,the greatest accuracy, estimate it both from century tocenturyfrom year to year. From century to century, corn is a betterthan silver, because,from century to century, equalof corn will command the same quantity of labour morethanequal quantities of silver. From year to year, on the, silver is a better measure than corn,because equalof it will more nearly command the same quantity of labour.

But though in establishing perpetual rents, or even in lettinglong leases, it may beof use to distinguish between real andprice; it is of none in buying and selling, the morecommonordinary transactions of human life.

At the same time and place the real and the nominal price of allare exactly inproportion to one another. The more or lessyou get for any commodity, in the Londonmarket for example, theor less labour it will at that time and place enable you toorcommand. At the same time and place, therefore, money isexact measure of the realexchangeable value of all commodities.is so, however, at the same time and place only.

Though at distant places, there is no regular proportion betweenreal and themoney price of commodities, yet the merchant whogoods from the one to the other hasnothing to consider butmoney price, or the difference between the quantity of silverwhichhe buys them, and that for which he is likely to sell. Half an ounce of silver at Canton inChina may command a greaterboth of labour and of the necessaries and conveniencesofthan an ounce at London. A commodity, therefore, which sellshalf an ounce of silver atCanton may there be really dearer, ofreal importance to the man who possesses it there,than awhich sells for an ounce at London is to the man whoit at London. If a Londonmerchant, however, can buy atfor half an ounce of silver, a commodity which he cansell atLondon for an ounce, he gains a hundred per cent bybargain, just as much as if an ounceof silver was at Londonof the same value as at Canton. It is of no importance tothat halfan ounce of silver at Canton would have given him theof more labour and of a greaterquantity of the necessariesconveniences of life than an ounce can do at London. An ounceatwill always give him the command of double the quantity ofthese which half an ouncecould have done there, and this iswhat he wants.

As it is the nominal or money price of goods, therefore, whichdetermines theprudence or imprudence of all purchases and, and thereby regulates almost the wholebusiness of commonin which price is concerned, we cannot wonder that it should havesomuch more attended to than the real price.



In such a work as this, however, it may sometimes be of use tothe different realvalues of a particular commodity attimes and places, or the different degrees of powerover theof other people which it may, upon different occasions, haveto those whopossessed it. We must in this case compare, notmuch the different quantities of silver forwhich it was commonly, as the different quantities of labour which those differentof silvercould have purchased. But the current prices ofat distant times and places can scarce everbe known with anyof exactness. Those of corn, though they have in few placesregularlyrecorded, are in general better known and have beenfrequently taken notice of byhistorians and other writers. Wegenerally, therefore, content ourselves with them, not asbeingexactly in the same proportion as the current prices of labour,as being the nearestapproximation which can commonly be had toproportion. I shall hereafter have occasionto make severalof this kind.

In the progress of industry, commercial nations have found itto coin severaldifferent metals into money; gold forpayments, silver for purchases of moderate value, andcopper,some other coarse metal, for those of still smaller. They have always, however,considered one of thoseas more peculiarly the measure of value than any of the other; andthis preference seems generally to have been given to thewhich they happened first tomake use of as the instrument of. Having once begun to use it as their standard, whichtheyhave done when they had no other money, they have generallyto do so even when thenecessity was not the same.

The Romans are said to have had nothing but copper money tillfive years beforethe first Punic war, when they first began tosilver. Copper, therefore, appears to havecontinued always theof value in that republic. At Rome all accounts appear to havekept,and the value of all estates to have been computed eitherasses or in sestertii. The as wasalways the denomination of acoin. The word sestertius signifies two asses and a half.thesestertius, therefore, was originally a silver coin, itswas estimated in copper. At Rome, onewho owed a great deal ofwas said to have a great deal of other people's copper.

The northern nations who established themselves upon the ruinsthe Romanempire, seem to have had silver money from the firstof their settlements, and not to haveknown either gold orcoins for several ages thereafter. There were silver coins inin the timeof the Saxons; but there was little gold coinedthe time of Edward III nor any copper tillthat of James I ofBritain. In England, therefore, and for the same reason, I, in all othermodern nations of Europe, all accounts are kept,the value of all goods and of all estates isgenerally computed in: and when we mean to express the amount of a person's, we seldommention the number of guineas, but the number ofsterling which we suppose would begiven for it.

Originally, in all countries, I believe, a legal tender of paymentbe made only in thecoin of that metal, which was peculiarlyas the standard or measure of value. In England,gold wasconsidered as a legal tender for a long time after it was coinedmoney. Theproportion between the values of gold and silver moneynot fixed by any public law orproclamation; but was left to beby the market. If a debtor offered payment in gold,themight either reject such payment altogether, or accept ofat such a valuation of the goldas he and his debtor could agree. Copper is not at present a legal tender except in the



changethe smaller silver coins. In this state of things the distinctionthe metal which wasthe standard, and that which was not the, was something more than a nominal distinction.

In process of time, and as people became gradually more familiarthe use of thedifferent metals in coin, and consequentlyacquainted with the proportion between theirrespective values,has in most countries, I believe, been found convenient tothis proportion,and to declare by a public law that a, for example, of such a weight and fineness, shouldexchangeone-and-twenty shillings, or be a legal tender for a debt ofamount. In this state ofthings, and during the continuance ofone regulated proportion of this kind, the distinctionbetween thewhich is the standard, and that which is not the standard,little more than anominal distinction.

In consequence of any change, however, in this regulated, this distinctionbecomes, or at least seems to become,more than nominal again. If the regulated value of aguinea,example, was either reduced to twenty, or raised to two-and-twenty, all accountsbeing kept and almost all obligations for debtexpressed in silver money, the greater part ofpayments could incase be made with the same quantity of silver money as; but wouldrequire very different quantities of gold money; ain the one case, and a smaller in theother. Silver wouldto be more invariable in its value than gold. Silver wouldto measure thevalue of gold, and gold would not appear tothe value of silver. The value of gold wouldseem to dependthe quantity of silver which it would exchange for; and the valuesilverwould not seem to depend upon the quantity of gold whichwould exchange for. Thisdifference, however, would be altogetherto the custom of keeping accounts, and ofexpressing theof all great and small sums rather in silver than in gold. One of Mr.Drummond's notes for five-and-twenty or fiftywould, after an alteration of this kind, bestill payable withand-twenty or fifty guineas in the same manner as before. It, after such analteration, be payable with the same quantitygold as before, but with very differentquantities of silver. Inpayment of such a note, gold would appear to be more invariableinvalue than silver. Gold would appear to measure the value of, and silver would notappear to measure the value of gold. Ifcustom of keeping accounts, and of expressingpromissory notes andobligations for money in this manner, should ever become, gold, andnot silver, would be considered as the metalwas peculiarly the standard or measure ofvalue.

In reality, during the continuance of any one regulated proportionthe respectivevalues of the different metals in coin, theof the most precious metal regulates the value ofthe whole. Twelve copper pence contain half a pound, avoirdupois, of, of not the bestquality, which, before it is coined, is seldomsevenpence in silver. But as by the regulationtwelve such penceordered to exchange for a shilling, they are in the marketas worth ashilling, and a shilling can at any time befor them. Even before the late reformation of thegold coin ofBritain, the gold, that part of it at least which circulatedLondon and itsneighbourhood, was in general less degraded belowstandard weight than the greater partof the silver.and-twenty worn and defaced shillings, however, were considered asto aguinea, which perhaps, indeed, was worn and defaced, but seldom so much so. The lateregulations have brought the goldas near perhaps to its standard weight as it is possible tobringcurrent coin of any nation; and the order, to receive no gold atpublic offices but byweight, is likely to preserve it so, as longthat order is enforced. The silver coin still



continues in the sameand degraded state as before the reformation of the gold coin.Inmarket, however, one-and-twenty shillings of this degradedcoin are still considered asworth a guinea of this excellentcoin.

The reformation of the gold coin has evidently raised the value ofsilver coin whichcan be exchanged for it.

In the English mint a pound weight of gold is coined intofour guineas and a half,which, at one-and-twenty shillingsguinea, is equal to forty-six pounds fourteen shillingsand. An ounce of such gold coin, therefore, is worth L3 17s. 10/2d. in silver. In Englandno duty or seignorage is paid upon the, and he who carries a pound weight or an ounceweight ofgold bullion to the mint, gets back a pound weight or anweight of gold in coin,without any deduction. Three poundsshillings and tenpence halfpenny an ounce, therefore,isto be the mint price of gold in England, or the quantity ofcoin which the mint gives inreturn for standard gold bullion.

Before the reformation of the gold coin, the price of standardbullion in the markethad for many years been upwards of L3s. sometimes L3 19s. and very frequently L4 anounce; that sum, itprobable, in the worn and degraded gold coin, seldom containingthan anounce of standard gold. Since the reformation of the gold, the market price of standardgold bullion seldom exceeds L3 17s.d. an ounce. Before the reformation of the gold coin,the marketwas always more or less above the mint price. Since that, the market price hasbeen constantly below the mint. But that market price is the same whether it is paid in goldorsilver coin. The late reformation of the gold coin, therefore,raised not only the value ofthe gold coin, but likewise that ofsilver coin in proportion to gold bullion, and probably,too, into all other commodities; through the price of thepart of other commodities beinginfluenced by so many other, the rise in the value either of gold or silver coin into themmay not be so distinct and sensible.

In the English mint a pound weight of standard silver bullion isinto sixty-twoshillings, containing, in the same manner, aweight of standard silver. Five shillings andtwopence an ounce,, is said to be the mint price of silver in England, or theof silver coinwhich the mint gives in return for standardbullion. Before the reformation of the gold coin,the marketof standard silver bullion was, upon different occasions, fiveand fourpence, fiveshillings and fivepence, fiveand sixpence, five shillings and sevenpence, and veryfiveshillings and eightpence an ounce. Five shillings and, however, seems to have been themost common price. Sincereformation of the gold coin, the market price ofstandardbullion has fallen occasionally to five shillings and, five shillings and fourpence,and five shillings andan ounce, which last price it has scarce ever exceeded.the marketprice of silver bullion has fallen considerablythe reformation of the gold coin, it has notfallen so low asmint price.

In the proportion between the different metals in the English, as copper is ratedvery much above its real value, so silverrated somewhat below it. In the market of Europe,in the Frenchand in the Dutch coin, an ounce of fine gold exchanges forfourteen ounces offine silver. In the English coin, itfor about fifteen ounces, that is, for more silver thanitworth according to the common estimation of Europe. But as theof copper in bars is not,even in England, raised by the highof copper in English coin, so the price of silver in



bullionnot sunk by the low rate of silver in English coin. Silver instill preserves its properproportion to gold; for the samethat copper in bars preserves its proper proportion tosilver.

Upon the reformation of the silver coin in the reign of Williamthe price of silverbullion still continued to be somewhat abovemint price. Mr. Locke imputed this high priceto the permission ofsilver bullion, and to the prohibition of exporting silver. Thispermission of exporting, he said, rendered the demand forbullion greater than the demandfor silver coin. But the numberpeople who want silver coin for the common uses of buyingandat home, is surely much greater than that of those who wantbullion either for the use ofexportation or for any other use.subsists at present a like permission of exporting goldbullion,a like prohibition of exporting gold coin: and yet the price ofbullion has fallenbelow the mint price. But in the Englishsilver was then, in the same manner as now, under-rated into gold, and the gold coin (which at that time too wassupposed to require anyreformation) regulated then, as well as, the real value of the whole coin. As thereformation of thecoin did not then reduce the price of silver bullion to theprice, it is notvery probable that a like reformation will do so.

Were the silver coin brought back as near to its standard weightthe gold, a guinea,it is probable, would, according to the present, exchange for more silver in coin than itwould purchase in. The silver coin containing its full standard weight, therein this case bea profit in melting it down, in order, first, tothe bullion for gold coin, and afterwards toexchange this goldfor silver coin to be melted down in the same manner. Somein thepresent proportion seems to be the only method ofthis inconveniency.

The inconveniency perhaps would be less if silver was rated in theas much aboveits proper proportion to gold as it is at presentbelow it; provided it was at the same timeenacted that silvernot be a legal tender for more than the change of a guinea,the samemanner as copper is not a legal tender for more than theof a shilling. No creditor could inthis case be cheated inof the high valuation of silver in coin; as no creditorat present becheated in consequence of the high valuation of. The bankers only would suffer by thisregulation. When a runupon them they sometimes endeavour to gain time by paying in,and they would be precluded by this regulation from thismethod of evading immediatepayment. They would bein consequence to keep at all times in their coffers a greaterofcash than at present; and though this might no doubt beconsiderable inconveniency tothem, it would at the same time be asecurity to their creditors.

Three pounds seventeen shillings and tenpence halfpenny (theprice of gold)certainly does not contain, even in our presentgold coin, more than an ounce of standardgold, and it maythought, therefore, should not purchase more standard bullion.gold in coinis more convenient than gold in bullion, and, in England, the coinage is free, yet the goldwhich is carriedbullion to the mint can seldom be returned in coin to the ownerafter adelay of several weeks. In the present hurry of the mint,could not be returned till after adelay of several months. Thisis equivalent to a small duty, and renders gold in coinsomewhatvaluable than an equal quantity of gold in bullion. If in thecoin silver was ratedaccording to it proper proportion to, the price of silver bullion would probably fall belowthe minteven without any reformation of the silver coin; the valueof the present worn and



defaced silver coin being regulated byvalue of the excellent gold coin for which it can bechanged.

A small seignorage or duty upon the coinage of both gold andwould probablyincrease still more the superiority of thosein coin above an equal quantity of either of themin bullion.coinage would in this case increase the value of the metalin proportion to theextent of this small duty; for the samethat the fashion increases the value of plate inproportionthe price of that fashion. The superiority of coin above bullionprevent themelting down of the coin, and would discourage its. If upon any public exigency it shouldbecome necessary tothe coin, the greater part of it would soon return again of itsaccord.Abroad it could sell only for its weight in bullion. Atit would buy more than that weight.There would be a profit,, in bringing it home again. In France a seignorage ofeight percent is imposed upon the coinage, and the French coin,exported, is said to return homeagain of its own accord.

The occasional fluctuations in the market price of gold and silverarise from thesame causes as the like fluctuations in that ofother commodities. The frequent loss ofthose metals fromaccidents by sea and by land, the continual waste of them inand plating,in lace and embroidery, in the wear and tear of, and in that of plate; require, in allcountries which possess noof their own, a continual importation, in order to repair thisandthis waste. The merchant importers, like all other merchants,may believe, endeavour, aswell as they can, to suit theirimportations to what, they judge, is likely to be thedemand.With all their attention, however, they sometimesthe business, and sometimes underdo it.When they import moretha

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Adam Smith - The Wealth of Nations