s the science of the laws which regulate the production, distribution, and consumption of the products and services necessary, useful, or agreeable to man, which it requires some portion of voluntary labour to produce, procure, or preserve.

This definition has been framed so as to exclude all reference to whatever exists independently of man, and may be obtained in unlimited quantities without any laborious exertion. Had such been the case with the various articles required to satisfy our wants and desires, political economy would not have existed. It is the most practical of sciences, for it is exclusively conversant with the application, the objects, and the results of art and industry. It may indeed be said to be the science of values, inasmuch as those things only which may be exchanged or bartered for other things that are either wholly or in part produced by means of voluntary exertion or labour come within the scope of its inquiries. An article may be possessed of the highest degree of utility, or, as it is sometimes termed, of intrinsic worth, and yet be wholly destitute of value in exchange. Without utility of some sort or other, nothing can ever become an object of desire or demand. But however necessary an article may be to our comfort, or even existence, and however much it may be in demand, still, if it be a spontaneous production of nature, if it exist independently of human agency, and if every individual have an indefinite command over it, it cannot become the subject of an exchange, or afford any basis for the reasonings of the economist. Though food and clothes are not more useful than atmospheric air, they possess that value of which it is destitute. The reason is obvious. They are not, like air, gratuitous products, which may be had at all times without any exertion; they are obtainable only by labour. And as none will voluntarily sacrifice the fruits of their industry without an equivalent, they are truly said to possess exchangeable worth.

The word value is, we are aware, very often employed to express the utility as well as the exchangeable worth of between articles; but as these qualities have nothing in common, value in this double employment had better be avoided. It is obvious, for example, that the utility of bread and water, or milk, their capacity to appease hunger and quench thirst, is something fundamentally different from their value or capacity to exchange for or buy other things. Adam Smith perceived this difference, and was alive to the importance of carefully distinguishing between the utility, or, as he expressed it, the "value in use," of commodities, and their value in exchange. But he did not always keep this distinction in view, and it has been frequently lost sight of by later writers. There can, indeed, be no doubt that the confounding of these opposite qualities has been a principal cause of the confusion and obscurity in which many branches of the science, not in themselves difficult, are still involved. When it is said that water is highly valuable, it is meant that, being indispensable to existence, it has a high degree of utility, or of value in use; for, being usually obtainable in large quantities with little labour or exertion, it has in most places a very low value in exchange. But when it is said that gold is highly valuable, a totally different meaning is attached to the phrase. Gold is of comparatively small utility; but as it requires a great deal of labour and expense to bring limited quantities of it to market, it has a high value in exchange, and is readily accepted as an equivalent for large quantities of most other articles. To confound qualities which are so very different must evidently lead to erroneous conclusions. And therefore, to avoid all chance of error from mistaking the sense of so important a word as value, we shall not use it except to signify exchangeable worth, or value in exchange; and shall employ the word utility to express the power or fitness of an article to satisfy our wants and desires.

Were utility and value identical, or were they regulated by the same laws, it would follow, that whatever increased the utility of an article would also increase its value, and vice versa. But the fact is completely the reverse. A deficient harvest adds nothing to the utility—that is, to the nutritive power—of bread; while, by increasing its value and price, it adds to the privations of the great bulk of the consumers, and especially to those of the lower and poorer and most numerous classes. And so in every case. A rise of value or price is always publicly injurious; and conversely. Were the manufacture of hats improved so that they might be sold for half their present price, everybody would gain by the change. Those by whom they have been worn would save half their outlay upon them, while they would be brought within the reach of others who may hitherto have been too poor to become their purchasers. The discovery of the rules or principles by the application of which the value of commodities may be reduced to the lowest limits, is a principal object of this science. For, the more their value is reduced, the more obtainable they become, and the greater, consequently, is the amount of necessaries and conveniences at the disposal of individuals.

Political economy has frequently been defined to be "the science which treats of the production, distribution, and consumption of the wealth of nations." Definition, sumption of wealth;" and if by wealth were meant those products which possess exchangeable value, and are necessary, useful, or agreeable, the definition would be one of the least exceptionable. But those by whom it has been adopted have given to wealth a different and in general much too extensive a meaning. They have sometimes, for example, considered it as synonymous with "all that man desires as useful and agreeable." But if political economy were to embrace a discussion of the production and distribution of whatever is useful and agreeable, it would include within itself every other science; and the best Encyclopedia would be the best treatise on political economy. Good health is the greatest of boons, and therefore, on this hypothesis, the science of wealth should comprise the science of medicine; civil and religious liberty are highly desirable, and therefore the science of wealth should comprise the science of politics, and so on. Such definitions are obviously worse than useless. They generate confused and erroneous notions respecting the objects and limits of the science, and prevent the student acquiring a distinct idea of the nature of the inquiries in which he is engaged.

Malthus defined wealth to consist of "those material objects which are necessary, useful, and agreeable to man." (Principles of Political Economy, p. 28.) But waiving the objections that may perhaps be made to the introduction of the word "material," it is too comprehensive to be of use. Atmospheric air and the heat of the sun are both material products, and are highly useful and agreeable. But their independent existence and incapacity of appropriation exclude them, as already seen, from the investigations of this science.

Adam Smith has not explicitly stated what was the meaning which he attached to the term wealth. Probably, indeed, his ideas on the subject were not very precise; but he most commonly describes it as "the annual produce of land and labour." It has, however, been objected to this definition, that it refers to the sources of wealth before it is known what wealth is, and that it includes the useless products of the earth, as well as those which are appropriated and enjoyed by man.

The definition we have given is not open to any of these objections. By confining the science to a discussion of the laws which regulate "the production, distribution, and consumption of those products and services which have exchangeable value, and are necessary, useful, or agreeable," we give it a distinct and definite object. When thus properly restricted, the researches of the economist occupy a field which is exclusively his own. He runs no risk of wasting his time in inquiries which belong to other sciences, or in unprofitable investigations respecting the production and consumption of articles which cannot be appropriated, and exist independently of human agency.

Capacity of appropriation is indispensable to constitute wealth. And we shall invariably employ this term to distinguish those products which are obtainable only by the intervention of human labour, and which may in consequence be appropriated and consumed exclusively by their owners. A man is not said to be wealthy because he has an indefinite command over atmospheric air; for that being a privilege which he enjoys in common with every one else, it forms no ground of distinction. But he is said to be wealthy according to the degree in which he can afford to command those necessaries, conveniences, and luxuries which are not the gifts of nature, but the produce of industry. It must, however, be carefully observed, that though value and wealth be constantly conjoined, they are not identical, but are as widely different as utility and value. Our command of the necessaries and gratifications of which wealth consists will evidently be greater when their value declines than when it increases. It is a law of this science that wealth and value vary inversely—the one increasing as the other diminishes, and diminishing as the other increases. Wealth is greatest where the facility of production is greatest; and value is greatest under the opposite circumstances, or where the difficulty of production is greatest.

Besides being exclusively conversant with that class of Impet-phenomena which the exertion of industry exhibits, the science of this science is to ascertain the means by which the latter may be rendered most productive of the necessaries, luxuries, and enjoyments which form wealth; the laws which determine the distribution of wealth among the different classes into which society is divided; and how it may be most profitably consumed. To enter into lengthened arguments to prove the importance of a science having such objects in view would be worse than useless. The consumption of wealth is indispensable to existence; but the eternal law of Providence has decreed that it can only be procured through the intervention of industry—that man must earn his bread "in the sweat of his face." This twofold necessity renders the production of wealth a constant and principal object of the exertions of the vast majority of the human race. It has subdued the aversion of man from labour, given activity to indolence, and armed the patient hand of industry with zeal to undertake, and perseverance to overcome, the most difficult and disagreeable tasks.

When pursued with proper diligence, these efforts seldom fail to attain the end in view. And while they furnish the bulk of society with ample supplies of the articles required for their comfortable subsistence, they afford time for the cultivation of those speculative inquiries and elegant tastes which elevate and adorn civilized man. To use the words of Dr Barrow,—"Wealth is that which generally men of all things are wont to affect, and covet with most ardent desire, as the great storehouse of their needs and conveniences, the sure bulwark of their state and dignity, the universal instrument of compassing their designs and pleasures; and most evident it is, that in the natural course of things industry is the way to acquire it, to secure it, to improve and enlarge it; the which course, pursued innocently and modestly God will be so far from obstructing, that He will further and bless it; for that indeed it would be a flaw in Providence if honest industry, using the means it affordeth, should fail of procuring a competency."

But when the acquisition of wealth makes a part of the order of Providence, and is indispensable not merely to the supply of our necessary wants, but to our progress in intelligence and refinement, can we doubt the importance of the science which teaches the modes by which its acquisition may be facilitated, and the greatest amount of wealth obtained with the least difficulty? There are none to whom a knowledge of political economy can be considered as extrinsic or superfluous. There are some, doubtless, to whom it may be of more advantage than to others; but it is of paramount consequence to all. The prosperity of individuals and nations does not depend nearly so much on salubrity of climate or fertility of soil, as on their ability to apply labour with perseverance, skill, and judgment. Industry can balance almost every other deficiency. It can render regions, naturally inhospitable and unproductive, the comfortable abodes of an intelligent and refined, a crowded and wealthy population. But where it is wanting, the choicest gifts of nature are of no value; and countries possessed of the greatest capabilities of improvement with difficulty furnish a miserable subsistence to the

1 See the first of Dr Barrow's eloquent and admirable Sermons on Industry. The citizens of Greece and Rome considered it degrading to employ themselves in those occupations which form the principal business of the inhabitants of modern Europe. In some of the Grecian states they were prohibited from engaging in manufacturing or commercial industry; and in Athens and Rome, where this prohibition did not exist, these employments were regarded as mean, mercenary, and unworthy of freemen, and were carried on either by slaves, or the very dregs of the people. Agriculture was treated with more respect. Some of the most distinguished characters in the earlier ages of Roman history had been actively engaged in rural affairs. But notwithstanding their example, in the later ages of the republic, and under the emperors, the cultivation of the soil was usually carried on by slaves belonging to the landlords, and employed on their account. The mass of Roman citizens were mostly engaged in the military service, or derived a precarious and dependent subsistence from the supplies of corn furnished by the conquered provinces. The relations subsisting in modern Europe between landlords and tenants, and masters and servants, being thus in great measure unknown, the ancients were comparative strangers to those interesting questions growing out of the rise and fall of rents and wages which form so important a branch of this science. The philosophy of the ancient world was also extremely unfavourable to its cultivation. The luxurious or more refined mode of living of the rich was regarded by the ancient moralists as an evil of the first magnitude. They considered it as subversive of those warlike virtues which were the principal objects of their admiration; and they denounced the passion for accumulation as being fraught with the most injurious consequences. Political economy could not become an object of attention to men imbued with such prejudices; nor could it be studied by those who held the objects about which it is conversant in contempt, and spurned the labour by which they are produced.

At the establishment of our universities, the clergy being almost the exclusive possessors of the little knowledge then in existence, their peculiar feelings and pursuits naturally exercised a marked influence over the plans of education they were employed to frame. Grammar, rhetoric, logic, school divinity, and civil law comprised the whole course of study. To have appointed professors to explain the principles of commerce, and the means by which labour might be rendered most efficient, would have been considered as alike superfluous and degrading to the dignity of science. The prejudices against commerce, manufactures, and luxury, generated in antiquity, had a powerful influence in the middle ages. None had then any clear ideas of the true sources of wealth, happiness, and prosperity. The intercourse between different countries was extremely limited, and was confined rather to marauding excursions, and a piratical scramble for the precious metals, than to a commerce founded on the gratification of real or reciprocal wants.

These circumstances sufficiently account for the slow progress of this science, and the little attention paid to it, down to a very recent date. And since it became an object of more general attention and liberal inquiry, the opposition between the theories and opinions of the most eminent of its professors—an inevitable result of its recent cultivation—has proved unfavourable to its progress, and generated a disposition to distrust its best established conclusions. This, however, is an extremely ill-founded prejudice; and notwithstanding the diversity of the theories that have been formed to explain its various phenomena, it admits of as much certainty in its conclusions as any science not dependent on mere relation. A brief exposition of the principles on which it is founded, and of the mode in which its investigations should be conducted, will evince the correctness of this statement.

Political economy is not a science of speculation, but of fact and experiment. The principles on which the production and accumulation of wealth, and the progress of civilization depend, are not the offspring of legislative enactments. Nature's laws are not the offspring of legislative enactments. Man's existence depends on his exerting himself to produce goods and services; and the desire by which he is actuated to rise in the world and improve his condition impels him to save and accumulate. The principles which form the basis of this science make, therefore, a part of the constitution of man and of the physical world; and their operations, like those of the mechanical principles, may be traced by the aid of observation and analysis. There is, however, a material distinction between the physical and the moral and political sciences. The conclusions of the former apply in every case, while those of the latter apply only in the majority of cases; and the theorist must satisfy himself with framing his rules so as to explain their operation in the greater number of instances, leaving it to the sagacity of the observer to modify them so as to suit particular cases. Thus it is a principle admitted alike in morals and political economy, that by far the greater number of individuals have a much clearer view of what is conducive to their own interests than it is possible for any other man, or select number of men, to have; and that, therefore, it is sound policy to allow them to follow the bent of their inclination, and to engage in such branches of industry as they think proper. This is the general theorem; and it is one which is established on the most comprehensive experience. It is not, however, universally applicable, like the laws which regulate the motions of the planetary system. It will hold

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1 The force of the prejudices on this head may be learned from the following quotations—"Illiberales autem et sordidi," Cicero says, "quosque mercenariarum, omniumque quorum operae, non quaeram artes emuntur. Est enim illis ipsa merces auctoritatem servitutis. Sordida etiam putandi, qui mercantur a mercatoribus quod statim vendant, nisi enim proficent, nisi admodum excentrantur." Opificesque omnes in sordida arte versantur, nec enim quisquam ingenium agere potest habere officium. Mercatura autem, si tenitis est, sordida putanda est; sin autem magna et copiosa, multa undique apportans, multique sine vanitate imperiens, non est admodum vituperanda. (De Officiis, lib. i., sect. 42.) "Vulgari opificium, quae manu constant, et ad instruendam vitam occupant sunt; in quibus autem ingenio, nulla honesti similitudo est." (Senecae Epistulae, ep. 89.) A hundred similar quotations might be produced, but the ones from Cicero are sufficient to illustrate the accuracy of what has been stated. These are the prejudices against commerce, and the arts is proved by its exerting so powerful an influence over so cultivated a mind. For a further discussion of the opinions of the Romans on this subject see the Dissertazioni del Commercio di Romani of Monti, which received a prize from the Academy of Paris in 1767, and the Memoria Apologetica del Commercio di Romani of Torres, published at Venice in 1768.

2 "Rei militaria virtus praestat easteria omnibus; hae populo Romano, hae haie urbi eternam gloriam peperit." (Cicero pro Murena.) good in nine out of ten instances, but the tenth may be an exception. But it is not required of the economist that his theories should square with the peculiar bias of a particular person. His conclusions are drawn from contemplating the principles which are found to determine the condition of mankind, as presented on the large scale of nations and empires. His business is with man in the aggregate, with states, and not with families, with the passions and propensities which actuate the great bulk of the human race, and not with those which are occasionally found to influence a solitary individual.

This distinction should be kept constantly in view. Nothing is more common than to hear it objected to some of the best established truths in politics and political economy, that they are at variance with certain facts, and that, therefore, they should be rejected. But these objections very often originate in an entire misapprehension of the subject. It would be easy to produce a thousand instances of individuals who have been enriched by monopolies and restrictions, and even by robbery and plunder; though it would be rather rash thence to conclude that society may be enriched by such means! This, however, is the single consideration to which the economist has to attend. And until it can be shown that monopolies and restrictions are not destructive of national wealth, and that what is gained by the monopolist is not lost by the public, he is bound to regard them as injurious. To arrive at a well-founded conclusion in this science, it is not enough to observe results in particular cases, or as they affect a few individuals; we must further inquire whether these results be constant and universally applicable; whether the same circumstances which have given rise to them in one instance, would in every instance, and in every state of society, be productive of the same or similar results. A theory which is inconsistent with an uniform and constant fact must be erroneous. But the observance of a particular result at variance with customary experience, and when we may not have the means of discriminating the circumstances attending it, should not make us hastily modify or reject a principle which accounts satisfactorily for the greater number of appearances.

The example of the few arbitrary princes, distinguished by their equity, humanity, and generosity, is not enough to overthrow the principle which teaches that it is of the essence of irresponsible power to debauch and vitiate its possessors, to render them haughty, cruel, and suspicious: nor is the example of those who, attentive only to present enjoyment, and careless of the future, lavish their fortunes in boisterous dissipation or vain expense, sufficient to invalidate the conclusion, that the passion for accumulation is stronger and more powerful than the passion for expense. Had this not been the case, mankind could hardly have emerged from the condition of savages. The stupendous improvements which have been made in different ages and nations, the forests that have been cut down, the marshes and lakes that have been drained and cultivated, the harbours, roads, and bridges that have been constructed, the cities and edifices that have been raised, are all the fruit of a saving of income, and establish, in despite of thousands of instances of prodigality, the ascendancy and superior force of the accumulating principle.

The want of attention to these considerations has occasioned much of the error and misapprehension with which this science has been infected. The false theories and opinions which have successively appeared, though destitute of any real foundation, have mostly been supported by an appeal to facts. But a knowledge of facts, without a knowledge of their mutual relation, without being able to show why the one is a cause and the other an effect, is, as Say has observed, no better than the indigested erudition of an Almanac-maker, and affords no means of judging of the truth or falsehood of a general principle.

But though we are not to reject a received principle because of the apparent opposition of a few results with the circumstances of which we are unacquainted, we should have no confidence in its solidity, unless it be deduced from a comprehensive and careful induction. He who would arrive at a true knowledge of the laws regulating the production, distribution, and consumption of wealth, must draw his materials from a very wide surface, and study man under very different aspects. He should have recourse to the history of society, arts, commerce, and civilization; to the works of philosophers and travellers; to everything, in short, that may throw light on the causes which accelerate or retard the progress of civilization. He should observe the changes which have taken place in the fortunes and condition of the human race in different regions and ages; he should trace the rise, progress, and decline of industry; and, above all, he should carefully discriminate the effects of political measures, and the various circumstances wherein advancing and declining societies differ from each other. Such investigations, by disclosing the real causes of national opulence and refinement, and of poverty and degradation, furnish the means of satisfactorily solving almost all the important problems in the science of wealth, and of devising a scheme of administration calculated to insure the continued improvement of nations.

It should be kept in mind, that it is no part of the business of the economist to inquire into the means by which individual fortunes may be increased or diminished, except to ascertain their general operation and effect. The public interests should always form the exclusive objects of his attention. He is not to frame systems, and devise schemes, for increasing the wealth and enjoyments of particular classes; but to apply himself to discover the sources of national wealth and universal prosperity, and the means by which they may be best secured and rendered most productive.

Those who reflect on the variety and extent of knowledge required for the construction of a sound theory of political economy will cease to feel any surprise at the errors into which economists have been betrayed, or at the discrepancy of the opinions still entertained on some important points. This science is of very recent origin. Though various treatises of considerable merit had previously appeared on some of its separate parts, it was not treated as a whole, or in a systematic manner, until about the middle of last century. This circumstance is of itself enough to account for the number of erroneous theories that have since appeared. Instead of deducing their general conclusions from a comparison of particular facts, and a careful examination of the phenomena attending the operation of different principles, and of the same principles under different circumstances, the first cultivators of almost every branch of science begin by framing their hypotheses on a very narrow and insecure basis. Nor is it really in their power to go to work differently. Observations are scarcely ever made or particulars noted for their own sakes. It is not till they begin to be in request as furnishing the only test by which to ascertain the truth of some popular theory, that they are made in sufficient numbers and with sufficient accuracy. The effectual demand of the theorist occasions, in the peculiar phraseology of this science, the production of the facts or raw materials he is afterwards to work into a system. The history of political economy exemplifies the truth of this remark. Being, as already observed, entirely unknown to the ancients, and but little attended to by our ancestors down to a comparatively late period, those circumstances which would have enabled us to judge with the greatest precision of the wealth and civilization of the more celebrated states of antiquity, and of Europe during the middle ages, have either been thought unworthy of notice by the historian, or have been very imperfectly and carelessly detailed. Those, therefore, who first began to trace the principles of the science had but a comparatively scanty experience on which to build their conclusions. Nor did they even avail themselves of the few historical facts with which they might easily have become acquainted, but confined their attention almost exclusively to those which happened to fall within the sphere of their own observation.

Accordingly to what has now been stated, we find that the theories advanced by the early economical writers were formed on the most contracted basis, and were only fitted to explain a few obvious and striking phenomena. The mercantile theory, for example, was entirely bottomed on the popular and prevalent opinions respecting money. The precious metals having been long used, both as standards by which to ascertain the values of different commodities, and as the equivalents for which they were most frequently exchanged, acquired a fictitious importance in the estimation of persons of the greatest discernment, as well as of the vulgar. The obvious fact, that all buying and selling is really nothing more than the bartering of one commodity for another—of a certain quantity of corn or wool, for example, for a certain quantity of gold or silver, and vice versa, was entirely overlooked. The attention was gradually transferred from the money's worth to the money itself; and the wealth of individuals and of states came to be measured by the quantities of the precious metals actually in their possession, and not by the abundance and value of the disposable products with which they could afford to purchase these metals. On this flimsy and fallacious hypothesis are founded the theories of almost every writer on economical subjects antecedent to the appearance of the works of Child, North, and Locke in England, and of Gournay and Quesnay in France. And, which is of infinitely greater moment, it is on this same hypothesis that the great powers of Europe proceeded to regulate their intercourse with each other. Their grand object was to monopolize the largest possible supplies of gold and silver, not to facilitate the production of necessaries, comforts, and luxuries. And as gold and silver could not be obtained in countries destitute of mines, except in exchange for exported commodities, various schemes were set on foot for encouraging exportation, and for preventing the importation of most products other than the precious metals. In consequence, an excess of exports over imports was long considered as the best possible proof that a country was advancing in the accumulation of wealth: For it was believed that this excess could not be balanced otherwise than by an equivalent importation of gold or silver, or of the only real wealth which it was supposed a country could possess.

These principles and conclusions, though entirely false and erroneous, afford a tolerable explanation of a few very obvious phenomena, and are in perfect unison with the popular prejudices on the subject. It was natural, therefore, that they should be espoused by the merchants or practical men, who were the earliest writers on commerce. They did not consider it necessary to subject the principles they assumed to any refined analysis or examination. But, reckoning them as sufficiently established by the common consent of mankind, they applied themselves to the discussion of the practical measures calculated to give them the greatest efficacy.

"Although a kingdom," says one of the earliest and ablest writers in defence of the mercantile system, "may be enriched by gifts received, or by purchase taken, from some other nations, yet these are things uncertain, and of small consideration when they happen. The ordinary means, therefore, to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule,—to sell more to strangers yearly than we consume of theirs in value. For suppose that when this kingdom is plentifully served with cloth, lead, tin, iron, fish, and other native commodities, we do yearly export the surplus to foreign countries to the value of L2,200,000, by which means we are enabled, beyond the seas, to buy and bring in foreign wares for our use and consumption to the value of L2,000,000. By this order duly kept in our trading, we may rest assured that the kingdom shall be enriched yearly L200,000, which must be brought to us as so much treasure; because that part of our stock which is not returned to us in wares must necessarily be brought home in treasure." (Mun's Treasure by Foreign Trade, orig. ed., p. 11.)

The gain on our foreign commerce is here supposed to consist exclusively of the gold and silver which, it is taken for granted, must be brought home in payment of the excess of exported commodities. Mun lays no stress on the circumstance of foreign commerce enabling countries to obtain an infinite variety of useful and agreeable products, of which, but for it, they would be wholly deprived, while it supplies them with a great many more at comparatively low prices. We are desired to consider the innumerable additions which are thus made by commerce to the motives which stimulate, and the comforts and enjoyments which reward, the labour of the industrious—as nothing, and to fix our attention exclusively on the favourable balance of gold and silver! This is like desiring a person to estimate the utility of a suit of clothes by the number and glare of the metal buttons with which they are fastened! And yet this rule for judging of the advantageousness of foreign commerce was long regarded as infallible by the generality of merchants and practical statesmen; and, until very recently, we were annually congratulated on the excess of our exports over our imports!

But in addition to the erroneous notions respecting the precious metals, there were other circumstances which led to the establishment of the mercantile system, and the enacting of regulations subversive of the freedom of industry. The feudal governments established in the countries which formed the western division of the Roman empire, early degenerated into a system of anarchy and lawless oppression. The princes, unable to restrain the usurpations of the greater barons, or to control their violence, endeavoured to strengthen their influence and consolidate their power by attaching the cities and towns to their interests. For this purpose they granted them charters, which enfranchised the inhabitants, abolished every existing mark of servitude, and formed them into corporations, or bodies politic, to be governed by councils and magistrates of their own selection. The order and good government that were thus established in them, and the security enjoyed by the citizens, when the rest of the country was a prey to rapine and disorder, stimulated their industry, and gave them a vast ascendancy over the cultivators of the soil. It was from the towns that the princes derived the greater part of their supplies of money, and with their assistance they were enabled to control and subdue the pride and independence of the barons. But the townsfolk were not disinterested enough to take part with their sovereigns merely from gratitude for the original gift of their charters. They were continually soliciting new privileges. And it was not to be expected that princes whom they had laid under the greatest obligations, and by whom they were justly regarded as the most industrious and deserving portion of their subjects, should be at all disinclined to gratify their wishes. To enhance the value of their corporate rights, they were authorized to hinder all individuals, whether native or foreign, who had not obtained leave from them, from carrying on any trade or craft within their limits; to enable them to obtain cheaper food and materials, the exportation of corn and of the raw products used in their manufactures was prevented; and to secure a market for whatever articles they had to sell, heavy duties and prohibitions were imposed on such foreign articles as might come into competition with those made at home, at the same time that bounties were employed to force the exportation of the latter! Such were the principal features of the system of public economy adopted, in the view of encouraging domestic industry, in every country of Europe, in the fourteenth, fifteenth, sixteenth, and seventeenth centuries. The freedom of trade recognised by their ancient laws was almost totally destroyed. It would be easy to mention a thousand instances of the excess to which this artificial system was carried in England and elsewhere; but we shall only observe, as illustrative of its spirit, that by an act passed in 1678, for the encouragement of the woollen manufacture, it was ordered that all dead bodies should be wrapped in woollen shrouds!

But the exclusion of foreign competition, and the monopoly of the home market, did not satisfy the manufacturers and merchants. Having obtained all the advantage they could from the public, they next attempted to prey on each other. Those possessed of most influence were authorized to carry on particular branches of industry, to the exclusion of every one else. This abuse having been carried to an extreme in the reign of Elizabeth, who granted an infinite number of new patents, became at last so intolerable as to make all classes join in petitioning for its abolition. And this, after much opposition on the part of government, by which the power of erecting monopolies was regarded as a very valuable branch of the prerogative, was effected by an act passed in the 21st of James I. But this act did not touch any of the fundamental principles of the mercantile or manufacturing system; and the privileges of bodies corporate were exempted from its operation.

In France the interests of the manufacturers were warmly espoused by Colbert, the celebrated minister of finance during the most splendid period of the reign of Louis XIV.; and the year 1664, when the tariff, compiled under Colbert's direction, was promulgated, has been sometimes considered, though improperly, as the era of the manufacturing system.

These restrictions were zealously supported by the writers in defence of the mercantile system and the balance of trade. The facilities given to the exportation of manufactured goods, and the obstacles thrown in the way of their importation, seemed to them to be particularly well fitted for making the exports exceed the imports, and procuring a favourable balance. Instead, therefore, of regarding these regulations as the offspring of a selfish monopolizing spirit, they looked on them as having been dictated by the soundest policy. The manufacturing and mercantile systems were thus naturally blended together. The acquisition of a favourable balance of payments was the grand object to be accomplished; and heavy duties and restrictions on importation from abroad, and bounties and premiums on exportation from home, were the means by which it was to be attained! It cannot excite surprise that a system having so many popular prejudices in its favour, and which afforded a plausible and convenient apology for the exclusive privileges enjoyed by the manufacturing and commercial classes, should have early attained, or that it should still preserve, notwithstanding the overthrow of its principles, a powerful practical influence.

Melon and Forbonnais in France; Genovesi in Italy; Mun, Sir Josiah Child, Davenant, the authors of the British Merchant, and Sir James Stewart in England, are the ablest writers who have espoused, some with more and some with fewer exceptions, the leading principles of the mercantile system.

"It is no exaggeration to affirm that there are but few political errors which have produced more mischief than the mercantile system. Armed with power, it commanded and forbid where it should only have protected. The regulating mania which it inspired tormented industry in a thousand ways to force it from its natural channels. It made each nation regard the welfare of its neighbours as incompatible with his own; hence the reciprocal desire of injuring and impoverishing each other; and hence that spirit of commercial rivalry which has been made the immediate or remote cause of the greater number of modern wars. This system stimulated nations to employ force or cunning to extort commercial treaties, productive of no real advantage to themselves, from the weakness or ignorance of others. It formed colonies that the mother country might enjoy the monopoly of their trade, and force them to resort exclusively to her markets. In short, where it has been productive of the least injury, it has retarded the progress of national prosperity; everywhere else it has deluged the earth with blood, and has depopulated and ruined some of those countries whose power and opulence it was supposed it would carry to the highest pitch." (Storch, Traité d'Economie Politique, tom. i., p. 123.)

The greater attention which began to be paid, in the Progress of seventeenth and in the earlier part of the last century, to commercial subjects connected with finance, commerce, and agriculture, gradually prepared the way for the downfall of the mercantile system. The English writers preceded those of every other country in pointing out its defects, and in discovering the real nature and functions of money, and the true principles of commerce. The establishment of a direct intercourse with India did much to accelerate the progress of sound opinions. The precious metals have always been one of the most advantageous articles of export to the East. And when the East India Company was established in 1600, leave was given them to export foreign gold coins or bullion of the value of L.30,000 a year, on condition of their importing, within six months after the termination of every voyage, except the first, as much gold and silver as should together be equal to the value of the silver they exported. But the Company's enemies contended that these conditions were not complied with, and that it was contrary to all principle, and highly injurious to the public interests, to permit the exportation of any quantity of bullion. The merchants and others interested in the India trade,—among whom we have to reckon Sir Dudley Digges, whose defence of the Company was published in 1615; Mun, who published a very able pamphlet in defence of the Company in 1621; Misselden; and, more recently, Sir Josiah Child,—could not controvert the reasoning of their opponents without openly impugning some of the commonly received opinions regarding money. In such circumstances it might easily have been foreseen that prejudice would give way to interest. At first, however, the advocates of the Company did not contend, nor is there, indeed, any good reason for thinking that they were of opinion, that the exportation of gold and silver to the East Indies was beneficial, on the ground that the commodities brought back

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1 Pliny, when enumerating the spices, silks, and other eastern products imported into Italy, says, "Minimaque computatione millies centena millia sestertium annis omnibus, India et Seres, ponimisque illa (Arabla) imperia nostro demunt." (Hist. Nat., lib. xii., cap. 18.) Charles V. used to say that the Portuguese, who in his time engrossed almost the whole commerce of the East, were the common enemies of Christendom, inasmuch as they drained it of its treasure to export it to infidels! (Misselden on Free Trade, p. 24.)

2 This pamphlet, which had become extremely rare, is included in the volume of early tracts on commerce reprinted for the Political Economy Club in 1856. were of greater value. They contended that the Company did not export a greater quantity of bullion than their charter authorized; and they further contended that its exportation was advantageous, because the commodities imported from India were chiefly re-exported to other countries, where they obtained a greater quantity of bullion in exchange for them than they had originally sent to India. But even this was an immense advance in the progress to a sounder theory. C'est toujours le premier pas qui coûte. The advocates of the Company began gradually to assume a higher tone; and at length boldly contended that bullion was nothing but a commodity, and that its exportation should be as free as that of anything else. Nor were these opinions confined to the partners of the East India Company. They were gradually communicated to others; and many eminent merchants were taught to look with suspicion on several received maxims, and were in consequence led to acquire more correct and comprehensive views regarding commercial intercourse. The new ideas ultimately made their way into the House of Commons; and in 1658 the statutes prohibiting the exportation of foreign coin and bullion were repealed, and full liberty given to the East India Company and to private traders to export them in unlimited quantities.

In addition to the controversies respecting the East India trade, the foundation of the colonies in America and the West Indies, the establishment of a compulsory provision for the support of the poor, the acts prohibiting the exportation of wool and the non-importation of Irish cattle, &c., drew an extraordinary portion of the public attention to questions of domestic policy. In the course of the seventeenth century a more than usual number of tracts were published on commercial and economical subjects. And although it must be admitted that the authors of the greater number are deeply imbued with the prevailing spirit of the age, there were some among them who rose far above the prejudices of their contemporaries, and have an unquestionable right to be regarded as the founders of the modern theory of commerce. They were the earliest teachers of those sound and liberal doctrines which show that the prosperity of states cannot be promoted by restrictive regulations, or by the depression of their neighbours; that the genuine spirit of commerce is inconsistent with the selfish and shallow policy of monopoly; and that the self-interest of mankind, not less than their duty, requires them to live in peace, and to cultivate a fair and friendly intercourse with each other.

We have already referred to Mun's treatise, entitled England's Treasure by Foreign Trade. It was first published in 1664; but there is good reason to suppose that it had been written many years previously. Mun's son, in the dedication to Lord Southampton, which he has prefixed to the work, says that his father "was, in his time, famous among merchants," a mode of expression which he would hardly have used had not a considerable period elapsed since his father's death; and Misselden, in his Circle of Commerce, published in 1623 (p. 36), refers to Mun's tract on the East India trade, and speaks of its author as being an accomplished and experienced merchant. Perhaps, therefore, we shall not be far wrong if we assume that the treatise on Foreign Trade was written so early as 1635 or 1640. At all events, the doctrines which it contains do not differ much from those which he had previously maintained in his pamphlet in defence of the East India Company, and some of the expressions are literally the same with those in the petition presented by that body to Parliament in 1628, which is known to have been written by Mun. The extract we have previously given shows that his opinions, in so far as regards the balance of trade, were identical with those of his contemporaries. But we incline to think that, if not the first, he was one of the first, who endeavoured to show, and who in fact successfully showed, that a favourable balance could not be procured by restrictive regulations; that the exportation and importation of bullion, coin, and everything else, should be freely permitted; and that "violent measures will never bring gold or silver into a kingdom, or retain them in it." (Pp. 27, 92, &c., original edition.) Mun also distinctly lays it down, "that those who have wares cannot want money;" and that "it is not the keeping of our money in the kingdom, but the necessity and use of our wares in foreign countries, and our want of other commodities, that causeth the vent and consumption on all sides, which causeth a quick and ample trade." (P. 43.) Nor are these detached and incidental passages thrown out at random. The spirit which they breathe pervades the book, and forms part of the system of the author. His observations in answer to Malyne's, on some rather difficult questions connected with exchange, are both acute and ingenious.

The first edition of Sir Josiah Child's celebrated work on Sir Josiah trade (A New Discourse of Trade, &c.) was published in 1668; but it was very greatly enlarged in the next edition, published in 1690. There are many sound and liberal doctrines advanced in this book. The argument to show that colonies do not depopulate the mother country is as conclusive as if it had proceeded from the pen of Malthus; and the just and forcible reasoning in defence of the naturalization of the Jews is highly creditable to the liberality and good sense of the writer, and discovers a mind greatly superior to existing prejudices. Sir Josiah has also some judicious observations on the laws against forestalling and regrating, on those limiting the number of apprentices, on corporation privileges, &c.

When treating of the laws relating to the exportation of wool, Sir Josiah lays it down, "that they that can give the best price for a commodity shall never fail to have it by one means or other, notwithstanding the opposition of any laws, or interposition of any power by sea or land; of such force, subtlety, and violence, is the general course of trade."

The radical defect of Sir Josiah Child's treatise consists in its being chiefly written to illustrate the advantages which he labours to show would result from reducing the legal rate of interest to four per cent.; an error into which he was led by mistaking the low interest of Holland for the principal cause of her wealth, when in truth it was mainly the result of her comparatively heavy taxation.

It is, however, worthy of remark, that this error was very soon detected. In the same year (1668) that Sir Josiah's treatise first appeared, a tract was published, entitled Interest of Money Mistaken, or a Treatise proving that the Abatement of Interest is the Effect and not the Cause of the Riches of a Nation. The author of this tract maintains the opinion afterwards held by Locke and Montesquieu, that the interest of money does not depend on statutory regulations, but that it varies according to the comparative opulence of a country; or rather according to the scarcity and abundance of money, increasing when the supply of money diminishes, and diminishing when it in-

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1 Those who have not the original pamphlets may consult Macpherson's History of Commerce, vol. ii., pp. 297, 315, 511; Macpherson's Account of the European Commerce with India, pp. 94, 104; and Mr Robert Grant's Sketch of the History of the Company, p. 44, where they will find ample confirmation of what is stated above.

2 This petition, and the reasons on which it is founded, were so well esteemed as to occasion its being reprinted in 1641.

3 These expressions are in the petition of the Company, presented to Parliament in 1628. Having endeavoured to establish this plausible but erroneous doctrine, the author contends that Sir Josiah Child had totally mistaken the cause of the wealth of the Dutch, of which he says the lowness of interest was merely a consequence.

In 1672 Sir William Petty published his celebrated tract, entitled the *Political Anatomy of Ireland*. In this work the mischiefous influence of the act passed in 1664, prohibiting the importation of cattle, beef, &c., from Ireland, is ably exposed, and the advantage of an unconstrained internal commerce clearly set forth. "If it be good for England," says Sir William, "to keep Ireland a distinct kingdom, why do not the predominant party in Parliament, suppose the western members, make England beyond Trent another kingdom, and take tolls and customs upon the borders? Or why was there ever any union between England and Wales? And why may not the entire kingdom of England be further cantonized for the advantage of all parties?"

The great defect of the writings of Mun, Misselden, Child, and others, does not consist so much in their notions about the superior importance of the precious metals, or the balance of trade, as in those respecting the advantages which they supposed were derivable from importing durable rather than rapidly perishable commodities and luxuries. This, however, was an extremely natural opinion; and we need not be surprised that the early writers on commerce fell into an error, from which neither the profound sagacity of Locke, nor the strong sense of Harris, has been able to preserve them. But even so early as 1677, the fallacy of this opinion was perceived. In that year there appeared a small tract, entitled *England's Great Happiness, or a Dialogue between Content and Complaint*; in which the author contends, that if there be a demand for wine, fruit, and such like articles, their importation in exchange for money is advantageous; and, on this ground, he defends the French trade, which was loudly declaimed against by the practical men of that day. We shall make a short extract from this remarkable tract:

"Complaint.—You speak plain; but what think you of the French trade, which draws away our money by wholesale? Mr Portrey, whom I have heard you speak well of, gives an account that they get L1,600,000 a year from us.

"Content.—'Tis a great sum; but perhaps were it put to a vote in a *secre council*, whether for that reason the trade should be left off, 'would go in the negative.' For paper, wine, linen, Castile soap, brandy, olives, capers, prunes, kid-skins, taffetas, and such like, we cannot be without; and for the rest, which you are pleased to style *opes* and *peacocks* (although wise Solomon ranked them with gold and ivory), they set us all agog, and have increased among us many considerable trades. . . . I must confess, I had rather they'd use our goods than money; but if not, I would lose the getting of ten pound because I can't get an hundred; and I don't question but when the French get more foreign trade, they'll give more liberty to the bringing in foreign goods. Till suppose John-a-Nokes to be a butcher, Dick-a-Styles to be an exchange man, yourself a lawyer; will you buy no meat or ribbands, or your wife a fine Indian gown or fan, because they will not truck with you for indentures which they have need of? I suppose no; but if you get money enough of others, you care not though you give it away in specie for these things. I think 'tis the same case."

The spirit of this tract may perhaps be better inferred from the titles of some of the dialogues. Among others, we have: "To export money our great advantage;"—"The French trade a profitable trade;"—"Variety of wares for all markets, a great advantage;"—"High living, a great improvement to the arts;"—"Invitation of foreign arts, a great advantage;"—"Multitudes of traders, a great advantage," &c., &c. But its influence was far too feeble to arrest the current of popular prejudice. In the year after its publication (1678) the importation of French commodities was prohibited for three years. This prohibition was made perpetual in the reign of William III, when the French trade was declared to be a nuisance!—a principle, if we may so call it, which has been acted upon down to our own times.

In 1681 a pamphlet was published in defence of the East India Company, under the signature of "Philopatris," but evidently the production of Sir Josiah Child. In the Introduction to this pamphlet the following principles are laid down:

"That all close monopolies (Sir Josiah contends that the East India Company does not come under this description), of what nature or kind soever, are destructive to trade, and consequently obstructive to the increase of the value of our lands."

"That silver or gold, coined or uncoined, though they are used for a measure of all other things, are no less a commodity than wine, oil, tobacco, cloth, or stuffs; and may, in many cases, be exported as much to the national advantage as any other commodity."

"That no nation ever was, or will be, considerable in trade, that prohibits the exportation of bullion." (P. 3.)

In Sir William Petty's *Quantulumcunque*, published in 1682, the subject of money is ably treated, and the Petty's idea of draining England of her cash by an unfavourable balance successfully combated. "If some English merchants," it is said, "should be so improvident as to carry out money only, then the foreign merchants would buy up such English commodities as they wanted with money brought into England from their respective countries, or with such commodities as England likes better than money; for the vending of English commodities doth not depend on anything else but the use and need which foreigners have of them." Sir W. denies that "a country is the poorer for having less money;" and concludes by strongly condemning the laws regulating the rate of interest; observing, that there may as well be laws to regulate the rate of exchange and of insurance. (See pp. 3, 6, 8, original edition.)

But a tract, entitled *Discourses on Trade, principally directed to the Cases of Interest, Coinage, Clipping, and North Increase of Money*, written by Sir Dudley North, and published in 1691, contains a far more able statement of the true principles of commerce than any that had then appeared.

We regret that our limits will not permit our giving so full an account as we could have wished of this extraordinary tract. The author is a most intelligent and consistent advocate of the great principles of commercial freedom. He is not, like the most eminent of his predecessors, well informed on one subject, and erroneous on another. He

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1 It has been generally supposed that Hume was the first who showed (in his Essay on Interest) the fallacy of this opinion, and who proved that the rate of interest does not depend on the abundance or scarcity of money, but on the abundance or scarcity of disposable capital connected with the demands of the borrowers and the rate of profit. This, however, is a mistake, the doctrine in question having been fully demonstrated in a pamphlet written by Mr Massie, entitled *Essay on the Governing Cause of the Natural Rate of Interest*, published two years before Mr Hume's Essay appeared.

2 Mr Portrey's pamphlet has been much referred to. It was published in 1663, and reprinted in 1673. It contains a very good argument in favour of enclosures. The reference in the text sufficiently explains the opinions of the writer in regard to commerce. Throughout sound and liberal. His system is consistent in its parts, and complete. He shows that in commercial matters nations have the same interests as individuals; and exposes the absurdity of supposing that any trade advantageous to the merchant can be injurious to the public. His opinions respecting the imposition of a seigniorage on the coinage of money, and the expediency of summary laws, then in great favour, are equally enlightened.

We subjoin from the Preface to this tract an abstract of the general propositions maintained in it:

"That the whole world as to trade is but as one nation or people, and therein nations are as persons."

"That the loss of a trade with one nation is not that only, separately considered, but so much of the trade of the world rescinded and lost; for all is combined together."

"That there can be no trade unprofitable to the public; for if any prove so, men leave it off; and wherever the traders thrive, the public, of which they are a part, thrive also."

"That to force men to deal in any prescribed manner may profit such as happen to serve them; but the public gains not, because it is taking from one subject to give to another."

"That no laws can set prices in trade, the rates of which must and will make themselves. But when such laws do happen to lay any hold, it is so much impediment to trade, and therefore prejudicial."

"That money is a merchandise, whereof there may be a glut, as well as a scarcity, and that even to an inconvenience."

"That a people cannot want money to serve the ordinary dealing, and more than enough they will not have."

"That no man will be the richer for the making much money, nor have any part in it, but as he buys it for an equivalent price."

"That the free coynage is a perpetual motion found out, whereby to melt and coyn without ceasing, and so to feed goldsmiths and coyners at the public charge."

"That debasing the coin is defrauding one another, and to the public there is no sort of advantage from it; for that admits no character or value but intrinsick."

"That the sinking by alloy or weight is all one."

"That exchange and ready money are the same, nothing but carriage and re-carriage being saved."

"That money exported in trade is an increase to the wealth of the nation; but spent in war, and payments abroad, is so much impoverishment."

"In short, that all favour to one trade or interest is an abuse, and cuts so much of profit from the public."

Unluckily this admirable tract never obtained any considerable circulation. There is good reason, indeed, to suppose that it was designedly suppressed. At all events, it speedily became excessively scarce; and we are not aware that it was ever referred to by any subsequent writer till it was noticed in the first edition of this article.

The disordered state of the coin, and the proceedings relative to the great re-coining, in the reign of William III., led to a great deal of discussion both in and out of Parliament, and contributed in no ordinary degree to diffuse juster notions respecting money and commerce. It was then that Mr Locke published his well-known tracts on Money. They immediately obtained a very extensive circulation; and though infected with some very grave errors, had a powerful influence in preventing the adoption of Mr Lowndes's proposal for degrading the standard of the coin, and in contributing to establish the true theory of money. The restoration of the currency was not, however, effected without great opposition. A large minority in Parliament supported Lowndes's views; and they were also supported by a number of writers. Of these, Mr Nicholas Barbon seems to have been one of the ablest. In his tract, entitled "A Discourse concerning Coining the New Money Lighter," published in 1696, he detected several of the errors into which Locke had fallen; and he had the further merit of demonstrating the fallacy of the popular opinions respecting the balance of trade; and of showing that bullion would never be sent abroad in payment of an unfavourable balance, unless it were at the time the cheapest and most profitable article of export.

The inferences deduced by Barbon from his investigations into the balance of trade and foreign exchange are—

"That a trading nation is made rich by traffic and the industry of the inhabitants—and that the native stock of a nation can never be wasted."

"That no sort of commodities ought to be totally prohibited—and that the freer trade is, the better the nation will thrive."

"That the poverty and riches of a nation do not depend on a lesser or greater consumption of foreign trade, nor on the difference of the value of those goods that are consumed."

"That the balance of trade is a notion that serves rather to puzzle all debates of trade, than to discover any particular advantages a nation may get by regulating of trade."

"That the balance of trade (if there be one) is not the cause of sending away the money out of a nation; but that proceeds from the difference of the value of bullion in several countries, and from the profit that the merchant makes by sending it away more than by bills of exchange."

"That there is no occasion to send away money or bullion to pay bills of exchange, or balance accounts."

"That all sorts of goods, of the value of the bill of exchange, or the balance of the account, will answer the bill, and balance the account as well as money" (P. 59.)

It is singular that a writer possessed of such just and enlarged opinions respecting the principles of commercial intercourse, and who had shown that bullion differed in no respect from other commodities, should have maintained that the value of coins depended on the stamp impressed on them by government. This gross and unaccountable error destroyed the effect of Barbon's tract; and was, most probably, the cause of the oblivion into which it very soon fell, and of its never having attracted that attention to which, on other accounts, it was entitled.

The commercial writings of Dr Davenant, inspector-general of imports and exports, were published in the interval between 1695 and 1711. Though a partisan of the mercantile system, Davenant had emancipated himself from many of the prejudices of its more indiscriminate and zealous supporters. He considered a watchful attention to

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1 See the Honourable Roger North's Life of his brother, the Honourable Sir Dudley North, p. 179. 2 This tract, and the greater number of those referred to in this article, with many more of equal value and importance, are included either in the collection of early tracts on trade reprinted by the Political Economy Club of London in 1856, or in the four volumes of economical tracts that have been since reprinted by Lord Overstone. This last is one of the most valuable contributions that have ever been made to the literature of that age, none of which the noble lord is so great a master. It has been a means of preserving many valuable publications, some of which were extremely scarce, and ran an imminent risk of being entirely lost, and of making them available to the historians and economists of this and future ages. It is much to be wished that other opulent noblemen and gentlemen would follow so excellent an example, by collecting and reprinting the rarest and most valuable tracts in other departments of knowledge. 3 Considerations on the Lowering of Interest and Raising the Value of Money, 1691; Further Considerations concerning Raising the Value of Money, 1695. In 1734 Jacob Vanderlint, who describes himself as a tradesman, published his tract, entitled *Money Answers all Things*. Dugald Stewart has referred to it in the Appendix to his Life of Adam Smith, and has quoted some passages illustrative of the advantages of commercial freedom, which, he says, "will bear a comparison, both in point of good sense and liberality, with what was so ably urged by Mr Hume twenty years afterwards, in his Essay on the Jealousy of Trade." Vanderlint closes his pamphlet with an argument in favour of the substitution of a territorial tax in place of every other,—an idea borrowed from Locke, and subsequently adopted by the French economists.

In 1744, Mr Richardson, an extensive merchant, published an Essay on the Causes of the Decline of Foreign Trade. This essay has been frequently referred to by Adam Smith, and it deserves his notice. Richardson is an intelligent and decided enemy of restrictions, monopolies, and prohibitions. To give full freedom to industry, he proposed that corporation privileges should be abolished, and that the existing taxes should be repealed, and replaced by a single tax laid on the consumers of luxuries, proportionally to their incomes. The following extracts will give an idea of the spirit and ability which pervades this essay:

"In the Memoirs of De Witt it is said, 'that restraint is always hurtful to trade;' the reason whereof is plain, for nature has given various products to various countries, and thereby knit mankind in an intercourse to supply each other's wants. To attempt to sell our products, but to buy little or none from foreigners, is attempting an impossibility, acting contrary to the intent of nature, cynically, and absurdly, and, as ours is a populous manufacturing country, might be prejudicial to our interests; for, could we raise all necessaries and vanities within ourselves, this intercourse designed by nature would be destroyed; and then, how is our navy, our only bulwark, to be maintained?" (P. 147.)

"Trade cannot, will not, be forced; let other nations prohibit, by what severity they please, interest will prevail; they may embarrass their own trade, but cannot hurt a nation whose trade is free so much as themselves. Spain has prohibited our woollens; but had a reduction of our taxes brought them to their natural value only, they would be

The progress of enlarged and liberal opinions with regard to commerce seems to have been in no small degree counteracted by the publication of the *British Merchant*. This work was written by some of the first merchants of their time to expose the alleged defects in the commercial treaty with France negotiated by Queen Anne's Tory administration in 1713. It consists of a series of papers published weekly, and afterwards collected in three volumes. Public opinion being very much against the treaty, the *British Merchant* enjoyed a large share of popularity. Its authors appeared to have been thoroughly imbued with all the prejudices of the mercantile sect; and the work is now only deserving of notice as containing the fullest exposition of their peculiar doctrines.

We quote from the edition of the Essay published at Edinburgh in 1756. The first edition, in 4to, was published in 1744. merely for an imaginary profit, which yet would prove their ruin in the end; for it is a fallacy and an absurdity to think to raise the value of lands by oppressions on the people that cramp their trade; for if trade declines, the common people must either come upon the parish, or fly for business to our neighbours. In the first case, they become a heavy tax on the rich, and, instead of buying the produce of their lands, must have it given them; and, in the second case, when the consumers are gone, what price will the produce of land bear?" (P. 56.)

Of a work so well known as Mr Hume's Political Essays (published in 1752) it is superfluous to speak. The ability with which he has combated the prejudice against the French trade, and ridiculed the fear of being deprived of a sufficiency of bullion; the liberality and expansion of his views respecting commerce; the beauty of his style, and the aptness of his illustrations, cannot be too highly praised. It did not, however, enter into his plan to give a systematic view of the influence of commerce, nor did he institute any analysis of the sources of wealth. Mr Harris endeavoured to supply the latter deficiency; and his Essay on Money and Coins, published in 1757, is perhaps on the whole the best economical treatise that had appeared previously to the Wealth of Nations. We have already noticed Harris's mistake in supposing that it was more profitable to import durable rather than rapidly consumable commodities; and, as a writer on commerce, he is undoubtedly inferior to Sir Dudley North and Mr Richardson. But the comprehensive and able manner in which he has treated the subject of money, the skill with which he has illustrated the influence of the division of labour, and the near approach he has made to some of the fundamental doctrines of Smith, if they do not give him a pre-eminence, certainly place him in the first rank among his precursors.

We have been induced to treat of the progress of commercial science in England at considerable length, partly on account of the interest and importance of the subject, and partly because it has been but little investigated. Say and other continental writers contend that the Italians and French were the first who discovered and established the just principles of commercial intercourse. But the details now given prove the indisputable priority of the English. The economical works of Davanzati, Serra, Turbolo, and Scaruffi are almost wholly occupied with a discussion of the effects of a forced reduction of the standard of money. They deserve credit for having opposed all tampering with the currency; but the arguments they employ to show its injustice and impolicy are stated with much greater brevity and force in Sir Robert Cotton's speech before the Privy Council in 1626. The Discourse Economico di Bandini, the earliest writer on commerce whose works have been thought worthy of a place in the voluminous collection of Italian works on political economy, was published so late as 1737. Belloni and Algarotti's Essays on Commerce, both very inferior to the works of Child and North, were published, the former in 1750, and the latter in 1763.

The French have still less claim than the Italians to be considered the discoverers of the true principles of commerce. There are many just and striking observations on the injury France sustained from the want of a free internal traffic, and the oppressiveness of taxation, in the French Dixme Royale de Marshal Vauban, written in 1698. But Vincent de Gournay, whom the French state to be one of the earliest of their authors who entertained comprehensive and liberal notions in regard to commerce, was born so late as 1712. Gournay published translations of the treatise of Sir Josiah Child, and of a tract by Sir Thomas Culpeper, at Paris in 1752. So slow was the progress of economical science in France, that even Montesquieu has a chapter entitled, "A quelles nations il est désavantageux de faire le commerce."

But neither the efforts of the English nor French writers in favour of the freedom of commerce and industry had any considerable influence on the mercantile system. Their opinions respecting the nature of wealth and the causes of national opulence being confused and contradictory, their arguments in favour of a liberal system of commerce had somewhat of an empirical appearance, and failed to make that impression which is always made by arguments founded on well-established principles, and shown to be consistent with experience. Locke, as will be afterwards seen, entertained correct opinions respecting the paramount influence of labour in the production of wealth; but he does not appear to have been aware of their value, and did not again refer to them. And though Harris adopted Locke's views, and deduced from them some important practical inferences, his general reasonings are merely introductory to his Treatise on Money, and are not thrown into a scientific form. On the whole it would seem that the celebrated M. Quesnay, a physician attached to the court of Louis XV., was the first who investigated the sources of national wealth, in the view of ascertaining the fundamental principles or natural laws on which national prosperity is mainly dependent; and by so doing he gave to political economy a systematic form, and raised it to the rank of a science. Having been brought up in the country, Quesnay was naturally inclined to regard agriculture with more than ordinary partiality. Its depressed state in France made him set about discovering the causes which had prevented its making that progress which the industry of the inhabitants, the fertility of the soil, and the excellence of the climate seemed to ensure. In the course of this inquiry he became convinced that the prohibition of exporting corn to foreign countries, and the preference given in the system of Colbert (which continued in the ascendant) to manufactures and commerce over agriculture, formed the most powerful obstacle to the improvement of the latter. But Quesnay did not satisfy himself with exposing the injustice of this preference and its pernicious consequences. His zeal for the interests of his favourite pursuit led him not merely to place it on the same level with the other great departments of industry, but to raise it above them, by endeavouring to show that agriculture is the only species of industry by which the riches of a nation can be increased. Founding on the

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1 Scriventi Classici Italiani di Economia Politica. The publication of this collection of the works of her economical writers does honour to Italy, or rather to Napoleon, by whom it was liberally patronized. It was begun in 1803, and finished in 1805, in 50 volumes 4to.

2 See Dupont's edition Des Écrits de M. Turgot, tom. iii., p. 311.

3 Maupertuis, in his Éloge de Montesquieu, candidly admits that France is indebted for the science of commerce, finance, and population, to England. The passage is curious—"Comme le plan de Montesquieu," he observes, "renferme tout ce qui peut être utile au genre humain, il n'a pas oublié cette partie essentielle qui regarde le commerce, les finances, la population; sciences si nouvelle pour nous, qu'elle n'y a encore point de nom. Ce n'est chez nos voisins qu'elle est née; et elle y demeure jusqu'à ce que M. Melon lui fasse passer le mer." M. Moreau's work, Éloge de Montesquieu, p. 13. It is entirely founded on the principles of the mercantile system. Mr Blount translated it into English, and published it, along with some other valuable annotations and remarks, at Dublin in 1739. Melon had another and animating policy of raising the estimation of the work. This was the object of the publication of an acute work by Dutot, entitled Réflexions Politiques sur les Finances et le Commerce, 2 tomes 12mo, 1738. Dutot's work was in its turn very ably criticised by Duverney in his Essais des Réflexions Politiques sur les Finances, &c., 2 tomes 12mo, 1740. These works contain a great deal of curious and interesting information respecting French finance. Duverney's account of the Mississippi scheme is particularly good. fact, that everything which either ministers to our wants or gratifies our desires, must be originally derived from the earth, Quesnay assumed as a self-evident truth, that the earth is the only source of wealth, and held that industry is altogether incapable of producing any new value, except when employed in its culture, including therein the working of fisheries and mines.1 His observance of the effects produced by the vegetative powers of nature, and his inability to explain the true origin and causes of rent, confirmed him in his opinion. The circumstance, that of all who engage in industrial undertakings, none but the cultivators of the soil pay rent for the use of natural agents, appeared to him to prove beyond all question that agriculture is the only variety of industry which yields a net surplus (product net) over and above the expenses of production. He admitted that manufacturers and merchants are highly useful; but as they realize no net surplus in the shape of rent, he contended that they added no greater value to the commodities they manufactured or carried from place to place than was barely equivalent to the capital or stock consumed in these operations. These principles once established, it followed that landlords, farmers, and the labourers employed in agriculture are the only productive classes; and that the industry of manufacturers and traders being unproductive, their means of subsistence and wealth must be wholly derived from the agriculturists. It further followed that the expenses of government, and the various public burdens, however imposed, are really defrayed out of the product net, or rent of the landlords; and consistently with this principle, Quesnay proposed that the existing taxes should be repealed, and that a single tax (impôt unique), laid directly on the produce of the land, should be imposed in their stead.

The economical table of M. Quesnay—"Cette formule économe," says Dupont, "qui joint la naissance, la distribution, et la reproduction des richesses, et qui sert à calculer avec tant de sûreté, de promptitude, et de précision, l'effet de toutes les opérations relatives aux richesses"—was published at Versailles in 1758.

But Quesnay, though deeply impressed with the superior importance of agriculture, did not solicit for it any exclusive favour or protection. He successfully contended that the advantage of the agriculturists, and of all classes, would be best promoted by establishing a perfectly free system. It could never, he said, be for the interest of the proprietors and cultivators of the soil to discourage the pursuits, or fetter the industry, of merchants, artificers, and manufacturers; for the greater their liberty, the greater would be their competition, and the cheaper their products. Neither, on the other hand, could it ever be for the interest of the unproductive classes to injure the agriculturists by preventing them from exporting their produce, or subjecting them to restrictive regulations. Cultivators who enjoy the greatest degree of freedom prosecute their business under the most favourable circumstances; and their net surplus (product net)—the only fund whence any accession to the public wealth can be derived—attains in consequence to the largest dimensions. According to this "liberal and generous system" ("Wealth of Nations, p. 303"), the establishment of perfect liberty, perfect security, and perfect justice, is the only, as it is the infallible, means of securing the highest degree of prosperity to all classes.

"On a vu" says the commentator of this system, M. Mercier de la Rivière, "qu'il est de l'essence de l'ordre que l'intérêt particulier d'un seul ne puisse jamais être séparé de l'intérêt commun de tous; nous en trouvons une preuve bien convaincante dans les effets que produit naturellement et nécessairement la plénitude de la liberté qui doit régner dans le commerce, pour ne point blesser la propriété. L'intérêt personnel, encouragé par cette grande liberté, presse vivement et perpétuellement chaque homme en particulier, de perfectionner, de multiplier les choses dont il est vendeur, de grossir ainsi la masse des jouissances qu'il peut procurer aux autres hommes, afin de grossir, par ce moyen, la masse des jouissances que les autres hommes peuvent lui procurer en échange. Le monde alors va de lui-même; le désir de jouir, et la liberté de jouir, ne cessant de provoquer la multiplication des productions et l'accroissement de l'industrie, ils impriment à toute la société un mouvement qui devient une tendance perpétuelle vers son meilleur état possible." (Tome ii., p. 444.)

We shall have other opportunities of fully examining the principles of this theory. At present it is sufficient to remark that, in assuming agriculture to be the only source of wealth, because the matter of commodities is derived from the earth, Quesnay and his followers mistook altogether the nature of production, and really supposed wealth to consist of matter. But, in its natural state, matter is rarely possessed of utility, and is always destitute of value. The labour bestowed on its appropriation, and in fitting it for and applying it to our use, is the only means by which it acquires exchangeable value, and becomes wealth. The latter is not produced by adding to the contents of our globe, these being susceptible neither of augmentation nor diminution.

1 "Cherchant d'où vient les richesses des nations, Quesnay trouva qu'elles ne naissent que des travaux dans lesquels la Nature et la Providence Divine concourent avec les efforts pour produire ou faire recueillir des productions nouvelles: de sorte qu'on ne peut attendre l'augmentation des ces richesses que de la culture, de la pêche, et de l'exploitation des mines, et des carrières." (See the Notice sur les Economistes,) by one of the most zealous of the sect, Dupont de Némours, in the Œuvres de Turgot, tom. iii., p. 312.)

2 McCulloch's edition, I vol. Svo.

That Quesnay is entitled to the merit of originality cannot, we think, be disputed. He had certainly, however, been anticipated in several of his peculiar doctrines by some English writers of the previous century. The fundamental principles of the economical system are distinctly and clearly stated in a tract entitled Reasons for a Limited Exportation of Wool, published in 1698. "That it is of the greatest concern and interest to the nation," says the author of the tract, "to preserve the nobility, gentry, and those who, where the land of the country belongs, at least, much greater than a few artificers employed in working the superfluity of our wool, or the merchants who gain by the exportation of our manufactures, is manifest—1. Because they are the masters and proprietaries of the foundation of all the wealth in this nation, all profit arising out of the ground, which is theirs; 2. Because they bear all taxes and public burdens, which, in truth, are only borne by those who buy, and sell not; all sellers raising the price of their commodities, or abating of their goods, according to the market." (Not being able to procure the pamphlet itself, we quote from the extract given in Mr Smith's Memoirs of Wool, vol. i., p. 294.) In 1699 Mr Asgill published a treatise entitled Several Assertions Proved, in order to Create Another Species of Money than Gold, in support of the Chamberlayne's proposition for a land bank. We extract from this treatise the following passage, breathing, as Dugald Stewart has justly said, the very spirit of Quesnay's philosophy. "What we call commodities is nothing but land severed from the soil. Man deals in nothing but earth. The merchants are the factors of the world, to exchange one part of the earth for another. The king himself is fed by the labour of the ox; and the clothing of the army and the victualling of the navy must all be paid for by the owner of the soil as the ultimate receiver. All things in the world are originally the produce of the ground, and must there all things be raised." (This passage has been quoted in Lord Lauderdale's Inquiry into the Nature and Origin of Public Wealth, 2d ed., p. 109.) These passages are interesting as exhibiting the first germs of the doctrine of the political economists. But there is no reason to suppose that Quesnay was aware of the existence of either of the tracts referred to. The subjects treated in them were of too local a description to excite the attention of foreigners; and Quesnay was too candid to conceal his obligations, had he really owed them any. It is probable he may have seen Locke's treatise on Raising the Value of Money, where the idea is thrown out that all taxes fall ultimately on the land. But there is an immeasurable difference between the suggestion of Locke and the well-digested system of Quesnay. diminution, but by giving utility to matter already in existence. And it will be immediately seen, that the labour employed in manufactures and commerce is as productive of utility, and consequently of wealth, as that employed in agriculture. Neither is the cultivation of the soil, as Quesnay supposed, the only variety of industry which yields a surplus over the expenses of production. When none but the best soils are cultivated, and when, consequently, agriculture is most productive, no rent, or product net, is obtained from the land; and it is only after recourse has been had to poorer soils, and when the productive powers of the labour and capital employed in cultivation begin to diminish, that rent begins to appear; so that, instead of its being any proof of the superior productiveness of agricultural industry, rent is a consequence of its becoming comparatively less productive! The opinion of Quesnay, that man derives no assistance from the productive powers of nature, if he be not employed in agriculture, is totally destitute of foundation. It will be shown in a subsequent part of this article, that the manufacturer and merchant derive fully as much assistance from these powers as the agriculturist, fisher, or miner.

But though the theory of the Economists, considered in reference to the fundamental principles of the science, be as erroneous as that to which it was opposed, its novelty and ingenuity, its systematical and consentaneous form, the liberal system of commercial intercourse which it recommended, and the benevolent and excellent character of its founder, speedily obtained for it a very high degree of reputation. The opinions of Quesnay were early communicated to, and zealously espoused by, the Marquis de Mirabeau, Mercier de la Rivière, Dupont de Némours, St Peravy, and others; and were afterwards advocated by Turgot, one of the most distinguished statesmen of whom France has to boast; and by Letrosne, Condorcet, Raynal, and most of the succeeding French writers on commerce and finance. Their practical influence on the legislation of France has also been considerable. In 1763 the free transportation of corn from one province to another was permitted; and in 1764 liberty was given to export it to foreign countries whenever the home price did not exceed thirty livres the septier (48s. the quarter). This last edict, after being suspended in 1770, was again revived in 1778 during the administration of Turgot. But the facility given to the imposition of the contribution foncière may be considered as the greatest practical achievement of the Economists; and there is reason to fear that it will long continue to afford a palpable proof of the fallacy of their doctrines.

Notwithstanding the defects of their theory, the labours of the Economists contributed powerfully to accelerate the progress of this science. In reasoning on subjects connected with national wealth, it was henceforth found to be necessary to subject its sources, and the laws which regulate its production and distribution, to a more accurate and searching analysis. In the course of this examination, it was speedily ascertained that the mercantile and economical theories were alike erroneous and defective; and that to establish the science on a firm foundation, it was necessary to take a much more extensive survey, and to seek for its principles, not in a few partial and distorted facts, or in metaphysical abstractions, but in the connection subsisting among the various phenomena manifested in the progress of civilization. The Count di Verri, whose Meditations on Political Economy were published in 1771, pointed out the fallacy of the opinions entertained by the Economists respecting the superior productiveness of agriculture; and showed that all the operations of industry really consist of modifications of matter already in existence. But Verri did not trace the consequences of this important principle; and, possessing no clear or definite notions of what constituted wealth, he did not attempt to discover the means by which its production might be promoted. He made several valuable additions to particular branches of the science, and had sufficient acuteness to detect the errors in the systems of others; but the task of constructing a better system in their stead required talents of a far higher order.

At length, in 1776, our illustrious countryman, Adam Smith, published the Wealth of Nations—a work which has done for political economy what the Principia of Newton did for physics, and the treatise De Jure Belli ac Pacis of Grotius for international law. In this work the science was, for the first time, treated in its fullest extent, and many of its fundamental principles placed beyond the reach of cavil and dispute. In opposition to the Economists, Smith showed that labour is the only source of wealth, and that the desire of individuals to improve their fortunes and rise in the world occasions its accumulation. He next traced the means by which the powers of labour may be rendered most effective; and showed that it is productive of wealth when employed in manufactures and commerce, as well as in the cultivation of the land. Having established these principles, Smith showed, in opposition to the commonly received opinions of the merchants and statesmen of his time, that wealth did not consist in the abundance of gold and silver, but in that of the various necessaries, conveniences, and enjoyments of human life; and he further showed that individuals are always the best judges of what is for their own interest, and that, in prosecuting branches of industry ad-

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1 Turgot's Réflexions sur la Formation et la Distribution des Richesses, published in 1771, is certainly the best of all the works founded on the principles of the Economists, and is, in some respects, the best work on political economy published previously to the Wealth of Nations.

2 Exclusive of the Réflexions of Turgot, the following are the principal works published by the French Economists:—Tableau Économique et Marins Économiques du Gouvernement Économique, par François Quesnay, 4to, Versailles, 1758; Théorie de l'Impôt, par M. de Mirabeau, 4to, 1760; L'Ami des Hommes, par M. de Mirabeau, 7 tomes, 1760, &c.; Éléments de la Philosophie Rurale, par M. de Mirabeau, 3 tomes 12mo, 1763; L'Ordre Naturel et Essentiel des Sociétés Politiques, par Mercier de la Rivière, 4to, et 2 tomes 12mo, 1767; Sur l'Origine et Progrès d'une Nouvelle Science, par Dupont de Némours, 1767; La Physiocratie, ou Constitution Naturelle du Gouvernement le plus avantageux aux genres humains, par Quesnay, 2 tomes, 1767; Lettres d'un Citoyen à un Magistrat, sur les Vingt-trois et les autres Impôts, par l'Abbé Baudeau, 1768; Mémoire sur les Effets de l'Angle Indirect, par St Peravy, 12mo, 1768.

3 "Alcuni benemeriti scrittori, rattristati dal grave disordine, che soffrono i popoli per le guerre, sono passati all'estremo di considerare rare ingiustizia e mal collocato il tributo se non ripartito sul fondi di terra, e colla creazione di un ingiusto assedio, hanno eretta la setta degli economisti, presso la quale ogni uomo che non adopera l'arte, ma un esercizio sterile, è un manifattore si chiamano una classe sterile. Rispettando il modo di vero e di utili che da sé è stato scritto, io non vorrei associarmi alla loro opinione ne sul tributo, ne su di questa protesa classe sterile. La riproduzione è attribuibile alla manifattura egualmente, quanto al lavoro di Campi. Tutti i fenomeni dell'universo, semplicemente dalla mano dell'uomo o vero dalla universali leggi della fisica, non ci danno idea di alcun'idea creatrice, ma solamente di una modificazione della materia. Accettare sevèremente gli uni elementi che l'ingegno umano ritrova analizzando l'idea della riproduzione; e tanto e riproduzione di valore e di ricchezza se la terra, l'aria, e l'acqua ne campi si trasmutano in grano, come se colla mano dello uomo il glutine di un insetto si trasmuti in velluto, o vero alcuni pezzetti di metallo si organizzino a formare una ripetizione. Degli interi citta, e degli stati interi campano non d'altrò che sul prodotto di questa secondissima classe sterile, la di cui riproduzione comprende il valore della materia prima, la consumazione proporzionata delle mani impiegatevi, e di più questa porzione che fa arricchire chi ha intrapresa la fabbrica e chi vi s'impegna con felice talento." (Meditazioni sulla Economia Politica, § 3.) History, advantageous to themselves, they necessarily prosecute such as are advantageous to the public. Thence he drew his grand inference, that every regulation intended to force industry into particular channels, or to determine the commercial intercourse to be carried on between different parts of the same country, or between distant and independent countries, is impolitic and pernicious— injurious to the rights of individuals, and adverse to the progress of real opulence and lasting prosperity.

It may here, perhaps, be necessary to observe that, in laying it down that individuals are the "best judges" of what is best for themselves, the phrase is not to be taken absolutely, but conditionally, or as meaning the best in their circumstances, with their knowledge, views, and means of compassing their ends. People in a different situation, with more extensive information, able to make a more correct estimate of the ends proper to be sought after, and possessing more efficient means for their attainment, would probably act differently. But in legislating, men should be taken for what they really are, and not for what it may be supposed they should be. And though it were otherwise, legislators are rarely more advanced than those for whom they legislate, and are extremely apt to be biased by party and selfish considerations. Hence the true line of policy—allow all individuals at all times to prosecute what they believe to be their interest in their own way, provided only they do not encroach on the rights of others. When they are left to their own guidance, their constant endeavour is to find out better methods of effecting their objects; and they seldom fail to profit by such new lights, inventions, and discoveries, as may come to their knowledge. And while they have every facility, they have every motive to get into the right path, or that by following which they may best advance themselves. But when they are kept in a state of papillage and dictated to by others, their talents are but little exerted, and they become less enterprising, and care less about the progress of discovery. At the same time, too, that their energies are paralysed, and that they are injuriously affected by the ignorance, the crotchets, and the prejudices of their self-sufficient guides, they cannot abandon the path chalked out for them, though they may have ascertained that it would be greatly for their advantage to leave it, and to enter upon a different one. The pretension to direct others what they should and should not do, and with whom or in what they should deal or not deal, is, in truth, so excessively overweening, and so certain to be abused, that it could be safely entrusted only to omniscience. And it could nowhere be worse placed than in the hands of individuals or legislatures, who, to use the words of Smith, had folly and presumption enough to fancy themselves fit to exercise it.

The fact, that traces of most part of the principles referred to above, and that the distinct statement of some of the more important amongst them, may be found in the works of previous writers, detracts but little, if anything, from the merits of Smith. In adopting the discoveries of others, he made them his own; he demonstrated the truth of principles on which his predecessors had in most instances stumbled by chance; separated them from the errors by which they were encumbered; traced their remote consequences; pointed out their limitations; showed their practical importance and real value; and reduced them into a consistent and well-compacted system. We do not, however, mean to say that Smith produced a perfect theory. Undoubtedly there are errors, and those, too, of no slight importance, in the Wealth of Nations. The principles already noticed, and which form its basis, are unimpeachable. Smith, however, has not always reasoned correctly from them, and he has occasionally introduced others, which a more careful observation and analysis has shown to be ill-founded. But after every allowance has been made for the defects in his great work, enough remains to justify us in considering him as the real founder of the science. Though he has not left a perfect treatise, he has left one which contains a greater mass of useful and universally interesting truths than have ever been given to the world by any other individual; and he has pointed out and smoothed the route by following which subsequent philosophers have been enabled to perfect much that he had left incomplete, to rectify the mistakes into which he fell, and to make many new and important discoveries. Whether, indeed, we refer to the soundness of its leading doctrines, to the liberality and universal applicability of its practical conclusions, or to the powerful and beneficial influence it has had on the improvement of economical science, and on the policy and destiny of nations, the Wealth of Nations must be placed in the foremost rank of those works that have done most to liberalize, enlighten, and enrich mankind.

The practical part of this science was long confounded with that of politics; and it is undoubtedly true that they between are very intimately connected, and that it is frequently impossible to treat those questions which strictly belong to the one without referring more or less to the principles of the other. But in their leading features they are sufficiently distinct. The laws which regulate the production and distribution of wealth are the same in every country and stage of society. Those circumstances which are favourable or unfavourable to the increase of riches and population in a republic may equally exist, and will have the same effects, in a monarchy. That security of property, without which there can be no steady and continued exertion,—that freedom of engaging in every different branch of industry, so necessary to call the various powers and resources of human talent and ingenuity into action,—and that economy in the public expenditure, so conducive to the accumulation of national wealth,—are not the exclusive attributes of any particular species of government. If free states have generally made the most rapid advances in wealth and population, it is an indirect rather than a direct consequence of their political constitution. It results more from the greater security which a popular government presents, that the right of property will be held sacred,—that the freedom of industry will be less fettered and restricted,—and that the public income will be more judiciously levied and expended,—than from the circumstance of a greater proportion of the people being permitted to exercise political rights and privileges. Give the same securities to the subjects of an absolute monarch, and they will make the same advances.

1 It is of importance to observe, that Dr Smith does not say that, in prosecuting such branches of industry as are most advantageous to themselves, individuals necessarily prosecute such as are at the same time most advantageous to the public. His leaning to the system of the Economists—a leaning perceptible in every part of his work—led him so far as to diverge from the principles of his own system as to admit, that individual advantage is not always a true test of the public advantage consequent of different employments. He considered that agriculture, though not the only productive employment, is the most productive of any; that the home trade is more productive than a direct foreign trade; and the latter than the carrying trade. It will be hereafter seen that there is no foundation for these distinctions.

2 Mr Buckle carries his admiration of Smith and his great work to what will perhaps appear to some an extravagant extent. "Well may it be said of Adam Smith, and said, too, without fear of contradiction, that this solitary Scotchman has, by the publication of one single work, contributed more towards the happiness of man than has been effected by the united abilities of all the statesmen and legislators of whose history has preserved an authentic account." (History of Civilization, i., p. 196, 2d ed.) Industry does not require to be stimulated by extrinsic advantages. The additional comforts and enjoyments which it procures have always been found sufficient to insure the most persevering and successful exertions. And whatever may be the form of government, those countries always advance in the career of improvement in which the public burdens are moderate, industry free, and every individual permitted peaceably to enjoy the fruits of his labour. It is not, therefore, so much on its political organization, as on the talents and spirit of its rulers, that the wealth of a country is principally dependent. Economy, intelligence, and liberality on the part of those in power, have frequently elevated absolute monarchies to a very high degree of opulence and prosperity; while all the advantages derived from a more liberal system of government have not been able to preserve free states from being impoverished and exhausted by the extravagance, intolerance, and short-sighted policy of their rulers.

Politics and political economy are therefore sufficiently distinct. The politician examines the principles on which government is founded; he endeavours to determine in whose hands the supreme authority may be most advantageously placed, and unfolds the reciprocal duties and obligations of the governing and governed portions of society. The political economist does not take so high a flight. It is not of the constitution of the government, but of its acts only, that he presumes to judge. Whatever measures affect the production or distribution of wealth come within the scope of his observation, and are canvassed by him. He examines whether they are in unison with the principles of the science. If they are, he pronounces them to be advantageous, and shows the nature and extent of the benefits of which they will be productive; if they are not, he shows in what respect they are defective, and to what extent their operation will be injurious. But he does this without inquiring into the constitution of the government by which these measures have been adopted. The circumstance of their having emanated from the privy council of an arbitrary monarch, or the representative assembly of a free state, though in other respects of supreme importance, cannot affect the immutable principles by which he is to form his opinion upon them.

Besides being confounded with politics, the practical part of political economy has also been frequently confounded with statistics; but they are still more easily separated and distinguished. The object of the statistician is to describe the condition of a country at a particular period; while the object of the political economist is to discover the causes which have brought it into that condition, and the means by which its wealth and riches may be indefinitely increased. He is to the statistician what the physical astronomer is to the observer. He takes the facts furnished by the statistician, and after comparing them with those furnished by historians and travellers, he applies himself to discover their relation. By a patient induction,—by carefully observing the circumstances attending the operation of particular principles,—he discovers the effects of which they are really productive, and how far they are liable to be modified by the operation of other principles. It is thus that the relation between rent and profit, between profit and wages, and the various general laws which regulate and connect the apparently conflicting, but really harmonious interests of the different classes, have been discovered and established with all the certainty of demonstrative evidence.

This point has been well stated by M. Destutt Tracy:—"Nous seulement," says he, "nous ne créons jamais rien, mais il nous est même impossible de concevoir ce que c'est que créer ou inventer, si nous entendons rigoureusement par ces mots, faire quelque chose de rien, ou reduire quelque chose à rien; car nous avons jamais vu un être quelconque sortir du néant ni y rentrer. De là cet axiom admis par toute l'antiquité, 'Rien ne vient de rien, et ne peut redévenir rien.' Que faisons-nous donc par notre travail, par notre action sur tous les êtres qui nous entourent? Jamais rien qu'opérer dans ces êtres des changements de forme ou de lieu qui les approprient à notre usage, qui les rendent utiles à la satisfaction de nos besoins. Voilà ce que nous devons entendre par produire; c'est donner aux choses une utilité qu'elles n'avaient pas. Quel que soit notre travail, s'il n'en résulte point d'utilité, il est infructueux; s'il en résulte, il est productif." (Traité d'Economie Politique, p. 162.) Production scattered over the surface of the countries which they occupy; and, notwithstanding the fewness of their numbers, any unusual deficiency in the supply of game never fails to reduce them to the extremity of want. The second step in the progress upwards is made when the tribes of hunters and fishers addict themselves, like the ancient Scythians and modern Tartars, to the domestication of wild animals and the rearing of flocks. Their subsistence is much less precarious than that of hunters; but they are almost entirely destitute of the comforts and elegances which give to civilized life its chief value. The third and most decisive step in the progress of civilization—in the great art of producing necessaries and conveniences—is made when the wandering tribes of hunters and shepherds renounce their migratory habits, and become agriculturists and manufacturers. It is then, properly speaking, that man begins fully to avail himself of his productive powers. He becomes laborious, and, by a necessary consequence, his wants are for the first time fully supplied, and he acquires an extensive command over the articles required for his comfort as well as subsistence.

However paradoxical the assertion may at first sight appear, it is notwithstanding true that the earth does not gratuitously supply us with a single atom of wealth. It is a powerful machine given by Providence to man; but without his labour it would be altogether useless, and would stand idle and unemployed. It is through the intervention of labour that the products of the earth become valuable and useful. Its surface is, in its natural state, covered with fruits and game; its bowels contain an infinite variety of mineral products; its seas and rivers are stored with fish; and it is endowed with inexhaustible vegetative and productive powers. But these powers and products are of no use, and have no value, until man renders the former subservient to his purpose, and appropriates the latter, and gives them the peculiar form required to fit them for his service.

The importance of labour in the production of wealth was very clearly perceived both by Hobbes and Locke. At the commencement of the 24th chapter (entitled, "Of the Nutrition and Procreation of a Commonwealth") of the Leviathan, published in 1651, Hobbes says, "The nutrition of a commonwealth consisteth in the plenty and distribution of materials conducing to life."

"As for the plenty of matter, it is a thing limited by nature to those commodities which, from (the two breasts of our common mother) land and sea, God usually either freely giveth, or for labour selleth to mankind.

"For the matter of this nutriment, consisting in animals, vegetables, minerals, God hath freely laid them before us, in or near to the face of the earth, so as there needeth no more but the labour and industry of receiving them: insomuch that plenty dependeth (next to God's favour) on the labour and industry of man."

But Locke had a much clearer apprehension of this doctrine. In his Essay on Civil Government, published in 1689, he has entered into a lengthened and able analysis to show that the products of the earth owe almost all their value to labour. "Let any one consider," says he, "what the difference is between an acre of land planted with tobacco or sugar, sown with wheat or barley, and an acre of the same land lying in common, without any husbandry upon it, and he will find that the improvement of labour makes the far greater part of the value. I think it will be but a very modest computation to say that, of the products of the earth useful to the life of man, nine-tenths are the effects of labour; nay, if we will rightly consider things as they come to our use, and cast up the several expenses about them, what in them is purely owing to Production nature and what to labour, we shall find that in most of them ninety-nine hundredths are wholly to be put on the account of labour.

"There cannot be a clearer demonstration of anything than several nations of the Americans are of this, who are rich in land and poor in all the comforts of life; whom nature, having furnished as liberally as any other people with the materials of plenty,—i.e., a fruitful soil apt to produce in abundance what might serve for food, raiment, and delight,—yet, for want of improving it by labour, have not one-hundredth part of the conveniences we enjoy; and the king of a large and fruitful territory there feeds, lodges and is worse clad, than a day-labourer in England.

"To make this a little clear, let us but trace some of the ordinary provisions of life through their several progresses before they come to our use, and see how much of their value they receive from human industry. Bread, wine, and cloth are things of daily use and great plenty; yet notwithstanding, acorns, water, and leaves or skins must be our bread, drink, and clothing, did not labour furnish us with these more useful commodities; for whatever bread is more worth than acorns, wine than water, and cloth or silk than leaves, skins, or moss, that is solely owing to labour and industry; the one of these being the food and raiment which unassisted nature furnishes us with, the other provisions which our industry and pains prepare for us, which how much they exceed the other in value, when any one hath computed, he will then see how much labour makes the far greatest part of the value of things we enjoy in this world; and the ground which produces the materials is scarce to be reckoned on as any, or at most but a very small part of it.

"An acre of land that bears here twenty bushels of wheat, and another in America which, with the same husbandry, would do the like, are without doubt of the same natural intrinsic value. But yet the benefit mankind receives from the one in a year is worth L5, and from the other possibly not worth one penny; if all the profit an Indian received from it were to be valued and sold here, at least, I may truly say, not 1653th. 'Tis labour, then, which puts the greatest part of value upon land, without which it would scarcely be worth anything; 'tis to that we owe the greatest part of its useful products; for all that the straw, bran, bread, of that acre of wheat is more worth than the product of an acre of good land which lies waste, is all the effect of labour. For 'tis not merely the ploughman's pains, the reaper's and thrasher's toil, and the baker's sweat, is to be counted into the bread we eat; the labour of those who broke the oxen, who digged and wrought the iron and stones, who fell and framed the timber employed about the plough, mill, oven, or any other utensils, which are a vast number, requisite to this corn, from its being seed to be sown to its being made bread, must all be charged on the account of labour, and received as an effect of that; Nature and the earth furnishing only the almost worthless materials as in themselves. 'Twould be a strange catalogue of things that industry provided and made use of about every loaf of bread, before it came to our use, if we could trace them. Iron, wood, leather, barks, timber, stone, brick, coals, lime, cloth, dyeing drugs, pitch, tar, masts, ropes, and all the materials made use of in the ship that brought away the commodities made use of by any of the workmen, to any part of the work; all which it would be almost impossible, at least too long, to reckon up." (Of Civil Government, book ii., §§ 40, 41, 42, and 43.)

Had Locke carried his analysis a little further, he could

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This is a very remarkable passage. It contains a far more distinct and comprehensive statement of the fundamental doctrine, that labour is the constituent principle of value, than is to be found in any other writer previous to Smith, or than is to be found even in the Production not have failed to perceive that water, leaves, skins, and the other spontaneous productions of nature, have no value except what they owe to the labour required for their appropriation. The value of water to a man placed on the bank of a river depends on the labour required to raise it to his lips; and its value, when carried ten or twenty miles off, is equally dependent on the labour required to convey it there. All the rude products and capacities of nature are gratuitously offered to man. She is not niggardly or parsimonious. She neither demands nor receives an equivalent for her favours. An object or a power which may be freely appropriated or applied to our use, may, like the water which floats a ship, or the wind which fills her sails, be of the very highest utility; but being the free gift of nature, it has no value.

"Si je retranche," to use a striking illustration of this doctrine given by M. Cunard, "de ma montre, par la pensée, tous les travaux qui lui ont été successivement appliqués, il ne resterait que quelques grains de minéral placés dans l'intérieur de la terre, d'où les a tirés, et où ils n'ont aucune valeur. De même, si je décompose le pain que je mange, et que j'en retranche successivement tous les travaux successifs qu'il a reçus, il ne restera que quelques tiges d'herbes, graminées, éparées dans des déserts inculcates, et sans aucune valeur." (Principes d'Economie Politique, p. 6.)

It has been said that demand is the source or cause of value. Such, however, is not the case. The real or supposed suitableness of certain articles to satisfy our wants, or to add to our enjoyments, makes them, as already seen, objects of desire or demand. But their value depends entirely on the greater or less difficulty of obtaining them, that is, on the greater or less quantity of labour required to produce or acquire them. This labour, therefore, is at once the source and the measure of their value.

But suppose that we stumble upon a nugget of gold or a diamond, are we to be told, it is asked, that its value is proportioned only to the labour, if so it may be called, expended in finding it? No! you are to be told nothing of the sort. In these and all similar inquiries, the question does not turn upon accidental or exceptional occurrences, like that now referred to, but upon the nature of the processes necessary to obtain sufficient supplies of the required article. If gold and diamonds could be had in any quantity in the easy way that has been specified, their value would sink accordingly, and they would become cheaper than iron or bits of glass. But not one millionth—no, nor one ten-millionth—part of the supplies of gold and diamonds brought to market has ever been, or ever will be, furnished by chance finders. And the quantities offered by them being so extremely small as to have no influence of any kind upon the market, they are sold at the price necessary to indemnify the ordinary producers of the metal and the gem. And hence, though it may not be strictly true of every sovereign in existence, or of every diamond, hat, or other article in the shops, that its price is proportioned to the cost of its production, this (apart from general fluctuations) is true in more than 999 out of every 1000 instances. Those that are exceptions are so very few as to be wholly inappreciable and undeserving of any notice.

It is to labour, therefore, that we owe everything possessed of exchangeable value. Dii laboribus omnia vendunt. Labour is the talisman that has raised man from the condition of the savage—that has changed the desert and the forest into cultivated fields—that has covered the earth with cities and the ocean with ships—that has given him plenty, comfort, and elegance, instead of want, misery, and barbarism.

"Why," asks Dr Barrow, "is any man a beggar, why contemptible, why ignorant, why vicious, why miserable? Why, but for this one reason, because he is slothful; because he will not labour to rid himself of these evils?" (Second Sermon on Industry.)

Having established this fundamental principle—having shown that labour alone gives value to commodities and procures for us whatever we most covet and desire—it is plain that the great practical problem of this science must resolve itself into a discussion of the means by which labour may be rendered most efficient, that is, by which the greatest amount of necessary and desirable products may be obtained with the least outlay of labour. Every measure and invention that has any tendency to save labour, or to reduce the cost of commodities, adds proportionally to our command over wealth and riches; while every measure or regulation that has any tendency to waste or misapply labour, or to raise the cost of commodities, equally lessens this command. This is the simple and decisive test by which we are to judge of every measure affecting the wealth of the country, and of every invention. If they render labour more productive—if they tend to reduce the value of commodities—to render them more easily obtainable, and consequently to bring them within the command of a greater portion of society—they are advantageous; but if their tendency be different, they are as certainly disadvantageous. Considered in this point of view, that great branch of the science which treats of the production of wealth will be found to be abundantly simple, and easily understood.

Labour, according as it is applied to the raising of raw produce—to the fashioning of that raw produce, when raised, into articles of utility, convenience, or ornament—and to the conveyance of raw and wrought products from one country and place to another—is said to be agricultural, manufacturing, and commercial. An acquaintance with the particular processes and most advantageous methods of applying labour in each of these great departments of industry, forms the appropriate study of the agriculturist, manufacturer, and merchant. It is not consistent with his objects for the political economist to enter into the details of particular businesses and professions. He confines himself to an investigation of the means by which labour gene-

Wealth of Nations. But Locke does not seem to have been sufficiently aware of the value of the principles he had elucidated, and has not deduced from it any important practical conclusion. On the contrary, in his tract on the Raising of the Value of Money, published in 1691, he lays it down broadly, that all taxes, however imposed, ultimately fall on the land; whereas it is plain he should consistently with the above principle, have shown that they would fall, not exclusively on the produce of land, but generally on the produce of industry, or on all species of commodities.

1 Bishop Berkeley entertained very just opinions respecting the source of wealth. In his Querist, published in 1735, he says, "Whether it were not wrong to suppose land itself to be wealth? And whether the industry of the people is not first to be considered as that which constitutes wealth, which makes even land and silver to be wealth, neither of which would have any value but as means and motives to industry?" "Whether, in the wastes of America, a man might not possess twenty miles square of land, and yet want his dinner or a coat to his back?" (Querist, Nos. 38 and 39.) We shall afterwards notice Sir William Petty's opinion on this subject. Say approves of this. (Discours Philosophique, p. 37.) That Gallani was the first to show, in his treatise Della Moneta, published in 1750, that labour is the only source of value, is not disputed; but it is not easy for the reader prove the correctness of this opinion. Gallani has entered into no analysis or argument to prove the correctness of his statement; and as it appears from other parts of his work that he was well acquainted with Locke's Treatise on Money, a suspicion naturally arises that he had seen the Essay on Civil Government, and that he was really indebted to it for a knowledge of this principle. This suspicion derives strength from the circumstance of Gallani being still less aware than Mr Locke of the value of the discovery. (See Trattato della Moneta, p. 38, ediz. 1789.) Production rally may be rendered most productive, and how its powers of wealth may be increased in all departments of industry.

**Sect. II.—Means by which the Productive Powers of Labour are Increased.—Security of Property.—Division of Labour.—Accumulation and Employment of Capital.**

The most careless and inattentive observer of the progress of mankind from poverty to affluence must have early perceived that there are three circumstances whose conjoint operation is necessary to stimulate and improve the productive powers of industry. The first and most indispensable is that security of property, which produces a strong conviction in the mind of individuals that they will be allowed to dispose at pleasure of the fruits of their industry. The second is the introduction of exchange or barter, and the consequent appropriation of particular individuals to particular employments. And the third is the accumulation and employment of the produce of previous labour, or, as it is more commonly termed, of capital or stock. Every improvement that either has been or that may yet be made in the production of necessaries and conveniences, will be found to be resolvable into the more judicious application of one or more of those means of stimulating labour, and adding to its power.

To give a full exposition of the nature and influence of each would far exceed the limits of this article; and we must content ourselves with such observations as may suffice to give a general idea of their operation.

**Security of property.** Security of property is the first and most indispensable requisite to the production of wealth. Its utility in this respect is so obvious, as to make it be more or less respected in every country, and in the earliest and rudest periods. All have been impressed with the reasonableness of the maxim which teaches that those who sow should be permitted to reap; that the labour of a man's body and the work of his hands should be considered as exclusively his own. No horde, how barbarous soever, has been discovered in which the principle of meus et tuus was not recognised. Nothing, it is evident, could ever tempt any one to engage in laborious employments—he would neither domesticate wild animals, nor clear and cultivate the ground,—if, after months and years of toil, when his flocks had become numerous, and his harvests were ripening for the sickle, a stranger were allowed to rob him of the produce of his industry. No wonder, therefore, that the utility of regulations fitted to secure to individuals the peaceable enjoyment of the produce they had raised, and of the ground they had cultivated and improved, suggested itself to the first legislators. The author of the book of Job places those who removed their neighbours' landmarks at the head of his list of wicked men; and some of the earliest profane legislators subjected those guilty of this offence to a capital punishment. (Goguet, *De l'Origine des Lois*, &c., tom. i., p. 30, 4to ed.)

Paley has said that the law of the land is the real foundation of the right of property. But the obvious utility of securing to individuals the property acquired by their industry has undoubtedly formed the irresistible reason which has induced every people emerging from barbarism to establish this right. It is, in truth, the foundation on which all the institutions of society rest. Until property has been publicly guaranteed, men look on each other as enemies rather than as friends. The idle and improvident are always desirous of seizing on the earnings of the laboursome and frugal; and were their efforts to enrich themselves by the plunder of their neighbours not restrained by the strong arm of the law, they would, by generating a feeling of insecurity, effectually check both industry and accumulation, and sink all classes to the same level of hopeless misery as themselves. Nor is the security of property less necessary to accumulation than to production. No man ever denies himself an immediate gratification of wealth, when it is within his power, unless he think that by doing so he has a fair prospect of obtaining at some future period a greater accession of comforts and enjoyments, or of avoiding some considerable evil. Where the right of property is vigilantly protected, an industrious man, who produces as much by one day's labour as is sufficient to maintain him two days, instead of idling away the second day, accumulates the surplus which exceeds his wants as a capital; the increased consequence and enjoyments which the possession of capital brings along with it being, in the great majority of cases, more than sufficient to counteract the desire of immediate gratification. But wherever property is insecure, we look in vain for the operation of this principle. "It is plainly better for us," is then the invariable language of the people, "to enjoy while it is in our power, than to accumulate property which we shall not be permitted to use, and which will either expose us to the extortion of a rapacious government, or to the depredations of those who exist only by the plunder of their more industrious neighbours."

The right of property is not violated merely when a man is deprived of the power of peaceably enjoying the fruits of his industry; it is also violated, and perhaps in a still more unjustifiable manner, when he is prevented from exerting himself in any way not injurious to others that he considers most likely to conduce to his interests. Of all the species of property which a man can possess, the faculties of his mind and the powers of his body are most particularly his own. He should therefore be permitted to enjoy, that is, to use or exert these powers at discretion. And hence the right of property is as much or more infringed upon when a man is interdicted from engaging in such and such branches of business, as it is when the property he has produced and accumulated is forcibly taken from him. Every monopoly which gives to a few individuals the power to carry on certain branches of industry to the exclusion of others, is thus, in fact, established in direct violation of the rights of every one else. It prevents them from using their natural capacities or powers in the way they might consider best; and as every man who is not a slave is justly held to be the best judge of what is advantageous for himself, the principles of natural law and the right of property are both subverted when he is excluded from any lawful business. In like manner, the right of property is violated whenever individuals are obliged to employ themselves or their property in any specified manner, to accept certain rates of interest for loans, or certain rates of wages, and so forth.

The finest soil, the finest climate, and the finest intellectual powers can prevent no people from becoming barbarous, rous, poor, and miserable, if they have the misfortune to be subjected to a government which does not respect and support the right of property. This is the greatest of all calamities. The ravages of civil war, of pestilence, and of famine may be repaired, but nothing can enable a nation to contend against the deadly influence of an established system of violence and rapine. The want of security, of a lively and well-founded expectation of being permitted freely to dispose of the fruits of industry, is the principal cause of the wretched state of the Ottoman dominions in the present day, as it was of the decline of industry and arts in Europe during the middle ages. When the Turkish conquerors overran those fertile and beautiful countries in which, to the disgrace of the other European powers, they are still permitted to encamp, they parcelled them among their followers, on condition of their performing certain military services, on a plan corresponding in many important particulars to the feudal system of our ancestors. But these possessions are not hereditary. And unless their present possessors leave them in trust to some religious incorporation for behoof of their children and legatees, they would, on their death, revert to the sultan. Hence, among the greater number of the occupiers of land in Turkey there is little thought of futurity. No one feels any interest about the prosperity of an unknown successor, and, except in the peculiar cases now mentioned, no one ever executes any improvement unless he expects to reap all the advantage during his own life. This is the cause why the Turks are so extremely careless about their houses. They seldom construct them of solid or durable materials. And it would be a gratification were they assured that they would fall to pieces the moment they have breathed their last. Under this miserable system the palaces have been changed into cottages, and the cities into villages. The long-continued want of security has extinguished the very spirit of industry, and destroyed not only the power, but even the desire to emerge from barbarism.

Had it been possible for arbitrary power to profit by the lessons of experience, it would long since have perceived that its own wealth, as well as that of its subjects, would be best promoted by maintaining the inviolability of property. Were the Turkish government to establish a vigilant system of police, to give to individuals full power to dispose of the fruits of their labour, and to substitute a regular plan of taxation for the present odious system of extortion and tyranny, industry would revive, capital and population would be augmented, and moderate duties, imposed on a few articles in general demand, would bring a much larger sum into the coffers of the treasury than all that is now obtained by force and violence. The stated public burdens to which the Turks are subject are light compared with those imposed on the English, the Hollanders, and the French. But when the latter have paid the taxes due to government, they know they will be permitted peaceably to enjoy or accumulate the remainder of their earnings; whereas the Turk, notwithstanding the reforms of which so much has been said, has no security but that, the moment after he has paid his stated contribution, the pasha, or one of his satellites, may strip him of every additional farthing he possesses. Security is the foundation, the principal element, in every well-digested system of finance. When maintained inviolate, it enables countries to support with little difficulty a very heavy load of taxes; but where there is no security, where property is a prey to rapine and spoliation, to the attacks of the needy, the powerful, or the profligate, the smallest burdens are justly regarded as oppressive, and uniformly exceed the means of the impoverished and spiritless inhabitants.

Let us not, therefore, deceive ourselves by supposing that it is possible for any people to emerge from barbarism, or to become wealthy, populous, and civilized, without the security of property. From whatever point of the political compass we may set out, this is the principle to which we must come at last. Security is indispensable to the successful exertion of the powers of industry. Where it is wanting, it is idle to expect either riches or civilization.

"The exclusive right to the produce is the only excitement to industry which acts constantly and universally—the only spring which keeps human labour in motion."

Rousseau and some other writers of his caste have made objection to the right of property, which has been in of Rome some measure sanctioned by Beccaria. They allow that this right is advantageous for those who possess property; but they contend that it is disadvantageous for those who are poor and destitute. It condemns, say they, the greater portion of mankind to a state of misery, and provides for the exaltation of the few by the depression of the many! The sophistry of this reasoning is so apparent as hardly to require being pointed out. The right of property has not made poverty, but it has made wealth. Previously to its institution, those nations which are now most civilized were sunk to the same level of wretchedness and misery as the savages of New Holland and Kamtschatka. All classes have been benefited by the change, and it is mere error and delusion to suppose that the rich have been benefited at the expense of the poor. The right of property gives no advantage to any one man over any other man. It deals out justice impartially to all. It does not say, "Labour, and I shall reward you," but it says, "Labour, and I shall take care that none be permitted to rob you of the produce of your exertions." This right has not made all men rich, because it could not make all men frugal, fortunate, and industrious. But it has done more than all the other institutions of society put together to produce that result. It is not, as it has been sometimes ignorantly or knavishly represented, a bulwark thrown up to protect the property of a few favourites of fortune. It is a rampart raised by society against its common enemies—against rapine and violence, plunder and oppression. Without its protection, the rich man would become poor, and the poor man would never be able to become rich—all would sink to the same bottomless abyss of barbarism and poverty.

"The security of property has overcome the natural aversion of man from labour, given him the empire of the earth, a fixed and permanent residence, and has implanted in his breast the love of country and of posterity. To enjoy immediately,—to enjoy without labour,—is the natural inclination of every man. This inclination must be restrained; for its obvious tendency is to arm all who have nothing against those who have something. The law which restrains this inclination, and which secures to the humblest individual the quiet enjoyment of the fruits of his industry, is the most splendid achievement of legislative wisdom,—the noblest triumph of which humanity has to boast."

(Bentham, Traité de Législation, tom. ii., p. 37.)

Division of Labour.—The division of labour may be best treated of in two branches,—viz., 1st, The division of labour among individuals; and, 2d, Its division among nations.

1 "Ce n'est que là où les propriétés sont assurées, où l'emploi des capitaux est abandonné au choix de ceux qui les possèdent : ce n'est que là, dis-je, que les particularités seront encouragées à se soumettre aux privations le plus dures pour compenser par leurs éparpiles les retards de la production du gouvernement peut apporter aux progrès de la richesse nationale. Si l'Angleterre, malgré ses guerres récentes, est parvenue à un haut degré d'opulence ; si, malgré les contributions énormes dont le peuple y est chargé, son capital est pourtant accru dans le silence par l'économie des particuliers, il ne faut attribuer ces effets qu'à la liberté des personnes, et à la sureté des propriétés qui y règnent, plus que dans aucun autre pays de l'Europe, la Suisse exceptée." (Storch, Traité d'Economie Politique, tom. i., p. 317.)

2 Speaking of theft, Beccaria calls it "Il delitto di quella infelice parte di uomini a cui il diritto di proprietà (terribile, e forse non necessario diritto), non ha lasciato che una nuda esistenza." (Dei Delitti e delle Pene, § 22.)

3 The treatise of M. Thiers, De la Propriété, is deserving of the highest commendation. It was published in 1845, when Communism was struggling for the ascendant, and the maxim la propriété c'est la voix current in France. Thiers has set in the clearest light the folly, the absurdity, the imbecility, the wickedness, and the principles, if so we may call the miserable fallacies, on which they were said to be founded; and has forcibly depicted the universal poverty and barbarism that would inevitably follow from their being adopted. It says little for the progress of science, or for the influence of common-sense, that such pernicious theories should have received any popular support. It is satisfactory, however, to find that, when put forth, their real character and tendency was so promptly and ably exposed. Individual Division of Labour.—The division of labour can only be imperfectly introduced in rude societies and thinly-peopled countries. But in every state of society, in the rudest as well as in the most improved, we may trace its operation and effects. Men are endowed with such various physical powers, talents, and propensities, that those who are best fitted for some pursuits, are not unfrequently wholly unfit for others. These differences being palpable and obvious, a regard to their mutual interest and convenience would lead them, at a very early period, to introduce the practice of barter and a subdivision of employments. And a brief experience would suffice to show, not only that their tasks were in consequence better suited to their capacities, but that their aggregate production was largely increased; and that to obtain the greatest supply of useful and desirable articles, they should apply themselves to particular businesses, and exchange the articles each had to spare for such of the products of his neighbours as he had occasion for; and they were willing to part with. As society advances, this system becomes more and more extended. In process of time different men become tanners or dressers of skins, shoemakers, weavers, house-carpenters, smiths, and so on; and each endeavours to cultivate and bring to perfection whatever talent or genius he may possess for the peculiar branch of industry in which he is employed. The mass of necessary and desirable articles and services is in consequence prodigiously augmented. Wherever the division of labour is carried to any considerable extent, agriculturists do not spend their time in clumsy attempts to manufacture their own produce; and manufacturers cease to interest themselves about the raising of corn and the fattening of cattle. The facility of exchanging is the vivifying principle of industry. It stimulates agriculturists to adopt the best system of cultivation, and to raise the largest crops, that they may barter such portions of their produce as exceed their wants for the various articles furnished by manufacturers and merchants; and it stimulates the latter to put forth their energies in the view of obtaining greater quantities of agricultural and other raw products. Hence it is that the business of an advanced society resolves itself almost entirely into the negotiation of exchanges; and that society itself may be said to be an association founded on a principle of reciprocity, in which, speaking generally, nothing is to be had except for an equivalent of one sort or other.

The advantages that result from individuals being able to embrace the pursuits which are most agreeable to their tastes, and for which they are best suited, are too apparent to require further notice. But the influence of the division of employments in adding to the efficiency of labour, though less obvious than the other, is no less important, and requires to be set in its true light. This has been done in a very masterly manner by Smith, who has clasped the circumstances which make the division of labour increase its productive powers under the following heads:

First, The increase of the skill and dexterity of the workman; Second, The saving of time, which would otherwise be lost in passing from one employment to another; and, Third, The tendency of the division of employments to facilitate the invention of machines and processes for abridging and saving labour. We shall make a few observations on each of these heads.

1st. As respects the increased skill and dexterity of the labourer, it is plain that when a person's whole attention is devoted to some one calling, when all the energies of his mind and powers of his body are made to bear, as it were, on it only, he can hardly fail to attain to a degree of proficiency in that calling to which no individual engaged in a variety of occupations can be expected to reach. A peculiar play of the muscles, or sleight-of-hand, is necessary to perform the simplest operation in the best and most expeditious manner; and this can only be acquired by constant practice. Smith has given an example, in the case of the nail manufacturer, of the extreme difference between training a workman to the precise occupation, in which he is to be employed, and training him to a similar and closely allied occupation. "A common smith," says he, "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 very bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailing, can seldom, with his utmost diligence, make more than eight hundred or a thousand nails in a day. But I have seen several boys under twenty years of age, who had never exercised any other trade but that of making nails, who, when they exerted themselves, could make each of them upwards of two thousand three hundred nails in a day; or nearly three times the number of the smith who had been accustomed to make them, but who was not entirely devoted to that particular business!

2nd. The division of labour prevents that waste of time in moving from one employment to another which necessarily takes place when the same individuals have successively to engage in different occupations. If these be carried on at considerable distances from each other, and require, as they generally do, different sets of tools, the serious loss of time that is occasioned by leaving one and going to another is obvious. And though the employments were contiguous, or concentrated in the same workshop, the loss would be very considerable. For, as Smith has observed, "a man commonly stutters a little in changing from one business to another. When he first begins his work, he is seldom keen or hearty; his mind is said not to go along with it, and for some time he rather trifles than applies himself 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." (Wealth of Nations, p. 5.)

3rd. As respects the tendency of the division of employments to facilitate the invention of machines and processes for saving labour, it is obvious that those engaged in an industrial pursuit will be more likely to discover easier and readier methods of carrying it on when their attention is devoted exclusively to it, than if they had occasionally to attend to a number of other pursuits. But it is a mistake to suppose, as is sometimes done, that the influence of the division of labour is confined to work-people and artificers. It extends to all classes,—to those who work with the head as well as those who work with the hand. As society advances, the study of particular branches of science and philosophy be-

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1 "Je ne crains point de dire : la société est pourvoit et seulement une série continue d'échanges ; elle n'est jamais autre chose dans aucune époque de sa durée, depuis son commencement le plus informe jusqu'à sa plus grande perfection; et c'est là le plus grand éloge qu'on puisse faire, car l'échange est une transaction admirable, dans laquelle les deux contracteurs gagnent toujours tous deux ; par conséquent la société est une suite non interrompue d'avantages sans cesse renaisant pour tous ses membres." (Destutt Tracy, Économie Politique, p. 144.) comes the principal or sole occupation of the most ingenious men. Chemistry becomes a distinct science from natural philosophy; the physical astronomer separates himself from the astronomical observer; the political economist from the politician; and each meditating exclusively or principally on his peculiar department, attains to a degree of proficiency and expertise in it which the general scholar seldom or never reaches. And hence, in labouring to promote our own ends, we adopt those courses which are most advantageous for all. Like the different parts of a well-constructed engine, the inhabitants of countries like England are all mutually dependent on and connected with each other. Without any previous concert, and obeying only the powerful and steady impulse of self-interest, they universally conspire to the same great end, and contribute, each in his respective sphere, to furnish the greatest supply of necessaries, conveniences, and enjoyments.

But it should be observed that the advantages derived from the division of labour, though they are partially enjoyed in every country and state of society, are only reaped in their full extent where there is a great power of exchanging, or an extensive market. Many employments cannot be separately carried on beyond the precincts of a large city; and in all cases the division becomes more perfect according as the demand for the produce of the work is extended. It is stated by Smith that in his time ten labourers employed in different departments in a pin factory could produce 48,000 pins a day; and such has been the progress of improvement, that they are now (1858) able to produce twice that number, or upwards. But, unless the demand had been sufficiently extensive to take off this increased quantity, it is evident that the greater division of employments and other improvements introduced into the factory, could not have been carried to their present extent. And this principle holds in every case. A cotton-mill could not be constructed in a small country having no intercourse with its neighbours. The demand and competition of the commercial world have been necessary to carry the manufactures of Glasgow, Manchester, and Birmingham to their present state of improvement.

The influence of the division of labour in multiplying and perfecting the products of industry was noticed by several writers previous to Smith, especially Harris and Turgot. But none of them did what Smith has done. None of them fully analysed and exhibited its various effects, or showed that the power of engaging in different employments depends on the power of exchanging; and that consequently the advantages derived from the division of labour are dependent on, and regulated by, the extent of the market. This is a principle of great importance, by establishing which Smith shed a new light on the theory of production, and laid the foundation of many important practical conclusions. "Présentée de cette manière," says M. Storch, "l'idée de la division du travail était absolument neuve; et l'effet qu'elle a fait sur les contemporains de Smith, prouve bien qu'elle l'était réellement pour eux. Telle qu'elle se trouve indiquée dans les passages que je viens de citer, elle n'a fait aucune impression. Développée par Smith, cette idée a d'abord saisi tous ses lecteurs; tous en ont senti la vérité et l'importance; et cela suffit pour lui en assurer tout l'honneur, lors même que son génie ait été guidé par les indications de ses devanciers." (Tome vi., p. 10.)

Territorial Division of Labour, or Commerce.—The division of labour is not confined to its effect on the occupations of men in limited societies. It extends much further than this; and influences the population of entire provinces, and even great nations, in the same way that it influences individuals and families, by teaching them that it is for their interest to addict themselves in preference to those industrial pursuits for succeeding in which they have some natural or acquired advantage. And hence the territorial division of employments, and the commerce of which it is at once the cause and the effect. The various soils, climates, and capacities of the different districts of an extensive country render some particularly well suited for the prosecution of certain branches of industry, and others for the prosecution of other branches. A district where coal is abundant, which has an easy access to the ocean, and a considerable command of internal navigation, is the natural seat of manufactures. Wheat and other species of grain are the proper products of rich arable soils; and cattle, after being reared in mountainous districts, are most advantageously fattened in meadows and low grounds. Nothing is more obvious than that the inhabitants of these districts, by confining themselves to the businesses for the carrying on of which they have some especial capability, will produce a much greater aggregate quantity of useful and desirable articles than they could do were they to engage indiscriminately in every possible employment. It cannot be doubted that a vastly greater supply of manufactured goods, corn, and cattle, is produced by the inhabitants of Glasgow, the Carse of Gowrie, and Argyllshire respectively, confining themselves to manufactures, agriculture, and the rearing of cattle, than if each had endeavoured, in addition to their own, to raise the products peculiar to the others.

But it is easy to see that foreign trade, or the territorial division of labour between different and independent countries, contributes to increase the wealth of each in the same manner that the trade between different provinces of the same kingdom contributes to increase their wealth. There is a still greater difference between the productive powers with which nature has endowed different and distant countries than there is between those of the provinces of the same country. The establishment of a free intercourse between them must therefore be proportionally more advantageous. It would evidently cost a great deal more to raise the wines of France or Spain in England, than to make Yorkshire yield the same products as Devonshire. Indeed there are a multitude of products, some of which are of the very greatest utility, that cannot be raised except in particular situations. Were it not for our commercial intercourse with foreigners, we should be wholly destitute of tea, raw cotton, raw silk, gold bullion, and a thousand other equally useful and valuable commodities. Providence, by giving different soils, climates, and natural productions to different countries, has evidently provided for their mutual intercourse and civilization. There can, indeed, be no reasonable doubt, had their trade been free and unfettered, that each people would have engaged in preference in those departments of industry in which their genius, the capacities of their soil, their products, climate, and situation fitted them to excel. And though, owing to the prevalence of that selfish and short-sighted policy, of which we have traced the outline, the benefits that would have resulted from foreign trade have been greatly diminished, still it would be no easy matter to exaggerate the amount and importance of those of which, even in its restricted state, it has been productive. Products of all sorts have been multiplied and cheapened; and their distribution binds together the universal society of nations by the common and powerful ties of mutual interest and reciprocal obligation. Commerce has also, by showing how greatly they are indebted to others, moderated the extravagant high opinion which nations, when they have little intercourse with their neighbours, are too apt to entertain of themselves; and has thus either wholly removed or greatly weakened a host of unworthy prejudices. It has shown that nothing can be more illiberal and absurd than the once prevalent dread of the progress of others in wealth and civilization; and that the true glory and real interest of every nation will be more certainly advanced by endeavouring to emulate and outstrip its neighbours in the career of science and civilization, than by labouring to attain a barren pre-eminence in the bloody and destructive, though necessary, art of war.

The way in which commerce gives increased efficacy to labour, and augments national wealth, may be easily illustrated. Thus, in the case of the intercourse, or territorial division of labour, carried on between England and Portugal, our superior wool, added to our command of coal, skilful workmen, and improved machinery, enable us to produce cloth at a much cheaper rate than the Portuguese; while, on the other hand, the soil and climate of Portugal being peculiarly favourable for the growth of the grape, she produces wine at an infinitely less cost than it could be produced for here. And hence it is obvious that, by exchanging cloth for wine, and wine for cloth, both parties, the English and Portuguese, are greatly benefited. Each of them is incomparably better supplied than they otherwise would be with useful and desirable articles. Portions of their capital and industry are diverted into those channels in which they are naturally most productive and most secure; and in which, consequently, it is not more for their own than for the general advantage of mankind that they should be employed.

These statements are sufficient to expose the sophism of the French of the Economists, who contended that, as equivalents must always be given for commodities brought from abroad, foreign commerce could not be a means of increasing wealth. How, they asked, can wealth be increased by giving equal values for equal values? They admitted that commerce might make a better distribution of the wealth of the world; but as it merely exchanged one sort of wealth for another, they denied that it could make any addition to its amount. At first sight, this sophistical and delusive statement appears sufficiently conclusive; but a very few words will be enough to demonstrate its fallacy. In commercial transactions none of the parties obtain articles of greater value than those they gave in exchange for them. The cloth with which the English merchant purchases Portuguese wine may have cost as much as the latter, or it may have cost more. But then it must be observed that, in making the exchange, the value of the wine is estimated by what it takes to produce it in Portugal, which has peculiar capabilities for that species of industry, and not by what it would take to produce it in England were the trade put an end to; and, in like manner, the value of the cloth is estimated by what it takes to produce it in England, and not by what it would take to produce it in Portugal. Hence, by trading together, countries obtain commodities which it might not be possible for them to produce at home, or, if possible, only at a comparatively heavy cost, for what it takes to produce them in other countries under the most favourable circumstances, and at the least expense. The gain of one is not the loss of another. They are universally benefited by the intercourse; for their labour being better distributed and rendered more efficient, they all obtain larger supplies of useful and desirable articles.

To set this important principle in a clearer point of view, let it be supposed that in England a given number of men can, in a given time, manufacture 10,000 yards of cloth and raise 1000 quarters of wheat, and that the same number of men can, in a given time, manufacture in Poland 5000 yards of cloth and raise 2000 quarters of wheat. It is plain that the establishment of a free intercourse between the two countries would in these circumstances enable England, by manufacturing cloth and exporting it to Poland, to obtain twice the quantity of corn in exchange for a given outlay of capital and labour that she would obtain in return for the same outlay on cultivation at home; and Poland would, on her part, be enabled to obtain twice as much cloth in exchange for her corn as she would have done had she attempted directly to manufacture it. How ridiculous, then, to contend that commerce is not a means of adding to the efficacy of labour, and consequently of increasing wealth! Were the intercourse between England and Portugal and the West Indies put an end to, it would require at least fifty or a hundred times the expense to produce port-wine, sugar, and coffee, directly in this country, that is required to produce the equivalents sent to Portugal and the West Indies in exchange for them. And no outlay, however great, could directly supply us with teas, spices, and fifty other most important articles.

"The commerce of one country with another is merely an extension of that division of labour by which so many benefits are conferred on the human race. As the same country is rendered richer by the trade of one province with another; as its labour becomes thus infinitely more divided and more productive than it could otherwise have been; and as the mutual interchange of all those commodities which one province has and another wants, multiplies the accommodations and comforts of the whole, and the country becomes thus in a wonderful degree more opulent and happy; so the same beautiful train of consequences is observable in the world at large, that vast empire of which the different kingdoms may be regarded as the provinces. In this magnificent empire one province is favourable to the production of one species of produce, and another province of another. By their mutual intercourse mankind are enabled to distribute their labour as best fits the genius of each particular country and people. The industry of the whole is thus rendered incomparably more productive, and every species of necessary, useful, and agreeable accommodation is obtained in much greater abundance, and with infinitely less expense." (Mill's Commerce Defended, p. 38.)

To enter into a more enlarged discussion of this interesting and important subject would be inconsistent alike with the objects and limits of this article. In the articles on Colonies, and the Corn Laws and Corn Trade, we have examined the policy of the restrictions on the colonial and corn trades; and in the article Exchange we have pointed out the circumstances which regulate the importation and exportation of the precious metals, and have shown that, instead of an excess of exports over imports being any criterion of an advantageous commerce, it is quite the reverse, and that it is by the excess of the imports over the exports that the gain of the merchants, and consequently of the community, is to be estimated. In the fourth book of the Wealth of Nations, Adam Smith has examined and refuted the various arguments in favour of restrictions on commerce in the most able and masterly manner, and with an amplitude of illustration which leaves little to be desired. A very complete exposure of the sophisms of the French Economists on the subject of commerce may be found in the pamphlets of Mill (Commerce Defended) and Colonel Torrens (Economists Refuted), in answer to Spence's pamphlet entitled Britain Independent of Commerce. And ample information on most points relating to the practice, theory, and history of commerce will be found in the Principles of Political Economy (4th edition), and in the Commercial Dictionary, by the author of this article.

When the division of labour was first introduced, commodities were universally bartered for each other. But as the division of employments was extended, and exchanges became more numerous, it became obvious that it would be highly advantageous to use some one article as a common medium of exchange, as an equivalent for all other articles, and as a standard by which to ascertain their values. It is unnecessary, however, to inquire into this subject. It has been already fully discussed in Accumulation and Employment of Capital.—Capital may be defined to be "that portion of the accumulated produce of labour which may be directly employed to maintain productive labourers, or to facilitate production."

The fitness of an article to serve as an instrument of production, or to support those engaged in industrial undertakings, is the only criterion by which to decide whether it is or is not capital. Its employment, on which much stress has been laid, depends entirely on the judgment or caprice of its owner, and affects neither its identity nor its qualities. It is frequently, also, very difficult to distinguish between what are really productive and unproductive employments; so that a definition which depended on such a distinction being made, must be of the class of those that explain ignotum per ignotum. But there is never, or but very rarely, any difficulty in learning whether an article may be employed to facilitate labour or maintain labourers; and that is all that is required for its proper classification.

A great many articles, including pictures, prints, statues, vases, most sorts of gems, trinkets, and so forth, cannot be employed in either of the ways now referred to, and have therefore no claim to be called capital. But any article that may be so employed is entitled to that designation, however it may be disposed of. Gunpowder, for example, is capital, whether it be expended in fireworks or in the blasting of rocks; and horses have no better claim to be called capital when they are employed in ploughing and harrowing, than when they are racing at Newmarket or Goodwood.

Having thus seen what capital is and what it is not, we proceed to observe that its accumulation and employment are indispensable to the successful prosecution of almost every branch of industry. Without the capital which chiefly consists of tools and engines, and which has been denominated fixed, labour could not be rendered considerably productive; and without the capital which chiefly consists of the food and clothes required for the consumption of the labourer during the time he is employed in production, and which has been denominated circulating, he could not engage in any undertaking which did not yield a speedy return. An agricultural labourer, for example, might have an ample supply of carts and ploughs, of oxen and horses, and generally of all the instruments and animals used in his department of industry; but were he destitute of circulating capital, or of food and clothes, he would be unable to avail himself of their assistance, and instead of tilling the ground, would have to betake himself to some species of appropriative industry. And, on the other hand, supposing the husbandman to be abundantly supplied with provisions, what could he do without fixed capital, or tools? What could the most skilful agriculturist perform without his spade and his plough? a weaver without his loom? or a house-carpenter without his saw, his axe, and his planes? Both sorts of capital are required for the elevation of every nation in the scale of civilization. And it is only by their conjoined and powerful operation that wealth is largely produced.

The division of labour in such societies as are a little advanced is consequent to the accumulation of capital. Before labour can be considerably subdivided, "a stock of goods of different kinds must be stored up somewhere, sufficient to maintain the labourer, and to supply him with the materials and tools of his work." A weaver cannot apply himself entirely to his peculiar business, unless there is beforehand stored up somewhere, either in his own possession or in that of some other person, a stock sufficient to maintain him, and supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business." (Wealth of Nations, p. 119.)

As the accumulation of stock must precede all but the earliest division of labour, so its further division is more and more extended as capital is more and more accumulated. Accumulation and division act and re-act on each other. The raw material which the same number of people can work up increases according as labour is more and more subdivided; and when the operations of each workman are reduced to a greater degree of identity and simplicity, he has, as already explained, a greater chance of discovering machines and processes for facilitating and abridging labour. Industry therefore not only increases in every country with the increase of the stock or capital which sets it in motion, but, in consequence of this increase, the division of labour becomes extended, new and more powerful implements and machines are invented, and the same amount of labour produces a much greater quantity of commodities.

Besides enabling labour to be divided, capital contributes to facilitate labour and produce wealth in the three following ways:

First.—It enables work to be executed that could not be executed, or commodities to be produced that could not be produced, without it.

Second.—It saves labour in the production of almost every species of commodities.

Third.—It enables work to be executed better, as well as more expeditiously.

With regard to the first mode in which we are benefited by the employment of capital, or its enabling commodities to be produced that could not be produced without it, we have seen that the production of such commodities takes as require a considerable period for their completion could not be attempted until a stock of circulating capital, or of food and clothes, sufficient for the maintenance of the labourers employed on them, has been provided. But the employment of fixed capital in the shape of tools and engines is also in most cases indispensable in production. There are, indeed, very few, if any, arts that may be carried on by the mere agency of the fingers, or rude tools given to us by nature. A pair of stockings could not be produced without the aid of wires; and though the ground may be cultivated without ploughs, it could not be cultivated without spades or hoes. But man is not, like the lower animals, condemned to vegetate for ever in the situation in which he was originally placed. He is always aspiring to something better; and he has a head to contrive, as well as hands to construct the means and instruments required to assist him in his undertakings. And no sooner is one step gained, one difficulty overcome, than he advances to grapple with another. The curis acuens mortalium corda never ceases to operate. The spirit which it inspires is neither enervated by success nor dispirited by failure. It is perpetually urging society forward to attempt new discoveries, and to improve and perfect the inventions already made. It is this principle that has made so many natural powers subservient to our will, and armed, if we may so speak, our feeble hands with "the force of all the elements."

In the second place, while the employment of capital is indispensable to the production of many descriptions of commodities, it enables a large saving of labour to be effected in the production of a still greater number, and, by lowering their price, brings them within the reach of a much larger number of consumers. We have been so long accustomed to make use of the most powerful machines, that it requires a considerable effort of abstraction to become fully aware of the extent of the advantages we derive from them. But if we compare the arts practised alike in rude and civilized societies, we cannot fail to be convinced that we owe a very large portion of our superior well-being to the employment of machines of one sort or other. It is by their means that the land is cultivated, clothes manufactured, books and newspapers printed, and the products of industry, with the treasures of art and knowledge, conveyed from one country and hemisphere to another. Those who reflect, how cursorily soever, on the immeasurable distance between slings, or bows and arrows, and muskets and heavy ordnance, between the pen of a copying-clerk and a steam-press, between spindles and distaffs and spinning-mills, between a canoe and a line-of-battle or first-class merchant ship, and, on fifty similar contrasts, will be ready to admit that the progress of mankind from their lowest and most abject to their highest and most polished state, has been mainly a consequence of the invention and improvement of tools and engines. Man was defined by Dr Franklin to be a "tool-making animal," and the definition turns upon one of his distinctive and most valuable faculties, and is really one of the best that has been given.

In the third place, the employment of machinery enables work to be done better, as well as more expeditiously, than it could be done without it. Cotton, for example, might be spun by the hand; but the admirable machines invented by Hargreaves, Arkwright, Crompton, and others, have not only enabled a hundred or a thousand times more yarn to be produced than could be spun by means of a common hand-wheel (itself a great invention), but it has also improved its quality, and given it a degree of fineness and of evenness or equality in its parts, which was never previously attained. It would require a painter months, or it might be years, to paint with a brush the cottons or printed cloths used in the hanging of a single room; and it would be very difficult, if not impossible, for the best artist to give the same perfect identity to his figures that is given to them by the admirable machinery now used for that purpose. Not to mention the other and more important advantages derived from the invention of moveable types and printing, the most perfect manuscript—one on which years of patient and irksome labour have been expended—is unable, in point of delicacy and correctness, to match a well-printed work, executed in the hundredth part of the time, and at a hundredth part of the expense, required to copy the manuscript. The great foreign demand for English manufactured goods results no less from the superiority of their fabric than from their greater cheapness; and for both these advantages we are principally indebted to the excellence of our machinery.

There are other considerations which equally illustrate the extreme importance of the accumulation and employment of capital. Setting aside the variations of harvests, the produce of the land and labour of a nation cannot be increased otherwise than by an increase in the number of its labourers or of their productive powers. But without an increase of capital, it is in most cases difficult to employ additional workmen with advantage. If capital be not augmented, and if the food and clothes destined for the support of the labourers, and the tools and machines with which they are to work, be all required for the maintenance and efficient employment of those in existence at this or any other period, there can be no advantageous demand for more. In such circumstances, the rate of wages cannot rise; and if the number of inhabitants be increased, they can hardly fail to be worse provided for. Neither can the productive powers of the labourer be considerably augmented without a previous increase of capital. For it is only by their better education and training, by the greater subdivision of their employments, or by an improvement of machinery, that the productive powers of workmen are ever materially increased. And in almost all these cases additional capital is required. When the work to be done consists of a number of parts, to keep every man constantly employed in a particular part requires a larger stock than where every man is occasionally employed in different parts. "When," says Adam Smith, "we compare the state of a nation at two different periods, and find that the annual produce of its land and labour is evidently greater at the latter than at the former, that its lands are better cultivated, its manufactures more numerous and more flourishing, and its trade more extensive, we may be assured that its capital must have increased during the interval between these 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." (Wealth of Nations, p.152.) It is therefore apparent that no country can ever reach the stationary state so long as she continues to add to her capital. While she does this, she will have an increasing demand for labour, and will be constantly augmenting the mass of necessaries, luxuries, and conveniences, and consequently also the numbers of her people. But with every diminution of the rate at which capital may have been accumulating, the demand for labour will decline. When no additions are made to capital, no more labour will be, or at least can be, beneficially employed. And should the national capital be diminished, the condition of the great body of the people would be deteriorated; for the wages of labour would be reduced, and pauperism, with its attendant train of vice, misery, and crime, would begin to spread its ravages throughout the largest portion of society.

Having thus endeavoured to point out the vast importance of the employment of capital, and the manner in which it co-operates in production, we proceed to explain the circumstances most favourable for its accumulation. Now, as capital is nothing but the accumulated produce of bygone industry, it is evident that its increase of high will, ceteris paribus, be greatest where industry is most productive, or, in other words, where the profits of stock are highest. A man who produces a bushel of wheat in two days may accumulate twice as fast as a man who, either from a deficiency of skill, or from having to cultivate a bad soil, has to labour four days to produce the same quantity; and capitalists who invest stock so as to yield a profit of ten per cent., have it equally in their power to accumulate twice as fast as those who can only obtain five per cent. on their outlays. Experience, too, shows that while large profits afford greater means of saving, they act as incentives to accumulation. Hence it is found that in the countries which are making the greatest progress, the rate of profit is always comparatively high. In Australia and the United States, for example, it is usually twice as high as in Great Britain or France; and it is to this that the more rapid advancement of the former in wealth and population is mainly to be ascribed. We do not mean to say that high profits are necessarily and in every instance accompanied by a great degree of prosperity. Countries with every other advantage for the profitable employment of industry and stock, may be subjected to revolutionary and arbitrary governments which do not respect the right of property; and the want of security thence resulting may be suffi-

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1 To avoid all chance of misconception, it is necessary to observe, that this refers to net profit, or to the sum which remains to the capitalist after all his outgoings are compensated, including therein a sum sufficient to insure his capital against risk, and to make up for whatever may be peculiarly disagreeable in his business. But however high the rate of profit, had men always lived up to their incomes,—that is, had they always consumed them in the gratification of their immediate wants and desires,—there would have been no such thing as capital in the world. High profits are advantageous because they afford the means of amassing capital; but something more is necessary to make us use these means, and that is the desire implanted in the breasts of all, or mostly all individuals, of rising in the world, and improving their condition. This strong desire has prompted them, as already seen, to invent machines and instruments; and it also prompts them to save and accumulate a portion of their incomes or earnings as a fund or capital to be employed in their future undertakings, or invested in loans to others, or retained as a reserve stock on which to fall back in sickness or adversity. Hence it is to the principle of accumulation, or rather to its source, parsimony, which, though one of the most useful, is one of the least popular of the virtues, that we owe that capital without whose assistance and co-operation mankind could have made no considerable progress, and would most likely have continued in a state but little removed from barbarism.

Bacon objects to parsimony, that “it withholdeth men from works of liberality and charity.” (Essays, No. 34.) But unless a man be born to affluence, which is the lot of few, the exercise of parsimony is required to enable him to be really charitable. Those who spend as fast as they acquire are almost always in difficulties; they live, as the phrase is, from hand to mouth; and are without the means, even if they had the inclination, to act liberally. But it is not necessary to the practice of a proper degree of parsimony that people should submit to painful privations, or that they should behave in a mean or niggardly manner. Parsimony is not to be confounded with the base passion of avarice. It does not regard accumulation as an end, but only as a means to an end; and it should correspond to, and be consistent with, a man’s situation and prospects. And, in truth, it is everywhere found that the establishments of those parties, whether in the lower, middle, or upper classes, who are said to be saving or parsimonious, are more distinguished by their good order and the avoidance of waste than by anything else. They do not deny themselves gratifications, but they keep the taste for them within due bounds, and do not allow their means to be made away with (as many do), they know not how. They are careful and economical upon principle, and add to their fortunes that they may be able to live better, and be more hospitable and generous. Cicero says of Rabirius Postumus, “In angenda re non avaritiae praedam, sed instrumentum bonitati quæerre videatur.” (Pro Rabirio Postumo, cap. 2.)

It has been wisely ordered that this principle should be as powerful as it is advantageous. “With regard to profusion,” says Smith, “the principle which prompts to expense is the passion for present enjoyment; which, though sometimes violent, and very difficult to be restrained, is in general only momentary and occasional. But the principle which prompts to save is the desire of bettering our condition; a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. In the whole interval which separates these two moments there is scarce perhaps a single instance 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. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the means the most vulgar and the most obvious; and the most likely way of augmenting their fortune is to save and accumulate some part of what they acquire either regularly and annually, or upon some extraordinary occasion. Though the principle of expense, therefore, prevails in almost all men upon some occasions, and in some men upon almost all occasions, yet in the greater part of men, taking the whole course of their life at an average, the principle of frugality seems not only to predominate, but to predominate very greatly.” (Wealth of Nations, p. 151.)

It is this principle which carries society forward. The spirit of parsimony, and the efforts which the frugal and industrious classes make to improve their condition, in most instances balance not only the profusion of individuals, but also the more wasteful profusion and extravagance of government. This spirit has been happily compared by Smith to the unknown principle of animal life—the vis medicatrix nature—which frequently restores health and vigour to the constitution, in spite both of disease and of the mischievous prescriptions of the physician.

But though the principle of accumulation be powerful enough, when its vigorous action is not paralysed by any fear of insecurity, to make good the waste or loss of large amounts of capital, we must not fall into the error of supposing, as very many have done, that its operations are in all cases promoted by a large public expenditure. To a certain extent, indeed, this is true. A moderate increase of taxation has the same effect on the habits and industry of a nation that an increase of his family or of his unavoidable expenses has upon a private individual. Man is not influenced solely by hope; he is also powerfully operated upon by fear. Taxation brings the latter principle into the field. To the desire of rising in the world, an increase of taxation superadds the fear of being cast down to a lower station, of losing consideration, and of being deprived of conveniences and gratifications which habit may have rendered almost indispensable; and the combined influence of the two principles produces effects that could not be produced by the unassisted agency of either. They stimulate individuals to endeavour, by increased efforts of industry and economy, to repair the breach taxation has made in their fortunes. And it not unfrequently happens that their efforts do more than this, and that, consequently, the national wealth is increased through the increase of taxation. But we must be on our guard against the abuse of this doctrine. To render increased taxation a cause of greater exertion, economy, and invention, the increase should be slow and gradual; and it should never be carried to such a height as to disable individuals from meeting the sacrifices it imposes, by such additional exertion and economy as it may be in their power to make, without requiring any very sudden or violent change in their habits. Difficulties which, though great, are seen to be surmountable, sharpen the inventive powers, and are readily grappled with. But an apparently insurmountable difficulty, or such an excessive increase of taxation as it was deemed impossible to meet, would not stimulate, but destroy exertion. Instead of producing new efforts of ingenuity and economy, it would produce only despair. Whenever taxation becomes so heavy that the produce it takes from individuals cannot be replaced by fresh efforts of economy and invention, these efforts uniformly cease to be made; the population becomes dispirited, industry is paralysed, and the country rapidly declines. Ambition to rise is, we repeat it, the animating principle of society. Instead of remaining satisfied with the condition of their fathers, the great object of mankind in every age has been to rise above it, to elevate themselves in the scale of consideration and of wealth. To achieve this grand object, they scruple not

"To continue stationary, or to retrograde, is not natural to society. Man from youth grows to manhood, then decays and dies; but such is not the destiny of nations. The arts, the scientific discoveries, and the capital of one generation become the patrimony of that which succeeds them; and as the former are imperishable, and will continue to give birth to new arts and new discoveries in all time to come, while the natural tendency of the latter is to increase, it follows that, if not counteracted by the want of security, or by other adventitious causes, the principle of improvement would always operate, and would secure the constant advancement of nations in wealth and population.

It may be said perhaps that, however true, the previous statements are incomplete, from no mention being made of credit, which, we are assured, plays an important part in all industrial operations. But this is an entire mistake. Credit is not capital, nor even anything real. It is merely the term employed to designate the lending or transfer of capital by one individual to another. The lender is said to give, and the borrower to get or receive credit. No doubt we often hear of this, that, and the other undertaking being carried on by means of credit; but by this is really meant that they are carried on by the agency of borrowed capital. And speaking generally, the giving of credit or the lending of capital may be said to be advantageous, because in most instances the borrowers employ it to better purpose than the lenders. When, however, it is otherwise, and capital is conveyed, as is sometimes the case, from the industrious and frugal to the idle and improvident, the credit that has been given is plainly injurious. And in all cases its influence, whether for good or for evil, depends on the capital being employed more or less advantageously after its transfer than before.

Sect. III.—Different Employments of Capital and Industry.—Manufactures and Commerce shown to be equally advantageous as Agriculture.—Rate of Profit a true Test of Individual and Public Advantage.

In the previous section we endeavoured to show that the increase and diminution of capital is the pivot on which national prosperity principally hinges; that an increase of capital proportionally increases the means of supporting and employing labour, and that any considerable diminution of its amount seldom fails to lessen the comforts and enjoyments, and perhaps also the necessaries of the productive classes, and to spread poverty throughout the land; and we also endeavoured to show that the increase and diminution of the rate of profit is the great cause of the increase and diminution of capital. But if such be the case, it would seem necessarily to follow that those employments which yield the greatest profit, or in which industry is most productive, are the most advantageous. Adam Smith, however, with Malthus and others, have objected to this inference. They allow that if two capitals yield equal profits, the employments in which they are engaged are equally beneficial to their possessors; but they contend that if one of them be employed in agriculture, it will be productive of greater public advantage. We believe, however, notwithstanding the deference due to the authorities referred to, that this opinion rests on no good foundation, and that the average rate of profit is the test by which we should always judge which employment is most and which is least advantageous.

A capital may be employed in four different ways,—viz., first, In the acquisition of raw products; or, secondly, In manufacturing and preparing these raw products for use and consumption; or, thirdly, In transporting the raw and manufactured products from one place to another, according to the demand; or, fourthly, In dividing either into such small parcels as may suit the public convenience, and supplying them to those by whom they are wanted. The capital of those who undertake the improvement or cultivation of lands, mines, or fisheries, is employed in the first of these ways; that of master manufacturers in the second; that of wholesale merchants in the third; and that of retailers in the fourth. It is difficult to conceive that a capital should be employed in any way which may not be classed under one or other of these heads.

It is unnecessary to enlarge on the importance of employing capital in the acquisition of raw produce, and especially in the cultivation of the soil. It is from the capital in latter, including therein mines and fisheries, that the matter of all commodities that minister to our necessities, comforts, and enjoyments is originally derived. The industry which appropriates the raw or spontaneous products of the earth preceded every other. But these are always comparatively limited. And it is by agriculture only,—that is, by the united application of immediate labour and capital to the cultivation of the ground,—that large supplies of those species of produce which form the principal part of the food of man can be obtained. It is not quite certain whether any of the principal bread corns, as wheat, barley, rye, oats, &c., have been discovered growing spontaneously. But although this must originally have been the case, their extreme scarcity, and the labour required to raise them in considerable quantities, prove that we are indebted for them almost exclusively to agriculture. The transition from the pastoral to the agricultural mode of life is the most important step in the progress of society. Whenever, indeed, we compare the supplies of food and other raw products obtained from a given surface of a well-cultivated country, with those obtained from the same extent of an equally fertile country occupied by hunters or shepherds, the powers of agricultural industry in increasing useful productions appear so extraordinary, that we cease to feel surprise at the preference which was so early and generally given to agriculture over manufactures and commerce, and are disposed to subscribe without hesitation to the panegyric of Cicero when he says, "Omnium autem rerum ex quibus aliquid acquiritur, nihil est agricultura melius, nihil uberior, nihil dulcior, nihil homine libero dignius."

But are there any really just grounds for this preference? Are not manufactures and commerce as advantageous as agriculture? Without the latter we should never possess any considerable supply of the materials out of which food... Production of Wealth.

Employment of capital in manufacturing industry.

Necessity of manufacturing industry to the improvement in agriculture.

No real difference between agricultural and manufacturing industry.

There is not at bottom any real distinction between agricultural and manufacturing industry. It is, as already seen, a vulgar error to suppose that the operations of husbandry add anything to the stock of matter in existence. All that man can do, and all that he ever does, is to give to matter that particular form or shape which fits it for his use. But it was contended by Quesnay and the Economists, and their opinions have in this instance been espoused by Smith, that while the husbandman, in adapting matter to our use, is powerfully assisted by the vegetative powers of nature, the manufacturer has to perform everything himself without any such co-operation. "No equal quantity of productive labour employed in manufactures," says Smith, "can ever occasion so great a reproduction (as if it were employed in agriculture). In them nature does nothing, Production man does all; and the reproduction must always be in proportion to the strength of the agents that occasion it."

The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in proportion, too, to the quantity of productive labour which it employs it adds a much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants. Of all the ways in which a capital can be employed, it is by far the most advantageous to the society." (Wealth of Nations, p. 162.)

This is perhaps the most objectionable passage in the Error of Wealth of Nations; and it is astonishing that so able and this sagacious a reasoner as Smith should have maintained a doctrine so manifestly erroneous. It is unquestionably true that nature powerfully assists the husbandman. He prepares the ground for the seed, and deposits it therein; but it is nature that unfolds the germ, that feeds and ripens the growing plant, and brings it to maturity. But does she not do as much for us in every other department of industry? The powers of water and of wind which move our machines, support our ships, and impel them over the deep, the pressure of the atmosphere and the elasticity of steam, which enable us to work the most stupendous engines,—are they not spontaneous gifts of nature? Machines are in truth merely contrivances by which we press natural powers into our service, and make them perform the principal part of what would otherwise be wholly the work of man. In navigation, for example, is it possible to doubt that the powers of nature,—the buoyancy of the water, the impulse of the wind, and the polarity of the magnet,—contribute fully as much as the labour of the sailor to waft our ships from one hemisphere to another. In bleaching and fermentation the whole processes are carried on by natural agents. And it is to the influence of heat in softening and melting metals, preparing food, and warming houses, that we owe many of our most powerful and convenient instruments, and that these northern climates have been made to afford a comfortable habitation. So far, indeed, is it from being true that nature does much for man in agriculture and nothing in manufactures, that the fact is more nearly the reverse. There are no limits to her bounty in manufactures, but there are limits, and those not very remote, to her bounty in agriculture. Any amount of capital may be expended in the construction of steam-engines, ships, or other machines, and, however largely they may be multiplied, the last, apart from the improvements which are usually being made, will be as powerful and efficient as the first. But such is not the case with the soil. Lands of the first quality are speedily exhausted; and capital cannot be applied indefinitely, even to the best soils, without obtaining a diminished rate of profit. The rent of the landlord is not, as Smith supposed, the recompense of the work of nature remaining, after all that part of the produce is deducted which may be regarded as a recompense for the work of man. It is, as will hereafter be shown, the excess of produce obtained from the best soils in cultivation over that which is obtained from the worst,—it is a consequence, not of an increase, but of a diminution of the productive power of the labour employed in agriculture.

Inasmuch as all labour which gives utility to matter Employed is productive, it follows that the labour which is employed in carrying commodities from where they are produced to where they are to be consumed, and in dividing them into minute portions, so as to suit the wants of the consumers, is as much entitled to that designation as if it were employed in agriculture or manufactures. The miner gives utility to matter, to coal, for example, by bringing it we should have no manufactures; and without these and production of wealth, commercial industry, the greater part of that produce would be entirely worthless, and would neither minister to our wants or our comforts. Manufacturers and merchants are to the body politic what the digestive powers are to the human body. Food is indispensable to existence; but the largest supplies of food cannot lengthen our days if the machinery by which nature adapts it to our use, and incorporates it with our body, be vitiated and deranged. Nothing, therefore, can be more silly and childish than the estimates so frequently put forth of the comparative advantageousness of agricultural, manufacturing, and commercial industry. They are alike indispensable, and depend upon, and grow out of, each other. "Land and trade," to borrow the just and forcible expressions of Sir Josiah Child, "are twins, and have always, and ever will, wax and wane together. It cannot be ill with trade but lands will fall, nor ill with lands but trade will feel it." This reasoning cannot be controverted; and on its authority we are entitled to condemn every attempt to exalt one species of industry, by giving it fictitious advantages, as being both impolitic and pernicious. It must be done at the expense of the others; and no preference can be given to agriculturists over manufacturers and merchants, or to the latter over the former, without having prejudicial results. Wherever industry is free, the interests of individuals and the public always coincide. And those who, in such circumstances, succeed best in increasing their own wealth necessarily also succeed best in increasing the wealth of the state of which they are subjects.

This dependence of the different branches of industry on each other, and the necessity of their co-operation to enable mankind to make any considerable progress in civilization, have been ably illustrated in an early number of the Edinburgh Review:—"It may safely be concluded, that all those occupations which tend to supply the necessary wants or to multiply the comforts and pleasures of human life, are equally productive, in the strict sense of the word, and tend to augment the mass of human riches,—meaning by riches all those things which are necessary, or convenient, or delightful to man. The progress of society has been productive of a complete separation of employments originally united. At first every man provided, as well as he could, for his necessities as well as his pleasures, and for all his wants as well as all his enjoyments. By degrees a division of these cares was introduced; the subsistence of the community became the province of one class, its comforts of another, and its gratifications of a third. The different operations subservient to the attainment of each of these objects were then entrusted to different hands; and the universal establishment of barter connected the whole of these divisions and subdivisions together,—enabled one man to manufacture for all, without danger of starving by not ploughing or hunting, and another to plough or hunt for all, without the risk of wanting tools or clothes by not manufacturing. It has thus become as impossible to say exactly who feeds, clothes, or entertains the community, as it would be to say which of the many workmen employed in the manufacture of pins is the actual pin-maker, or which of the farm-servants produces the crop. All the branches of useful industry work together to the common end, as all the parts of each branch co-operate to its particular object. If you say that the farmer feeds the community, and produces all the raw materials which the other classes work upon, we answer, that unless those other classes worked up the raw materials, and supplied the farmer's necessities, he would be forced to allot part of his labour to this employment, whilst he forced others to assist in raising raw produce. In such a complicated system it is clear that all labour has the same effect, and equally increases the whole mass of wealth. Nor can any attempt be more vain than Production theirs who would define the particular parts of the machine of Wealth, that produce the motion, which is necessarily the result of the whole powers combined, and depends on each particular one of the mutually-connected members." (Vol. iv., p. 362.)

The extent to which the division of labour is carried in manufacturing establishments, and the exclusive attention which it requires the workman to bestow on one operation, or on some portion thereof, has been supposed to exert a highly pernicious influence over his mental faculties. But we have seen that this is an exceedingly erroneous supposition, and that, in truth and reality, the work-people engaged in manufactures are, speaking generally, more intelligent than the ordinary run of agricultural labourers. (See Manufactures.)

Much also has been said respecting the extraordinary mortality of large manufacturing establishments. The ready communication of contagion where people are crowded together,—the want of sufficient ventilation,—the confinement of children,—and the positive unhealthiness of some processes,—are circumstances from which most writers have been led to infer that the mortality in manufacturing cities must be unusually great, without giving themselves the trouble to inquire whether it really was so. The returns under the population acts have shown the fallacy of these opinions. Great Britain is at present infinitely more of a manufacturing country than in 1780; but, notwithstanding the vast increase during the intermediate period of what we have been in the habit of considering unhealthy employments, the average mortality in England and Wales in 1856 and 1857 was less than one in every forty-seven of the existing population, whereas in 1780 it was probably more than one in every thirty-five. It may perhaps be said that this increased healthiness is mainly owing to improvements in agriculture,—to the drainage of bogs and marshes, the inclosure and cultivation of commons and wastes,—the influence of which has counteracted the increase of manufactures. But suppose this were admitted, we should have to inquire what had occasioned these extraordinary improvements in agriculture. And a moment's reflection would suffice to convince us that they have principally resulted from the improvement and extension of manufactures, and the consequently increased demand of the manufacturing population for the produce of the soil. A good deal, however, of the diminution of mortality is a direct rather than an indirect consequence of the circumstances referred to. Every one knows the vast importance, in respect of health, of people being supplied with comfortable clothes at a cheap rate. And that is one of the many advantages which grow out of improved manufactures. The reduction in the price of cotton goods, to notice one only of innumerable instances, occasioned by the greater facility with which they are produced, enables the poorer classes to clothe themselves in a comfortable and elegant dress, and is productive of an increase of enjoyment, of which it is difficult to estimate the extent.

Malthus, whose leanings were all on the side of agriculture, has justly observed that "Most of the effects of manufactures and commerce on the general state of society are in the highest degree beneficial. They infuse fresh life and activity into all classes of the state, afford opportunity for the inferior orders to rise by personal merit and exertion, and stimulate the higher orders to depend for distinction upon other grounds than mere rank and riches. They excite invention, encourage science and the useful arts, spread intelligence and spirit, inspire a taste for conveniences and comforts among the labouring classes, and, above all, give a new and happier structure to society, by increasing the proportion of the middle classes,—that production body on which the liberty, public spirit, and good government of every country must mainly depend." (Observations on the Effects of the Corn Laws, p. 29.)

Hence it would seem that those engaged in the different channels of employment contribute in nearly equal degrees to the general wellbeing; and though some rank higher in the public estimation than others, they are not on that account more indispensable. "The great author of order hath distributed the ranks and offices of men in order to mutual benefit and comfort, that one man should plough, another thresh, another grind, another labour at the forge, another knit or weave, another sail, another trade, another supervise all these, labouring to keep them all in order and peace; that one should work with his hands and feet, another with his head and tongue; all conspiring to the common end—the welfare of the whole, and the supply of what is useful to each particular member; every man so reciprocally obliging and being obliged; the prince being obliged to the husbandman for his bread, to the weaver for his clothes, to the mason for his palace, to the smith for his sword; those being all obliged to him for his vigilant care in protecting them, for their security in pursuing the work, and enjoying the fruit of their industry." (Barrow's Third Sermon on Industry.)

Thus, from whatever point of view we may regard the rate of division and combination of employments, we come to the same result. The inextinguishable passion for gain—the auri sacra fames—will always lead individuals to employ themselves and their stocks in those branches of industry in which, all things considered, wages and profits employed are highest. And we have seen that these are the employments in which it is most for the public interest that capital should be invested. The profits of a particular branch of industry are rarely raised except by an increased demand for its produce. Should the demand for cottons, owing to their being substituted for other articles now in use, be considerably augmented, their price would rise, so as to yield the manufacturers comparatively high profits. But profits in different employments constantly tend to equality; and they can never, unless monopolies interpose, continue either permanently higher or lower in one than in others. Whenever, therefore, the rise in the price of cottons had taken place, the manufacturers engaged in the trade would put forth all their energies and borrow additional capital, at the same time that a number of capitalists engaged in less lucrative employments would contract their engagements, and transfer a portion of their stock to where it would yield a larger return. The equilibrium of profit would thus be again restored. For the additional impetus given to the production of cottons, by proportioning their supply to the increased demand, would infallibly reduce their price to its proper level. Such is the mode in which the interests of individuals are in every case rendered subservient to those of the public. High profits attract capital; but high profits in particular businesses are the effect of high prices; and these are always reduced, and the commodities brought within the command of a greater number of purchasers, as soon as additional capital and work-people have been employed in their production. It is plain, therefore, that that employment is the best which yields the greatest profit; and if two capitals yield equal profits, it is a proof that the departments of industry in which they are respectively invested, how muchsoever they may differ in many respects, are equally beneficial. Nothing can be more nugatory than to apprehend that, under a free system, capital or work-people will be attracted to a disadvantageous employment. The one is determined by high profits, and the other by

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1 In 1856 the mortality was 1 in 49, and in 1857 it was 1 in 46. PART III.

DISTRIBUTION OF WEALTH.

Having thus endeavoured to trace the various methods by which that labour which is the only source of wealth may be rendered most productive, and to exhibit the relation and dependence of the different kinds of industry, we proceed to the third division of our subject, or to an investigation of the laws regulating the proportions in which the various products of art and industry are distributed among the different classes of the people.

Sect. I.—Primary Division of the Produce of Industry.—Value of Commodities measured in the Earliest Stages of Society by the Quantities of Labour expended in their Production.

It is evident that only three classes—labourers, capitalists, and owners of land—can be directly concerned in the production of commodities. It is to them, therefore, that all that is derived from the surface of the earth, or from its bowels, by the united application of immediate labour and capital, must primarily belong. The other classes, if such there be, have no revenue except what they derive, either voluntarily or by compulsion, from these three classes.

But although there be no state of society in which any class besides labourers, landlords, and capitalists, participates directly in the produce of industry, there are states of society in which that produce belongs to one only of these classes; and others in which it belongs to two of them, to the exclusion of the third. The reason is, that in the earlier stages of society, little or no capital being accumulated, there is no distinction between labourers and capitalists; and that, in all newly-settled and unappropriated countries, abundance of fertile lands may be obtained without paying any rent.

In that remote period which preceded the establishment of property in land, and the accumulation of capital or stock—when men roamed, without any settled habitations, over the surface of the earth, and existed by the appropriation of its spontaneous productions,—the whole produce of labour belonged to the labourer, and the quantity of it required to procure different articles formed the only standard by which their relative worth or exchangeable value could be estimated. "If among a nation of hunters," says Adam Smith, "it usually costs twice the labour to kill a beaver that it does to kill a deer, one beaver would naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days' or two hours' labour should be worth double of what is usually the produce of one day's or one hour's labour.

"If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way frequently exchanges for that of two hours' labour in 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 superior to what would be due to the time employed about it. Such talents can seldom be acquired but in consequence of long application; 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. In the advanced state of society, allowances of this kind, for superior hardship and superior skill, are commonly made in the wages of labour; and something of the same kind must probably have taken place in the earliest and rudest period.

"In this state of things, the whole produce of labour belongs to the labourer; and the quantity of labour commonly employed in acquiring or producing any commodity is the only circumstance which can regulate the quantity of labour (of other commodities) which it commonly ought to purchase, command, or exchange for." (Wealth of Nations, p. 22.)

Thus far there is no room for doubt or difference of opinion. Where there are none but labourers, they only can share in its produce; and the quantity of labour required to produce articles or procure services forms the only standard by which their value is estimated. It is at this point, therefore, that the investigation of the laws which regulate the division of the produce of industry among the three great classes of labourers, capitalists, and landlords should properly begin: and we shall commence it by endeavouring, in the first place, to acquire a knowledge of the laws which determine the value of commodities in an advanced period of society, when circulating and fixed capital are employed in their production, and when land is appropriated and rent paid. A previous acquaintance with these laws is necessary to ascertain the principles which regulate their distribution.

Sect. II.—Preliminary Considerations.—Equality of Wages and Profits.—Inquiry into the Effect of Variations of Demand and Supply on Value and Price.—Cost of Production shown to be their regulating Principle.

If the popular opinions on this subject were well founded, Preliminary inquiry on which we are about to enter might be dispensed with in a few words. The value of commodities, when compared with each other, and their value or price when compared with money, is held almost universally to depend on their abundance or scarcity in the market, compared with the demand. But though this statement has some it has but a very small admixture of truth. And it will be found that the prices of commodities are determined, speaking generally, by the cost of their production,—that is, by the quantities of labour required to produce them and bring them to market. Before, however, we proceed further, it may be proper, the better to facilitate our investigations in this and the following sections, to premise, that wherever industry is free, the rate of wages earned by the labourers in specified departments, and the rate of profit derived from the capital vested in them cannot, for any considerable period, taking everything into account, either fall below or rise above the rates of wages and profits accruing to the labourers and capitalists engaged in other departments.

With regard to the first of these positions, or the equality Equality of the wages earned by those engaged in different employments, it is not meant to infer that all labourers receive, earned by precisely the same sum of money, or the same proportion of the produce of their labour. Such an opinion would be in different equally at variance with fact and with principle. Wages branches of are a compensation made to the labourer for the exertion industry. of his physical powers, or of his skill or ingenuity. They therefore vary according to the greater intensity of the labour to be performed, and to the degree of skill and ingenuity required. Wages would not be equal if a jeweller or engraver, for example, received no more than a common farm-servant or scavenger. A long course of training is required to instruct a man in the businesses of jewellery and engraving; and if this were not compensated by a higher rate of wages, none would choose to learn such difficult arts, and all persons would addict themselves, in preference, to such employments as hardly require any training. The cost of producing artificers or labourers regulates the wages they obtain, in the same way that the cost of producing commodities regulates their value. Artisans who practise a difficult or nice business lose all the time spent in their apprenticeship, as well as the clothes and provisions consumed during its currency. Hence, in addition to the rate paid to farm-servants and those who get little or no training, their wages should include a payment for the extra time and expense required to learn their business. If they be either more or less than are sufficient to compensate for this greater outlay on their education, work-people will, in the former case, be attracted to their peculiar departments, and in the latter they will leave them to go to others; this influx on the one hand, and efflux on the other, being sure to continue till wages have found their just and true level.

Besides this prominent cause of apparent inequality, wages vary in amount proportionally to the ease and hardship, the agreeableness and disagreeableness, the constancy and inconstancy, of employment. In the greater number of manufactures a journeyman may, except in periods of general distress, usually obtain constant employment. But there are several businesses, such as those of masons and bricklayers, that can neither be carried on in hard frost nor foul weather. Their earnings should therefore be sufficient not only to maintain them while they are employed, but also while they are idle, and to make them some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. Hence, says Smith, "where the computed earnings of the greater part of manufacturers are nearly upon a level with the day-wages of common labourers, those of masons and bricklayers are generally from a half more to double those wages. Where common labourers earn four and five shillings a week, masons and bricklayers frequently earn seven and eight; and where the former earn nine or ten, as in London, the latter commonly earn fifteen and eighteen." (Wealth of Nations, p. 47.)

But these variations, instead of being inconsistent with the principle we have been endeavouring to establish, plainly result from it. Wages are not equal when each workman earns the same number of shillings or of pence in a given space of time, but when each is paid in proportion to the severity of the labour he has to perform, the degree of previous education and of skill that it requires, and the other causes of variation. So long, indeed, as competition is allowed to operate without let or hindrance of any kind, or as every one may employ himself as he pleases, the higgling of the market will always adjust the rate of wages, on the principle now mentioned; and it will, in reality, be nearly equal in different employments. If it were depressed in one department below the common level, labourers would leave it to go to others; and if it were raised above it, labourers would be attracted from the departments where wages were lower, until the increased supply had sunk them to their just level. A period of greater or less duration, according to the circumstances of the country at the time, is always required to bring about this equalization. But all theoretical inquiries, and such as have the establishment of principles for their object, either are or should be founded on periods of average duration; and when such is the case, we may always, without occasioning any error of consequence, assume that the wages earned in different employments are, all things considered, about equal.

In like manner, the profit accruing to the undertakers of different businesses varies proportionally to the greater or less risk, and other circumstances affecting the capital which is employed in them. It is obvious, indeed, that profits have not attained their proper level until they have been adjusted so as to balance these advantages and disadvantages. None would engage in unusually hazardous undertakings did the capital which they employ only yield the same profit that might be obtained by employing it in more secure businesses. None will voluntarily place their fortunes in situations of comparative danger. Extraordinary risk must be compensated. And hence the well-known distinction between gross and net profit. Gross profit varies according to the risk, respectability, and agreeableness of different employments; whereas net profit is the same, or nearly the same, in them all. A gunpowder manufacturer, for example, must obtain as much profit, over and above that which is obtained from the surest businesses, as will suffice to guarantee or insure his capital from the extraordinary risk to which it is exposed in a business of such extreme hazard. Were he to obtain more than this amount, additional capital would be attracted to the business; and were he to obtain less, capital would be withdrawn from it. The ever-acting principle of competition, or, which is the same thing, the self-interest of every individual, will not permit the wages or profits of any particular set of workmen or capitalists, taking all things into account, to continue either long below or long above the common and average rate of wages and profits obtained by those who are employed or have capital vested in other businesses. It is by this common standard that the wages and profits of particular businesses are always regulated; they never diverge considerably from it; they have a constant tendency to equalization; and may, in theoretical inquiries, be supposed, without occasioning any error of consequence, exactly to coincide.

The equality, or rather the constant tendency to equality, of the wages earned by the labourers, and of the profits derived from the capital employed at the same time in the various branches of industry, was pointed out by Harris, and also by Cantillon in his work entitled The Analysis of Trade, &c., published in 1759; but it was first fully demonstrated in the eighth, ninth, and tenth chapters of the first book of the Wealth of Nations. The establishment of this principle was one of the greatest services rendered by Adam Smith to the science. Nothing can be more convincing and satisfactory than his reasoning on this subject. The equality of wages and of profits has, since the publication of his work, been always assumed as admitted and incontestible.

The equality of wages and profits once established, it is easy to see that variations in the demand and supply of demanded commodities can exert no lasting influence over price, and supply. The cost of production, denominated by Smith and the Marquis Garnier necessary or natural price, is the ultimate regulator of the value of every commodity not subject to a monopoly, of which the quantity may be indefinitely increased by the application of fresh capital and labour to its production. The market price of such commodities and their cost do not always coincide; but they cannot for any considerable period be far separated, and have a constant tendency to equality. Commodities will not continue to be produced if they sell for less than the cost of their production; that is, for less than will repay the outlay upon them, including the ordinary rate of profit on the capital employed. This is a limit below which it is plain prices cannot be permanently reduced; and it is equally plain that were they for any considerable period to rise above it, additional capital would be attracted to the advantageous business, and the competition of the producers would lower prices.

A demand, to be effectual, must be such as will cover the expense of production. If it be insufficient to do this, it is insufficient to make commodities be produced and brought to market. A real demander must have the power, as well as the will, to purchase. A person with a sovereign in his pocket may be as anxious—nay, he may be ten times more anxious—to become the purchaser of a coach than of a hat. But while a sovereign will pay the expense of producing a hat, it will not pay the expense of producing a coach; and hence, though he may have the former, he cannot have the latter. Were such an improvement made in the art of coachmaking as should enable coaches to be manufactured as cheaply as hats, then a sovereign would buy a coach as easily as it now buys a hat. The demand for any particular commodity may become ten or twenty times more extensive, or it may decline in the same proportion; but if the cost of its production continue the same, its price will not permanently vary. If, for example, the demand for hats were suddenly doubled, their price would rise, and the hatters would make large profits; but this rise would only be of very limited duration; for the large profits, by attracting additional capital to the hat trade, would make an increased supply of hats be speedily brought to market; and if no variation took place in the cost of their production, their price would sink to its former level. Suppose, on the other hand, that the demand for hats is increased fivefold, and that the cost of their production is diminished in the same proportion: we should, notwithstanding the increased demand, be able in a short while to buy a hat for the fifth part of what it now costs. Again, suppose the demand for hats to decline, and the cost of producing them to increase, the price would, notwithstanding the diminished demand, gradually rise till it had reached the point at which it would yield the hatters the ordinary rate of profit on their capital. It is admitted that variations of demand and supply occasion temporary variations of price. But it is essential to observe that these variations are only temporary. The cost of production is the grand regulator of price—the centre of all those transitory and evanescent oscillations on the one side and the other; and wherever industry is free, the competition of the producers will always elevate or sink prices to this level.

In branches of industry, such as agriculture, which are liable to be seriously affected by variations of the seasons, and from which capital cannot be easily withdrawn, there is a longer interval than in others before the market price of produce and the cost of its production are equalized. But such an equalization is sure to be brought about in the end. No farmer, and no producer of any description, will continue to bring corn, cattle, and other products to market, unless they sell for a price sufficient to pay the expense of their production, including the common and average rate of profit on the capital employed. An excess of supply occasionally depresses the prices of corn and other farm produce below this level; and the occupiers of land are in consequence involved in difficulties; but such ills do not continue. The cultivators of the worst soils are driven from their employment; a smaller supply is in consequence brought to market; and prices are adjusted so as to yield customary profits to the agriculturists who continue to prosecute their business. The interest of the cultivators will not permit prices to be permanently depressed below this level; and the interest of the public will not permit them to be permanently raised above it; for if they were raised above it, the cultivators would gain more than the common and average rate of profit, and capital would, of course be attracted to agriculture, and would continue flowing in that direction until the equilibrium of profit had been restored—that is, as will be afterwards seen, until the price of agricultural produce had fallen to such a sum as would yield ordinary profits to the occupiers of the worst soils in cultivation, or the improvers of the best. This is the point at which average prices continue stationary, or about which market prices oscillate, until the cost of production increase or diminish. Were any great discovery made in agriculture—such, for instance, as would reduce the cost of cultivation a half, the price of agricultural produce would speedily fall in the same proportion, and it would continue to sell at that reduced rate till the stimulus which this fall would give to population, and the consequently greater demand for supplies of food, forced recourse to soils of less fertility. Whenever this took place, prices would again rise, unless the influence of the decreased fertility of the land were counterbalanced by some new improvement. Why is the price of corn almost invariably higher in England than in Russia and Poland? Is it not because of the greater cost of its production in this country?

A pound-weight of gold is at present worth about fourteen or fifteen pounds of silver. It cannot, however, be said that why gold is a consequence of the demand for gold being greater than that for silver, the reverse being the fact. Neither can it be said to be occasioned by an absolute scarcity of gold; for those who choose to pay a sufficient price for it may obtain it in any quantity they please. The cause of the difference in the price of the two metals consists entirely in the circumstance of its costing about fourteen or fifteen times as much to produce a pound of gold as to produce a pound of silver. That this is the case, is plain from the admitted fact, that the producers of gold do not gain any greater profit than the producers of silver, iron, lead, or any other metal. They have no monopoly of the business. Every one may go or send capital to California and Australia, and become a producer of gold; and wherever this is the case, competition will always make the product be sold at such a price as will pay the expenses of its production, and no more. Were a gold-mine discovered of equal productivity with the silver-mines, the production of gold would immediately become the most advantageous of all businesses; an immense supply of that metal would in consequence be thrown upon the market, and its price would be gradually reduced to the same level as silver.

In further illustration of this principle, take the case of cottons. None can deny that the demand for them has been prodigiously augmented within the last ninety or a hundred tons have been constantly and rapidly diminishing. If it be said that this is a consequence of the supply of cottons having augmented in a still greater ratio than the demand, we answer that this is not enough to explain the fall of price. The supply would not have been brought to market had not the diminution of prices, which has been constantly going on since the invention of spinning-jennies in 1767, been balanced by an equal diminution of their cost. It is to this principle—to the vastly increased facility of production, occasioned by the stupendous inventions and discoveries of Hargreaves, Watt, Arkwright, Crompton, and others—that the lower price and increased demand for cottons are wholly owing. Their extraordinary cheapness has brought them within reach of all classes; and enabled the poorest individuals to clothe themselves in a dress which, at the accession of George III., was fully as expensive as silk.

A like reduction of price, though seldom to the same extent, has been occasioned by the introduction of improved machinery and processes into most departments of

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1 Some of the advocates of the agricultural interest have represented this as one of the "dangerous dogmas" of the Scotch Economists! But it can boast of a much more remote origin—"Nemo enim sanae," says Varro, "debet velle impensum ac sumptum facere in culturaem, si videt non possis refiri." (De Re Rustica, lib. i., § 2.) manufacturing industry. And we may take this opportunity of observing, that this circumstance shows the error of those who estimate the condition of the labouring classes by comparing their wages with the price of corn; and who contend, if the former have not increased as much as the latter, that their condition has deteriorated. But this conclusion is not necessarily true, unless these classes subsisted on corn only, which, as everybody knows, is not the case. Other articles as well as bread enter largely into their food; and they must in addition be clothed, housed, and supplied with fuel, while they generally also have some command over luxuries. Hence it is apparent, that though wages should not have done more than preserve their former relation to corn, or should even have declined as compared with it, the condition of the labourers may, notwithstanding, have been very materially improved; inasmuch as what they have not gained or lost in corn, they may have more than gained in their greater command over the many other things required for their subsistence and wellbeing. And it would be easy to show that such has been the case, though not to the extent that might be wished for, here and in most other countries.

But to return—

If a set of men were brought together from various countries, ignorant of each other's wants, and of the labour and expense necessary to produce the commodities which each possesses, these would be bought and sold according to the wants and fancies of the parties. In such circumstances, a pound of gold might be given for a pound of iron, and a gallon of wine for a gallon of small beer. As soon, however, as a commercial intercourse is established, and as the wants of society and the powers of production come to be well and generally known, an end is put to this method of bartering. Thousands of sellers then enter the market; and when such is the case, it is no longer possible to sell a pound of gold for a pound of iron; and why? because the producers of iron will undersell each other until they have, by their competition, reduced its price to such a sum as will suffice to pay the expense of its production. This, in every advanced society, is the pivot on which exchangeable value always turns. A civilized man may obtain articles from a savage, in exchange for toys or trinkets which it cost infinitely less to produce; but if he try to obtain the same advantage over his own countrymen, a very short experience will satisfy him that they are quite as clear-sighted and attentive to their own interests as he is.

Thus, then, it appears that no variation of demand, unaccompanied by a variation in the cost of production, has any lasting influence over price. If the cost of production be diminished, price will equally decline, though the demand should be increased to any conceivable extent. If the cost of production be increased, price will equally rise, though the demand should sink to the lowest possible limit.

It must always be remembered that this reasoning applies only to those commodities on which competition is allowed to operate without restraint, and whose quantity may be indefinitely increased by the application of fresh capital and industry to their production. When an individual, or class of individuals, obtains the exclusive privilege of manufacturing certain species of goods, the principle of competition is suspended with respect to them, and their price depends on the proportion in which they are brought to market compared with the demand. If monopolists supplied the market liberally, or kept it as fully stocked as it would be under a free system, their commodities would sell at their natural price, and the monopoly would have no disadvantage other than the exclusion of the public from an employment which every one should have leave to carry on. In point of fact, however, the market is never fully supplied with monopolized commodities. Producers universally endeavour to obtain the highest prices for their commodities; and when they are protected by a monopoly against being undersold by others, they either keep the market understocked, or supply it with inferior articles, or both. Under such circumstances, the prices of articles which cannot be easily smuggled from abroad, or clandestinely produced at home, may be elevated to the highest point to which the competition of the buyers can raise them; and may in consequence amount to five, ten, or twenty times the sum they would fetch were competition permitted to operate in their production. The skill and power of the purchasers to offer a high price forms the only limit to the rapacity of monopolists.

Besides the articles produced under artificial monopolies, there is another class whose quantity cannot be increased by human industry, and whose price is not therefore dependent on the cost of production. Ancient statues, vases, and gems, the pictures of the great masters, some species of wines produced in limited quantities from soils of a particular quality and exposure, and a few other articles, come under this description. As their supply cannot be increased, their price varies inversely as the demand, and is totally unaffected by anything else.

It must also be understood, in saying that the cost of production is the regulating principle of value, that the statement applies to those articles only, the demand for which is sufficient to pay this cost, or to make them be produced. When corn falls or rises in price because of a good or a bad harvest, or black cloth or silk rises or falls because of the occurrence of a public mourning or a rejoicing, everybody is aware that the disturbance is temporary only, and that prices will be speedily adjusted to their common and ordinary level. But when, owing to a change of fashion or other cause, the demand for furniture, books, prints, and articles of a durable description, falls considerably off, their price sinks permanently below the cost of their production. The latter, indeed, has no influence over the price of articles which have ceased to be in efficient demand. Some half dozen or dozen individuals may be anxious to procure copies of a book, or of an edition of a book, which has been long out of print. But as the demand of the parties would not suffice to defray the cost of reprinting the work, the stray copies that may occasionally cast up are sold for the highest price the buyers are disposed to offer, without their being affected in any degree by the original cost of the book, of which, indeed, they most probably know nothing. And supposing, on the other hand, that a considerable impression of a book has been thrown off, and that the anticipated demand for it has not been realized, it will in no very lengthened period come to be sold for a third or a fourth part, or less, of its cost. Hence when it is affirmed that, in the long run, the prices of commodities or services are determined by their cost, it is always to be remembered that the principle is limited to those products or services for which there is a demand considerable enough to make them be supplied. If such be not the case, their prices may continue sunk far below, though they cannot exceed, what it would take to bring them to market. Suppose that an article would cost 20s. for its production, but that, from its getting out of fashion, none will give more than some 15s. or 16s. for the quantities of it on hand; in such circumstances, no more of it will be produced, and its price will no longer be dependent in any degree on the sum required to furnish the market with fresh supplies. But articles of this description make a comparatively unimportant class. They have ceased to be produced; and for all practical purposes it is true to say that in periods of average duration the prices of products and services are determined by the cost of their production. cost has been equally diminished. If this be the case, the fall of price will not be disadvantageous to the producers, and will be permanent; but if this be not the case,—if the cost of production continue the same, or has not fallen in the same ratio as the price,—the fall must be injurious to the producers, and prices will in no very lengthened period attain to their former level. It is the same with a rise of prices. No rise can be permanent unless the cost of production be proportionally increased. If it remain stationary, or do not increase in a corresponding degree, prices will decline as soon as the ephemeral causes of enhancement have disappeared.

The extreme importance of having correct opinions respecting the regulating principle of price, and the discordant and erroneous opinions so very prevalent with regard to it, will, we hope, be deemed a sufficient apology for the length of the previous remarks, and for the insertion of the following paragraph from the *Histoire de la Monnaie* of the Marquis Garnier, in which the doctrine we have been endeavouring to establish is enforced with equal ability and eloquence.

"Mais les producteurs tendent continuellement à régler la quantité des productions sur la somme des demandes; ils ne resteront pas au-dessous de ce point, sans être tentés d'accroître la masse de leurs produits; et ils ne peuvent le dépasser sans s'exposer à perdre. Ces deux quantités, celle des produits et celle des demandes, s'efforcent donc à se mettre en équilibre l'une avec l'autre. Il existe donc un point de repos vers lequel elles gravitent chacune de son côté; un point qui est leur niveau, et c'est ce point qui constitue le prix naturel de la chose vénale. Quelle est la limite au-delà de laquelle le producteur ne peut porter la quantité de ses produits? C'est le prix naturel; car, s'il ne peut obtenir ce prix pour tout son produit, il sera en perte. Quelle est la borne des demandes du consommateur? C'est le prix naturel; car il ne veut pas donner plus que l'équivalent de ce qu'il reçoit. Si, par une découverte, ou par un perfectionnement de l'industrie, le producteur est mis à même d'établir l'article sur lequel il s'exerce à moins de temps et de dépense, alors le prix naturel baissera, mais aussi la somme des demandes accroîtra dans une proportion pareille, parce que plus de consommateurs seront en état de payer ce prix naturel, moins élevé que l'ancien. Le prix naturel sera toujours, pour chaque chose vénale, la limite commune au-delà de laquelle la somme des demandes de cette chose et la quantité de sa production ne devront plus faire de progrès. Quand le prix courant est le prix naturel, le producteur et le consommateur se donnent réciproquement l'équivalent de ce qu'ils reçoivent. Quand le prix courant s'écarte du prix naturel, ou c'est la consommation qui souffre au profit de la production, ou c'est la production qui souffre au profit de la consommation. Cet état de souffrance ne peut durer, et de là procèdent les variations du prix courant. Ces variations, que Smith a expliquées et analysées avec une si parfaite lucidité, ne sont autre chose que les efforts pour revenir au prix naturel. Tenter d'expliquer ces variations, sans reconnaître l'existence d'un prix naturel, ce serait vouloir expliquer les oscillations du pendule sans convenir de sa tendance vers un centre de gravitation; ce serait supposer un effort sans but et sans mobile; ce serait admettre le mouvement et nier le repos; enfin, en voyant les phénomènes du cours des fluides et de l'équilibre des solides, ce serait contester les lois du niveau et de la pesanteur. Si les choses vénales n'ont point de prix naturel, alors les mouvements de la circulation seront dirigés par une force aveugle et inconnue; les prix moyens ne seront plus que le résultat de chances purement fortuites; il n'y aura plus d'équivalent réel; les valeurs n'auront plus de mesure naturelle; l'économie politique ne pourra plus aspirer à être au rang des sciences, puisqu'elle manquera du caractère essentiel qui les constitue telles, et que les faits dont elle traite ne seront plus fondés sur les lois immuables de la nature." (Tome I., Introduction, p. 62.)

Having thus shown that the cost of production is the regulating principle of price, we shall now proceed to investigate the elements which enter into and constitute this cost in an advanced state of society, when rent is paid for land, and circulating and fixed capital employed to assist the labour of workmen. This is, of all others, the most important, as it is the most radical inquiry in that part of the science which treats of the distribution of wealth; and it is indeed impossible, without possessing accurate notions on this subject, to advance a single step without falling into errors. We shall begin by endeavouring to ascertain whether rent enters into the cost of production.

Sect. III.—Nature, Origin, and Progress of Rent.—Not a Cause, but a Consequence, of the High Value of Raw Produce.—Does not enter into Price.—Distinction between Agriculture and Manufactures.—Practical Considerations.

Rent is properly "that portion of the produce of the earth which is paid by the occupier to the landlord for the rent use of the natural and inherent powers of the soil." If buildings have been erected on a farm, or if it have been inclosed, drained, or in any way improved, the sum which a farmer will pay to the landlord for its use will be composed not only of what is properly rent, but also of a remuneration for the use of the capital laid out on its improvement. In common language, these two sums are always confounded under the name of rent; but in an inquiry of this nature it is necessary to consider them as perfectly distinct. The laws by which rent and profits are regulated being totally different, those which govern the one cannot be ascertained if it be not considered separately from the other.

On the first settling of any country abounding in large tracts of unappropriated land, no rent is paid; and for paid on the obvious reason, that no person will pay rent for what first set may be procured in unlimited quantities for nothing. Thus, tillage in New Zealand, where there is an ample supply of unappropriated land, it is certain that, until the best lands are cultivated, no such thing as rent will ever be heard of. Suppose, however, that tillage has been carried to this point, and that the increasing demand can, in the actual state of agriculture, be no longer supplied by the best lands; it is plain that either the increase of population must cease, or the inhabitants consent to pay such an additional price for raw produce as will enable the second quality of land to be cultivated. No advance short of this will procure them another bushel of corn; and competition will not, as will be immediately seen, allow

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1 The theory of rent explained in this chapter was first promulgated and satisfactorily established in a tract on the Corn Laws, Edinburgh, 1777 (see pp. 45-47). The author of this original and most important theory, Dr James Anderson, was a native of Haddington in Mid-Lothian, and subsequently editor of the Bee and other publications; in one of which (*Observations on Agriculture and Natural History*, &c., v., pp. 401-403) he gave a new exposition of his theory. But notwithstanding the clear and able manner in which he explained his doctrines, and their ingenuity and importance, they do not appear to have attracted the least attention, and seem to have been completely forgotten. So much so was this the case, that when Mr Malthus (*An Inquiry into the Nature and Progress of Rent*) and Mr Foster (*Observations on the Application of Capital to Land*, by a Fellow of University College, Oxford) published tracts in 1815 explaining the nature and origin of rent, they were universally believed to be the authors of the theory. There is, we believe, no doubt as to their originality. Still, however, they were merely expositors of what had been clearly and ably explained about forty years previously to the publication of their pamphlets. them to pay more for it. They have therefore but one alternative. If they choose to pay a price sufficient to cover the expense of cultivating land of the second quality, they will obtain additional supplies; if they do not, they must want them. Suppose, now, that the consumers offer such a price as will pay the expense of producing corn on soils which, in return for the same expenditure as would have produced 100 quarters on lands of the first quality, will only yield 90 quarters; it is plain it will then be indifferent to a farmer whether he pay a rent of ten quarters for the first quality of land, or farms the second quality, which is unappropriated and open to him without paying rent. If the population went on increasing, lands which would yield only 80, 70, 60, 50, &c. quarters in return for the same expenditure that had obtained 100 quarters from the best lands, might be successively brought under cultivation. And when recourse had been had to these inferior lands, the rent of the higher qualities would plainly be equal to the difference, or the value of the difference, between their produce and the produce of the worst quality under cultivation. Suppose, for example, that the worst quality under cultivation yields 60 quarters, then the rent of the first quality will be 40 quarters, or 100 - 60; the rent of the second quality would, in like manner, be equal to the difference between 90 and 60, or 30 quarters; the rent of the third quality to 80 - 60, or 20 quarters, and so on. But it is material to remark, that the produce raised on the land last cultivated, or with the capital last applied to the soil, is always sold at its necessary price, or at that price which is just sufficient to yield the cultivators the common and average rate of profit, or, which is the same thing, to cover the cost of its production. If the price were above this level, then agriculture would be the best of all businesses, and tillage would be immediately extended; while, on the other hand, if the price were below it, capital would be withdrawn from the soil, and the poorer lands thrown out of cultivation. Under such circumstances, it is clear that no rent would enter into the price of the produce raised by means of the capital last applied to the soil. It is entirely made up of wages and profits. The proprietors of the superior lands obtain rent; but this is the result of their greater fertility. The demand cannot be supplied without cultivating inferior soils; and, to enable them to be cultivated, their produce must fetch such a price as will afford the ordinary rate of profit to their cultivators. This price will, however, yield a surplus, over and above the ordinary rate of profit, to the cultivators of the more fertile lands, and this surplus is rent.

An increase of rent is not, therefore, as is very generally supposed, occasioned by improvements in agriculture, or by an increase in the fertility of the soil. It results from the necessity of resorting, as population increases, to soils of a decreasing degree of fertility, and from the inability to apply capital indefinitely to the best land without a diminished return. Rent varies inversely as the amount of produce; that is, it increases when the produce of agricultural labour diminishes, and diminishes when the produce increases. That labour is best rewarded in countries like New Zealand, Indiana, and Minnesota, and generally in all situations in which no rent is paid, and the best lands only are cultivated.

A quarter of wheat may be raised in the Vale of Gloucester or the Carse of Gowrie, for perhaps a fourth or a fifth part of the expense necessary to raise it on the worst soils in cultivation in other parts of the kingdom. There cannot, however, be at the same time two or more prices for the same article in the same market. And it is hardly necessary to say, that unless the price of wheat be such as will indemnify the producers of the portion of the crop which is raised on the worst soils, they will cease bringing it to market, and the required supplies will not be obtained; and it is equally plain, that if its price exceed this sum, fresh capital will be applied to its production, and competition will eventually sink prices to their natural level,—that is, to a sum sufficient to afford ordinary profits to the growers of that portion of the required supply which is raised in the most unfavourable circumstances, and at the greatest expense. The cost of producing this portion determines the price of the rest. And hence it is indifferent to the consumers whether, in an advanced stage of society, the excess of return over the cost of production on the best lands belong to a non-resident landlord or an occupier. It must belong to the one or the other. Corn is not high because a rent is paid, but a rent is paid because corn is high—because the demand is such that it cannot be supplied without cultivating soils of a diminished degree of fertility as compared with the best. Suppose there is an effectual demand for ten millions of quarters, of which one million must be raised on lands that yield nothing but the ordinary rate of profit to their cultivators: it is clear that, though the rents payable by the cultivators of the superior lands were relinquished, that would be no boon to the cultivators of the inferior lands. It would not lessen their expenses; that is, it would not lessen the amount of capital and labour required to produce that portion of the necessary supply that is raised under the most unfavourable circumstances; and, unless it did this, it is impossible, supposing the demand not to decline, that it should lower prices. Although, therefore, landlords were to give up the whole of their rents, their ill-judged liberality would not cheapen anything. It would turn farmers into landlords, and landlords into beggars; but there its effect would stop. But the case is altogether different when the cost of production varies. If it be diminished, the competition of the producers never fails to sink prices in an equal degree; while, if it be increased, supplies will cease to be brought to market, unless the price rise to a corresponding level. In no case, therefore, whether the demand be great or small,—whether for a million or ten million quarters,—can the price of raw produce permanently exceed or fall below the cost of producing that portion of the necessary supply which is raised on the worst land, or with the last capital laid out on the soil.

Various objections have been made to this theory. In the Objections first place, it has been said that, though it may hold in a country like Australia, where land is not appropriated, yet that the worst land in civilized and appropriated countries, like England, always yields some small rent to the proprietor; and that therefore it cannot be said that the price of produce is, in such countries, determined by the cost of raising it on that quality of land which pays no rent.

It has been justly observed of this objection, that even were it well founded, it would not practically affect any of the conclusions we have endeavoured to establish. There are in England and Scotland thousands of acres of land which do not let for L.100; but to cultivate them would require an outlay of many thousands, and the rent would consequently bear so small a proportion to the expenses of production as to become altogether evanescent and inappreciable.

There can be no doubt, however, that there is in this Land is and most other extensive countries, a great deal of land every which yields no rent. In the United States and Russia (where this is unquestionably the case; and yet no one presumes to say that the laws which regulate rent in these countries are different from those which regulate it in England and rent. France. The poorest lands are always let in immense tracts. If it were attempted to let particular portions of these tracts separately, they would bring no rent; but they appear to yield rent, because, though rent is not paid for for, besides the peculiar attractions which agriculture possesses, it would be quite as advantageous to cultivate it as to engage in any other business. It would not, however, be more advantageous; for its produce would yield no surplus in the shape of rent. But suppose that a combination took place among the proprietors of Nos. 1, 2, 3, 4, and 5, to withhold a portion of their produce from market; and that, in consequence of this or any other cause, the price of corn is raised a little above the expense of its production on No. 5; in that case it is obvious that soils of the very next degree of fertility, or that portion of soil of No. 6 which, in point of productive power, differs extremely little from No. 5, would be brought under cultivation, and the increased supply would infallibly sink prices to the level that would afford the average rate of profit, and no more, to the cultivators of No. 5, or of the poorest soils which the supply of the effectual demand renders it necessary to cultivate. It is quite the same, therefore, in so far as price is concerned, whether a country be appropriated or not. When it is appropriated, prices are kept down to their lowest limit by the competition of the landlords. And it is by the same principle,—the cost of producing the portion of the necessary supply which is raised under the most unfavourable circumstances,—that the price of raw produce is determined in England and France, and in New Holland and Minnesota.

But then it is said that this reasoning involves a contradiction; that it accounts for a rise and a fall of price in the same way, or by an extension of cultivation! In truth and both for reality, however, it does no such thing. The market price of corn will always be low where it is cheaply produced, as in Poland; and it will occasionally be low where it costs a great deal to produce it, when a redundant supply is brought to market. Suppose, as before, that the effectual demand for corn in Great Britain is such as will enable lands of the fifth degree of fertility to be cultivated; but that, owing to various harvests, to injudicious encouragement held out by the legislature, the ardour of speculation, the miscalculation of farmers, or any other cause, lands of the sixth degree of fertility have been cultivated; the increased quantity of produce that must thus be thrown on the market will plainly depress prices to such an extent that, instead of yielding average profits to the cultivators of No. 6, they will not yield them to the cultivators of No. 5. But they will yield more to them than to the cultivators of No. 6. The latter, therefore, will be first driven from their business; and when they have retired, prices will rise, not indeed to such a height as to enable No. 6 to be cultivated, but so high as to enable the cultivators of No. 5 to continue their business; that is, as has been already shown, to such a sum as will enable the raisers of the last portion of the necessary supply to obtain the common and average rate of profit. Should the demand, instead of continuing stationary, increase so that it could not be supplied without cultivating Nos. 6 and 7, the price will rise in proportion to the increased expense of their cultivation. But to whatever extent the demand might increase, still, were such an improvement made in agriculture, or in the art of raising corn, as would enable the supply to be raised from No. 1 only, the price would infallibly fall to the sum that paid the expenses of its cultivators, and rent would entirely disappear.

The intelligent trader will easily perceive, when it is said that superior lands are the first to be brought into cultivation, that the statement is not made absolutely, but with them, that reference to the capacities of the cultivators. Lands endowed with a high degree of natural fertility are often, in not always thinly-peopled countries, either heavily timbered or so first cultivated very wet as to be totally unfit for tillage; and wherever varied, this is the case, cultivation is confined at first to open, dry, or down lands. The latter are, in fact, the most fertile which it is in the power of the inhabitants to cultivate. After population has become denser, and capital been accumulated, the neglected lands will most likely be cleared, drained, and brought into tillage. But it by no means follows, though they may yield a greater amount of produce per acre, that they are therefore more fertile than those first cultivated. The presumption, indeed, is all the other way. Fertility, it is to be remembered, does not depend merely on quantities of produce, but on the quantities compared with the outlay required for their production; so that, if an acre of a certain description of land produce 50 bushels of wheat to an outlay of L100, and an acre of a different description produce 35 or 40 bushels to an outlay of L50, the latter is by far the more fertile of the two; and when both qualities of land are cultivated, the last will bring a large rent. It is, indeed, absurd to suppose that men will resort in preference to what is really inferior land. Whatever Mr Carey or any one else may say to the contrary, such folly must be of rare occurrence, and it may be safely laid down that those lands which, all things considered, are the most fertile, will be first brought into cultivation.

This analysis of the nature and causes of rent discovers a fundamental distinction between agricultural and commercial and manufacturing industry. In manufactures, the worst machinery is first set in motion; its powers are progressively improved by new inventions; and it is rendered capable of yielding a greater amount of produce with the same expense. And as no limits can be assigned to the quantity of improved machinery that may be introduced; as a million of steam-engines may be constructed for the same, or rather for a less, proportional expense than would be required for the construction of one; the competition of capitalists never fails to reduce the price of manufactured commodities to the sum which the least expensive method of production necessarily requires for their production.

In agriculture, on the contrary, the best machinery, that is, the best soils, are first brought under cultivation, and recourse is afterwards had to inferior soils, requiring a greater expenditure of capital and labour to produce the same supplies. The improvements in the construction of farming implements, and the meliorations in agricultural management, which occasionally occur, counteract to a greater or less extent the decreasing fertility of the soil. But the fall of price, which is permanent in manufactures, is only temporary in agriculture. A fall in the price of raw produce, by enabling every class to obtain greater quantities than before for their products or their labour, raises the rate of profit, and leads of course to an increased accumulation of capital; and this necessarily leads to a greater demand for labour, to higher wages, to an increased population, and consequently to a further demand for raw produce and an extended cultivation. Agricultural improvements check for a while the necessity of having recourse to inferior soils and the rise of rents; but the check cannot be lasting. The stimulus which they at the same time give to improvement and population is sure in the end to raise prices, and, by forcing recourse to poor lands, to raise rents.

Malthus, in illustrating this important distinction between agricultural and manufacturing industry, set the doctrine of rent in a striking point of view. "The earth," he observes, "has been sometimes compared to a vast machine, presented by nature to man for the production of food and raw materials; but to make the resemblance more just, as far as they admit of comparison, we should consider the soil as a present to man of a great number of machines, all susceptible of continued improvement by the application of capital to them, but yet of very different original qualities and powers.

"This great inequality in the powers of the machinery employed in procuring raw produce, forms one of the most remarkable features which distinguishes the machinery of the land from the machinery employed in manufactures.

"When a machine in manufactures is invented which will produce more finished work with less labour and capital than before, if there be no patent, or as soon as the patent is over, a sufficient number of such machines may be made to supply the whole demand, and to supersede entirely the use of all the old machinery. The natural consequence is, that the price is reduced to the price of production from the best machinery; and if the price were to be depressed lower, the whole of the commodity would be withdrawn from the market.

"The machines which produce corn and raw materials, on the contrary, are the gifts of nature, not the works of man; and we find by experience that these gifts have very different qualities and powers. The most fertile lands of a country, those which, like the best machinery in manufactures, yield the greatest products with the least labour and capital, are never found sufficient to supply the effective demand of an increasing population. The price of raw produce, therefore, naturally rises till it becomes sufficiently high to pay the cost of raising it with inferior machines, and by a more expensive process; and as there cannot be two prices for corn of the same quality, all the other machines, the working of which requires less capital compared with the produce, must yield rents in proportion to their goodness.

"Every extensive country may thus be considered as possessing a gradation of machines for the production of corn and raw materials, including in this gradation not only all the various qualities of poor land, of which every large territory has generally an abundance, but the inferior machinery which may be said to be employed when good land is further and further forced for additional produce. As the price of raw produce continues to rise, these inferior machines are successively called into action; and as the price of raw produce continues to fall, they are successively thrown out of action. The illustration here used serves to show at once the necessity of the actual price of corn to the actual produce, and the different effect which would attend a great reduction in the price of any particular manufacture, and a great reduction in the price of raw produce.

"I have no hesitation, then, in affirming, that the reason why the real price of corn is higher, and continually rising, in countries which are already rich, and still advancing in prosperity and population, is to be found in the necessity of resorting constantly to poorer land,—to machines which require a greater expenditure to work them,—and which consequently occasion each fresh addition to the raw produce of the country to be purchased at a greater cost:—in short, it is to be found in the important truth, that corn is sold at the price necessary to yield the actual supply; and that, as the production of this supply becomes more and more difficult, the price rises in proportion.

"I hope to be excused for having dwelt so long, and presented to the reader in various forms, the doctrine that corn, in reference to the quantity actually produced, is sold at its necessary price, like manufactures, because I consider it as a truth of the highest importance, which has been entirely overlooked by the economists, by Dr Smith, and all those writers who have represented raw produce as selling always at a monopoly price." (Inquiry into the Nature and Progress of Rent, p. 37.)

It appears, therefore, that in the earliest stages of so- In estimating rent, difference of situation has in many cases an influence similar to difference of fertility. Lands that are situated in the immediate vicinity of a large town uniformly bring higher rents than those that are situated some twelve, twenty, or thirty miles off, provided the latter have no other market. The town affords a ready outlet for a great variety of articles for which there is little or no demand in the country; and though each of these may be trifling, yet their aggregate amount is usually considerable. Inasmuch, too, as the cost of conveying articles varies with the distance and difficulty of the roads along which they have to be carried, the less charge on those raised in the vicinity of markets enables their growers to pay a proportionally greater amount of rent. To preserve this advantage, the landlords of the counties contiguous to the metropolis opposed in 1767 the extension of turnpike roads to those situated at greater distances. But though their selfish policy had been so far successful, it would not have gained their object unless they had been able to get obstructions laid on the navigation of the Thames. And had these also been imposed, the result would have been, that by checking or preventing the growth of the city, they would not have realized a tenth part of the advantage from their monopoly that they now reap from the all but boundless market which it affords for all the products, whether of the nearest or most distant parts of the empire.

To prevent misapprehensions, it may be as well, perhaps, to repeat that the theory of rent which has now been explained refers only to the sums paid for the use of the soil, without including those which are also paid under the name of rent for the services rendered by the capital that has been expended upon the soil. But in all tillage farms this latter portion makes a part, and often a very large part, of what is popularly called rent. Even in the best farms the payments on account of houses, fences, and roads are usually far from being an inconsiderable portion of the rent; while the rent of such naturally inferior farms as have been highly improved, consists almost entirely of the profit of the outlay upon them. Hence the necessity, if we would avoid falling into the most serious errors, of distinguishing between the different constituents of the gross rent paid for lands. It may be supposed, perhaps, that if two farms let for the same sum—as L500 or L1000 a year each—that they are therefore of the same value; and this would be the case if they were of the same or nearly the same quality. But if they be of different qualities, the one consisting of fine and the other of poor but highly-improved land, they would, if offered for sale, bring very different prices. For, as the rent of the superior farm consists mainly of a payment for the use of the natural powers of the soil, it may be considered as a perennial source of income; whereas the rent of the inferior farm, being derived from improvements which wear out and require to be renewed, is of comparatively transient duration, and worth so much less.

The circumstances now mentioned ought always to be taken into account when taxes and other burdens are imposed on land. And the all but insuperable difficulty of making proper allowances for their influence has been a main cause of the unjust and pernicious operation of such taxes.

It may further be observed, that the theory of rent now explained is practically applicable only to countries in something like the same condition as England; that is, to countries in which the tenants and occupiers of land farm it to realize ordinary profits on their capital, under a system of free competition. But in many countries of Europe the occupiers have little or no capital except what is furnished to them by the landlords, the produce being divided between them in certain proportions, of which the least generally goes to the tenant. In India and the greater number of eastern countries the sovereign is held to be the proprietor of all the lands of the empire; and the exorbitant amount of the land-tax or rent imposed on the cultivators, added to the impossibility of its being fairly assessed, make it a powerful obstacle to improvement, and a fruitful source of barbarism. But it is enough to have indicated the nature and importance of some of the practical questions connected with the theory of rent; to enter further into their enumeration or discussion would be inconsistent with the objects and limits of this article.

It being thus established that the circumstance of land being appropriated, and rent paid to the landlords, does not affect the price of commodities, or the principle which determined their exchangeable value in the earliest stages of society, we have next to inquire into the effects of the accumulation and employment of capital, and of the rise and fall of wages on the value of commodities.

**Sect. IV.—Influence of the Accumulation and Employment of Capital, and of Fluctuations in the Rate of Wages on Exchangeable Value.**

It will be remembered that the quantity of labour required to produce commodities and bring them to market, commodified, in the earliest stages of society, and before capital was accumulated, the standard by which their exchangeable amount of value was regulated. But capital is merely the accumulated immediate produce of anterior labour; and when it is employed in labour and the production of commodities, their value is not determined capital by the quantity of immediate labour only, but by the total expended quantity of immediate and accumulated labour or capital their necessarily laid out on them. Suppose that an individual can by a day's labour, without the assistance of capital, kill a deer; but that it requires a day's labour to construct the weapons necessary to enable him to kill a beaver, and another day's labour to kill it; it is evident, supposing the weapons to have been rendered useless in killing the beaver, that it took as much labour to kill the latter as was required to kill two deer, and the beaver would therefore be worth the two deer. The durability of the weapons, or capital of the beaver hunter, is obviously an element of the greatest importance in estimating the value of the animals he has killed. Had the weapons been more durable than has been supposed,—had they served, for example, to kill twenty beavers instead of one, then it is plain the quantity of labour required to kill a beaver would only have been one twentieth part, or five per cent., more than that required to kill a deer, and the animals would of course have been exchanged in that proportion. With every extension of the duration of the weapons, the value of the deer and the beaver would be brought still nearer to equality.

It appears, therefore, inasmuch as capital is nothing but the produce of anterior labour, that its accumulation and employment is consistent with, or rather is embodied in, the proposition, that the value of commodities depends on the labour required for their production. A commodity may be altogether produced by capital, without the cooperation of any immediate labour; and if so, its value will be determined by the quantity of capital, that is, of antecedent labour expended on its production: or it may be partly produced by capital, and partly by immediate labour, and then its value will be proportioned to the sum of the two; or, which is the same thing, to the total amount of labour bestowed upon it. The principles now laid down are almost self-evident, and have been generally assented to; but a considerable difference of opinion is entertained respecting the influence which the employment of workmen by capitalists, and the fluctuations in their wages, have over value.

It does not, however, seem that there is much room for these differences. Suppose that a certain quantity of goods, say twenty pairs of stockings, manufactured by independent workmen, freely exchange for forty pairs of gloves, also manufactured by independent workmen: they would continue to be exchanged on this footing, provided the quantity of labour required for their production continued unchanged, though the workmen should be employed by master manufacturers. In the first case, it is true, as Adam Smith has observed, that the goods produced by the workmen belong wholly to themselves; and that, in the second case, they have to share them with others. But it must be recollected, that in the first case the capital made use of in their production also belonged to the workmen, and that in the latter case it has been supplied to them by others. The question then comes to be,—Does the circumstance of labourers voluntarily agreeing to give a portion of the commodities produced by them as an equivalent or compensation for the use of capital supplied to them by others, afford any ground for raising the price of such commodities? It is evident it does not. The profits of stock are only another name for the wages of accumulated labour. They enter into the price of every commodity in the production of which any portion of capital has been expended. But whether the capital belong to the labourer, or is furnished to him by another, is obviously of no consequence. When the capital does not belong to the labourer, the commodities he produces are divided into two portions, whereof one is the return for the immediate labour, and the other for the capital or accumulated labour required for their production. But the value of the produce is the same, into how many portionssoever it may be divided. A shoemaker who manufactures shoes on his own account obtains the same profits on their sale that would accrue to the master-shoemaker who should employ him as a workman. He must have capital to maintain himself and his family until his shoes are disposed of; to provide himself with a workshop and tools, to advance money to the tanner to pay his leather, and to meet other outgoings. If he did not, exclusive of the ordinary wages of labour, realise a profit or a return for his capital equal to the profit obtained by the master-shoemaker, it would be for his advantage to lend his capital to the latter, and to work on his account: and it is plain, insomuch as his shoes would not sell for a higher price than those of the capitalist, that he could not realise a greater profit. It is immaterial, therefore, whether the accumulated labour or capital, and the immediate labour employed in the production of commodities, be furnished by the same or by different parties. It is by the total quantity of labour necessarily expended upon them, and not by the channels through which it is supplied, that their value is determined.

It now only remains to trace the influence of fluctuations of wages on price. When this is done, the subject will be exhausted.

To simplify this inquiry, we shall divide it into two branches. We shall inquire, first, whether fluctuations of wages have any, and if any, what effects, on the value of commodities produced by the aid of capitals of equal degrees of durability; and secondly, whether these fluctuations have any, and if any, what effects, when the capitals employed are of unequal degrees of durability.

I. When all classes of producers employ fixed or circulating capitals of the same degree of durability, they must be all equally affected by a rise or fall of wages. This principle is admitted by every one, and is indeed self-evident. But when such is the case, it is plainly impossible capital that a rise or fall of wages should occasion any variation in employed the value of commodities. To revert to our former example: let it be supposed that wages, at the rate of a shilling a day, were paid by the stocking manufacturer, a pair of whose stockings exchanged for two pairs of gloves, and that, from some cause or other, the wages of his workpeople have been doubled, or raised to two shillings; the question is, will he now obtain a greater quantity of gloves for his stockings? It is obvious he will not. He cannot urge the fact of his having to pay higher wages as a reason why the glove manufacturer should give him more gloves in exchange for stockings; for the latter would have it in his power to reply, that the same rise of wages affected him to precisely the same extent! If, therefore, one pair of stockings were previously worth two pairs of gloves, they would continue to preserve that relation so long as the quantities of labour required for their production did not vary, whatever might be the fluctuation of wages,—whether they fell to a sixpence, or rose to five shillings a day. Even if the price of commodities rose, which it does not, when wages rise, that would be no advantage to the producers. Commodities are always bought by commodities or by labour. Of what consequence, then, would it be to a capitalist to sell, when wages rose, his commodities at an equal advance, seeing that he, in his turn, would be obliged to give so much more for every article which he has to purchase? Were wages to rise ten per cent., a producer—a hatter for example—would be in precisely the same condition whether he sold his hats for ten per cent. advance, and gave an additional ten per cent., as he would be obliged to do, for his food, shoes, clothes, &c., &c., or sold his hats at their former price, and bought the articles for which he has occasion at the prices he formerly paid for them.

In order farther to illustrate this principle, we may be allowed to make a supposition, which, though it cannot actually take place, will serve to set this doctrine in a clearer point of view. Should the quantities of labour required for the production of all sorts of commodities be increased in exactly the same proportion, their exchangeable values would plainly remain unaltered. Their cost would, however, be augmented. A bushel of corn would not then exchange for a greater quantity of muslins or of broad cloth than it did before the increased expense of its production; but each would be the produce of more than the former quantity of labour. Under such circumstances, the prices of commodities would remain stationary, while the wealth and comforts of the society would be materially diminished. Every person would have to make greater exertions to obtain a given supply of any one commodity; but as the expense of producing all commodities is, by the supposition, equally increased, it would not be necessary to make any greater exertions to obtain one than another, and their values, as compared with each other, would be totally unaffected.

In these statements it is taken for granted that the value of money has been invariable. But if it become either more or less valuable, then undoubtedly the rate of wages and the prices of commodities will both vary. They will do so, however, not because the labourer gets a greater or less amount of wages, but because the value of the commodity or standard in which wages and prices are estimated has varied. Wages, though most commonly paid in money, really consist of a portion of the produce of industry. And hence, to avoid falling into endless mistakes, it is best, in theoretical investigations with respect to value, to consider wages as constituting a certain share of the produce of industry; as being really invariable, so long as this share continues unchanged; and as having really risen when it is increased, and really fallen when it is diminished.

The mistaking of fluctuations in the rate of money wages for fluctuations in the rate of real wages, has been the source of much error and misapprehension. A man whose wages are one shilling a day, must get two shillings to keep them at the same level, should the value of money decline a half; and the hat which now sells for ten shillings must then, for the same reason, sell for twenty shillings. It is obviously wrong to call this a real rise, either of wages or prices; this, however, is what is generally done. The manufacturer who gives sixpence a day more to his men, and who sells his goods at a proportionally higher price because of a fall in the value of money, rarely suspects that there has been any such fall, and generally concludes that the rise of wages has been the cause of the rise of prices, overlooking entirely the real cause of the rise of both—the decline in the value of the money or commodity in which wages and prices are rated.

It has been seen that a general and equal increase of the labour required for the production of commodities does not alter their relation to one another; and it is consequently obvious that this relation cannot be altered by a general and equal increase of the wages paid for that labour. Fluctuations in the rate of wages affect the proportion in which the produce of industry, under deduction of rent, is divided between capitalists and labourers—diminishing the proportion belonging to the capitalists when they rise, and increasing it when they fall. But as these changes in the distribution of commodities neither add to nor take from the quantity of labour required to produce them and bring them to market, they neither affect their real nor exchangeable value.

II. We have seen by the investigation under the preceding head, that, where the capitals employed in production are of equal degrees of durability, fluctuations of wages affect all classes of producers to the same extent, and have, therefore, no influence on the value or price of commodities. But when the capitals employed are of different degrees of durability, this is not the case. Fluctuations in the rate of wages do not, in such cases, equally affect all producers, and the natural equilibrium of profit cannot be maintained without a variation in the value of their products. To illustrate this, let it be supposed that a quantity of goods, the produce of fixed capital or machinery fitted to last many years, freely exchanges for a quantity of other goods entirely produced by manual labour. It is plain they would not be exchanged on this footing after a rise or fall of wages; for the proprietor of the machinery would be very little affected by such fluctuations, whereas they would very seriously affect the proprietor of the goods produced by manual labour. And, therefore, when wages fluctuate, the values of the goods produced by capitals of different degrees of durability must also fluctuate—that is, they must be adjusted so that they may continue to yield the same average rate of profit. Let us endeavour to trace the mode in which this adjustment is effected.

The arguments now brought forward, to show that fluctuations in the rate of wages do not affect the value of commodities produced by capitals of the same durability, were first advanced by Mr Ricardo. He, too, was the first who endeavoured to analyse and discover the influence of fluctuations in the rate of wages on commodities, when the capitals employed in their production were not of the same degree of durability. The results of his researches in this more difficult branch of the science were still more important, and more at variance with the previously received opinions of economists. Ricardo not only showed that it was impossible for any rise of wages to raise the price of all commodities; but he also showed, that in many cases a rise of wages led to a fall of prices, and a fall of wages to a rise of prices! The novelty of these opinions, and the talent and ingenuity with which they were supported, immediately recommended them to general notice, and the repeated examinations to which they have since been subjected have confirmed their truth, and set them in a clearer point of view.

Suppose a manufacturer has a machine worth £20,000; If a rise of a high degree of durability, and which can, without any wages lower but little, manual labour, produce commodities: If profits, profits were at ten per cent, the commodities annually lower the produced by this machine would sell for £2,000, together value of with a small addition to replace its wear and tear. Now, goods it is clear, that when profits either rise or fall, the price of chiefly pro- the goods produced by this machine will also rise or fall, duced by If profits were to rise to fifteen per cent, the goods pro- tal or ma- produced by the machine would, in order that its owner may chinery. obtain the same profit with other capitalists, rise to £30,000; and if, on the other hand, profits fell to five per cent., the goods would, for the same reason, fall to £1,000. If, therefore, it be true that a rise of wages reduces the rate of profits, it will also reduce the price of such commodities as are chiefly produced by machinery, or fixed capital of a considerable degree of durability, or by circulating capital returnable at distant periods, and vice versa. And it is not difficult to see that this is really the case, and that, in point of fact, profits, supposing other things to continue the same, fall when wages rise, and rise when wages fall.

It results from what has been previously stated, that to whatever extent wages might rise, no class of producers, whether their capitals were returnable in a day, a week, or any other period, would obtain any larger share of the commodities produced by others of the same class,—that is, whose capitals were returnable in equal periods with their own. Suppose wages rise ten or twenty per cent., that would not enable a manufacturer whose capital was returnable in a month, or in twelve months, to obtain in exchange for his goods, any greater portion of the goods of such manufacturers as were affected to the same extent as himself by the rise of wages,—that is, whose capitals were returnable in the same period as his own. This is as impossible as it is to change the relation of numbers by multiplying or dividing them by the same number; and therefore it is not true that a rise of wages will raise the price of any one commodity, as compared with all other commodities.

But if a rise of wages cannot do this, it is demonstrably certain it must lower profits. Suppose that the numbers 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10, represent capitals of corresponding degrees of durability. When wages fluctuate, the proprietors of the least durable capitals, numbers 1, 2, 3, 4, and 5, are plainly more affected thereby than the proprietors of the more durable capitals, numbers 6, 7, 8, 9, and 10. Suppose, now, that wages rise, and let us endeavour to discover what would be the effect of this rise on the holder of a capital of the tenth degree of durability. It has been already seen that, whatever might be the amount of the rise—whether it were one, ten, or a hundred per cent.—the holder of such capital would not get any additional quantity of the commodities belonging to other producers whose capitals were also of the tenth degree of durability; and in so far, therefore, as this class of commodities is concerned, profits will be reduced to the precise extent that wages have risen. But the holders of the other capitals are all of them more affected by the rise of wages than the holders of No. 10; and if we took any one of them as a standard by which to measure profits, they would appear to have fallen in a still greater proportion.

Hence it is plain, that while other things remain the same, profits vary inversely as wages—that is, they fall when wages really rise, and rise when wages really fall. But, owing to the different and ever-varying proportions in which fixed and circulating capital and immediate labour are employed in the production of commodities, it is extremely difficult to discover the precise extent to which any given fluctuation in the rate of wages affects profits. We shall, however, state three different cases, which will briefly, and, it is hoped, satisfactorily, elucidate the manner in which fluctuations in the rate of wages always operate, and the method to be followed in estimating their influence on profits.

1. If all commodities were produced by immediate labour, or by capital employed in the payment of wages, it is obvious that every rise of wages would cause an equal fall of profits. A capitalist who employed L1,000 in the payment of wages must, if profits were at ten per cent., sell the commodities at L1,100. But when wages rise five per cent., or to L1,050, he would not be able to sell his commodities for more than L1,100; for money is itself a commodity, and as, by the supposition, all commodities are produced by immediate labour, the rise of wages would affect the producers of money in the same degree that it affects other producers. In this case, therefore, it is plain that a rise of wages will equally sink profits, and that a fall of wages will equally raise them.

2. If all commodities were produced, half by immediate labour, and the other half by capital, profits would only fall to half the extent that wages rose. Suppose a capitalist employs L500 in the payment of wages, and L500 as a fixed capital, when profits are at ten per cent., the commodities produced must, as before, sell for L1,100. If wages rose five per cent., the capitalist would have to pay L325 as wages, and would, consequently, retain only L75 as profit. In this case, therefore, a rise of wages to the extent of five per cent. would, because of equal quantities of capital and immediate labour being employed in the production of commodities, only sink profits two and half per cent.

3. If all commodities were produced by capital of a high degree of durability, capitalists, it is obvious, would not be at all affected by a rise of wages, and profits would, of course, continue as before.

Now, suppose that commodities, instead of being wholly produced by immediate labour, as in the first case, or wholly by equal quantities of immediate labour and of capital, as in the second, or wholly by fixed capital, as in the third, are partly produced in the one mode and partly in the other, and let us see what effect an increase of five per cent. in the rate of wages would have on their relative values. To facilitate this inquiry, we shall distinguish these three descriptions of commodities by the Nos. 1, 2, and 3. Now, it is quite evident that the rise of wages has affected No. 1 two and a half per cent. more than it has affected No. 2, and five per cent. more than it has affected No. 3. No. 1 must, therefore, as compared with No. 2, have risen two and a half per cent. in value, and, as compared with No. 3, it must have risen five per cent.; No. 2 must have fallen two and a half per cent. as compared with No. 1, and risen two and a half per cent. as compared with No. 3; and No. 3 must have fallen five per cent. as compared with No. 1, and two and a half per cent. as compared with No. 2. If wages, instead of rising, had fallen, the same effects would obviously have been produced, but in a reverse order. The proprietors of the commodities of the class No. 1 would gain five per cent. by the fall, those of No. 2 would gain two and a half per cent., and those of No. 3 nothing; and the relative values of their commodities would be adjusted accordingly.

Thus, then, it appears, inasmuch as a commodity taken General for a standard by which to estimate the values of other rule on the commodities must itself be produced by capital returnable subject of in a certain period, that when wages rise those commodities all fluctua- tions, which are produced by less durable capitals than those which produce the standard will rise in exchangeable value, and those produced by more durable capitals will fall; and conversely when wages are reduced. Suppose, as before, that the Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10, represent capitals of corresponding degrees of durability: If a com- modity produced by the least durable capital No. 1, which may be supposed to be wholly employed in the payment of wages, be taken for a standard, all commodities produced by the other and more durable capitals would fall in value when wages rose; and if we suppose those produced by No. 2 to decline one per cent., those produced by No. 3 would decline two per cent., those produced by No. 4 three per cent., and so on until we arrive at No. 10, which will have fallen nine per cent. If, on the other hand, a com- modity produced by the most durable capital No. 10, which may be supposed to consist wholly of highly durable ma- chinery, be made the standard, all the commodities produced by the other and less durable capitals would rise when wages rise; and if those produced by No. 9 rose one per cent., those produced by No. 8 would rise two per cent., and those produced by No. 1 nine per cent. If a com- modity produced by capital of a medium degree of durability, as No. 5, which may be supposed to consist half of circu- lating capital employed in the payment of wages, and half of fixed capital or machinery, be taken as a standard, the commodities produced by the less durable capitals, Nos. 4, 3, 2, and 1, will rise with a rise of wages, on the former hypothesis,—the first, or No. 4, one per cent., the second, or No. 3, two per cent., &c.; while those produced by the more durable capitals, Nos. 6, 7, 8, 9, and 10, will fall,—the first, or No. 6, one per cent., the second, or No. 7, two per cent., &c., exactly the reverse of the other.

Hence it is obvious that the influence which variations in the rate of wages have on price will principally depend on the nature of the capital employed in the production of gold and silver. Whatever may be the proportions of cir- culating and fixed capital employed in the production of money, all commodities produced by the agency of a greater quantity of manual labour, and with less fixed capital and machinery, will rise when wages rise, and fall when wages fall; but those that are produced by the agency of a less quantity of manual labour, and with more fixed capital or machinery, will fall when wages rise, and rise when wages fall. Those that are produced in nearly the same circum- stances, or by the agency of the same quantities of cir- culating and fixed capital as money, will not be affected by fluctuations of wages.

It should be observed, however, that variations in the values of most commodities, caused by variations in the

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1 These examples are substantially the same with those given by Mr James Mill. See Elements of Political Economy, p. 77. rate of proportional wages, are confined within comparatively narrow limits. It has been seen that were all commodities produced wholly by immediate labour, or wholly by capital, or wholly by equal quantities of both, variations of wages would have no influence on their value.

But a very large class of commodities are produced by means of nearly equal portions of fixed and circulating capital; and as every rise of real wages that may take place under such circumstances will be balanced by a fall in the rate of profit, or by a proportional increase in the productivity of industry, it is evident that the value of the commodities in question, as compared with each other, would remain nearly stationary. Although, therefore, a rise of wages has a necessary tendency to raise the exchangeable value of one class of commodities, and consequently to lower that of another, the fall of profits, which inevitably follows every rise of wages that is not accompanied by an increased productivity of industry, has a contrary effect, and tends to sink the value of the commodities which the increased rate of wages would raise, and to elevate the value of those which the same increased rate would sink. And it is only in extreme cases, or in the case of commodities produced almost wholly by direct manual labour on the one hand, or in that of those produced almost wholly by the aid of fixed capital or machinery on the other, that a variation in the rate of wages occasions a considerable variation in their values.

It must also be observed, that though fluctuations in the rate of wages may occasion variations in the values of particular commodities, they neither add to nor take from the total value of the entire mass. If they increase the value of those produced by the least durable capitals, they equally diminish the value of those produced by the more durable capitals. Their aggregate value continues, therefore, the same after a rise or fall of wages as before. And though it may not be strictly true of a particular commodity, that its exchangeable value is directly as its cost or real value, or as the quantity of labour required to produce it and bring it to market, it is most true to affirm this of the mass of commodities taken together.

In thus endeavouring to trace the cost of all descriptions of non-monopolized commodities to the quantity of labour required for their production, it is not meant to deny that a very large portion of the useful or desirable qualities of such commodities may be the result of the action or influence of natural agents. But it is, as was previously seen, the peculiar and distinguishing feature of natural agents or powers, that they render their services gratuitously. Whatever they do is done without fee or reward. And hence, though their co-operation be necessary to the production of all things that are either useful or desirable, they add nothing to their value. This is a quality that can be communicated only by the labour of man, or by the capital appropriated or accumulated by his labour. In estimating, for example, the cost or value of a quantity of corn, we include only the wages paid to the individuals employed in raising it, as ploughmen, reapers, thrashers, &c., with the value of the corn used as seed, and that of the services rendered by the horses and instruments made use of in the different operations. The influence of the vegetative powers of nature, and of the sun and showers, is ignored, or goes for nothing; for though without their powerful assistance the crop could not be obtained, and our utmost exertions would be altogether fruitless, yet, as they are the free gift of Providence, they add nothing to the value of the produce,—that is, they add nothing to its power of exchanging for or buying labour, or other things procured by the intervention of labour.

It may be thought, perhaps, that this principle is at variance with what is observed to take place in the production of certain descriptions of commodities. Thus, if a cask of new wine be kept for a definite period, or till it arrive at maturity, it will acquire a higher value; now, as the change produced on the wine is entirely brought about by the operation of natural agents, and as without the change the wine would have no higher value, it has been contended that this is a case in which the labour of natural agents is plainly productive of an increased value. It is easy, however, to see that this is a mistake. The cask of wine is a capital, being the result of the labour employed in cultivating, gathering, pressing, and otherwise preparing the grapes from which it was made. But the processes of fermentation, decomposition, &c., do not act instantaneously; and to enable them to effect the changes in the wine, it is necessary that it should be laid aside until they are completed. The merchant would not, however, employ his capital in this way, unless it were to yield the same return as other businesses. And hence, though the processes carried on inside the cask render the wine more desirable without adding anything to its value, the latter is increased by the amount of profit accruing on the capital subjected to the processes.

In estimating the cost of grinding corn, or spinning cotton, or forging anchors by the agency of wind or water-wheels, nothing is set down to the account of the wind or water. And such is invariably the case. Natural powers, however efficient and indispensable, are always left out of view in estimating the value of the products or results of undertakings. That is wholly dependent on the labour, including capital necessarily expended in bringing them about.

Sect. V.—Division of the Produce of Industry, under deduction of Rent, between Capitalists and Workmen.—Definition of Profits.—Mr Ricardo's Theory of Profits; Sense in which it is true.—Causes which occasion a Rise or a Fall of Profits.—Influence of the Decreasing Fertility of the Soil and of Taxation on Profits.

Before attempting to investigate the circumstances which determine the rate of profit, it is necessary to be aware of the proportions in which the whole produce of industry, under deduction of rent, is divided between labourers and capitalists.

This preliminary inquiry may be disposed of in a few words. We have seen that the whole produce of the land men and labour of every civilized society is always divided, in the first instance, into three, and not more than three, portions; the first of which goes to the labourers, the second to the capitalists or proprietors of stock, and the third to the landlords; and we have also seen that the portion of the produce of industry, or the rent, which belongs to the landlords, as proprietors of the soil, and not as capitalists, is altogether extrinsic to the cost of production; and that, though the landlords were to give it up, such self-immolation on their part would not occasion any change in the productiveness of industry, or any reduction in the price of raw produce. Supposing, then, that rent is deducted or

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1 Sir William Petty stated, so early as 1667, that the value of commodities is always regulated by the quantity of labour required to produce them; there is, however, the same difference between his statements and the analysis and investigations of Mr Ricardo, whom we have principally followed in this section, that there is between the conjectures of Pythagoras respecting the true system of the world, and the demonstrations of Newton. But as the statement of Petty is curious, we subjoin it:—"If," says he, "a man can bring to London an ounce of silver out of the earth in Peru in the same time that he can produce a bushel of corn, then one is the natural price of the other; now, if, by reason of new and more easy mines, a man can get two ounces of silver as easily as formerly he did one, then corn will be as cheap at 10s. the bushel as it was before at 5s., ceteris paribus." (Treatise of Taxes and Contributions, ed. 1679, p. 31.) set aside, it is obvious that the remaining produce of the land and labour of every country must be primarily divided between the two great classes of labourers and capitalists.

And it is further obvious that were there no taxes in a country, or were the rate of taxation invariable, the proportion of the entire produce of industry, under deduction of rent, falling to the share of the labourers, could not be increased except by an equivalent reduction in the proportion falling to the share of the capitalists, and vice versa.

Suppose, still better to illustrate this proposition, that the whole produce of industry in Great Britain is represented by the number 1000; suppose, farther, that the landlords get 200 of this sum as rent, and that the remaining 800 is divided in equal portions between labourers and capitalists. Under these circumstances, it is obvious that nothing could be added to the proportion of the produce, or to the 400, falling to the labourers, except at the expense of the capitalists; nor to the proportion, or 400, falling to the latter, except at the expense of the former.

Whether the 800 were increased to 1600, or reduced to 400, so long as those between whom it must be divided receive each a half, their relative condition must continue the same. And hence the propriety of distinguishing between proportional and real wages, that is, between wages estimated in parts of the produce raised by the labourer, and those estimated in definite quantities of money or produce. If the productiveness of industry were to diminish, proportional wages might rise, notwithstanding that real wages, or the amount of the produce of industry received by the labourer, might be diminished; and if, on the other hand, the productiveness of industry were to increase, proportional wages might be diminished, while real wages might at the same time be increased.

Hence it follows that, were taxation unknown or constant, the whole produce of industry, under deduction of rent, would be divided between capitalists and labourers; and that the proportion thereof falling to either party would vary inversely as the proportion falling to the other—that is, the proportion falling to the capitalists would be increased when that falling to the labourers was diminished, and diminished when it was increased.

Profits must not, however, be confounded with the produce of industry primarily received by capitalists. They really consist of that produce, or its value, which remains to the capitalists, after their necessary payments to others have been deducted, and after the capital wasted or used in industrial undertakings has been replaced. If the produce derived from an undertaking, after defraying the necessary outlay, be insufficient to replace the capital expended, a loss will have been incurred; if the capital be merely replaced, and there is no surplus, there will be neither loss nor profit; and the greater the surplus, the greater of course will be the profit. Profits are not measured by the proportion which they bear to the rate of wages, but by the proportion which they bear to the capital by the agency of which they have been produced. Suppose an individual employs a capital equivalent to 1000 quarters of corn in the cultivation of a farm, that he expends 700 quarters in the payment of wages and 300 in seed and other outgoings, and that the return to this capital is 1200 quarters. Under these circumstances, the proportion of the produce falling to the labourers as wages will be to that falling to the capitalists as seven to two; for of the 1200 quarters that go in the first instance to the capitalist, 200 only are profits, 1000 being required to replace the capital he has expended. In this case, therefore, the rate of profit would be said to be twenty per cent., meaning that the excess of produce belonging to the cultivator, after the capital employed in its production was fully replaced, amounted to twenty per cent. upon that capital.

We have been thus particular with respect to the definition of profits, because, from not keeping it sufficiently in view, Mr Ricardo has been led to contend that a rise of profits cannot be brought about except by a fall of wages, nor a fall of profits except by a corresponding rise of wages.

It is evident, however, that this theory is true only in the event of our attaching a radically different sense to the term profit from what is usually attached to it, and supposing it to mean the proportion of the produce which goes to the share of the capitalist, without reference to the ratio which it bears to the capital employed in its production. If we understand the terms in this sense, Ricardo's theory will hold universally; and it may be affirmed that so long as the proportion in which the produce of industry, under deduction of rent, is divided between capitalists and labourers, continues the same, no increase or diminution of the amount of that produce, or of the powers of production, will occasion any variation in the rate of profit. But if we consider profits in the light in which they are invariably considered in the real business of life—as the produce accruing to the capitalists after the capital expended by them in payments and outgoings of all sorts is fully replaced—it will immediately be seen that there are innumerable exceptions to Ricardo's theory.

It will facilitate the acquisition of precise ideas respecting profits in the circumstances which determine the rate of profit in agricultural employments, as that term is commonly understood, if we confine our attention, in the first place, to those which determine profits in agriculture,—both because the latter admit of being accurately measured, and because they may be taken as representing profits in other businesses. Agriculture is a branch of industry that must be carried on at all times, and under all circumstances; but it would not be carried on unless it did, at an average, yield as great a return to the capital vested in it as other businesses; nor would the latter be carried on if they yielded a less return than is derived from agriculture. Hence it follows that the returns obtained from agricultural industry or agricultural profits may, in ordinary cases, be considered as identical with the returns or profits obtained from other businesses. Whenever, for example, the average return to an outlay of capital or labour worth 100 quarters of wheat, employed in the cultivation of the soil, amounts to 110 quarters, we may safely infer that L100 employed in manufactures is also yielding L110; for a regard to their own interest will not permit those engaged in such departments to prosecute them for less profit than is obtained in agriculture, and the competition of the agriculturists will not permit them to obtain more.

Taking, then, as we are entitled to do, agricultural profits as a standard for profits in general, let us suppose that a landlord employs a capital equivalent to 10,000 quarters, which expenses 5000 quarters, or L5000, of this capital in seed, in the keep of horses, and in defraying the wear and tear of implements and machines; and 5000 quarters, or L5000, in paying the wages of labourers. Suppose, now, that the return obtained by this landlord is 12,000 quarters, or L12,000; of which 10,000 quarters, or L10,000, go to replace his capital, and 1000 quarters, or L1000, to pay his taxes,—leaving 1000 quarters, or L1000, as profits, being ten per cent. on the capital employed; it is plain from this case (and this case is, in point of principle, the actual case of all cultivators) that the rate of profit may be increased in three, but only in one or other of three ways,—viz., 1, by a fall of wages; 2, by a fall of taxes; or, 3, by an increased productiveness of industry.

Thus it is obvious (1.), that if wages were reduced from 5000 to 4000 quarters, profits, supposing other things to continue the same, would be increased from 1000 to 2000 quarters, or from ten to twenty per cent.; if (2.) the burden of taxation were reduced from 1000 to 500 quarters, profits... would be increased from 1000 to 1500 quarters, or from ten to fifteen per cent.; and if (3.), owing to the introduction of an improved system of agriculture, the return to a capital of 10,000 quarters were increased from 12,000 to 13,000 quarters, profits, supposing wages still to amount to 5000 and taxes to 1000 quarters, would be increased to 2000 quarters, or to twenty per cent.; And though, in this case, after the productiveness of industry had been increased, wages form a less proportion of the whole produce than they did previously, it is to be observed, that this less proportion is the consequence, and not the cause, of profits having risen; and, therefore, in such cases as this, and they are of very frequent occurrence, it is true to say, that proportional wages fall because profits rise; but the converse of the proposition is not true; for the rise of profits was occasioned by causes that had nothing whatever to do with wages, and which were, in fact, totally independent of them.

It is indeed true, inasmuch as the rise of profits is the result of an increased productiveness of industry, that the real value of the 13,000 quarters will not exceed the real value of the 12,000 previously obtained by the same quantity of labour; but profits, in the sense in which they are practically understood, and as we understand them, do not depend on real values, but on the excess of the commodities produced above the capital expended in their production; and whenever this excess is augmented, without any previous depression of the rate of wages, the rate of profit is evidently increased by the operation of causes extrinsic to variations in that rate.

Nor is this all. The rate of profit may remain stationary, or rise, though the proportion of the produce of industry falling to the share of the labourer be actually increased. Suppose, to exemplify this, that a landlord employs 1000 quarters of wheat as a capital, 500 of which are expended in seed, keep of horses, &c., and 500 in paying wages; if the produce be 1200 quarters, and the taxes to which he is subjected 100, his profits will amount to 100 quarters, or ten per cent.; suppose now that, owing to the introduction of improved machinery, or improved methods of culture, he only requires to expend 400 quarters in seed, keep of horses, &c., but that wages rise from 500 to 550 quarters, and that the same return is obtained; in this case, supposing taxation to be constant, the profits of the landlord will be increased from ten to fifteen three-fourths per cent., though proportional wages have risen from five-twelfths to five and a half twelfths of the whole produce.

If this increased productiveness were confined to agriculture, without extending to other important businesses, the price of agricultural produce would fall, while that of other produce would remain stationary; and, in such a case, it may be said that the profits of the agriculturists, if estimated in money, or in any commodity other than corn, would be diminished in consequence of the rise of wages. This is true; but Ricardo made no exception, in laying down his theory, in favour of those possible, and indeed frequently occurring cases, when, from any single circumstance, or combination of various circumstances, industry becomes generally more productive, and when, consequently, profits generally rise, without that rise being occasioned by a fall of wages. And it is also true, that an increased productiveness of agriculture, whether caused by improvements made in it, or by the repeal of restrictions on the importation of corn, most commonly extends itself to other businesses, and has the effect of bringing about an universal rise of profits; for, as farm produce forms the principal part of the labourer's subsistence, and as he obtains a larger quantity thereof in exchange for the same amount of money after it has fallen in price, his condition is in so far improved; and a stimulus being, in this way, given to population, the supply of labour is increased, and wages being reduced, the rate of profit is universally raised.

When industry, instead of becoming more becomes less productive, the opposite effects follow. Profits then fall, without any fall having previously taken place in the rate of wages. It is evident, therefore, that the proposition that a rise of profits cannot be brought about otherwise than by a fall of wages, nor a fall of profits otherwise than by a rise of wages, is true only in those cases in which the productiveness of industry and the burden of taxation remain constant. So long as this is the case, or, which is the same thing, so long as the same capital is employed, and the same quantity of produce has to be divided between capitalists and labourers, the share of the one cannot be increased without that of the other being equally diminished; and, it is also true, that if profits depended on the division of the produce of industry between capitalists and labourers, they could not be affected by variations in its productiveness, but would be determined wholly by the proportion of the produce set apart as wages. But profits depend, as has been already seen, on none of these things, but on the proportion which they bear to the capital by which they are produced. Suppose an individual employs a capital of 1000 quarters, or L.1000, in cultivation; that he lays out half this capital in the payment of wages, and obtains a return of 1200 quarters, or L.1200; in this case, assuming he is not affected by taxation, his profits will amount to 200 quarters, or L.200, being at the rate of twenty per cent., and will be to wages in the proportion of two to five. Suppose, now, that the productiveness of industry is universally doubled, and let it be farther supposed, that the additional 1200 quarters, or L.1200, is divided between the capitalist and his labourers in the former proportion of two to five, or that the capitalist gets 343 quarters, or L.343, of additional profits, and the labourers 857 quarters, or L.857, of additional wages: in this case, both parties will still obtain the same proportions of the produce of industry as before; and if we look only to them, we must say that neither profits nor wages have risen. But when we compare, as is invariably done in estimating profits, the return obtained by the capitalist with the capital he employs, it will be found, notwithstanding the constancy of proportional wages, that the rate of profit has really increased from twenty to fifty-four per cent.

Thus, then, it appears, as was previously stated, that profits rise in one or other of the three following ways, viz.—(1.), from a fall of wages; (2.) from a fall of taxes, directly or indirectly affecting capitalists; or (3.), from an increased productiveness of industry: and they fall (1.), from a rise of wages; or (2.), from an increase of taxes; or (3.), from a diminished productiveness of industry. But they can neither rise nor fall, except from the operation of one or more of the causes now stated.

In the previous observations we have, to simplify the Extra-pro-subject, considered profits as arising from the employment of capital by persons of ordinary skill and intelligence in what they usually pursue of industry. But, in addition to these, very considerable amounts of capital are employed by parties who possess superior knowledge and ability in the callings in which they engage, and who, in consequence, obtain proportionally large returns. It has been disputed whether these extraordinary returns should be considered as profits or wages. And we are disposed to think that, in as far as they result from the better training and instruction of those who superintend the employment of the capital, they should be considered as the profit upon, or return to, the extra outlay on their education. But in cases where the parties possess, as they sometimes do, any peculiar talent or genius, by which they are enabled to strike out new and better methods of production, the results must be considered as the fruit of natural gifts of which they are the exclusive possessors. The profits realized by such parties are not subject to any ordinary rule or law. Everything depends on the peculiar genius and intelligence with which they are endowed. If it be far above the common level, and applicable to the production of articles or services for which there is a great demand, their gains will be proportionally great, and may far exceed, even when the things they supply have little intrinsic worth, those realized by ordinary people.

But though these extra profits are always being made, and amount in the aggregate to a very great sum, yet there are no good grounds for thinking that they bear any very large proportion to the vast amount of profits produced in businesses and professions conducted in the ordinary way, and with ordinary talent and attention. And it is also to be borne in mind that if there be, on the one hand, individuals who, by dint of superior skill and ability, make large profits and accumulate fortunes, there are, on the other hand, a great number of individuals who, from want of the requisite capacity or care, make little or no profit, and not unfrequently sink into the abyss of bankruptcy. The losses incurred by the latter class go far to balance, if they do not exceed, the extraordinary gains of the other. And though fortunes made, like those of Arkwright and Watt, by the exertion of genius and invention, attract and fix the public attention; yet there can be no manner of doubt that the great bulk of the public wealth is the result of ordinary skill and industry, backed up and assisted by the general disposition to save and amass. For one fortune that owes its existence to superior talent, ten owe theirs to a long-continued course of economy. But having already seen that parsimony is the main source of national riches, it is needless to enlarge further on this topic.

It is consistent with the widest experience, that profits are invariably higher in colonies, and thinly-peopled countries, than in countries that have been long settled, and where the population is comparatively dense: and that (referring to periods of average duration) their tendency is to fall in the progress of society. This sinking of profits in rich and populous countries was ascribed by Smith to the competition of capitalists. He supposed that when capital is augmented, its owners endeavoured to encroach on each other's employments; and that, in furtherance of their object, they were tempted to offer their goods at a lower price, and to give higher wages to their workmen; which has a twofold influence in reducing profits. This theory was long universally assented to. It has been espoused by MM. Say, Sismondi, and Storch, by the Marquis Garnier, and, with some trifling modifications, by Malthus. But notwithstanding the deference due to these authorities, it is easy to see that competition cannot bring about a general fall of profits. It prevents an individual, or set of individuals, from monopolizing a particular branch of industry, and reduces the rate of profit in different businesses nearly to the same level; but this is its whole effect. It has no tendency to lessen the productivity of industry, or to raise wages or taxation; and unless it do one or other of these things, it cannot affect profits. So long as an individual, employing a capital of 1000 quarters, or £1000, obtains from it a return of 1200 quarters, or £1200, of which he has to pay 100 quarters, or £100, as taxes, so long will his profits continue at ten per cent., whether he has the market to himself, or has 50,000 competitors. The increase of taxation, and the necessity under which a growing society is placed of resorting to soils of less fertility to obtain supplies of food, or of bringing them from greater distances, are the great causes of that reduction in the rate of profit which usually takes place in advanced periods. When the last lands taken into cultivation are fertile, there is a comparatively large amount of produce to be divided between capitalists and labourers; and both profits and real wages may, consequently, be high. But with every successive diminution in the fertility of the soils to which recourse is had, the quantities of produce obtained by the same outlays of capital and labour necessarily diminish. And this diminution will obviously operate to reduce the rate of profit—(1.), by lessening the quantity of produce to be divided between capitalists and labourers; and (2.), by increasing the proportion falling to the share of the latter.

The influence of the decreasing productivity of the soil, as well on the condition and fortunes of society, as on the rate of profit, is so very powerful, that we shall endeavour to exhibit its operation a little more in detail. It has been shown over and over again, that the principle of increase in the human race is so very strong, as not only to keep population steadily up to the means of subsistence, but to give it a tendency to exceed them. A peculiar combination of favourable circumstances sometimes makes capital increase faster than population, and wages are in consequence augmented. But such augmentation is rarely permanent, at least to the whole extent; for the new stimulus it gives to population seldom fails, by proportioning the supply of labour to the increased demand, to reduce wages to their old level, or to one not much above it. If, therefore, it were possible to continue to employ additional capital with an equal return in raising raw produce, in manufacturing it when raised, and in conveying the raw and manufactured products from place to place, it is evident, if we suppose taxation to be invariable, that, speaking generally, the greatest increase of capital would not occasion any sensible fall in the rate of profit. So long as labour may be obtained at the same rate, and as its productive power is undiminished, so long will the profits of stock continue unaffected. It is evident, then, that the mere increase of capital has of itself no lasting influence over wages; and it is the same thing, in so far as the rate of profit is concerned, whether one hundred or one thousand millions be employed in the cultivation of the soil, or in the manufactures and commerce of this or any other kingdom, provided the last million so employed be as productive, or yield as large a return, as the first. And this is invariably the case with manufactures and commerce. Inasmuch, too, as future Watts, Arkwrights, and Wedgwoods will no doubt arise, and as no limits can be assigned to the improvement of the arts, and of the skill and dexterity of workpeople, it may be confidently predicted that equal amounts of capital and labour employed in manufactures and commerce will continue to furnish increasing quantities of produce. But such is not the case with agriculture. Here, and here only, the bounty of nature is limited, and she deals out her gifts with a frugal and parsimonious hand,

"Pater ipse colendi Hand faciendum esse viam voluit."

Equal quantities of capital and labour do not always produce equal quantities of raw produce. The soil is of limited extent and limited fertility; and this limitation is the real check—the insuperable obstacle, which prevents the means of subsistence, and consequently the inhabitants of all countries, from increasing in a geometrical proportion, until the space required for carrying on the operations of industry becomes deficient.

It may be observed, that while this decreasing productivity of the soil lessens the produce to be divided between profits and wages, it increases the proportion thereof which goes to the latter. It is evidently impossible that the price of raw produce, which is the principal part of the subsistence... of the labourer, should be progressively increased by forcing good or taking inferior lands into cultivation, without raising wages. Their rise is seldom indeed exactly coincident with a rise in the price of necessaries, but they can never be very far separated. The price of necessaries forms, in fact, the cost of producing labour. The labourer cannot work or continue his race if he be not supplied with the means of subsistence. And though a certain period of varying extent, according to the circumstances of the country at the time, must generally elapse, when necessaries are rising in price, before wages are augmented, such augmentation must, in all ordinary cases, be eventually brought about, if not to the whole, at least to some considerable extent.

Without, however, dwelling on these considerations, and apart from the political revulsions which sometimes act injuriously on industry, it may be safely concluded that the decreasing fertility of the soil, or its inability to continue permanently to yield the same quantities of produce in return for the same outlays, is at bottom the great cause, the causa causans, of that fall of profits which uniformly takes place in the progress of society. Other causes may, and frequently do, conspire to bring about this result, but this only is necessary and inherent in the order of nature.

But though this cause of the reduction of profits be "of such magnitude and power as finally to overwhelm every other," its energy is at all times liable to be counteracted or facilitated by extrinsic circumstances. It is obvious, for example, that every improvement or discovery in husbandry which enables a greater quantity of produce to be obtained for the same expense, has an influence similar to what would result from an addition being made to the area of the superior lands, and may, for a lengthened period, raise the rate of profit or hinder its fall.

Had the inventive genius of man been limited in its powers, and had the various machines and implements used in agriculture, and the skill of the husbandman, speedily attained to perfection, the rise in the price of raw produce, and the fall of profits consequent to the increase of population, would have been so apparent as to force themselves on the attention of everyone. When, in such a state of things, it became necessary to resort to poorer soils to raise additional quantities of food, a corresponding increase of labour would have been required; for, supposing the perfection of art to be attained, nothing except greater exertion can overcome fresh obstacles. Not only, therefore, would additional labour have been required for the production of a greater quantity of food, but it would have been required in the precise proportion in which the difficulty of its production was increased; so that, had the arts continued stationary, the price of corn and other raw products would have varied directly with every variation in the qualities of the soils successively brought under tillage.

But the circumstances which really regulate the value of raw produce are extremely different. It is true, indeed, that even in those societies that are most rapidly improving, it has, as previously shown, a constant tendency to rise; for the rise of profits consequent to every invention, by occasioning a greater demand for labour, gives a fresh stimulus to population; and thus, by increasing the demand for food, again inevitably forces the cultivation of poorer soils, and raises prices. But these effects of this great law of nature, from whose all-pervading influence the utmost efforts of human ingenuity cannot enable man to escape, are rendered far less palpable and obvious, and sometimes, indeed, are entirely defeated by means of improvements. After inferior soils are cultivated, more labour is required to raise the same quantities of food; but as the powers of the labourer, and the implements he employs, are gradually improved, a smaller number of work-people is required, in proportion to the work to be performed, than if no improvements had taken place. The tendency to an increase in the price of raw produce is counterbalanced by an opposite tendency. The productive energies of the earth gradually diminish, and we are compelled to resort to less fruitful soils; but the productive energies of the labour employed in their tillage are as constantly augmented by the discoveries and inventions that are always being made. Two opposite and continually acting principles are thus set in motion. From the operation of fixed and permanent causes, the increasing sterility of the soil is pretty sure, in the long run, to overmatch the improvements that occur in machinery and agriculture, so that prices experience a corresponding rise, and profits a corresponding fall. Occasionally, however, these improvements more than compensate, during lengthened periods, for the deterioration in the quality of the soils successively cultivated, and a fall of prices and rise of profits take place, until the renewed pressure of population once more forces the cultivation of still poorer lands.

In so far as the general principle is concerned, the previous reasoning is applicable alike to the commercial world and to a single nation. It is plain, however, that the fall of profits, and the check to the progress of society, originating in the necessity of resorting to poorer soils, will be earlier and more severely felt in improving countries which exclude foreign corn from their markets, than in those which maintain an unfettered intercourse with their neighbours. When a great manufacturing and commercial country deals with all the world on fair and liberal principles, she avails herself of the various capacities of production which Providence has given to different countries; and besides obtaining supplies of food at the cheapest rate at which they can be raised, the numberless markets to which she can resort prevents her from feeling any very injurious consequences from the occasional failure of her own harvests, or from deficiencies in one or a few of the sources whence she draws her foreign supplies; so that in this way she goes far to secure for herself constant plenty, and, what is of hardly less importance, constant steadiness of price. Such a nation has the foundations of her greatness established on a broad and solid basis; for they rest, not on the productive powers of her own soil only, but on those of all the countries of the world. And supposing her not to be involved in an unusual degree in war, or subjected to comparatively heavy taxes, her profits would not be reduced, nor would she get clogged in her progress, until the increase of population forced the cultivation of inferior soils in the countries whence she was in the custom of importing corn. And even then she would not be surpassed by her neighbours; her progress being retarded by a cause which equally affected them, her relative power would not be impaired; and should new markets be opened or new discoveries made, in any quarter of the world, she would reap her full share of the advantage, and be renovated and strengthened for a new career of exertion.

But the case is very different when foreign raw produce is excluded from the markets of a nation which has made an unusual progress in commerce and manufactures, and whose population is therefore comparatively dense. A government which prevents its subjects from exchanging their manufactured goods for the corn of more fertile or less densely-peopled countries, compels them to a premature resort to poor soils at home; and profits being consequently reduced, the country is made to approach the stationary state at a period when, had the legislature acted on more enlarged principles, she might have been advancing with the same rapidity as before in the career of improvement.

It is needless, however, to dwell on these circumstances,

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1 Malthus' Principles of Political Economy, &c., p. 317. or to show the influence of restrictions on the trade in raw produce in aggravating the evils of scarcity, and occasioning fluctuations of price. These and other important correlative matters are discussed in the article CORN LAWS AND CORN TRADE in this work. In it the reader will find the history as well as the principles and practical operation of the late Corn Laws, treated of at considerable length.

PART IV.

CONSUMPTION OF WEALTH.

Having in the previous parts endeavoured to explain the means by which labour is facilitated, and wealth produced, and to investigate the laws which regulate its distribution among the various classes of society, we come now to the fourth and last division of the science, or to that which treats of the CONSUMPTION OF WEALTH.

Definition of Consumption.—Consumption the end of Production.—Test of Advantageous and Disadvantageous Consumption.—Error of Dr Smith's Opinions with respect to Unproductive Consumption.—Error of those who contend, that to facilitate Production, it is necessary to encourage Consumption.—Cause of Gluts.—Consumption of Government.—Conclusion.

It was formerly seen, that by production in this science, is not meant the production of matter, that being the prerogative of Omnipotence, but the giving to matter such a shape as might fit it for ministering to our wants and enjoyments. In like manner, by consumption is not meant the consumption or annihilation of matter, that being as impossible as its creation, but the consumption or annihilation of the qualities which render commodities useful and desirable. To consume the products of art or industry, is to deprive them of the utility, and consequently of the value, communicated to them by labour. And hence we are not to measure consumption by the magnitude, weight, or number of the products consumed, but exclusively by their value. Large consumption is the destruction of large value, however small the bulk in which it may happen to be compressed.

Consumption, in the sense in which the word is used by political economists, is synonymous with use. We produce commodities only that they may be used or consumed. Consumption is the end and object of human industry; production is merely a means to attain that end. It matters nothing in this respect whether commodities are of the class called durable or perishable. The bread that is baked in the morning may be made use of in the course of the day; whereas the use of other articles may extend over weeks, or months, or even many years. But, however widely they may differ in their qualities, and whether they are employed to satisfy the urgent wants, to increase the riches, or to gratify the social or the selfish passions of their possessors, they are all destined to be used or consumed; to be made serviceable in some way, or for some purpose or other.

But though commodities are produced only to be consumed, we must not fall into the error of supposing that all consumption is equally advantageous to the individual or the society. If a gentleman employ a set of labourers to build him a house the one summer, and to pull it down the next, the wages paid them while they are engaged in this futile occupation are evidently lost to their employer and the public; whereas had he employed them in husbandry or manufactures he would most likely have obtained products equal to, or more valuable than, their wages. The value of the return, or the advantage obtained from consumption, is the true test whether it is advantageous or disadvantageous, or as it is more commonly termed, productive or unproductive. Commodities are consumed productively when the advantage or benefit, whether material or otherwise, accruing in consequence to their possessors, exceeds their value; and they are consumed unproductively when such advantage or benefit is less than their value. The prosperity and decay of nations depends on this balance. If, in given periods, the commodities produced in a country exceed those consumed in it, the means of increasing its capital are provided, and its population will increase, or the actual numbers be better accommodated, or both. If the consumption in such periods fully equals the reproduction, the stock or capital of the nation not being increased, society will be at a stand. And if the consumption exceed the reproduction, every succeeding period will see the society worse supplied; its prosperity and population will evidently decline, and pauperism will gradually spread itself over the country.

It is impossible, however, to fix on any standard by a comparison with which even a tolerable approximation may be obtained of the value or advantage of different kinds of consumption. This is a point on which the sentiments of no two individuals ever exactly coincide. The opinions of each always depend more or less on the situation in which he is placed. A rich man is inclined to give a greater extension to the limits of advantageous consumption than a man of middling fortune; and the latter than he who is poor. And it is a truism to say that a man's expenses should always bear some proportion to his fortune and condition in society; and that what might be proper and advantageous expenditure in one case, might be exceedingly improper and indeed absurd in another. Hence it is quite impracticable to frame any system of rules with regard to expenditure applicable to all individuals; and were it practicable, there is no ground for thinking that they would be of the smallest utility. The public interest requires that the national capital should, if possible, be constantly kept on the increase; or, which is the same thing, that the consumption of any given period should become the means of reproducing a greater value. But it has been sufficiently proved that this desirable result cannot, under any circumstances, be brought about by a system of surveillance and restriction. Industry and frugality never have been, and never will be, promoted by such means. To render a man industrious, secure him the peaceable enjoyment of the fruits of his industry—to wean him from extravagance, and make him frugal and parsimonious, allow him to reap all the disadvantage of the one line of conduct, and all the advantage of the other. The poverty and loss of station that inevitably result from improvident and prodigal consumption are a sufficient security against its becoming injuriously prevalent. Wherever the public burdens are moderate, property protected, and industry free, the efforts of the body of the people to rise in the world and improve their condition occasion the continued increase of national wealth. It is idle to expect that all unproductive and unprofitable expenditure should ever be avoided; but the experience of all tolerably well governed states proves, that the wealth which is productively expended, greatly exceeds that which is expended unproductively.

It was long a prevalent opinion among moralists, that Luxury in the production and consumption of luxuries was essentially dissimilarly unproductive. But this opinion is now almost universally abandoned. Unless, indeed, all comforts and enjoyments are to be proscribed, it is not possible to say where necessaries end and luxuries begin. But if we are to understand by necessaries such products only as are absolutely required for the support of human life, everything but wild fruits, roots, and water, must be deemed superfluous; and in this view of the matter, it would follow that the peasantry of Ireland when they lived only on potatoes and butter-milk, had much more of the character of productive labourers than those of Britain! The mere statement of such a doctrine is sufficient for its refutation. Everything that stimulates exertion is advantageous. The mere necessaries of life may be obtained with comparatively little labour; and those savage and uncivilized hordes, who have no desire to possess its comforts, are proverbially indolent and dissipated. To make men industrious,—to make them shake off what seems to be their natural lethargy,—they must be inspired with a taste for the luxuries and enjoyments of civilized life. When this is done, their artificial wants become equally clamorous with those that are strictly necessary, and they increase exactly as the means of gratifying them increase. Wherever a taste for comforts and conveniences is generally diffused, the wants and desires of man become altogether illimitable. The gratification of one leads directly to the formation of another. In civilized societies, new products and new modes of enjoyment are constantly presenting themselves as motives to exertion, and as means for its reward. The operations of industry are prosecuted without intermission, and idleness, with its attendant train of evils, almost entirely disappear. "What," asks Paley, "can be less necessary, or less connected with the sustenance of human life, than the whole produce of the silk, lace, and plate manufactory? Yet what multitudes labour in the different branches of these arts! What can be imagined more capricious than the fondness for tobacco and snuff? Yet how many various occupations, and how many thousands in each, are set at work in administering to this frivolous gratification!" The stimulus given to industry by the desire to possess these articles renders their introduction advantageous. The earth is capable of furnishing food adequate for the support of a much greater number of human beings than can be profitably employed in its cultivation. But its owners will not part with their produce for nothing; or rather they will not raise what they can neither use themselves nor employ to buy what they want. As soon, however, as a taste for conveniences and luxuries is introduced, this difficulty is got over. The occupiers of the ground forthwith endeavour to raise from it the most that it can be made to produce, that they may exchange the surplus for the articles offered to them by manufacturers and merchants. And hence, though the latter have neither property in the soil, nor any concern in its cultivation, they are regularly and liberally supplied with its produce. In this way the quantity of necessaries, as well as of useful and agreeable products, is vastly increased by the introduction of a taste for luxuries; and while the people are infinitely better provided for, their numbers are greatly augmented.

So long, therefore, as the consumption of luxuries is confined within proper limits, it is quite unexceptionable. But when it exceeds these limits, that is, when it is greater than the consumers can afford, it becomes injurious. The injury, however, would be quite as great if they consumed an equivalent amount of necessaries. The mischief consists in the cost or value of the articles consumed exceeding the means of the consumers, and not in their belonging to this or that description or species of articles. But, except in cases where credit has been obtained through fraudulent representations, this is a fault which may be safely left to be dealt with by those concerned. The poverty and degradation that are sure to result from reckless consumption is a sufficient guarantee against its being carried to an injurious extent. To attempt to lessen it by proscribing luxury, is like attempting to enrich a country by taking away some of the most powerful motives to production.

Adam Smith has given another criterion of productive and unproductive consumption. But though exceedingly ingenious, and supported with his usual ability, his opinions on this point appear to rest on no solid foundation. He divides society into two great classes. The first consists of those who fix, or, as he terms it, "realize their labour," in some particular subject, or vendible commodity, which lasts for some time at least after that labour is past; the second, of those whose labour leaves nothing in existence effective after the moment of exertion, but perishes in the act of consumption-performance. The former are said by Smith to be productive, the latter unproductive labourers. Not that, in making this distinction, he meant to undervalue the services rendered by the latter, or to deny that they are frequently indispensable. But he contends that, how advantageous soever, these services not having any results of a fixed and transferable character, add nothing to the wealth of a country; and that, consequently, the labour of those by whom they have been rendered has been unproductively expended. To avoid, however, all chance of misrepresentation, we shall give Smith's opinions in his own words.

"There is one sort of labour," says he, "which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former, as it produces a value, may be called productive, the latter unproductive labour. Thus the labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance, and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants. The labour of the latter, however, has its value, and deserves its reward, as well as that of the former. But the labour of the manufacturers fixes and realizes itself in some particular subject, or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up, to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace or value behind them for which an equal quantity of service could afterwards be procured.

"The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how necessary, or how useful soever, produces nothing for which an equal quantity of service can afterwards be procured. This protection, security, and defence of the commonwealth, the effect of their labour this year, will not purchase its protection, security, and defence for the year to come. In the same class must be reckoned some both of the gravest and most important, and some of the most friv... It will not, we think, be very difficult to show the fallacy of the distinction which Smith has endeavoured to establish in the paragraphs now quoted, between the labour, and consequently also the consumption of the different classes of society. To begin with the case of the menial servant: — His labour is said to be unproductive, because it is not realized in a vendible commodity, whereas the labour of the manufacturer is productive; because it is so realized. But of what, may we ask, is the labour of the manufacturer really productive? Does it not consist of comforts and conveniences required for the use and accommodation of society? The manufacturer is not a producer of matter, but of utility only. And is it not obvious that the menial servant is also a producer of utility? If the labour expended in converting the wool when in the fleece into a coat be, as no one doubts, productive, then surely the labour expended in cleaning and brushing the coat, and rendering it fit to be worn, must be so too. And if the husbandman who raises corn, beef, and other articles of provision, be a productive labourer, why is the menial servant who performs the indispensable task of dressing these articles, and fitting them to be used, to be stigmatized as unproductive? It is clear there is no substantial difference between their employments—that they are either both productive, or both unproductive. To have a fire, it is quite as necessary that coals should be brought from the cellar to the stove, as that they should be brought from the bottom of the mine to the surface of the earth. And if it be said that the labour of the miner is productive, must we not say as much of that of the servant employed to make and mend the fire? The whole of Smith's reasoning proceeds on a false hypothesis. He has made a distinction where there is none, and can be none. The end of all human exertion is the same—that is, to increase the sum of necessaries, comforts, and enjoyments; and it must lie left to the judgment of every man to determine what portion of these he will have in the shape of services, and what in the shape of material products. A man is not more readily impoverished by maintaining menial servants than by indulging in any other species of expense. Doubtless he will be ruined if he keep more of them than he has occasion for, or can afford to pay; but his ruin will be equally certain if he purchase an excess of food or clothes, or engage a greater number of work-people in his business than are required to carry it on, or his capital can employ. The keeping of two ploughmen when one only might suffice, is as improvident and wasteful as the keeping of two footmen to do the business of one. It is in the extravagant quantity or cost of the things or services we require, irrespective of anything else, that we must seek for the causes of impoverishment.

The same reasoning applies to all the instances mentioned by Smith. Take, for example, the case of the physician. He is classed, like the menial servant, among the unproductive labourers, because the bodies on which he exerts his art are not vendible or exchangeable. But if so, then it is plain that the veterinary surgeon who has charge of horses and dogs, will be entitled to rank in the productive class; and when the physician prescribes for and cures a slave, he also will become productive! Without, however, insisting on such self-contradictory statements, is it not clear that if the exertions of the physician conduce to health, and if he enable others to produce more than they could do without his assistance, he is, indirectly at all events if not directly, a productive labourer? Smith makes no scruple about admitting that a workman employed to repair a steam-engine should be enrolled in the productive class; and yet he would place a physician, who had been instrumental in saving the life of an Arkwright or a Watt among those that are unproductive! It is singular that he was not struck by such flagrant inconsistencies. And the errors into which he has fallen in treating this important branch of the science, set in a strong light the necessity of advancing with extreme caution, and of subjecting every theory, how ingenious soever it may appear when first stated, to a severe and patient examination.

The amusements furnished by players, singers, and so forth, come under the description of luxuries, and have the same effect on the public wealth as a taste for champagne, tobacco, tea, or other superfluities. They create new wants, and, by so doing, stimulate industry to procure the means of gratifying them. They are really, therefore, a means of production; and while they furnish fresh comforts and amusements, they add to the mass of useful products.

The productivity of the higher class of functionaries is still more obvious. Far, indeed, from being unproductive, they are, when they properly discharge the duties of their high station, the most productive labourers in a state. Smith says, that the results of their service, that is, to use his own words, "the protection, security, and defence of the commonwealth any one year, will not purchase its protection, security, and defence for the year to come." But this is plainly an error. He allows that the food and other articles produced by society in any given year, furnish in great part the means of producing its supplies of the same articles for the succeeding year. But without the security and protection afforded by government, these articles would either not exist at all, or their quantity would be very greatly diminished. How, then, is it possible to deny that those by whom this security is afforded are productively employed? Take the case of the labourers who construct fences: no one ever presumed to doubt that their labour is productive; and yet they do not contribute directly to the raising of corn or anything else. The object of their industry is to give security; to guard the fields that have been fertilized and planted from depredation, and to enable the husbandman to prosecute his employments without being distracted by the care of watching. But if those who defend a single corn field against the neighbouring crows and cattle, are justly said to be productive labourers, on what pretence shall we deny that title to the judges and magistrates, the solicitors and sailors, who protect every field in the empire—to those to whose exertions we are indebted for our independence, and the free enjoyment of our property and privileges?

That much wealth has been unproductively consumed by the servants of the public, both in this and other countries it is impossible to doubt. But we are not to argue, from abuses extrinsic to a beneficial institution, against the institution itself. If the public pay their servants excessive salaries, or employ more than are required for the purposes of good government and security, it is their own fault. Their conduct is similar to that of a manufacturer who should pay his labourers comparatively high wages, and employ more of them than he had occasion for. But though a state or an individual may act in this foolish and extravagant manner, it would be not a little rash thence to conclude that all public servants and all manufacturing labourers are unproductive! If the establishments which provide security and protection be formed on an extravagant scale, if there are more judges and magistrates, more soldiers or sailors, than are necessary, or if they receive larger salaries than would suffice to procure the services of others quite as competent to discharge their duties, let their numbers and their salaries be reduced. The excess, if there be any, is not a fault inherent in the nature of such establishments, but results entirely from the extravagant scale on which they are arranged.

But, in showing that Smith was mistaken in calling the consumption of menial servants, lawyers, physicians, and public functionaries, unproductive, we must beware of falling into the opposite extreme, and of countenancing the erroneous and infinitely more dangerous doctrine of those who contend that consumption, even when most unproductive, should be encouraged as a means of stimulating production, and of increasing the demand for labour. The consumption of the classes mentioned by Smith is advantageous, because they render services in return, which those who employ them, and who are the only proper judges, consider of greater value than the wages they pay them. But the case would be totally different were governments, capitalists, and others, to employ labourers not to profit by their services, but to stimulate production by their consumption. It is a fallacy to suppose, as many do, that production is encouraged by a wasteful consumption of the products of industry. A man is stimulated to produce when he finds a ready market for the produce of his labour—that is, when he can readily exchange it for other products. And hence the only legitimate encouragement of industry consists in the increase of production, and not in the increase of wasteful and improvident consumption. Every new article forms a new equivalent for, or means of purchasing some other article. It must always be remembered, that the mere existence of a demand, how intense soever it may be, cannot of itself be a means of encouraging production. "The sale of articles," to use the words of Paley, "depends upon the number, not of those who want, but of those who have something to offer in return for what they want; not of those who would consume, but of those who can buy; that is, upon the number of those who have the fruits of some other kind of industry to tender in exchange for what they stand in need of."1 The more, therefore, that these fruits are increased, that is, the more industrious individuals become, their power to buy or to offer products of one sort or other in exchange for what they stand in need of, will be proportionally increased, and the market rendered so much the more extensive.

It was contended by Sismondi and Malthus, in opposition to this doctrine, that the productivity of industry may be carried to excess, and that where it is peculiarly efficient, a large unproductive consumption is necessary to prevent the overloading of the market. But if we attend to the motives which make men engage in industrial undertakings, we shall be satisfied that the apprehensions of these writers are unfounded, and that the greatest facility of production cannot occasion a permanent glut of the market, or require to be counterbalanced by means of unproductive expenditure. In exerting his productive powers, every man intends either to consume the produce himself, or to exchange it for such articles as he wishes to get from others. If he do the first,—if he consume the articles he produces, there is an end of the matter, and it is evident that no conceivable increase of such articles could occasion a glut: If he do the second,—if he bring them to market, and offer them in exchange for other things, then, and then only, there may be glut. But why? Not because there has been an excess of production, but because the proper things have not been produced. A, for example, wished to obtain silks, and he manufactured cottons, and offered them in exchange to the holders of silks. But the latter did not want cottons, but broad cloths. And hence the glut in this case (and what is true of it, is true of every other case) does not originate in over-production, but in the production of articles which were not wanted, instead of articles which were. Let this error be rectified, and the glut will disappear. Even on the very improbable supposition that the holders of silks are supplied with cloth and everything else which those who wished to trade with them had it in their power to offer, the principle for which we are contending would not be in any degree invalidated. Such parties as cannot get the articles they want by means of an exchange are not at their wits' end; but would forthwith turn their industry into other channels, and, instead of producing their equivalents, would set about directly producing the articles themselves, or substitutes that might be used in their stead. Production is never carried on except as a means to an end; and if it be rightly adapted to compass that end, it is contradictory to suppose it can be too great. Owing to miscalculations of one sort and another there is often an excess of one or of a few articles; but it is quite impossible that there should be an universal glut. For every surplus, on the one hand, there must be a corresponding deficiency on the other. The fault is not in producing too much, but in producing commodities which are not suited to those to whom we wish to sell them, or which we cannot ourselves make use of. If we attend to these two grand requisites, we may increase the power of production ten or twenty times, and yet be as free of all excess as if we diminished it in the same proportion. Unproductive consumption is not therefore required to prevent the overloading of the market; and though it were, no government would be justified in carrying it on for such a purpose.

It must, however, be remembered, consistently with what has been previously advanced, that in deciding as to the character of the consumption or expenditure of wealth, we must look at its indirect and ultimate, as well as its direct and immediate effects. An expenditure which, if we take its immediate results only into account, we should pronounce imprudent and unproductive, may yet be discovered, by looking at it in its different bearings, and in its remote influences, to be distinctly the reverse; and it is also true that cases frequently occur in which that expenditure which is ruinous to the individual may, by stimulating industry in others, be beneficial to the state.

Montesquieu has said, "Si les riches ne dépensent pas beaucoup, les pauvres mourront de faim."2 The truth of this proposition has, however, been disputed; and this is not to be wondered at, as it may be either true or false,

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1 Moral Philosophy, b. vi., cap. 11. 2 M. Say was the first who showed in a satisfactory manner that effective demand depends upon production. (See his chapter De Débouchés.) But the principles from which his conclusions are drawn had been stated so early as 1752 in a tract of Dean Tucker, entitled Queries on the late Naturalization Bill. As this tract is now become of rare occurrence, we subjoin the queries referred to:—Whether it is possible in the nature of things for all trades and professions to be overstocked? and whether, if you were to remove any proportionable number from each calling, the remainder would not have the same grounds of complaint they had before?—Whether, in fact, any tradesman would make them desirous of other occupations to become his customers; though narrow selfish views lead him to wish there were fewer of his own trade!—If a particular trade be at any time overstocked, will not the disease cure itself? that is, will not some persons take to other trades, and fewer young people be bred up to that which is least profitable? and whether any other remedy but this is not in fact curing one transient disorder by bringing on many which are dangerous, and will grow intractable?—Whether it is not an infallible maxim that one man's labour creates employment for another? p. 13. For a further demonstration of the same principle see Mill's Commerce Defended, p. 80.

3 Esprit de Lois, liv. vii., cap. 4. according to the sense in which it is understood. If it be construed to mean that a rich man will be able continuously to employ a greater number of servants or labourers if he spend his revenue in luxurious accommodations than if he lay out a part of it on the improvement of his estate, or in accumulating a provision for his younger children, it is plainly erroneous. An increased demand for labour is the effect of an increased amount of capital; and as those who spend their whole incomes cannot amass capital, so neither can they employ a greater number of labourers. But the proposition advanced by Montesquieu should not be interpreted in this confined sense, or as being restricted to the direct influence of the demand of the rich for the services of the poor, but as also referring to and comprising its indirect influence over the demand of the middle classes and society in general for these services. And if we so interpret it, and suppose it to mean that the lavish expenditure and luxury of the great and affluent becomes a means of materially benefiting the poor, by exciting the emulation of others, who cannot expect, except through an increase of industry and economy, to be able to indulge in a similar scale of expense, it will, we apprehend, be found to be perfectly correct.

To suppose, indeed, that the passion for luxurious gratifications should decline amongst the rich, and that men should, notwithstanding, continue equally industrious, is a contradiction. Riches are desirable only because they afford the means of obtaining these gratifications; and so powerful is the influence of a taste for them, that it may be doubted whether the extravagance which has ruined so many individuals has not been, by giving birth to new arts and new efforts of emulation and ingenuity, of material advantage to the public.

These remarks are not made in the view of countenancing extravagant expenditure, but to show that those who attempt to decide as to the influence, in a public point of view, of an outlay of wealth, without endeavouring to appreciate and weigh its remote as well as its immediate effects, must, when they are right in their conclusions, be so only through accident. But without insisting farther on this point, it is abundantly certain that there is nothing to fear from the improvidence of individuals. No people, as has been already observed, ever misses an opportunity to save and amass. In all tolerably well-governed countries the passion for accumulation has always had a decided ascendancy over the passion for expense.

The incomes of individuals being, in the vast majority of cases, the result of their own industry and frugality, they are fully conscious of the sacrifice which their expenditure compels them to make, and endeavour, with but few exceptions, to confine it within the narrowest limits. This, however, is but seldom the case with the consumption of governments and their servants. They do not consume their own wealth, but that of others; and this circumstance prevents them from being so much interested in its profitable outlay, or so much alive to the injurious consequences of wasteful expenditure, as their subjects. But, though more difficult to practise, economy on the part of governments is of infinitely greater importance than economy on the part of individuals. A private gentleman, being master of his own fortune, may dispose of it as he pleases. He may act on the erroneous principle of profusion being a virtue, or he may attempt to excite the emulation and industry of his fellow-citizens by the splendour of his equipages and the magnificence of his mode of living. But government can with propriety do none of these things. It is merely a trustee for the affairs of others, which it is bound to administer as economically as possible. Were the principle admitted, that money might be raised to excite industry and ingenuity by the pressure of taxation or the luxury of public functionaries, an avenue would be opened to every species of malversation. It is, indeed, pretty certain that no people would submit to be taxed for such purposes; but if they did, the flagrant abuses to which it would inevitably lead could hardly fail of ending either in revolution or in national poverty and degradation.

Economy in expenditure is, upon all occasions, the first virtue of a government, and the most pressing of its duties.

We have now seen how labour may be rendered most productive of wealth—how that wealth is distributed among the various classes of society—and how it may be most advantageously consumed. We have seen the indissoluble connection between private and public opulence; that whatever has any tendency to increase the former, must to the same extent increase the latter; and that security of property, freedom of industry, and moderation in the public expenditure, are the only, as they are the certain means by which the various powers and resources of human talent and ingenuity may be called into action, and society made continually to advance in the career of wealth and civilization. Owing to the different dispositions and capacities of individuals, and the widely different circumstances under which they are placed, they will no doubt continue to exhibit in time to come, as they have done hitherto, great differences in their situation and conduct. But the adoption of a well-digested system of public economy is sure, notwithstanding, to conduce to their general well-being. While it adds to the numbers and wealth of the rich, it makes still greater additions to the numbers and wealth of the middle classes, and raises the poor more nearly to a level with the others. The latter, indeed, are now in possession of a vast number of conveniences and luxuries which formerly could not be commanded even by the richest lords. In a well-constituted society, all who pursue their occupations with diligence, perseverance, and economy, may reasonably expect to realize the advantages attached by Providence to such conduct. At all events, that is the only way in which their condition can be honourably, and therefore beneficially improved, and the public wealth augmented. It is by the spontaneous and unconstrained, but well-protected efforts of individuals to improve their condition and rise in the world that nations become rich and powerful. Their labour and their savings are at once the source and the measure of national opulence and public prosperity. They may be compared to the drops of dew, which invigorate and mature all vegetable nature. None of them has singly any perceptible influence; but we owe the foliage of summer and the fruits of autumn to their combined action.

(J. R. M.)